Half Yearly Report

RNS Number : 6280U
Impax Environmental Markets PLC
30 July 2015
 



IMPAX ENVIRONMENTAL MARKETS PLC

 

HALF-YEARLY FINANCIAL REPORT

 

FOR THE SIX MONTHS ENDED 30 JUNE 2015

 

 

INVESTMENT OBJECTIVE, FINANCIAL INFORMATION AND PERFORMANCE SUMMARY

 

 

INVESTMENT OBJECTIVE

 

The Company's objective is to enable investors to benefit from growth in the markets for cleaner or more efficient delivery of basic services of energy, water and waste.  Investments are made predominantly in quoted companies which provide, utilise, implement or advise upon technology-based systems, products or services in environmental markets, particularly those of alternative energy and energy efficiency, water treatment and pollution control, and waste technology and resource management (which includes sustainable food, agriculture and forestry).

 

 

FINANCIAL INFORMATION

 






At 30 June 2015

Net assets





£377.2m

Net asset value ("NAV") per Ordinary Share





174.3p

Ordinary Share price





158.5p

Ordinary Share price discount to NAV





9.1%

 

 

PERFORMANCE SUMMARY

 






% change1

Share price total return per Ordinary Share





+4.8%

NAV total return per Ordinary Share2





+3.6%

FTSE ET100 Index2





+8.4%

MSCI AC World Index2





+1.8%







1 Total returns in sterling for the six months to 30 June 2015.

2 Source: Morningstar

 

 

www.impaxenvironmentalmarkets.co.uk

 

Follow us on Twitter @IEMplc

 

CHAIRMAN'S REVIEW

 

Against a more positive backdrop for environmental and resource efficiency markets, Impax Environmental Markets plc ("IEM" or "the Company") has had a strong start to 2015. 

 

In previous reports I have highlighted changing investor awareness and concern about climate risk and this trend has continued apace. In June, the publication of Pope Francis's Encyclical on Climate Change featured prominently in the media around the world.  In the same month Mercer, a leading global investment consultant, published an important report: "Investing in a time of Climate Change".  Its findings reflect our view that climate change will affect investment returns, while the way in which policy makers respond to rising emissions will dictate how specific markets and individual companies are affected.

 

In response to higher levels of perceived risk, some 800 major investors (including, notably, the Rockefeller family) have now committed to divest approximately $50 billion of fossil fuel assets; of particular interest was the Norwegian Sovereign Wealth Fund's recent announcement to sell all its coal holdings.    Meanwhile, the build up to the United Nations Climate Change Conference ("COP21") in Paris in December generates additional news.  Countries accounting for more than 70% of global greenhouse gas emissions have now set out their plans for emissions reduction in advance of the meeting, which is due to produce a deal taking effect from 2020. Your Company's Directors believe that growing investor familiarity with these issues should lead to heightened interest in IEM, as investors seek to manage climate risk and benefit from potential solutions to the challenge.

 

While the climate change debate builds, we have seen further evidence of the impact of more extreme weather patterns.  The California drought, now in its fourth year, is causing severe disruption to the local economy.  At the same time, interesting investment opportunities are emerging in companies with new technologies, making desalination viable and improving water treatment and re-use in drought afflicted areas.

 

Performance

 

During the Period, the total returns on the Company's net asset value per Ordinary Share ("NAV") and share price were 3.6% and 4.8% respectively.  Over the same period, the total return on the MSCI All Country World Index ("ACWI", priced in Pounds Sterling) was 1.8%, while the total return on the comparator FTSE ET100 Index was 8.4%.  The underperformance versus the environmental benchmark can be partly attributed to companies such as Hanergy and SunEdison that the Manager has decided not to own because their fundamentals, governance or valuations do not fit with IEM's long term investment process.

 

In the second half of the Period, investor fears of Greece leaving the Euro, and concerns about China's economy, resulted in broad market declines.  However IEM outperformed the ACWI during these months and was in line with the FTSE ET100 Index.

 

Impact measurement

 

The Company's investment philosophy is to target companies which generate the majority of revenues from resource efficiency and environmental markets since we believe these will deliver superior total returns over the long term.  Revenue exposure of the portfolio to those markets is approximately 80%, making the Company one of the highest "pure play" environmental investment opportunities amongst its peers.   In addition to this metric, the Board has recognised strong interest from investors in quantifying the positive environmental impact of the portfolio and is looking to estimate certain important environmental metrics. These include carbon dioxide saved, renewable energy generated, water treated and total materials recycled.

 

These impact metrics will be covered in more detail in the Company's Annual Report.

 

Gearing

 

The Company's £30 million, two year, multi-currency, revolving credit facility with The Royal Bank of Scotland plc was fully drawn down throughout the Period.  As at 30 June 2015 the Company's net gearing was 5%.  The loan facility will expire on 8 January 2016 and, in the coming months, the Board will be considering the possible financing options following that date.

 

Discount and Share Buybacks

 

During the year, the discount to NAV at which the Company's Ordinary Shares traded ranged from 6% to 14% and ended the period at 9.1%.  The Company bought back 3,610,000 Ordinary Shares for cancellation in the Period at an average discount to NAV of 12%.  The buybacks enhanced the NAV per Ordinary Share by approximately 0.3p, equivalent to 0.2% of the NAV per Ordinary Share at the Period end. 

 

Shareholder communications

 

Following changing market practice away from paper-based communications, and in order to reduce our paper consumption, we announced in the Annual Report that we are no longer automatically mailing a hard copy of our financial reports.  Hard copies are available on request from the Company's registered office.  With the increasing focus on digital reporting we have introduced some additional functions to our website (www.impaxenvironmentalmarkets.co.uk).  There is an alert service on the home page where you can sign up to receive information, including press releases, regulatory news, financial calendar details and Reports & Accounts as soon as they are published.  You can also follow us on Twitter @IEMplc, where we post updates on the Company, views on our sectors and interesting third party commentary on environmental and related markets. 

 

Outlook

 

The investment hypothesis for IEM continues to strengthen. The Directors expect positive future returns across global equity markets for the remainder of 2015, albeit with higher volatility. Meanwhile, investor awareness of climate change and other environmental issues is growing, the Company has a proven record of delivery of premium growth versus global equities and a valuation that we believe understates the Company's prospects.  Your Board believes that IEM remains a compelling investment opportunity for long term investors.

 

John Scott

30 July 2015

 

MANAGER'S REPORT

 

The resurgence of interest in resource efficiency has finally reached or surpassed pre-financial crisis levels and IEM's diverse investment universe continues to grow.  Furthermore, during the Period solid earnings reports and outlook statements continued to point to superior growth delivery from companies across IEM's environmental and resource efficiency markets.  

 

IEM's portfolio has a small cap bias and is geographically diversified.  These characteristics both proved positive during the Period as small cap stocks returned to favour with investors and the Company was cushioned against major currency fluctuations. 

 

Key Developments and Drivers of Environmental Markets

 

During the Period there were numerous significant catalysts and new policy announcements providing further support for the Company's long term growth drivers.

 

Solar update

Solar stocks were weak in the second half of last year.  We believe this was a reflection of negative sentiment surrounding the dramatic fall in oil prices.  This weakness was followed by significant positive developments during the Period that strengthen the sector outlook.  Government announcements around the world continue to open up and enlarge new and diverse end markets, with India announcing ambitious cumulative installation targets of 100 GW by 2022 (versus 3 GW today) and China raising its 2015 target from 15 to 17.8 GW. 

 

Technology costs also continue to fall, reducing reliance on subsidies and creating an environment for leaders to emerge with the technology, scale and cost base to thrive.  These favourable supply/demand dynamics drove strong performance in our solar holdings including Chinese companies Trina Solar and Xinyi Solar.  We remain focussed on companies with strong business models, robust financials and solid governance.  For this reason we have never held Hanergy Thin Film Solar (Hong Kong), which was suspended amidst a storm of media attention in June.

 

Strong environmental policy news flow from China

The political will to combat the country's severe environmental problems continues to grow.  Earlier this year, China published its Water Pollution Action Plan and announced a RMB 4 - 5 trillion (£1 trillion) spend on improving the country's scarce and polluted water supply.  China was in the headlines again in June with its carbon pledge ahead of the Paris talks and next year will publish its 13th Five Year Plan, setting out the Government's targets and draft spending commitments up to the end of 2021.  We expect further major investment in all aspects of pollution control and environmental amelioration, providing a positive catalyst for many companies in our investment universe.

 

Mergers & Acquisitions

The acceleration in M&A that we saw in the second half of 2014 has been maintained this year.  In particular, Danaher Corporation (US) purchased Pall Corporation (US), the world leader in filtration, for $13.8 billion; the largest ever acquisition in environmental markets.  Pall Corporation was a top ten holding in the portfolio which had already returned approximately 600% since we initiated a position in 2002.  Filtration businesses are very attractive due to the focus on consumables, as well as high margins and returns on capital.  These features are reflected in the valuation multiples that companies are prepared to pay to acquire these businesses.  For example, Danaher acquired Pall on a multiple of 20.9x EV/EBITDA1.   This compares favourably with the current IEM valuation multiple of 10.6x EV/EBITDA and also those of other filtration market companies still held in the portfolio, including Donaldson (US), Clarcor (US) and Porvair (UK).

 

Absolute Performance Contributors and Detractors

 

Contributors

During the Period, there was particularly strong growth in renewable energy markets, driving earnings and margin recovery for leading suppliers including the Danish wind turbine manufacturer Vestas and Chinese solar companies Trina and Xinyi Solar.

 

The markets and investment case for holding energy efficiency stocks endures and the sub-sector delivered superior returns.  Our buildings and industrial energy efficiency holdings continued to benefit from the cyclical recovery of industrial and construction activity i.e. more houses built, compounded by the "multiplier" effect of new energy efficiency regulations which require significantly more insulation materials per building. 

                                                                                                                

Mergers and acquisitions during the Period again contributed to performance and we expect to see further M&A activity across environmental markets.

 

Detractors

Water Utilities, which are often considered bond proxies, were weaker, driven by investors selling out of equities in expectation of interest rate rises.  This rotation is presenting opportunities as these companies' business models should not be adversely affected by rising interest rates.

 

Efficient lighting markets also disappointed.  The delayed capex cycle affected Aixtron (Germany), and concerns about the commoditisation of light emitting diode ("LED") chips led to poorer performance for Epistar (Taiwan).  Dialight (UK) experienced a reduced level of retrofit orders from oil and gas customers.  We believe in the underlying strengths of these businesses and have selectively taken advantage of current weaker prices to add to our holdings.

 

Unquoted Companies

 

At 30 June 2015, the value of the Company's investments in unquoted companies was £9.7 million, representing 2.6% of net assets.  We continue to monitor progress in the Company's remaining investments in this area and ensure our valuations are appropriate.  This approach led to a downward revaluation of one holding during the Period.  We maintain our objective of working towards exits for IEM's unlisted investments.

 

Movements in the Period were as follows:

 

 


£m

Valuation at 1 January 2015           

10,913

Net valuation and FX changes

(1,234)

Valuation at 30 June 2015

  9,679

 

 

Portfolio Positioning & Activity

 

The portfolio comprised 66 listed holdings at the end of the Period (compared to 67 at the end of 2014).

 

During the Period, we sold out of some Chinese small cap holdings following strong performance and/or a decision to focus the portfolio further.  Additions included holdings in the sustainable food and agriculture sectors to access this growth opportunity and increase portfolio diversification such as Leroy Seafood, a leading salmon farmer based in Norway with strong margins and returns. In addition, the company has strong sustainability processes.

 

Positioning by sub-sector and region is set out in the charts on page 9.  During the Period, we changed the basis of our regional disclosure from "country of risk" (location of principal operations) to "country of listing", to allow a like-for-like comparison with ACWI.  Despite an apparent increase in US exposure, IEM remains overweight Europe and underweight the US versus ACWI.  More importantly, analysis of end market exposure shows that the portfolio is currently well-diversified across Europe, US and rest of the world, which we consider appropriate. 

 

IEM is overweight Waste Management & Technologies and Water Infrastructure & Technologies sub-sectors, both of which have strong defensive growth characteristics, compared to the FTSE ET100.  The portfolio is underweight Renewable & Alternative Energy and Energy Efficiency sub-sectors, which are more cyclical and have higher beta.

 

Outlook for 2014

 

At the start of the second half, global equity markets continue to struggle with significant uncertainties such as the outlook for the EU (with or without Greece), turbulent equity markets in China and the likely start of interest rate tightening in the US.  These concerns led to significant declines in markets in late June which have not been regained since the end of the Period.  Nonetheless, we remain positive on the prospects for IEM.  The Company's portfolio comprises a well-balanced selection of high quality, pure-play companies across environmental markets.  The drivers behind these markets continue to build and we expect several strong catalysts to boost these sectors further over the coming months. 

 

 

Impax Asset Management (AIFM) Limited

30 July 2015

 

1.         Enterprise value trailing twelve months, earnings before income, taxes, depreciation and amortization - a financial metric to assess the valuation of a target company

 

TEN LARGEST HOLDINGS

As at 30 June 2015

 

LKQ Corp (United States) 3.3% of net assets

 

LKQ is the largest provider of recycled and aftermarket vehicle parts in the United States. The company's growth is driven by the increased use of recycled parts that has resulted from insurance companies' desire to reduce costs of collision repair. LKQ occupies a dominant market position in the US with high barriers to entry and pricing power. It has a compelling offer to customers: to sell at a large discount to original equipment manufacturers' prices. The company has potential for strong growth in the European market where it seeks to become the leading distributor of mechanical and collision parts.

http://www.lkqcorp.com/

 

Pall Corp (United States) 3.1%

 

Pall is a filtration and fluid management specialist, providing solutions for complex contamination, separations, purification and detection. It is currently the subject of a takeover offer from Danaher Corporation which values it at 21x trailing earnings before interest, tax, depreciation and amortization ("EBITDA"). The transaction is expected to close in 2015.

http://www.pall.com/

 

Kingspan (Ireland) 3.0%

 

Kingspan is a manufacturer of insulated panels and boards and environmental housing solutions including solar hot water and rainwater harvesting. It is benefiting from both a cyclical recovery in its end markets such as the UK, and structural growth aided by a strong pipeline of innovative products. For example, the penetration rate of insulated panels is about 60% in the UK but only about 10% in the US. Kingspan is a high quality business that should be advantaged over the longer term from increasing regulatory focus on energy efficient buildings.

http://www.kingspan.com/

 

Xylem (United States) 2.9%

 

Xylem manufactures a range of water infrastructure and treatment products, including pumps and pumping systems, water testing equipment and irrigation products. The company is well-positioned as a pure-play global water company with market leading technology, selling into the water and waste water, agricultural, industrial, residential and commercial end markets. The company is well positioned for growth above the underlying market rate. The appointment of a new CEO also offers the potential for restructuring management, removing costs and optimising processes.

http://www.xyleminc.com/

 

Stericycle (United States) 2.8%

 

Stericycle manages regulated waste and provides an array of related and complementary services. It has a dominant market position in the US medical waste market with strong secular drivers such as an ageing population and increasing regulation. Stericycle is expanding into the large international market, which now represents about 30% of the company's sales and is improving the company's margins.  It is also developing into related markets such as retail hazardous waste and patient communications.

http://www.stericycle.com/

 

Clean Harbors (United States) 2.7%

 

Clean Harbors is North America's leading provider of environmental and hazardous waste management services. Its key asset is its hazardous waste business, which has high barriers to entry due to permitting restrictions. The Company also benefits from tightening environmental regulations, which are driving industrial customers to close captive treatment plants in favour of outsourcing to Clean Harbors.

http://www.cleanharbors.com/

 

Horiba (Japan) 2.5%

 

Horiba is a manufacturer of measuring instruments and systems for the automotive, environmental, medical and semiconductor industries. Its key automotive testing systems business is expected to generate record sales on a recovery in orders and it has also announced a goal to increase its already strong 25% market share to 30% by 2020. Increasingly complicated drivetrains will also underpin long term growth in the automotive testing market. The company has about 80% share of the global market for auto emission measurement equipment.

http://www.horiba.com/

 

Donaldson Company (United States) 2.5%

 

Donaldson is a leading manufacturer of air and liquid filtration systems and emission control products for the engine and industrial markets. It is the leading provider of original equipment manufacturer ("OEM") air filters and exhaust products for heavy-duty trucks and off-road equipment and is looking to leverage its relationships with the OEMs to increase its share of the aftermarket. Management has an excellent track record of delivering results, for example by improving operating margins over recent years from 10% to nearer 15%.

http://www.donaldson.com/

 

BorgWarner (United States) 2.5%

 

BorgWarner is widely regarded as the best-positioned automotive supplier to benefit from the growing global regulatory focus on transport energy efficiency with its primary focus on powertrain and drivetrain applications. Its products such as turbochargers and timing chain systems should experience strong growth, driven by the continuing global trend to increase fuel economy and reduce emissions. Unlike many automotive suppliers, it has a geographically diversified revenue mix and an order book full of new and more profitable products.

http://www.borgwarner.com/

 

TOMRA Systems (Norway) 2.4%

 

TOMRA develops and manufactures sensor-based machines for collecting and sorting in a variety of applications. It was founded in 1972 as a producer of vending machines ("RVMs") and this remains its largest end market. TOMRA has used its expertise in RVMs, where it enjoys a dominant market position, to move into other markets including food sorting and material recovery. The company's focus on costs is proving successful with about 40% taken out of cost-of-goods-sold in the past few years.

http://www.nibe.com

 

 

TOP TEN HOLDINGS IN COMPANIES

As at 30 June 2015

 

 

 


Valuation

% of

Company

£'000

Net Assets

LKQ

12,631

3.3%

Pall Corp

11,507

3.1%

Kingspan

11,302

3.0%

Xylem

10,828

2.9%

Stericycle

10,543

2.8%

Clean Harbors

10,320

2.7%

Horiba

9,614

2.5%

Donaldson Company

9,422

2.5%

BorgWarner

9,300

2.5%

TOMRA Systems

8,908

2.4%

Top ten holdings

104,375

27.7%

Other holdings

289,747

76.8%

Total holdings in companies

394,122

104.5%

Cash

11,592

3.1%

Bank loan

(29,416)

(7.8%)

Other net assets

941

0.2%

Total net assets

377,239

100.0%

 

 

 

The full portfolio is published quarterly in arrears on the Company's website www.impaxenvironmentalmarkets.co.uk

 

 

STRUCTURE OF PORTFOLIO

As at 30 June 2015

 

 

 

Breakdown by Environmental Markets Classification System




Company

FTSE ET100 Index

Renewable & Alternative Energy

16%

18%

Energy Efficiency

27%

32%

Food, Agriculture & Forestry

5%

8%

Waste Management & Technologies

17%

11%

Environmental Support Services

1%

1%

Water Infrastructure & Technologies

21%

15%

Pollution Control

13%

15%

 

 

Breakdown by Region (by company listing)


North America

52%

 

Europe

30%

 

Asia Pacific

18%

 

Rest of World

0%

 

 

Breakdown by Region (by end market exposure1)

North America

37%

Europe

29%

Asia Pacific

23%

Rest of World

11%

 

1 Portfolio-weighted regional exposure of revenues. 

(Allocated to Rest of World if breakdown not provided by companies).

 

Breakdown by Company Profitability


 

Profitable

94%

 

Unprofitable (including unquoteds)

6%

 



 

Breakdown by Market Capitalisation


 

More than US$5bn

35%

 

US$2bn-5bn

25%

 

US$500m-2bn

31%

 

Less than US$500m

7%

 

Unquoted

2%

 

 

INTERIM MANAGEMENT REPORT

 

The Chairman's review on pages 1 and 2 and the Manager's report on pages 3 to 5 provide details on the performance of the Company.  Those reports also include an indication of the important events that have occurred during the first six months of the financial year ending 31 December 2015 and the impact of those events on the condensed set of financial statements included in this Half-yearly financial report.

 

Details of the largest ten investments held at the period end are provided on pages 6 and 7and the structure of the portfolio at the period end is analysed on page 9.

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Board considers that the main risks and uncertainties faced by the Company fall into the categories of (i) Market risks (ii) Environmental Markets and (iii) Corporate governance and internal control risks.  A detailed explanation of these risks and uncertainties can be found in the Company's most recent Annual Report for the year ended 31 December 2014.  The risks and uncertainties facing the Company remain unchanged from those disclosed in the Annual Report.

 

RELATED PARTY TRANSACTIONS

 

Details of the investment management arrangements were provided in the Annual Report.  There have been no changes to the related party transactions described in the Annual Report that could have a material effect on the financial position or performance of the Company.  Amounts payable to the investment manager in the period are detailed in the Unaudited Income Statement on pages 12 and 13.

 

Board of Directors

30 July 2015

 

DIRECTORS' STATEMENT OF RESPONSIBILITY FOR THE HALF-YEARLY REPORT

 

The Directors confirm to the best of their knowledge that:

 

 

·     The condensed set of financial statements contained within the Half-yearly financial report has been prepared in accordance with FRS 104 Interim Financial Reporting.

 

 

·     The interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure and Transparency Rules.

 

 

John Scott

Chairman of the Board of Directors

30 July 2015

 

 

UNAUDITED INCOME STATEMENT

 

 


Six months ended 30 June 2015

Six months ended 30 June 2014

Year ended 31 December 2014


Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000











Gains on

 

 

 

 

 

 

 

 

 

Investments

-

11,176

11,176

-

8,350

8,350

-

4,736

4,736

Investment income (see note 4)

3,844

-

3,844

3,336

-

3,336

5,422

-

5,422

Investment

 

 

 

 

 

 

 

 

 

management fees

(448)

(1,347)

(1,795)

(446)

(1,337)

(1,783)

(882)

(2,642)

(3,524)

Other expenses

(340)

-

(340)

(393)

-

(393)

(667)

-

(667)

Return on

 

 

 

 

 

 

 

 

 

ordinary activities

 

 

 

 

 

 

 

 

 

before finance

 

 

 

 

 

 

 

 

 

costs and taxation

3,056

9,829

12,885

2,497

7,013

9,510

3,873

2,094

5,967

Finance costs (see note 5)

 

(72)

 

(216)

 

(288)

 

(43)

 

(128)

 

(171)

 

(117)

 

(352)

 

(469)

Return on

 

 

 

 

 

 

 

 

 

ordinary activities

 

 

 

 

 

 

 

 

 

before taxation

2,984

9,613

12,597

2,454

6,885

9,339

3,756

1,742

5,498

Taxation

(324)

-

(324)

(187)

-

(187)

(372)

-

(372)

Return on

 

 

 

 

 

 

 

 

 

ordinary activities

 

 

 

 

 

 

 

 

 

after taxation

2,660

9,613

12,273

2,267

6,885

9,152

3,384

1,742

5,126

 

Return per Ordinary










Share (see note 6)

1.22p

4.41p

5.63p

1.00p

3.05p

4.05p

1.52p

0.78p

2.30p

 

 

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

 

All capital and revenue items in the above statement derive from continuing operations.  No operations were acquired or discontinued during the period. 

 

The above "Unaudited Income Statement" is the Company's "Unaudited Statement of Comprehensive Income".

 

Return on ordinary activities after taxation is also the "Total comprehensive income for the period".

 

 

UNAUDITED BALANCE SHEET

 


At 30 June

At 30 June

At 31 December


2015

2014

2014


 £'000

 £'000

   £'000





Fixed assets




Investments at fair value through profit and loss (see note 3)

394,122

403,780

398,099





Current assets




Income receivable

983

530

86

Sales - future settlements

482

953

-

Taxation recoverable

249

224

236

Other debtors

14

10

10

Cash at bank and in hand

11,592

7,612

7,180


13,320

9,329

7,512

 

 




Creditors: amounts falling due within one year




Bank loan (see note 7)

(29,416)

-

-

Purchases - future settlements

(199)

(719)

-

Accrued liabilities

(588)

(675)

(922)


(30,203)

(1,394)

(922)





Net current (liabilities) / assets

(16,883)

7,935

6,590





Total assets less current liabilities

377,239

411,715

404,689





Creditors: amounts falling due after more than one year




Bank loan (see note 7)

-

(29,619)

(30,989)





Total net assets

377,239

382,096

373,700





Capital and reserves: equity




Share capital

26,216

26,868

26,577

Share premium

16,035

16,035

16,035

Capital redemption reserve

6,235

5,583

5,874

Share purchase reserve

162,619

172,680

168,310

Capital reserve

161,088

156,618

151,475

Revenue reserve

5,046

4,312

5,429

Total equity

377,239

382,096

373,700

 

Net asset value per share

 




Net assets per Ordinary Share (see note 8)

174.28p

171.35p

169.81p





           

UNAUDITED STATEMENT OF CHANGES IN EQUITY

 

Six months ended 30 June 2015

 

 

 


 

Share

Capital

£'000

Share

 Premium

Account

£'000

Capital

Redemption

Reserve

£'000

Share

Purchase

Reserve

£'000

 

Capital

Reserve

£'000

 

Revenue

Reserve

£'000

 

 

Total

£'000









Opening equity as








as at 1 January 2015

26,577

16,035

5,874

168,310

151,475

5,429

373,700









Share buy backs (see note 10)

-

-

-

(5,691)

-

-

(5,691)

Cancellation of treasury shares

(361)

-

361

-

-

-

-

Dividend paid (May 2015)

-

-

-

-

-

(3,043)

(3,043)

Profit for the period

-

-

-

-

9,613

2,660

12,273









Closing equity








as at 30 June 2015

26,216

16,035

6,235

162,619

161,088

5,046

377,239

 

 

 

Six months ended 30 June 2014

 


 

Share

Capital

£'000

Share

 Premium

Account

£'000

Capital

Redemption

Reserve

£'000

Share

Purchase

Reserve

£'000

 

Capital

Reserve

£'000

 

Revenue

Reserve

£'000

 

 

Total

£'000









Opening equity as








as at 1 January 2014

32,451

16,035

-

183,051

149,733

4,728

385,998









Share buy backs (see note 10)

(583)

-

583

(10,371)

-

-

(10,371)

Cancellation of treasury shares

(5,000)

-

5,000

-

-

-

-

Dividend paid (May 2014)

-

-

-

-

-

(2,683)

(2,683)

Profit for the period

-

-

-

-

6,885

2,267

9,152









Closing equity








as at 30 June 2014

26,868

16,035

5,583

172,680

156,618

4,312

382,096

 

 

Year ended 31 December 2014

 


 

Share

Capital

£'000

Share

 Premium

Account

£'000

Capital

Redemption

Reserve

£'000

Share

Purchase

Reserve

£'000

 

Capital

Reserve

£'000

 

Revenue

Reserve

£'000

 

 

Total

£'000









Opening equity








as at 1 January 2014

32,451

16,035

-

183,051

149,733

4,728

385,998









Share buy backs

(874)

-

874

(14,741)

-

-

(14,741)

Cancellation of treasury shares

(5,000)

-

5,000

-

-

-

-

Dividend paid (May 2014)

-

-

-

-

-

(2,683)

(2,683)

Profit for the year

-

-

-

-

1,742

3,384

5,126









Closing equity








as at 31 December 2014

26,577

16,035

5,874

168,310

151,475

5,429

373,700

 

 

UNAUDITED STATEMENT OF CASH FLOWS

 

 

 

Six months

Six months

Year

 

ended

ended

ended

 

30 June

30 June

31 December

 

2015

2014

2014

 

£'000

£'000

£'000

 

 

 

 





Operating activities




Return on ordinary activities before finance costs and taxation

12,885

9,510

5,967

Less: Tax deducted at source on income from investments

(324)

(187)

(372)

Add: Realisation of investments at book cost

67,889

42,875

94,211

Less: Purchase of investments

(66,025)

(75,327)

(140,473)

Adjustment for losses on investments held

2,113

12,387

31,879

Foreign exchange non cash flow (gains) / losses

(58)

(271)

1,102

(Increase) / decrease in debtors

(1,417)

151

1,533

Increase / (decrease) in creditors

137

(572)

(886)

Net cash flow from operating activities

15,200

(11,434)

(7,039)





Financing activities




Bank loan

(1,494)

29,910

29,910

Finance costs paid

(560)

(40)

(42)

Share buy backs

(5,691)

(11,087)

(15,912)

Equity dividends paid

(3,043)

(2,683)

(2,683)

Net cash flow (used in) / from financing

(10,788)

16,100

11,273





Increase in cash and cash equivalents

4,412

4,666

4,234





Cash and cash equivalents at start of period

7,180

2,946

2,946





Cash and cash equivalents at end of period

11,592

7,612

7,180





                       

 

NOTES TO THE ACCOUNTS

 

1              Accounting policies

The accounts have been prepared in accordance with FRS 104 Interim Financial Reporting and the Statement of Recommended Practice  "Financial statements of investment trust companies" issued by the Association of Investment Companies in November 2014.

 

This Half-yearly Financial Report is unaudited and does not include all of the information required for full annual financial statements. The Half-yearly Financial Report should be read in conjunction with the Annual Report and Accounts of the Company for the year ended 31 December 2014. The Annual Report and Accounts for the year ended 31 December 2014 were prepared in accordance with applicable UK accounting standards and received an unqualified audit report.  The financial information for the year ended 31 December 2014 in this Half-yearly Financial Report has been extracted from the audited Annual Report and Accounts for the year ended 31 December 2014.   The accounting policies and presentation in this Half-yearly Financial Report are consistent with those intended to be applied in the Annual Report for the year ending 31 December 2015.

 

2. Going concern note

The directors have adopted the going concern basis in preparing the accounts. The following is a summary of the directors' assessment of the going concern status of the Company.

 

Operational resources

The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least twelve months from the date of this document. In reaching this conclusion, the directors have considered the liquidity of the Company's portfolio of investments as well as its cash position, income and expense flows. At the date of approval of this document the Company has substantial operating expenses cover.

 

Continuation vote

As required under its Articles, the Company will put forward a resolution for its continuation at the Annual General Meeting in 2016.

 

In the event that such a resolution is not passed, the directors are required to draw up proposals for Shareholders' approval for the voluntary liquidation or unitisation or other reorganisation of the Company, which would require a special resolution of Shareholders.

 

3              Investments

Securities of companies quoted on regulated stock exchanges and the Company's holdings in unquoted companies have been classified as "fair value through profit or loss" and are initially recognised on the trade date and measured at fair value. Investments are measured at subsequent reporting dates at fair value by reference to their market bid prices. Any unquoted investments are measured at fair value which is determined by the directors in accordance with the International Private Equity and Venture Capital guidelines.

 

4              Investment income

 

Six months

Six months

Year

 

ended

ended

ended

 

 30 June

 30 June

31 December

 

2015

2014

2014

 

£'000

£'000

£'000

Income from investments:




Dividends from UK investments                      

714

283

721

Dividends from overseas investments

3,130

3,053

4,701


3,844

3,336

5,422

 

 

5              Finance Costs

 


Six months ended

Six months ended

Year ended


30 June 2015

30 June 2014

31 December 2014


Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Capital


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Interest payable

70

210

280

41

121

162

114

342

456

Direct costs

2

6

8

2

7

9

3

10

13


72

216

288

43

128

171

117

352

469

 

 

6              Return per Ordinary Share

Return per Ordinary Share is based on the net return on ordinary activities after taxation attributable to the weighted average of 218,059,546 (six months ended 30 June 2014: 225,703,950, year ended 31 December 2014: 223,268,664) Ordinary Shares in issue (excluding treasury shares) during the period.

 

 

7              Bank loan

On 8 January 2014, the Company entered into a two year multi-currency revolving credit facility with The Royal Bank of Scotland plc. Under the terms of the facility the Company may draw down loans of, in aggregate, up to 30 million. As at 30 June 2015, the facility was fully drawn down and the Company's loans outstanding totalled, in aggregate, £29,416,000.  The table below shows the breakdown of the loans at 30 June 2015.

 

Currency of loans

Local currency amount

£'000

GBP loans

£15,425,000

15,425

USD loans

$22,000,000

13,991



29,416

 

Interest is payable on amounts drawn down under the facility calculated at the rate of LIBOR plus a margin of 1% per annum.  A commitment fee calculated at the rate of 0.25% per annum is payable on amounts not drawn down.

 

Following the classification of the bank loan as "Creditors: amounts falling due more than one year" in the Company's accounts for the year ended 31 December 2014, the bank loan for the comparative period as at 30 June 2014 has been classified as "Creditors: amounts falling due more than one year" rather than "Creditors: amounts falling due within one year" as per the Half yearly Financial Report for the six months ended 30 June 2014.  The bank loan facility's termination date is 8 January 2016, therefore the bank loan as at 30 June 2015 is classified as "Creditors: amounts falling due within one year".

 

8              Net assets per Ordinary Share

Net assets per Ordinary Share for the six months ended 30 June 2015 are based on the net assets of the Company attributable to the 216,457,264 (six months ended 30 June 2014: 222,985,264, year ended 31 December 2014: 220,067,264) Ordinary Shares in issue (excluding treasury shares) at the end of the period.

 

9              Dividend

The final dividend for the year ended 31 December 2014 of 1.4p per Ordinary Share was paid on 27 May 2015 (year ended 31 December 2013 dividend of 1.2p per share was paid on 28 May 2014).  In accordance with UK accounting standards the dividend for the year ended 31 December 2014 has been recognised in the Half-yearly financial report for the six months ended 30 June 2015.

 

The directors do not recommend the payment of an interim dividend for the year ending 31 December 2015.

 

10           Purchase of own Shares

During the six months ended 30 June 2015 3,610,000 Ordinary Shares were bought back and cancelled at an aggregate cost of £5,691,000 (six months ended 30 June 2014: 6,845,000 Ordinary Shares were bought back at an aggregate cost of £10,371,000).

 

11           Related party transactions

Fees payable to the Manager are shown in the Income Statement. At 30 June 2015 the fee accrual outstanding to the Manager was £309,302 (30 June 2014: £296,682). 

 

The Manager's group has a holding in Ensyn. The Manager has procedures in place to mitigate any conflicts of interest from this investment.

 

Fees payable to the directors for the six months ended 30 June 2015 were £49,000 (six months ended 30 June 2014: £59,000).  Fees were payable at an annual rate of £30,000 to the Chairman, £24,000 to the Chairman of the Audit Committee and £20,000 to the other directors until 31 March 2015.  From 1 April 2015 fees have been payable at an annual rate of £33,000 to the Chairman, £26,500 to the Chairman of the Audit Committee and £22,000 to the other directors

 

The directors had the following shareholdings in the Company, all of which were beneficially owned.

 

 


Ordinary Shares

Ordinary Shares

Ordinary Shares


At 30 June

At 30 June

At 31 December


2015

2014

2014

V Hastings

12,500

12,500

12,500

J Le Blan

10,000

5,000

5,000

W Rickett

5,000

5,000

5,000

J Scott

22,000

10,000

10,000

 

 

12           Classification of financial instruments

FRS 102 (see note 13) requires that the classification of financial instruments be valued by reference to the source of inputs used to derive the fair value. The classifications and their descriptions are below:

 

Level a

The best evidence of fair value is a quoted price for an identical asset in an active market. Quoted in an active market in this context means quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted price is usually the current bid price.

 

Level b

When quoted prices are unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If the entity can demonstrate that the last transaction price is not a good estimate of fair value (eg because it reflects the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that price is adjusted.

 

Level c

If the market for the asset is not active and recent transactions of an identical asset on their own are not a good estimate of fair value, an entity estimates the fair value by using a valuation technique. The objective of using a valuation technique is to estimate what the transaction price would have been on the measurement date in an arm's length exchange motivated by normal business considerations.

 

 

The classification of the Company's investments held at fair value is detailed in the table below:

 


30 June  2015


30 June 2014


Level a

Level b

Level c

Total


Level a

Level b

Level c

Total


£'000

£'000

£'000

£'000


£'000

£'000

£'000

£'000

Investments at fair value through










profit and loss










- Quoted

377,881

-

6,562

384,443


386,908

-

6,115

393,023

- Unquoted

-

-

9,679

9,679


-

-

10,757

10,757


377,881

-

16,241

394,122


386,908

-

16,872

403,780

 

Level c quoted investments detailed above are holdings in quoted companies held through broker participatory notes. As at 30 June 2015 and 30 June 2014 the Company held one investment, Thermax (India), through a participatory note.

 

The movement on the Level c unquoted investments during the period is shown below:

 

 

 


Six months

Six months

Year

 


ended

ended

ended



30 June

30 June

31 December



2015

2014

2014



£'000

£'000

£'000

Opening balance


10,913

10,957

10,957

Additions during the year


-

-

-

Disposals during the year


-

-

-

Valuation adjustments


(1,234)

(200)

(44)

Closing balance


9,679

10,757

10,913

 

Unquoted investments are valued using relevant financial data available on those investments and applying International Private Equity and Venture Capital guidelines. This includes, where appropriate, consideration of price of recent market transactions, earnings multiples, discounted cash flows, net assets and liquidity discounts.

 

13           Impact of new accounting standards

The accounts for the year ending 31 December 2015 will be prepared for the first time under FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland which is applicable to accounting periods beginning on, or after, 1 January 2015.  This is not expected to have any significant impact on the financial statements other than minor changes to the presentation and terminology used in the accounts.  There will be no material changes to the Company's accounting policies.

 

This Half-yearly Report has been prepared for the first time under FRS 104 Interim Financial Reporting which is applicable to accounting periods beginning on, or after, 1 January 2015. This has not had any significant impact on the Half-yearly Report other than minor changes to the presentation and terminology used in the accounts.  There have been no material changes to the Company's accounting policies.

 

The profit or loss of the Company and the Company's equity for the six months ended 30 June 2014 and the year ended 31 December 2014 have not been affected by the introduction of the above standards.

 

14.          Distributable reserves

The Company's distributable reserves consist of the share purchase reserve, capital reserve and revenue reserve.

 

The Company currently pays dividends from the revenue reserve. Share buy backs are funded from the share purchase reserve.

 

15           Status of this report

These financial statements are not the Company's statutory accounts for the purposes of section 434 of the Companies Act 2006.  They are unaudited.  The Half-yearly financial report will be made available to the public at the registered office of the Company.   The report will be available in electronic format on the Manager's website (www.impaxam.com) and the Company's website (www.impaxenvironmentalmarkets.co.uk).

 

The Half-yearly financial report was approved by the Board on 30 July 2015.

 

The Company's statutory accounts for the year ended 31 December 2014 received an unqualified audit report and have been filed with the registrar of companies at Companies House.

 

 

DIRECTORS, MANAGER AND ADVISERS

 

 

DIRECTORS

INVESTMENT MANAGER

John Scott DL (Chairman)

Impax Asset Management (AIFM) Limited

Vicky Hastings

Norfolk House

Julia Le Blan

31 St James's Square

William Rickett, CB       

London SW1Y 4JR





BROKER

REGISTERED OFFICE*

Canaccord Genuity Limited

145-157 St John Street

9th Floor

London EC1V 4RU

88 Wood Street

 

London EC2V 7QR




DEPOSITARY AND CUSTODIAN

SECRETARY & ADMINISTRATOR

BNP Paribas Securities Services

Cavendish Administration Limited

55 Moorgate

145-157 St John Street

London

London EC1V 4RU

EC2R 6PA




REGISTRAR

AUDITORS

Capita Asset Services

Ernst & Young LLP

The Registry

1 More London Place

34 Beckenham Road

London

Beckenham

SE1 2AF

Kent BR3 4TU




BANKER

 

The Royal Bank of Scotland Plc

 

280 Bishopsgate

 

London EC2M 4RB


 

 

 

 

 

 

* Registered in England and Wales No. 4348393

 

For further information contact:

Anthony Lee

Cavendish Administration Limited

Tel: 020 7490 4355

 

The Half-yearly financial report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM

 

END

 

 

 


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