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Impax Environmental Markets PLC
Quarterly Report • Aug 3, 2023
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Quarterly Report
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National Storage Mechanism | Additional information 
RNS Number : 1243I
Impax Environmental Markets PLC
03 August 2023
Impax Environmental Markets plc
Half-yearly Financial Report Announcement
For the six months to 30 June 2023
LEI: 213800RAR6ZDJLZDND86
Investment Objective
The investment objective of Impax Environmental Markets plc (the "Company") 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, notably 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
| As at 30 June 2023 | As at 31 December 2022 | |
| Net asset value ("NAV") per ordinary share | 431.6p | 419.5p |
| Ordinary share price | 410.0p | 419.5p |
| Ordinary share price (discount) premium to NAV1 | (5.0%) | 0.0% |
| Net assets | £1,292m | £1,276m |
PERFORMANCE SUMMARY
For the six months ended 30 June 2023
| % CHANGE2,3 | |
| NAV total return per ordinary share1 | 3.4% |
| Share price total return per ordinary share1 | -1.7% |
| MSCI ACWI Index | 7.8% |
| FTSE ET100 Index | 14.7% |
1 These are alternative performance measures
2 Total returns in sterling for the six months to 30 June 2023
3 Source: Bloomberg and FactSet
ALTERNATIVE PERFORMANCE MEASURES ("APMS")
The disclosures as indicated in footnote 1 above are considered to represent the Company's APMs. Definitions of these APMs and other performance measures used by the Company, together with how these measures have been calculated, can be found in the Half-Yearly Report.
Chair's Statement
I took over as Chair in May and want firstly to thank John Scott and Vicky Hastings for the services that they provided to Impax Environmental Markets plc ("IEM" or the "Company") and to shareholders over the past ten years, a period during which the Company has grown from £379 million to £1.3 billion assets under management and has established itself as one of the leading companies, if not the leading company, in this sector of the investment trust market.
Although the wider equity markets have performed well in the first six months of 2023 (the "Period"), continued challenges and upheavals in the macroeconomic environment have created a volatile backdrop, generating headwinds for the small- and mid-cap growth companies in which the Company invests. Consequently, while the Company's investment thesis remains strong, and valuations have become increasingly attractive, the Company underperformed its global equities and environmental comparator indicies - the MSCI All Country World Index ("MSCI ACWI") and the FTSE Environmental Technology 100 ("FTSE ET100"), respectively - during the Period.
Persistently high inflation has led to interest rate rises beyond those originally priced into markets. This is clouding the outlook for growth, increasing the risk of a 'hard landing' or recession, and encouraging investors to reallocate capital from equities into less risky bonds, where yields have become increasingly attractive. In addition, the failure of Silicon Valley Bank in the US, followed by the collapse of Credit Suisse in Europe, stoked fears of another financial crisis. While these fears proved exaggerated, they have triggered tighter lending standards, which create another risk to economic growth. These events prompted 'risk off' sentiment in markets, leading to significant underperformance of small- and mid-cap markets in the second quarter, contributing to IEM's underperformance over the Period.
Conversely, the sources of positive equity market performance during the Period have been extremely narrowly focused. Much of the rise in equity indices was delivered by a small number of US 'mega-cap' technology names to which IEM is not exposed. However, growing excitement among investors about the prospects for artificial intelligence has fuelled the meteoric rise of chipmaker Nvidia, one of these tech names, and does create opportunities for IEM which are discussed in the Manager's Report.
Wider market challenges obscured continued positive developments in environmental markets, also discussed in detail below. Policy support has remained resolute despite a challenging macroeconomic environment, with the US Inflation Reduction Act and the EU's Green Deal Industrial Plan poised to drive accelerating growth in the markets in which IEM invests.
It is worth re-stating the investment hypothesis that underpins the Company. There is a clear need for solutions to pressing environmental challenges, to promote resource efficiency and for infrastructure that enables basic needs to be more efficiently and cleanly met. The Board and Manager believe that investing globally in pureplay companies that provide these solutions across a diverse range of end-markets will generate investment outperformance. The current combination of a strong underlying investment hypothesis and a de-rating of the portfolio compared with wider equity markets creates a compelling valuation case, which has been instrumental in the gearing decisions discussed below.
INVESTMENT PERFORMANCE
During the Period, the total return of the NAV per share of the Company was 3.4% and the share price total return was -1.7%. IEM underperformed the MSCI ACWI, its global comparator index, which generated a total return of 7.8%. Similarly, IEM underperformed the FTSE ET100, which rose 14.7% over the Period.
Notwithstanding the disappointing outcome for 2022, the longer term returns for IEM remain very respectable: three-year annualised performance of the share price and NAV are 9.8% and 12.4%, respectively, compared to 9.9% for MSCI ACWI. Over five years, the annualised returns are 10.0% for the share price and 10.4% for the NAV versus 8.9% for MSCI ACWI.
"I have great confidence in the long-term thesis that sustainability pressures create opportunities for companies providing environmental solutions."
GEARING
The Board and Manager fundamentally believe that gearing represents an attractive feature of investment trusts, which can enhance long-term performance. When originally put in place in 2014, the Board and Manager agreed a tolerance of up to 10% gearing. As mentioned in the 2022 Annual Report, the existing £50.3 million facilities, which have been in place for five years and represent a diminished level of 3.1% net gearing following IEM's growth, come up for renewal in September 2023. In the absence of share issuance, previously flagged capacity constraints have eased. Following extensive discussions, and based in part on a compelling portfolio valuation, the Board has decided to replace the existing facility with long-term structural debt. After the Period end the Company announced the placement of €60 million (~£51.7 million) privately placed notes ("Notes") with a mixture of maturities and interest rates, and a balance of fixed versus floating interest rates. These are set out below.
| Principal amount | Maturity | Interest rate |
| €20m | 7 years | Floating: 6M EURIBOR +1.35% |
| €30m | 10 years | Fixed: 4.48% |
| €10m | 12 years | Fixed: 4.63% |
In addition to the above, the Board is in advanced discussions with its existing bank, Scotiabank, for an additional £35m floating rate facility. Whilst subject to documentation, this facility, if fully drawn, together with the Notes, would result in approximately 7% gross gearing and a mix of fixed and floating interest rate debt. This is considered appropriate and desirable at current valuation levels and given the uncertain trajectory of interest rates.
PREMIUM AND DISCOUNT CONTROL
The Company's ordinary shares traded at net asset value ("NAV") on 31 December 2022 and a discount to NAV of 5.0% on 30 June 2023, trading between a premium of 1.3% and a discount of 6.1% during the Period.
Equity market volatility has seen discounts on investment trusts continue to widen materially over the first half of 2023. The Board's intention remains for the Company's share price to trade close to NAV in normal market conditions and it will continue to exercise its authority to buy back or issue shares accordingly. A total of 4,835,000 shares were bought back into treasury during the Period, resulting in 6,291,500 shares being held in treasury at 30 June 2023.
DIVIDEND
The Company's net revenue return for the Period was £9.1 million, compared with £7.5 million earned in the same period last year. This increase reflects continued recovery of dividends post pandemic. There were 304.2 million ordinary shares in issue at the start of the year, falling to 299.3 million by the end of the Period, reflecting the 4.8 million shares bought back.
The second interim dividend for the 2022 financial year, of 2.5 pence per ordinary share, was declared on 1 February 2023 and paid on 10 March 2023. It remains the Board's intention to pay out substantially all earnings by way of dividends, the quantum of which is affected both by the level of dividends received by the Company and by the number of shares in issue at the relevant record date.
On 28 July 2023, the Board announced a first interim dividend for this financial year of 1.7 pence per ordinary share, payable on 1 September 2023 to shareholders who appear on the register at 11 August 2023, with an ex-dividend date of 10 August 2023.
THE BOARD
At the Company's AGM in May 2023, I was appointed by the Board as the Company's new Chair, taking over from John Scott. I would like to extend the Board's thanks to John, who not only had served the Company as Chair for nine years, but also remained in post beyond his planned retirement, following the sudden death in 2021 of then Chair‑designate Simon Fraser.
Additionally, I would like to extend the Board's gratitude to Vicky Hastings, who also retired at the 2023 AGM. She served for ten years and is replaced by Guy Walker. Guy is the senior independent director at JPMorgan European Growth & Income plc. He was previously Managing Director of UK & European Equities at UBS Asset Management and before that had held various roles at Schroder Investment Management. I look forward to working with Guy and the rest of the Board.
The Board has initiated a search for an additional director with a complementary skill set and experience, which would return the Board to five members.
OUTLOOK
I join the Company at a challenging time for its Manager and, indeed, for all investors, as we move into a new economic paradigm, characterised by higher interest rates, continuing conflict in Ukraine and the at least partial unraveling of globalised supply chains. These factors are injecting uncertainty into global markets, to the particular disadvantage of riskier market segments such as growth equity. Nonetheless, I have great confidence in the long‑term thesis that sustainability pressures create opportunities for companies providing environmental solutions. I am also confident in the skills and experience of the Manager in identifying strong companies with attractive valuations that are well-positioned to generate value from those opportunities.
Glen Suarez,
Chair
2 August 2023
Manager's Report
The first half of 2023 has presented a difficult market environment in which to invest in small- and mid-cap companies, despite the overall upward direction of equity markets. As was the case in 2022, macroeconomic events have been the predominant driver of stock markets, with inflation, the interest rate environment and banking upheavals, as flagged in the Chair's Statement. Over the Period, IEM's NAV underperformed the MSCI ACWI by 4.4% and the FTSE ET100 by 11.3%.
In relation to its performance against the MSCI ACWI, IEM has a core focus on small- and mid-cap companies, which provide pure and focused exposure to the environmental markets growth story and are less easily accessible to our investors. This market cap bias has worked against us in the Period, with ACWI Small Caps delivering 2.2% and ACWI Mid Caps 1.7%, while MSCI ACWI returned 7.8%.
As a part of this dynamic, the performance of the MSCI ACWI was driven by a small number of 'mega-cap' technology stocks, notably Apple, Nvidia, Microsoft, Amazon and Meta (Facebook), which fall outside of our remit and collectively contributed to a 5% drag to relative performance. Performance of the FTSE ET100 was also dominated by large-cap names such as Tesla, Tokyo Electron and Schneider Electric, all of which have market caps many times larger than our biggest holdings. We continue to believe our market cap bias will deliver strong performance over time.
Notwithstanding the above, we were encouraged by continued solid earnings delivery across the portfolio during the Period, driven by strong pricing power and the easing of the supply chain constraints that were a feature of 2021 and 2022. Our Digital Infrastructure holdings and our construction-exposed holdings in Buildings Energy Efficiency and Water Infrastructure also delivered standout performance. Portfolio valuation is another highlight and both are discussed in our report.
From a broader perspective, we see continued positive momentum around policy. The substantial investment in climate action promised by the US Government's Inflation Reduction Act, which unexpectedly passed last year, will begin to make itself felt in the real economy in the second half of this year. This will underpin strong growth in renewables, electricity transmission infrastructure, electric vehicles and associated manufacturing. This has prompted a significant response from the EU, discussed below.
KEY DEVELOPMENTS AND DRIVERS OF ENVIRONMENTAL MARKETS
Europe's response to the Inflation Reduction Act
The Inflation Reduction Act was not only the largest single government commitment to climate action - with US$369 billion in subsidies and tax breaks for green technologies1 - it is also heavily skewed towards domestic job creation. Much of its funding is directed either to US consumers, or US-based manufacturing, and it is encouraging multinationals to reorientate their clean technology investment plans towards the US market to take advantage of its provisions.
The European Union has come under considerable pressure from its manufacturing sector and some member states to respond with incentives of its own. In its response, the European Commission unveiled its Green Deal Industrial Plan in February. Its goal is to "enhance the competitiveness of Europe's net-zero industry and support the fast transition to climate neutrality",2 the European Commission says. The plan aims to simplify regulation and permitting, speed up access to public finance, support green technology skills development and promote global trade in critical raw materials.
The plan does not directly offer new subsidies to support EU-based climate technologies, but it does loosen the rules around the State Aid that member state governments can provide to the private sector. In addition, Commission President Ursula von der Leyen said member states could draw on around €250 billion in the EU's post-pandemic recovery fund to direct towards net-zero industries.3
Compared with the Inflation Reduction Act, the EU policy response is more complicated, less focused and is subject to several loopholes and gaps; it may therefore be less potent as a driver of company performance. Nonetheless, it is incrementally positive for environmental markets. We are particularly pleased to see efforts to ease permitting for clean energy infrastructure, which has represented a bottleneck in recent years.
1 https://www.energy.gov/lpo/inflation-reduction-act-2022
2 https://ec.europa.eu/commission/presscorner/detail/en/ip_23_510
3 https://ec.europa.eu/commission/presscorner/detail/en/statement_23_521
China's drive towards technology independence
Increased geopolitical tensions between China and the West are leading to the reconstitution of global supply chains, including in key environmental technologies. China has long pursued policies aimed at reducing dependence on foreign technology and boosting homegrown innovation. This drive for technological independence and self-sufficiency has intensified in recent years and is supporting the emergence of China-based champions that are displacing multinational giants in supplying the domestic market with high-end clean technologies.
Automation is one sector which benefits from both this drive for technology independence and a push for higher industrial energy efficiency. Here, we as Manager have leveraged the experience of our team on the ground in Hong Kong to make IEM's first investment in a China A-share company. Shenzhen Inovance (Industrial Energy Efficiency, China) is emerging as one of the top players in industrial automation and EV components. It produces inverters, servo motors, industrial robots, EV powertrain components and other products aimed at optimising energy usage for industrial automation equipment and electric vehicles.
This is part of a broader trend towards the emergence of companies in the region that dominate niches in fast‑growing areas of the new economy. Their focus on technological innovation and leadership provides high barriers to entry to competitors and can help protect profit margins. We continue to work closely with our Asian team to identify additional attractive investments.
Emerging opportunities in artificial intelligence
Recent leaps forward in the development of generative artificial intelligence ("AI") have triggered intense debate about the implications of this technology. The launch in November 2022 of ChatGPT and the release in February of OpenAI's GPT-4 large language model have drawn attention to the far-reaching implications of a potentially transformative technology.
There is considerable concern about the impact of AI on jobs, society and politics, and even the existential threat it could pose to humankind. Its defenders, on the other hand, argue that it could lead to breakthroughs in medicine or in technologies to tackle climate change. The reality, in the near future at least, is likely to be more prosaic, but impactful nonetheless. Some of the Company's holdings are already deploying AI to help deliver efficiencies in the pursuit of a more sustainable global economy, or are exposed to fast-growing parts of the emerging AI ecosystem.
For example, an immediate implication of rising AI adoption is an increase in the power density of data centres; this makes power management even more important. Monolithic Power Systems (Digital Infrastructure, US) works closely with graphic processing unit manufacturers like Nvidia to deliver superior power management, reduce thermal leaks and enable the deployment of AI from a hardware perspective.
Downstream, IEM has exposure through our investments in the Digital Infrastructure sub-sector to software companies that are translating AI to tangible use-cases in end-markets such as manufacturing, construction, logistics and agriculture. Digital Infrastructure holdings like PTC (US) and Altair Engineering (US) enable efficiencies during the product design stage using generative design, reduce wastage in manufacturing with more automation and enhanced quality inspection and enable connected operating environments with applications like predictive maintenance. Descartes (Canada) uses AI to deliver a more efficient logistics network and optimise fleet route planning, while Trimble (US) enables efficiencies in construction, using generative design and better project planning, and in agriculture, through location-based and data-informed precision agriculture solutions.
ABSOLUTE PERFORMANCE CONTRIBUTORS AND DETRACTORS
Contributors
As noted above, the Digital Infrastructure sector delivered strong performance from industrial software holdings Altair and PTC, both US, on accelerating uptake of software across industrial markets and solid growth in 'sticky' subscription revenues for both companies. In power management chips, Monolithic Power delivered solid earnings from power management solutions across a broadening range of industries, in addition to tailwinds from AI.
There are early signs of recovery in US residential construction, driven by low inventories of new homes, stabilisation of house prices and mortgage rates, and an end to de-stocking in building material supply chains. Across IEM, there is 19% aggregate exposure to construction. Driving recovery from weakness in 2022 were Pentair and Zurn Elkay Water Solutions (both Water Distribution & Infrastructure, US), wood plastic composite decking company Azek (Recycled & Recyclable Products, US) and Lennox (Buildings Energy Efficiency, US). The portfolio is well-diversified across regions and categories, with exposure to residential and non-residential, and new build and refurbishing markets. We see significant potential from this segment, as investors increasingly look to the next construction cycle.
Detractors
In natural ingredients, we saw weakness in consumer-facing markets, with destocking and soft end-market demand. DSM-Firmenich (Sustainable Agriculture, Switzerland) suffered from low volumes and prices for vitamins for animal and human nutrition. Croda (Recycled, Recyclable Products & Biomaterials, UK), was hit by weaker personal care markets and Corbion (Sustainable Agriculture, Netherlands) faced lower demand for polylactic acid for bioplastics, with a focus in the industry on lower-cost alternatives. We selectively added to these holdings during the Period, given attractive valuations and their compelling long-term substitution stories.
Renewable energy independent power producers faced concerns about the outlook for returns on new projects, given supply chain inflation (especially for wind turbines) and rising interest rates. This led to underperformance, especially of Northland Power (Canada) given its focus on offshore wind with long lead times and complex supply chains, and of EDP Renovaveis (Portugal). We maintain confidence in these names, based on contractual structures which allow for inflation recovery, strong demand for renewable power purchase agreements and management confidence in achievable returns. We added to both holdings during the Period.
PERFORMANCE CONTRIBUTION ANALYSIS
| 6 MONTHS ENDED | 6 MONTHS ENDED | |||
| 30 JUNE 2023 | 30 JUNE 2023 | |||
| PERFORMANCE RELATIVE TO MSCI ACWI | % | PERFORMANCE RELATIVE TO FTSE ET100 | % | |
| NAV total return | 3.4 | NAV total return | 3.4 | |
| MSCI ACWI total return | 7.8 | FTSE ET100 total return | 14.7 | |
| Relative performance | (4.4) | Relative performance | (11.3) | |
| Analysis of relative performance | Analysis of relative performance | |||
| Portfolio total return | 4.1 | Portfolio total return | 4.1 | |
| MSCI ACWI total return | 7.8 | FTSE ET100 total return | 14.7 | |
| Portfolio underperformance | (3.7) | Portfolio outperformance | (10.6) | |
| Borrowing: | Borrowing: | |||
| Gearing effect | - | Gearing effect | - | |
| Finance costs | (0.1) | Finance costs | (0.1) | |
| Management fee | (0.4) | Management fee | (0.4) | |
| Other expenses | (0.1) | Other expenses | (0.1) | |
| Trading costs | (0.1) | Trading costs | (0.1) | |
| Share transactions: | Share transactions: | |||
| Buy-backs | 0.1 | Buy-backs | (0.1) | |
| Tax | (0.1) | Tax | (0.1) | |
| Total relative NAV performance | (4.4) | Total relative NAV performance | (11.3) |
PORTFOLIO POSITIONING, ACTIVITY, VALUATION AND RISK
At the end of the Period, the Company held a well-diversified portfolio of 61 listed companies. Consistent with our year end report, we maintained a balance of cyclical and defensive holdings, with an emphasis on quality throughout, with small increases in Asian exposure.
Our activity over the Period focused on two aspects. First, we continued to look for defensive opportunities. We added Dabur (Recycled, Recyclable Products and Biomaterials, India) a leading supplier of natural ingredients into food and personal care markets in India. It produces substitutes for polluting synthetic and fossil fuel-derived products, with strong market share in fast growing markets.
Second, we sought out strong cyclical companies at depressed valuations. We invested in Kingspan (Buildings Energy Efficiency, Ireland) a previous holding we exited in April 2021 based on expensive valuation. We recognise its historical controversy in relation to the Grenfell Tower tragedy in the UK in 2017 but have been reassured by the comprehensive remedial action the company has taken and see a valuation opportunity in the current EU construction downturn. The company has compelling long-term growth prospects from the increasing penetration of high-performance insulation materials, together with recently added opportunities in daylighting, district heating and roofing/weatherproofing.
During the Period we fully exited Airtac (Industrial Energy Efficiency, Taiwan) at a profit following strong performance.
The portfolio was valued at 19.6 times next 12-months earnings at the end of the Period, with a premium of 21% to MSCI ACWI. Absolute valuation is currently in line with the long-term average and the premium to MSCI ACWI is now below long-term average levels. We find current valuation levels attractive, especially against the backdrop of a steadily strengthening investment hypothesis. Continued earnings delivery will remain key to delivering long-term outperformance.
Looking forward, we have a strong bench of approved names for investment across a range of environmental market segments. We particularly see opportunities for new investments in Asia and in companies exposed to the circular economy.
OUTLOOK
The macroeconomic picture remains challenging, with residual uncertainty regarding the trajectory of inflation. There is potential for interest rates to remain elevated beyond current market expectations, which would create headwinds for the growth-oriented equities where IEM focuses. However, it is likely that we are towards the end of the tightening cycle, and there is considerable potential for an uplift in performance caused by investors rotating back into growth stocks and into the small- and mid-cap companies in which IEM invests.
We are also encouraged by continued strong policy support for environmental markets, even against a challenging macroeconomic backdrop. The long-term investment case, based on the ongoing and increasingly urgent need to address environmental challenges, remains firmly intact, with compelling valuations contributing to our support for putting in place long term borrowings and increasing the Company's gearing.
Impax Asset Management (AIFM) Limited
2 August 2023
Ten Largest Holdings
As at 30 June 2023 and 31 December 2022
| 1 | ||
| 2.7% of net assets (2022: 2.8%) |
PTC - United States | www.ptc.com |
| PTC provides software solutions that are deployed in industrial design and manufacturing. The company's software is used to design products (computer-aided design - CAD), monitor how they are being manufactured and manage them throughout their lifetime (product lifecycle management - PLM). Importantly, PTC's industrial connectivity platform allows customers to connect 'smart' devices and analyse associated data enabling applications like remote monitoring and predictive maintenance. Operating in a market with high barriers to entry and low customer turnover, using its established market position, PTC is emerging as a leader in industrial 'Internet of Things' and benefitting from high recurring revenues. | ||
| 2 | ||
| 2.5% of net assets (2022: 2.9%) |
CLEAN HARBORS - United States | www.cleanharbors.com |
| Clean Harbors is a market leader in the US hazardous waste sector with a strong market position and pricing power in a business with high barriers to entry. It provides collection, transportation, recycling, treatment and disposal services and holds dominant positions in waste to energy plants, where new permits are becoming rare. It is also a leading responder to emergency clean-ups, for example post extreme weather events such as hurricanes and for the COVID-19 crisis. | ||
| 3 | ||
| 2.5% of net assets (2022: 2.1%) |
LITTELFUSE - United States | www.littelfuse.com |
| Littelfuse sells fuses, and other circuit protection devices, for use in the automotive, electronics and general industrial markets. There is significant growth in electrical circuits across the global economy - greater protection, control and sensing within circuits can enhance efficiency. To meet net zero ambitions in the coming three decades, more and more products will have to run off electricity and thus the demand for Littelfuse's circuit protection, sensor and connector goods should increase. | ||
| 4 | ||
| 2.4% of net assets (2022: 2.5%) |
SPIRAX-SARCO ENGINEERING - United Kingdom | www.spiraxsarco.com |
| Spirax-Sarco Engineering is a world leader in the control and efficient use of steam, electrical thermal energy solutions and peristaltic pumping and associated fluid path technologies. Its Steam Specialties and Electric Thermal Solutions businesses provide products and expertise that improve production efficiency and help customers meet their environmental sustainability targets. Its diverse end markets and broad customer base underpin its resilience. 50% of Group revenue is derived from defensive, less cyclical, end markets such as food, pharmaceuticals and water & wastewater, and 85% of Group revenue is derived from annual maintenance and operating budgets, rather than large projects from capex budgets. | ||
| 5 | ||
| 2.4% of net assets (2022: 2.3%) |
NORTHLAND POWER - Canada | www.northlandpower.com |
| Northland owns, or has economic interests in, power generation facilities in Canada, the United States and Germany. Its assets produce electricity from renewable energy sources - such as solar, wind and biomass - and natural gas. The company maintains an active development and construction program for additional new power generation opportunities and is now the fourth largest developer of offshore wind globally. Northland has a strong project development track record as well as a solid future pipeline, which should drive growth. | ||
| 6 | ||
| 2.4% of net assets (2022: 2.4%) |
GRAPHIC PACKAGING - United States | www.graphicpkg.com |
| Graphic Packaging is a provider of paperboard and integrated paperboard packaging to multinational beverage and consumer products companies. It is increasingly contributing to the displacement of single-use plastic packaging and tableware, via its fibre-based packaging products. Some of its packaging inputs are drawn from over 50% recycled material. Graphic is poised to benefit as the US packaging sector consolidates, which is improving industry returns. Graphic will benefit in the long term from trends away from singe use plastic packaging and towards the greater use of recyclable materials. | ||
| 7 | ||
| 2.4% of net assets (2022: 2.3%) |
CRODA INTERNATIONAL - United Kingdom | www.croda.com |
| Croda International is the holding company for a group of companies that manufacture a diverse range of chemicals and chemical products, including oleochemicals and industrial chemicals. Croda supplies its items to companies that specialise in the personal care, pharmaceutical, plastics, food processing, nutrition, fire prevention, engineering, and automotive industries. | ||
| 8 | ||
| 2.3% of net assets (2022: 2.6%) |
BRAMBLES - Australia | www.brambles.com |
| Brambles is a global support services group which provides pallet and plastic container recycling and pooling services. Pallets, used broadly in shipping and supply chains around the world, are collected, cleaned, repaired and reused by Brambles, aligning well with the concept of a "circular economy". The company also enables pallet and container pooling, which increases efficiency and decreases pallet waste. When required, Brambles makes new pallets from wood sourced from certified sustainable plantations. As the leader in the industry, Brambles' client base is stable and diversified, with many in food and daily necessities. | ||
| 9 | ||
| 2.3% of net assets (2022: 2.1%) |
DARLING INGREDIENTS - United States | www.darlingii.com |
| Darling is a leading company extracting value added products from food waste. The company collects bakery, abattoir, cooking oil and other food waste and converts it into animal feed, glycerine and advanced biodiesel. Biodiesel production is achieved via its "Diamond Green Diesel" ("DGD") joint venture with Valero, selling into the attractive Californian markets. With a dominant position in the US and significant expansion of DGD ongoing, the company is well positioned for growth and strong cashflow generation. | ||
| 10 | ||
| 2.3% of net assets (2022: 1.7%) |
EDP RENOVAVEIS - Portugal | www.edpr.com |
| EDPR is a renewable energy company which engages in the development, construction, and operation of wind farms and solar plants. It is a leading renewable energy developer with high quality assets in Europe and the US and with a strong pipeline in Europe and the Americas. EDP ranks fourth globally in terms of ownership of renewables assets. It is a market leader with an excellent operating history for existing plants, an ongoing ability to reduce costs, and has an effective asset rotation strategy that takes advantage of demand for operating assets. |
Top Thirty Portfolio Investments
| MARKET | % OF | |||
| AS AT 30 JUNE 2023 | COUNTRY OF MAIN | VALUE | NET | |
| COMPANY | SECTOR | LISTING | £'000 | ASSETS |
| PTC | Digital Infrastructure | United States | 34,360 | 2.7 |
| Clean Harbors | Resource Efficiency & Waste Management | United States | 32,450 | 2.5 |
| Littelfuse | Transport Solutions | United States | 31,970 | 2.5 |
| Spirax-Sarco Engineering | Energy Management & Efficiency | United Kingdom | 31,517 | 2.4 |
| Northland Power | Alternative Energy | Canada | 31,389 | 2.4 |
| Graphic Packaging | Resource Efficiency & Waste Management | United States | 31,195 | 2.4 |
| Croda International | Resource Efficiency & Waste Management | United Kingdom | 30,469 | 2.4 |
| Brambles | Resource Efficiency & Waste Management | Australia | 30,326 | 2.3 |
| Darling Ingredients | Resource Efficiency & Waste Management | United States | 29,453 | 2.3 |
| EDP Renovaveis | Alternative Energy | Portugal | 29,393 | 2.3 |
| Top ten holdings | 312,522 | 24.2 | ||
| Stericycle | Resource Efficiency & Waste Management | United States | 29,315 | 2.3 |
| Bucher Industries | Sustainable Food & Agriculture | Switzerland | 29,128 | 2.3 |
| Aalberts Industries | Water Infrastructure & Technologies | Netherlands | 28,903 | 2.2 |
| DSM-Firmenich | Sustainable Food & Agriculture | Switzerland | 28,538 | 2.2 |
| Rayonier | Sustainable Food & Agriculture | United States | 27,792 | 2.2 |
| Pentair | Water Infrastructure & Technologies | United States | 27,220 | 2.1 |
| Eurofins Scientific | Sustainable Food & Agriculture | France | 27,056 | 2.1 |
| Advanced Drainage Systems | Water Infrastructure & Technologies | United States | 26,099 | 2.0 |
| Generac Holdings | Energy Management & Efficiency | United States | 25,713 | 2.0 |
| Lem Holding | Energy Management & Efficiency | Switzerland | 25,330 | 2.0 |
| Top twenty holdings | 587,616 | 45.6 | ||
| Solaregdge Technologies | Alternative Energy | United States | 24,355 | 1.9 |
| Monolithic Power Systems | Digital Infrastructure | United States | 23,974 | 1.9 |
| Donaldson | Transport Solutions | United States | 23,727 | 1.8 |
| Lennox International | Energy Management & Efficiency | United States | 23,384 | 1.8 |
| Trimble Navigation | Digital Infrastructure | United States | 23,329 | 1.8 |
| Repligen | Resource Efficiency & Waste Management | United States | 23,303 | 1.8 |
| Indraprastha Gas | Alternative Energy | India | 23,136 | 1.8 |
| Altair Engineering | Digital Infrastructure | United States | 22,926 | 1.8 |
| American Water Works | Water Infrastructure & Technologies | United States | 22,575 | 1.7 |
| CIA Saneamento Basico | Water Infrastructure & Technologies | Brazil | 22,391 | 1.7 |
| Top thirty holdings | 820,716 | 63.6 | ||
| Other quoted holdings | 507,398 | 39.2 | ||
| Portfolio Total | 1,328,114 | 102.8 | ||
| Cash | 14,627 | 1.1 | ||
| Other net liabilities | (50,902) | (3.9) | ||
| Total net assets | 1,291,839 | 100.0 |
All investment is in equity securities unless otherwise stated.
The full portfolio is published each month, quarterly in arrears on the Company's website
www.impaxenvironmantalmarkets.co.uk
Interim Management Report
The Directors are required to provide an Interim Management Report in accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance and Transparency Rules ("DTR"). The Directors consider that the Chair's Statement on pages 2 and 3 and the Manager's Report on pages 4 to 7 of the Half-yearly Financial Report, provide details of the important events which have occurred during the six months ended 30 June 2023 ("Period") and their impact on the financial statements. The statement on related party transactions and the Directors' Statement of Responsibility (below), the Chair's Statement and the Manager's Report together constitute the Interim Management Report of the Company for the Period. The outlook for the Company for the remaining six months of the year ending 31 December 2023 is discussed in the Chair's Statement and the Manager's Report.
Details of the largest ten investments held at the Period end are provided on pages 9 to 10 of the Half-Yearly Report and the structure of the portfolio at the Period end is analysed on page 8 of the Half-yearly Report.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties facing the Company are summarised below:
(i) economic and market risks - price movements of the Company's investments are highly correlated to market movements and general economic conditions. This is even more so for investee companies with small market capitalisation;
(ii) environmental markets - the Company invests in companies operating in environmental markets. There is a risk in such markets that change to governmental support, technology costs or customer demand may have an adverse effect;
(iii) share price trades at excessive premium or discount to net asset value - returns to shareholders may be affected by the level of discount or premium at which the Company's shares might trade;
(iv) financing risk - the Company may borrow money for investment purposes and should investment markets fall in value, any borrowing will enhance the level of loss. Capacity constraints on the availability of desirable companies for investment may mean the Company is unable to achieve the level of gearing wanted. Higher interest rates will increase the cost of borrowing for the Company and borrowings may not be available of acceptable types, amounts and/or interest rates;
(v) failure or breach of information security (IT) - including cyber-security and physical security risks - failure of IT or physical security could potentially lead to breaches of confidentiality, data records being compromised and the inability to make investment decisions. In addition, unauthorised physical access to buildings could lead to damage or loss of equipment; and
(vi) operational risk - the management of the investment portfolio and other key services have been delegated to third party service providers. Failure by any service provider to carry out its obligations to the Company could have a material adverse effect on the Company's performance or prevent the accurate reporting and monitoring of the Company's financial position.
Emerging risks are considered by the Board at its quarterly meetings and by the Audit Committee as part of its risk management and internal control review. Failure to identify emerging risks may cause reactive actions rather than being proactive and the Company could be forced to change its structure, objective or strategy and, in worst case, could cause the Company to become unviable or otherwise fail.
Specifically, the risks posed by global economic conditions including higher inflation and interest rates, the war in Ukraine and the secondary effects of the COVID-19 pandemic continue to be monitored by the Board. The Manager and other key service providers provide periodic reports to the Board on market impact and operational resilience to these events. The Board is satisfied that the key service providers have the ability to continue their operations efficiently in a remote or virtual working environment, whilst safeguarding their staff.
The Company's Annual Report for the year ended 31 December 2022 contains more detail on the Company's principal risks and uncertainties, including the Board's ongoing process to identify, and where possible mitigate, emerging risks (pages 34 to 38). Detail is also provided on other risks that, whilst not being identified as principal risks after mitigation controls are applied, are relevant risks to the Company. The Annual Report can be found on the Company's website at www.impaxenvironmentalmarkets.co.uk.
In the view of the Board the principal risks and uncertainties facing the business are broadly the same as those in the published annual report and financial statements for the year ended 31 December 2022.
RELATED PARTY TRANSACTIONS
Details of the investment management arrangements are 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.
GOING CONCERN
This Half-yearly Financial Report has been prepared on a going concern basis. The Directors consider this the appropriate basis as they 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 report. In reaching this conclusion, the Directors considered the liquidity of the Company's portfolio of investments, as well as its cash position, income and expense flows. The Company's net assets as at 30 June 2023 were £1,292 million, of which £1,328 million was in quoted investments and cash totalled £14.6 million. The total expenses (excluding finance costs and taxation) for the six months ended 30 June 2023 were £5.5 million, while income was £12.6 million.
The Company's current borrowing facilities totalling £50.3 million with Scotiabank expire on 6 September 2023. As announced on 20 July 2023, the Company has agreed, and is committed, to issue €60 million (circa £55 million) of privately placed notes, the details of which are set out in the Chair's Statement. Funding is expected to be 1 September 2023 and will be used to repay the Scotiabank borrowings.
In addition, as also set out in the Chair's Statement, the Board is in advanced discussions with Scotiabank for new short term facilities of £35 million.
The Directors have considered the above changes in the borrowing facilities, including their timings, when considering going concern. The Directors also considered the impact of higher inflation and interest rates and possible recession as well as the war in Ukraine on the Company's portfolio of investments and that any future prolonged and deep market decline would likely lead to falling values in the Company's investments and/or reduced dividend receipts. However, as explained above, the Company has more than sufficient liquidity available to meet its expected future obligations.
Board of Directors
2 August 2023
DIRECTORS' STATEMENT OF RESPONSIBILITY
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 and gives a true and fair view of the assets, liabilities, financial position and return of the Company; and
• 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 Guidance and Transparency Rules.
Glen Suarez
Chair of the Board of Directors
2 August 2023
Condensed Income Statement
Unaudited
| SIX MONTHS ENDED 30 JUNE 2023 | SIX MONTHS ENDED 30 JUNE 2022 | ||||||
| REVENUE | CAPITAL | TOTAL | REVENUE | CAPITAL | TOTAL | ||
| NOTES | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains/(losses) on investments | - | 41,677 | 41,677 | - | (255,299) | (255,299) | |
| Net foreign exchange losses | - | (2,192) | (2,192) | - | (2,355) | (2,355) | |
| Income | 4 | 12,569 | - | 12,569 | 11,625 | - | 11,625 |
| Investment management fees | (1,197) | (3,592) | (4,789) | (1,379) | (4,136) | (5,515) | |
| Other expenses | (754) | - | (754) | (664) | - | (664) | |
| Return/(loss) on ordinary activities before finance costs and taxation | 10,618 | 35,893 | 46,511 | 9,582 | (261,790) | (252,208) | |
| Finance costs | 5 | (385) | (1,155) | (1,540) | (189) | (566) | (755) |
| Return/(loss) on ordinary activities before taxation | 10,233 | 34,738 | 44,971 | 9,393 | (262,356) | (252,963) | |
| Taxation | 6 | (1,142) | (295) | (1,437) | (1,930) | 579 | (1,351) |
| Return/(loss) on ordinary activities after taxation | 9,091 | 34,443 | 43,534 | 7,463 | (261,777) | (254,314) | |
| Return/(loss) per ordinary share | 7 | 3.00p | 11.36p | 14.36p | 2.46p | (86.29p) | (83.83p) |
The total column of the Income Statement is the profit and loss account of the Company.
The supplementary revenue and capital columns are provided for information purposes in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
Return on ordinary activities after taxation is also the "Total comprehensive income for the Period".
The accompanying notes form part of these financial statements.
Condensed Balance Sheet
Unaudited
| AS AT | AS AT | ||
| 30 JUNE | 31 DECEMBER | ||
| 2023 | 2022* | ||
| NOTES | £'000 | £'000 | |
| Fixed assets | |||
| Investments at fair value through profit or loss | 3 | 1,328,114 | 1,302,605 |
| Current assets | |||
| Dividends receivable | 2,245 | 512 | |
| Sales awaiting settlement | 1,669 | - | |
| Taxation recoverable | 42 | 90 | |
| Other debtors | 53 | 108 | |
| Cash and cash equivalents | 14,627 | 26,327 | |
| 18,636 | 27,037 | ||
| Creditors: amounts falling due within one year | |||
| Purchases awaiting settlement | (1,271) | - | |
| Trade and other payables | (2,866) | (1,929) | |
| Bank loans and credit facilities | 8 | (50,310) | (51,606) |
| (54,447) | (53,535) | ||
| Net current liabilities | (35,811) | (26,498) | |
| Total assets less current liabilities | 1,292,303 | 1,276,107 | |
| Creditors: amounts falling due after more than one year | |||
| Capital gains tax provision | (464) | (169) | |
| Net assets | 1,291,839 | 1,275,938 | |
| Capital and reserves: equity | |||
| Share capital | 9 | 30,562 | 30,562 |
| Share premium account | 423,098 | 423,098 | |
| Capital redemption reserve | 9,877 | 9,877 | |
| Share purchase reserve | 121,843 | 141,872 | |
| Capital reserve | 691,816 | 657,373 | |
| Revenue reserve | 14,643 | 13,156 | |
| Shareholders' funds | 1,291,839 | 1,275,938 | |
| Net assets per ordinary share | 10 | 431.57p | 419.49p |
* Audited
Approved by the Board of Directors and authorised for issue on 2 August 2023.
Impax Environmental Market plc incorporated in England with registered number 4348393.
The accompanying notes form part of these financial statements.
Statement of Changes in Equity
Unaudited
| CAPITAL | ||||||||
| SHARE | REDEMP- | SHARE | ||||||
| SHARE | PREMIUM | TION | PURCHASE | CAPITAL | REVENUE | |||
| SIX MONTHS ENDED | CAPITAL | ACCOUNT | RESERVE | RESERVE | RESERVE | RESERVE | TOTAL | |
| 30 JUNE 2023 | NOTE | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Opening equity as at 1 January 2023 | 30,562 | 423,098 | 9,877 | 141,872 | 657,373 | 13,156 | 1,275,938 | |
| Dividend paid | 11 | - | - | - | - | - | (7,604) | (7,604) |
| Cost of share buybacks | 9 | - | - | - | (20,029) | - | - | (20,029) |
| Return for the period | - | - | - | - | 34,443 | 9,091 | 43,534 | |
| Closing equity as at 30 June 2023 | 30,562 | 423,098 | 9,877 | 121,843 | 691,816 | 14,643 | 1,291,839 | |
| CAPITAL | ||||||||
| SHARE | REDEMP- | SHARE | ||||||
| SHARE | PREMIUM | TION | PURCHASE | CAPITAL | REVENUE | |||
| SIX MONTHS ENDED | CAPITAL | ACCOUNT | RESERVE | RESERVE | RESERVE | RESERVE | TOTAL | |
| 30 JUNE 2022 | NOTE | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Opening equity as at 1 January 2022 | 29,806 | 388,262 | 9,877 | 147,855 | 894,915 | 8,923 | 1,479,638 | |
| Dividend paid | 11 | - | - | - | - | - | (4,471) | (4,471) |
| Net proceeds from issue of new shares | 9 | 756 | 34,162 | - | - | - | - | 34,918 |
| Net proceeds of shares sold from treasury | 9 | - | 57 | - | 452 | - | - | 509 |
| Cost of share buybacks | 9 | - | - | - | (7,093) | - | - | (7,093) |
| Return for the period | - | - | - | - | (261,777) | 7,463 | (254,314) | |
| Closing equity as at 30 June 2022 | 30,562 | 422,481 | 9,877 | 141,214 | 633,138 | 11,915 | 1,249,187 |
The accompanying notes form part of these financial statements.
Condensed Statement of Cash Flows
Unaudited
| SIX MONTHS | SIX MONTHS | ||
| ENDED | ENDED | ||
| 30 JUNE 2023 | 30 JUNE 2022 | ||
| NOTES | £'000 | £'000 | |
| Operating activities | |||
| Return/(loss) on ordinary activities before finance costs and taxation* | 46,511 | (252,208) | |
| Less: Tax deducted at source on income from investments | (1,142) | (1,930) | |
| Foreign exchange non cash flow (gains/losses) | (1,296) | 2,689 | |
| Adjustment for (gains)/losses on investments | (41,677) | 255,299 | |
| Increase in other debtors | (1,630) | (1,726) | |
| Increase in other creditors | 923 | 425 | |
| Net cash flow from operating activities | 1,689 | 2,549 | |
| Investing activities | |||
| Sale of investments | 281,452 | 116,426 | |
| Purchase of investments | (265,682) | (154,532) | |
| Net cash flow used in investing | 15,770 | (38,106) | |
| Financing activities | |||
| Equity dividends paid | (7,604) | (4,471) | |
| Payment to revolving credit facility | - | (87) | |
| Finance costs paid | (1,526) | (813) | |
| Net proceeds from issue of new shares | 9 | - | 34,918 |
| Net proceeds of shares sold from treasury | 9 | - | 509 |
| Net cost of share buybacks | 9 | (20,029) | (7,093) |
| Net cash flow from financing | (29,159) | 22,963 | |
| (Decrease)/increase in cash | (11,700) | (12,594) | |
| Cash and cash equivalents at start of period | 26,327 | 28,319 | |
| Cash and cash equivalents at end of period | 14,627 | 15,725 |
* Cash inflow includes dividend income received during the Period to 30 June 2023 of £10,467,000 (30 June 2022: £9,921,000).
Changes in Net Debt Note
| SIX MONTHS | SIX MONTHS | |
| ENDED | ENDED | |
| 30 JUNE 2023 | 30 JUNE 2022 | |
| £'000 | £'000 | |
| Net debt at start of period | (25,279) | (20,794) |
| (Decrease)/increase in cash and cash equivalents | (11,700) | (12,594) |
| Foreign exchange movements | 1,296 | (2,689) |
| Repayment of revolving credit facility | - | 87 |
| Net debt at end of period | (35,683) | (35,990) |
The accompanying notes form part of these financial statements.
Notes to the Financial Statements
1 ACCOUNTING POLICIES
The Half-yearly Condensed Financial Statements have been prepared in accordance with FRS 104 Interim Financial Reporting issued by the Financial Reporting Council ('FRC') and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies in July 2022.
This Half-yearly Financial Report is unaudited and does not include all of the information required for a full set of 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 2022. The Annual Report and Accounts for the year ended 31 December 2022 were prepared in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' ('FRS 102') and received an unqualified audit report. The financial information for the year ended 31 December 2022 in this Half-yearly Financial Report has been extracted from the audited Annual Report and Accounts for the year ended 31 December 2022. The accounting policies in this Half-yearly Financial Report are consistent with those applied in the Annual Report for the year ended 31 December 2022.
Management fees and finance costs are charged 75% to capital in the Condensed Income Statement.
2 GOING CONCERN
The Directors have adopted the going concern basis in preparing the accounts. Details of the Directors' assessment of the going concern status of the Company, which considered the adequacy of the Company's resources and the impacts of higher inflation and interest rates and possible recession and war in Ukraine, are given in the Interim Management Report.
3 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Classification of financial instruments
Securities of companies quoted on regulated stock exchanges and the Company's holdings in unquoted companies have been classified as 'at fair value through profit or loss' and are initially recognised on the trade date and measured at fair value in accordance with sections 11 and 12 of FRS 102. 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.
Changes in fair value are included in the Condensed Income Statement as a capital item.
The classifications and their descriptions are below:
FRS 102 requires classification of financial instruments within the fair value hierarchy be determined by reference to the source of inputs used to derive the fair value and the lowest level input that is significant to the fair value measurement as a whole. The classifications and their descriptions are below:
Level 1
The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2
Level 2 investments are holdings in companies with no quoted prices. 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.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
The classification of the Company's investments held at fair value is detailed in the table below:
| 30 JUNE 2023 | 31 DECEMBER 2022 | |||||||
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investments at fair value through | ||||||||
| profit or loss | ||||||||
| - Quoted | 1,328,114 | - | 1,328,114 | 1,302,605 | - | - | 1,302,605 | |
| 1,328,114 | - | 1,328,114 | 1,302,605 | - | - | 1,302,605 |
4 INCOME
| SIX MONTHS | SIX MONTHS | |
| ENDED | ENDED | |
| 30 JUNE 2023 | 30 JUNE 2022 | |
| £'000 | £'000 | |
| Dividends from UK listed investments | 889 | 961 |
| Dividends from overseas listed investments | 11,311 | 10,648 |
| Bank interest received | 369 | 16 |
| Total Income | 12,569 | 11,625 |
5 FINANCE COSTS
| SIX MONTHS ENDED 30 JUNE 2023 | SIX MONTHS ENDED 30 JUNE 2022 | |||||
| REVENUE | CAPITAL | TOTAL | REVENUE | CAPITAL | TOTAL | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Interest charges | 383 | 1,149 | 1,532 | 187 | 560 | 747 |
| Direct finance costs | 2 | 6 | 8 | 2 | 6 | 8 |
| Total | 385 | 1,155 | 1,540 | 189 | 566 | 755 |
Facility arrangement costs amounting to £72,000 are amortised over the life of the facility on a straight-line basis.
6 TAXATION
Analysis of charge in the year
| SIX MONTHS ENDED 30 JUNE 2023 | SIX MONTHS ENDED 30 JUNE 2022 | |||||
| REVENUE | CAPITAL | TOTAL | REVENUE | CAPITAL | TOTAL | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Overseas taxation | 1,142 | - | 1,142 | 1,930 | - | 1,930 |
| Increase/(decrease) on capital gains tax provision | - | 295 | 295 | - | (579) | (579) |
| Taxation | 1,142 | 295 | 1,437 | 1,930 | (579) | 1,351 |
The capital gains tax provision represents an estimate of the amount of tax provisionally payable by the Company on direct investment in Indian equities. It is calculated based on the long term or short term nature of the investments and the unrealised gain thereon at the applicable tax rate at the Period end.
Movements on the capital gains tax provision for the period
| SIX MONTHS | SIX MONTHS | |
| ENDED | ENDED | |
| 30 JUNE 2023 | 30 JUNE 2022 | |
| £'000 | £'000 | |
| Provision brought forward | 169 | 579 |
| Increase/(decrease) in provision in period | 295 | (579) |
| Provision carried forward | 464 | - |
7 RETURN PER SHARE
| SIX MONTHS | SIX MONTHS | |
| ENDED | ENDED | |
| 30 JUNE 2023 | 30 JUNE 2022 | |
| £'000 | £'000 | |
| Revenue return after taxation (£'000) | 9,091 | 7,463 |
| Capital return after taxation (£'000) | 34,443 | (261,777) |
| Total net return after tax (£'000) | 43,534 | (254,314) |
| Weighted average number of ordinary shares | 303,095,575 | 303,362,501 |
Net return per ordinary share is based on the above totals of revenue and capital and the weighted average number of ordinary shares in issue during each period.
There is no dilution to return per share as the Company has only ordinary shares in issue.
8 BANK LOANS AND CREDIT FACILITY
On 6 September 2018, the Company entered into five-year fixed rate multi-currency US$20 million and £15 million loans with The Bank of Nova Scotia, London Branch ("Scotiabank"). The loans expire on 6 September 2023.
The Company also has a £20 million multi-currency revolving credit facility ("RCF") with Scotiabank which was fully drawn down in two currencies, US$12.5 million and £10 million, throughout the Period. The facility expires on 6 September 2023.
A summary of the Company's loans follows.
| 30 JUNE 2023 | 31 DECEMBER 2022 | ||||
| LOAN | LOAN | ||||
| CURRENCY | CURRENCY | ||||
| INTEREST RATE | AMOUNT | £'000 | AMOUNT | £'000 | |
| Bank Loans - Fixed Rate | |||||
| Sterling | 2.910% | 15,000,000 | 15,000 | 15,000,000 | 15,000 |
| Non-sterling | 4.504% | 20,000,000 | 15,728 | 20,000,000 | 16,531 |
| 30,728 | 31,531 | ||||
| RCF-floating rate | |||||
| Sterling | Six month SOFR+1.7% | 10,000,000 | 10,000 | 10,000,000 | 10,000 |
| Non-sterling | Six month SONIA+1.7% | 12,185,017 | 9,582 | 12,185,017 | 10,075 |
| 50,310 | 51,606 |
The maturity profile of the bank loans and revolving credit facility follows:
| 30 JUNE | 31 DECEMBER | |
| 2023 | 2022 | |
| PAYABLE LESS THAN ONE YEAR | £'000 | £'000 |
| Bank loans payable less than one year | 30,728 | 31,531 |
| Revolving credit facility payable less than one year | 19,582 | 20,075 |
| 50,310 | 51,606 |
9 SHARE CAPITAL
| SIX MONTHS ENDED 30 JUNE 2023 |
SIX MONTHS ENDED 30 JUNE 2022 |
|||
| NUMBER | £'000 | NUMBER | £'000 | |
| Issued and fully paid shares of 10p each | ||||
| Brought forward | 304,167,039 | 30,416 | 298,061,439 | 29,806 |
| New shares issued in period | - | - | 7,562,100 | 756 |
| Shares bought back and held in treasury | (4,835,000) | (484) | (1,694,400) | (169) |
| Treasury shares issued in period | - | - | 112,900 | 11 |
| Carried forward | 299,332,039 | 29,932 | 304,042,039 | 30,404 |
| Treasury shares of 10p each | ||||
| Brought forward | 1,456,500 | 146 | - | - |
| Shares bought back and held in treasury | 4,835,000 | 484 | 1,694,400 | 169 |
| Issued in year | - | - | (112,900) | (11) |
| Carried forward | 6,291,500 | 630 | 1,581,500 | 158 |
| Share capital | 305,623,539 | 30,562 | 305,623,539 | 30,562 |
During the Period, 4,835,000 ordinary shares (2022: 1,694,400) have been bought back and placed into treasury at a total cost of £20,029,000 after purchase costs of £83,000.
Since the Period end and up to 31 July 2023, being the latest practical date before the publication of this Half-yearly Financial Report, a further 2,820,000 ordinary shares have been bought back and placed into treasury at a total cost of £11,598,000 after purchase costs of £46,000.
10 NET ASSET VALUE PER ORDINARY SHARE
| 30 JUNE | 31 DECEMBER | |
| 2023 | 2022 | |
| Net asset value (£'000) | £1,291,839 | £1,275,938 |
| Ordinary shares in issue (excluding shares held in treasury) | 299,332,039 | 304,167,039 |
| Net assets per ordinary share | 431.57p | 419.49p |
11 DIVIDENDS
(a) Dividends paid in the period
| 2023 | 2022 | |||
| RATE | £'000 | RATE | £'000 | |
| Second interim in lieu of final for the previous year | 2.50p | 7,604 | 1.50p | 4,471 |
(b) Dividends payable in respect of the period, which is the basis on which the requirements of s1158-1159 of the Corporation Tax Act 2010 are considered
| 2023 | 2022 | |||
| RATE | £'000 | RATE | £'000 | |
| First interim for the current year1 | 1.70p | 5,041 | 1.50P | 4,568 |
1 The first interim dividend payable is based upon 296,512,039 ordinary shares, which is the number of shares in issue on the 31 July 2023, being the latest practical date before the publication of this Half-yearly Financial Report.
12 TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the Period were with the Directors. There have been no material transactions between the Company and its Directors during the half year other than amounts paid to them in respect of expenses and remuneration for which there are no outstanding amounts payable at the half-year period end.
Fees payable to the Manager are shown in the Income Statement. As at 30 June 2023 the fee outstanding to the Manager was £2,397,000 (31 December 2022: £1,601,000).
13 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 information for the year ended 31 December 2022 has been extracted from the last published audited financial statements, unless otherwise stated. The audited financial statement has been delivered to the Registrar of Companies. BDO LLP reported on those accounts and their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.
This Half-yearly Financial Report was approved by the Board on 2 August 2023.
For further information contact:
| Impax Asset Management | [email protected] |
| Paul French | 0203 912 3032 |
| Montfort Communications | [email protected] |
| Gay Collins/Nita Shah/Lesley Wang | 07798 626282 |
| Apex Listed Companies Services (UK) Limited | 020 3327 9720 |
| Company Secretary |
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