SDCL Efficiency Income Trust PLC on Monday said it was targeting disposals to raise liquidity, after gearing rose above its investment policy limit.
The London-based investment trust focused on energy efficiency and decarbonisation said its net asset value fell 3.3% to 87.6 pence as at September 30 from 90.6p at March 31, reflecting more cautious valuation assumptions amid market volatility.
Pretax profit plunged to £1.7 million in the six months to September 30 from £35.1 million the year prior, with basic and diluted earnings per share reduced to 0.2 pence from 3.2p.
Investment income dropped to £7.3 million from £40.3 million.
SDCL said gearing at 71.9% of NAV as at September 30 is above the investment policy limit and that disposals are underway to reduce leverage.
Chair Tony Roper said: ‘The portfolio is broadly performing in line with expectations, yet we have seen little improvement in sentiment towards SEIT’s segment of the investment trust market in the past six months.’
‘We are acutely aware of the need to dispose of assets in order to reduce gearing levels, notwithstanding the challenging environment for asset sales. Our priority remains to make disposals but also to take action to find an alternative to the status quo, whilst ensuring that we deliver value for all shareholders,’ he added.
SDCL said it has issued a ‘clear instruction’ to the trust manager that no further borrowings are to be incurred until gearing is reduced below 65% of NAV.
‘The board and the Investment Manager are committed to achieving disposals to raise liquidity, to reduce gearing and in due course, to facilitate a return of capital to shareholders,’ the company said.
But SDCL warned this also has important implications for the portfolio.
‘As debt has become the primary source of capital for growth by those investments requiring capital, there is a risk that until such sources of capital - or any alternatives that are not borrowings - are available again, this could lead to further impacts on valuation where successful future growth is assumed in current valuations. This is clearly of concern to the board.’
Shares in SDCL plummeted 19% to 51.00 pence each in London on Monday morning.
SDCL said aggregate dividends of 3.18p per share were declared in the period, in line with guidance, and compared to 3.16p a year ago. Target dividend guidance remains 6.36p per share for the financial year to March 2026.
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