SDCL tumbles as gearing exceeds investment policy, NAV falls

(Sharecast News) - Shares in SDCL Efficiency Income Trust tumbled on Monday after it reported a drop in net asset value per share and said that gearing had exceeded the investment policy. In results for the six months to 30 September, the company said net asset value per share fell to 87.6p from 90.6p at the end of March. This reflects "more cautious valuation assumptions amid market volatility", it said.

It also said that at 71.9% of NAV, gearing was above the investment policy limit of 65%, but that disposals were underway to reduce leverage.

SDCL said its portfolio valuation was £1.17bn at the end of September, up from £1.12bn at the end of March.

Chair Tony Roper said: "In light of volatile general market conditions, the board and investment manager have taken a more cautious view of certain valuation drivers and underlying assumptions.

"Conditions impacted the portfolio unevenly, with certain assets more exposed to policy and regulatory changes, particularly in the US, and to short-term macroeconomic factors such as energy and financial market volatility, while others have been largely protected or even benefitted. Valuations were also influenced by revised timelines for assets under construction and other asset management initiatives."

The company has a continuation vote at its AGM next year but said on Monday that it was unlikely to recommend investors vote in favour without some "material" success in making disposals.

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."

SDCL - in which activist investor Saba Capital recently took a 5% stake - invests mainly in energy efficiency projects.

At 1140 GMT, the shares were down 17.7% at 51.79p, making it the biggest loser on the FTSE 250.