Premier Energy & Water has published its results for the year ended 31 December 2015. Over the period the fund underperformed the FTSE All-World Utilities Index, returning -4.3% on total assets as compared to a -2.7% return on the index. The gearing provided by the company’s zero dividend preference shares (2.89x at the end of December 2015) meant that the cum-income Ordinary Share Net Asset Value (“NAV”) fell from 196.23p at 31 December 2014, to 145.83p at 31 December 2015, a fall of 25.7%. The discount on the ordinary shares widened from 1.9% to 10.5%. The full year dividend was reduced to 12.7p from 13.4p (and will fall again in 2016 as a result of the structural changes made to the company at the end of the period which also had the effect of reducing the gearing). As a result of the fall in NAV, and widening discount, Ordinary Shareholders saw a negative total return of 26.5%.
Following the very strong performance of the utilities sector in 2014, the sector returned to under-performance in 2015, although equities in general were lacklustre in most sectors and regions. The FTSE All-World Index, expressed in GBP, delivered a modest total return of 4.0%. As well as having a utilities based portfolio, PEWT is also over-weight in emerging markets, which had a poor year in 2015. The FTSE Emerging Index, GBP adjusted, recorded a negative total return of 10.2%.
The manager says, over the year, PEWT found its best returns in Western Europe, China, and the United States, with stock selection producing a positive return in each case despite negative returns from the utilities in those regions. This was offset by over-weight positions in South America, Eastern Europe, and also India, all areas which performed poorly in 2015.
The manager has produced an extensive analysis of the performance of the portfolio which we will not reproduce here. We suggest you read the annual report which should be available here shortly – click the documents tab. You can also read more about the company in our latest note.
PEW : Falling markets weigh on Premier Energy & Water