Gore Street Energy Storage (GSF) has disappointed shareholders in the international battery fund with a 12.4% drop in net asset value (NAV) and a half-year dividend that fell short of expectations.
For the six months to 30 September, NAV per share fell 12.7p from 102.8p to 90.1p, below the 97.6p it had in June 2018 shortly after launch.
Lower-than-expected revenue forecasts for both GB and US markets from independent consultants were the biggest negative factor, knocking 10.2p off NAV per share or a £51.3m bite out of net assets that stood at £455.3m at half-year-end, down from £519.3m at 31 March.
Including quarterly dividends, the total underlying half-year loss to shareholders was 10.6%. The company pointed out that dividends had powered a 31.6% total investment return since listing even if NAV had fallen since the original initial public offer (IPO).
However, a third quarter dividend of 0.69p per share came in less than the 0.75p had guided to in its annual results to 31 March, as a result of cuts in anticipated revenues in California and Texas and the company’s new policy of ensuring the payouts are covered by earnings.
The bad news was softened somewhat by confirmation that a second 1.5p per share dividend from the sale of US investment tax credits would go ahead. Shareholders received the first 1.5p tranche in October.
Nevertheless, the shares dropped 6.3p, or 10.5%, to 53.7p, maintaining the discount to the new NAV at around 40%, as investors digested news that technical issues had prevented its Enderby project near Leicester from becoming fully operational and was not yet realising its full revenue potential.
Outgoing chair Patrick Cox reflected on a “difficult” first half that has seen the board overhauled, fees slashed to Gore Street Investment Management and pre-construction assets put up for sale after pressure from RM Funds, which has recently been joined by fellow activist Saba Capital on the register with a 5% stake.
“While we have delivered a substantial increase in operational capacity and completed our current construction cycle, the reduction in third party revenue curve forecasts has weighed on our NAV and shareholder returns. The board has taken decisive action to address these challenges,” he said in his last statement to shareholders before passing the chair to Angus Gordon Lennox.
Alex O’Cinneide, chief executive of Gore Street Investment Management, said: “The listed energy storage sector continues to face headwinds, with persistent discounts to NAVs despite NAV-validating transactions seen across the private markets.”
He reiterated his commitment to disciplined capital allocation, cost efficiency and unlocking shareholder value through targeted capital expenditure and disposals.
The company said it had engaged extensively with shareholders, including activist investors, and would hold a further round of formal consultation toward the end of the financial year in March.
Our view
QuotedData’s head of investment companies research, James Carthew, said: “A halving of near-term revenue forecasts for GSF’s US assets on the back of good weather and increased competition in the storage market were the main factors in the hit to its NAV. None of this is really new news so investors will be forgiven for expressing their disappointment. The encouraging sign is an increased commitment to transparency and the refreshed board’s openness to input from shareholders about the way forward. Hopefully, we are close to a bottom for the share price.”
