SDCL Efficiency Income Trust (SEIT) is to start a managed wind-down after failing to get shareholder support to turn the £469m investment trust into an energy services operating company. Tired of a 51% share price discount, investors wanted their money back, said chair Tony Roper.
Roper, who in 2019 stated an ambition to make SEIT as big as HICL Infrastructure (HICL), which he used to manage, said the company had been a victim of difficult circumstances. “Since the material increase to interest rates in late 2022, the macro environment and investment trust landscape has become increasingly challenging and it has become clear to the board that SEIT, like a lot of its investment trust peers, can no longer deliver returns that are acceptable to shareholders in its current structure and the status quo is not viable.”
However, he said last month’s sale of a £105m portfolio at a 9% discount illustrated the challenges of making disposals at reasonable valuations in the current market.
The board had believed relaunching SEIT as an operating company with a lower dividend and a growth agenda with the backing of cornerstone shareholder General Atlantic could have produced better returns for shareholders in time. While there had been some support, other shareholders wanted a quicker return of their capital and disliked the “execution risk” in the proposal. As a result, it was clear that the proposal would not pass a shareholder vote, Roper said.
SEIT shares dropped 4.7% to 43.4p. Excluding the 14%-yielder’s dividends, shareholders have seen their stakes more than halve since launch at 100p in 2018. Including dividends, shareholders have still suffered a 38% loss over five years.
Our view
James Carthew, head of investment company research at QuotedData, said: “I’m in favour of SEIT’s decision to pursue a managed wind down as long as it doesn’t prioritise speedy returns of capital over achieving decent prices for its assets. The statement makes it clear that it is not easy to make disposals in the current environment – so let’s not rush things. At the same time the portfolio is generating significant cash flows that could be used to pay down debt. That feels like a sensible first step to me.”
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