Market Update: 12 Months to 31 December 2019
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR TO U.S. PERSONS. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION.
** Please note new analyst and investor conference call details at the end of this notice
26 March 2020
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
('INPP', the 'Company')
MARKET UPDATE FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2019
HIGHLIGHTS
· The Company's final results for the year ending 31 December 2019 have been postponed due to the request by the Financial Conduct Authority ('FCA') and the Financial Reporting Council ('FRC') for all listed companies to delay the issuance of preliminary results for at least two weeks.
· Prior to this the Company was on track to publish its full audited results for the full year to 31 December 2019 as scheduled for today (26 March 2020). The Board continues to be ready to publish these and will do so as soon as possible, once this moratorium has been lifted.
· The Company believes that its business model and the diversity of the portfolio continue to offer a significant degree of protection to shareholders and it is reassured by the operational performance of its assets which has to date continued as expected.
· The Company's Investment Adviser, Amber Infrastructure Group ('Amber') and its asset management team are fully resourced and are actively managing portfolio performance. During this time of uncertainty, the team has been working to continue to provide clients with the support they need, whilst ensuring the health and safety of staff.
· 2019 was a good year for the Company with a 10.3% increase in Net Asset Valuei('NAV') to £2.4 billion (31 December 2018: £2.2 billion) and an increase in NAV per sharei to 150.6 pence (31 December 2018: 148.1 pence per share). The total NAV return of 6.3%ii was consistent with the Company's expectations for the year. The Company expects to declare a dividend for the second half of 2019 in the amount previously targeted at the same time as it publishes its 2019 full year results.
· The Company is in a strong position with a £400 million revolving debt facility (maturing in July 2021) of which only c.£9.5 million is currently utilised. The Company currently also has c.£70 million of cash available with additional cash reserves held within the underlying investments.
OPERATIONAL UPDATE
· The Company reaffirms that the operational performance of its investment portfolio continues as expected.
· The Covid-19 pandemic has, to date, had no material impact on the Company's cashflow from its investment portfolio. However, the Company notes that the Covid-19 pandemic is unprecedented and its full impact on the Company over time cannot be ascertained at this time.
· The Company notes that there are a range of contingent risks stemming from the Covid-19 pandemic. These include, but may not be limited to, staff shortages and supply chain breakdowns and similar risks. The Company will continue to monitor and where possible take action to avoid or mitigate the consequence of any such impacts on its portfolio.
· The Company believes that its investments benefit from a range of protective mechanisms to mitigate the consequences of adverse events. These include contractual and regulatory mechanisms together with project insurances.
· However, the Company notes that even where these mitigants apply they may not work in "real time" which might result in changes to the currently assumed profile and/or timing of cash receipts by the Company from specifically affected assets.
· The Company will continue to monitor the performance of all its assets but notes the following:
o With respect to the Thames Tideway Tunnel (9.2% of NAVi) the Company notes Tideway's announcement on 25 March 2020 that, based on the government's direction, it has now temporarily reduced operational activities and is continuing only with essential and safety-critical works. As a result, the Company believes that some degree of extra cost and delay is likely. The Tideway project documentation includes provisions to share additional costs between stakeholders (including INPP), up to a threshold beyond which they are borne by Government.
o The Company's investment in the Diabolo rail link to Brussels airport (8.6% of NAVi) has approximately 75% of its revenues linked to either the usage of the link or the wider rail system in Belgium. Usage was higher than base case in 2019 but can be assumed to be lower at the current time. There are contractual mitigants where usage is lower than the base case which have been effectively used previously.
o We note the closure of all schools in the UK and Germany (and likely closures in Australia). The Investment Adviser has engaged positively with our public sector partners over affected schools within the investment portfolio. We currently expect that the Company will be in a no worse position as a result of these closures, given the portfolio is not exposed to usage risk.
o Many businesses may seek to maximise liquidity in the current circumstances. The Company notes that it is not in direct control of the timing or amount of distributions from entities in which it is a minority investor. However, it is closely monitoring distributions from all investments and through its Investment Adviser is actively engaging with counterparts at the portfolio level - the majority of which are public sector counterparties.
· Debt at the level of the Company's underlying assets is bespoke to each asset but is non-recourse to the Company and is typically either fixed-rate debt, which fully amortises over the asset life without refinancing risk, or where refinancings are required, there are regulatory or other mechanisms designed to compensate for changes in the market cost of debt over time.
· Overall, the Company believes that its liquidity position, its business model, diversified portfolio and its focus on risk mitigation combine to offer a significant degree of protection to shareholders.
PERFORMANCE FOR THE PERIOD TO 31 DECEMBER 2019
· The Company's investments generated strong operational cash flows to support a 10.3% increase in NAVi to £2.4 billion and an increase in NAV per share to 150.6 pence (31 December 2018: 148.1 pence per share).
· The reliability of the portfolio's operational performance supported an expected 2.6% increase in full-year dividend distribution of 7.18 pence per share. The 2019 second half year dividend of 3.59 pence per share is expected to be declared with the full-year results when published.
· Strong inflation-linkage was maintained, measured by a projected increase in return of 0.82% p.a. resulting from a 1.00% p.a. increase in inflation (31 December 2018: 0.82% p.a.).iii
· Low correlation to the FTSE All Share Index of 0.25 and 0.19 over 12 months and 5 years, respectively.iv
· 2019 cash dividend cover of 1.3x. v
· £281.3 million of new cash investments were made during 2019, reflecting the Investment Adviser's continued origination of value-enhancing opportunities in line with the Company's investment strategy.
· The Company successfully raised £190.1 million of new capital during the year to partially repay the cash drawn on its corporate debt facility.
· The Company continues to progress its current pipeline of investments with up to £130 million of investment opportunities identified including the Rampion and Beatrice OFTOs and continued deployment of the Company's commitment to the National Digital Infrastructure Fund.
MEETING STAKEHOLDER EXPECTATIONS
· During 2019, the Company continued to deliver long-term benefits for all its stakeholders by responsibly managing its portfolio of 130 public and social infrastructure projects and businesses.
· Our infrastructure assets collectively touch over 13 million lives, households and businesses daily across the countries in which we invest.
· The Company's Investment Adviser is a signatory to the UN Principles of Responsible Investment ('UN PRI'), and during the period assisted the Company to increase its alignment to the UN Sustainable Development Goals ('UN SDGs') to help reduce risk and drive environmental progress across its assets.
Michael Gerrard, Chairman of International Public Partnerships Limited, said: "2019 was another strong year for the Company in which we expect to deliver our target inflation-linked returns to shareholders. Our immediate thoughts are now engaged with the consequences of Covid-19 and, in particular, the health and well-being of the many people who contribute to the Company's success. We believe that we have a robust and risk mitigated portfolio and will work to ensure that any impacts of Covid-19 on shareholders are mitigated as far as possible. Our progress in 2019 supports my belief that the Company is in a very strong shape to deal with the current uncertainties."
DIRECTORATE CHANGES
As part of the Board's ongoing succession planning, John Stares will retire from the Board with effect from 31 March 2020 and, as previously announced, John Whittle will retire from the Board at the 2020 AGM.
Mr Gerrard added: "I and my fellow directors thank John Stares and John Whittle for their dedicated service to the Company over many years, and for the always wise counsel they have provided".
Important notice: Investors should note that the financial information contained in this release is based on the Company's books and records but remains unaudited pending release of the market wide FCA and FRC imposed moratoria.
ENDS.
INVESTOR AND ANALYST CONFERENCE CALL
INPP will be holding an analyst and investor conference call at 9.00am today in conjunction with this announcement.
**Please note that the dial in details for the conference facility have changed and the call can now be accessed by visiting https://secure.emincote.com/client/ipp/ipp001/vip_connect. Please note the conference call is not open to the media or their third party representatives.
A copy of the presentation will be available on the Company's website
NOTES TO EDITORS
Amber Infrastructure Erica Sibree / Amy Joslin
| +44 (0)20 7939 0558 / 0587 |
FTI Consulting Ed Berry / Mitch Barltrop | +44 (0) 20 3727 1046 / 1039 |
Important Information
This announcement contains information that is inside information for the purposes of the Market Abuse Regulation (EU) No. 596/2014.
This announcement is an advertisement. It does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract therefor.
Forward-looking statements are subject to risks and uncertainties and accordingly the Company's actual future financial results and operational performance may differ materially from the results and performance expressed in, or implied by, the statements. These forward-looking statements speak only as at the date of this announcement. The Company, Amber and Numis Securities expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect actual results or any change in the assumptions, conditions or circumstances on which any such statements are based unless required to do so by the Financial Services and Markets Act 2000, the Prospectus Rules of the Financial Conduct Authority or other applicable laws, regulations or rules.
About International Public Partnerships ('INPP'):
INPP is a listed infrastructure investment company that invests in global public infrastructure projects and businesses, which meets societal and environmental needs, both now, and into the future.
INPP is a responsible, long-term investor in 130 infrastructure projects and businesses. The portfolio consists of utility and transmission, transport, education, health, justice and digital infrastructure projects and businesses, in the UK, Europe, Australia and North America. INPP seeks to provide its shareholders with both a long-term yield and capital growth.
Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and consists of approximately 130 staff who are responsible for the management of, advice on and origination of infrastructure investments.
Visit the INPP website at www.internationalpublicpartnerships.com for more information.
Endnotes
i. NAV figures (and percentages derived from those figures) are unaudited due to the moratorium applied to audit opinions
ii. Calculated by dividing the NAV return of £138.5m by the opening NAV of £2,198.7m. 2019 NAV figures (and percentages derived from those figures) are unaudited due to the moratorium applied to audit opinions.
iii. Calculated by running a 'plus 1.00%' inflation sensitivity for each investment and solving each investment's discount rate to return the original valuation. The inflation-linkage is the increase in the portfolio weighted average discount rate.
iv. Correlation (R) from Bloomberg - 12 months and five years to 31 December 2019.
v. Cash dividend cover is the estimated cash dividend cover from the dividend anticipated to be declared. For the purpose of calculation this figure payments to investors are assumed paid from net operating cash flow before non-recurring operating costs as detailed.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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