Portfolio Update: 1 January 2020 to 29 May 2020
PORTFOLIO UPDATE FOR THE PERIOD 1 JANUARY 2020 TO 29 MAY 2020
1 June 2020
International Public Partnerships Limited ('INPP', the 'Company'), the listed investment company which invests in global public infrastructure projects and businesses, has today issued the following portfolio update for the period 1 January 2020 to 29 May 2020.
OPERATIONAL HIGHLIGHTS
· The Company reaffirms that the operational performance of its investment portfolio remains as expected and there has been no material change since it announced its results for the year-ending 31 December 2019 on 9 April 2020
· The Company's portfolio of 130 investments in public and social infrastructure assets and related businesses continues to deliver benefits for all its stakeholders
· The Company's Investment Adviser, Amber Infrastructure Group ('Amber') and its asset management team are fully resourced and continue to actively manage portfolio performance
· The team continues to provide clients with the support they need, whilst ensuring the health and safety of staff during this time of uncertainty - the full extent of the Covid-19 pandemic and its associated impact on the Company cannot yet be ascertained
· Through our Investment Adviser, we have been proactively engaging with our public sector clients and supply chain to determine how to provide support and develop solutions, where possible.
Covid-19 Update
We continue to closely monitor the performance of all of our investments but we specifically note the following:
· Tideway - (9.2% of Investments at Fair Value4) - we note Tideway's announcement on 12 May 2020 stating that it has now recommenced work at many of its construction sites following a series of detailed safety reviews and the implementation of measures to protect its workers and the wider community. Notwithstanding, Covid-19 and the associated Government guidance is likely to result in some degree of extra cost and delay to the project, the impact of which cannot yet be accurately assessed. 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
· Diabolo Rail - (8.6% of Investments at Fair Value4) - approximately 75% of revenues are linked to either the usage of the rail link itself or the wider Belgian rail network. Passenger numbers are significantly lower than the same period in the prior year although they are showing some signs of recovery and we note that there are contractual mitigants available where passenger numbers result in the project returns falling below a certain threshold (which have been used effectively previously)
· Social accommodation assets - we note the closure of certain schools, blue light facilities and other public buildings across the portfolio. Amber has engaged positively with our public sector partners over affected facilities within the investment portfolio. We currently expect that the Company will be in a no worse position as a result of closures or reduced operations owing to the availability-based nature of the revenues. Amber continues to work proactively with our public sector partners, with many of the facilities having been repurposed to help with broader Covid-19 initiatives including school kitchens being used to provide meals to the wider community
· Minority investments - 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, the overwhelming majority of distributions due in the period have been received in line with forecasts set at the time of the 31 December 2019 valuation.
FINANCIAL HIGHLIGHTS
On 9 April 2020, the Company announced its results for the 12 months to 31 December 2019 reporting:
· 2.5 pence increase in Net Asset Value ('NAV') per share to 150.6 pence (31 Dec 2018: 148.1 pence per share)
· The portfolio maintains a high level of inflation-linkage such that a 1.00% increase in inflation leads to a 0.82% increase in return1
· A second half-year 2019 dividend of 3.59 pence per share was declared on 9 April 2020 and is expected to be paid on 19 June 2020
· This distribution was made in respect of the period 1 July 2019 to 31 December 2019 and represents a 2.6% increase on the distribution paid in the previous corresponding period
· The Scrip Dividend Alternative Circular applicable to that dividend was available to investors and the associated scrip allotment or dividend payment is expected to be paid on 19 June 2020
· A target dividend for the 2020 and 2021 financial years has been set at 7.36 and 7.55 pence per share, respectively, in line with a target annual increase of c.2.5%2. Whilst we currently have good forward-visibility of the cash flows projected to be generated by the Company's investments we continue to monitor the portfolio for the impact of Covid-19 related risks including those noted above.
· The Company has delivered a Total Shareholder Return3 since IPO in November 2006 to 29 May 2020 of 204.84% or 8.6% on an annualised basis
VALUATION
· The Company's investment portfolio valuation is determined semi-annually by the Directors after advice from the Investment Adviser and is reviewed by the Company's auditors, EY. This semi-annual valuation is published within the Company's interim and annual accounts, the last of which was published with the Company's results ended 31 December 2019 on 9 April 2020
· The Company also provides quarterly NAV guidance predominantly based on movements over the period in the government bond yields of countries where the Company holds investments and changes to relevant foreign exchange rates
· This quarterly guidance does not include any changes (positive or negative) in NAV arising from matters specific to individual investments (e.g. changes in asset specific risks, changes to cash flow projections and assumptions, indexation adjustments due to changes in inflation, etc.) although attention is drawn to the COVID-19 update provided above
· Since the Company published its 31 December 2019 NAV of 150.6 pence per share, government bond yields have decreased in all jurisdictions in which INPP is invested. Other things being equal, the decrease in government bond yields could be expected to have a positive impact on the Company's NAV
· Since 31 December 2019, Sterling has weakened against the Canadian Dollar, the Euro and the US Dollar, and has strengthened against the Australian Dollar. The net impact of these foreign exchange rate movements could also be expected, other things being equal, to have a small positive impact on the Company's NAV.
Debt facility, gearing and cash position
· The Company's liquidity position remains strong with a £400 million revolving debt facility (maturing in July 2021) of which only c.£ 20.2 million is currently utilised.
· The Company currently also has c.£121 million of cash available with additional cash reserves held within the underlying investments
Investments
During the period since 1 January 2020 the Company made new investments of c.£11.5 million, including previously existing commitments.
On 26 May 2020, the Company committed a further c.£6.8 million to acquire stakes in the two PFI project companies of the Essex Building Schools for the Future Project (the 'Project') that own the four schools which provide education facilities to over 3,700 secondary school pupils across Essex, UK. The acquisitions increase the Company's existing investment to 28 per cent on phase 1 of the project and 100 per cent on phase 2 of the project.
In July 2017, the Company agreed to invest up to £45 million into UK digital infrastructure alongside the UK Government through the National Digital Infrastructure Fund ('NDIF'). As part of this commitment, the Company made further investments across NDIF's existing portfolio during the period.
PORTFOLIO UPDATE
The Company's portfolio of assets continues to perform well with revenues and cash receipts in line with management forecasts and levels of satisfaction remaining high amongst public sector clients.
· The portfolio currently has 9.2%4 of assets still in physical construction. The weighted average investment life of the portfolio is currently 34 years5 with a weighted average (non-recourse) debt tenor of 32 years5.
· As at 31 December 2019, the portfolio comprised economic interests in 130 projects and businesses with a composition as detailed below which has largely remain unchanged to 29 May 2020 as there has been limited investment over the period4:
Sector breakdown | Investment Fair Value % |
Energy Transmission | 22% |
Transport | 20% |
Education | 18% |
Gas Distribution | 17% |
Waste Water | 9% |
Health | 3% |
Courts | 3% |
Military Housing | 3% |
Other | 5% |
INVESTMENT ENVIRONMENT AND OUTLOOK
· Our portfolio of investments provides essential infrastructure to over 13 million people, households and businesses daily across the countries in which we invest
· The appetite for long-term responsible investment into public and social infrastructure remains high. There continues to be a positive outlook for private sector investment into public infrastructure across the geographies that the Company invests in
· However, the Company is also acutely aware of the significant impact that the Covid-19 pandemic may have on the broader economy and continues to work hard to understand the likely impacts on the Company's operations
· While we are in no way complacent about the future, which is full of uncertainties, we take comfort from the fact that the overwhelming majority of our assets benefit from payments either linked to the availability of that asset for use, or made through a legislatively backed regulated mechanism
· In addition, the Company continues to monitor developments as Brexit preparations progress and as previously expressed, we do not believe that we are unusually exposed or that there will necessarily be a significant impact on the Company's existing investments. However, this cannot be guaranteed, and we continue to monitor developments closely, as the new relationship between the UK and the EU continues to evolve
· The pipeline for the types of assets the Company invests in is positive and the Company remains confident in the ability to continue to source and develop high-quality, well-performing opportunities, globally, that deliver long-term, predictable cash flows with strong inflation-linkage that meet the Company's risk-return profile
Notes to Editors:
While it is no longer a requirement under the Disclosure and Transparency Rules for the Company to issue Interim Management Statements, the Board believes it is in the interest of shareholders for the Company to provide quarterly updates in addition to its half year reports.
1. In aggregate, the weighted average return of the portfolio would be expected to increase by 0.82% per annum in response to a 1.00% per annum inflation increase over the currently assumed inflation rates across the whole portfolio. Based on analysis as at 31 December 2019.
2. Dividend targets are targets and not profit forecasts and there can be no guarantee they will be achieved. Projections are based on the current individual asset financial models and may vary in the future.
3. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
4. This is based on the fair valuation of the Company's investments as at 31 December 2019 calculated utilising a discounted cash flow methodology as stated in the valuation section.
5. This includes non-concession entities which have potentially a perpetual life but are assumed to have finite lives.
ENDS.
For further information:
Erica Sibree/Amy Joslin +44 (0)20 7939 0558/0587
Amber Fund Management Limited
Hugh Jonathan +44 (0)20 7260 1263
Numis Securities
Ed Berry/Mitch Barltrop +44 (0) 20 3727 1046/1039
FTI Consulting
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 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.
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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