Portfolio Update & Rescheduled Capital Markets Day
PORTFOLIO UPDATE AND RESCHEDULED CAPITAL MARKETS DAY NOTIFICATION
5 December 2023
International Public Partnerships Limited, the listed infrastructure investment company ('INPP', or the 'Company'), which invests in public or social infrastructure assets and related businesses internationally, has today issued a portfolio update for the period 1 July 2023 to 5 December 2023.
KEY HIGHLIGHTS
· The Company's portfolio of 143 projects and businesses has continued to perform well during the period, delivering strong operational and financial performance with cash generation in line with expectations.
· Acknowledging the recent higher levels of inflation, the Company previously announced an increase in its 2023 dividend target to 8.13 pence per share1, representing a 5% increase compared to the 2022 dividend. The Company expects this revised dividend to be fully covered by net operating cash flows.
· In the current environment, the Board maintains a disciplined approach to capital allocation. In July 2023, the Company completed the divestment of Airband, a UK fibre to the premise and fixed wireless access network. The proceeds from the sale of Airband, together with free cashflow, have been used to reduce the cash drawn balance on the Company's Corporate Debt Facility ('CDF') to £80 million.
· The Company is pleased to confirm that it is making good progress on another divestment and expects to realise sufficient proceeds to pay down the full £80 million cash drawn balance on the CDF within the next eight weeks. Once completed, the Board intends to consider what further measures, such as a share buyback, it may take to address the discount to NAV at which the Company's shares are currently trading. More information will be provided in due course.
· Following the publication of the Company's second Sustainability Report in March 2023, the Company is seeking to enhance its ESG KPIs, including its approach to net zero, and considering the implications of the FCA's recent guidance on the UK Sustainability Disclosure Requirements.
FINANCIAL PERFORMANCE
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. The last semi-annual valuation was published with the Company's half-year results ending 30 June 2023 on 7 September 2023. This reported that as at 30 June 2023, the net asset value ('NAV') per share was 155.2 pence.
The Company observes that the relevant government bond yields have increased modestly since the publication of the 30 June 2023 NAV, although it notes that historically discount rates have not moved in lockstep with government bond yields. The 31 December 2023 NAV is expected to be published in conjunction with Company's full-year results at the end of March and whilst a comprehensive review of valuation datapoints will be undertaken in due course, the Company is not currently aware of any relevant valuation datapoints that would indicate a need to significantly change its discount rates.
Since 30 June 2023, the Company has observed a marginal weakening of Sterling against the foreign currencies it is exposed to. Other things being equal, this would have a negligible positive impact on the Company's NAV.
Cash generation from the investment portfolio remains in line with expectations and the Company remains on track to meet its 2023 dividend target of 8.13 pence per share1. The interim 2023 dividend of 4.06 pence was paid on 17 November 2023 and it is expected that the remaining 4.07 pence will be paid in June 2024. The 2024 dividend target is currently 8.33 pence per share1. These dividends are all expected to be fully covered by net operating cash flows.
The Company has delivered a Total Shareholder Return2 since IPO in November 2006 to 29 November 2023 of 194.3% or 6.5% on an annualised basis.
CAPITAL ALLOCATION
As noted in the highlights section, the Board is acutely focussed on the way it allocates capital in the current environment. Through the Airband divestment and the use of surplus free cash flow, the Company has already reduced the cash drawings on its CDF from £107 million at 30 June 2023 to £80 million.
As part of the Company's Interim Results announcement, the Board announced its intention to realise additional value from the existing portfolio in order to further reduce the cash drawn balance on the CDF. The Company is pleased to confirm that it is making good progress on another divestment and expects to realise sufficient proceeds to pay down the full £80 million cash drawn balance on the CDF within the next eight weeks.
Once the Company is in a position where it has repaid the cash drawn balance of its CDF and has cash available, the Board intends to consider what further measures, such as a share buyback, it may take to address the discount to NAV at which the Company's shares are currently trading.
Fundamentally, the Company does not need to make additional investments to deliver current projected returns. Moreover, the projected cash receipts from the Company's portfolio are such that even if no further investments are made, the Company would be able to continue to meet its existing progressive dividend policy for at least the next 20 years3.
The Company is aware that current market conditions are not optimal for raising new equity financing and therefore any further investment opportunities, including long-standing opportunities that form the Company's near-term pipeline, would need to be funded by recycling capital from the existing portfolio and ultimately improve the overall portfolio composition and key metrics. Moreover, the economics of such opportunities would need to be considered against alternative capital allocation options whilst taking into account the longer-term strategic rationale.
RESCHEDULED CAPITAL MARKETS DAY
The Company previously advised it had to postpone its October Institutional Capital Markets Day ('CMD') due to rail strikes. The CMD has now been rescheduled and will be held on the morning of 27 February 2024 at the Tate Modern, London. Institutional investors and sell-side analysts who wish to join the event should register by emailing: investorrelations@amberinfrastructure.com. Details of the event will be provided upon registration.
OUTLOOK
INPP, together with peers across the listed investment trust segment, continues to be impacted by significant market volatility, as financial markets respond to various political and economic headwinds. The Board continues to believe that the discount to the NAV at which the Company's shares are trading materially undervalues the Company.
Good progress is being made on initiatives to address the discount to NAV at which the Company's shares are trading, and the Board expects to make a further announcement in the coming weeks.
Overall the Board believes that the financial returns offered by the portfolio together with the inflation linkage4 and wider environmental and social benefits, continue to make the Company an attractive investment proposition. Further, the thesis for infrastructure investment continues to be underpinned by key global trends and, notwithstanding current market headwinds, the Company will continue to ensure that its portfolio delivers long-term benefits for all stakeholders across the public and social infrastructure sectors in which it invests.
Notes to Editors:
While it is no longer a requirement under the Disclosure Guidance 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 updates between its half year and full year reporting cycles.
1. Future profit projections and dividends cannot be guaranteed. Projections and targets are based on current estimates and may vary in future.
2. Source: Bloomberg. Share price appreciation plus dividends assumed to be reinvested.
3. This is reflective of the increased 2023 and 2024 dividend targets, and c.2.5% annual dividend growth thereafter.
4. The weighted average return of the portfolio (before fund-level costs) would be expected to increase by 0.7% per annum in response to a 1.0% per annum increase in all of the assumed inflation rates. This is calculated by running a 'plus 1.0%' inflation sensitivity for each investment and solving each investment's discount rate to return the original valuation. The inflation-linked return is the increase in the portfolio weighted average discount rate.
ENDS.
For further information:
Erica Sibree +44 (0) 7557 676 499
Amber Fund Management Limited
Hugh Jonathan +44 (0)20 7260 1263
Numis Securities
Ed Berry / Mitch Barltrop +44 (0) 7703 330 199 / (0) 7807 296 032
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 over 140 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, New Zealand 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 over 170 staff who are responsible for the management of, advice on and origination of infrastructure investments.
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