TIDM3IN
RNS Number : 5551S
3i Infrastructure PLC
07 November 2023
7 November 2023
Results for the six months to 30 September 2023
The portfolio continues to generate attractive value growth,
outperforming 3i Infrastructure's target return of 8-10% per annum.
We are on track to deliver the FY24 dividend target of 11.90 pence
per share, which is 6.7% higher than the previous year and expected
to be fully covered by net income.
Performance highlights
Continued growth in NAV, driven
GBP191m 6.3% by our largest assets
Total return for the Total return on
period opening
(September 2022: GBP247m) net asset value
('NAV') (September
2022: 9.3%)
GBP3,241m 351.4p
NAV (31 March 2023: GBP3,101m) NAV per share
(31 March 2023:
336.2p)
--------------------
Good level of income and non-income
GBP104m cash to support the dividend
Total income and
non-income cash
(September 2022: GBP98m)
-------------------- -----------------------------------
On track to deliver the FY24
5.95p dividend target, 6.7% higher
Interim dividend per than FY23
share
(FY23 interim dividend:
5.575p per share)
-------------------- -----------------------------------
Value uplift achieved on sale
c.31% of Attero
Increase based on agreed
EUR sales proceeds for
Attero versus March 2023
valuation
-------------------- -----------------------------------
Richard Laing, Chair of 3i Infrastructure plc ('3i
Infrastructure', '3iN' or the 'Company')
"The portfolio continues to outperform with strong value growth
in real terms, driven by our largest assets. We are on track to
deliver our FY24 dividend target, which is a 6.7% increase on last
year's dividend."
Performance
The Company generated a total return of 6.3% on opening NAV for
the first half of the year, ahead of our target return of 8% to 10%
per annum. The NAV per share increased to 351.4 pence. The
portfolio overall is performing robustly and ahead of expectations.
During the period, we were pleased to agree the sale of Attero at a
c.31% uplift to our March 2023 valuation, demonstrating the
resilient demand from private market investors for our high-quality
infrastructure investments.
Interim dividend
The Board is announcing an interim dividend of 5.95 pence per
share, scheduled to be paid on 11 January 2024 to holders of
ordinary shares on the register on 24 November 2023. The
ex-dividend date will be 23 November 2023. As an investment trust,
the Company is permitted to designate dividends wholly or partly as
interest distributions for UK tax purposes. The Board is
designating 5.65 pence of the 5.95 pence interim dividend as an
interest distribution.
Corporate governance
The Company's Annual General Meeting ('AGM') was held on 6 July
2023. All resolutions were approved by shareholders, including the
re-election of the existing Directors to the Board. There have been
a number of changes to the Board since the AGM. Paul Masterton
served on the Board until 20 July 2023 and Martin Magee was
appointed as a non-executive Director on the same date. I would
like to express my gratitude to Paul for his valuable contribution
over the past 10 years as Senior Independent Director and welcome
Martin to the Board. Martin, a Jersey resident, brings relevant
experience in the infrastructure sector from his previous roles at
Jersey Electricity plc and Scottish Power plc. Stephanie Hazell has
been appointed as the Senior Independent Director, replacing
Paul.
Also on 20 July, Ian Lobley stepped down from the Board after
nine years' service. I would also like to thank Ian for his
valuable contribution. Ian was replaced by Jennifer Dunstan as the
3i Group plc nominated Director of the Company.
Both Jennifer and Martin will stand for election at the
Company's AGM in July 2024.
Richard Laing
Chair
For further information, please contact:
Thomas Fodor, investor enquiries Tel: 020 7975 3469
Kathryn van der Kroft, press enquiries Tel: 020 7975 3021
Notes
This report contains Alternative Performance Measures ('APMs'),
which are financial measures not defined in International Financial
Reporting Standards ('IFRS'). These include Total return on opening
NAV, NAV per share, Total income and non-income cash, Investment
value including commitments, Total portfolio return percentage and
Total liquidity. More information relating to APMs, including why
we use them and the relevant definitions, can be found in the
Financial review section and in the Company's Annual report and
accounts 2023. The Total return for the period is the total
comprehensive income for the period under IFRS.
For further information regarding the announcement of the
results for 3i Infrastructure plc, please visit
www.3i-infrastructure.com. The analyst presentation will be made
available on this website.
Notes to editors
3i Infrastructure plc is a Jersey-incorporated, closed-ended
investment company, an approved UK Investment Trust, listed on the
London Stock Exchange and regulated by the Jersey Financial
Services Commission. The Company's purpose is to invest responsibly
in infrastructure, delivering long-term sustainable returns to
shareholders and having a positive influence on our portfolio
companies and their stakeholders.
3i Investments plc, a wholly-owned subsidiary of 3i Group plc,
is authorised and regulated in the UK by the Financial Conduct
Authority and is the investment manager to 3i Infrastructure
plc.
This statement has been prepared solely to provide information
to shareholders. It should not be relied on by any other party or
for any other purpose. It and the Company's Half-yearly report may
contain statements about the future, including certain statements
about the future outlook for 3i Infrastructure plc. These are not
guarantees of future performance and will not be updated. Although
we believe our expectations are based on reasonable assumptions,
any statements about the future outlook may be influenced by
factors that could cause actual outcomes and results to be
materially different.
This press release is not for distribution (directly or
indirectly) in or to the United States, Canada, Australia or Japan
and is not an offer of securities for sale in or into the United
States, Canada, Australia or Japan. Securities may not be offered
or sold in the United States absent registration under the U.S.
Securities Act of 1933, as amended (the 'Securities Act'), or an
exemption from registration under the Securities Act. Any public
offering to be made in the United States will be made by means of a
prospectus that may be obtained from the issuer or selling security
holder and will contain detailed information about 3i Group plc, 3i
Infrastructure plc, and management, as applicable, as well as
financial statements. No public offering in the United States is
currently contemplated.
3i Infrastructure plc Half-yearly report 2023
Review from the Managing Partners
3i Infrastructure's portfolio once again exceeded its target
return during the period, further demonstrating its quality and
resilience. The portfolio is structurally positioned to deliver
growth in real terms throughout the economic cycle.
The c.31% value uplift achieved by the Attero exit illustrates
the robust demand for high-quality, core-plus infrastructure
companies amongst private market investors. It also extends our
realised investment track record to a weighted average IRR of 21%
since 3i Infrastructure's inception in 2007. This is truly
exceptional performance.
We are encouraged by the strength in earnings growth across the
portfolio, particularly evident in our larger companies, which we
expect will continue to benefit from the structural tailwinds
underpinning the original investment theses.
We continue to work closely with our portfolio company
management teams to maximise value creation throughout our
ownership. This includes defining strategy, supporting M&A
activity, capital structuring, identifying and executing further
growth investments, and ultimately preparing and leading exit
processes.
The value of our active management approach is apparent across
our portfolio. We see evidence in the strength of the earnings our
companies are achieving, in the quality and motivation of our
management teams, in the outcomes we have achieved on exits such as
Attero and also in our portfolio company debt management
activities. Our portfolio has no material near-term refinancing
exposure because we proactively secured long duration debt
structures whilst interest rates were at historical lows.
The portfolio also continues to demonstrate real return
protection through its positive value correlation to inflation.
Fixed interest products are now offering their highest returns
for the last 15 years, driving a rebalancing of investors'
portfolio weightings. In our view, 3i Infrastructure's core-plus
portfolio displays an attractive return premium to fixed income
products, which is typically not evident in PPP/PFI concessions or
core infrastructure. 3iN's return profile continues to be
attractive and relevant, even in a changing market environment.
During the period, we extended the maturity of the Company's
GBP900 million Revolving Credit Facility ('RCF') by an additional
12 months, to November 2026, providing further flexibility for us
to manage investment and divestment activity.
Proceeds from the Attero sale will be applied to reduce the
outstanding RCF balance.
Portfolio review
TCR delivered another strong performance in the period,
delivering impressive earnings growth and further demonstrating the
accelerating demand for its full-service rental model globally. A
number of new contracts were won in the period across multiple
locations throughout Europe, the US and Australia. We expect that
TCR is well positioned to grow organically with its existing
clients as well as increasing both the number of airports at which
it operates as well as the market penetration of its full service
rental offering, propelled by the clear need for fleet renewal
investment required to decarbonise ground support equipment.
ESVAGT had a good first half, driven by increasing day rates and
high levels of vessel utilisation. ESVAGT is the clear market
leader in European offshore wind Service Operation Vessel ('SOV')
provision, with nine vessels currently in operation. A further
three SOVs are under construction, each being built to service
long-term charter agreements. All are progressing to plan. Whilst
we note recent unit price pressure impacting certain high profile
wind farm developments, the near-term pipeline for new SOVs in the
North Sea and USA remains strong, driven by government targets and
an increasing focus on energy security.
Infinis's landfill gas generation assets continued to perform
ahead of expectations, offsetting the lower volatility in power
prices which reduced demand for its power response assets. The
company continues to make significant progress in developing its
1.6GW solar and battery pipeline.
Tampnet had a very strong first half, exceeding EBITDA targets.
The importance of Tampnet's infrastructure to its customers'
operations is evident in growing average revenue per customer, as
well as increasing interest in its private network solution. The
scale of the carbon capture and offshore wind opportunities is also
emerging. Tampnet's infrastructure and expertise are likely to be
important facilitators of the energy transition offshore. We are
working closely with the management team to define and scope the
potential opportunity and design the appropriate strategy.
Joulz continues to benefit from the attractive combination of
its inflation-linked long-term contracts, as well as fast moving
Dutch energy transition ambitions. The new CEO joined in March and
is actively focused on further expanding Joulz's product offering.
During the period, a highly comparable peer to Joulz was sold at an
attractive valuation, providing further evidence of the strong
appetite from private infrastructure investors for comparable
energy transition platforms.
Ionisos's valuation progressed in line with expectations in the
period. Lower Covid-related bio-processing volumes and reduced
demand in markets linked to the construction industry were offset
by receipt of a one-off insurance payment in settlement of issues
previously reported at its discontinued Italian subsidiary. The
acquisition of an E-Beam plant in Daniken, Switzerland, completed
in June and current trading at that facility is ahead of
expectations. During the period, Ionisos received permits to build
a new X-ray greenfield facility in North East France. This will
enlarge Ionisos's sterilisation offering and support its customers'
growth ambitions in the medical and pharmaceutical market. In
support of these investments, during the period Ionisos completed a
EUR60 million debt raise, accompanied by a further EUR5 million
equity investment from 3i Infrastructure.
Oystercatcher's financial performance was in line with
expectations during the period. Its Singapore storage facilities
continued to operate at capacity and with slightly improved rates,
despite the continued backwardation market structure for petroleum
products. The project to convert gasoline tanks to sustainable
aviation fuel completed on time and on budget and now represents 7%
of total storage capacity. Management has been exploring the
potential to increase the proportion of sustainable fuels. A new
contract to store sustainable marine fuel oil in the terminal's
fuel oil tanks was signed during the period, with premium rates to
those achieved on non-sustainable fuel products. The financing
assumptions in our valuation have been updated to reflect
increasing debt costs within the oil storage sector.
SRL performed well in the period, with revenues and utilisation
levels ahead of expectations. Management is seeking to expand its
offering in underserved regions of the UK and is working with
contractors on products to improve health and safety performance on
large capital projects.
DNS:NET has made progress on the rollout of its
fibre-to-the-home ('FTTH') network in the Berlin area. 3iN invested
a further EUR24 million in the period to part-fund the ongoing
rollout. The company, like many others rolling out FTTH networks in
Germany, is still experiencing delays in connecting and activating
customers, which, in turn, has negatively impacted the availability
and cost of debt. To reflect the uncertainties in access to capital
markets and the rollout delivery, we have increased the discount
rate, leading to the valuation reduction reported. The Investment
Manager has dedicated material time embedding resources in the
company, instigating significant organisational change and
improving management capabilities. We have appointed a new CEO,
with the requisite experience to deliver the network rollout.
Valorem performed well in the first half of the year, with
revenues from electricity generation and growth in installed
capacity both ahead of plan. French wind auction tariffs have
continued to increase in the last 12 months, reflecting increases
in the cost of equipment and interest rates. To help fund its value
accretive development pipeline, Valorem successfully raised a EUR75
million Green Euro bond private placement and is finalising the
sale of a minority stake in a subset of its French operational
portfolio at attractive terms, despite the current volatile market
environment.
GCX is experiencing growing bandwidth capacity demand whilst
achieving cost savings, which we anticipate will result in margin
improvements. The business is growing its recurring,
leased-bandwidth revenue contribution, partially as a result of
increasing adoption of Artificial Intelligence applications and
multi-billion investments in capacity and route diversification by
the hyperscalers. GCX continues to explore a number of attractive
growth opportunities which would enhance the value of its existing
network.
Future Biogas has performed ahead of our expectations since our
acquisition in February 2023, driven by the outperformance of its
managed plant portfolio. During the period, the company signed a
new gas supply agreement for unsubsidised green gas with
AstraZeneca ('AZ'). To deliver this green gas a new plant will be
constructed. 3iN invested a further GBP35 million to fund the
construction of the plant which will supply 100 GWh of biomethane
to AZ's UK sites and will be the UK's first unsubsidised Anaerobic
Digestion ('AD') plant. The AZ contract is an important milestone
in delivering the investment thesis of transitioning Future Biogas
from a manager of third-party biogas plants into an owner and
operator. A growing list of viable sites is being targeted for the
construction of new AD plants and interest from high-quality
corporate counterparties to partner with Future Biogas is highly
encouraging.
On 24 July 2023, the Company signed an agreement to sell Attero
to Ardian Infrastructure. Expected net proceeds from the sale are
approximately EUR215 million, representing an uplift of EUR51
million on the value at 31 March 2023. This results in a 23% gross
IRR and a 2.7x gross money multiple for the Company. Completion is
expected by
30 November 2023.
The portfolio is analysed below.
Portfolio - Breakdown by
value
at 30 September 2023
TCR 15%
ESVAGT 13%
Infinis 11%
GCX 9%
Tampnet 9%
Ionisos 8%
Joulz 7%
Oystercatcher 6%
SRL 6%
Valorem 5%
Attero 5%
DNS:NET 4%
Future Biogas 2%
-------------------- -----
Sustainability
We continue to actively engage with our portfolio companies on
Environmental, Social and Governance matters, notably on the topics
of climate change, occupational health and safety, and diversity,
equity and inclusion.
In particular, we are working closely with our portfolio
companies to support their efforts in developing carbon emission
reduction strategies and roadmaps that are aligned with the
ambition of the Science Based Targets initiative ('SBTi'). The
Investment Manager wrote to SBTi in April 2023 to commit to set
science-based targets and is working to formulate these. It will
report using the TCFD framework by the 2024 deadline set by the FCA
for asset managers such as 3i.
Outlook
We continue to focus our asset management activities on ensuring
we maximise returns from 3iN's existing portfolio. In practice,
that means supporting our portfolio companies to continue to
deliver earnings growth, combined with occasional, well-managed
exits.
This strategy is well-proven.
We expect earnings growth to be underpinned by the structural
megatrends we identified as part of our original investment cases,
supplemented by capex reinvestment at rates of return that we
forecast will be accretive. This growth capex is predominantly
funded by the portfolio companies directly, through a combination
of internal cash generation and available debt facilities. Material
levels of capex reinvestment provide visibility over further
earnings and value growth.
At the appropriate moment during our hold period, we will
initiate sales processes for our investments. As evidenced by our
extensive track record, these sales tend to be well supported by
the deep pool of private market capital actively seeking high
quality, core-plus infrastructure investments such as those held by
3iN. This is a core component of our portfolio management and value
creation strategy.
We are focused on continuing to grow value for 3iN shareholders
whilst being responsible custodians of our investments. We are
confident we have the portfolio and team to allow us to do so.
Scott Moseley and Bernardo Sottomayor
Managing Partners and Co-Heads of European Infrastructure
3i Investments plc
6 November 2023
Financial review
The portfolio delivered another period of strong income growth
and solid capital returns. The Company signed an agreement to sell
Attero for expected net proceeds of approximately EUR215 million,
representing an uplift of EUR51 million on the value at 31 March
2023. Follow-on investments of GBP35 million into Future Biogas,
GBP20 million into DNS:NET and GBP5 million into Ionisos were
completed in the period. The Company actively manages its liquidity
position through its GBP900 million RCF. During the period, we
extended the maturity of this RCF to November 2026, providing
liquidity to fund growth in existing portfolio companies and good
flexibility over the timing of repayment of drawings.
The portfolio has the income-generating capacity to support the
Company's progressive dividend policy and the interim dividend is
covered by income and non-income cash in the period. We are on
track to deliver the full-year dividend target, which we also
expect to be fully covered.
The weighted average discount rate ('WADR') was unchanged from
March 2023 at 11.3%, as an increase in the discount rate of DNS:NET
was offset by a change in the valuation methodology for Attero from
a discounted cash flow basis to a sale basis. The remaining change
in portfolio mix had an immaterial impact on the WADR. Given the
significant risk premium included in our long-term discount rates
and the continued appetite for high-quality infrastructure
businesses, rising risk-free rates did not impact the discount
rates used to value our portfolio companies at 30 September 2023.
The agreement to sell Attero at a significant premium to NAV
supports this assessment.
Portfolio and returns
The Company generated a total return for the six-month period of
GBP191 million, representing a 6.3% return on opening NAV
(September 2022: GBP247 million, 9.3%), ahead of the target return
of 8% to 10% per annum. The Company's portfolio was valued at
GBP3,892 million at 30 September 2023 (31 March 2023: GBP3,641
million) and delivered a total portfolio return in the period of
GBP233 million, including income and allocated foreign exchange
hedging (September 2022: GBP285 million).
Table 1 summarises the valuation and movements in the portfolio,
as well as the return for each investment, for the period.
Table 1: Portfolio summary (30 September 2023, GBPm)
Directors' Directors' Allocated Underlying Portfolio
valuation Investment Divestment Foreign valuation foreign portfolio total
Accrued return
31 March in the in the Value exchange 30 exchange income in the
2023 period period income movement translation September hedging in the period(1)
movement 2023 period
Portfolio
assets
============== ========== ========== ========== ======== ======== =========== ========== ========= ========== =========
TCR 537 11(2) - - 33 (5) 576 5 11 44
ESVAGT 485 23(2) - 1 2 - 511 2 24 28
Infinis 407 - - 4 13 - 424 - 9 22
GCX 323 29(2) - (14) 6 4 348 (4) 15 21
Tampnet 292 - - 3 37 3 335 - 10 50
Ionisos 298 5 - 5 8 (4) 312 4 4 12
Joulz 287 3(2) - - 10 (4) 296 3 3 12
Oystercatcher 254 - (6)(3) - 5 (3) 250 2 2 6
SRL 219 - - 10 1 - 230 - 10 11
Valorem 188 - - - 19 (2) 205 3 2 22
Attero 144 - - - 45 (2) 187 1 1 45
DNS:NET 179 20 - 5 (50) (2) 152 3 5 (44)
Future Biogas 28 35 - - 3 - 66 - 1 4
============== ========== ========== ========== ======== ======== =========== ========== ========= ========== =========
Total
portfolio
reported
in the
Financial
statements 3,641 126 (6) 14 132 (15) 3,892 19 97 233
============== ========== ========== ========== ======== ======== =========== ========== ========= ========== =========
1 This comprises the aggregate of value movement, foreign exchange translation,
allocated foreign exchange hedging and underlying portfolio income in
the period.
2 Capitalised interest.
3 Shareholder loan repayment (non-income cash).
Portfolio return by asset
Table 2 below shows the portfolio return in the period for each
asset as a percentage of the aggregate of the opening value of the
asset and investment in the asset in the period (excluding
capitalised interest). Note that this measure does not time-weight
for investments in the period.
Table 2: Portfolio return by asset (six months to 30 September
2023, not annualised)
Portfolio assets
TCR 8.2%
ESVAGT 5.8%
Infinis 5.4%
GCX 6.5%
Tampnet 17.1%
Ionisos 4.0%
Joulz 4.2%
Oystercatcher 2.4%
SRL 5.0%
Valorem 11.7%
Attero(1) 31.3%
DNS:NET (22.1)%
Future Biogas 6.4%
Total portfolio return(2) 6.3%
========================== ========
1 Change in valuation methodology from discounted cash flow basis to sale
basis.
2 Portfolio returns include FX net of hedging.
Sensitivities
Our approach to valuation is consistent with previous years.
Our inflation assumptions for the first two years of our
projections reflect the current and forecast inflation levels. The
longer-term inflation assumptions beyond two years remain
consistent with central bank targets, e.g. UK CPI at 2%. A 1%
increase in short-term (two-year) inflation assumptions is
estimated to increase the portfolio value by GBP43 million and a 1%
decrease is estimated to decrease the portfolio value by GBP44
million.
The weighted average discount rate is 11.3%. Increasing the
discount rate used in the valuation of each asset by 1% would
reduce the value of the portfolio by GBP327 million and decreasing
the discount rate used by 1% would increase the value of the
portfolio by GBP376 million.
The portfolio valuations are partially protected against changes
in interest rates as long-term fixed rate or hedged debt is in
place across the majority of our portfolio. Increasing the cost of
borrowing assumption for unhedged borrowings and any future
uncommitted borrowing and the cash deposit rates used in the
valuation of each asset by 1% would reduce the value of the
portfolio by GBP224 million. A 1% decrease in the interest rate
assumption would increase the value of the portfolio by GBP221
million.
These sensitivities are indicative and are considered in
isolation, holding all other assumptions constant. Timing and
quantum of price increases will vary across the portfolio and the
sensitivity may differ from that modelled. Changing the inflation
rate assumption may necessitate consequential changes to other
assumptions used in the valuation of each asset. Sensitivities to
key inputs to our valuations are described in more detail in Note 4
to the accounts.
Total return
An analysis of the elements of the total return for the period
is shown in Table 3 below. The Company generated a total return for
the six-month period of GBP191 million, representing a 6.3% return
on opening NAV (September 2022: GBP247 million, 9.3%), ahead of the
target return of 8% to 10% per annum.
Table 3: Summary total return (six months to 30 September,
GBPm)
2023 2022
=================================================== ==== ====
Capital return (excluding exchange) 132 210
Foreign exchange movement in portfolio (15) 86
=================================================== ==== ====
Capital return (including exchange) 117 296
Movement in fair value of derivatives and exchange
on EUR borrowings 19 (81)
=================================================== ==== ====
Net capital return 136 215
Total income(1) 98 72
Costs including exchange movements (43) (40)
=================================================== ==== ====
Total return 191 247
=================================================== ==== ====
1 Includes interest receivable on cash balances held of GBP1 million
(September 2022: GBP2 million).
The capital return is the largest element of the total return.
The portfolio generated a value gain of GBP132 million in the
six-month period to 30 September 2023 (September 2022: GBP210
million), driven principally by outperformance from a number of
portfolio companies, particularly Attero, Tampnet, Valorem and TCR,
which was offset by a value reduction for DNS:NET.
The value increase in Attero of GBP45 million reflects the
agreed sale of the investment for a price considerably above its
opening valuation. Tampnet's value gain of GBP37 million is driven
by higher forecast revenue per customer due to increasing demand
for bandwidth and strong interest in its private network solution.
The value increase in TCR of GBP33 million reflects the
outperformance and significant earnings growth of the business
during the period. The DNS:NET valuation has been reduced by GBP50
million due to the revision of cashflow forecasts to reflect delays
in the projected rollout of its FTTH network and an increase in the
discount rate used.
The movement in foreign exchange rates generated a loss of GBP15
million in the period (September 2022: gain of GBP86 million). This
was offset by a gain on the movement in the value of derivatives
and the exchange gain on Euro drawings of GBP19 million (September
2022: loss of GBP81 million). The foreign exchange hedging
programme supports our objective to deliver steady NAV growth for
shareholders by reducing our exposure to fluctuations in the
foreign exchange markets.
Total income was GBP98 million (September 2022: GBP72 million),
comprising portfolio income of GBP97 million and interest
receivable on cash balances of GBP1 million. The income by
portfolio company is shown in Table 1 above. The dividend to
shareholders is supported by this income, together with non-income
cash receipts of GBP6 million during the period (September 2022:
GBP26 million). These non-income cash receipts reflect
distributions from underlying portfolio companies, which would
usually be income to the Company, but that are instead distributed
as a repayment of investment for a variety of reasons. While
non-income cash does not form part of the total return shown in
Table 3, it is included when considering dividend coverage. Total
income and non-income cash is shown in Table 4 below.
Table 4: Total income and non-income cash (six months to 30
September, GBPm)
2023 2022
================ ==== ====
Total income 98 72
Non-income cash 6 26
================ ==== ====
Total 104 98
================ ==== ====
Costs
Management and performance fees
During the period to 30 September 2023, the Company incurred
management fees of GBP24 million (September 2022: GBP22 million),
including a one-off GBP1 million transaction fee relating to the
additional investments in Future Biogas, Ionisos and DNS:NET
(September 2022: GBP2 million). The year-on-year increase also
reflects the higher average value of the portfolio in the
period.
The annual performance hurdle of 8% was not exceeded in the
first half of the year, as the total return for the period was
6.3%, resulting in no performance fee accrual (September 2022: GBP9
million).
Other operating and finance costs
Operating expenses, comprising Directors' fees, service provider
costs and other professional fees, totalled
GBP1 million in the period (September 2022: GBP2 million).
Finance costs of GBP16 million in the period (September 2022:
GBP5 million) comprised interest, arrangement and commitment fees
for the Company's GBP900 million RCF. Finance costs were higher
than in the prior period as more funds were drawn and interest
rates increased in the UK and Eurozone. During the period, we
extended the maturity of the RCF by one year to November 2026.
Ongoing charges ratio
The ongoing charges ratio measures annual operating costs, as
disclosed in Table 5 below, against the average NAV over the
reporting period.
The Company's ongoing charges ratio is calculated in accordance
with the methodology recommended by the Association of Investment
Companies ('AIC') and was 1.61% for the period to 30 September 2023
(September 2022: 1.58%).
The AIC methodology does not include performance fees or finance
costs. However, the AIC recommends that the impact of performance
fees on the ongoing charges ratio is noted, where performance fees
are payable. The cost items that contributed to the ongoing charges
ratio are shown below. There was no performance fee accrual in the
period to 30 September 2023. The ratio including the performance
fee accrual for September 2022 was 1.89%.
Table 5: Ongoing charges (six months to 30 September, annualised
GBPm)
2023 2022
============================= ====== ======
Investment Manager's fee 47.3 40.9
Auditor's fee 0.8 0.6
Directors' fees and expenses 0.5 0.4
Other ongoing costs 2.3 2.4
============================= ====== ======
Total ongoing charges 50.9 44.3
============================= ====== ======
Ongoing charges ratio 1.61% 1.58%
============================= ====== ======
Balance sheet
The NAV at 30 September 2023 was GBP3,241 million (31 March
2023: GBP3,101 million). The principal components of the NAV are
the portfolio assets, cash holdings, the fair value of derivative
financial instruments, borrowings and other net liabilities. A
summary balance sheet is shown in Table 6.
Table 6: Summary balance sheet (GBPm)
As at 30 September As at 31 March
2023 2023
================================= ================== ==============
Portfolio assets 3,892 3,641
Cash balances 6 5
Derivative financial instruments 16 39
Borrowings (628) (501)
Other net liabilities (45) (83)
================================= ================== ==============
NAV 3,241 3,101
================================= ================== ==============
Cash is principally held in AAA-rated money market funds. The
Company has a GBP900 million RCF in order to maintain a good level
of liquidity for further investment while minimising returns
dilution from holding excess cash balances.
At 30 September 2023, GBP628 million of the facility was drawn,
leaving GBP272 million available in the facility. Following the
expected completion of the sale of the investment in Attero for
c.EUR215 million (equivalent to GBP187 million based on 30
September exchange rates) in November, c.GBP459 million will be
available. In September, the RCF maturity date was extended by a
year to November 2026 with no changes to terms.
Derivative financial instruments reflect the foreign exchange
hedging programme described previously.
Other net liabilities predominantly comprise a performance fee
accrual of GBP48 million (31 March 2023: GBP83 million), relating
to fees earned in prior years. GBP35 million of prior year
performance fees were paid during the period.
NAV per share
The total NAV per share at 30 September 2023 was 351.4 pence (31
March 2023: 336.2 pence). This will reduce to
345.5 pence (31 March 2023: 330.6 pence) after the payment of
the interim dividend of 5.95 pence (31 March 2023: final dividend
of 5.575 pence).
Dividend
The Board has announced an interim dividend for the period of
5.95 pence per share or GBP55 million in aggregate (September 2022:
5.575 pence; GBP50 million). This is half of the Company's target
full-year dividend for FY24 of 11.90 pence per share. The Board is
designating 5.65 pence of the 5.95 pence interim dividend payable
as an interest distribution.
Alternative Performance Measures ('APMs')
We assess our performance using a variety of measures that are
not specifically defined under IFRS and are, therefore, termed
APMs. The APMs that we use may not be directly comparable with
those used by other companies. The table below defines our APMs and
should be read in conjunction with the Annual report and accounts
2023.
APM Purpose Calculation Reconciliation to
IFRS
Total return A measure of the It is calculated The calculation uses
on opening NAV overall financial as the total return IFRS measures.
performance of the of GBP191 million,
Company. as shown in the Statement
of comprehensive
income, as a percentage
of the opening NAV
of GBP3,101 million
net of the final
dividend for the
previous year of
GBP51 million.
====================== ============================ ==========================
NAV per share A measure of the It is calculated The calculation uses
NAV per share in as the NAV of GBP3,241 IFRS measures and
the Company. million divided by is set out in Note
the total number 7 to the accounts.
of shares in issue
at the balance sheet
date of 922.4 million.
====================== ============================ ==========================
Total income A measure of the It is calculated Total income uses
and non-income income and other as the total income the IFRS measures
cash cash receipts by from the underlying Investment income
the Company which portfolio and other and Interest receivable.
support the payment assets plus non-income
of expenses and dividends. cash The non-income cash,
being the repayment being the proceeds
of shareholder loans from partial realisations
or share premium of investments, are
repayments shown in the Cash
not resulting from flow statement. The
the disposal of an realisation proceeds
underlying portfolio which result from
asset. This is shown a partial sale of
in Table 4. an underlying portfolio
asset are not included
within non-income
cash.
====================== ============================ ==========================
Investment value A measure of the It is calculated The portfolio asset
including commitments size of the investment as the portfolio value is the 'Investments
portfolio including asset value plus at fair value through
the value of further the amount of the profit or loss' reported
contracted future contracted commitment. under IFRS. At 30
investments committed At 30 September 2023, September 2023, the
by the Company. the Company had no Company had no investment
investment commitments. commitments.
====================== ============================ ==========================
Total portfolio A measure of the It is calculated The calculation uses
return percentage financial performance as the total portfolio capital return (including
of the portfolio. return in the period exchange), movement
of GBP233 million, in fair value of
as shown in Table derivatives, underlying
1, as a percentage portfolio income,
of the sum of the opening portfolio
opening value of value and investment
the portfolio and in the period. The
investments in, and reconciliation of
syndication of, assets all these items to
during the period IFRS is shown in
(excluding capitalised Table 1 including
interest) of GBP3,701 in the footnotes.
million.
====================== ============================ ==========================
Total liquidity A measure of the It is calculated The calculation uses
Company's ability as the cash balance the cash balance,
to make further investments of GBP6 million plus which is an IFRS
and meet its short-term the undrawn balance measure, and undrawn
obligations. available under the balances available
Company's revolving under the Company's
credit facility of revolving credit
GBP272 million. facility, which are
described in Note
5 to the accounts.
====================== ============================ ==========================
Risk Review
Review of principal risks and uncertainties
The Company's approach to risk governance, the risk review
process and risk appetite is set out in the Risk report in the
Annual report and accounts 2023, which can be found on our website
www.3i-infrastructure.com .
The principal risks to the achievement of the Company's
objectives are unchanged from those reported on pages 73 to 75 of
the Annual report and accounts 2023. Developments in relation to
these principal risks during the period are outlined below.
External risks - market and competition
During the period, we have seen a rise in interest rates and
risk-free rates as central banks responded to higher inflation. The
market for high-quality core-plus infrastructure companies, such as
those in our portfolio, remains competitive. The realisation of
Attero at a c.31% premium to the March 2023 valuation provides
evidence that our approach to valuations remains appropriate. There
remains a risk that pricing does change for core-plus
infrastructure in the medium term.
Inflation in the UK and Europe has eased in the period, although
it remains above central bank targets. The portfolio is positively
correlated to inflation as most portfolio companies have revenues
at least partially linked to inflation. Sensitivities to
macroeconomic assumptions are discussed in the Financial review and
in Note 4 to the accounts.
Interest rates continued to rise in the period, although there
are now signs that they are near the top of the cycle in the UK and
Europe. There are no material refinancing requirements in the
portfolio until 2026 and over 93% of long-term debt facilities are
either hedged or fixed rate. This mitigates the risk from further
near-term interest rate rises.
The Company is exposed to movements in sterling exchange rates
against a number of currencies, most significantly the euro. During
the period, sterling appreciated c.1% against the euro. The Company
operates a hedging programme which substantially offsets any
foreign exchange movements.
Current and medium-term power prices remain elevated but have
decreased considerably since the prior year. This is broadly in
line with forecasts for the period and is reflected in the results
of Infinis, Attero and Valorem. These portfolio companies generate
electricity and typically sell it on a forward basis in order to
avoid spot market volatility.
Strategic risks
The Company actively manages its balance sheet and liquidity
position, seeking to maintain adequate liquidity to pursue
investment opportunities, without diluting shareholder returns by
holding surplus cash. At 30 September 2023, there was GBP6 million
available in cash, with drawings of GBP628 million under the RCF.
During the period, the Company extended the maturity of its
facility to November 2026. In July 2023, the Company agreed the
realisation of its investment in Attero for c.EUR215 million, with
completion expected in November 2023. Proceeds will be used to
repay drawings on the RCF.
Statement of comprehensive income
for the six months to 30 September
Six months to Six months to
30 September
2023 30 September 2022
Notes (unaudited) (unaudited)
GBPm GBPm
------------------------------------------ ----- ------------- -----------------
Net gains on investments 4 117 296
Investment income 97 70
Interest receivable 1 2
========================================== ===== ============= =================
Investment return 215 368
Movement in the fair value of derivative
financial instruments 14 (81)
Management and performance fees 2 (24) (31)
Operating expenses (1) (2)
Finance costs (16) (5)
Exchange movements 3 (2)
========================================== ===== ============= =================
Profit before tax 191 247
------------------------------------------ ----- ------------- -----------------
Income taxes 3 - -
------------------------------------------ ----- ------------- -----------------
Profit after tax and profit for the
period 191 247
------------------------------------------ ----- ------------- -----------------
Total comprehensive income for the
period 191 247
------------------------------------------ ----- ------------- -----------------
Earnings per share
Basic and diluted (pence) 7 20.7 27.7
----------------------------------------- ----- ------------- -----------------
Statement of changes in equity
for the six months to 30 September
Stated Total
capital Retained Capital Revenue shareholders'
For the six months to 30 account reserves reserve reserve equity
September 2023
(unaudited) Notes GBPm GBPm GBPm GBPm GBPm
================================ ===== ======= ======== ======= ======= =============
Opening balance at 1 April
2023 879 1,282 940 - 3,101
Total comprehensive income
for the period - - 131 60 191
Dividends paid to shareholders
of the Company during the
period 8 - - - (51) (51)
================================ ===== ======= ======== ======= ======= =============
Closing balance at 30 September
2023 879 1,282 1,071 9 3,241
================================ ===== ======= ======== ======= ======= =============
Stated Total
capital Retained Capital Revenue shareholders'
For the six months to 30 September account reserves reserve reserve equity
2022
(unaudited) Notes GBPm GBPm GBPm GBPm GBPm
=================================== ===== ======= ======== ======= ======= =============
Opening balance at 1 April
2022 779 1,282 643 - 2,704
Total comprehensive income
for the period - - 202 45 247
Dividends paid to shareholders
of the Company during the
period 8 - - (1) (45) (46)
=================================== ===== ======= ======== ======= ======= =============
Closing balance at 30 September
2022 779 1,282 844 - 2,905
=================================== ===== ======= ======== ======= ======= =============
Balance Sheet
as at 30 September
30 September
2023 31 March 2023
(unaudited) (audited)
Notes GBPm GBPm
========================================== ===== ============ =============
Assets
Non-current assets
Investments at fair value through profit
or loss 4 3,892 3,641
Derivative financial instruments 4 28 29
------------------------------------------ ----- ------------ -------------
Total non-current assets 3,920 3,670
========================================== ===== ============ =============
Current assets
Derivative financial instruments 4 10 28
Trade and other receivables 4 4
Cash and cash equivalents 6 5
========================================== ===== ============ =============
Total current assets 20 37
========================================== ===== ============ =============
Total assets 3,940 3,707
------------------------------------------ ----- ------------ -------------
Liabilities
Non-current liabilities
Derivative financial instruments 4 (5) (10)
Trade and other payables (15) (48)
Loans and borrowings (628) (501)
------------------------------------------ ----- ------------ -------------
Total non-current liabilities (648) (559)
========================================== ===== ============ =============
Current liabilities
Derivative financial instruments 4 (17) (8)
Trade and other payables (34) (39)
========================================== ===== ============ =============
Total current liabilities (51) (47)
========================================== ===== ============ =============
Total liabilities (699) (606)
========================================== ===== ============ =============
Net assets 3,241 3,101
========================================== ===== ============ =============
Equity
Stated capital account 6 879 879
Retained reserves 1,282 1,282
Capital reserve 1,071 940
Revenue reserve 9 -
========================================== ===== ============ =============
Total equity 3,241 3,101
========================================== ===== ============ =============
Net asset value per share
Basic and diluted (pence) 7 351.4 336.2
========================================= ===== ============ =============
The Financial statements and related Notes were approved and
authorised for issue by the Board of Directors on
6 November 2023 and signed on its behalf by:
Richard Laing
Chair
Cash flow statement
for the six months to 30 September
Six months to Six months to
30 September 30 September 2022
2023
(unaudited) (unaudited)
GBPm GBPm
================================================== ============= =================
Cash flow from operating activities
Purchase of investments (60) (318)
Proceeds from other financial assets - 98
Proceeds from partial realisations of investments 6 118
Proceeds from full realisations of investments - 105
Investment income(1) 18 18
Fees rebated on investment activities - 2
Operating expenses paid (2) (2)
Interest received 1 -
Management and performance fees paid (61) (50)
Amounts received/(paid) on the settlement
of derivative contracts 36 (3)
================================================== ============= =================
Net cash flow from operating activities (62) (32)
================================================== ============= =================
Cash flow from financing activities
Fees and interest paid on financing activities (16) (5)
Dividends paid (51) (46)
Drawdown of revolving credit facility 310 1,924
Repayment of revolving credit facility (179) (1,827)
================================================== ============= =================
Net cash flow from financing activities 64 46
================================================== ============= =================
Change in cash and cash equivalents 2 14
Cash and cash equivalents at the beginning
of the period 5 17
Effect of exchange rate movement (1) (2)
================================================== ============= =================
Cash and cash equivalents at the end of
the period 6 29
================================================== ============= =================
1 Investment income includes dividends of GBP8 million (September 2022:
GBP1 million) and interest of GBP10 million (September 2022: GBP17 million)
received from portfolio assets held directly by the Company.
Accounting policies
Basis of preparation
These financial statements are the unaudited Half-yearly
condensed financial statements (the 'Half-yearly Financial
Statements') of 3i Infrastructure plc (the 'Company'), a company
incorporated and registered in Jersey for the six-month period
ended 30 September 2023.
The Half-yearly Financial Statements have been prepared in
accordance with International Accounting Standard 34 Interim
Financial Reporting ('IAS 34'). The accounting policies are
consistent with those set out in the Annual report and accounts
2023 and those which we expect to adopt for the Annual report and
accounts 2024, which will be prepared in accordance with United
Kingdom adopted international accounting standards. They should be
read in conjunction with the financial statements for the year to
31 March 2023, as they provide an update of previously reported
information. The financial statements are prepared on a going
concern basis, as the Directors are satisfied that the Company has
the resources to continue in business for the foreseeable future.
In making this assessment, the Directors have considered a wide
range of information relating to present and future conditions,
including future projections of profitability and cash flows. The
key factors likely to affect the Company's ability to continue as a
going concern were set out in the Annual report and accounts 2023.
The Company is in a strong position in relation to its ability to
continue to operate and the Company has sufficient resources to
meet its ongoing needs. At 30 September 2023, the Company's
liquidity totalled GBP278 million (31 March 2023: GBP404 million).
Liquidity comprised cash and deposits of GBP6 million (31 March
2023: GBP5 million) and undrawn facilities of GBP272 million (31
March 2023: GBP399 million) with a maturity date of November 2026.
Income and non-income cash is expected to be received from the
portfolio investments during the coming year, a portion of which
will be required to support the payment of the dividend target and
the Company's other financial commitments. Proceeds of
approximately EUR215 million are due to be received from the sale
of Attero in November.
The Half-yearly Financial Statements were authorised for issue
by the Directors on 6 November 2023.
The Half-yearly Financial Statements do not constitute statutory
accounts. The Financial Statements for the year to
31 March 2023, prepared in accordance with United Kingdom
adopted International Financial Reporting Standards ('IFRS') and
International Accounting Standards, and on which the auditors
issued a report, which was unqualified, have been filed with the
Jersey Financial Services Commission.
Key judgements and sources of estimation uncertainties
The preparation of the Half-yearly Financial Statements in
conformity with IFRS requires the Board to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if
the revision affects only that period or in the period of the
revision and future periods if the revision affects both current
and future periods. All judgements used in the preparation of the
Half-yearly Financial Statements are consistent with those stated
in the Annual report and accounts 2023.
The key area where estimates are significant to the Half-yearly
Financial Statements and have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities in future periods is in the valuation of the investment
portfolio. The majority of assets in the investment portfolio are
valued on a discounted cash flow basis which requires assumptions
to be made regarding future cash flows and the discount rate to be
applied to these cash flows. The portfolio is well diversified by
sector, geography and underlying risk exposures. The valuation of
each asset has significant estimation in relation to asset specific
items and the potential impact of macroeconomic factors such as
near-term power price expectations, inflation and supply shortages.
The key risks to the portfolio are discussed in further detail in
the Risk review section. A key focus of the portfolio valuations at
30 September 2023 was an assessment of the impact of the
macroeconomic environment on the operational and financial
performance of each portfolio company. In particular, this focused
on a high inflationary market, rising interest rates and ongoing
geopolitical uncertainties. We have incorporated into our cash flow
forecasts a balanced view of future income receipts and
expenses.
Notes to the accounts
1 Operating segments
In previous years, the Directors reviewed information on a
regular basis that was analysed by portfolio segment; being
Economic Infrastructure businesses, the Projects portfolio and the
India fund, and by geography. Following the sale of the Projects
portfolio and the India Fund reaching the end of its life, these
segments are no longer relevant and the Directors are of the
opinion that the Company is engaged in a single segment of business
being investment in Core-plus infrastructure. The internal
information shared with the Directors on a monthly basis to
allocate resources, assess performance and manage the Company
presents the business as a single segment comprising the total
portfolio of investments.
The Company is an investment holding company and does not
consider itself to have any customers. Given the nature of the
Company's operations, the Company is not considered to be exposed
to any operational seasonality or cyclicality that would impact the
financial results of the Company during the period or the financial
position of the Company at 30 September 2023.
2 Management and performance fees
Six months Six months
to to
30 September 30 September
2023 2022
(unaudited) (unaudited)
GBPm GBPm
================ ============ ============
Management fee 24 22
Performance fee - 9
================ ============ ============
24 31
================ ============ ============
Total management and performance fees payable by the Company for
the period to 30 September 2023 were
GBP24 million (September 2022: GBP31 million). Note 9 provides
further details on the calculation of the management fee and
performance fee.
3 Income taxes
Six months Six months
to to
30 September 30 September
2023 2022
(unaudited) (unaudited)
GBPm GBPm
========================================================== ============ ============
Current taxes
Current year - -
========================================================== ============ ============
Total income tax charge in the Statement of comprehensive - -
income
========================================================== ============ ============
Reconciliation of income taxes in the Statement of comprehensive
income
The Company is a UK tax resident approved investment trust. The
tax charge for the period is different from the standard rate of
corporation tax in the UK, currently 25% (2022: 19%), and the
differences are explained below:
Six months Six months
to to
30 September 30 September
2023 2022
GBPm GBPm
============================================================ ============ ============
Profit before tax 191 247
Profit before tax multiplied by rate of corporation
tax in the UK of 25% (2022: 19%) 48 47
Effects of:
Non-taxable capital profits due to UK approved
investment trust company status (33) (40)
Non-taxable dividend income (2) -
------------ ------------
Dividends designated as interest distributions (13) (9)
------------
Brought forward losses - (1)
Temporary differences on which deferred tax is
not recognised - 3
=========================================================== ============ ============
Total income tax charge in the Statement of comprehensive - -
income
============================================================ ============ ============
The Company's affairs are directed so as to allow it to meet the
requisite conditions to continue to operate as an approved
investment trust company for UK tax purposes. The approved
investment trust status allows certain capital profits of the
Company to be exempt from tax in the UK and also permits the
Company to designate the dividends it pays, wholly or partly, as
interest distributions. These features enable approved investment
trust companies to ensure that their investors do not ultimately
suffer double taxation of their investment returns, i.e. once at
the level of the investment fund vehicle and then again in the
hands of the investors.
4 Investments at fair value through profit or loss and financial
instruments
All financial instruments for which fair value is recognised or
disclosed are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
Level Fair value input description Financial instruments
===== ======================================== ================================
Level Quoted prices (unadjusted and in active Quoted equity investments
1 markets)
Level Inputs other than quoted prices included Derivative financial instruments
2 in Level 1 that are observable in the held at fair value
market either directly (ie. as prices)
or indirectly (ie. derived from prices)
Level Inputs that are not based on observable Unquoted investments and
3 market data unlisted funds
===== ======================================== ================================
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Company determines whether
transfers have occurred between levels in the hierarchy by
reassessing the categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) for
each reporting period.
The table below shows the classification of financial
instruments held at fair value into the fair value hierarchy at
30 September 2023. For all other assets and liabilities, their
carrying value approximates to fair value. During the period ended
30 September 2023, there were no transfers of financial instruments
between levels of the fair value hierarchy (31 March 2023:
none).
Trade and other receivables on the Balance sheet includes GBP4
million of deferred finance costs relating to the arrangement fee
for the revolving credit facility (31 March 2023: GBP4 million).
This has been excluded from the table below as it is not
categorised as a financial instrument.
Financial instruments classification
As at 30 September 2023
(unaudited)
----------------------------------------- ------------------------------
Level Level Level Total
1 2 3
GBPm GBPm GBPm GBPm
----------------------------------------- ------- ------ ------ -----
Financial assets
Investments at fair value through profit
or loss - - 3,892 3,892
Derivative financial instruments - 38 - 38
----------------------------------------- ------- ------ ------ -----
- 38 3,892 3,930
------------------------------------------------- ------ ------ -----
Financial liabilities
Derivative financial instruments - (22) - (22)
----------------------------------------- ------- ------ ------ -----
- (22) - (22)
------------------------------------------------- ------ ------ -----
As at 31 March 2023
(audited)
----------------------------------------- ----------------------------
Level Level Level 3 Total
1 2
GBPm GBPm GBPm GBPm
----------------------------------------- ----- ----- ------- -----
Financial assets
Investments at fair value through profit
or loss - - 3,641 3,641
Derivative financial instruments - 57 - 57
----------------------------------------- ----- ----- ------- -----
- 57 3,641 3,698
----------------------------------------- ----- ----- ------- -----
Financial liabilities
Derivative financial instruments - (18) - (18)
----------------------------------------- ----- ----- ------- -----
- (18) - (18)
----------------------------------------- ----- ----- ------- -----
Reconciliation of financial instruments categorised within Level
3 of fair value hierarchy
As at 30 September As at 31 March 2023
2023
(unaudited) (audited)
Level 3 fair value reconciliation GBPm GBPm
======================================== ================== ===================
Opening fair value 3,641 2,873
Additions 126 824
Disposal proceeds and repayment (6) (426)
Movement in accrued income 14 31
Fair value movement (including exchange
movements) 117 339
======================================== ================== ===================
Closing fair value 3,892 3,641
======================================== ================== ===================
All unrealised movements on investments and foreign exchange
movements are recognised in profit or loss in the Statement of
comprehensive income during the period and are attributable to
investments held at the end of the period.
The holding period of the investments in the portfolio is
expected to be greater than one year. Therefore, investments are
classified as non-current unless there is an agreement to dispose
of the investment within one year and all relevant regulatory
approvals have been received. It is not possible to identify with
certainty where any investments may be sold within one year,
including the intermediate holding company through which the
investment in Attero is held.
Investment income of GBP97 million (September 2022: GBP70
million) comprises dividend income of GBP8 million (September 2022:
GBP1 million) and interest income of GBP89 million (September 2022:
GBP69 million).
Unquoted investments
The Company invests in private companies which are not quoted on
an active market. These are measured in accordance with the
International Private Equity Valuation guidelines with reference to
the most appropriate information available at the time of
measurement. Further information regarding the valuation of
unquoted investments can be found in the Portfolio valuation
methodology section of the Annual report and Accounts 2023.
The Company's policy is to fair value both the equity and
shareholder debt investments in infrastructure assets together
where they will be managed and valued as a single investment, were
invested at the same time and cannot be realised separately. The
Directors consider that equity and debt share the same
characteristics and risks and they are, therefore, treated as a
single unit of account for valuation purposes and a single class
for disclosure purposes.
As at 30 September 2023, the fair value of unquoted investments
was GBP3,892 million (31 March 2023: GBP3,641 million). Individual
portfolio asset valuations are shown in Table 1 in the Financial
review section.
The majority of the assets held within Level 3 are valued on a
discounted cash flow basis; hence, the valuations are sensitive to
the discount rate assumed in the valuation of each asset. Other
significant unobservable inputs include the long-term inflation
rate assumption, the interest rate assumption used to project the
future cash flows and the forecast cash flows themselves.
The fair value of the investments is sensitive to changes in the
macroeconomic assumptions used as part of the portfolio valuation
process. As part of its analysis, the Board has considered the
potential impact of a change in a number of the macroeconomic
assumptions used in the valuation process. By considering these
potential scenarios, the Board is well positioned to assess how the
Company is likely to perform if affected by variables and events
that are inherently outside of the control of the Board and the
Investment Manager.
Increasing the discount rate used in the valuation of each asset
by 1% would reduce the value of the portfolio by
GBP327 million (31 March 2023: GBP296 million). Decreasing the
discount rate used in the valuation of each asset by 1% would
increase the value of the portfolio by GBP376 million (31 March
2023: GBP343 million).
The majority of assets held within Level 3 have revenues that
are linked, partially linked or in some way correlated
to inflation. The long-term CPI assumption for the country of
domicile of the investments in the portfolio is 2.0% (31 March
2023: 2.0%). The long-term RPI assumption for UK assets is 2.5% (31
March 2023: 2.5%). Changing the inflation rate assumption may
result in consequential changes to other assumptions used in the
valuation of each asset. The impact of increasing the inflation
rate assumption by 1% for the next two years would be to increase
the value of the portfolio by GBP43 million (31 March 2023: GBP47
million). Decreasing the inflation rate assumption used in the
valuation of each asset by 1% for the next two years would decrease
the value of the portfolio by GBP44 million (31 March 2023: GBP52
million).
The valuations are sensitive to changes in interest rates, which
may result from: (i) unhedged existing borrowings within portfolio
companies; (ii) interest rates on uncommitted future borrowings
assumed within the asset valuations; and (iii) cash deposits held
by portfolio companies. These comprise a wide range of interest
rates from short-term deposit rates to longer-term borrowing rates
across a broad range of debt products. Increasing the cost of
borrowing assumption for unhedged borrowings and any future
uncommitted borrowing and the cash deposit rates used in the
valuation of each asset by 1% would reduce the value of the
portfolio by GBP224 million (31 March 2023: GBP182 million).
Decreasing the interest rate assumption used in the valuation of
each asset by 1% would increase the value of the portfolio by
GBP221 million (31 March 2023: GBP175 million). This calculation
does not take account of any offsetting variances which may be
expected to prevail if interest rates changed, including the impact
of inflation discussed above.
Intermediate holding companies
The Company invests in a number of intermediate holding
companies that are used to hold the unquoted investments, valued as
referred to above. All other assets and liabilities of the
intermediate holding companies are held either at fair value or at
a reasonable approximation to fair value. The fair value of these
intermediate holding companies, therefore, approximates to their
NAV and the Company classifies the fair value as Level 3. As at 30
September 2023, the fair value of the other assets and liabilities
within these intermediate holding companies was less than GBP1
million
(31 March 2023: less than GBP1 million).
Over-the-counter derivatives
The Company uses over-the-counter foreign currency derivatives
to hedge foreign currency movements. The derivatives are held at
fair value which represents the price that would be received to
sell or transfer the instruments at the balance sheet date. The
valuation technique incorporates various inputs including foreign
exchange spot and forward rates and uses present value
calculations. For these financial instruments, significant inputs
into models are market observable and are included within Level
2.
Valuation process for Level 3 valuations
The valuations on the Balance sheet are the responsibility of
the Board of Directors of the Company. The Investment Manager
provides a valuation of unquoted investments, debt and unlisted
funds held by the Company on a half-yearly basis. This is performed
by the valuation team of the Investment Manager and reviewed by the
valuation committee of the Investment Manager. The valuations are
also subject to quality assurance procedures performed within the
valuation team. The valuation team verifies the major inputs
applied in the latest valuation by agreeing the information in the
valuation computation to relevant documents and market information.
The valuation committee of the Investment Manager considers the
appropriateness of the valuation methods and inputs and may request
that alternative valuation methods are applied to support the
valuation arising from the method chosen. On a half-yearly basis,
the Investment Manager presents the valuations to the Board. This
includes a discussion of the major assumptions used in the
valuations, with an emphasis on the more significant investments
and investments with significant fair value changes. Any changes in
valuation methods are discussed and agreed with the Audit and Risk
Committee before the valuations on the Balance sheet are approved
by the Board.
5 Loans and borrowings
The Company had a GBP900 million revolving credit facility
('RCF') at 30 September 2023. In September 2023, the maturity of
the RCF was extended to 3 November 2026 with no changes to
terms.
The RCF is secured by a floating charge over the bank accounts
of the Company. Interest is payable at EURIBOR or SONIA plus a
fixed margin on the drawn amount. This fixed margin is subject to a
small adjustment annually based upon performance against agreed
sustainability metrics. As at 30 September 2023, the Company had
GBP628 million of drawings under the RCF (31 March 2023: GBP501
million). The RCF has one financial covenant, a loan-to-value
ratio.
There was no change in total financing liabilities for the
Company during the period as the cash flows relating to the
financing liabilities were equal to the income statement expense.
Accordingly, no reconciliation between the movement in financing
liabilities and the cash flow statement has been presented.
6 Issued capital
As at 30 September 2023 As at 31 March 2023
(unaudited) (audited)
Number GBPm Number GBPm
------------------------- ---------------- ------- -------------- -----
Authorised, issued and
fully paid
========================= ================ ======= ============== =====
Opening balance 922,350,000 1,598 891,434,010 1,496
Issue of ordinary shares - - 30,915,990 102
========================= ================ ======= ============== =====
Closing balance 922,350,000 1,598 922,350,000 1,598
========================= ================ ======= ============== =====
Reconciliation to Stated capital account
As at As at
30 September 31 March 2023
2023
GBPm GBPm
============================================= ============ =============
Proceeds from issue of ordinary shares 1,598 1,598
--------------------------------------------- ------------ -------------
Transfer to retained reserves on 20 December
2007 (693) (693)
--------------------------------------------- ------------ -------------
Cost of issue of ordinary shares (26) (26)
--------------------------------------------- ------------ -------------
Stated capital account closing balance 879 879
--------------------------------------------- ------------ -------------
7 Per share information
The earnings and net assets per share attributable to the equity
holders of the Company are based on the following data:
Six months to Six months to
30 September 30 September 2022
2023
(unaudited) (unaudited)
=========================================== =============
Earnings per share (pence)
Basic and diluted 20.7 27.7
=========================================== ============= =================
Earnings (GBPm)
Profit after tax for the year 191 247
=========================================== ============= =================
Number of shares (million)
Weighted average number of shares in issue 922.4 891.4
=========================================== ============= =================
As at As at
30 September 31 March
2023 2023
(unaudited) (audited)
================================== ============ =========
Net asset value per share (pence)
Basic and diluted 351.4 336.2
Net assets (GBPm)
Net assets 3,241 3,101
================================== ============ =========
8 Dividends
Six months to 30 September Six months to 30 September
2023 2022
(unaudited) (unaudited)
========================== ============================
Declared and paid during pence per GBPm pence per GBPm
the period share share
-------------------------- ------------------ -------- ------------------ --------
Prior year final dividend
paid on ordinary shares 5.575 51 5.225 46
========================== ================== ======== ================== ========
The Company proposes paying an interim dividend of 5.95 pence
per share (September 2022: 5.575 pence) which will be payable to
those shareholders that are on the register on 24 November 2023. On
the basis of the shares in issue at 30 September 2023, this would
equate to a total interim dividend of GBP55 million (September
2022: GBP50 million). The designation of a portion of the dividend
as an interest distribution is described in the Information for
shareholders section.
9 Related parties
Transactions between the Company and 3i Group
3i Group plc ('3i Group') holds 29.2% (31 March 2023: 29.2%) of
the ordinary shares of the Company. This classifies
3i Group as a 'substantial shareholder' of the Company as
defined by the Listing Rules. During the period, 3i Group received
dividends of GBP15 million (September 2022: GBP14 million) from the
Company.
3i Investments plc, a subsidiary of 3i Group, is the Company's
Alternative Investment Fund Manager and provides
its services under an Investment Management Agreement ('IMA').
3i plc, another subsidiary of 3i Group, together with 3i
Investments plc, provides support services to the Company (which
are ancillary and related to the investment management service)
which it is doing pursuant to the terms of the IMA.
Fees under the IMA consist of a tiered management fee and time
weighting of the management fee calculation and a one-off
transaction fee of 1.2% payable in respect of new investments. The
applicable tiered rates are shown in the table below. The
management fee is payable quarterly in advance.
Gross investment value Applicable tier rate
======================= ====================
Up to GBP1.25bn 1.4%
GBP1.25bn to GBP2.25bn 1.3%
Above GBP2.25bn 1.2%
======================= ====================
For the period to 30 September 2023, GBP24 million (September
2022: GBP22 million) was payable and advance payments of GBP24
million were made resulting in no amount due to 3i plc at 30
September 2023 (31 March 2023: GBP2 million due to 3i plc). In
consideration of the provision of support services under the IMA,
the Company pays the Investment Manager an annual fee that
increases each year on 1 October by the amount of the prevailing
CPI rate of the current year. The cost for the support services
incurred for the period to 30 September 2023 was GBP0.5 million
(September 2022: GBP0.5 million). There was no outstanding balance
payable at 30 September 2023 (31 March 2023: nil).
Under the IMA, a performance fee is payable to the Investment
Manager equal to 20% of the Company's total return in excess of 8%,
payable in three equal annual instalments. The second and third
instalments will only be payable
if either (a) the Company's performance in the year in which
that instalment is paid also triggers payment of a performance fee
in respect of that year, or (b) if the Company's performance over
the three years starting with the year in which the performance fee
is earned exceeds the 8% hurdle on an annual basis.
The performance hurdle requirement was not exceeded for the
period to 30 September 2023 and, therefore, no performance fee
accrual was recognised (September 2022: GBP9 million). The
outstanding balance payable as at 30 September 2023 was GBP48
million (31 March 2023: GBP83 million), which includes the second
and third instalments of the FY23 fee and the third instalment of
the FY22 fee.
Year Performance fee Outstanding balance Payable in FY24
at 30 September
2023
(GBPm) (GBPm) (GBPm)
FY23 45 30 15
FY22 54 18 18
====== ================ ==================== ================
Under the IMA, the Investment Manager's appointment may be
terminated by either the Company or the Investment Manager giving
the other not less than 12 months' notice in writing, unless 3i
Investments plc has previously ceased to be a member of 3i Group,
or with immediate effect by either party giving the other written
notice in the event of insolvency or material or persistent breach
by the other party. The Investment Manager may also terminate the
agreement on two months' notice given within two months of a change
of control of the Company.
Independent review report to 3i Infrastructure plc
Conclusion
We have been engaged by 3i Infrastructure plc ('the Company') to
review the condensed set of financial statements
in the Half-yearly financial report for the six months ended 30
September 2023 which comprises the Statement of comprehensive
income, the Statement of changes in equity, the Balance sheet, the
Cash flow statement, the accounting policies section and related
notes 1 to 9.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with United Kingdom adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom (ISRE (UK) 2410). A review of interim financial
information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in the accounting policies, the Annual financial
statements of the Company are prepared in accordance with United
Kingdom adopted international accounting standards. The condensed
set of financial statements included in this Half-yearly financial
report has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The Directors are responsible for preparing the Half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the Half-yearly financial report, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the Half-yearly financial report, we are
responsible for expressing to the Company a conclusion on the
condensed set of financial statements in the Half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
ISRE (UK) 2410. Our work has been undertaken so that we might state
to the Company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Deloitte LLP
London, United Kingdom
Date: 6 November 2023
Notes
1 Legislation in Jersey governing the preparation and dissemination of
condensed financial statements may differ from legislation in other
jurisdictions.
Statement of Directors' responsibilities
The Directors, who are required to prepare the financial
statements on a going concern basis unless it is not appropriate,
are satisfied that the Company has the resources to continue in
business for the foreseeable future
and that the financial statements continue to be prepared on a
going concern basis.
The Directors confirm to the best of their knowledge that:
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the United Kingdom;
-- the Half-yearly report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company's performance; and
-- the Half-yearly report includes a fair review of the
information required by the FCA's Disclosure and Transparency Rules
(4.2.7 R and 4.2.8 R).
The Directors of 3i Infrastructure plc and their functions are
listed below.
By order of the Board
Richard Laing
Chair
6 November 2023
Board of Directors and their functions
Richard Laing
Non-executive Chair and chair of the Nomination Committee, Disclosure
Committee and the Management Engagement Committee.
Doug Bannister
Independent Non-executive Director.
Wendy Dorman
Independent Non-executive Director and chair of the Audit and Risk Committee.
Jennifer Dunstan (appointed 20 July 2023)
Non-executive Director.
Stephanie Hazell
Senior Independent Non-executive Director and chair of the Remuneration
Committee.
Samantha Hoe-Richardson
Independent Non-executive Director.
Ian Lobley (resigned 20 July 2023)
Non-executive Director.
Martin Magee (appointed 20 July 2023)
Independent Non-executive Director.
Paul Masterton (resigned 20 July 2023)
Senior Independent Non-executive Director and chair of the Remuneration
Committee.
Information for shareholders
Financial calendar
Ex-dividend date for final dividend 23 November 2023
==================================== ================
Record date for final dividend 24 November 2023
==================================== ================
Interim dividend expected to be paid 11 January 2024
==================================== ================
Full year results expected date 8 May 2024
==================================== ================
Designation of dividends as interest distributions
As an approved investment trust, the Company is permitted to
designate dividends wholly or partly as interest distributions for
UK tax purposes. Dividends designated as interest in this way are
taxed as interest income in the hands of shareholders and are
treated as tax deductible interest payments made by the Company.
The Company expects to make such dividend designations in periods
in which it is able to use the resultant tax deduction to reduce
the UK corporation tax it would otherwise pay on the interest
income it earns from its investments. The Board is designating 5.65
pence of the 5.95 pence interim dividend payable in respect of the
period as an interest distribution.
3i Infrastructure plc
Registered office
11-15 Seaton Place
St. Helier
Jersey JE4 0QH
Channel Islands
www.3i-infrastructure.com
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END
IR FSLFAMEDSEEF
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