TIDMINPP
RNS Number : 6964L
International Public Partnerships
07 September 2023
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS NOT
FOR PUBLICATION, RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH
AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL OR
TO US PERSONS. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE
AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION.
7 September 2023
INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED
('INPP', the 'Company')
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2023
International Public Partnerships, ('INPP', the 'Company'), the
FTSE 250-listed infrastructure investment company, is pleased to
announce its results for the six months to 30 June 2023.
The Company has maintained strong operational and financial
performance, despite a volatile macroeconomic backdrop, which is
testament to the resilience of the Company's diversified investment
portfolio and active asset management approach in generating
predictable, long-term and inflation-linked cash flows.
FINANCIAL AND OPERATIONAL PERFORMANCE
Shareholder Returns and Revised Dividend Targets
-- The Company has continued to deliver robust, predictable shareholder returns.
-- Recognising the inflationary environment, the Board
determined it was an appropriate time to further realise the
benefits of the portfolio's inflation-linkage and is pleased to
announce a 5% increase in the 2023 target dividend to 8.13 pence
per share(i) . This compares to the Company's 2.5% long-term
dividend growth rate since inception.
-- The Board is therefore pleased to declare an interim dividend
of 4.06 pence per share (31 December 2022: 3.87 pence per
share).
-- Beyond 2023, the Board will keep the Company's dividend
policy under review, nevertheless it is currently forecasting to
continue its long-term projected dividend growth rate of c.2.5%,
such that the 2024 dividend target is 8.33 pence per share [i]
.
-- Assuming the FY 2023 dividend target of 8.13p, the Company's
prospective dividend yield is c.6.3% [ii] .
-- The Company has maintained its cash dividend cover in the
period of 1.2x [iii] (31 December 2022: 1.2x).
-- The Company maintained strong inflation-linkage at 0.7% [iv]
, generating long-term real rates of shareholder returns
notwithstanding volatile macroeconomic conditions.
-- The share price as at 30 June 2023 implied a projected net
return for INPP of 8.7% [v] which was 4.4% [vi] more than that of a
30-year UK government bond [vii] .
Valuation Highlights
-- During the period, the portfolio continued to perform in line
with expectations with 100% of the investment portfolio's overall
forecast distributions received by the Company.
-- The Company's Net Asset Value ('NAV') reduced by 2.4% to
155.2 pence per share (31 December 2022: 159.1 pence). The decline
is principally driven by an increase in the discount rates used to
value the forecast cashflows, partially offset by the positive
impact of the portfolio's inflation-linkage and higher cash deposit
rates.
-- IFRS profit before tax was GBP0.3 million (H1 2022: GBP219.9
million), principally reflective of the unrealised fair value loss
on the portfolio in the period.
-- The Company's shares maintain a low correlation to the FTSE
All Share Index, of 0.27 over the 12 months to 30 June 2023 (31
December 2022: 0.33).
PORTFOLIO PERFORMANCE AND ASSET STEWARDSHIP
Responsible investment is a core component of the Company's
ability to deliver essential public services, maintain
relationships with its clients and local communities, and preserve
and grow the long-term value of each investment. The references to
UN Sustainable Development Goals ('SDGs') below refer to the
contribution of each mentioned asset to defined SDGs.
Digital infrastructure | SDG 9: Industry, innovation and
infrastructure
During the period, the Company through the National Digital
Infrastructure Fund ('NDIF') agreed the sale of its interest in
Airband, with the sale completing shortly after period-end. INPP
first invested in Airband in 2018 and has supported Airband in
expanding its fibre network to cover more than 290,000 premises in
the West of England. INPP has two remaining digital assets: toob
and Community Fibre.
In May 2023, the Company announced its intention to invest a
further GBP13.7 million in toob, alongside additional capital from
its co-investors in the Amber-advised NDIF. Toob currently has a
fibre network covering c.150,000 premises across the South of
England. INPP's further investment is part of a wider GBP300
million of additional funding raised by the business, which will
expand its reach to over 300,000 premises. The investment is
expected to be made in 2024.
Community Fibre continues to make strong progress, with the
business recently achieving a significant milestone of connecting
over one million homes with fibre, and becoming London's largest
100% full fibre broadband provider.
Energy transmission | SDG 7: Affordable and clean energy
The Company's OFTO investments are regulated by Ofgem, which has
granted those OFTOs a licence to transmit electricity generated by
an offshore wind farm to bring it into the onshore grid. INPP
currently has a portfolio of 10 OFTOs, accounting for 22% of the
portfolio by investment fair value.
In June 2022, Ofgem released a second consultation regarding
potential regulatory developments underpinning an extension of the
OFTO revenue stream. As previously reported, the Investment Adviser
is actively engaged with all relevant industry stakeholders. All
parties recognise that the life extension of renewable energy
assets is required to meet the UK's net zero emissions targets. The
results of the consultation are expected to be published in late
2023.
Gas distribution | SDGs 8, 9 & 11: Decent work and economic
growth; industry innovation and infrastructure; sustainable cities
and communities
Cadent continues to support the UK Government in meeting its net
zero target, working closely with the Department for Energy
Security and Net Zero ('DESNZ') in supporting its Heat and
Buildings Strategy, and Hydrogen Strategy, to integrate hydrogen as
a core component of the UK's future energy mix. Cadent also
continues to actively engage with the UK Government and regulators
to build awareness of the opportunities offered by green gases in
the UK's net zero transition.
Waste water | SDGs 6, 8, 9 & 11: Clean water and sanitation;
decent work and economic growth; industry innovation and
infrastructure; sustainable cities and communities
Tideway remains one of the largest investments in the Company's
portfolio by fair value. Construction has continued to progress,
with overall works approximately 90% complete at 30 June 2023. The
tunnelling phase was completed in 2022 and the focus is now
principally on the completion of the secondary lining and the
upcoming system commissioning phase. The estimated cost of the
project is currently GBP4.5 billion, representing a 2% increase
since costs were last reported in March 2023 (largely due to
inflation).
To mitigate concerns around the financial difficulties faced by
Thames Water, and the extent to which this affects the Tideway
project, the Company has sought to provide clarity to its
investors, confirming that Thames Water and Tideway are completely
separate companies. Whilst Thames Water possesses a licence
requirement to collect Tideway's revenues from its customers and
pass those amounts to Tideway, statutory and regulatory protections
are in place to mitigate the risk of disruption to the receipt of
revenues in the event that Thames Water's financial position
worsens. The matter is not expected to have a material impact on
the Company's investment in Tideway.
INVESTMENT ACTIVITY
The Company continues to maintain its disciplined approach to
making new investments; something which is increasingly important
to emphasise given prevailing market conditions. The Company made
GBP108.1 million of investments during the period, largely focused
on commitments made in previous periods. These were:
-- PPP portfolio, New Zealand: In June 2023, the Company
successfully reached financial close on its acquisition of five New
Zealand availability-based social infrastructure investments. The
investment of c.GBP107.3 million marks the Company's first
expansion in the mature New Zealand market. The investments further
support diversifying INPP's investment portfolio and also
complement its existing activity in Australia. The investments are
operational and delivering long-term stable cash flows linked to
inflation, in line with the Company's overarching pursuit of
disciplined investment activity.
-- Ealing Building Schools for the Future ('BSF'), UK: In March
2023, the Company acquired a further 20% investment in Ealing BSF
for c.GBP0.7 million, increasing its holding to 100%. The BSF
scheme provides educational facilities to over 1,400 pupils.
The Company also refers to long-standing investment commitments
of GBP17.0 million in two Australian projects, both of which are
supported by letters of credit already issued under the Company's
Corporate Debt Facility ('CDF'). These commitments include GBP10.0
million into the Flinders University Health and Medical Research
Building, and GBP7.0 million into Stage 3 of the Gold Coast Light
Rail project. Investment commitments are expected to be funded in
2024 and 2025, respectively.
Two further long-standing investment opportunities, the Moray
East OFTO, and a further investment in toob, an existing digital
infrastructure investment, remain under consideration and will only
be acquired should circumstances justify.
CAPITAL ALLOCATION AND DISCOUNT MANAGEMENT
-- The Board and its Investment Adviser continue to believe the
discount to the NAV at which the Company's shares are trading
materially undervalues the Company and have actively considered
actions that it may take to address the issue.
-- Post period-end, the Company completed the divestment of
Airband, a UK fibre to the premise and fixed wireless access
network. The proceeds of the sale of Airband (mentioned above)
together with free cashflow have repaid GBP20 million of the
CDF.
-- Following the repayment, the GBP350 million CDF is c.GBP104
million utilised, (including c.GBP17 million committed by way of
letters of credit), with gross fund level leverage therefore
representing only c.3% of the Company's 30 June 2023 NAV. The
maturity date of the CDF was extended from March 2024 to June
2025.
-- In addition to a strong focus on efficient balance sheet
management and reducing, to the extent possible, the use of the
Company's CDF, the Company also intends to realise value from its
existing portfolio, the proceeds of which will be used to further
reduce corporate indebtedness.
Mike Gerrard, Chair of International Public Partnerships, said:
"INPP's high-quality portfolio continues to perform exceptionally
well where the Company received 100% of cash distributions from the
143 assets we manage. The Board continues to be disappointed by the
persistent discount to NAV and we are committed to addressing it as
best as we can. In the near-term, this includes pursuing asset
realisations to reduce corporate leverage. We maintain high
confidence in the future of the Company, reflected in the 5%
increase in the 2023 dividend target. INPP continues to provide a
compelling opportunity to receive long-term real returns and the
value of the Company's inflation-linkage is even more critical in
this macroeconomic environment."
OUTLOOK
INPP, together with its infrastructure sector peers and the
broader listed infrastructure trust universe, has continued to
navigate the headwinds created by market volatility.
The outlook for infrastructure remains strong, with
infrastructure investment and performance remaining high priorities
for governments in the countries in which INPP invests
The Board remains confident in the essential role that core
infrastructure plays in national prosperity, economic resilience
and the transition to net zero. These characteristics will
ultimately restore closer alignment between these sector
fundamentals and their valuation by financial markets, underpinning
long-term investor appetite for the sector, and INPP, as a
result.
OTHER INFORMATION
The 2023 Half-yearly Financial Report for the six months to 30
June 2023 has today been published on the Company's website, along
with a copy of the results presentation, and can be accessed and
downloaded at
https://www.internationalpublicpartnerships.com/investors/results-reports-presentations-and-circulars/
.
In compliance with LR 9.6.1, a copy of the 2023 Half-yearly
Financial Report has been submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
In accordance with DTR 6.3.5(1A), the regulated information
required under DTR 6.3.5 is available in unedited full text within
the 2023 Half-year Financial Report as uploaded and available on
the National Storage Mechanism and on the Company's website as
noted above.
ENDS
NOTES TO EDITORS
For further information
Amber Infrastructure FTI Consulting
Erica Sibree Ed Berry / Mitch Barltrop / Jenny
+44 (0) 7557 676 499 Boyd
+44 (0) 7703 330 199 / (0) 7807 296
032 / (0) 7971 005 577
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 approximately 180 staff who are responsible
for the management of, advice on and origination of infrastructure
investments.
Visit the INPP website at
www.internationalpublicpartnerships.com for more information.
Important Information
This announcement contains information that is inside
information for the purposes of the UK version of the Market Abuse
Regulation (EU) No. 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018 (as amended and
supplemented from time to time).
This announcement does not constitute a prospectus relating to
the Company and does not constitute, or form part of, any offer or
invitation to sell or issue, or any solicitation of any offer to
purchase or subscribe for, any shares in the Company in any
jurisdiction nor shall it, or any part of it, or the fact of its
distribution, form the basis of, or be relied on in connection with
or act as any inducement to enter into, any contract therefor. The
issuance programme, as described in Part VI of the Prospectus
issued by the Company on 8 April 2022, available on the website, is
closed.
Forward-looking statements are subject to risks and
uncertainties and accordingly the Company's actual future financial
results and operational performance may differ materially from the
results and performance expressed in, or implied by, the
statements. These forward-looking statements speak only as at the
date of this announcement. The Company, Amber and Numis Securities
Limited expressly disclaim any obligation or undertaking to update
or revise any forward-looking statements contained herein to
reflect actual results or any change in the assumptions, conditions
or circumstances on which any such statements are based unless
required to do so by the Financial Services and Markets Act 2000,
the Prospectus Regulation Rules of the Financial Conduct Authority
or other applicable laws, regulations or rules.
[i] Future profit projection and dividends cannot be guaranteed.
Projections are based on current estimates and may vary in
future.
[ii] Based on the closing share price of 129.6 pence per share
as at 30 June 2023. Future profit projection and dividends cannot
be guaranteed. Projections are based on current estimates and may
vary in future.
[iii] Cash dividend payments to investors are paid from net
operating cash flow before capital activity.
[iv] 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.
[v] This is calculated based on INPP's weighted average discount
rate, less the ongoing charges ratio, adjusted to reflect the share
price discount to the NAV using published sensitivities.
[vi] As at 30 June 2023.
[vii] Referenced owing to the UK weighting of the portfolio and
the weighted average investment tenor of c.37 years.
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