INTERNATIONAL PUBLIC
PARTNERSHIPS LIMITED
PORTFOLIO
UPDATE
FOR THE PERIOD 1 JANUARY 2024
TO 19 JUNE 2024
19 June 2024
International Public Partnerships
Limited, the listed infrastructure investment company ('INPP', or
the 'Company'), has today issued a portfolio update for the period
1 January 2024 to 19 June 2024.
HIGHLIGHTS
· The
Company's portfolio of over 140 projects and businesses has
continued to perform well, both operationally and financially,
during the period.
· The portfolio
continues to deliver essential services to stakeholders,
maintaining high levels of asset availability.
· Projects under
construction continue to progress well, with Tideway notably
completing major construction works during the period.
· Investments totalling c.£83 million have been made since 1
January 2024, including in the Offshore Transmission (OFTO), social
infrastructure and digital sectors. These investments are in line
with previously published investment commitments and were funded
from cash generated through the Company's recent realisations
totalling c.£200 million.
· The
Board has continued, throughout the period, to review progress
against its strategy for reducing its share price discount, and to
determine strategic priorities for the management of its
portfolio.
Predictable investor
returns
· The Company
reaffirms its annual dividend growth targets for 2024 and 2025,
with a 3.0% increase to 8.37 pence per share for 20241
and a further 2.5% increase to 8.58 pence per share for
20251. This reflects the Company's ambitions to
sustainably grow dividends over the long term, whilst providing
full dividend cash coverage from net operating cash flow before
capital activity.
· The
second and final dividend for the 2023 financial year was paid on
13 June 2024. The total dividend paid during 2023 was in line with
previously published growth forecasts of 5.0%.
· Strong
inflation-linkage of 0.7%2 has also been maintained,
generating long-term real rates of shareholder returns.
Responsible capital
allocation
· The Company
maintains a disciplined approach to capital allocation and
continues to take proactive steps to reduce the discount to Net
Asset Value ('NAV') at which the Company's shares are
trading.
· Cash drawings
under the Company's Corporate Debt Facility
('CDF') remain at nil with £19.2 million utilised via letters of
credit.
· Through the
£30 million share buy-back programme launched in January 2024, the
Company has, to date, bought back c.£13 million of
shares.
FINANCIAL PERFORMANCE
· As at
31 December 2023, the Company's NAV per share was 152.6 pence, as
published with the Company's full-year results on 28 March
2024.
· The Company's
investment portfolio valuation is determined semi-annually by the
Directors after advice from the Investment Adviser, and is reviewed
by the Company's auditors. A semi-annual valuation is published
within the Company's interim and annual accounts.
· As
with the wider investment company peer group, the Company's NAV per
share is subject to changes in the external macroeconomic
environment, including inflation rates, government bond yields and
foreign exchange rates. Taken together, and other things being
equal, these factors are currently expected to have a modest
negative impact on the Company's last published NAV:
o Inflation rates have fallen faster in the majority of the
jurisdictions the Company is invested in over the first half of the
year, compared to previously published forecasts. Given the
portfolio's positive inflation linkage, a reduction in forecast
inflation rates (other things being equal) will have a negative
impact on the Company's NAV.
o Yields on the government bonds issued by the countries in
which the Company is invested are, on average, broadly in line with
the levels seen at 31 December 2023. The discount rates that will
be adopted as part of the 30 June 2024 valuation will be determined
by taking into account, among other things, the underlying
government bond yields, operational performance of the investments
and prevailing market conditions.
o Since 31 December 2023, the Company has observed a
strengthening of Sterling against the majority of the currencies it
is exposed to, including the Australian Dollar, Canadian Dollar,
Danish Krone, and Euro, with the only exception being the US
Dollar. In isolation, this would have a minor negative impact on
the Company's NAV.
INVESTMENT ACTIVITY & PORTFOLIO UPDATES
· Since
1 January 2024, the Company has made investments totalling c.£83
million:
o In
February 2024, the Company reached Financial Close on its eleventh
OFTO, Moray East OFTO, which connects the onshore electricity grid
to the Moray East wind farm off the coast of Scotland. The Moray
East OFTO has the capacity to transmit renewable electricity to
power the equivalent of c.1.0 million homes, increasing the total
number of homes capable of being powered across the Company's
OFTO portfolio to c.3.7 million homes.
o Other investments include funding into two long-standing
commitments to Flinders University Health and Medical Research
Building and Gold Coast Light Rail - Stage 3 projects, which
continue to be supported by letters of credit issued under the
Company's CDF. These investments are expected to be funded between
2024 and 2025.
o In
addition, the previously announced c.£13 million further investment
into toob, the digital fibre investment, has commenced and is
expected to be fully deployed by 2025.
· At the
time of writing, the Company has remaining commitments totalling
c.£20.9 million across the transport (Gold Coast Light Rail - Stage
3), education (Flinders University Health and Medical Research
Building) and digital (toob) sectors.
CAPITAL ALLOCATION AND CURRENT MARKET
ENVIRONMENT
· Together with the majority of its investment company peers,
the Company's share price has been trading at a discount to its NAV
since Q4 2022 and continues to be impacted by the sustained higher
interest rate environment.
· The
Board and its Investment Adviser continue to believe the share
price materially undervalues the Company and have previously
committed to take a number of actions to optimise the portfolio and
reallocate capital to improve shareholder returns. The Company has
made good progress against these objectives to date, having fully
repaid the CDF, increasing the dividend for 2023 and dividend
target for 20241, commencing a share buy-back programme,
revising the target returns and recycling capital.
· In
addition, the Company, through its Investment Adviser, is actively
pursuing further divestments and expects to be in a position to
provide the market with further updates on or before the
announcement of its 2024 Interim Results (expected in September
2024). At that time, it also expects to provide guidance around
other capital allocation considerations, including pipeline
opportunities and enhancements to the share buy-back
programme.
· Fundamentally, the Board intends for the following actions to
guide its decision-making process while the share price discount to
NAV persists:
1. Continued limited use
of the Company's CDF;
2. Continuation of a
programme of divestments to both demonstrate value and reallocate
capital;
3. The utilisation of
any divestment proceeds towards both, (i) increasing the share
buy-back programme, and (ii) subject to the economics being more
attractive over the medium to long-term relative to the opportunity
to engage in a share buy-back, making new, accretive
investments.
WIDER SHAREHOLDER INITIATIVES
· The
Company is committed to maintaining an open and transparent
dialogue with its shareholders. It was pleased to hold a Capital
Markets Day in February 2024 for sell-side analysts and
institutional investors. More information and materials are
available on the website:
https://www.internationalpublicpartnerships.com/investors/capital-markets-day-27-february-2024/
·
In March 2024, the Company published its
third Sustainability Report alongside its Annual Report. Following ongoing engagements
with the Company's investors, a new set of ESG Key Performance
Indicators ('KPIs') have been developed across the portfolio. In
addition, the Report provides enhanced ESG disclosures that will
support shareholders in meeting their obligations under the EU
Sustainable Finance Disclosure Regulation ('SFDR') and the
recommendations of the Taskforce on Climate-related Financial
Disclosures ('TCFD').
OUTLOOK
· While the
Company, and its broader investment company peers, continue to
experience challenging market conditions, the continued strength,
long-term nature and inflation-linkage of the portfolio's projected
cash receipts together provide the Board and the Investment Adviser
with confidence that the Company will continue to meet its
performance objectives.
· In
particular, the Board reminds investors that the implied projected
net returns are in excess of 9%4 and that the projected
cash receipts from the Company's portfolio are such that even if no
further investments are made, the Company should be able to
continue to meet its existing progressive dividend policy for at
least the next 20 years5.
· The
Company reiterates its intention to take proactive steps to address
the discount to NAV that its share price is currently trading and,
through a prudent approach to capital allocation, is aiming to
create long-term shareholder value.
· Governments across the jurisdictions in which the Company
invests have pressing infrastructure renewal and expansion
requirements but continue to be fiscally constrained. The
opportunity for the Company to assist in the development and
funding of these infrastructure requirements provides the Board
with optimism around prospects for growth in the
longer-term.
ENDS.
For
further information:
Erica
Sibree
+44 (0) 7557 676 499
Amber Fund Management
Limited
Hugh
Jonathan
+44 (0)20 7260 1263
Numis
Securities
Ed Berry / Mitch
Barltrop
+44 (0) 7703 330 199 / (0) 7807 296 032
FTI Consulting
Notes to Editors:
While it is no longer a requirement
under the Disclosure Guidance and Transparency Rules for the
Company to issue Interim Management Statements, the Board believes
it is in the interest of shareholders for the Company to provide
quarterly updates in addition to its half year reports.
1. Future profit
projection and dividends cannot be guaranteed. Projections are
based on current estimates and may vary in future.
2. 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.
3. 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.
4. 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.
5. This is reflective of the increased 2023 dividend and the 2024
dividend target, and 2.5% annual dividend growth thereafter.
About International Public Partnerships
(INPP):
INPP is a listed infrastructure
investment company that invests in global public infrastructure
projects and businesses, which meets societal and environmental
needs, both now, and into the future.
INPP is a responsible, long-term
investor in over 140 infrastructure projects and businesses. The
portfolio consists of utility and transmission, transport,
education, health, justice and digital infrastructure projects and
businesses, in the UK, Europe, Australia, New Zealand and North
America. INPP seeks to provide its shareholders with both a
long-term yield and capital growth.
Amber Infrastructure Group ('Amber')
is the Investment Adviser to INPP and consists of over 180 staff
who are responsible for the management of, advice on and
origination of infrastructure investments.