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INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF
SECURITIES FOR SALE IN ANY JURISDICTION.
5 SEPTEMBER
2024
INTERNATIONAL PUBLIC
PARTNERSHIPS LIMITED
('INPP', 'the
Company')
HALF YEAR RESULTS FOR THE SIX
MONTHS ENDED 30 JUNE 2024
International Public Partnership,
the FTSE 250-listed infrastructure investment company
('INPP' or the
'Company'), is pleased to
announce its results for the six months to 30 June 2024 in which it
continued to provide investors with predictable, long-term
inflation-linked returns.
- Full-year
target dividend growth of 3.0% to 8.37 pence per share[i],[ii] (31
December 2023: 8.13 pence per share).
- Declaration of a fully cash covered interim dividend of 4.18
pence per share for the six months to 30 June 2024.
- Strong
inflation-linkage of 0.7%[iii], generating long-term real
rates of shareholder returns.
- Fully
repaid the cash drawings under the corporate debt facility ('CDF')
and the Board approved a reduction of the CDF from £350 million to
£250 million.
- Realised
proceeds of c.£235 million in the last 18 months through asset
realisations.
- Completed
the acquisition of Moray East OFTO for c.£77 million in February
2024, which will further increase the Company's contribution to the
UK's transition to a net zero carbon economy.
Mike Gerrard, Chair of International Public Partnerships,
said: "The Company's solid performance in the period is a testament
to the resilience of its diversified, low-risk portfolio and
fundamentals of the investment case. The Company has a progressive
dividend policy on which it has delivered every year since its IPO
in 2006. Moreover, the strength of the portfolio is such that no
further investments are needed to continue this policy for at least
the next 20 years."
"The Board continues to believe the share price at which the
Company is currently trading relative to the NAV materially
undervalues the Company. Discount management is a primary focus for
the Board and Investment Adviser, having realised c.£235 million
through asset recycling in the last 18 months. The realisation
proceeds achieved were in line with the last published valuations.
The Company expects further divestment activity and, as a
consequence, also expects to extend its existing share buyback
programme, increasing the programme to up to £60 million.
This demonstrates our confidence in the Company's
valuation."
"Whilst the bar is high for new investment, we continue to
originate compelling opportunities to further enhance long-term
shareholder value, investing over £85 million in new investments in
the energy transmission, social and digital infrastructure sectors
during the period."
VALUATION
·
The Company's Net Asset Value ('NAV') decreased to
£2.8 billion (3 December 2023: £2.9 billion) and the NAV per share
decreased to 149.5 pence (31 December 2023: 152.6
pence).
·
The c.30bps increase in the weighted average of
the discount rates used to value the Company's investments
principally contributed to the decline in NAV. This increase is
designed to reflect perceived changes in the rates of return
currently required by investors and, ultimately, ensure that these
point-in time valuations reflect prevailing market
conditions.
·
IFRS profit before tax for the six months to 30
June 2024 was £16.7 million (30 June 2023: £0.3
million).
·
The Company's shares maintained low correlation to
the FTSE All Share Index, of 0.5 over the 12 months to 30 June 2024
(31 December 2023: 0.4).
SHAREHOLDER RETURNS
·
The Company reconfirmed its 2024 target dividend
of 8.37 pence per sharei,ii, representing a further 3%
growth, and has declared an interim dividend of 4.18 pence per
share for the six months to 30 June 2024.
·
Beyond 2024, the Board expects to continue its
long-term projected annual dividend growth rate of 2.5% in line
with the Company's historical track record since the IPO in
2006i,ii.
·
In order to provide investors with a more regular
income stream, the Company intends to increase the frequency of its
dividend payments, from semi-annually to quarterly, commencing in
2025[iv].
·
The Company has delivered a total shareholder
return[v] ('TSR') of 197.2% since the IPO,
equivalent to an annualised TSR of 6.4%.
CAPITAL ALLOCATION AND DISCOUNT MANAGEMENT
Whilst the discount to the NAV at
which the Company's shares are trading has narrowed, the Board and
its Investment Adviser continue to believe that the current share
price materially undervalues the Company. For example, the
Company's share price on 30 June 2024 implied a projected net
return of 9.3%[vi] which was, in our view, an
attractive 4.6% premium to that offered by a 30-year UK government
bond[vii] .
The Board has resolved that as long
as the Company's share price discount to NAV persists, its capital
allocation strategy will be guided by three principles:
1.
Prudent use of the Company's CDF;
2.
Maintain a targeted programme of divestments to
both demonstrate underlying value and reallocate capital;
and
3.
Allocate divestment proceeds towards both, (i)
increasing the share buyback programme, and (ii) subject to the
economics being more attractive over the medium to long-term
relative to a share buyback, making new, accretive
investments.
Significant progress has been made
in executing this capital reallocation strategy,
including:
Fully repaid the Corporate Debt Facility
·
During the period, cash drawings under the CDF
were fully repaid and the Board has since approved a reduction of
the CDF from £350 million to £250 million. The reduction assists
with continuing disciplined cost management while maintaining the
flexibility for investment opportunities as they may
arise.
c.£235 million raised from divestments over the last 18
months
·
In the 12 months to 30 June 2024, the Company
realised proceeds of c.£220 million through asset recycling. This
included proceeds of c.£108 million which were received early in
the period but related to the December 2023 OFTO
realisation.
·
Post-period end, the Company sold its investment
in the Three Shires portfolio raising c.£14 million. The portfolio
comprised the design, build, financing and maintenance of four
community healthcare facilities, including two in Derbyshire and
the others in Lincolnshire and Leicestershire.
·
All divestments made by the Company in the last 18
months have been in line with the most recently published
valuations. The Company and its Investment Adviser continue to
focus on actively pursuing divestment opportunities within the
portfolio to both demonstrate underlying intrinsic value and
reallocate capital to support shareholder value.
Increased size of existing share buyback programme to up to
£60 million
·
Intention to increase the existing share buyback
programme from £30 million to up to £60 million and extend the
programme to the end of Q1 2025 in expectation of further
divestment activity.
·
To date, c.£18 million has been used to buy the
Company's shares under the 12 month buyback programme which
commenced in January 2024. Shares will continue to be bought under
the programme whilst they trade at a significant discount to their
net asset value.
INVESTMENT ACTIVITY
During the period, the Company made
a number of attractive investments totalling over £85 million,
including in the energy transmission, 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:
·
Moray East
OFTO: In December 2023, the Company
committed to acquire its eleventh OFTO investment. This acquisition
totalling c.£77 million was completed in February 2024 using the
proceeds from the previous OTFO realisations and will further
increase the Company's contribution to the UK's transition to a net
zero carbon economy. The investment has the capacity to transmit
sufficient renewable electricity to power the equivalent of c.1.0
million homes, increasing the total equivalent across the Company's
OFTO portfolio to c.3.7 million homes.
·
Flinders
University Health and Medical Research Buildings
('HMRB'): The Company has a long-standing commitment to
invest in the Flinders University HMRB. Funding commenced in Q1
2024 with c.£4.3m invested during H1 2024. The HMRB collates
research, clinical and technological platforms and will further
Flinders University's longstanding contributions to the health,
education and medical sectors.
·
Gold Coast Light
Rail - Stage 3: The Company also has
a long-standing commitment to invest in Gold Coast Light Rail -
Stage 3. Funding commenced in Q2 2024 with c.£0.5m invested during
H1 2024. The Gold Coast project has been developed to create a
world-class sustainable, city changing integrated light rail system
for the future prosperity of the Gold Coast community.
·
toob: As part of the Company's
previously reported commitment to invest a further c.£13 million,
alongside additional capital from its co-investors in the
Amber-managed National Digital Infrastructure Fund ('NDIF'),
throughout 2024 and 2025, INPP invested c.£4 million during the
period. This further investment is part of a wider potential £300
million of additional funding raised by toob, which should enable
it to reach over 600,000 premises.
The Company does not need to make
additional investments to deliver current projected returns.
Further investment opportunities will be assessed against the
Company's relevant strategic KPIs and the overall level of returns
will be considered against alternative capital allocation
options.
PORTFOLIO PERFORMANCE AND ASSET STEWARDSHIP
Energy transmission | SDG 7: Affordable and clean
energy
The Company's OFTO investments are regulated by
Ofgem, which has granted those OFTOs licences to transmit
electricity generated by offshore wind farms into the onshore grid.
INPP currently has a portfolio of 11 OFTOs.
The Ofgem consultation process
regarding the potential regulatory developments underpinning an
extension of the OFTO revenue stream is ongoing. In January 2024,
Ofgem published decisions on some of the questions raised in their
2022 consultation. This confirmed Ofgem's overarching objective to
maximise the combined operational lifetimes of both generation and
transmission assets where it is economic and efficient to do so.
Ofgem expects incumbent OFTOs to be best positioned to operate
transmission assets in an extension period.
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 net zero emissions targets.
The Company notes that East Anglia One OFTO ('EA1') is
currently operating at half its physical capacity having suffered
an offshore cable fault. Repair works are scheduled to commence
shortly with the asset expected to return to full service in Q4
2024. Evidence gathered to date indicates that the cable fault was
beyond the reasonable control of the EA1 OFTO and therefore it
should be protected against any revenue penalties by the
protections available in its transmission licence. The cables
remain under warranty from the original manufacturer.
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. The transition to net zero will change the role of the gas
network over time as consumers gradually shift their consumption to
lower carbon alternatives such as renewable electricity and
hydrogen alongside an expected decline in natural gas. Cadent will
play a critical role in energy decarbonisation in the UK by, (i)
continuing to safely and reliably provide gas and thereby
facilitate the increased use of cleaner albeit more intermittent
technologies, (ii) driving reductions in emissions while customers
still need gas, and (iii) converting and developing the network to
enable the distribution of cleaner fuels such as hydrogen to where
it is needed when customers are ready.
Ofgem continues to consult
stakeholders as part of its process for determining the revenues
that UK gas network companies will be able to earn in the next
five-year price control period which starts in 2026.
Post-period end, Ofgem announced
that it does not anticipate significant regulatory changes in the
next price control period. The terms of the
announcement made by Ofgem were broadly consistent with the
Company's expectations and are another step in the consultation
process, with the regulator expected to finalise the revenue
determinations in late 2025.
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 top
investments in the Company's portfolio by fair value. Major
construction work on the project completed during the period, and
the commissioning phase will begin shortly with the project
remaining on course to be fully operational in 2025. The estimated
cost of the project remains in line with the £4.5 billion stated in
INPP's 2023 Annual Report and the cost to Thames Water customers
remains well within the initial estimate provided at the outset of
the project.
Tideway continues to monitor
developments in relation to the well-publicised financial position
of Thames Water. The matter is not expected to have a material
impact on the Company's investment in Tideway. Whilst Thames Water
has a licence obligation to pass revenues to Tideway, statutory and
regulatory protections are afforded to Tideway which are designed
to mitigate the risk of disruption to the receipt of revenues and
would continue to apply should Thames Water's status
change.
Transport | SDG 8, 9 & 11: Decent
work and economic growth; industry innovation and infrastructure;
sustainable cities and communities
Angel Trains, UK: A rolling
stock leasing company which owns more than 4,000 vehicles. Angel
Trains continues to perform well with its train on lease to Train
Operating Companies ('TOCs') across the UK. The UK's new Labour
government intends to establish Great British Railways ('GBR') to
oversee the British rail sector, following a review that was
commissioned by the previous government. The proposed establishment
of GBR and the nationalisation of operating services are not
expected to have a material impact on Angel Trains. The business
continues to demonstrate its commitment to sustainable technology
to support the transition to net zero (e.g. through the pioneering
trial to replace a diesel engine with a battery on an intercity
train.
BeNEX, Germany: BeNEX is an
investor in both rolling stock and TOCs which operate regional
passenger rail franchises across Germany under contract with
numerous German federal states. During the period, BeNEX signed an
agreement to acquire Abellio's regional rail operations in Germany
which principally comprise two TOCs generating mostly
availability-based revenues. The projected economics of this c.£15
million investment are significantly more attractive, over the
medium to long-term, relative to the opportunity to engage in a
share buyback and the Company approved funding for this investment
post period end. It is anticipated that this acquisition will
complete in Q4 2024 and will be funded from existing cash reserves
and/or proceeds expected to be generated from near term divestment
activity.
Notably, this transaction would see
BeNEX enhance its contribution to the decarbonisation of transport
within Germany and increase its service volume from c.49m train km
per annum to c.64m train km per annum, becoming one of the largest
passenger rail operators in Germany by service volume.
Digital infrastructure | SDG 9: Industry, innovation
and infrastructure
Following the sale of the Company's
stake in Airband through
the Amber-advised NDIF in 2023, INPP has two remaining investments
in digital assets - toob and Community Fibre.
As previously reported, the Company
has committed to invest a further c.£13 million into toob, alongside additional capital from
its co-investors in the Amber-managed NDIF, throughout 2024 and
2025. During the period, INPP invested c.£4 million of its c.£13
million commitment, helping toob achieve the significant milestone
of connecting 50,000 customers, demonstrating the attractiveness of
the toob product and proposition.
Community Fibre continues to
make strong progress and has now passed c.1.4 million homes with
fibre and has over 300,000 customers. Community Fibre remains
London's largest 100% full fibre broadband provider.
OUTLOOK
Looking ahead, the Board remains
confident that its strategy will enable the Company to deliver
consistent shareholder returns whilst navigating the uncertainties
of the macroeconomic environment. The Company reconfirms that the
projected investment receipts from the Company's investment
portfolio as at 30 June 2024 are such that even if no further
investments are made, the Company expect to be able to continue to
meet its existing progressive dividend policyiv for at
least the next 20 years.
Significant progress has already
been made following proactive measures to optimise the portfolio
and reallocate capital. The Board continues to actively monitor its
strategy to reduce the share price discount and remains focused on
creating long term shareholder value.
The outlook for infrastructure
remains strong, and there continues to be a significant need for
infrastructure investment across the geographies in which the
Company invests. Governments have a pressing requirement to renew
and expand public infrastructure but continue to be fiscally
constrained. The potential for the Company to assist in the
development and funding of new infrastructure should provide the
Company with highly attractive growth opportunities in the longer
term.
OTHER INFORMATION
The 2024 Interim Report and
financial statements for the six months to 30 June 2024 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/reports-and-publications/
In compliance with LR 9.6.1, a copy
of the 2023 Annual 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
Annual 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:
Erica Sibree/Amy
Edwards
+44 (0) 7557 676 499 / (0) 7827 238
355
Amber Fund Management
Limited
Hugh
Jonathan
+44 (0)20 7260 1263
Numis
Securities
Mitch Barltrop/ Jenny
Boyd
+44 (0) 7703 330 199 / (0) 7971 005 577
FTI Consulting
About International Public Partnerships
('INPP'):
INPP is a listed infrastructure
investment company that invests in global public infrastructure
projects and businesses, which meets societal and environmental
needs, both now, and into the future.
INPP is a responsible, long-term
investor in over 140 infrastructure projects and businesses. The
portfolio consists of utility and transmission, transport,
education, health, justice and digital infrastructure projects and
businesses, in the UK, Europe, Australia 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.
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.