TIDM3IN
RNS Number : 9039E
3i Infrastructure PLC
11 November 2020
11 November 2020
Results for the six months to 30 September 2020
On track to deliver increased FY21 dividend of 9.8 pence per share.
Performance highlights
GBP84m, 3.8% Total return Resilient portfolio underpinning growth in
259.4p net asset value ('NAV')
NAV per share
GBP48m Good level of income and non-income cash
Total income and non-income to support the dividend
cash
==================================================
GBP360m Strong liquidity position to make new investments
Cash balances
==================================================
4.9p On track to deliver the FY21 dividend target,
Interim dividend per share 6.5% higher than FY20
==================================================
Richard Laing, Chair of 3i Infrastructure plc (the
'Company')
"I am pleased with the resilient performance in the first half
which demonstrates the overall strength of our portfolio,
particularly in light of the ongoing Covid-19 pandemic. We are on
track to deliver our dividend target, which is 6.5% higher than
last year."
Performance
The Company generated a total return of 3.8% on opening NAV for
the first half of the year. The NAV per share increased to 259.4
pence. The portfolio overall is performing in line with
expectations, both financially and operationally, with our
Investment Manager driving value growth over the period through
active asset management of the portfolio.
The Company delivered a Total Shareholder Return ('TSR') of
18.9% in the period (FTSE 250: 16.0%). Since IPO, the Company's
annualised TSR is 12.7%, comparing favourably with the broader
market (FTSE 250: 6.1% annualised over the same period). The
Company has achieved this outperformance with a low correlation to
the broader equity market.
Interim dividend
The Board is announcing the payment of an interim dividend of
4.9 pence per share, scheduled to be paid on
11 January 2021 to holders of ordinary shares on the register on
27 November 2020. The ex-dividend date will be 26 November 2020. 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 3.9 pence of the 4.9 pence
interim dividend as an interest distribution.
Corporate governance
The Company's Annual General Meeting was held on 9 July 2020.
All resolutions were approved by shareholders, including the
re-election of the existing Directors and the election of Samantha
Hoe-Richardson as a Director to the Board.
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 and Total
portfolio return percentage. 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 2020.
For further information regarding the announcement of the
results for 3i Infrastructure plc, including a live webcast of the
results presentation at 10.00am today, 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 deliver a
long-term sustainable return to shareholders from investing in
infrastructure.
3i Investments plc, a wholly-owned subsidiary of 3i Group plc,
is authorised and regulated in the UK by the Financial Conduct
Authority and acts as 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 reas onable 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 or in any other jurisdiction.
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 Unite d
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, 3i
India Infrastructure Fund and the Investment Manager, as
applicable, as well as financial statements. No public offering in
the United States is currently contemplated.
3i Infrastructure plc Half-yearly report 2020
Review from the Managing Partner
Portfolio review
The Company is in a strong position with ample liquidity. We
have built a well-diversified portfolio providing essential
infrastructure services that has proved resilient to the challenges
of the Covid-19 pandemic. However, we remain cautious about the
speed of the recovery in our markets and conscious of further
Covid-19 related risks, particularly in relation to TCR which is
the business most directly affected.
Joulz performed ahead of our investment case for the year to
date. The carve-out from Stedin is progressing well and the company
is integrating the new electric vehicle charging solutions business
it acquired in March. We completed a successful refinancing on
better terms than envisaged in our previous valuation. We have
strengthened the management team with the appointment of Joulz's
first CFO, Paul Smits, who was previously the CFO for the Port of
Rotterdam.
Ionisos performed well during the first year under our ownership
and has benefited from cold sterilisation being an essential
service to the healthcare and pharma industries. The Covid-19
pandemic resulted in reduced demand for surgical, cosmetic and
veterinary products but this was largely compensated by an increase
in demand for medical PPE and packaging. During the period, Ionisos
began construction of a new E-beam facility in Bautzen, Germany. We
have added a new CFO to the management team, Mohamed El Bounaamani,
with the previous CFO transitioning to the role of General Manager,
France.
Tampnet's success in signing an agreement to acquire BP's fibre
assets in the Gulf of Mexico represents an important milestone for
our investment, securing ownership of a key piece of subsea
infrastructure and enabling Tampnet to replicate its North Sea
business model in the Gulf of Mexico. The transaction is subject to
certain third party and regulatory consents and approvals and is
expected to be funded from Tampnet's internal resources and
existing credit facilities. During the period, performance in
Tampnet's roaming business was affected by the pandemic as
operators reduced some personnel-related activities, and across the
business we saw certain growth projects delayed. We were pleased
with the appointment of Ulf Bonnevier as the new CFO. Ulf brings
significant large corporate experience from his previous role as
CFO at Humana Group.
TCR has performed broadly in line with our expectations during
the first half of the year, as flights resumed slightly earlier
than we had anticipated and operating costs were managed well.
However, travel restrictions and the ongoing effects of the
pandemic on demand for air travel are now expected to endure for
longer than we had previously assumed, with a more prolonged period
of gradual recovery to previous air traffic levels by 2024 and
consequential impacts on TCR's customers. This has led to a
reduction in our valuation of TCR at the period end.
Attero continues to perform well operationally. Waste production
in the Netherlands had largely recovered by the end of the period.
However, waste imports from the UK are still materially below
pre-pandemic levels. Attero's EfW plants were nevertheless able to
continue operating at full capacity during the period by drawing
waste from Attero's buffer. The significant reduction in power
prices was partly mitigated by the company's hedging programme but
our valuation at the period end reflects both lower current power
prices and lower medium to long-term forecasts.
Oystercatcher's terminals enjoyed a good first half of the year,
outperforming expectations and prior year, on the back of more
favourable market conditions for oil storage and lower costs. The
negative impact of Covid-19 has been limited to lower throughput
levels as a result of lower end-user demand and refineries
continuing to operate below their normal output levels.
Infinis performed ahead of expectations in the period, primarily
due to outperformance in its captured landfill methane business. As
a result of its progressive near-term hedging strategy, Infinis has
suffered limited financial impact from low power prices but medium
to long-term forecasts have been revised down.
The impact of the Covid-19 pandemic and the significant fall in
the oil price has not affected ESVAGT's Service Operation Vessels
('SOVs') fleet which services the offshore wind market, but has
impacted its ERRV fleet which operates in the oil and gas segment,
where we are seeing lower utilisation levels. Overall performance
improved compared to the same period last year. During the period
we committed further funding to support ESVAGT's continued growth
in the wind sector, with three new SOVs due to commence operations
in the coming year.
Valorem performed well in the first half of the year, benefiting
from favourable wind conditions, good availability and a partial
refinancing. All assets continued to operate as normal during the
lockdown period and a number of new projects became operational,
while some construction projects suffered only limited delays,
mainly due to supply chain issues. The management team has been
strengthened with the appointment of a new CFO, Tristan Maes.
The availability-based Projects portfolio has performed in line
with expectations. We were pleased with the significant progress
made towards realising the remaining assets in the India Fund, with
an agreement to sell the Fund's stake in Krishnapatnam Port. The
valuation of the Company's investment in the Fund reflects the
terms of the sale agreement.
The portfolio is analysed below.
Portfolio - Breakdown by value Portfolio - Breakdown by country
at 30 September 2020 at 30 September 2020
--------------------------------- ----------------------------------
Infinis 16% Netherlands 21%
Tampnet 13% France 19%
Joulz 12% UK 16%
Ionisos 12% Norway 13%
TCR 11% Belgium 11%
ESVAGT 9% Luxembourg 9%
Oystercatcher 9% Denmark 9%
Valorem 6% India 2%
-------------------------- ------
Attero 6%
Projects 4%
India Fund 2%
-------------------------- -----
Investment activity
In October we agreed to acquire further stakes in our Dutch PPP
projects from our co-shareholders Fluor Infrastructure and Heijmans
Nederland for a total equity investment of c.EUR25 million.
During the period we invested GBP15 million in ESVAGT out of a
total commitment of GBP27 million to support the build of three new
SOVs.
The investment pipeline contains a broad range of potential
investment opportunities for the Company, including through our
existing platform investments. We remain selective, pursuing
opportunities that will enhance the portfolio while seeking to
limit abort cost risk in highly competitive sales processes.
Sustainability
We continue to work closely with our portfolio company
management teams to respond to the opportunities and challenges
presented by sustainability. Our work over the first half of the
year has focused on developing or enhancing each company's
sustainability strategy and objectives, as well as reviewing and,
where necessary, building their ability to monitor and report on
their environmental impacts including carbon emissions.
Outlook
The uncertainty created by the Covid-19 pandemic continues to
create a degree of volatility in the financial markets, but we have
seen a reasonable level of transaction activity in the
infrastructure sector demonstrating continued investor appetite for
the resilience inherent in many infrastructure businesses.
Competition for new investments is still high, but we remain
patient around the deployment of our available liquidity, seeking
those opportunities that enhance the portfolio. The pipeline
includes further investments in existing sectors, particularly to
support energy transition and communications infrastructure.
We are confident of delivering long-term sustainable returns to
shareholders, through the Company's well-balanced portfolio and
through selective new investment from our broad origination
platform. Our experienced team and active approach to asset
management delivered a first half return consistent with our
expectations and we are well-positioned to meet our return
objective for the year as a whole.
Phil White
Managing Partner and Head of Infrastructure
3i Investments plc
Financial review
Portfolio and returns
Total return
The Company generated a total return for the six-month period of
GBP84 million, representing a 3.8% return on opening shareholders'
equity (September 2019: GBP107 million, 5.8%). This return was
underpinned by a portfolio return of 5.5% (September 2019: 6.0%),
diluted by the cash balance held during the period.
Table 1 summarises the valuation and movements in the portfolio,
as well as the return for each investment, for the period. In
accordance with accounting standards, 'Investments at fair value
through profit or loss' as reported in the Balance sheet include,
in addition to the portfolio asset valuation, the cash and other
net assets held within intermediate unconsolidated holding
companies. These amounts are set out at the foot of the table
below, to provide a reconciliation between the Directors' valuation
of the portfolio assets and 'Investments at fair value through
profit or loss' reported in the financial statements.
Table 1: Portfolio summary (30 September 2020, GBPm)
Directors' Directors' Allocated Underlying Portfolio
valuation Investment Divestment Accrued Foreign valuation foreign portfolio total
31 March in the in the Value exchange 30 exchange income return
income September in in
Portfolio 2020 period period movement translation 20 20 hedging the period the
assets movement period(1)
---------------- ---------- ---------- ---------- -------- -------- ----------- ---------- --------- ---------- ---------
Infinis 285 -- (2)(2) -- (2) -- 281 -- 9 7
Tampnet 205 2(3) -- -- 14 4 22 5 (7) 2 1 3
Joulz 187 -- -- 3 24 5 219 (2) 3 30
Ionisos 194 -- -- 4 9 5 212 (2) 4 1 6
TCR 195 -- -- 6 (19) 5 187 (3) 6 (1 1)
ESVAGT 141 25(3,4) -- -- (4) 4 16 6 (7) 10 3
Oystercatcher 154 -- -- -- 6 1 1 61 -- -- 7
Valorem 88 -- -- -- 15 2 10 5 (1) 2 1 8
Attero 103 1(3) -- -- (5) 2 101 (1) 1 ( 3)
Economic
infrastructure
portfolio 1,552 28 (2) 13 38 28 1,657 (23) 37 80
---------------- ---------- ---------- ---------- -------- -------- ----------- ---------- --------- ---------- ---------
Projects 68 -- -- -- 4 1 73 (1) 3 7
India Fund 27 -- -- -- 5 -- 32 -- -- 5
---------------- ---------- ---------- ---------- -------- -------- ----------- ---------- --------- ---------- ---------
Total portfolio 1,647 2 8 (2) 13 47 29 1,762 (24) 40 92
================ ========== ========== ========== ======== ======== =========== ========== ========= ========== =========
Adjustments
related
to
unconsolidated
subsidiaries(5) 5 -- -- 3 (3) -- 5 -- 3 --
---------------- ---------- ---------- ---------- -------- -------- ----------- ---------- --------- ---------- ---------
Reported
in the
consolidated
financial
statements 1,652 28 (2) 16 73 -- 1,767 (24) 43 92
---------------- ---------- ---------- ---------- -------- -------- ----------- ---------- --------- ---------- ---------
1 This comprises the aggregate of value movement, foreign exchange translation, allocated foreign
exchange hedging and underlying portfolio income in the period .
2 Shareholder loan repaid.
3 Capitalised income.
4 Follow on investment in ESVAGT of GBP15 million.
5 Income statement adjustments explained in Table 6 and Balance sheet adjustments explained
in Table 7.
An analysis of the elements of the total return for the period
is shown in Table 2 below.
Table 2: Summary total return ( six months to 30 September ,
GBPm )
2020 2019
========================================================== ==== ====
Capital return (excluding exchange) (1) 47 67
Foreign exchange movement in portfolio 29 22
========================================================== ==== ====
Capital return (including exchange) (1) 76 89
Movement in fair value of derivatives (24) (15)
========================================================== ==== ====
Net capital return 52 74
Total income (2) 46 51
Costs (14) (18)
Other net income/(costs) including exchange movements (1) -- --
========================================================== ==== ====
Total return 84 107
========================================================== ==== ====
1 Foreign exchange movement in portfolio is shown within Net capital return. Non-portfolio foreign
exchange movement is shown within Other net income/(costs).
2 Includes interest receivable of GBP6 million (September 2019: GBP0.2 million).
The financial statements' classification of these components of
total return includes transactions within unconsolidated
subsidiaries as the Company adopts the Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27) basis for its
reporting. The non-material adjustments required to reconcile this
analysis to the financial statements are shown in Table 6.
The capital return is the largest element of the total return.
The portfolio generated a value gain of GBP47 million in the period
to 30 September 2020 (September 2019: GBP67 million), driven
primarily by valuation uplifts for the Company's holdings in Joulz,
Tampnet, Valorem, the Projects portfolio and the India Fund, offset
by a decline in the valuation of TCR. Infinis and Attero performed
well operationally and financially, but their valuations were
reduced by lower power price expectations.
Table 3: Portfolio return by asset ( six months to 30 September
2020, not annualised )
Portfolio assets
------------------------ -------
Infinis 2.5%
Tampnet 6.3%
Joulz 16.0%
Ionisos 8.2%
TCR (5.6)%
ESVAGT 1.9%
Oystercatcher 4.5%
Valorem 20.5%
Attero (2.9)%
Projects 10.6%
India Fund 18.5%
------------------------ -------
Total portfolio return 5.5%
------------------------ -------
The portfolio was valued on a consistent basis with no change to
our underlying principle which is to value our portfolio on a fair
value basis in line with IPEV guidelines. At March 2020 we made a
series of general assumptions in relation to the Covid-19 pandemic
but adapted them for country and company-specific circumstances.
This continues to be the case, but we have adapted these
assumptions based on our experience of the last six months, and
these are now as follows:
-- current precautions e.g. social distancing, restricted
travel, including on public transport, will be in place until
Spring 2021 before any further relaxation of requirements;
-- enhanced restrictions will be implemented at a local or
national level in response to increases in Covid-19 cases; and
-- a vaccine will not be widely available until late 2021.
With the benefit of another six months of experience, the
application of those assumptions is company-specific and varies
across the portfolio. We have updated the cash flow forecasts for
each investment and, in relation to the impact of Covid-19, we now
have better visibility of the short to medium-term impact than we
had in March, including the expectation that operations will
continue largely without interruption, but the recovery will vary
widely by sector.
The economic impact on many companies, including on customers of
our portfolio companies, was mitigated by government support
schemes. For some customers, we assume that the impact has been
postponed until 2021 but will still occur (e.g. a level of bad debt
and deferred growth). The effect of the reduction in spot power
prices and the forecast future power price curves on our energy
generating portfolio companies has been material and is reflected
in our valuations. The aviation sector remains severely affected by
travel restrictions, although this varies by region and domestic
services have been recovering more than international travel. The
reduction in the value of TCR of GBP19 million reflects revised
business plan assumptions as we now expect the full recovery in air
traffic to pre-Covid levels to take until 2024.
Joulz increased in value by GBP24 million which reflects the
refinancing completed on better terms than originally anticipated
and the limited impact that Covid-19 has had on the business to
date.
The value increase in Tampnet of GBP14 million reflects the
expected acquisition of BP's fibre assets in the Gulf of Mexico,
partially offset by slower near-term growth and lower roaming
revenues.
Valorem increased in value by GBP15 million. The business
completed a successful refinancing of 11 operating wind assets and
two solar assets and received the necessary permits for a new wind
project in Finland. We lowered the discount rate to reflect the
growth of the operating asset base and the ongoing reduction in
risk profile of the business.
The weighted average discount rate used in the valuation of the
portfolio reduced marginally to 11.2% at September 2020 (March
2020: 11.3%). This was driven by the reduction in the discount rate
for Valorem, a small reduction in that of Joulz, and a reduction in
discount rates for the Projects portfolio to bring them into line
with evidence from recent transaction activity in that sector.
The movement in foreign exchange rates generated a GBP29 million
gain in the period (September 2019: GBP22 million). This was offset
by the movement in the value of derivatives of GBP24 million
(September 2019: GBP15 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 GBP46 million, comprising portfolio income of
GBP40 million and interest receivable on vendor loan notes and cash
balances of GBP6 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 GBP2 million
during the period ( September 2019: GBP6 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. Whilst non-income cash does not form part of the total
return shown in Table 2, it is included when considering dividend
coverage. Total income and non-income cash is shown in Table 8
below.
Costs
Management and performance fees
During the period to 30 September 2020, the Company incurred
management fees of GBP12 million (September 2019: GBP15 million).
The prior year period included a one-off GBP2 million transaction
fee relating to the new investment in Ionisos and the remainder of
the decrease reflects the reduction in portfolio value following
realisations in the second half of last year.
The annual performance hurdle of 8% was not exceeded in the
first half of the year, as the total return for the period was
3.8%, resulting in no performance fee accrual (September 2019:
nil).
Other operating and finance costs
Operating expenses, comprising Directors' fees, service provider
costs and other professional fees, totalled GBP1 million in the
period (September 2019: GBP1 million).
Finance costs of GBP1 million in the period (September 2019:
GBP1 million) comprised arrangement, commitment and utilisation
fees for the Company's GBP300 million revolving credit facility
('RCF').
Ongoing charges ratio
The ongoing charges ratio measures annual operating costs, as
disclosed in Table 4 below, against the average NAV over the
reporting period.
The Company's ongoing charges ratio is calculated in accordance
with the Association of Investment Companies ('AIC') recommended
methodology and was 1.16% for the period to 30 September 2020
(September 2019: 1.63%).
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. As no performance fee was accrued in the
period, no additional disclosure is required (September 2019:
nil).
Table 4: Ongoing charges ( six months to 30 September ,
annualised GBPm )
2020 2019
============================= ===== =====
Investment Manager's fee 23.5 28.1
Auditor's fee 0.4 0.4
Directors' fees and expenses 0.5 0.5
Other ongoing costs 2.2 2.6
============================= ===== =====
Total ongoing charges 26.6 31.6
============================= ===== =====
Ongoing charges ratio 1.16% 1.63%
============================= ===== =====
Balance sheet
The NAV at 30 September 2020 was GBP2,312 million (March 2020:
GBP2,269 million). The principal components of the NAV are the
portfolio assets, cash holdings, the vendor loan notes from the
sale of WIG, the fair value of derivative financial instruments and
other net assets and liabilities. A summary balance sheet is shown
in Table 5.
The accounting standards require cash or other net assets and
liabilities held within intermediate holding companies to be
presented as part of the fair value of the investments. The
Directors consider that it is helpful for users of the accounts to
be able to consider the valuation of the Company's portfolio assets
and total aggregate cash and net assets/liabilities within the
Company and its unconsolidated subsidiaries. The non-material
adjustments required to provide this analysis are shown in Table
7.
Table 5: Summary balance sheet (GBPm)
As at 30 September 2020 As at 31 March 2020
=============================================================== ======================= ===================
Portfolio assets 1,762 1,647
Cash balances 360 418
Derivative financial instruments (4) 21
Other net assets (including vendor loan notes) and liabilities 194 183
=============================================================== ======================= ===================
NAV 2,312 2,269
--------------------------------------------------------------- ----------------------- -------------------
Cash is principally held in AAA-rated money market funds. The
Company has a GBP300 million RCF in order to maintain a good level
of liquidity for further investment whilst minimising returns
dilution from holding excess cash balances. This is a three-year
facility, with a maturity date of April 2023. At 30 September 2020
the full GBP300 million facility was available.
The liability for derivative financial instruments reflects the
foreign exchange hedging programme described above.
Other net assets and liabilities predominantly comprise the
vendor loan notes received from the WIG sale and a performance fee
accrual. The movement from March 2020 is due to accrued interest on
these vendor loan notes and a decrease in the performance fee
payable.
NAV per share
The total NAV per share at 30 September 2020 was 259.4 pence
(March 2020: 254.5 pence). This reduces to 254.5 pence (March 2020:
249.9 pence) after the payment of the interim dividend of 4.9 pence
(March 2020: final dividend of 4.6 pence).
Dividend
The Board has announced an interim dividend for the period of
4.9 pence per share, or GBP44 million in aggregate (September 2019:
4.6 pence; GBP41 million). This is half of the Company's target
full year dividend for FY21 of 9.8 pence per share. The Board is
designating 3.9 pence of the 4.9 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 2020.
APM Purpose Calculation Reconciliation to IFRS
Total return on opening NAV A measure of the overall It is calculated as the The calculation uses IFRS
financial performance of total return of GBP84 measures.
the Company. million, as shown in the
Statement of comprehensive
income, as a percentage of
the opening NAV of GBP2,269
million net of the final
dividend for
the previous year of GBP41
million.
============================ ============================ ============================
NAV per share A measure of the NAV per It is calculated as the NAV The calculation uses IFRS
share in the Company. divided by the total number measures and is set out in
of shares in issue at the Note 7 to the accounts.
balance
sheet date.
============================ ============================ ============================
Total income and non-income A measure of the income and It is calculated as the The reconciliation of Total
cash other cash receipts by the total income from the income to IFRS is shown in
Company which support the underlying portfolio and Table 6.
payment of other assets plus
expenses and dividends. non-income The proceeds from partial
cash realisations of investments
being the repayment of are shown in the Cash flow
shareholder loans statement.
not resulting from the The realisation proceeds
disposal of an underlying which result from a partial
portfolio asset. sale of an underlying
portfolio asset
are not included within
non-income cash.
============================ ============================ ============================
Investment A measure of the size of It is calculated as the The calculation uses
value including the investment portfolio portfolio asset value plus portfolio assets shown in
commitments including the value of the amount of the the reconciliation in Table
further contracted contracted commitment. 7, together with
future investments the value of future
committed by the Company. commitments. Undrawn loan
commitments to the India
Fund are not included
as these are not expected
to be drawn.
============================ ============================ ============================
Total portfolio return A measure of the financial It is calculated as the The calculation uses
percentage performance of the total portfolio return in capital return (including
portfolio. the period of GBP92 exchange), movement in fair
million, as shown in value of derivatives,
Table 1, as a percentage of underlying portfolio
the sum of the opening income, opening portfolio
value of the portfolio and value and investment in the
investments period. The reconciliation
in the year (excluding of all these items to IFRS
capitalised interest) of is shown in Table 1.
GBP1,662 million.
============================ ============================ ============================
In addition to the APMs, the Half-yearly report shows portfolio
information including cash and other net assets held within
intermediate unconsolidated holding companies. Tables 6 and 7 show
a reconciliation of this portfolio information to the information
presented in the financial statements. The calculation of 'Total
income and non-income cash' is shown in Table 8.
Table 6: Reconciliation of summary total return (six months to
30 September 2020, GBPm)
Adjustments for
Underlying portfolio transactions in
asset aggregate unconsolidated Financial
returns and costs subsidiaries statements
====================================================== ==================== =============== ==========
Capital return (including exchange) 76 (3) 73
Movement in fair value of derivatives (24) -- (24)
====================================================== ==================== =============== ==========
Net capital return 52 (3) 49
Total income 46 3(1) 49
Costs (14) -- (14)
Other net income/(costs) including exchange movements -- -- --
====================================================== ==================== =============== ==========
Total return 84 -- 84
====================================================== ==================== =============== ==========
1 Interest income accrued from loans between the Company and the unconsolidated subsidiaries.
Table 7: Reconciliation of summary balance sheet (as at 30
September 2020, GBPm)
Adjustments for
Underlying portfolio transactions in
asset aggregate unconsolidated Financial
returns and costs subsidiaries(1) statements
================================= ==================== =============== ==========
Portfolio assets 1,762 5 1,767(2)
Cash balances 360 (5)(3) 355
Derivative financial instruments (4) -- (4)
Other net assets 194 -- 194
================================= ==================== =============== ==========
Net asset value 2,312 -- 2,312
================================= ==================== =============== ==========
1 'Investments at fair value through profit or loss' in the financial statements includes GBP5
million of unrestricted cash balances. The adjustments reclassify these balances to show the
underlying value of the portfolio assets, the total cash holdings and other net assets/(liabilities)
positions, as monitored by the Board.
2 Described as 'Investments at fair value through profit or loss' in the financial statements.
3 Cash balances held in unconsolidated subsidiaries totalled GBP5 million.
Table 8: Total income and non-income cash ( six months to 30
September, GBPm )
2020 2019
---------------- ---- ----
Total income 46 51
Non-income cash 2 6
---------------- ---- ----
Total 48 57
---------------- ---- ----
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 2020, 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 64 to 65 of
the Annual report and accounts 2020. Developments in relation to
these principal risks during the period are outlined below.
Covid-19
The Covid-19 pandemic has had a severe impact on economic growth
forecasts worldwide. The experience of the past six months has
helped us understand the current and potential effects on our
portfolio, but the ultimate impact will only be fully understood
over time.
All of our portfolio companies have been affected to some
extent, either directly or indirectly, for example through the
reduction in air traffic, the fall in the oil price, lower power
prices and changes in customer demand. Operationally, the portfolio
has been highly resilient with the activities of our companies
deemed essential in the countries in which they operate. The
principal effects on each portfolio company are described in the
Review from the Managing Partner and the Financial review above.
The impact of Covid-19 on the principal risks is described
below.
External risks - market/economic and competition
The European economic infrastructure market remains competitive,
with strong demand for new investments. Despite the restrictions
imposed in response to the Covid-19 pandemic, we have seen a
reasonable level of transaction activity.
We remain cautious about the speed of the recovery in economic
activity and conscious of further Covid-19 related risks. The risk
exposure from market/economic risk remains elevated as a result of
Covid-19, and this remains the top risk facing the Company.
The UK's future trading arrangements with the EU and the
regulatory environment in which the Company operates remain
uncertain and could create a generally less favourable financial
environment for the Company and its investments. The majority of
the Company's investments are in domestic businesses with limited
cross-border trading. This mitigates the risk to the Company of
there being unfavourable trading terms between the UK and the
EU.
Inflation in the UK declined sharply in the period, falling to
its lowest level since June 2016. This downwards trend was also
seen in European inflation rates. The decrease in inflation
negatively affects assets with inflation-linked revenues, but this
is partially offset for assets with inflation-linked costs.
Interest rates remained low during the period. Government bond
yields have declined further over the period, from already
historically low levels. The Company has taken advantage of this
favourable environment through continued debt refinancing activity
in the portfolio.
The Company is exposed to movements in sterling exchange rates
against a number of currencies, most significantly the euro. During
the period sterling depreciated against the euro, primarily driven
by continued uncertainty over the terms of the UK's departure from
the EU, which resulted in foreign exchange gains in the portfolio.
Losses from the hedging programme substantially offset these
gains.
The revenues of Infinis are underpinned by the inflation-linked
UK Renewables Obligation Certificate ('ROC') regime until 2027,
while the valuation of the business is also affected by the
evolution of long-term power price forecasts and by fluctuations in
the spot power price which has been volatile in the period,
dropping to a 13-year low at the peak of the pandemic but
recovering recently. Approximately 25% of the revenues for Attero
are generated from the sale of heat and power which is also
affected by fluctuations in the power price.
The oil price was volatile in the period but appears to have
stabilised for now. The low oil price has delayed some expected
growth for Tampnet and reduced demand for ESVAGT vessels operating
in the oil and gas sector. For Oystercatcher, the drop in oil
prices caused a contango which led to storage rate improvements and
customers keen to renew sooner. However this benefit was partially
offset by reduced throughput revenues driven by the decline in
end-user demand.
A recovery in air travel commenced following the easing of
restrictions imposed in response to the Covid-19 pandemic. This
recovery has been hampered by restrictions being reimposed in
certain countries towards the end of the period. Air traffic
movements and passenger numbers remain substantially below prior
year levels, and the timing and extent of future recovery is
uncertain. This affects TCR, as discussed in the Review from the
Managing Partner and the Financial review above.
Attero imports waste from the UK and the levels remain
materially below pre-pandemic levels. Attero's EfW plants were
nevertheless able to continue operating at full capa city during
the period by drawing waste from Attero's significant buffer of
untreated waste.
External risks - regulatory and tax
The Company's investment in Infinis is exposed to regulatory
risk around 'embedded benefits'. Ofgem is currently conducting
several reviews into network access and charging arrangements. It
is possible that this could affect the valuation of Infinis, but
our current expectation is that this would not be material. Carbon
taxes are an important driver of UK power prices and the future of
the two main schemes - the EU ETS and the UK Carbon Price Support -
are in doubt as the UK leaves the EU ETS after December 2020.
External risks - debt markets
Ongoing access to debt markets is important to businesses in the
portfolio, particularly as existing debt matures. Changes in the
terms and availability of debt finance, including as a consequence
of the underlying performance of portfolio assets, could affect
valuations. The majority of the portfolio has now been refinanced
over the medium to long term, mitigating this risk. Debt markets
remain open and we successfully refinanced the acquisition debt in
Joulz during the period on better terms than envisaged in our
previous valuation. We also completed a further refinancing of
operating assets in Valorem.
Investment risks
The Company has ample liquidity to pursue new investment
opportunities but shareholder returns are diluted to the extent
that this liquidity is in the form of cash balances.
Statement of comprehensive income
for the six months to 30 September
Six months to Six months to
30 September 2020 30 September 2019
Notes (unaudited) (unaudited)
GBPm GBPm
----------------------------------------------------------------- ------ ------------------ ------------------
Net gains on investments 4 73 85
Investment income 43 55
Fees payable on investment activities - (1)
Interest receivable 6 -
Investment return 122 139
----------------------------------------------------------------- ------ ------------------ ------------------
Movement in the fair value of derivative financial instruments (24) (15 )
Management and performance fees payable 2 (12) (15)
Operating expenses (1) (1)
Finance costs (1) (1)
Profit before tax 84 107
----------------------------------------------------------------- ------ ------------------ ------------------
Income taxes 3 - -
----------------------------------------------------------------- ------ ------------------ ------------------
Profit after tax and profit for the period 84 107
----------------------------------------------------------------- ------ ------------------ ------------------
Total comprehensive income for the period 84 107
----------------------------------------------------------------- ------ ------------------ ------------------
Earnings per share
Basic and diluted (pence) 7 9.4 13.3
---------------------------------------------------------------- ------ ------------------ ------------------
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 September 2020 account reserves reserve reserve equity
(unaudited) Notes GBPm GBPm GBPm GBPm GBPm
===================================================== ====== ======== ========= ======== ======== ==============
Opening balance at 1 April 2020 779 1,282 196 12 2,269
Total comprehensive income for the period - - 49 35 84
Dividends paid to shareholders of the Company during
the period 8 - - - (41) (41)
----------------------------------------------------- ------ -------- --------- -------- -------- --------------
Closing balance at 30 September 2020 779 1,282 245 6 2,312
----------------------------------------------------- ------ -------- --------- -------- -------- --------------
Stated Total
capital Retained Capital Revenue shareholders'
For the six months to 30 September 2019 account reserves reserve reserve equity
(unaud ited) Notes GBPm GBPm GBPm GBPm GBPm
----------------------------------------------------- ------ -------- --------- -------- -------- --------------
Opening balance at 1 April 2019 560 1,282 64 (4) 1,902
Total comprehensive income for the period - - 68 39 107
Dividends paid to shareholders of the Company during
the period 8 - - - (35) (35)
----------------------------------------------------- ------ -------- --------- -------- -------- --------------
Closing balance at 30 Se ptember 2019 560 1,282 132 - 1,974
----------------------------------------------------- ------ -------- --------- -------- -------- --------------
Balance sheet
as at 30 September
30 September 2020 31 March 2020
(unaudited) (audited)
Notes GBPm GBPm
--------------------------------------------------- ------ ------------------ --------------
Assets
Non-current assets
Investments at fair value through profit or loss 4 1,767 1,652
Trade and other receivables 103 99
Derivative financial instruments 4 2 7
--------------------------------------------------- ------ ------------------ --------------
Total non-current assets 1,872 1,758
--------------------------------------------------- ------ ------------------ --------------
Current assets
Derivative financial instruments 4 9 26
Trade and other receivables 103 101
Cash and cash equivalents 355 413
--------------------------------------------------- ------ ------------------ --------------
Total current assets 467 540
--------------------------------------------------- ------ ------------------ --------------
Total assets 2,339 2,298
--------------------------------------------------- ------ ------------------ --------------
Liabilities
Non-current liabilities
Derivative financial instruments 4 (7) (4)
Trade and other payables (6) (11)
Total non-current liabilities (13) (15)
--------------------------------------------------- ------ ------------------ --------------
Current liabilities
Derivative financial instruments 4 (8) (8)
Trade and other payables (6) (6)
Total current liabilities (14) (14)
--------------------------------------------------- ------ ------------------ --------------
Total liabilities (27) (29)
--------------------------------------------------- ------ ------------------ --------------
Net assets 2,312 2,269
--------------------------------------------------- ------ ------------------ --------------
Equity
Stated capital account 6 779 779
Retained reserves 1,282 1,282
Capital reserve 245 196
Revenue reserve 6 12
--------------------------------------------------- ------ ------------------ --------------
Total equity 2,312 2,269
--------------------------------------------------- ------ ------------------ --------------
Net asset value per share
Basic and diluted (pence) 7 259.4 254.5
-------------------------------------------------- ------ ------------------ --------------
The Financial statements and related Notes were approved and
authorised for issue by the Board of Directors on
10 November 2020 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 2020 30 September 2019
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------------------------------------------ ------------------ ------------------
Cash flow from operating activities
Purchase of investments (15) ( 389)
Proceeds from partial realisations of investments 2 11
Proceeds from full realisation of investments 1 -
Investment income(1) 12 32
Fees paid on investment activities - (1)
Operating expenses paid (1) (2)
Management and performance fees paid (16) (44)
Amounts received/(paid) on the settlement of derivative contracts 1 (14)
Payments for transfer of investments from unconsolidated subsidiaries(2) - 17
Distributions from transfer of investments from unconsolidated
subsidiaries(2) -- (17)
Net cash flow from operations (16) (407)
------------------------------------------------------------------------------ ------------------ ------------------
Cash flow from financing activities
Fees and interest paid on financing activities (1) (1)
Dividends paid (41) (35)
Drawdown of revolving credit facility - 192
Net cash flow from financing activities (42) 156
------------------------------------------------------------------------------ ------------------ ------------------
Change in cash and cash equivalents (58) (251)
Cash and cash equivalents at the beginning of the period 413 257
Cash and cash equivalents at the end of the period 355 6
------------------------------------------------------------------------------ ------------------ ------------------
1 Investment income includes dividends of GBP1 million (September 2019: GBP9 million) and interest
of GBP11 million (September 2019: GBP19 million) received from portfolio assets held directly
by the Company and distributions of nil (September 2019: GBP4 million) received from unconsolidated
subsidiaries.
2 Following the change of tax residence of the Company from Jersey to the UK, several of the
investments held in unconsolidated subsidiaries domiciled outside the UK were transferred
to be held directly by the Company.
Reconciliation of net cash flow to movement in net
cash/(debt)
for the six months to 30 September
Six months to Six months to
30 September 2020 30 September 2019
(unaudited) (unaudited)
===================================================== ================== ==================
Change in cash and cash equivalents (58) (251)
Drawdown of revolving credit facility - (192)
===================================================== ================== ==================
Change in net cash/(debt) resulting from cash flows (58) (443)
===================================================== ================== ==================
Movement in net cash/(debt) (58) (443)
Net cash at the beginning of the period 413 257
===================================================== ================== ==================
Net cash/(debt) at the end of the period 355 (186)
===================================================== ================== ==================
In the above reconciliation there were no non-cash
movements.
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 2020.
The Half-yearly Financial Statements have been prepared in
accordance with International Accounting Standard 34 Interim
Financial Reporting ('IAS 34') and the accounting policies are
consistent with those set out in the Annual report and accounts
2020. They should be read in conjunction with the consolidated
financial statements for the year to 31 March 2020, 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 2020. While the global impact of
Covid-19 has been profound, and the Company's NAV has not been
immune to this,
the Company remains in a strong position in relation to its
ability to continue to operate and the Company has ample resources
to meet its ongoing needs. At 30 September 2020, the Company's
liquidity totalled GBP660 million (March 2020: GBP718 million).
Liquidity comprised cash and deposits of GBP360 million (March
2020: GBP418 million) and undrawn facilities of GBP300 million
(March 2020: GBP300 million). In addition, the Company is due to
receive deferred consideration from the realisation of WIG in two
tranches, GBP98 million in December 2020 and GBP98 million in
December 2021. The Company has a strong investment portfolio
providing a predictable income yield and an expectation of
medium-term capital growth. Whilst a significant amount of income
is expected to be received from the portfolio investments during
the year, the Company has sufficient liquidity to meet its
financial commitments even if no income were received and has
sufficient resources to make equity investments in new and existing
portfolio companies where required.
The Half-yearly Financial Statements were authorised for issue
by the Directors on 10 November 2020.
The Half-yearly Financial Statements do not constitute statutory
accounts. The statutory accounts for the year to 31 March 2020,
prepared under IFRS as adopted by the European Union, 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 2020.
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 uncertainty surrounding the
ultimate impact of the Covid-19 pandemic has resulted in
significant estimation in respect to the future cash flows for some
of the portfolio companies. This includes estimation in relation to
liquidity and delays to debtor payments; forecast revenue, supply
chain, employee and slower growth effects; and the offsetting
impact of government and central bank mitigation measures. The
portfolio is diversified by sector, geography and underlying risk
exposures. The valuation of each asset has significant estimation
in relation to asset specific items. The key risks to the portfolio
are discussed in further detail in the Risk review section.
The methodology for deriving the fair value of the investment
portfolio, including the key estimates and the general assumptions
adopted in relation to the Covid-19 pandemic, is set out in the
Financial review section. For each portfolio company, we have
considered the effects of government support schemes on some of
their customers and assumed that, where applicable, this has
postponed the potential impact on debtor payments until 2021 but
that it will still occur. Consideration was also given to the
effects of stay at home and social distancing policies on
customers, including on their viability and access to liquidity.
The impact of power price reductions on our energy generating
portfolio companies has been material and is reflected in our
valuations. Both the spot price and the forecast future price
curves have reduced. The oil price was volatile in the period and
lower oil prices have affected the portfolio in different ways. For
example, the resulting contango has created a strong incentive to
store oil and oil products, but a lower oil price has reduced or
delayed capital expenditure on oil and gas projects. We have also
considered delays to noncommitted capital expenditure, cost-cutting
initiatives and delays to construction activity, new business wins
or new orders.
As described above, the macroeconomic uncertainty has created
uncertainty in the fair value of the investment portfolio. The
Directors believe that they have reflected this uncertainty in a
balanced way through the assumptions used in the valuations of each
portfolio company. In respect of TCR, which operates in the
aviation industry, there is a greater level of estimation
uncertainty compared to the other portfolio investments. The
valuation of TCR, which represents 8% of the total net asset value
of the Company, is subject to the estimation uncertainty in respect
of the extent and duration of the disruption to air traffic
movements caused by Covid-19 and the pace and extent of the
eventual recovery. This varies by region and domestic services have
been recovering more than international travel.
The valuation of TCR is considered to reflect a balanced base
case of cash flows and appropriate discount rate. TCR's financial
performance in the period has been close to, or slightly ahead of,
our expectations. However, the timing of recovery in air travel to
pre-Covid levels remains highly uncertain and many businesses and
aviation forecasters in the sector now expect that to take several
years. We have assumed that passenger numbers overall do not return
to pre-Covid levels until 2024, a more conservative assumption than
that taken in March. TCR has largely fixed rental contracts, rather
than direct exposure to passenger numbers, and is diversified
across geographies so it has been less severely impacted than
airlines by the reduction in air traffic movements and passenger
numbers.
The effects of continuing reduced demand are likely to have
negative consequences for TCR's customers. We have sought to
reflect these difficult market conditions in our cash flow
forecasts for TCR, while also recognising increasing interest in
TCR's business model from existing and potential new customers. The
current base case reflects the revised commercial agreements
reached with TCR's main customers since the onset of the pandemic,
together with a number of cost reduction initiatives undertaken,
and assumes new contract wins based in the short term on those at
an advanced stage of negotiations. Additionally, the discount rate
increase at March has been maintained as a result of the continued
uncertainty in the aviation sector over the short term.
Notes to the accounts
1 Operating segments
The Directors review information on a regular basis that is
analysed by portfolio segment: being Economic Infrastructure
businesses, the Projects portfolio and the India fund, and by
geography. These segments are reviewed for the purpose of resource
allocation and the assessment of their performance. In accordance
with IFRS 8, the segmental information provided below uses these
segments for the analysis of results as it is the most closely
aligned with IFRS reporting requirements. The Company is an
investment holding company and does not consider itself to have any
customers.
The following is an analysis of the Company's investment return,
profit before tax, assets, liabilities and net assets by portfolio
segment for the six months to 30 September 2020:
Economic
Infrastructure Projects India
For the six months to 30 September 2020 businesses portfolio Fund Unallocated (1) Total
(unaudited) GBPm GBPm GBPm GBPm GBPm
----------------------------------------- --------------- ---------- ------ ---------------- ------
Investment return 104 7 5 6 122
----------------------------------------- --------------- ---------- ------ ---------------- ------
Profit/(loss) before tax 81 6 5 (8) 84
----------------------------------------- --------------- ---------- ------ ---------------- ------
For the six months to 30 September 2019
(unaudited)
------------------------------------------------------
Investment return/(loss) 113 26 1 (1) 139
-------------------------- ---- --- ----- ----
Profit/(loss) before tax 98 26 1 (18) 107
-------------------------- ---- --- ----- ----
As at 30 September 2020
(unaudited)
-----------------------------------------------
Assets 1,667 79 32 561 2,339
------------- ------ ---- --- ----- ------
Liabilities (13) (2) - (12) (27)
------------- ------ ---- --- ----- ------
Net assets 1,654 77 32 549 2,312
------------- ------ ---- --- ----- ------
As at 31 March 2020 (audited)
-----------------------------------------------
Assets 1,582 76 27 613 2,298
------------- ------ ---- --- ----- ------
Liabilities (11) (1) - (17) (29)
------------- ------ ---- --- ----- ------
Net assets 1,571 75 27 596 2,269
------------- ------ ---- --- ----- ------
1 Unallocated includes cash, management and performance fees payable and other payables and
receivables (including vendor loan notes) which are not directly attributable to the investment
portfolio.
The following is an analysis of the Company's investment return,
profit before tax, assets, liabilities and net assets by geography
for the six months to 30 September 2020:
UK and
For the six months to 30 September 2020 Ireland(1) Europe(2) Asia Total
(unaudited) GBPm GBPm GBPm GBPm
----------------------------------------- ----------- ---------- ----- ------
Investment return 13 104 5 122
========================================== =========== ========== ===== ======
Profit/(loss) before tax (1) 80 5 84
========================================== =========== ========== ===== ======
For the six months to 30 September 2019
(unaudited)
--------------------------------------------------
Investment return 38 100 1 139
========================== ==== ===== =====
Profit before tax 21 85 1 107
========================== ==== ===== =====
As at 30 September 2020
(unaudited)
------------------------------------------
Assets 842 1,465 32 2,339
-------------- ----- ------ --- ------
Liabilities (12) (15) - (27)
-------------- ----- ------ --- ------
Net assets 830 1,450 32 2,312
============== ===== ====== === ======
As at 31 March 2020 (audited)
------------------------------- ----- ------ --- ------
Assets 898 1,373 27 2,298
-------------------------------- ----- ------ --- ------
Liabilities (17) (12) - (29)
-------------------------------- ----- ------ --- ------
Net assets 881 1,361 27 2,269
================================ ===== ====== === ======
1 Including Channel Islands. All centrally incurred costs have been deemed to be incurred in
the UK and Ireland while recognising these costs support allocations across geographies.
2 Continental Europe includes all returns generated from, and investment portfolio value relating
to, the Company's investment in Oystercatcher, including those derived from its underlying
business in Singapore.
The Company generated 11% (September 2019: 27%) of its
investment return in the period from investments held in the UK and
Ireland and 85% (September 2019: 72%) of its investment return from
investments held in continental Europe. During the period, the
Company generated 90% (September 2019: 81%) of its investment
return from investments in Economic Infrastructure businesses, 6%
(September 2019: 18%) from investments in Projects and 4%
(September 2019: 1%) from its investment in the India Fund. 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 2020.
2 Management and performance fees payable
Six months to Six months to
30 September 2020 30 September 2019
(unaudited) (unaudited)
GBPm GBPm
------------------------ ------------------ ------------------
Management fee payable 12 15
Performance fee - -
------------------------ ------------------ ------------------
12 15
------------------------ ------------------ ------------------
Total management and performance fees payable by the Company for
the period to 30 September 2020 were GBP12 million (September 2019:
GBP15 million). Note 9 provides further details on the calculation
of the management fee and performance fee.
3 Income taxes
Six months to Six months to
30 September 2020 30 September 2019
(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 with
effect from 15 October 2018. The tax charge for the period is
different from the standard rate of corporation tax in the UK,
currently 19% (2019: 19%), and the differences are explained
below:
Six months to Six months to
==================================================================================== ============== ==============
30 September 30 September
2020 2019
GBPm GBPm
==================================================================================== ============== ==============
Profit before tax 84 107
Profit before tax multiplied by rate of corporation tax in the UK of 19% (2019:
19%) 16 20
Effects of:
Non-taxable capital profits due to UK approved investment trust company status (9) (13)
Non-taxable dividend income - (2)
Dividends designated as interest distribution (7) (5)
=================================================================================== ============== ==============
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, ie. 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 1 Quoted prices (unadjusted and in active markets) Quoted equity investments
Level 2 Inputs other than quoted prices included in Level 1 Derivative financial instruments held at fair value
that are observable in the market either
directly (ie . as prices) or indirectly (ie. derived
from prices)
Level 3 Inputs that are not based on observable market data Unquoted investments and 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 2020. For all other assets and liabilities, their
carrying value approximates to fair value. During the period ended
30 September 2020, there were no transfers of financial instruments
between levels of the fair value hierarchy (March 2020: none).
Trade and other receivables on the Balance sheet includes GBP1
million of deferred finance costs relating to the arrangement fee
for the revolving credit facility (March 2020: GBP1 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 2020
(unaudited)
-------------------------------------------------- -------------------------------------
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- --------- -------- -------- ------
Financial assets
Investments at fair value through profit or loss - - 1,767 1,767
Trade and other receivables - 205 - 205
Derivative financial instruments - 11 - 11
-------------------------------------------------- --------- -------- -------- ------
- 216 1,767 1,983
------------------------------------------------------------ -------- -------- ------
Financial liabilities
Derivative financial instruments - (15) - (15)
-------------------------------------------------- --------- -------- -------- ------
- (15) - (15)
------------------------------------------------------------ -------- -------- ------
As at 31 March 2020
(audited)
-------------------------------------------------- -------------------------------------
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- --------- -------- -------- ------
Financial assets
Investments at fair value through profit or loss - - 1,652 1,652
Trade and other receivables - 199 - 199
Derivative financial instruments - 33 - 33
-------------------------------------------------- --------- -------- -------- ------
- 232 1,652 1,884
------------------------------------------------------------ -------- -------- ------
Financial liabilities
Derivative financial instruments - (12) - (12)
-------------------------------------------------- --------- -------- -------- ------
- (12) - (12)
------------------------------------------------------------ -------- -------- ------
Reconciliation of financial instruments categorised within Level
3 of fair value hierarchy
As at 30 September 2020
(unaudited)
Level 3 fair value reconciliation GBPm
---------------------------------------------------- ------------------------
Opening fair value 1,652
Additions 28
Disposal proceeds and repayment (2)
Movement in accrued income 16
Fair value movement (including exchange movements) 73
---------------------------------------------------- ------------------------
Closing fair value 1,767
---------------------------------------------------- ------------------------
As at 31 March 2020
(audited)
Level 3 fair value reconciliation GBPm
---------------------------------------------------- --------------------
Opening fair value 1,697
Additions 423
Disposal proceeds and repayment (597)
Movement in accrued income 1
Fair value movement (including exchange movements) 128
---------------------------------------------------- --------------------
Closing fair value 1,652
---------------------------------------------------- --------------------
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.
Investment income of GBP43 million (September 2019: GBP55
million) comprises dividend income of GBP1 million (September 2019:
GBP9 million), interest of GBP41 million (September 2019: GBP39
million) and distributions of GBP1 million (September 2019: GBP7
million) from unconsolidated subsidiaries.
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.
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 2020, the fair value of
unquoted investments was GBP1,762 million (March 2020: GBP1,647
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 rates assumption used to project the
future cash flows and the forecast cash flows themselves.
For the March 2020 valuations a broad set of general assumptions
in relation to the Covid-19 pandemic were made across the whole
portfolio. This included that the general stay at home
policies/closed borders/major restrictions on travel would continue
for four months from 1 April 2020, followed by a gradual recovery
over the remainder of 2020. The Directors considered the impact on
the portfolio of the restrictions extending for nine months from 1
April 2020 followed by a gradual recovery throughout 2021 and
disclosed this as an additional sensitivity. The experience of the
last six months has demonstrated that the impact on the portfolio
is company specific and in many cases the impact was limited. The
asset that showed a material level of sensitivity was TCR and this
is discussed further in the Accounting policies section. The
duration of the lockdown was slightly shorter than expected but the
end date for a recovery is uncertain and varies widely by sector.
The assumptions made for these September 2020 valuations are
described in the Financial review section.
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
GBP144 million (March 2020: GBP136 million). Decreasing the
discount rate used in the valuation of each asset by 1% would
increase the value of the portfolio by GBP166 million (March 2020:
GBP157 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 inflation rate assumptions for the country
of domicile of the investments in the portfolio range from 5.0%
(India) (March 2020: 5.0%) to 2.0% (the Netherlands) (March 2020:
2.0%). The long-term RPI assumption for UK assets is 2.5% (March
2020: 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 GBP21 million (March 2020: GBP16 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 GBP21 million (March 2020: GBP15 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 GBP78 million (March 2020: GBP76 million). Decreasing
the interest rate assumption used in the valuation of each asset by
1% would increase the value of the portfolio by GBP73 million
(March 2020: GBP71 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 2020, the fair value of the other assets and liabilities
within these intermediate holding companies was GBP5 million (March
2020: GBP5 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
On 30 April 2018, the Company entered into a new three-year,
GBP300 million RCF with a syndicate of banks. The RCF is secured by
a fixed and floating charge over directly held assets of the
Company. Interest is payable at LIBOR plus a fixed margin on the
drawn down amount. As at 30 September 2020, the Company had not
drawn down cash from the RCF (March 2020: nil).
The RCF has certain loan covenants, including a debt service
coverage ratio and loan to value ratio. The Company has the right
to increase the size of the RCF by up to a further GBP200 million,
provided that existing lenders have a right of first refusal. In
May 2020, the Company agreed the second one-year extension to the
maturity date, to 27 April 2023.
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 2020 As at 31 March 2020
(unaudited) (audited)
Number GBPm Number GBPm
=========================== ================ ======== ============== ======
Authorised, issued and fully paid
Opening balance 891,434,010 1,496 810,434,010 1,273
Issued as part of Placing - - 81,000,000 223
Closing balance 891,434,010 1,496 891,434,010 1,496
--------------------------- ---------------- -------- -------------- ------
Aggregate issue costs of GBP24 million arising from IPO and
subsequent share issues have been offset against the stated capital
account in previous years. In addition, the stated capital account
was reduced by Court order on 20 December 2007 with an amount of
GBP693 million transferred to a new, distributable reserve which
has been combined with retained reserves in these accounts.
Therefore, as at 30 September 2020, the residual value on the
stated capital account was GBP779 million.
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 2020 30 September 2019
(unaudited) (unaudited)
============================================ ================== ==================
Earnings per share (pence)
Basic and diluted 9.4 13.3
============================================ ================== ==================
Earnings (GBPm)
Profit after tax for the period 84 107
============================================ ================== ==================
Number of shares (million)
Weighted average number of shares in issue 891.4 810.4
============================================ ================== ==================
As at As at
30 September 31 March
2020 2020
(unaudited) (audited)
============================== ============= ==========
Net assets per share (pence)
Basic and diluted 259.4 254.5
Net assets (GBPm)
Net assets 2,312 2,269
============================== ============= ==========
8 Dividends
As at 30 September 2020 As at 30 September 2019
(unaudited) (unaudited)
=================================================== ========================== ==========================
Declared and paid during the period pence per share GBPm pence per share GBPm
--------------------------------------------------- ------------------- ----- ------------------- -----
Prior year final dividend paid on ordinary shares 4.600 41 4.325 35
--------------------------------------------------- ------------------- ----- ------------------- -----
The Company proposes paying an interim dividend of 4.9 pence per
share (September 2019: 4.6 pence) which will
be payable to those shareholders that are on the register on 27
November 2020. On the basis of the shares in issue at 30 September
2020, this would equate to a total interim dividend of GBP44
million (September 2019: GBP41 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 30.2% (March 2020: 30.2%) 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 GBP12 million (September 2019: GBP12 million) from the
Company.
In 2007 the Company committed US$250 million to the 3i India
Infrastructure Fund (the 'India Fund') to invest in the Indian
infrastructure market. 3i Group also committed US$250 million to
the India Fund. No commitments were drawn down by the India Fund
from the Company during the period (September 2019: nil). In total,
commitments of US$184 million or GBP142 million re-translated had
been drawn down at 30 September 2020 (March 2020: US$184 million or
GBP148 million) by the India Fund from the Company. As the India
Fund has reached the end of its investment period, the Company's
outstanding commitment to the India Fund is limited to 15% of the
original US$250 million commitment. At 30 September 2020, the
outstanding commitment was US$38 million, or GBP29 million
re-translated (March 2020: US$38 million or GBP30 million).
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 Investments plc also
acts as the investment manager of the India Fund. 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 2020, GBP12 million (September
2019: GBP15 million) was payable and advance payments of GBP12
million were made resulting in an amount due to 3i plc of less than
GBP1 million at 30 September 2020 (March 2020: less than GBP1
million due from 3i plc). In consideration of the provision of
support services under the IMA, the Company pays the Investment
Manager an annual fee of GBP1 million. The cost for the support
services incurred for the period to 30 September 2020 was GBP0.5
million (September 2019: GBP0.5 million). The outstanding balance
payable as at 30 September 2020 was nil (March 2020: 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. There is no high water mark
requirement.
The performance hurdle requirement was not exceeded for the
period to 30 September 2020 and therefore no performance fee was
recognised (September 2019: GBPnil). The outstanding balance
payable as at 30 September 2020 was GBP11 million (March 2020:
GBP17 million), being the second and third instalments of the prior
year fee.
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, but subject
to a minimum term of four years from 15 October 2018, 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
Introduction
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 2020 which
comprises the Statement of comprehensive income, the Statement of
changes in equity, the Balance sheet, the Cash flow statement, the
Reconciliation of net cash flow to movement in net cash/(debt), the
accounting policies section and related notes 1 to 9 to the
accounts. We have read the other information contained in the
Half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The Half-yearly financial report is the responsibility of, and
has been approved by, 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.
As disclosed in the accounting policies, the annual financial
statements of the Company are prepared in accordance with IFRS as
adopted by the European Union. The condensed set of financial
statements included in this Half-yearly financial report has been
prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 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. 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.
Conclusion
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 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Financial
Reporting Council. 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
Statutory Auditor
London, United Kingdom
Date: 10 November 2020
Notes
1 The maintenance and integrity of the 3i Infrastructure plc website is the responsibility of
the Directors; the work carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any changes that may have
occurred to the condensed financial statements since they were initially presented on the
website.
2 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 European Union;
-- 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
10 November 2020
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.
Samantha Hoe-Richardson
Independent Non-executive Director.
Robert Jennings CBE
Independent Non-executive Director.
Ian Lobley
Non-executive Director.
Paul Masterton
Senior Independent Director and chair of the Remuneration Committee.
Investment policy
The Company aims to build a diversified portfolio of equity
investments in entities owning infrastructure businesses and
assets. The Company seeks investment opportunities globally, but
with a focus on Europe, North America and Asia.
The Company's equity investments will often comprise share
capital and related shareholder loans (or other financial
instruments that are not shares but that, in combination with
shares, are similar in substance). The Company may also invest in
junior or mezzanine debt in infrastructure businesses or
assets.
Most of the Company's investments are in unquoted companies.
However, the Company may also invest in entities owning
infrastructure businesses and assets whose shares or other
instruments are listed on any stock exchange, irrespective of
whether they cease to be listed after completion of the investment,
if the Directors judge that such an investment is consistent with
the Company's investment objectives. The Company will, in any case,
invest no more than 15% of its total gross assets in other
investment companies or investment trusts which are listed on the
Official List.
The Company may also consider investing in other fund structures
(in the event that it considers, on receipt of advice from the
Investment Manager, that that is the most appropriate and effective
means of investing), which may be advised or managed either by the
Investment Manager or a third party. If the Company invests in
another fund advised or managed by 3i Group, the relevant
proportion of any advisory or management fees payable by the
investee fund to 3i plc will be deducted from the annual management
fee payable under the Investment Management Agreement and the
relevant proportion of any performance fee will be deducted from
the annual performance fee, if payable, under the Investment
Management Agreement. For the avoidance of doubt, there will be no
similar set-off arrangement where any such fund is advised or
managed by a third party.
For most investments, the Company seeks to obtain representation
on the board of directors of the investee company (or equivalent
governing body) and in cases where it acquires a majority equity
interest in a business, that interest may also be a controlling
interest.
No investment made by the Company will represent more than 25%
of the Company's gross assets, including cash holdings, at the time
of the making of the investment. It is expected that most
individual investments will exceed GBP50 million. In some cases,
the total amount required for an individual transaction may exceed
the maximum amount that the Company is permitted to commit to a
single investment. In such circumstances, the Company may consider
entering into co-investment arrangements with 3i Group (or other
investors who may also be significant shareholders), pursuant to
which 3i Group and its subsidiaries (or such other investors) may
co-invest on the same financial and economic terms as the Company.
The suitability of any such co-investment arrangements will be
assessed on a transaction-by-transaction basis. Depending on the
size of the relevant investment and the identity of the relevant
co-investor, such a co-investment arrangement may be subject to the
related party transaction provisions contained in the Listing Rules
and may therefore require shareholder consent.
The Company's Articles require its outstanding borrowings,
including any financial guarantees to support subsequent
obligations, to be limited to 50% of the gross assets of the
Company (valuing investments on the basis included in the Company's
accounts).
In accordance with Listing Rules requirements, the Company will
only make a material change to its investment policy with the
approval of shareholders.
Portfolio valuation methodology
A description of the methodology used to value the investment
portfolio of the Company is set out below in order to provide more
detailed information than is included within the accounting
policies and the Financial review for the valuation of the
portfolio. The methodology complies in all material aspects with
the 'International Private Equity and Venture Capital valuation
guidelines' which are endorsed by the British Private Equity and
Venture Capital Association and Invest Europe.
Basis of valuation
Investments are reported at the Directors' estimate of fair
value at the reporting date in compliance with IFRS 13 Fair Value
Measurement. Fair value is defined as 'the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date'.
General
In estimating fair value, the Directors seek to use a
methodology that is appropriate in light of the nature, facts and
circumstances of the investment and its materiality in the context
of the overall portfolio. The methodology that is the most
appropriate may consequently include adjustments based on informed
and experience-based judgements and will also consider the nature
of the industry and market practice. Methodologies are applied
consistently from period to period except where a change would
result in a better estimation of fair value. Given the
uncertainties inherent in estimating fair value, a degree of
caution is applied in exercising judgements and making necessary
estimates.
Investments may include portfolio assets and other net
assets/liabilities balances. The methodology for valuing portfolio
assets is set out below. Any net assets/liabilities within
intermediate holding companies are valued in line with the Company
accounting policy and held at fair value or approximate to fair
value.
Quoted investments
Quoted equity investments are valued at the closing bid price at
the reporting date. In accordance with International Financial
Reporting Standards, no discount is applied for liquidity of the
stock or any dealing restrictions. Quoted debt investments will be
valued using quoted prices provided by third-party broker
information where reliable or will be held at cost less fair value
adjustments.
Unquoted investments
Unquoted investments are valued using one of the following
methodologies:
- Discounted Cash Flow ('DCF')
- Proportionate share of net assets
- Sales basis
- Cost less any fair value adjustments required
DCF
DCF is the primary basis for valuation. In using the DCF basis,
fair value is estimated by deriving the present value of the
investment using reasonable assumptions and estimation of expected
future cash flows, including contracted and uncontracted revenues,
expenses, capital expenditure, financing and taxation, and the
terminal value and date, and the appropriate risk-adjusted discount
rate that quantifies the risk inherent to the investment. The
terminal value attributes a residual value to the investee company
at the end of the projected discrete cash flow period. The discount
rate will be estimated for each investment derived from the market
risk-free rate, a risk-adjusted premium and information specific to
the investment or market sector.
Proportionate share of net assets
Where the Company has made investments into other infrastructure
funds, the value of the investment will be derived from the
Company's share of net assets of the fund based on the most recent
reliable financial information available from the fund. Where the
underlying investments within a fund are valued on a DCF basis, the
discount rate applied may be adjusted by the Company to reflect its
assessment of the most appropriate discount rate for the nature of
assets held in the fund. In measuring the fair value, the net asset
value of the fund is adjusted, as necessary, to reflect
restrictions on redemptions, future commitments, illiquid nature of
the investments and other specific factors of the fund.
Sales basis
The expected sale proceeds will be used to assign a fair value
to an asset in cases where offers have been received as part of an
investment sales process. This may either support the value derived
from another methodology or may be used as the primary valuation
basis. A marketability discount is applied to the expected sale
proceeds to derive the valuation where appropriate.
Cost less fair value adjustment
Any investment in a company that has failed or, in the view of
the Board, is expected to fail within the next 12 months, has the
equity shares valued at nil and the fixed income shares and loan
instruments valued at the lower of cost and net recoverable
amount.
Information for shareholders
Financial calendar
Ex-dividend date for interim dividend 26 November 2020
===================================== ================
Record date for interim dividend 27 November 2020
===================================== ================
Interim dividend expected to be paid 11 January 2021
===================================== ================
Full year results expected date May 2021
------------------------------------- ----------------
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 3.9
pence of the 4.9 pence interim dividend payable in respect of the
period as an interest distribution.
Registrars
For shareholder services, including notifying changes of
address, the Registrars' details are as follows:
Link Market Services (Jersey) Limited
PO Box 532
St. Helier
Jersey JE4 5UW
Channel Islands
Shareholder helpline: 0371 664 0300
Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. Lines are open between 09:00 -
17:30, Monday to Friday excluding public holidays in England and
Wales. Please note that calls may be monitored or recorded for
training and quality purposes.
Email: shareholderenquiries@linkgroup.co.uk
Investor relations and general enquiries
For all investor relations and general enquiries about 3i
Infrastructure plc, please contact:
Thomas Fodor
Investor Relations
3i Infrastructure plc
16 Palace Street
London, SW1E 5JD
email: thomas.fodor@3i.com
Telephone +44 (0)20 7975 3469
or for full up-to-date investor relations information including
the latest share price, recent reports, results presentations and
financial news, please visit our investor relations website
www.3i-infrastructure.com .
If you would prefer to receive shareholder communications
electronically, including your annual reports and notices of
meetings, please go to
www.3i-infrastructure.com/investors/shareholder-centre for details
of how to register.
Frequently used Registrars' forms can be found on our website
at
www.3i-infrastructure.com/investors/shareholder-centre.
3i Infrastructure plc
Registered office
12 Castle Street
St. Helier
Jersey JE2 3RT
Channel Islands
www.3i-infrastructure.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FFSESSESSEDF
(END) Dow Jones Newswires
November 11, 2020 02:00 ET (07:00 GMT)
3i Infrastructure (LSE:3IN)
Historical Stock Chart
From Feb 2024 to Mar 2024
3i Infrastructure (LSE:3IN)
Historical Stock Chart
From Mar 2023 to Mar 2024