TIDM3IN
RNS Number : 7007G
3i Infrastructure PLC
08 November 2018
8 November 2018
Results for the six months to 30 September 2018
Performance highlights
GBP157m, 9.3% Total return Portfolio is performing well, driving growth
226.4p in net asset value ('NAV') ahead of target
NAV per share
----------------------------- ----------------------------------------------
GBP132m Strong growth in income and non-income cash
Total income and non-income
cash
----------------------------- ----------------------------------------------
GBP196m Commitment to invest in Tampnet,
New investment commitment further diversifying the portfolio
----------------------------- ----------------------------------------------
GBP125m Maintained an efficient balance sheet
Cash balances
----------------------------- ----------------------------------------------
4.325p On track to deliver the FY19 dividend target,
Interim dividend per share 10% higher than FY18
----------------------------- ----------------------------------------------
Richard Laing, Chairman of 3i Infrastructure plc (the
'Company')
"I am delighted with our performance in the first half of the
financial year. The Company continues to outperform its objectives
and is on track to deliver the full year dividend target for FY19,
up 10% from last year. We remain confident in our business model
and strategy."
Performance
The Company generated a total return of 9.3% on opening NAV for
the first half, ahead of the target return of 8% to 10% per annum
to be achieved over the medium term. The NAV per share increased to
226.4 pence. The portfolio is performing in line with expectations
overall, both financially and operationally, with our Investment
Manager driving value growth over the period through engaged asset
management.
We delivered a Total Shareholder Return ('TSR') of 16.2% in the
period (FTSE 250: 6.1%). Since IPO, the Company's annualised TSR
was 12.7%, comparing favourably with the broader market (FTSE 250:
8.1% annualised over the same period). The Company has achieved
this outperformance with relatively low share price volatility.
Interim dividend
We are announcing the payment of an interim dividend of 4.325
pence per share, scheduled to be paid on 7 January 2019 to holders
of ordinary shares on the register on 23 November 2018. The
ex-dividend date will be 22 November 2018.
Corporate governance
The Company's Annual General Meeting was held on 5 July 2018.
All resolutions were approved by shareholders, including the
election and re-election of all Directors to the Board. An
Extraordinary General Meeting ('EGM') was held on 17 September
2018, at which shareholders approved the resolution regarding the
terms of the new Investment Management Agreement between the
Company and 3i Investments plc (the 'Investment Manager'). The
Board has continued to engage with shareholders since the EGM,
including those who voted against the resolution.
The management and tax residence of the Company moved to the UK
on 15 October 2018 with 3i Investments plc as the Alternative
Investment Fund Manager. This move mitigates the risk of additional
tax costs following the implementation of the tax base erosion and
profit shifting ('BEPS') initiative by OECD countries.
Richard Laing
Chairman
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'). More information relating to APMs,
including why we use them and the relevant definitions, can be
found in the Company's 2018 Annual Report and Accounts.
For further information regarding the announcement of results
for 3i Infrastructure plc please see www.3i-infrastructure.com. The
analyst presentation will be made available on this website during
the day.
Notes to editors
3i Infrastructure plc is a Jersey-incorporated, closed-ended
investment company, tax resident in the United Kingdom (with effect
from 15 October 2018), listed on the London Stock Exchange and
regulated by the Jersey Financial Services Commission. The Company
is a long-term investor in infrastructure businesses and assets.
The Company's market focus is on economic infrastructure and
greenfield projects in developed economies, principally in Europe,
investing in operating businesses and projects which generate
long-term yield and capital growth.
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 reasonable assumptions,
any statements about the future outlook may be influenced by
factors that could cause actual outcomes and results to be
materially different.
This press release is not for distribution (directly or
indirectly) in or to the United States, Canada, Australia or Japan
and is not an offer of securities for sale in or into the United
States, Canada, Australia or Japan 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 United States
will be made by means of a prospectus that may be obtained from the
issuer or selling security holder and will contain detailed
information about 3i Group plc, 3i Infrastructure plc, 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.
Half-yearly report
Review from the Managing Partner
Portfolio review
Our portfolio is performing well, with strong results and good
progress from our two largest investments, Infinis and Wireless
Infrastructure Group ('WIG'), as well as from TCR and particularly,
Cross London Trains ('XLT'), where all 115 trains in the fleet have
now been accepted for operation on the rail network. The trains
recently won 'Train of the Year' at the National Rail Awards 2018.
We have begun to explore options in relation to our holding in XLT,
including a possible sale of the investment.
Oystercatcher's terminals are experiencing challenging market
conditions, with soft demand for storage of certain oil product
types resulting in downward pressure on pricing and some vacant
capacity.
We managed our portfolio actively during the period. We
syndicated 50% of our original investment in Attero, a European
leader in waste treatment and processing. By reducing the Company's
holding in Attero to 25% we have reduced our exposure to
uncontracted power price risk and to the energy sector in general.
This syndication was part of our strategy for the investment at the
time of acquisition; 3i Investments plc will manage and retain
governance over the 50% of Attero the Company originally acquired.
Attero is benefiting from a lack of capacity for waste treatment
across Europe. In October, the Dutch prime minister unveiled a new
120MW steam turbine at Attero's Moerdijk energy-from-waste
facility, concluding a key strategic initiative.
Infinis, WIG and TCR were all refinanced during the period.
These transactions were secured on attractive terms and provide the
refinanced companies with flexibility for further growth and extend
their debt maturity profiles, whilst also delivering non-income
cash distributions to the Company.
The integration of the Alkane Energy business acquired by
Infinis early in 2018 is going well and the enlarged company
benefited from strong power prices in the period. WIG signed
contracts for two bolt-on acquisitions in October: a portfolio of
towers in Ireland and Arqiva's distributed antenna systems
business. These acquisitions are value accretive and do not require
additional equity investment from the Company.
ESVAGT announced the appointment of Peter Lytzen as CEO with
effect from September 2018. The company also announced contracts
with MHI Vestas to provide two new wind farm Service Operation
Vessels ('SOV') along with an option over a third SOV, underlining
its market-leading position in the offshore wind industry.
Valorem has continued to grow its portfolio of wind and solar
projects, almost doubling the generating capacity of the business
in the two years since acquisition in September 2016.
The portfolio including commitments is analysed below.
Portfolio - Breakdown by value at 30 September 2018
Infinis 15%
WIG 14%
----
XLT 13%
----
Tampnet 10%
----
TCR 10%
----
ESVAGT 8%
----
Oystercatcher 8%
----
Attero 5%
----
Valorem 4%
----
Projects portfolio 11%
----
India Fund 2%
----
Portfolio - Breakdown by geography at 30 September 2018
UK and Ireland 51%
Continental Europe and
Singapore 47%
----
India 2%
----
Investment activity
The investment in Attero, which was signed at the end of the
last financial year, completed on 14 June 2018. We had a good level
of new investment in the period, providing further diversification
of our portfolio and broadening our sector and geographic
exposure.
-- A EUR220 million (GBP196 million) investment commitment in
Tampnet AS, in a consortium with Danish pension fund ATP, our first
investment in fibre telecoms infrastructure. 3i Investments plc
will manage the investment on behalf of the consortium. Tampnet
provides low latency, high bandwidth connectivity to offshore
operations in the North Sea and the Gulf of Mexico. This investment
provides an attractive yield for the Company and further
diversifies the portfolio's geographic exposure. Completion is
subject to certain US regulatory approvals that are expected to be
received by the end of the financial year.
-- Existing commitments of EUR45.1 million (GBP40.1 million)
were funded during the period. These comprised:
- EUR12.0 million (GBP10.7 million) in Valorem for the
development of its pipeline of wind and solar projects.
- EUR10.9 million (GBP9.5 million) in La Santé prison in France
and EUR22.2 million (GBP19.9 million) in the A9 motorway in the
Netherlands as these projects approach operational status.
The investment pipeline continues to develop well and we are
seeing a wide range of opportunities for the Company, including
through our platform investments. We remain selective, pursuing
those opportunities that would enhance the portfolio while seeking
to limit abort cost risk in highly competitive transaction
processes.
Outlook
The Company has maintained its high returns performance,
outperforming our objectives. The portfolio is demonstrating the
resilience inherent in infrastructure businesses and delivering
value enhancement from growth initiatives and reduction in risk as
early stage investments mature into operation.
Competition for new investments remains intense, but we have a
strong origination platform across Europe and an attractive,
well-balanced portfolio on which to build.
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
GBP156.6 million, representing a 9.3% return on opening
shareholders' equity (September 2017: GBP120.8 million, 7.1%). This
performance is significantly ahead of the target return of 8% to
10% per annum over the medium term. Total income and non-income
cash of GBP132.3 million was 64% higher than the same period last
year (September 2017: GBP80.8 million).
This performance was driven by the delivery of planned cash
flows and other asset outperformance, particularly from XLT and
Infinis. Macroeconomic factors, including the increase in inflation
over the short term which benefits revenues across most of our
portfolio, have also added to performance. Overall this led to a
value increase of GBP130.9 million in the portfolio.
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 Consolidated balance
sheet includes, 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 Consolidated financial
statements. Accrued income is now classified within 'Investments at
fair value through profit or loss' and is included in Table 1. In
prior periods, accrued income was classified within 'Trade and
other receivables'.
Table 1: Portfolio summary (30 September 2018, GBPm)
Portfolio Directors' Directors' Allocated Underlying Asset
assets
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
2018 period period movement translation 2018 hedging the period the
movement(1) period(2)
---------------- ---------- ---------- ---------- ----------- -------- ----------- ---------- --------- ---------- ---------
Infinis 310.7 -- (45.7)(3) 5.1 37.9 -- 308.0 -- 10.3 48.2
WIG 300.4 7.1(4) (42.7)(3) 2.9 11.6 -- 279.3 -- 6.9 18.5
XLT 166.3 -- -- 1.2 103.6 -- 271.1 -- 2.4 106.0
TCR 179.5 -- -- 6.4 4.7 2.2 192.8 (1.9) 5.7 10.7
ESVAGT 149.1 8.1(4) -- 4.4 (1.8) 3.3 163.1 (2.7) 8.5 7.3
Oystercatcher 181.3 -- -- -- (31.7) 5.3 154.9 (4.2) 4.0 (26.6)
Attero -- 88.4(5) (1.3)(6) 0.2 6.0 1.0 94.3 (0.9) 0.7 6.8
Valorem 54.8 10.7(7) -- 0.7 6.7 0.9 73.8 (0.8) 1.3 8.1
---------------- ---------- ---------- ---------- ----------- -------- ----------- ---------- --------- ---------- ---------
1,342.1 114.3 (89.7) 20.9 137.0 12.7 1,537.3 (10.5) 39.8 179.0
Projects 167.0 29.7(4,7) (1.0)(3) 2.4 (0.2) 0.3 198.2 (0.2) 6.7 6.6
India Fund 36.8 -- -- -- (5.9) (1.2) 29.7 -- -- (7.1)
---------------- ---------- ---------- ---------- ----------- -------- ----------- ---------- --------- ---------- ---------
Total portfolio 1,545.9 144.0 (90.7) 23.3 130.9 11.8 1,765.2 (10.7) 46.5 178.5
================ ========== ========== ========== =========== ======== =========== ========== ========= ========== =========
Adjustments
related
to
unconsolidated
subsidiaries(8) 6.4 -- (0.3) -- 0.3 -- 6.4 (0.4) 0.3 0.2
---------------- ---------- ---------- ---------- ----------- -------- ----------- ---------- --------- ---------- ---------
Reported
in the
consolidated
financial
statements 1,552.3 144.0 (91.0) 23.3 143.0 -- 1,771.6 (11.1) 46.8 178.7
---------------- ---------- ---------- ---------- ----------- -------- ----------- ---------- --------- ---------- ---------
1 The movement in accrued income comprises GBP10.7 million of movement in the period and GBP12.6
million in relation to the reclassification of the opening balance at 31 March 2018.
2 This comprises the aggregate of value movement, foreign exchange translation, allocated foreign
exchange hedging and underlying portfolio income in the period.
3 Shareholder loan repaid.
4 Capitalised income.
5 Net of syndication.
6 Represents receipt of realised value gain on syndication.
7 Drawdown of commitment.
8 Income statement adjustments explained in Table 5 and Balance sheet adjustments explained
in Table 6.
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)
2018 2017
--------------------------------------------------------- ------ ------
Capital return (excluding exchange)(1) 130.9 98.6
Foreign exchange movement in portfolio 11.8 13.7
--------------------------------------------------------- ------ ------
Capital return (including exchange)(1) 142.7 112.3
Movement in fair value of derivatives (10.7) (22.7)
--------------------------------------------------------- ------ ------
Net capital return 132.0 89.6
Total income(2) 46.3 47.6
Costs (24.3) (19.1)
Other net income/(costs) including exchange movements(1) 2.6 2.7
--------------------------------------------------------- ------ ------
Total return 156.6 120.8
--------------------------------------------------------- ------ ------
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 negative bank interest receivable of GBP0.2 million (September 2017: nil), reflecting
the return on euro cash holdings.
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 5.
The capital return is the largest element of the total return.
The portfolio generated a value gain of GBP130.9 million in the
period to 30 September 2018 (September 2017: GBP98.6 million),
driven primarily by valuation uplifts for the Company's holdings in
XLT and Infinis, partially offset by a valuation reduction in
Oystercatcher.
The value increase in XLT of GBP103.6 million reflects a
reduction in the discount rate following the material reduction of
risk in the investment as a result of the acceptance into operation
of all 115 trains.
Infinis completed a full refinancing in August 2018 which
reduced the all-in cost of debt and will be used to fund growth
capital expenditure. This led to a value increase of GBP37.9
million in the period and also facilitated a
GBP45.7 million repayment of shareholder loan.
Also in August 2018, WIG completed a refinancing on more
favourable terms than assumed in our investment case, which led to
an GBP11.6 million value uplift and resulted in a GBP42.7 million
repayment of shareholder loan.
The value reduction in Oystercatcher of GBP31.7 million was
driven principally by lower profit expectations over the near term,
reflecting continued softness in demand for storage for certain oil
product types. This is discussed in more detail in the Risk review
section of this report.
During the period, the Company sold its equity investment in the
RIVM project to an existing shareholder at book value and the
corresponding commitment was cancelled with no impact on the
capital return. This followed extended delays in agreeing an
appropriate design for the building.
The weighted average discount rate used in the valuation of the
portfolio reduced slightly to 10.2% at September 2018 (March 2018:
10.5%). This was driven by the reduction in risk at XLT, offset by
the investment in Attero at a higher discount rate.
The movement in foreign exchange rates generated an GBP11.8
million gain in the period (September 2017: GBP13.7 million). This
was offset by the movement in the value of derivatives of GBP10.7
million (September 2017: GBP22.7 million). We aim to deliver steady
NAV growth for shareholders. The foreign exchange hedging programme
supports this objective by reducing our exposure to fluctuations in
the foreign exchange markets.
Total income of GBP46.3 million (September 2017: GBP47.6
million) comprised portfolio income of GBP46.5 million (September
2017: GBP47.6 million), with income from new investments made
during the last financial year replacing the income from AWG and
Elenia which were sold. This was offset by negative interest
receivable on euro cash balances of GBP0.2 million (September 2017:
nil).
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 GBP86.0 million during the period,
which was higher than the GBP33.2 million received in the same
period last year. 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 7 below.
Costs
Advisory fees and performance fees
During the period to 30 September 2018, the Company incurred
advisory fees of GBP14.1 million (September 2017: GBP12.7 million).
The increase is due to new investment activity in the intervening
period and growth in the value of the portfolio.
The annual performance hurdle of 8% was exceeded in the first
half of the year, as the total return for the period was 9.3%,
resulting in an accrual for a performance fee payable of GBP5.6
million (September 2017: nil). For an explanation of how advisory
and performance fees are calculated please refer to Note 9 of the
financial statements.
Fees payable
Fees payable on investment activities include third-party costs
for transactions that did not reach, or have yet to reach,
completion and the reversal of third-party costs for transactions
that have successfully reached completion and were subsequently
borne by the relevant portfolio holding company. For the period to
30 September 2018, fees payable totalled GBP0.2 million (September
2017: GBP1.9 million).
Other operating and finance costs
Operating expenses, comprising Directors' fees, service provider
costs and other professional fees, totalled GBP1.6 million in the
period (September 2017: GBP1.3 million). This included one-off
costs of GBP0.5 million associated with the move of the management
and tax residence of the Company to the UK.
Finance costs of GBP2.8 million in the period (September 2017:
GBP3.2 million) comprised GBP1.6 million of interest and fees for
the Company's new GBP300 million revolving credit facility, and a
further GBP1.2 million in relation to deferred arrangement fees for
the old revolving credit facility.
Ongoing charges ratio
The ongoing charges ratio measures annual operating costs, as
disclosed in Table 3 below, against the average net asset value
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 1.74% for the period to 30 September 2018
(September 2017: 1.60%). This increase was due to investment
activity in the period.
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. The ratio including the performance fee was
2.06% (September 2017: 1.60%).
Table 3: Ongoing charges (six months to 30 September, annualised
GBPm)
2018 2017
----------------------------- ----- -----
Investment Manager's fee 28.3 25.4
Auditor's fee 0.3 0.3
Directors' fees and expenses 0.5 0.5
Other ongoing costs 1.7 2.2
----------------------------- ----- -----
Total ongoing charges 30.8 28.4
----------------------------- ----- -----
Ongoing charges ratio 1.74% 1.60%
----------------------------- ----- -----
Balance sheet
The net asset value at 30 September 2018 was GBP1,835.0 million
(March 2018: GBP1,710.2 million). The principal components of the
net asset value are the portfolio assets, cash holdings, the fair
value of derivative financial instruments and other net assets and
liabilities, principally relating to advisory and performance fees
payable. A summary balance sheet is shown in Table 4.
At 30 September 2018, the Company's net assets after the
deduction of the interim dividend were GBP1,799.9 million (March
2018: GBP1,678.4 million after deduction of the final
dividend).
Table 4: Summary balance sheet (GBPm)
As at 30 September 2018 As at 31 March 2018
--------------------------------- ----------------------- -------------------
Portfolio assets 1,765.2 1,545.9
Cash balances 124.9 284.6
Borrowings -- --
Derivative financial instruments (46.8) (37.3)
Other net assets/(liabilities) (8.3) (83.0)
--------------------------------- ----------------------- -------------------
Net asset value 1,835.0 1,710.2
--------------------------------- ----------------------- -------------------
IFRS requires cash or other net assets and liabilities held
within intermediate holding companies to be presented as part of
the fair value of the investments in the financial statements. 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
6.
Cash is principally held in AAA-rated money market funds. The
Company has a GBP300 million revolving credit facility ('RCF') in
order to maintain a good level of liquidity for further investment
whilst minimising dilution of returns from holding excessive cash
balances. This is a three-year facility, refinanced in April 2018
to May 2021 with a reduction in margin and commitment fee.
At 30 September 2018, the Company had utilised GBP16.9 million
of the RCF to issue letters of credit for undrawn commitments to
projects comprising EUR6.6 million (GBP5.9 million) for the A27/A1
project, EUR7.9 million (GBP7.0 million) for the Condorcet project
and EUR4.5 million (GBP4.0 million) for the Hart van Zuid
project.
The liability for derivative financial instruments reflects the
foreign exchange hedging programme described above.
The movement in Other net assets and liabilities from the prior
year end predominantly reflects a decrease in the performance fee
payable.
Net asset value per share
The total net asset value per share at 30 September 2018 was
226.4p (March 2018: 211.0p). This reduces to 222.1p (March 2018:
207.1p) after the payment of the interim dividend of 4.325p (March
2018: final dividend of 3.925p).
Dividend and dividend cover
The Board has proposed an interim dividend for the period of
4.325 pence per share, or GBP35.1 million in aggregate (September
2017: 3.925 pence; GBP40.3 million). This is half of the Company's
target full year dividend for FY19 of 8.65 pence per share.
When considering the coverage of the proposed dividend, the
Board assesses the income earned from the portfolio, interest
received on cash balances and any additional non-income cash
distributions from portfolio assets which do not follow from a
disposal of the underlying assets, as well as the level of ongoing
operational costs incurred in the period. The Board also takes into
account any surpluses retained from previous years, and net capital
profits generated through asset realisations, which it considers
available as dividend reserves for distribution. The dividend cover
surplus for the period is GBP79.3 million (September 2017: surplus
of GBP24.4 million). The dividend is also fully covered excluding
the proceeds from portfolio company refinancing activity in the
period.
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. Further detail on the definition of APMs can be
found in the 2018 Annual report and accounts.
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 5 and 6 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 7.
Table 5: Reconciliation of summary total return (six months to
30 September 2018, GBPm)
Adjustments for
Underlying portfolio transactions in
asset aggregate unconsolidated Financial
returns and costs subsidiaries statements
Capital return (excluding exchange)(1) 130.9 0.3(2,3,4) 131.2
Foreign exchange movement in portfolio 11.8 -- 11.8
--------------------------------------------------------- -------------------- --------------- ----------
Capital return (including exchange)(1) 142.7 0.3 143.0
Movement in fair value of derivatives (10.7) (0.4)(2) (11.1)
--------------------------------------------------------- -------------------- --------------- ----------
Net capital return 132.0 (0.1) 131.9
Total income 46.3 0.3(3) 46.6
Costs (24.3) -- (24.3)
Other net income/(costs) including exchange movements(1) 2.6 (0.2)(4) 2.4
--------------------------------------------------------- -------------------- --------------- ----------
Total return 156.6 -- 156.6
--------------------------------------------------------- -------------------- --------------- ----------
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 Movement in fair value of derivatives relating to hedging specific to the Oystercatcher subsidiary,
reclassified as capital return, as it is monitored by the Board as part of the unrealised
value movement in Oystercatcher.
3 Portfolio income of GBP0.3 million received within unconsolidated subsidiaries in the prior
year but distributed to the Company in the current period. These are reflected in capital
returns as they reduce the carrying value of these subsidiaries.
4 Other income of GBP0.2 million received within unconsolidated subsidiaries but retained to
meet operating expenses. These are reflected in capital returns as they increase the carrying
value of these subsidiaries.
Table 6: Reconciliation of summary balance sheet (as at 30
September 2018, GBPm)
Adjustments for
Underlying portfolio transactions in
asset aggregate unconsolidated Financial
returns and costs subsidiaries(1) statements
--------------------------------- -------------------- --------------- ----------
Portfolio assets 1,765.2 6.4 1,771.6(2)
Cash balances 124.9 (2.3)(3) 122.6
Borrowings -- -- --
Derivative financial instruments (46.8) (0.3)(4) (47.1)
Other net assets (8.3) (3.8) (12.1)
--------------------------------- -------------------- --------------- ----------
Net asset value 1,835.0 -- 1,835.0
--------------------------------- -------------------- --------------- ----------
1 'Investments at fair value through profit or loss' in the financial statements includes GBP2.3
million of unrestricted cash balances and GBP3.8 million of other net assets within intermediate
unconsolidated holding companies and a GBP0.3 million reclassification of derivative liabilities
relating to the Oystercatcher subsidiary. These adjustments reclassify these balances to show
the underlying value of the portfolio assets, the total cash holdings and other net assets/(liabilities)
position, 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 GBP2.3 million.
4 A GBP0.3 million derivative liability relating to hedging specific to the Oystercatcher subsidiary
is reclassified as Portfolio assets, as it is monitored by the Board as part of the valuation
of Oystercatcher.
Table 7: Total income and non-income cash (six months to 30
September, GBPm)
2018 2017
---------------- ----- ----
Total income 46.3 47.6
Non-income cash 86.0 33.2
---------------- ----- ----
Total 132.3 80.8
---------------- ----- ----
Risk review
Review of principal risks and uncertainties
External risks - market and competition
The European economic infrastructure market is competitive, with
strong demand especially for large core assets. This has continued
to support value gains for existing assets in the portfolio. In
this challenging environment, the Investment Manager leverages its
network and skills to seek investments that can continue to deliver
attractive risk-adjusted returns to the Company's shareholders.
The terms on which the UK will leave the EU are 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 the UK leaving
the EU without a trade deal.
Inflation in the UK is running ahead of long-term targets and
forecasts show that this is expected to continue over the next 12
months. This short-term increase has been beneficial for the assets
with inflation-linked revenues, but the benefit has been partially
offset by increases in inflation-linked costs. European headline
inflation increased in the period but core inflation rates remain
low.
Interest rates increased slightly during the period, but overall
remained low. Refinancings for WIG, Infinis and TCR were completed
on improved terms. Were there to be sustained material increases in
long-term interest rates, this could reduce the demand for, and
valuation of, infrastructure assets.
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 most currencies, primarily
driven by continued uncertainty over the terms of the UK's
departure from the EU.
The Company's policy is to hedge substantially its direct euro
and Danish krone exposures and indirect Singapore dollar and
Norwegian krone exposures. The Indian rupee exposure remains
unhedged due to the significant costs associated with hedging this
currency. During the period, foreign exchange gains were recognised
from all currency exposures except the Indian rupee, with losses
from the hedging programme substantially offsetting these gains.
The Board monitors the effectiveness of the Company's hedging
policy on a regular basis.
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 dictated by the
evolution of long-term power prices and by fluctuations in the
power price. Approximately 25% of the revenues for Attero are from
the sale of heat and power which are also impacted by fluctuations
in the power price. Power prices increased during the period.
Gate fees for waste treatment across Europe have been rising
caused by lack of capacity in the market. This trend is likely to
benefit Attero in customer contract renewals.
The increase in the oil price has supported a recovery in the
utilisation rate for ESVAGT vessels.
Oystercatcher has continued to see softening of demand for
storage of certain oil product types, including fuel oil and gasoil
with some empty capacity and contract renewals at lower rates.
Storage of fuel oil is impacted by uncertainty around the
consequences of the IMO 2020 regulations on the fuel oil used in
shipping. The forward oil price curve is downward sloping, after
the rise in spot prices, reducing demand for non-strategic
storage.
External risks - regulatory and tax
The Company's investment in Infinis is exposed to regulatory
risk around 'embedded benefits'. In June 2017, Ofgem confirmed its
intention to cut the value of one of those benefits, known as
'Triads', sooner than had been anticipated. Ofgem will publish the
conclusions of its Significant Code Review by early 2019, with
implementation due to come into effect from the 2020/21 charging
year. It is possible that this could impact the valuation of
Infinis, but our expectation is that this would not be
material.
Further to the ongoing monitoring of the tax changes resulting
from the OECD's Base Erosion and Profit Shifting ('BEPS')
initiative and in particular in relation to BEPS Action 6, which
concerns the prevention of treaty abuse, the Company moved its tax
residence and management from Jersey to the UK with effect from 15
October 2018. The Company intends to operate as a UK approved
investment trust with effect from that date.
In relation to BEPS Action 4, the expected impact of changes to
interest deductibility rules in the UK and some European countries
continues to be reflected in the valuation of the Company's
investments as at 30 September 2018. The Netherlands and France
have recently announced proposed changes to their interest
limitation rules, due to come into effect from 1 January 2019, to
reflect the requirements of BEPS Action 4. As in the UK, these
rules are expected to include an exemption for businesses engaged
in public benefit infrastructure which should benefit the Company's
projects portfolio. We will continue to monitor the position as the
rules are debated and implemented in the relevant local European
jurisdictions.
Strategic risks
Given the increase in the size of the investment portfolio over
the last 18 months, with greater diversity across sector, geography
and investment maturity, the Investment Manager focused significant
effort on asset management in the period. The businesses acquired
during the financial year to March 2018 are performing well,
supported by this level of activity. The Company is not under
pressure to make new investments, particularly in the current
competitive environment, however the Investment Manager has a good
pipeline of investment opportunities that the team is reviewing. We
developed a number of these opportunities during the first half of
FY19 and expect to make further progress in the second half of the
year. Our platform investments made further progress during the
period with the signing by WIG of contracts to acquire a portfolio
of towers in Ireland and the distributed antenna systems business
from Arqiva, and with the completion of the investment in Alkane
Energy by Infinis.
During the period, the Company had to balance the liquidity
available to fund its pipeline of investments with the objective of
running its balance sheet efficiently. The Company made use of its
revolving credit facility to provide funding on a short-term basis
during the period.
The projects portfolio is based on long-term contracts with
public sector counterparties. There is a risk, particularly in the
UK, that the public sector may wish to terminate these contracts
early. In most cases, the contracts have robust provisions which
set out the basis on which investors will be compensated in the
event of early termination at the request of the public sector.
Where such provisions do not exist, termination and the associated
compensation are subject to mutual agreement. The Company's
projects portfolio is widely diversified by counterparty and legal
jurisdiction, and represents 11% of the total portfolio, including
investment commitments. Overall, we consider the risk of a material
loss arising from widespread early termination of the projects to
be low.
The acquisition of Alkane Energy by Infinis and the investment
in Attero both completed during the period. These investments are
exposed to uncontracted power prices. To manage the risk of this
exposure, half of the Company's investment in Attero was syndicated
to two institutions, with the Investment Manager retaining
governance over these syndicated holdings.
Investment risks
Following the record level of investment in the last financial
year and the investment commitment to Tampnet during the period,
the Company has a larger and more diverse portfolio. In line with
the Company's investment focus, these new investments have
characteristics which may increase volatility in returns from time
to time, for example from exposure to market power prices or demand
risk.
Ongoing access to debt markets is important to assets 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 impact
valuations. Refinancing risk reduced in the period following the
placement of new long-term debt at WIG, Infinis and TCR.
Operational
3i Investments plc became the Company's Investment Manager on 15
October 2018, replacing its previous role as Investment Adviser.
The new investment management agreement has a minimum term of four
years, retaining the proven quality and competence of the 3i
Investments plc infrastructure team across Europe, together with
its potential to continue its record of high performance.
Following the change to investment management in the UK, the
Company appointed Citibank Europe plc as its depositary on 15
October 2018. Citibank Europe plc will perform the functions
required of a depositary of an alternative investment fund that is
incorporated outside the EEA, such as the Company, which has an EEA
entity, such as 3i Investments plc, as its alternative investment
fund manager. The Company will continue to retain an administrator
and a registrar in Jersey.
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 2018 which
comprises the consolidated statement of comprehensive income, the
consolidated statement of changes in equity, the consolidated
balance sheet, the consolidated cash flow statement and related
notes 1 to 9 to the accounts and the accounting policies section.
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.
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.
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 group 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 2018 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.
Deloitte LLP
Statutory Auditor
London, United Kingdom
Date: 7 November 2018
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
web site.
2 Legislation in Jersey governing the preparation and dissemination of condensed financial statements
may differ from legislation in other jurisdictions.
Consolidated statement of comprehensive income
for the six months to 30 September
Six months to Six months to
30 September 2018 30 September 2017
Notes (unaudited) (unaudited)
GBPm GBPm
----------------------------------------------------------------- ------ ------------------ ------------------
Net gains on investments at fair value through profit or loss 4 143.0 109.8
Investment income 46.8 44.8
Fees payable on investment activities (0.2) (0.4)
Fees receivable on investment activities - -
Interest receivable/(payable) (0.2) -
----------------------------------------------------------------- ------ ------------------ ------------------
Investment return 189.4 154.2
----------------------------------------------------------------- ------ ------------------ ------------------
Movement in the fair value of derivative financial instruments (11.1) (21.1)
Advisory and performance fees payable 2 (19.7) (10.3)
Operating expenses (1.6) (1.2)
Finance costs (2.8) (3.2)
Other income 0.5 1.0
Exchange movements 1.9 1.4
----------------------------------------------------------------- ------ ------------------ ------------------
Profit before tax 156.6 120.8
----------------------------------------------------------------- ------ ------------------ ------------------
Income taxes 3 - -
----------------------------------------------------------------- ------ ------------------ ------------------
Profit after tax and profit for the period 156.6 120.8
----------------------------------------------------------------- ------ ------------------ ------------------
Total comprehensive income for the period 156.6 120.8
----------------------------------------------------------------- ------ ------------------ ------------------
Earnings per share
Basic and diluted (pence) 6 19.3 11.8
---------------------------------------------------------------- ------ ------------------ ------------------
Consolidated statement of changes in equity
for the six months to 30 September
Stated Total
capital Retained shareholders'
Notes account reserves equity
For the six months to 30 September 2018 (unaudited) GBPm GBPm GBPm
----------------------------------------------------------------- ------ -------- --------- --------------
Opening balance at 1 April 2018 560.4 1,149.8 1,710.2
Total comprehensive income for the period - 156.6 156.6
Dividends paid to shareholders of the Company during the period 7 - (31.8) (31.8)
----------------------------------------------------------------- ------ -------- --------- --------------
Closing balance at 30 September 2018 560.4 1,274.6 1,835.0
----------------------------------------------------------------- ------ -------- --------- --------------
Stated Total
capital Retained shareholders'
Notes account reserves equity
For the six months to 30 September 2017 (unaudited) GBPm GBPm GBPm
----------------------------------------------------------------- ------ -------- --------- --------------
Opening balance at 1 April 2017 560.4 1,174.2 1,734.6
Total comprehensive income for the period - 120.8 120.8
Dividends paid to shareholders of the Company during the period 7 - (38.7) (38.7)
----------------------------------------------------------------- ------ -------- --------- --------------
Closing balance at 30 September 2017 560.4 1,256.3 1,816.7
----------------------------------------------------------------- ------ -------- --------- --------------
Consolidated balance sheet
as at 30 September
30 September 2018 31 March 2018
(unaudited) (audited)
Notes GBPm GBPm
--------------------------------------------------- ------ ------------------ --------------
Assets
Non-current assets
Investments at fair value through profit or loss 4 1,771.6 1,552.3
--------------------------------------------------- ------ ------------------ --------------
Investment portfolio 1,771.6 1,552.3
Derivative financial instruments 4 1.2 1.5
--------------------------------------------------- ------ ------------------ --------------
Total non-current assets 1,772.8 1,553.8
--------------------------------------------------- ------ ------------------ --------------
Current assets
Derivative financial instruments 4 2.7 4.3
Trade and other receivables 2.5 14.1
Cash and cash equivalents 122.6 282.0
--------------------------------------------------- ------ ------------------ --------------
Total current assets 127.8 300.4
--------------------------------------------------- ------ ------------------ --------------
Total assets 1,900.6 1,854.2
--------------------------------------------------- ------ ------------------ --------------
Liabilities
Non-current liabilities
Derivative financial instruments 4 (21.1) (29.7)
Trade and other payables - (5.9)
--------------------------------------------------- ------ ------------------ --------------
Total non-current liabilities (21.1) (35.6)
--------------------------------------------------- ------ ------------------ --------------
Current liabilities
Derivative financial instruments 4 (29.9) (13.7)
Trade and other payables (14.6) (94.7)
--------------------------------------------------- ------ ------------------ --------------
Total current liabilities (44.5) (108.4)
--------------------------------------------------- ------ ------------------ --------------
Total liabilities (65.6) (144.0)
--------------------------------------------------- ------ ------------------ --------------
Net assets 1,835.0 1,710.2
--------------------------------------------------- ------ ------------------ --------------
Equity
Stated capital account 5 560.4 560.4
Retained reserves 1,274.6 1,149.8
--------------------------------------------------- ------ ------------------ --------------
Total equity 1,835.0 1,710.2
--------------------------------------------------- ------ ------------------ --------------
Net asset value per share
--------------------------------------------------- ------ ------------------ --------------
Basic and diluted (pence) 6 226.4 211.0
-------------------------------------------------- ------ ------------------ --------------
The Financial statements and related Notes were approved and
authorised for issue by the Board of Directors on
7 November 2018 and signed on its behalf by:
Wendy Dorman
Director
Consolidated cash flow statement
for the six months to 30 September
Six months to Six months to
30 September 2018 30 September 2017
(unaudited) (unaudited)
GBPm GBPm
---------------------------------------------------------- ------------------ ------------------
Cash flow from operating activities
Purchase of investments (128.3) (2.3)
Proceeds from partial realisations of investments 90.6 32.9
Proceeds from full realisations of investments 0.4 -
Investment income(1) 19.8 37.6
Fees paid on investment activities (0.4) 0.4
Operating expenses paid (1.4) (1.2)
Interest receivable (0.2) -
Advisory and performance fees paid (106.3) (14.1)
Amounts paid on the settlement of derivative contracts (1.3) (12.7)
Temporary loan to unconsolidated subsidiaries (0.3) -
Other income received 0.6 1.0
---------------------------------------------------------- ------------------ ------------------
Net cash flow from operations (126.8) 41.6
---------------------------------------------------------- ------------------ ------------------
Cash flow from financing activities
Fees and interest paid on financing activities (2.7) (3.8)
Dividends paid (31.8) (38.7)
Drawdown of revolving credit facility 50.6 -
Repayment of revolving credit facility (50.6) (10.0)
---------------------------------------------------------- ------------------ ------------------
Net cash flow from financing activities (34.5) (52.5)
---------------------------------------------------------- ------------------ ------------------
Change in cash and cash equivalents (161.3) (10.9)
---------------------------------------------------------- ------------------ ------------------
Cash and cash equivalents at the beginning of the period 282.0 17.1
Effect of exchange rate movement 1.9 0.5
---------------------------------------------------------- ------------------ ------------------
Cash and cash equivalents at the end of the period 122.6 6.7
---------------------------------------------------------- ------------------ ------------------
1 Investment income includes dividends of GBP0.4 million (September 2017: GBP0.3 million) and
interest of GBP9.9 million (September 2017: GBP14.1 million) received from portfolio assets
held directly by the Company and distributions of GBP9.5 million (September 2017: GBP23.2
million) received from unconsolidated subsidiaries.
Reconciliation of net cash flow to movement in net debt
for the six months to 30 September
Six months to Six months to
30 September 2018 30 September 2017
(unaudited) (unaudited)
----------------------------------------------------- ------------------ ------------------
Change in cash and cash equivalents (161.3) (10.9)
Drawdown of revolving credit facility (50.6) -
Repayment of revolving credit facility 50.6 10.0
----------------------------------------------------- ------------------ ------------------
Change in net cash/(debt) resulting from cash flows (161.3) (0.9)
----------------------------------------------------- ------------------ ------------------
Movement in net cash/(debt) (161.3) (0.9)
Net cash/(debt) at the beginning of the period 282.0 (82.9)
Effect of exchange rate movement 1.9 0.5
----------------------------------------------------- ------------------ ------------------
Net cash/(debt) at the end of the period 122.6 (83.3)
----------------------------------------------------- ------------------ ------------------
In the above reconciliation there were no non-cash
movements.
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 Group is an
investment holding company and does not consider itself to have any
customers.
The following is an analysis of the Group's investment return,
profit before tax, assets, liabilities and net assets by portfolio
segment for the six months to 30 September 2018:
Economic
Infrastructure Projects India
For the six months to 30 September 2018 businesses portfolio Fund Unallocated Total
(unaudited) GBPm GBPm GBPm GBPm GBPm
----------------------------------------- --------------- ---------- ------ ------------ --------
Investment return/(loss) 189.3 6.8 (7.1) 0.4 189.4
----------------------------------------- --------------- ---------- ------ ------------ --------
Profit/(loss) before tax 178.4 6.6 (7.1) (21.3) 156.6
----------------------------------------- --------------- ---------- ------ ------------ --------
For the six months to 30 September 2017 (unaudited)
------------------------------------------------------------------------------------------------------
Investment return/(loss) 152.2 7.0 (2.5) (2.5) 154.2
----------------------------------------- --------------- ---------- ------ ------------ --------
Profit/(loss) before tax 131.7 6.4 (2.5) (14.8) 120.8
----------------------------------------- --------------- ---------- ------ ------------ --------
As at 30 September 2018
(unaudited)
------------------------------------------------------------------------------------------------------
Assets 1,541.2 199.0 29.7 130.7 1,900.6
----------------------------------------- --------------- ---------- ------ ------------ --------
Liabilities (56.4) (1.0) - (8.2) (65.6)
----------------------------------------- --------------- ---------- ------ ------------ --------
Net assets 1,484.8 198.0 29.7 122.5 1,835.0
----------------------------------------- --------------- ---------- ------ ------------ --------
As at 31 March 2018 (audited)
------------------------------------------------------------------------------------------------------
Assets 1,364.7 167.9 36.9 284.7 1,854.2
----------------------------------------- --------------- ---------- ------ ------------ --------
Liabilities (48.2) (1.3) - (94.5) (144.0)
----------------------------------------- --------------- ---------- ------ ------------ --------
Net assets 1,316.5 166.6 36.9 190.2 1,710.2
----------------------------------------- --------------- ---------- ------ ------------ --------
The following is an analysis of the Group's investment return,
profit before tax, assets, liabilities and net assets by geography
for the six months to 30 September 2018:
UK and
For the six months to 30 September 2018 Ireland(1) Europe(2) Asia Total
(unaudited) GBPm GBPm GBPm GBPm
----------------------------------------- ----------- ---------- ------ --------
Investment return/(loss) 178.0 18.5 (7.1) 189.4
========================================== =========== ========== ====== ========
Profit/(loss) before tax 154.4 9.3 (7.1) 156.6
------------------------------------------ ----------- ---------- ------ --------
For the six months to 30 September 2017 (unaudited)
-------------------------------------------------------------------------------------
Investment return/(loss) 31.7 125.0 (2.5) 154.2
------------------------------------------ ----------- ---------- ------ --------
Profit/(loss) before tax 18.0 105.3 (2.5) 120.8
------------------------------------------ ----------- ---------- ------ --------
As at 30 September 2018
(unaudited)
----------------------------------------- ----------- ---------- ------ --------
Assets 1,137.2 733.7 29.7 1,900.6
------------------------------------------ ----------- ---------- ------ --------
Liabilities (8.3) (57.3) - (65.6)
------------------------------------------ ----------- ---------- ------ --------
Net assets 1,128.9 676.4 29.7 1,835.0
------------------------------------------ ----------- ---------- ------ --------
As at 31 March 2018 (audited)
----------------------------------------- ----------- ---------- ------ --------
Assets 1,223.1 594.2 36.9 1,854.2
------------------------------------------ ----------- ---------- ------ --------
Liabilities (94.6) (49.4) - (144.0)
------------------------------------------ ----------- ---------- ------ --------
Net assets 1,128.5 544.8 36.9 1,710.2
------------------------------------------ ----------- ---------- ------ --------
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 Group's investment in Oystercatcher, including those derived from its underlying business
in Singapore.
The Group generated 94.0% (September 2017: 20.6%) of its
investment return in the period from investments held in the UK and
Ireland and 9.8% (September 2017: 81.0%) of its investment return
from investments held in continental Europe. During the period, the
Group generated 100.2% (September 2017: 97.1%) of its investment
return from investments in Economic Infrastructure businesses, 3.6%
(September 2017: 4.5%) from investments in Projects and (3.8)%
(September 2017: (1.6)%) from its investment in the India Fund.
Given the nature of the Group's operations, the Group is not
considered to be exposed to any operational seasonality or
cyclicality that would impact the financial results of the Group
during the period or the financial position of the Group at 30
September 2018.
2 Advisory and performance fees payable
Six months to Six months to
30 September 2018 30 September 2017
(unaudited) (unaudited)
GBPm GBPm
------------------------------------------------ ------------------ ------------------
Advisory fee payable directly from the Company 14.1 10.3
Performance fee 5.6 -
------------------------------------------------ ------------------ ------------------
19.7 10.3
------------------------------------------------ ------------------ ------------------
Total advisory and performance fees payable by the Company for
the period to 30 September 2018 were GBP19.7 million (September
2017: GBP10.3 million). In addition to the fees described above, no
management fees (September 2017: GBP2.4 million) were paid to 3i
plc from unconsolidated subsidiary entities. Note 9 provides
further details on the calculation of the advisory fee, performance
fee and management fees.
3 Income taxes
Profits arising from the operations of the Company are subject
to tax at the standard corporate income tax rate in Jersey of 0%
(September 2017: 0%). The subsidiary of the Company has provided
for taxation at the appropriate rates that are applicable in the
country in which the subsidiary operates. The returns of the
subsidiary are largely not subject to tax.
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 Group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing 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 2018. For all other assets and liabilities, their
carrying value approximates to fair value. During the period ended
30 September 2018, there were no transfers of financial instruments
between levels of the fair value hierarchy (March 2018: nil).
Trade and other receivables on the Balance sheet includes GBP1.3
million of deferred finance costs relating to the arrangement fee
for the revolving credit facility. This has been excluded from the
table below as it is not categorised as a financial instrument.
Financial instruments classification
As at 30 September 2018
(unaudited)
-------------------------------------------------- --------------------------------------
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- -------- -------- -------- --------
Financial assets
Investments at fair value through profit or loss - - 1,771.6 1,771.6
Trade and other receivables - 1.2 - 1.2
Cash and cash equivalents 122.6 - - 122.6
Derivative financial instruments - 3.9 - 3.9
-------------------------------------------------- -------- -------- -------- --------
122.6 5.1 1,771.6 1,899.3
-------------------------------------------------- -------- -------- -------- --------
Financial liabilities
Trade and other payables - (14.6) - (14.6)
Derivative financial instruments - (51.0) - (51.0)
-------------------------------------------------- -------- -------- -------- --------
- (65.6) - (65.6)
-------------------------------------------------- -------- -------- -------- --------
As at 31 March 2018
(audited)
-------------------------------------------------- --------------------------------------
Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- -------- -------- -------- --------
Financial assets
Investments at fair value through profit or loss - - 1,552.3 1,552.3
Trade and other receivables - 12.8 - 12.8
Cash and cash equivalents 282.0 - - 282.0
Derivative financial instruments - 5.8 - 5.8
-------------------------------------------------- -------- -------- -------- --------
282.0 18.6 1,552.3 1,852.9
-------------------------------------------------- -------- -------- -------- --------
Financial liabilities
Trade and other payables - (100.6) - (100.6)
Derivative financial instruments - (43.4) - (43.4)
-------------------------------------------------- -------- -------- -------- --------
- (144.0) - (144.0)
-------------------------------------------------- -------- -------- -------- --------
Reconciliation of financial instruments categorised within Level
3 of fair value hierarchy
As at 30 September 2018
(unaudited)
Level 3 fair value reconciliation GBPm
---------------------------------------------------- ------------------------
Opening fair value 1,552.3
Additions 144.0
Disposal proceeds and repayment (91.0)
Movement in accrued income 23.3
Fair value movement (including exchange movements) 143.0
---------------------------------------------------- ------------------------
Closing fair value 1,771.6
---------------------------------------------------- ------------------------
As at 31 March 2018
(audited)
Level 3 fair value reconciliation GBPm
---------------------------------------------------- --------------------
Opening fair value 1,815.6
Additions 398.5
Disposal proceeds and repayment (1,188.4)
Fair value movement (including exchange movements) 526.6
---------------------------------------------------- --------------------
Closing fair value 1,552.3
---------------------------------------------------- --------------------
All unrealised movements on investments and foreign exchange
movements are recognised in profit or loss in the consolidated
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 GBP46.8 million (2017: GBP44.8 million)
comprises dividend income of GBP0.4 million (2017: GBP0.3 million),
interest of GBP36.1 million (2017: GBP21.6 million) and
distributions of GBP10.3 million (2017: GBP22.9 million) from
unconsolidated subsidiaries.
Unquoted investments
The Group 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 Group's policy is to fair value both the equity and 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 2018, the fair value of unquoted investments was
GBP1,746.3 million (March 2018: GBP1,527.3 million). Individual
portfolio asset valuations are shown in Table 1 in the Financial
review.
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 and interest rates assumption used to project the
future cash flows.
Increasing the discount rate used in the valuation of each asset
by 1% would reduce the value of the portfolio by GBP149.9 million
(March 2018: GBP130.1 million). Decreasing the discount rate used
in the valuation of each asset by 1% would increase the value of
the portfolio by GBP175.7 million (March 2018: GBP151.9
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 2018: 5.0%) to 2.0% (Netherlands) (March 2018: 2.0%)
but with the majority at 2.5% (UK RPI) (March 2018: 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
GBP32.0 million (March 2018: GBP39.1 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
GBP33.0 million (March 2018: GBP38.6 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 GBP33.0 million (March 2018: GBP56.3 million).
Decreasing the interest rate assumption used in the valuation of
each asset by 1% would increase the value of the portfolio by
GBP32.6 million (March 2018: GBP54.3 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.
Unlisted funds
The Company invests in one externally managed fund, the Dalmore
Capital Fund, which is not quoted in an active market. The Company
considered the valuation techniques and inputs used in valuing this
fund to ensure that they are reasonable and appropriate and that,
therefore, the NAV of this fund may be used as an input into
measuring its fair value. In measuring this fair value, the NAV 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 and fund manager. The
Company classifies the fair value of this investment as Level 3. As
at 30 September 2018, the fair value of unlisted funds was GBP18.9
million (March 2018: GBP18.6 million). The fund NAV reflects a 30
September 2018 valuation date (2018: 31 March 2018 valuation date).
A 10% adjustment in the fair value of the fund would result in a
GBP1.9 million (March 2018: GBP1.9 million) change in the
valuation.
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 2018, the fair value of the other assets and liabilities
within these intermediate holding companies was GBP6.4 million
(March 2018: GBP6.4 million).
Over-the-counter derivatives
The Company uses over-the-counter foreign currency derivatives
and interest rate swaps to hedge foreign currency movements and
interest rates respectively. The derivatives are held at fair value
which represents the replacement cost of the instruments at the
balance sheet date. The valuation technique incorporates various
inputs including foreign exchange spot and forward rates, interest
rate curves, 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 Group on a half-yearly basis. This is performed
by the valuation team of the Investment Manager and approved 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 being approved by the Board.
5 Issued capital
The Company is authorised to issue an unlimited number of shares
with no fixed par value (March 2018: same).
As at 30 September 2018 As at 31 March 2018
(unaudited) (audited)
Number GBPm Number GBPm
===================== =============== ========= ============== ========
Issued and fully paid
Opening balance 810,434,010 1,272.8 1,026,549,746 1,272.8
Share consolidation - - (216,115,736) -
--------------------- --------------- --------- -------------- --------
Closing balance 810,434,010 1,272.8 810,434,010 1,272.8
--------------------- --------------- --------- -------------- --------
Aggregate issue costs of GBP19.3 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 GBP693.1 million transferred
to a new, distributable reserve which has been combined with
retained reserves in these accounts. As at 30 September 2018, the
residual value on the stated capital account was GBP560.4
million.
On 29 March 2018, the Company paid a special dividend of
GBP425.0 million to shareholders. In order to maintain the
comparability of the Company's share price before and after the
special dividend, a share consolidation took place. The share
consolidation ratio was 15 new ordinary shares for every 19
existing shares.
6 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 2018 30 September 2017
(unaudited) (unaudited)
============================================ ================== ==================
Earnings per share (pence)
Basic and diluted 19.3 11.8
============================================ ================== ==================
Earnings (GBPm)
Profit after tax for the period 156.6 120.8
============================================ ================== ==================
Number of shares (million)
Weighted average number of shares in issue 810.4 1,026.5
-------------------------------------------- ------------------ ------------------
As at As at
30 September 31 March
2018 2018
(unaudited) (audited)
------------------------------ ------------- ----------
Net assets per share (pence)
Basic and diluted 226.4 211.0
Net assets (GBPm)
Net assets 1,835.0 1,710.2
------------------------------ ------------- ----------
7 Dividends
As at 30 September 2018 As at 30 September 2017
(unaudited) (unaudited)
Declared and paid during pence pence
the period per share GBPm per share GBPm
--------------------------------------------------- ---------------- -------- ---------------- --------
Prior year final dividend paid on ordinary shares 3.925 31.8 3.775 38.7
--------------------------------------------------- ---------------- -------- ---------------- --------
3.925 31.8 3.775 38.7
--------------------------------------------------- ---------------- -------- ---------------- --------
The Company proposes paying an interim dividend of 4.325 pence
per share (September 2017: 3.925 pence) which will be payable to
those shareholders that are on the register on 23 November 2018. On
the basis of the shares in issue at 30 September 2018, this would
equate to a total interim dividend of GBP35.1 million (September
2017: GBP40.3 million).
8 Contingent liabilities
As at 30 September 2018, the Company had issued EUR19.0 million
(re-translated GBP16.9 million) in the form of letters of credit,
drawn against the Revolving Credit Facility, for future investments
into the A27/A1, Hart Van Zuid and Condorcet PPP projects (March
2018: EUR57.7 million, GBP50.6 million). During the period, the
letters of credit relating to the A9 and La Santé PPP projects were
cancelled following the investment in those projects.
9 Related parties
Transactions between the Company and 3i Group
3i Group plc ('3i Group') has a direct and indirect interest of
33.3% (March 2018: 33.6%) in the ordinary shares of the Company.
This classifies 3i Group as a 'substantial shareholder' of the
Company as defined by the Listing Rules.
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 (March 2018: nil) were drawn down by
the India Fund from the Company during the period. In total,
commitments of US$183.7 million or GBP140.9 million re-translated
had been drawn down at 30 September 2018 (March 2018: US$183.7
million or GBP130.9 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
2018, the outstanding commitment was US$37.5 million, or GBP28.8
million re-translated (March 2018: US$37.5 million or GBP26.7
million).
In the prior year, 3i Networks Finland Limited, a subsidiary of
3i Group, received a priority profit share from 3i Networks Finland
LP, an unconsolidated subsidiary of the Company. Following the sale
of Elenia, which was the only investment held by 3i Networks
Finland LP, no further priority profit share is expected to be
paid. During the period, no fee (September 2017: GBP1.1 million)
was payable in this regard to 3i Group, of which the Company's
share was nil (September 2017: GBP1.0 million). There was therefore
nothing to offset in this regard against the total advisory fee
payable by the Company. As at 30 September 2018, no fee remained
outstanding (March 2018: nil).
In the prior year, 3i Osprey GP Limited, a subsidiary of 3i
Group, received a priority profit share from 3i Osprey LP, an
unconsolidated subsidiary of the Company. Following the sale of
Anglian Water Group, which was the only investment held by 3i
Osprey LP, no further priority profit share is expected to be paid.
During the period, no fee (September 2017: GBP2.1 million) was
payable in this regard to 3i Group, of which the Company's share
was nil (September 2017: GBP1.4 million). There was therefore
nothing to offset in this regard against the total advisory fee
payable by the Company. As at 30 September 2018, no fee remained
outstanding (March 2018: nil).
The management and tax residence of the Company moved to the UK
on 15 October 2018 with 3i Investments plc, a subsidiary of 3i
Group, being appointed as the Company's Alternative Investment Fund
Manager that will provide its services under an Investment
Management Agreement ('IMA'). Prior to this date, 3i Investments
plc acted as the exclusive Investment Adviser to the Company and
provided its services under an Investment Advisory Agreement
('IAA'). 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 it is now doing pursuant to the terms of the IMA.
Under the IAA, an annual advisory fee was payable to 3i
Investments plc based on the gross investment value of the Group at
the end of each financial period. While the IAA is replaced by the
IMA with effect from 15 October 2018, the basis of calculating the
fees, for both the ongoing fee and the performance fee, will
continue to apply as under the IAA in respect of the financial year
to 31 March 2019. Gross investment value is defined as the total
aggregate value (including any subscription obligations) of the
investments of the Group as at the start of a financial period plus
any investment (excluding cash) made during the period valued at
cost (including any subscription obligations). The applicable
annual rate is 1.5%, dropping to an annual rate of 1.25% for
investments that have been held by the Group for longer than five
years. A lower fee of 1% per annum is applicable in relation to
certain investments in greenfield projects. The fee accrues
throughout a financial period and quarterly instalments are payable
on account of the fee for that period. The fee is paid to 3i plc
and is not payable in respect of cash or cash equivalent liquid
temporary investments held by the Group throughout a financial
period. For the period to 30 September 2018, GBP14.1 million
(September 2017: GBP12.7 million) was payable and GBP1.5 million
(March 2018: GBP3.9 million) remained due to 3i plc at 30 September
2018. No fees were paid directly from unconsolidated subsidiary
entities to 3i plc (September 2017: GBP2.4 million).
With effect from 1 April 2019, the basis of calculating the fees
under the IMA will move to an annual management fee payable on a
tiered basis: 1.4% per annum in respect of the portion of the gross
investment value of the Group up to GBP1.25 billion; 1.3% per annum
in respect of the portion of the gross investment value above
GBP1.25 billion up to GBP2.25 billion; and 1.2% in respect of the
portion of the gross investment value above GBP2.25 billion. Unlike
under the IAA, the Group's gross investment value will be
calculated for the purposes of the management fee on a time
weighted average basis for the financial period in question. Also,
the Group will pay a one-off transaction fee in respect of any
investment acquired by the Group on or after 1 April 2019 equal to
1.2% of the acquisition price of that investment. Any transaction
fee paid by the Group in respect of any investment which is
disposed of (in whole or part) within 12 months of being acquired
may, at the option of the Board, be offset against future
transaction fees which would otherwise be payable to 3i Investments
plc.
The IAA also provided for an annual performance fee to be
payable to 3i Investments plc. This became payable when the Group's
total return for the period exceeded 8% ('the performance hurdle').
If the performance hurdle was exceeded, the performance fee was
equal to 20% of the Group's total return in excess of the
performance hurdle for the relevant financial period. In addition,
the performance fee included a high water mark requirement so that,
before payment of a performance fee, besides the performance
hurdle, the return must also exceed the performance level in
respect of which any performance fee has been paid in the previous
three financial years. The performance hurdle and high water mark
requirement was exceeded for the period to 30 September 2018 and
therefore a GBP5.6 million performance fee was recognised
(September 2017: nil). The outstanding balance payable as at 30
September 2018 was GBP5.6 million (March 2018: GBP89.8
million).
Under the IMA, with effect from 1 April 2019, the performance
fee will continue to be equal to 20% of the Group's total return in
excess of 8%, but any performance fee will be payable in three
equal annual instalments. The second and third instalments will
only be payable if either (a) the Group'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 Group'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 will be no high water mark requirement.
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.
Prior to the replacement of the IAA by the IMA, the Company also
paid 3i plc an annual fee for the provision of support services,
under a UK Support Services Agreement. This agreement was
terminated on 15 October 2018 and these support services (which are
ancillary and related to the investment management service) are now
also provided under the IMA. In consideration of the provision of
support services under the IMA, the Company will pay the Investment
Manager an annual fee of GBP1.0 million. The cost for the support
services incurred for the period to 30 September 2018 was GBP0.4
million (September 2017: GBP0.4 million). The outstanding balance
payable as at 30 September 2018 was GBP0.2 million (March 2018:
GBP0.2 million).
Accounting policies
Basis of preparation
These financial statements are the unaudited Half-yearly
condensed consolidated financial statements (the 'Half-yearly
Financial Statements') of 3i Infrastructure plc (the 'Company'), a
company incorporated and registered in Jersey, and its consolidated
subsidiary (together referred to as the 'Group') for the six-month
period ended 30 September 2018.
The Half-yearly Financial Statements have been prepared in
accordance with International Accounting Standard 34 Interim
Financial Reporting ('IAS 34') and the accounting policies set out
in the Annual report and accounts 2018. They should be read in
conjunction with the consolidated financial statements for the year
to 31 March 2018, 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 Group 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 Half-yearly Financial Statements were authorised for issue
by the Directors on 7 November 2018.
The Half-yearly Financial Statements do not constitute statutory
accounts. The statutory accounts for the year to 31 March 2018,
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.
The preparation of the Half-yearly Financial Statements in
conformity with IFRS requires the Board to make judgments,
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 judgments 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 accounting policies and related estimates used in the
preparation of the Half-yearly Financial Statements are consistent
with those stated in the Annual report and accounts 2018, except
for the adoption of the new accounting standards, IFRS 15 and IFRS
9. There is no material impact from these new accounting standards
becoming effective during the period.
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 Group 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
Chairman
7 November 2018
Board of Directors and their functions
Richard Laing
Non-executive Chairman and chairman of the Nominations Committee and the Management Engagement
Committee.
Doug Bannister
Non-executive Director.
Wendy Dorman
Non-executive Director and chairman of the Audit and Risk Committee.
Robert Jennings CBE
Non-executive Director.
Ian Lobley
Non-executive Director.
Paul Masterton
Senior Independent Director and chairman 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 and would be subject
to Board approval. 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 Group
(valuing investments on the basis included in the Group'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 and its consolidated subsidiary ('the
Group') 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 judgments, 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 judgments 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 Group
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 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 Group has made investments into other infrastructure
funds, the value of the investment will be derived from the Group'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 22 November 2018
===================================== ================
Record date for interim dividend 23 November 2018
===================================== ================
Interim dividend expected to be paid 7 January 2019
===================================== ================
Full year results expected date 9 May 2019
------------------------------------- ----------------
Registrars
For shareholder services, including notifying changes of
address, the registrar details are as follows:
Link Market Services (Jersey) Limited
12 Castle Street
St. Helier
Jersey JE2 3RT
Channel Islands
email: registrars@linkgroup.je
Telephone: +44 (0)1534 847 000
Shareholder helpline: 0871 664 0300
Calls cost 12p per minute plus your phone company's access
charge. If you are outside the United Kingdom, please call +44 371
664 0300. Calls outside the United Kingdom will be charged at the
applicable international rate. Link Group are open between
9.00am-5.30pm, Monday to Friday, excluding public holidays in
England and Wales.
Investor relations and general enquiries
For all investor relations and general enquiries about 3i
Infrastructure plc, please contact:
Investor relations
3i Infrastructure plc
16 Palace Street
London, SW1E 5JD
email: IRTeam@3i.com
Telephone +44 (0)20 7975 3131
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
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Kingdom. Terms and conditions relating to the use and distribution
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contact rns@lseg.com or visit www.rns.com.
END
IR FSDFAWFASELF
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