REG - 3i Infrastructure - Results for the six months to 30 September 2024
12/11/2024 07:00
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RNS Number : 7877L 3i Infrastructure PLC 12 November 2024
12 November 2024
Results for the six months to 30 September 2024
The portfolio continues to generate attractive value growth, ahead of 3i
Infrastructure's target return of 8-10% per annum. We are on track to deliver
the FY25 dividend target of 12.65 pence per share, which is 6.3% higher than
the previous year and expected to be fully covered by net income.
Performance highlights
Continued growth in NAV ahead of target
£169m 5.1%
Total return for the period Total return on opening
(30 September 2023: £191m) net asset value ('NAV')
(30 September 2023: 6.3%)
£3,456m 374.7p
NAV (31 March 2024: £3,342m) NAV per share
(31 March 2024: 362.3p)
On track to deliver the FY25 dividend target, 6.3% higher
£103m 6.325p than FY24
Total income and Interim dividend per share
non-income cash (FY24 interim dividend:
(30 September 2023: £104m) 5.95p per share)
€309m +15% +31% expected uplift over September 2023 valuation, before the Valorem sale
process was initiated
Valorem expected sale proceeds to be used to reduce drawn balance on revolving Increase based on expected EUR realisation proceeds versus March 2024
credit facility ('RCF') valuation
Premium to 31 March 2024 valuation implied by recent syndication of Future
Biogas
+15%
Future Biogas partial syndication implied premium to the March 2024 valuation
Richard Laing, Chair of 3i Infrastructure plc ('3i Infrastructure', '3iN' or
the 'Company')
"The portfolio continues to perform well, with our largest assets in
particular seeing strong earnings momentum. We are pleased with the outcome of
the realisation process for Valorem, with expected proceeds achieving a
significant uplift in value and a money multiple of 3.5x cost over the life of
this investment. We are on track to deliver our FY25 dividend target, which is
a 6.3% increase on last year's dividend."
Performance
The Company generated a total return of 5.1% on opening NAV for the first half
of the year, ahead of our target return of 8% to 10% per annum. The NAV per
share increased to 374.7 pence. The portfolio overall is performing ahead of
expectations. The realisation of Valorem at a 31% uplift to our September 2023
valuation and syndication of a stake in Future Biogas at a 15% uplift to our
March 2024 valuation demonstrates the resilient demand from private market
investors for our high-quality infrastructure investments.
Interim dividend
The Board is announcing an interim dividend of 6.325 pence per share,
scheduled to be paid on 13 January 2025 to holders of ordinary shares on the
register on 22 November 2024. The ex-dividend date will be 21 November 2024.
As an investment trust, the Company is permitted to designate dividends wholly
or partly as interest distributions for UK tax purposes. The Board is
designating the full 6.325 pence interim dividend as an interest distribution.
Corporate governance
The Company's Annual General Meeting ('AGM') was held on 4 July 2024. All
resolutions were approved by shareholders.
Wendy Dorman and Samantha Hoe-Richardson did not seek re-election as Directors
at the AGM and, accordingly, they ceased to be Directors of the Company at the
conclusion of the AGM.
Martin Magee, non-executive Director of the Company, succeeded Wendy Dorman as
Chair of the Audit and Risk Committee with effect from the conclusion of the
AGM. On 15 July 2024, Milton Fernandes was appointed as a non-executive
Director of the Company. Milton has over 20 years' experience in
infrastructure investment including previous roles as CFO and Managing
Director of Infracapital and CFO of Innisfree Limited.
Richard Laing
Chair
For further information, please contact:
Thomas Fodor, investor enquiries Tel: 020 7975 3469
Kathryn van der Kroft, press enquiries Tel: 020 7975 3021
Notes
This report contains Alternative Performance Measures ('APMs'), which are
financial measures not defined in International Financial Reporting Standards
('IFRS'). These include Total return on opening NAV, NAV per share, Total
income and non-income cash, Investment value including commitments, Total
portfolio return percentage and Total liquidity. More information relating to
APMs, including why we use them and the relevant definitions, can be found in
the Financial review section and the Company's Annual report and accounts
2024. The Total return for the period is the total comprehensive income for
the period under IFRS.
For further information regarding the announcement of the results for 3i
Infrastructure plc, please visit www.3i-infrastructure.com. The analyst
presentation will be made available on this website.
Notes to editors
3i Infrastructure plc is a Jersey-incorporated, closed-ended investment
company, an approved UK Investment Trust, listed on the London Stock Exchange
and regulated by the Jersey Financial Services Commission. The Company's
purpose is to invest responsibly in infrastructure, delivering long-term
sustainable returns to shareholders and having a positive influence on our
portfolio companies and their stakeholders.
3i Investments plc (the 'Investment Manager'), a wholly-owned subsidiary of 3i
Group plc, is authorised and regulated in the UK by the Financial Conduct
Authority and is the 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.
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, and
management, as applicable, as well as financial statements. No public offering
in the United States is currently contemplated.
3i Infrastructure plc Half-yearly report 2024
Review from the Managing Partners
3i Infrastructure's portfolio continues to demonstrate value growth driven by
fundamental earnings growth. Our companies have been carefully selected
because they operate in markets displaying long-term growth mega-trends,
whilst also typically demonstrating low cyclicality of earnings, positive
value correlation to inflation and defensive return characteristics. As a
result, 3i Infrastructure's portfolio provides a differentiated proposition to
shareholders; diversification from fixed income products alongside well-proven
capital growth potential.
We work closely with our portfolio company management teams to maximise value
creation throughout our ownership. Our active management is centered around
three key pillars; demonstrating high quality of earnings, investing in
return-accretive growth capex and defining white space growth potential in
preparation for our eventual exit.
The agreement to sell Valorem and partial syndication of Future Biogas that we
announced during the period are good illustrations of the success of our model
and are discussed in further detail below.
Valorem
On 7 October 2024, we announced that we had received a binding offer for our
33% stake in Valorem from AIP Management P/S and certain other co-investors.
Subject to acceptance of the binding offer and the receipt of regulatory
clearance, we expect the transaction to complete in Q1 2025. At the point of
exit, we expect our investment in Valorem to have generated a 21% gross annual
IRR and 3.5x gross multiple of invested capital. The expected net proceeds of
€309 million are 15% above our March 2024 carrying value and 31% above our
September 2023 carrying value (which was before the sales process began). Once
received, the proceeds will be applied to reduce 3i Infrastructure's
outstanding RCF balance.
We initially invested in Valorem in 2016. During our ownership period we
guided the company's successful transformation from an asset developer in
France to a leading renewable power producer in Europe. Initially focused on
onshore wind generation, Valorem grew its portfolio to include solar, hydro
generation and wind projects across France, Finland, Greece and Poland. During
the period of our involvement, Valorem's assets in operation grew to over
850MW, a more than five-fold increase, and its development pipeline reached
6.6GW. Valorem's EBITDA has also more than quadrupled.
Following the completion of Valorem, 3iN will have delivered a realised track
record since inception of 23% IRR, and realised proceeds of £4.1 billion
against an investment cost of £1.5 billion.
Valorem is the seventh consecutive core-plus realisation from 3i
Infrastructure's portfolio achieved at a premium to last reported NAV,
extending our track record of successful value creation on exits, and
demonstrating the continued appetite for 3i Infrastructure's investments
amongst the private markets infrastructure community. The weighted-average
premium to the previously reported valuation achieved from these realisations
is 37%.
Future Biogas
During the period, Future Biogas acquired a 51% stake in a portfolio of six
gas-to-grid Anaerobic Digestion ('AD') plants, that it had developed and was
operating under management contract with JLEN Environmental Assets Group
Limited ('JLEN'), for £68 million. Of this amount, £30 million was funded by
a follow-on investment from 3iN into Future Biogas with the remainder being
funded by Future Biogas's committed debt facilities. This acquisition marks an
important milestone in building Future Biogas into a scalable platform and
establishing it as the leading developer, asset owner and operator of green
gas plants in the UK. The company has a promising pipeline of potential sites
for the construction of new AD plants and is in ongoing dialogue with a number
of high-quality corporate customers to supply biogas.
In September 2024, 3iN completed the syndication of 23% of its stake in Future
Biogas to RWE Energy Transition Investments ('RWE') for proceeds of £30
million, at a valuation representing a 15% premium to the 31 March 2024
valuation.
Portfolio review
In addition to the successful transactions at Valorem and Future Biogas, we
are generally pleased with performance across the rest of the portfolio. In
particular, we note the following:
TCR outperformed expectations during the period. Demand for its rental product
remains strong, driven by growth in air traffic and the increasing rate of
leasing adoption within TCR's markets. TCR continues to support the
decarbonisation of its customers' operations by investing in new electric
Ground Support Equipment ('GSE'), now accounting for 38% of its GSE total
motorised fleet. It is also continuing to gain traction on its GSE pooling
solution at major airports worldwide.
ESVAGT had a strong first half, driven by increasing vessel day rates and high
levels of vessel utilisation. The company currently operates nine Service
Operation Vessels ('SOV') supporting the offshore wind sector, with a further
four currently under construction, each being built to service long-term
charter agreements. The near-term pipeline for new SOVs is strong. During the
period, ESVAGT closed a further €200 million committed debt facility at
attractive rates, providing additional capital to support its growth plans.
ESVAGT's emergency rescue and response vessels segment also continued to
perform well.
Infinis's landfill gas generation assets performed ahead of expectations,
offsetting lower margins from its power response assets. The company continues
to make significant progress in developing a high-quality 1.4GW solar and
battery pipeline and has strengthened its development team to accelerate
planning and construction processes. The Ford Oaks Solar Park (44 MW), a
45-hectare site close to Exeter Airport, and Oaklands Solar Farm (54 MW) in
South Wales both received planning consent during the period.
Tampnet had a good first half, exceeding EBITDA targets in both the North Sea
and Gulf of Mexico. During the period, Tampnet secured its first fibre-backed
contract in the Mexican deepwater and is exploring several new opportunities
outside of the regions it currently serves. The company also continues to
experience growing demand for its private network solution business and its
developing carbon capture and offshore wind connectivity solutions.
GCX outperformed expectations due to progress converting its sales pipeline
into signed contracts. Demand for GCX's bandwidth is driven by the increasing
need for capacity on GCX's routes. GCX continues to explore a number of
attractive network investment opportunities along the Europe-to-India and
India-to-Singapore corridors.
Joulz performed in line with expectations during the period. The sales
pipeline is progressing well. In August 2024, Joulz completed a refinancing of
its debt on favourable terms providing additional capital to fund future
growth projects.
Ionisos performed below expectations for the first half of the year due to
unplanned stoppages at its E-Beam plants and weakness in those volumes related
to the German construction industry. However, demand for Ionisos's services in
its core medical and pharmaceutical markets continues to grow. The
construction of a new greenfield X-ray facility in north-east France is
progressing as planned.
Oystercatcher's financial performance was ahead of expectations during the
period. Its Singapore storage facilities continued to operate at full capacity
and achieved favourable contract renewal rates for storage and ancillary
activities, despite the continued backwardation market dynamics for petroleum
products.
SRL performed behind expectations in the first half of the year due to a
challenging market backdrop. Local Authorities in the UK are budget
constrained, impacting the volume of contracts in the market during the
period. A new CEO joined the company in April 2024. He has identified several
new initiatives to drive growth in response to the more challenging market
backdrop.
DNS:NET is demonstrating early momentum in rolling out its fibre-to-the-home
network in the Berlin vicinity, Brandenburg and Saxony-Anhalt. During the
period, the number of activated customers increased in line with our revised
business plan. Substantially all of the networks built by authorities in the
neighbouring state of Saxony-Anhalt and leased to DNS:NET have now been handed
over, generating incremental cash flow. We retain a flat valuation in
recognition of the challenges experienced by the company to date, but we are
pleased with the progress management is making.
The portfolio is analysed below.
Portfolio - Breakdown by value
at 30 September 2024
TCR 16%
ESVAGT 14%
Infinis 11%
Tampnet 9%
GCX 9%
Joulz 8%
Ionisos 8%
Valorem 6%
Oystercatcher 6%
SRL 6%
DNS:NET 4%
Future Biogas 3%
Sustainability
We continue to actively engage with our portfolio companies on Environmental,
Social and Governance matters, with particular focus on climate change and
occupational health and safety. Following the approval of 3i's science-based
targets by the Science Based Targets initiative ('SBTi'), we are working
closely with our portfolio companies to support their efforts in developing
emission reduction strategies that are aligned with the ambition of the SBTi.
Two of our portfolio companies have now had their targets verified by the
SBTi. We are supporting more of our companies to progress towards this goal.
Outlook
The Company is on track to deliver its target return for this financial year.
We are pleased with the progress being made across our portfolio. Our
portfolio companies are strategically positioned to benefit from long-term
growth drivers, and private market investors continue to recognise their
quality, as demonstrated by the transactions at Future Biogas and Valorem
during the period; the latest in a long-line of successfully managed sale
processes.
Proceeds from the sale of Valorem will be used to reduce the outstanding
balance on the RCF. We will continue to support our portfolio companies'
growth journeys and are excited about the potential for further value creation
across the portfolio. We are confident that our approach will deliver
long-term sustainable returns for investors.
Scott Moseley and Bernardo Sottomayor
Managing Partners and Co-Heads of European Infrastructure
3i Investments plc
11 November 2024
Financial review
The portfolio delivered another strong performance during the period.
On 7 October 2024, the Company announced that it had received a binding offer
for its 33% stake in Valorem for expected net proceeds of €309 million,
representing an uplift of €41 million on the value at 31 March 2024. A
follow-on investment of £30 million was made into Future Biogas in August to
support the acquisition of a 51% stake in six AD plants from JLEN. An
equivalent amount was subsequently received by the Company in September
following the syndication of 23% of its stake in Future Biogas, demonstrating
an immediate uplift in value.
We are on track to deliver the full-year dividend target, which we expect to
be fully covered.
The weighted average discount rate ('WADR') remained unchanged compared to
March 2024 at 11.3% (31 March 2024: 11.3%). The change in the valuation
methodology for Valorem from a discounted cash flow basis to a sales basis had
only a marginal impact on the WADR. The agreement to sell Valorem at a
significant premium to NAV and the partial syndication of Future Biogas, also
at a premium to NAV, provide tangible support for our approach to valuation.
Portfolio and returns
The Company generated a total return for the six-month period of £169
million, representing a 5.1% return on opening NAV (September 2023: £191
million, 6.3%), ahead of the target return of 8% to 10% per annum. The
Company's portfolio was valued at £3,972 million at 30 September 2024 (31
March 2024: £3,842 million) and delivered a total portfolio return in the
period of £212 million, including income and allocated foreign exchange
hedging (September 2023: £233 million).
Table 1 summarises the valuation and movements in the portfolio, as well as
the return for each investment, for the period.
Table 1: Portfolio summary (30 September 2024, £m)
Directors' Directors' Allocated Underlying Portfolio
valuation Investment Divestment Accrued Foreign valuation foreign portfolio total
31 March in the in the income Value exchange 30 September exchange income in return in
Portfolio assets 2024 period period movement movement translation 2024 hedging the period the period(1)
TCR 608 5(2) - 5 20 (14) 624 15 11 32
ESVAGT 531 25(2) - 1 1 (6) 552 5 26 26
Infinis 421 - - 9 15 - 445 - 9 24
Tampnet 343 - - 3 34 (12) 368 10 3 35
GCX 345 24(2) - (7) 10 (21) 351 15 16 20
Joulz 306 5(2) (2) - 15 (8) 316 8 4 19
Ionisos 306 - - 5 5 (8) 308 8 5 10
Valorem 230 1(2) - - 26 (6) 251 6 2 28
Oystercatcher 248 - (5)(3) - 10 (3) 250 3 1 11
SRL 240 - - 11 (19) - 232 - 11 (8)
DNS:NET 164 - - 7 (7) (4) 160 4 7 -
Future Biogas 100 35(2,4) (30)(5) (2) 12 - 115 - 3 15
Total portfolio reported in the Financial statements 3,842 95 (37) 32 122 (82) 3,972 74 98 212
1 This comprises the aggregate of value movement, foreign exchange translation,
allocated foreign exchange hedging and underlying portfolio income in the
period.
2 Capitalised interest totalling £64 million across the portfolio.
3 Shareholder loan repayment (non-income cash).
4 Follow-on investment in Future Biogas of £30 million and capitalised interest
of £5 million.
5 Syndication of investment.
Portfolio return by asset
Table 2 below shows the portfolio return in the period for each asset as a
percentage of the aggregate of the opening value of the asset and investment
in the asset in the period (excluding capitalised interest). Note that this
measure does not time-weight for investments in the period.
Table 2: Portfolio return by asset (six months to 30 September 2024, not
annualised)
Portfolio assets
TCR 5.3%
ESVAGT 4.9%
Infinis 5.7%
Tampnet 10.2%
GCX 5.8%
Joulz 6.2%
Ionisos 3.3%
Valorem(1) 12.2%
Oystercatcher 4.4%
SRL (3.3)%
DNS:NET -%
Future Biogas 14.9%
Total portfolio return(2) 5.5%
1 Valorem valuation includes a small execution risk discount to expected
proceeds.
2 Portfolio returns include FX net of hedging.
Sensitivities
Our approach to valuation is consistent with previous years. The sensitivity
of the portfolio to key inputs to our valuations is shown in Table 3.
Our inflation assumptions for the first two years of our projections reflect
current and forecast consensus inflation levels. The longer-term inflation
assumptions beyond two years remain consistent with central bank targets, e.g.
UK CPI at 2%. A 1% increase in short-term (two-year) inflation assumptions is
estimated to increase the portfolio value by £53 million and a 1% decrease is
estimated to decrease the portfolio value by £52 million.
The weighted average discount rate is 11.3%. Increasing the discount rate used
in the valuation of each asset by 1% would reduce the value of the portfolio
by £329 million and decreasing the discount rate used by 1% would increase
the value of the portfolio by £372 million.
The portfolio valuations are partially protected against changes in interest
rates as long-term fixed rate or hedged debt is in place across the majority
of our portfolio. 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 £187 million. A 1% decrease in the interest rate assumption
would increase the value of the portfolio by £186 million.
These sensitivities are indicative and are considered in isolation, holding
all other assumptions constant. Timing and quantum of price increases will
vary across the portfolio and the sensitivity may differ from that modelled.
Changing the inflation rate assumption may necessitate consequential changes
to other assumptions used in the valuation of each asset. Sensitivities to key
inputs to our valuations are described in more detail in Note 3 to the
accounts.
Table 3: Portfolio sensitivities
£m % Impact
Discount rate (1)% 372 9.4%
+1% (329) (8.3)%
Inflation (1)% (52) (1.3)%
(for two years)
+1% 53 1.3%
Interest rate (1)% 186 5.0%
+1% (187) (5.0)%
Total return
An analysis of the elements of the total return for the period is shown in
Table 4 below. The Company generated a total return for the six-month period
of £169 million, representing a 5.1% return on opening NAV (30 September
2023: £191 million, 6.3%), ahead of the target return of 8% to 10% per annum.
Table 4: Summary total return (six months to 30 September, £m)
2024 2023
Capital return (excluding exchange) 122 132
Foreign exchange movement in portfolio (82) (15)
Capital return (including exchange) 40 117
Movement in fair value of derivatives and exchange on EUR borrowings 74 19
Net capital return 114 136
Total income(1) 98 98
Costs including (non-portfolio) exchange movements (43) (43)
Total return 169 191
1 Includes interest receivable on cash balances held of less than £1 million
(30 September 2023: £1 million).
The capital return is the largest element of the total return. The portfolio
generated a value gain of £122 million in the six-month period to 30
September 2024 (30 September 2023: £132 million), driven principally by
outperformance from a number of portfolio companies, particularly Tampnet,
Valorem and Future Biogas, which was offset by a value reduction for SRL.
The value increase in Valorem of £26 million reflects the offer received for
the investment for a price considerably above its opening valuation. The
valuation includes a small execution risk discount to the expected final cash
proceeds of €309 million. Tampnet's value gain of £34 million is
predominantly driven by higher forecast revenue per customer due to increasing
demand for bandwidth and strong interest in its private network solution. The
value increase in Future Biogas of £12 million reflects the value accretive
nature of the investment in the six AD plants previously operated by Future
Biogas on behalf of JLEN and is aligned with the pricing of the syndication
transaction with RWE. The SRL valuation has been reduced by £19 million due
to the revision of cashflow forecasts to reflect the current market downturn
in roadworks and more cautious assumptions in the medium term.
In a volatile period for the currency markets, the movement in foreign
exchange rates generated a loss of £82 million in the period (30 September
2023: £15 million). This was offset by a gain on the movement in the value of
derivatives and the exchange gain on Euro drawings of £74 million (30
September 2023: £19 million). The foreign exchange hedging programme supports
our objective to deliver steady NAV growth for shareholders by reducing our
exposure to fluctuations in the foreign exchange markets.
Total income was £98 million (30 September 2023: £98 million), comprising
portfolio income of £98 million and interest receivable on cash balances of
less than £1 million. The income by portfolio company is shown in Table 1
above. The dividend to shareholders is supported by this income, together with
non-income cash receipts of £5 million during the period (30 September 2023:
£6 million). These non-income cash receipts reflect distributions from
underlying portfolio companies, which would usually be income to the Company,
but that are instead distributed as a repayment of investment for a variety of
reasons. While non-income cash does not form part of the total return shown in
Table 4, it is included when considering dividend coverage. Total income and
non-income cash is shown in Table 5 below.
Table 5: Total income and non-income cash (six months to 30 September, £m)
2024 2023
Total income 98 98
Non-income cash 5 6
Total 103 104
Costs
Management and performance fees
During the period to 30 September 2024, the Company incurred management fees
of £25 million (30 September 2023: £24 million). The year-on-year increase
reflects the higher average value of the portfolio in the period.
The annual performance hurdle of 8% was not exceeded in the first half of the
year, as the total return for the period was 5.1%, resulting in no performance
fee accrual (30 September 2023: none).
Other operating and finance costs
Operating expenses, comprising Directors' fees, service provider costs and
other professional fees, totalled
£1 million in the period (30 September 2023: £1 million).
Finance costs of £17 million in the period (30 September 2023: £16 million)
comprised interest, arrangement and commitment fees for the Company's £900
million RCF.
Ongoing charges ratio
The ongoing charges ratio measures annual operating costs, as disclosed in
Table 6 below, against the average NAV over the reporting period.
The Company's ongoing charges ratio is calculated in accordance with the
methodology recommended by the Association of Investment Companies ('AIC') and
was 1.60% for the period to 30 September 2024 (30 September 2023: 1.61%).
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. There was no
performance fee accrual in the period to 30 September 2024 (30 September 2023:
nil).
Table 6: Ongoing charges (six months to 30 September, annualised £m)
2024 2023
Investment Manager's fee 50.4 47.3
Auditor's fee 0.8 0.8
Directors' fees and expenses 0.6 0.5
Other ongoing costs 2.6 2.3
Total ongoing charges 54.4 50.9
Ongoing charges ratio 1.60% 1.61%
Balance sheet
The NAV at 30 September 2024 was £3,456 million (31 March 2024: £3,342
million). The principal components of the NAV are the portfolio assets, cash
holdings, the fair value of derivative financial instruments, borrowings and
other net liabilities. A summary balance sheet is shown in Table 7.
Table 7: Summary balance sheet (£m)
As at 30 September 2024 As at 31 March 2024
Portfolio assets 3,972 3,842
Cash balances 1 5
Derivative financial instruments 109 77
Borrowings (595) (510)
Other net liabilities (31) (72)
NAV 3,456 3,342
Cash is principally held in AAA-rated money market funds. The Company has a
£900 million RCF in order to maintain a good level of liquidity for further
investment while minimising returns dilution from holding excess cash
balances.
At 30 September 2024, £595 million of the facility was drawn, leaving £305
million available in the facility. Following the expected completion of the
sale of the investment in Valorem for expected net proceeds of €309 million
(equivalent to £257 million based on 30 September 2024 exchange rate) in Q1
2025, the proforma available funds would be £562 million.
Derivative financial instruments reflect the foreign exchange hedging
programme described previously.
Other net liabilities predominantly comprise a performance fee accrual of £32
million (31 March 2024: £74 million), relating to fees earned in prior years.
£42 million of prior year performance fees were paid during the period.
NAV per share
The total NAV per share at 30 September 2024 was 374.7 pence (31 March 2024:
362.3 pence). This will reduce to 368.4 pence (31 March 2024: 356.4 pence)
after the payment of the interim dividend of 6.325 pence (31 March 2024: final
dividend of 5.95 pence).
Dividend
The Board has announced an interim dividend for the period of 6.325 pence per
share or £58 million in aggregate
(30 September 2023: 5.95 pence; £55 million). This is half of the Company's
target full-year dividend for FY25 of 12.65 pence per share. The Board is
designating the full 6.325 pence interim dividend payable as an interest
distribution.
Alternative Performance Measures ('APMs')
We assess our performance using a variety of measures that are not
specifically defined under IFRS and are therefore termed APMs. The APMs that
we use may not be directly comparable with those used by other companies.
These APMs provide additional information on how the Company has performed
over the period and are all financial measures of historical performance. The
table below defines our APMs and should be read in conjunction with the Annual
report and accounts 2024. The APMs are consistent with those disclosed in
prior periods.
APM Purpose Calculation Reconciliation to IFRS
Total return on opening NAV A measure of the overall financial performance of the Company. It is calculated as the total return of £169 million, as shown in the The calculation uses IFRS measures.
Statement of comprehensive income, as a percentage of the opening NAV of
£3,342 million net of the final dividend for the previous year of £55
million.
NAV per share A measure of the NAV per share in the Company. It is calculated as the NAV of £3,456 million divided by the total number of The calculation uses IFRS measures and is set out in Note 6 to the accounts.
shares in issue at the balance sheet date of 922.4 million.
Total income and non-income cash A measure of the income and other cash receipts by the Company which support It is calculated as the total income from the underlying portfolio and other Total income uses the IFRS measures; Investment income and Interest
the payment of expenses and dividends. assets plus non-income cash, receivable.
being the repayment of shareholder loans or share premium repayments
not resulting from the disposal of an underlying portfolio asset. This is
shown in Table 5.
The non-income cash, being the proceeds from partial realisations of
investments, is shown in the Cash flow statement. The realisation proceeds
which result from a partial sale of an underlying portfolio asset are not
included within non-income cash.
Investment value including commitments A measure of the size of the investment portfolio including the value of It is calculated as the portfolio asset value plus the amount of the The portfolio asset value is the 'Investments at fair value through profit or
further contracted future investments committed by the Company. contracted commitment. At 30 September 2024, the Company had no investment loss' reported under IFRS. At 30 September 2024, the Company had no investment
commitments. commitments.
Total portfolio return percentage A measure of the financial performance of the portfolio. It is calculated as the total portfolio return in the period of £212 million, The calculation uses capital return (including exchange), movement in fair
as shown in Table 1, as a percentage of the sum of the opening value of the value of derivatives, underlying portfolio income, opening portfolio value and
portfolio and investments in, and syndication of, assets during the period investment in the period. The reconciliation of all these items to IFRS is
(excluding capitalised interest) of £3,842 million. shown in Table 1, including in the footnotes.
Total liquidity A measure of the Company's ability to make further investments and meet its It is calculated as the cash balance of £1 million plus the undrawn balance The calculation uses the cash balance, which is an IFRS measure, and undrawn
short-term obligations. available under the Company's revolving credit facility of £305 million. balances available under the Company's revolving credit facility as described
in Note 4 to the accounts.
Risk Review
Review of principal risks and uncertainties
The Company's approach to risk governance, the risk review process and risk
appetite is set out in the Risk report in the Annual report and accounts 2024,
which can be found on our website www.3i-infrastructure.com
(http://www.3i-infrastructure.com) .
The principal risks to the achievement of the Company's objectives are
unchanged from those reported on pages 68 to 71 of the Annual report and
accounts 2024. Developments in relation to these principal risks during the
period are outlined below.
External risks - market and competition
During the period, we saw evidence that the interest rate cycle has turned in
the countries in which we invest. Inflation in the UK and eurozone is now
close to the Bank of England's and European Central Bank's 2% target following
three years of higher inflation. The portfolio is positively correlated to
inflation as most portfolio companies have revenues at least partially linked
to inflation. Sensitivities to macroeconomic assumptions are discussed in the
Financial review and in Note 3 to the accounts.
There are no material refinancing requirements in the portfolio until 2026 and
over 92% of drawn long-term debt facilities are either hedged or fixed rate.
The Company is exposed to movements in sterling exchange rates against a
number of currencies, most significantly the euro. During the period, sterling
appreciated c.3% against the euro. The Company operates a hedging programme
which substantially offsets any foreign exchange movements.
Despite the infrastructure market continuing to display lower transaction
volumes, we have still been able to generate a premium on exit for our
high-quality infrastructure businesses as demonstrated by the expected sale of
Valorem, the partial syndication of Future Biogas and, in the prior year, the
realisation of Attero.
There is evidence of increasing pressure on government deficits in the markets
in which we invest, which may cause changes in fiscal and economic policies
creating uncertainty for businesses.
Strategic risks
The Company actively manages its balance sheet and liquidity position, seeking
to maintain adequate liquidity to pursue investment opportunities, without
diluting shareholder returns by holding surplus cash. At 30 September 2024,
there was £1 million available in cash, with drawings of £595 million under
the RCF. In October 2024, the Company agreed the realisation of its investment
in Valorem for €309 million, with completion expected in Q1 2025. Proceeds
will be used to repay drawings on the RCF, improving available liquidity.
Statement of comprehensive income
for the six months to 30 September
Six months to Six months to
30 September 2024 30 September 2023
Notes (unaudited) (unaudited)
£m £m
Net gains on investments 3 40 117
Investment income 98 97
Interest receivable - 1
Investment return 138 215
Movement in the fair value of derivative financial instruments 58 14
Management and performance fees 2 (25) (24)
Operating expenses (1) (1)
Finance costs (17) (16)
Exchange movements 16 3
Profit before tax 169 191
Income taxes - -
Profit after tax and profit for the period 169 191
Total comprehensive income for the period 169 191
Earnings per share
Basic and diluted (pence) 6 18.3 20.7
Statement of changes in equity
for the six months to 30 September
Stated Total
capital Retained Capital Revenue shareholders'
For the six months to 30 September 2024 account reserves reserve reserve equity
(unaudited) Notes £m £m £m £m £m
Opening balance at 1 April 2024 879 1,282 1,173 8 3,342
Total comprehensive income for the period - - 98 71 169
Dividends paid to shareholders of the Company during the period 7 - - - (55) (55)
Closing balance at 30 September 2024 879 1,282 1,271 24 3,456
Stated Total
capital Retained Capital Revenue shareholders'
For the six months to 30 September 2023 account reserves reserve reserve equity
(unaudited) Notes £m £m £m £m £m
Opening balance at 1 April 2023 879 1,282 940 - 3,101
Total comprehensive income for the period - - 131 60 191
Dividends paid to shareholders of the Company during the period 7 - - - (51) (51)
Closing balance at 30 September 2023 879 1,282 1,071 9 3,241
Balance sheet
as at 30 September
30 September 2024 31 March 2024
(unaudited) (audited)
Notes £m £m
Assets
Non-current assets
Investments at fair value through profit or loss 3 3,972 3,842
Derivative financial instruments 3 66 49
Total non-current assets 4,038 3,891
Current assets
Derivative financial instruments 3 50 33
Trade and other receivables 2 3
Cash and cash equivalents 1 5
Total current assets 53 41
Total assets 4,091 3,932
Liabilities
Non-current liabilities
Trade and other payables (9) (32)
Loans and borrowings (595) (510)
Total non-current liabilities (604) (542)
Current liabilities
Derivative financial instruments 3 (7) (5)
Trade and other payables (24) (43)
Total current liabilities (31) (48)
Total liabilities (635) (590)
Net assets 3,456 3,342
Equity
Stated capital account 5 879 879
Retained reserves 1,282 1,282
Capital reserve 1,271 1,173
Revenue reserve 24 8
Total equity 3,456 3,342
Net asset value per share
Basic and diluted (pence) 6 374.7 362.3
The Financial statements and related Notes were approved and authorised for
issue by the Board of Directors on
11 November 2024 and signed on its behalf by:
Richard Laing
Chair
Cash flow statement
for the six months to 30 September
Six months to Six months to
30 September 2024 30 September 2023
(unaudited) (unaudited)
£m £m
Cash flow from operating activities
Purchase of investments (31) (60)
Proceeds from partial realisations of investments 37 6
Investment income(1) 2 18
Operating expenses paid (1) (2)
Interest received - 1
Management and performance fees paid (67) (61)
Amounts received on the settlement of derivative contracts 26 36
Net cash flow from operating activities (34) (62)
Cash flow from financing activities
Fees and interest paid on financing activities (16) (16)
Dividends paid (55) (51)
Drawdown of revolving credit facility 134 310
Repayment of revolving credit facility (33) (179)
Net cash flow from financing activities 30 64
Change in cash and cash equivalents (4) 2
Cash and cash equivalents at the beginning of the period 5 5
Effect of exchange rate movement - (1)
Cash and cash equivalents at the end of the period 1 6
1 Investment income includes dividends of £1 million (30 September 2023: £8
million) and interest of £1 million (30 September 2023: £10 million)
received from portfolio assets held directly by the Company.
Accounting policies
Basis of preparation
These financial statements are the unaudited Half-yearly condensed financial
statements (the 'Half-yearly Financial Statements') of 3i Infrastructure plc
(the 'Company'), a company incorporated and registered in Jersey for
the six-month period ended 30 September 2024.
The Half-yearly Financial Statements have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting ('IAS 34').
The accounting policies are consistent with those set out in the Annual report
and accounts 2024 and those which we expect to adopt for the Annual report and
accounts 2025, which will be prepared in accordance with United Kingdom
adopted international accounting standards. They should be read in conjunction
with the financial statements for the year to 31 March 2024, as they provide
an update of previously reported information.
Going concern
The financial statements are prepared on a going concern basis, as the
Directors are satisfied that the Company has the resources to continue in
business for the foreseeable future. In making this assessment, the Directors
have considered a wide range of information relating to present and future
conditions, including the Company's cash and liquidity position, current
performance and outlook, which considered the impact of the inflationary and
interest rate environment, ongoing geopolitical uncertainties and current and
expected financial commitments, using the information available up to the date
of issue of these Financial statements.
The Company is in a strong position in relation to its ability to continue to
operate and the Company has sufficient resources to meet its ongoing needs. At
30 September 2024, the Company's liquidity totalled £306 million
(31 March 2024: £395 million). Liquidity comprised cash and deposits of £1
million (31 March 2024: £5 million) and undrawn facilities of £305 million
(31 March 2024: £390 million) with a maturity date of November 2026. Income
and non-income cash is expected to be received from the portfolio investments
during the coming year, a portion of which will be required to support the
payment of the dividend target and the Company's other financial commitments.
Expected net proceeds of €309 million are due to be received from the sale
of Valorem in the first quarter of 2025. The Company had no investment
commitments at 30 September 2024 (31 March 2024: none).
The Half-yearly Financial Statements were authorised for issue by the
Directors on 11 November 2024.
The Half-yearly Financial Statements do not constitute statutory accounts. The
financial statements for the year to
31 March 2024, prepared in accordance with United Kingdom adopted
International Financial Reporting Standards ('IFRS') and International
Accounting Standards, and on which the auditors issued a report, which was
unqualified, have been filed with the Jersey Financial Services Commission.
Key judgements and sources of estimation uncertainties
The preparation of the Half-yearly Financial Statements in conformity with
IFRS requires the Board to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making the judgements about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and future periods
if the revision affects both current and future periods. All judgements used
in the preparation of the Half-yearly Financial Statements are consistent with
those stated in the Annual report and accounts 2024.
The key area where estimates are significant to the Half-yearly Financial
Statements and have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities in future periods is in the
valuation of the investment portfolio. The majority of assets in the
investment portfolio are valued on a discounted cash flow basis which requires
assumptions to be made regarding future cash flows and the discount rate to be
applied to these cash flows. The portfolio is well diversified by sector,
geography and underlying risk exposures. The valuation of each asset has
significant estimation in relation to asset specific items and the potential
impact of macroeconomic factors such as inflation and interest rate
expectations. The key risks to the portfolio are discussed in further detail
in the Risk review section. A key focus of the portfolio valuations at 30
September 2024 was an assessment of the impact of the macroeconomic
environment on the operational and financial performance of each portfolio
company. We have incorporated into our cash flow forecasts a balanced view of
future income receipts and expenses.
Notes to the accounts
1 Operating segments
The Directors are of the opinion that the Company is engaged in a single
segment of business being investment in Core-plus infrastructure. The internal
information shared with the Directors on a monthly basis to allocate
resources, assess performance and manage the Company presents the business as
a single segment comprising the total portfolio of investments.
The Company is an investment holding company and does not consider itself to
have any customers. Given the nature of the Company's operations, the Company
is not considered to be exposed to any operational seasonality or cyclicality
that would impact the financial results of the Company during the period or
the financial position of the Company at 30 September 2024.
2 Management and performance fees
Six months to Six months to
30 September 2024 30 September 2023
(unaudited) (unaudited)
£m £m
Management fee 25 24
Performance fee - -
25 24
Total management and performance fees payable by the Company for the period to
30 September 2024 were
£25 million (30 September 2023: £24 million). Note 8 provides further
details on the calculation of the management fee and performance fee.
3 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 that are observable in the Derivative financial instruments held at fair value
market either directly (ie. as prices) or indirectly (ie. derived from prices)
Level 3 Inputs that are not based on observable market data Unquoted investments and unlisted funds
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by reassessing the categorisation (based on
the lowest level input that is significant to the fair value measurement as a
whole) for each reporting period.
The table below shows the classification of financial instruments held at fair
value into the fair value hierarchy at
30 September 2024. For all other assets and liabilities, their carrying value
approximates to fair value. During the period ended 30 September 2024, there
were no transfers of financial instruments between levels of the fair value
hierarchy (31 March 2024: none).
Trade and other receivables on the Balance sheet includes £1 million of
deferred finance costs relating to the arrangement fee for the revolving
credit facility (31 March 2024: £2 million). This has been excluded from the
table below as it is not categorised as a financial instrument.
Financial instruments classification
As at 30 September 2024
(unaudited)
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Investments at fair value through profit or loss - - 3,972 3,972
Derivative financial instruments - 116 - 116
- 116 3,972 4,088
Financial liabilities
Derivative financial instruments - (7) - (7)
- (7) - (7)
As at 31 March 2024
(audited)
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Investments at fair value through profit or loss - - 3,842 3,842
Trade and other receivables - 1 - 1
Derivative financial instruments - 82 - 82
- 83 3,842 3,925
Financial liabilities
Derivative financial instruments - (5) - (5)
- (5) - (5)
Reconciliation of financial instruments categorised within Level 3 of fair
value hierarchy
As at 30 September 2024 As at 31 March 2024
(unaudited) (audited)
Level 3 fair value reconciliation £m £m
Opening fair value 3,842 3,641
Additions 95 256
Disposal proceeds and repayment (37) (224)
Movement in accrued income 32 (11)
Fair value movement (including exchange movements) 40 180
Closing fair value 3,972 3,842
All unrealised movements on investments and foreign exchange movements are
recognised in profit or loss in the Statement of comprehensive income during
the period and are attributable to investments held at the end of the period.
The holding period of the investments in the portfolio is expected to be
greater than one year. Therefore, investments are classified as non-current
unless there is an agreement to dispose of the investment within one year and
all relevant regulatory approvals have been received. It is not possible to
identify with certainty where any investments may be sold within one year.
Investment income of £98 million (30 September 2023: £97 million) comprises
dividend income of £1 million
(30 September 2023: £8 million) and interest income of £97 million (30
September 2023: £89 million).
Unquoted investments
The Company invests in private companies which are not quoted on an active
market. These are measured in accordance with the International Private Equity
Valuation guidelines with reference to the most appropriate information
available at the time of measurement. Further information regarding the
valuation of unquoted investments can be found in the Portfolio valuation
methodology section of the Annual report and accounts 2024.
The Company's policy is to fair value both the equity and shareholder debt
investments in infrastructure assets together where they will be managed and
valued as a single investment, were invested at the same time and cannot be
realised separately. The Directors consider that equity and debt share the
same characteristics and risks and they are, therefore, treated as a single
unit of account for valuation purposes and a single class for disclosure
purposes. As at 30 September 2024, the fair value of unquoted investments was
£3,972 million (31 March 2024: £3,842 million). Individual portfolio asset
valuations are shown in Table 1 in the Financial review section.
The fair value of the investments is sensitive to changes in the macroeconomic
assumptions used as part of the portfolio valuation process. As part of its
analysis, the Board has considered the potential impact of a change in a
number of the macroeconomic assumptions used in the valuation process. By
considering these potential scenarios, the Board is well positioned to assess
how the Company is likely to perform if affected by variables and events that
are inherently outside of the control of the Board and the Investment Manager.
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 inflation rate assumption, the interest rate assumption used to project
the future cash flows and the forecast cash flows themselves.
Increasing the discount rate used in the valuation of each asset by 1% would
reduce the value of the portfolio by
£329 million (31 March 2024: £352 million). Decreasing the discount rate
used in the valuation of each asset by 1% would increase the value of the
portfolio by £372 million (31 March 2024: £404 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 CPI assumption for the country of domicile of the
investments in the portfolio is 2.0% (31 March 2024: 2.0%). The long-term RPI
assumption for UK assets is 2.5% (31 March 2024: 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 £53 million (31 March 2024: £54 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 £52 million (31
March 2024: £56 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 £187 million (31 March
2024: £220 million). Decreasing the interest rate assumption used in the
valuation of each asset by 1% would increase the value of the portfolio by
£186 million (31 March 2024: £214 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.
Over-the-counter derivatives
The Company uses over-the-counter foreign currency derivatives to hedge
foreign currency movements. The derivatives are held at fair value which
represents the price that would be received to sell or transfer the
instruments at the balance sheet date. The valuation technique incorporates
various inputs including foreign exchange spot and forward rates and uses
present value calculations. For these financial instruments, significant
inputs into models are market observable and are included within Level 2.
Valuation process for Level 3 valuations
The valuations on the Balance sheet are the responsibility of the Board of
Directors of the Company. The Investment Manager provides a valuation of
unquoted investments, debt and unlisted funds held by the Company on a
half-yearly basis. This is performed by the valuation team of the Investment
Manager and reviewed by the valuation committee of the Investment Manager. The
valuations are also subject to quality assurance procedures performed within
the valuation team. The valuation team verifies the major inputs applied in
the latest valuation by agreeing the information in the valuation computation
to relevant documents and market information. The valuation committee of the
Investment Manager considers the appropriateness of the valuation methods and
inputs and may request that alternative valuation methods are applied to
support the valuation arising from the method chosen. On a half-yearly basis,
the Investment Manager presents the valuations to the Board. This includes a
discussion of the major assumptions used in the valuations, with an emphasis
on the more significant investments and investments with significant fair
value changes. Any changes in valuation methods are discussed and agreed with
the Audit and Risk Committee before the valuations on the Balance sheet are
approved by the Board.
4 Loans and borrowings
The Company has a £900 million revolving credit facility ('RCF') at 30
September 2024 maturing on 3 November 2026 (31 March 2024: £900 million).
The RCF is secured by a floating charge over the bank accounts of the Company.
Interest is payable at EURIBOR or SONIA plus a fixed margin on the drawn
amount. This fixed margin is subject to a small adjustment annually based upon
performance against agreed sustainability metrics. As at 30 September 2024,
the Company had £595 million of drawings under the RCF (31 March 2024: £510
million). The RCF has certain loan covenants, principally a loan-to-value
ratio.
There was no change in total financing liabilities for the Company during the
period as the cash flows relating to the financing liabilities were equal to
the income statement expense. Accordingly, no reconciliation between the
movement in financing liabilities and the cash flow statement has been
presented.
5 Issued capital
As at 30 September 2024 As at 31 March 2024
(unaudited) (audited)
Number £m Number £m
Authorised, issued and fully paid
Opening balance 922,350,000 1,598 922,350,000 1,598
Closing balance 922,350,000 1,598 922,350,000 1,598
Reconciliation to Stated capital account
As at As at
30 September 2024 31 March 2024
£m £m
Proceeds from issue of ordinary shares 1,598 1,598
Transfer to retained reserves on 20 December 2007 (693) (693)
Cost of issue of ordinary shares (26) (26)
Stated capital account closing balance 879 879
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 2024 30 September 2023
(unaudited) (unaudited)
Earnings per share (pence)
Basic and diluted 18.3 20.7
Earnings (£m)
Profit after tax for the year 169 191
Number of shares (million)
Weighted average number of shares in issue 922.4 922.4
As at As at
30 September 31 March
2024 2024
(unaudited) (audited)
Net asset value per share (pence)
Basic and diluted 374.7 362.3
Net assets (£m)
Net assets 3,456 3,342
7 Dividends
Six months to 30 September 2024 Six months to 30 September 2023
(unaudited) (unaudited)
Declared and paid during the period pence per share £m pence per share £m
Prior year final dividend paid on ordinary shares 5.950 55 5.575 51
The Company proposes paying an interim dividend of 6.325 pence per share (30
September 2023: 5.95 pence) which will be payable to those shareholders that
are on the register on 22 November 2024. On the basis of the shares in issue
at 30 September 2024, this would equate to a total interim dividend of £58
million (30 September 2023: £55 million). The designation of a portion of
the dividend as an interest distribution is described in the Information for
shareholders section.
8 Related parties
Transactions between the Company and 3i Group
3i Group plc ('3i Group') holds 29.2% (31 March 2024: 29.2%) of the ordinary
shares of the Company. This classifies 3i Group as a 'substantial
shareholder' of the Company as defined by the Listing Rules. During the
period, 3i Group received dividends of £16 million (30 September 2023: £15
million) from the Company.
3i Investments plc, a subsidiary of 3i Group, is the Company's Alternative
Investment Fund Manager and provides its services under an Investment
Management Agreement ('IMA'). 3i plc, another subsidiary of 3i Group, together
with 3i Investments plc, provides support services to the Company (which are
ancillary and related to the investment management service) which it is doing
pursuant to the terms of the IMA.
Fees under the IMA consist of a tiered management fee and time weighting of
the management fee calculation and a one-off transaction fee of 1.2% payable
in respect of new investments. The applicable tiered rates are shown in the
table below. The management fee is payable quarterly in advance.
Gross investment value Applicable tier rate
Up to £1.25bn 1.4%
£1.25bn to £2.25bn 1.3%
Above £2.25bn 1.2%
For the period to 30 September 2024, £25 million (30 September 2023: £24
million) was payable and advance payments of £25 million were made resulting
in no amount due to 3i plc at 30 September 2024 (31 March 2024: nil). In
consideration of the provision of support services under the IMA, the Company
pays the Investment Manager an annual fee that increases each year on 1
October by the amount of the prevailing CPI rate of the current year. The cost
for the support services incurred for the period to 30 September 2024 was
£0.6 million (30 September 2023: £0.5 million). There was no outstanding
balance payable at 30 September 2024 (31 March 2024: nil).
Under the IMA, a performance fee is payable to the Investment Manager equal to
20% of the Company's total return in excess of 8%, payable in three equal
annual instalments. The second and third instalments will only be payable if
either (a) the Company's performance in the year in which that instalment is
paid also triggers payment of a performance fee in respect of that year, or
(b) if the Company's performance over the three years, starting with the year
in which the performance fee is earned, exceeds the 8% hurdle on an annual
basis. There is no high water mark requirement.
The performance hurdle requirement was not exceeded for the period to 30
September 2024 and, therefore, no performance fee accrual was recognised (30
September 2023: nil). The outstanding balance payable as at 30 September 2024
was £32 million (31 March 2024: £74 million), which includes the second and
third instalments of the FY24 fee and the third instalment of the FY23 fee.
Year Performance fee Outstanding balance at 30 September 2024 Payable in FY25
(£m) (£m) (£m)
FY24 26 17 9
FY23 45 15 15
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, or by giving the other six months' notice in
writing if the Investment Manager has 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 six months of a change of control of the Company.
9 Subsequent events
On 7 October 2024, the Company announced that it had received a binding offer
for its 33% stake in Valorem for expected net proceeds of €309 million
(equivalent to £257 million based on 30 September 2024 exchange rate). This
is discussed further in the Financial review.
Independent review report to 3i Infrastructure plc
Conclusion
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 2024 which comprises the Statement of
comprehensive income, the Statement of changes in equity, the Balance sheet,
the Cash flow statement, the accounting policies section and related notes 1
to 9.
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 2024 is not prepared,
in all material respects, in accordance with United Kingdom adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 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 (ISRE (UK) 2410). 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.
As disclosed in the accounting policies, the Annual financial statements of
the Company are prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial statements
included in this Half-yearly financial report has been prepared in accordance
with United Kingdom adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however, future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of 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.
In preparing the Half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the Half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the Half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
London, United Kingdom
Date: 11 November 2024
Statement of Directors' responsibilities
The Directors, who are required to prepare the financial statements on a going
concern basis unless it is not appropriate, are satisfied that the Company has
the resources to continue in business for the foreseeable future
and that the financial statements continue to be prepared on a going concern
basis.
The Directors confirm to the best of their knowledge that:
• the condensed set of financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by the United
Kingdom;
• the Half-yearly report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's performance; and
• the Half-yearly report includes a fair review of the information
required by the FCA's Disclosure and Transparency Rules (4.2.7 R and 4.2.8 R).
The Directors of 3i Infrastructure plc and their functions are listed below.
By order of the Board
Richard Laing
Chair
11 November 2024
Board of Directors and their functions
Richard Laing
Independent non-executive Chair and Chair of the Nomination Committee,
Disclosure Committee and the Management Engagement Committee.
Doug Bannister
Independent non-executive Director.
Wendy Dorman (resigned 4 July 2024)
Independent non-executive Director and Chair of the Audit and Risk Committee.
Jennifer Dunstan
Non-executive Director.
Milton Fernandes (appointed 15 July 2024)
Independent non-executive Director.
Stephanie Hazell
Senior Independent non-executive Director and Chair of the Remuneration
Committee.
Samantha Hoe-Richardson (resigned 4 July 2024)
Independent non-executive Director.
Martin Magee
Independent non-executive Director, and appointed Chair of the Audit and Risk
Committee 4 July 2024.
Information for Shareholders
Financial calendar
Ex-dividend date for interim dividend 21 November 2024
Record date for interim dividend 22 November 2024
Interim dividend expected to be paid 13 January 2025
Full year results expected date 8 May 2025
Designation of dividends as interest distributions
As an approved investment trust, the Company is permitted to designate
dividends wholly or partly as interest distributions for UK tax purposes.
Dividends designated as interest in this way are taxed as interest income in
the hands of shareholders and are treated as tax deductible interest payments
made by the Company. The Company expects to make such dividend designations in
periods in which it is able to use the resultant tax deduction to reduce the
UK corporation tax it would otherwise pay on the interest income it earns from
its investments. The Board is designating the full 6.325 pence per share
interim dividend payable in respect of the period as an interest distribution.
3i Infrastructure plc
Registered office
IFC6, The Esplanade
St. Helier
Jersey JE2 3BZ
Channel Islands
www.3i-infrastructure.com (http://www.3i-infrastructure.com)
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