REG - 3i Infrastructure - Results for the year to 31 March 2024
08/05/2024 07:00
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RNS Number : 4994N 3i Infrastructure PLC 08 May 2024
8 May 2024
Results for the year to 31 March 2024
3i Infrastructure plc ('3i Infrastructure' or the 'Company') today announces
an 11.4% return for the year, delivery of the FY24 dividend target of 11.90
pence and a 6.3% increase in the target dividend for FY25 to 12.65 pence per
share.
Richard Laing, Chair of 3i Infrastructure plc, said:
"3i Infrastructure continues to deliver long-term sustainable returns. I am
pleased to report that we achieved another year of outperformance, with a
total return of 11.4% in the year ended 31 March 2024. This is the tenth
consecutive year that the Company has met or exceeded its target return."
Scott Moseley and Bernardo Sottomayor, Managing Partners, Co-Heads of European
Infrastructure, 3i Investments plc, added:
"This was another strong year for the Company, once again exceeding its target
return. This is a well-established and differentiated portfolio, demonstrating
strong growth characteristics. We have confidence in its potential for
continued value creation."
Performance highlights
Outperformed our target return of 8-10% p.a. 11.4%
Total return on opening NAV
£347m
Total return for the year
£3,342m
NAV
362.3p
NAV per share
Delivered FY24 dividend target, fully covered 11.90p
Full year dividend per share for FY24
Setting higher target for FY25 dividend, up 6.3% year-on-year
12.65p
Target dividend per share for FY25
For further information please contact:For further information, please
contact:
Richard Laing, Chair, 3i Infrastructure plc Tel: 037 1664 0445
Thomas Fodor, investor enquiries Tel: 020 7975 3469
Kathryn van der Kroft, press enquiries Tel: 020 7975 3021
For further information regarding the announcement of the results for 3i
Infrastructure plc, please visit www.3i-infrastructure.com. A recording of the
analyst presentation will be made available on this website during the day.
Notes to the preliminary announcement
Note 1
The statutory accounts for the year to 31 March 2024 have not yet been
delivered to the Jersey Financial Services Commission. The statutory accounts
for the year to 31 March 2023 have been delivered to the Jersey Financial
Services Commission. The auditor's reports on the statutory accounts for these
years are unqualified. This announcement does not constitute statutory
accounts. The preliminary announcement is prepared on the same basis as set
out in the statutory accounts for the year to 31 March 2023.
Note 2
Subject to shareholder approval, the proposed final dividend is expected to be
paid on 12 July 2024 to holders of ordinary shares on the register on 14 June
2024. The ex-dividend date for the final dividend will be on 13 June 2024.
Note 3
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 2024 Annual report and
accounts and in the Financial review section.
Note 4
The preliminary announcement has been extracted from the Annual report and
accounts 2024. The Annual report and accounts 2024 will be available on the
Company's website today. Printed copies of the Annual report and accounts 2024
will be distributed to shareholders who have elected to receive printed copy
communications on or soon after 22 May 2024.
Notes to editors
About 3i Infrastructure plc
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, 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 of 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 Annual report and accounts 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 are
subject to a number of risks and uncertainties and could change. Factors which
could cause or contribute to such differences include, but are not limited to,
general economic and market conditions and specific factors affecting the
financial prospects or performance of individual investments within the
portfolio of 3i Infrastructure plc.
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.
Our purpose
We invest responsibly in infrastructure, delivering long-term sustainable
returns to shareholders and having a positive influence on our portfolio
companies and their stakeholders.
Chair's statement
"Another year of outperformance from our unique portfolio."
Richard Laing
Chair, 3i Infrastructure
3i Infrastructure continues to deliver long-term sustainable returns, with
another year of outperformance.
I am pleased to report that we achieved another year of outperformance, with a
total return of 11.4% in the year ended 31 March 2024. That return is ahead of
our target to provide shareholders with a total return of 8% to 10% per annum,
to be achieved over the medium term. We have consistently achieved or
surpassed our return target over the long term. Additionally, we have raised
the dividend per share every year since the Company's inception in 2007.
The Company is unique in the listed infrastructure sector. We have built a
diverse portfolio of businesses that are aligned with long-term megatrends.
Our companies, supported by the engaged asset management approach of 3i, our
Investment Manager, are generating attractive and accretive growth investment
opportunities.
The dedicated environmental, social and governance ('ESG') team at the
Investment Manager works closely with our portfolio companies, supporting them
in the development and implementation of their own sustainability strategies.
I am grateful to all of the Investment Manager's team for their hard work and
dedication, as well as to shareholders and the Board of Directors for their
support during the year.
Our purpose
Our 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.
We invest across a broad range of infrastructure investment themes and
highlight the strong growth prospects of our portfolio companies in this
report. Our portfolio companies invest in, develop and actively manage
essential infrastructure. The progress of our portfolio companies along our
sustainability pathway is included in the Sustainability section of the Annual
report and accounts 2024.
Performance
The Company generated a total return of £347 million in the year ended 31
March 2024, or 11.4% on opening NAV, ahead of our target of 8% to 10% per
annum to be achieved over the medium term. This is discussed in more detail in
the Review from the Managing Partners.
The NAV per share increased to 362.3 pence. Our share price has not kept pace
with the growth in our NAV, which resulted in a Total shareholder return
('TSR') of 8.1% in the year, marginally behind that of the FTSE 250, which
returned 8.7% in the same period. Since the IPO, the Company's annualised TSR
is 11.5%, comparing favourably with the broader market (FTSE 250: 6.3%
annualised over the same period).
Dividend
Following the payment of the interim dividend of 5.95 pence per share in
January 2024, the Board is recommending a final dividend for the year of 5.95
pence per share, meeting our target for the year of 11.90 pence per share,
6.7% above last year's total dividend. We expect the final dividend to be paid
on 12 July 2024.
Consistent with our progressive dividend policy, we are announcing a total
dividend target for the year ending 31 March 2025 of 12.65 pence per share,
representing an increase of 6.3%.
AGM and Board
This year's Annual General Meeting ('AGM') will be held on 4 July 2024.
Further details are provided in the Notice of Meeting and on the Company's
website, www.3i-infrastructure.com. In July 2023, we were delighted to welcome
Martin Magee as a non-executive Director, replacing Paul Masterton. We also
welcomed Jennifer Dunstan as the 3i Group plc ('3i Group') nominated
non-executive Director, replacing Ian Lobley.
Both Martin and Jennifer will stand for election at the AGM. Wendy Dorman and
Samantha Hoe-Richardson will retire from the Board at the conclusion of the
2024 AGM. We thank Paul, Ian, Wendy and Samantha very much for their strong
contributions to the Board, and in particular for Paul and Wendy's
accomplished tenures as Senior Independent Director and Chair of the Audit and
Risk Committee respectively. Stephanie Hazell was appointed as the new Senior
Independent Director and Chair of the Remuneration Committee, whilst Martin
will succeed Wendy as Chair of the Audit and Risk Committee at the conclusion
of the 2024 AGM.
Outlook
After further interest rate increases at the start of the financial year,
there are signs that the interest rate curve may be stabilising. Our portfolio
companies are well financed, and the Company has remained disciplined in its
investment approach and balance sheet management. We expect to repay drawings
on the Company's revolving credit facility ('RCF') through realisation of
assets over time, as we did during the year following the sale of Attero.
Our portfolio consists of resilient businesses providing essential services to
their customers and the communities they serve, aligned with long-term
megatrends. We continue to see accretive growth opportunities through our
existing platform investments and are prioritising these over adding new
companies to the portfolio. We remain well positioned to continue our strong
performance.
Richard Laing
Chair, 3i Infrastructure plc
7 May 2024
2007 to 2024
In the 17 years since the IPO
the Company has delivered a total
shareholder return of
11.5%
per annum
Review from the Managing Partners
"Our portfolio continues to outperform."
Scott Moseley and Bernardo Sottomayor
Managing Partners, Co-Heads of European Infrastructure
3i Investments plc
This was another strong year for the Company, once again exceeding its target
return.
We delivered another strong total return this year of 11.4%.
Since 2015, when we adopted our current strategy of focusing on core-plus
infrastructure investments, NAV per share including dividends has grown by 18%
per annum.
Our track record represents top quartile performance when benchmarked across
all infrastructure managers, including those investing through private funds.
3i Infrastructure plc is unique in the listed infrastructure sector. We have
proven our value-creation model consistently through sourcing attractive
opportunities, active asset management and successfully managing exit
processes. The realisation of Attero in November at an IRR of 22% and a
money multiple of 2.7x is a good example of this.
We have constructed a portfolio that is diversified across industries,
geographies and risk factors and exhibits fundamental growth trends through
the economic cycle.
This year we have seen continued earnings momentum at our largest assets. Our
portfolio companies' earnings are typically positively correlated to
inflation, as well as growing in real terms.
We actively engage with the management teams at our portfolio companies to
pursue value-accretive initiatives, such as expanding into adjacent markets
and/or geographies, identifying and executing on add-on acquisitions or
establishing an appropriate capital structure for the business.
We take a prudent approach to the use of leverage. The average level of
gearing within our portfolio companies is a relatively modest 32% (2023: 33%)
of enterprise value, and there are no material refinancing requirements within
the portfolio before 2027. The strong operational cash generation by the
portfolio companies and available credit in the RCF ensures that we are well
placed to finance growth investment opportunities as they arise.
This combination of earnings growth and investment in accretive capital
expenditure results in a compounding growth dynamic that generates attractive
risk-adjusted returns for shareholders.
Competitive landscape
A number of infrastructure managers have shifted from middle market to large
cap investment strategies over time. This creates a visible route to exit for
3iN's investments. We have also seen a number of high-profile private market
manager acquisitions, such as BlackRock's acquisition of Global Infrastructure
Partners. This is in anticipation of rapid growth in the infrastructure sector
and is indicative of continued growth of buyer interest for our existing
portfolio.
We are seeing a number of attractive opportunities to invest through our
portfolio. One example of this was TCR's acquisition of KLM's equipment
services subsidiary, KES, funded by TCR's own resources.
Sustainability
Our dedicated ESG team continued to work closely with portfolio company
management teams to enhance their ESG maturity. The team continued to evolve
the systems and processes in place around ESG to increase their robustness and
level of automation, including the roll-out of new data collection software.
3i Group committed to set near-term science-based emissions reduction targets
in April 2023. We are working with our portfolio companies to support their
adoption of science-based emission reduction targets.
In the year ahead we plan to work with portfolio company management teams to
refine their data collection and calculation methodologies, including the
calculation of Scope 3 greenhouse gas ('GHG') emissions and, in a number of
cases, actively support them in the development of their decarbonisation
plans.
Investment and divestment activity
During the year we completed a number of transactions as shown in the table
below:
Date Activity
June 2023 Investment of £5 million in Ionisos to support the acquisition of an E-Beam
plant in Switzerland
June 2023 Investment of a further £20 million to fund DNS:NET's fibre roll-out
programme
September 2023 Investment of a further £35 million in Future Biogas to fund the construction
of a new Anaerobic Digestion ('AD') plant
November 2023 Investment of a further £30 million in Future Biogas to fund the acquisition
of two AD plants
November 2023 Sale of Attero for £183 million
March 2024 Investment of a further £14 million to fund DNS:NET's fibre roll-out
programme
Outlook
We have carefully constructed our portfolio to feature companies that are
supported by long-term growth trends. We believe the quality and defensive
characteristics of the portfolio will enable it to deliver attractive returns
throughout the economic cycle. This was the case through the recent period of
high inflation, energy prices and interest rates and before that, during
Covid. We have a clear strategy to deliver long-term sustainable returns
through focusing on earnings growth and accretive capital investment largely
funded by our portfolio companies' own resources. This approach, combined with
the scarcity value of our assets, means we are confident about the 3iN
portfolio's potential for continued value creation.
Scott Moseley and Bernardo Sottomayor
Managing Partners and Co-Heads of European Infrastructure, 3i Investments plc
7 May 2024
Realisation - Attero
Realisation in November 2023
€214m
Net proceeds received
2.7x
Return on investment (Total cash return over cost)
22%
Gross IRR
Key achievements during our ownership include:
• Acquired a 50% stake through a bilateral non-competitive process in
2018, alongside DWS as a trusted co-investor. Syndication of 3iN stake for
portfolio risk management
• Doubled EBITDA over five years. Spent €99 million cumulatively on
growth projects
• Outperformed the ambitious underwriting case substantially and
delivered a strong value-creation plan:
- Commissioned a new 120MW turbine, capable of producing enough
electricity in one hour to power a household for 25 years
- Commissioned a new plastics recycling plant
- Installed solar farms on landfill sites
- Renovated composting sites to deliver c.20 million m(3) of biogas and
biomethane p.a.
- Diversified sources of waste imports, thereby materially reducing
concentration risk
- Refinanced with long-term, portable debt before interest rate cycle
turned
• The investment in Attero delivered private equity-style returns
together with an infrastructure cash yield (c.11% p.a) - a very strong outcome
Our business model
Introduction
Unique offering for shareholders
The Company remains unique, providing public market investors with access to
private infrastructure businesses across a variety of megatrends, sectors and
geographies.
Investment discipline
We acquire private businesses that provide essential infrastructure services.
We remain a disciplined investor and, where possible, seek opportunities to
transact off-market, only participating in competitive processes where we
believe we have a distinct advantage.
We have an infrastructure-focused investment team, with an extensive network
and access spanning the geographies where we invest. Our reputation, local
presence and the relationships we develop with management teams provide us
with competitive advantages.
Active asset management
We maintain a significant focus on active asset management and investment
stewardship. We identify high-calibre management teams and look to implement a
clear business strategy. We help identify accretive growth opportunities with
the portfolio companies, and actively support them to deliver those
opportunities, including executing add-on M&A and putting in place
adequate capital structures and capital expenditure ('capex') facilities to
fund the associated investments.
We actively seek to enhance the infrastructure characteristics of the
businesses we acquire, ensuring that, where possible, we direct capex toward
immediate contracted revenue-generating assets, improving the infrastructure
characteristics of the business to attract competitive financing, adding
elements of service that create customer stickiness, and often implementing
operational efficiency programmes to optimise EBITDA margins. All of this
helps us maximise the potential exit value.
We typically execute all of the above through ownership control, ensuring
appropriate Board representation and composition, direct involvement in the
companies' key workstreams and incentivising and aligning management teams.
Investment focus
Competition for new investment primarily comes from private infrastructure
funds. Most other UK-listed infrastructure funds typically target smaller
investments in finite life contracted assets like operational and greenfield
Public Private Partnership ('PPP') projects or operational renewable
portfolios, which are outside our investment focus.
Our primary investment focus remains mid-market core-plus infrastructure with
controlling majority or significant minority positions and strong governance
rights, whilst adhering to a set of core investment characteristics and risk
factors.
Investment characteristics
Characteristics commonly found across our portfolio
We look to build and maintain a diversified portfolio of assets, across a
range of geographies and sectors, whilst adhering to a set of core investment
characteristics and risk factors.
The Investment Manager has a rigorous process for identifying, screening and
selecting investments to pursue. We look for businesses that combine a base of
strong cash flow resilience (for example, contracted revenues) with high
through-cycle underlying market growth fundamentals and operational
improvements, and M&A opportunities, which allows us to deliver above
target returns. Although investments may be made into a range of sectors, the
Investment Manager typically focuses on identifying investments that meet most
or all of the following criteria and are aligned with identified megatrends:
Asset-intensive business Good visibility of future cash flows
Owning or having exclusive access under long-term contracts to assets that are Long-term contracts or sustainable demand that allow us to forecast future
essential to deliver the service performance with a reasonable degree of confidence
Asset bases that are hard to replicate An acceptable element of demand or market risk
Assets that require time and significant capital or technical expertise to Businesses that have downside protection, but the opportunity for
develop, with low risk of technological disruption outperformance
Provide essential services Opportunities for further growth
Services that are an integral part of a customer's business or operating Opportunities to grow or to develop the business into new markets, either
requirements, or are essential to everyday life organically or through targeted M&A
Established market position Sustainability
Businesses that have a long-standing position, reputation and relationship Businesses that meet or are committed to meeting the criteria set out in our
with their customers - leading to high renewal and retention rates Responsible Investment policy and will work with us to enhance their ESG
maturity
How we create value
We invest responsibly in infrastructure to create long-term value for
stakeholders.
Enablers Investment characteristics How we create value Value created
Financial Non-financial
Investment Manager's team Asset-intensive Buy well 11.4% 5
business Total return on opening NAV Further investments in existing portfolio companies to fund growth
3i Group network Strong governance
Asset bases that
Engaged asset management are hard to replace Optimise strategy
Reputation Provide essential services Execute plan
and brand
Established Realisation
Dedicated ESG team market position
Robust policies and procedures Good visibility
of future cash flows
Efficient
balance sheet An acceptable element of demand or market risk
Opportunities
for further growth
Sustainability
11.90p +17%
Ordinary dividend per share Increase in installed renewable energy capacity
18% 100%
Asset IRR (since inception) Portfolio companies reporting on GHG emissions
We have a rigorous approach to identify the best investment opportunities and
then actively manage our portfolio companies to drive sustainable growth and
value creation.
1. Buy well 2. Strong governance 3. Optimise strategy
• Effective use of 3i's network • Make immediate improvements • Agree strategic direction
• Comprehensive due diligence • Appropriate board representation and composition • Develop action plan
• Consistent with return/yield targets • Incentivise and align management teams • Right capital structure to fund growth plan
• Fits risk appetite • Enhance ESG maturity
4. Execute plan 5. Realisation What we do is framed
by our strategic priorities
• Ongoing support • Position business and enhance infrastructure characteristics to
maximise exit value
• Monitor performance
• Long-term view but will sell to maximise shareholder value
• Review further investment opportunities
• Facilitate and execute M&A
What enables us to create value
Investment Manager's team
The Company is managed by an experienced and well-resourced team. The European
infrastructure team was established by 3i Group in 2005.
The partners in the Investment Management team, have a combined infrastructure
investment experience of 114 years and have been at 3i for a combined 86
years.
We have a very experienced group of infrastructure investment professionals,
supported by dedicated finance, tax, legal, operations, ESG and strategy
teams.
3i Group's network
3i Group has a network of offices, advisers and business relationships across
Europe. The Investment Management team leverages this network to identify,
access and assess opportunities to invest in businesses, on a bilateral basis
where possible, and to position the Company favourably in auction processes.
Engaged asset management
We create value from our investments through the Investment Manager's engaged
asset management approach. Through this approach, the Investment Manager
partners with our portfolio companies' management teams to develop and execute
a strategy to create long-term sustainable value. Examples of this partnership
include: developing strategies that support investment in the portfolio
company's asset base over the long term; continued improvements in operational
performance; and establishing governance models that promote an alignment of
interests between management and stakeholders.
We develop and supplement management teams, often bringing in a non-executive
chair early in our ownership.
Examples of this engaged asset management approach can be found on our
website, www.3i-infrastructure.com.
Strengthen portfolio company management teams Invest in and develop companies with a clear strategy Grow our platform businesses through further investments
Reputation and brand
The Investment Manager and the Company have built a strong reputation and
track record as investors by investing and managing their business and
portfolio responsibly and by carrying out their activities according to high
standards of conduct and behaviour. This has been achieved through upholding
the highest standards of governance, at the Investment Manager, the Company
and in portfolio companies. This in turn has earned the trust of shareholders,
other investors and portfolio companies, and has enabled the Investment
Manager to recruit and develop employees who share those values and ambitions
for the future.
The Board seeks to maintain this strong reputation through a transparent
approach to corporate reporting, including on our progress on driving
sustainability through our operations and portfolio. We are committed to
communicating in a clear, open and comprehensive manner and to maintaining an
open dialogue with stakeholders.
Robust policies and procedures
Established investment and asset management processes are supported by the
Investment Manager's comprehensive set of best practice policies, including
governance, conduct and anti-bribery.
Efficient balance sheet
The Company's flexible funding model seeks to maintain an efficient balance
sheet with sufficient liquidity to make new investments or support portfolio
companies.
Since FY15 the Company has raised equity three times and returned capital to
shareholders twice following successful realisations.
Dedicated ESG team
In FY23, the Investment Manager created a new team to lead ESG and
sustainability initiatives across the portfolio. The ESG team's role is to
ensure the Company's approach is right for the portfolio and to drive genuine
ambition and progress at portfolio company level.
Dedicated ESG resource enables us to identify, monitor and realise the
value-creation opportunities linked to sustainability for relevant portfolio
companies more effectively and to identify and manage sustainability risks.
The team supports each portfolio company in enhancing its ESG maturity, in
line with the sustainability pathway. The team also leads ESG reporting for
the Company and delivers the annual ESG review of the portfolio.
The Investment Manager is committed to constructing and managing the Company's
portfolio in accordance with the Investment Manager's Responsible Investment
policy, which covers a range of ESG issues including climate.
Sustainability and ESG standards are discussed throughout the Annual Report
and Accounts 2024.
"There is a strong link between companies that have high ESG standards and
those that are able to achieve long-term sustainable business growth."
Anna Dellis
Partner, 3i Investments plc
Megatrends
Megatrends significantly influence our world, affecting decision-making and
changing the demands placed on our economy and services. Identifying the
potential for growth across businesses, sectors and countries serves as a key
driver in our investment decision-making and asset management processes.
We seek to diversify the Company's portfolio across a range of megatrends that
will provide a supportive environment for long-term sustainable returns to
shareholders across the economic cycle. We also continually assess underlying
risk factors, both when considering new investment opportunities and in
managing the existing portfolio and its exposure to certain risks, such as
commodity prices and foreseeable technological disruptions
Investment themes
We constantly seek out structural growth trends that will provide long-term
tailwinds throughout the GDP cycle, 'Megatrends'. A selection of the related
investment themes are explained below.
Renewable energy generation
There is increasing demand for energy generated from renewable sources such as
wind and solar to support the energy transition. Our investments in Infinis,
Future Biogas, and Valorem all generate energy from a variety of renewable
sources and their combined installed capacity has grown significantly during
our ownership.
Electrification/energy transition
The transition towards a low-carbon economy is gathering pace. Rising
electricity consumption is increasing the demand for related equipment and
services such as those provided by Joulz, which has expanded its offering to
include solar and EV charging products.
Shared resources
Developed economies are experiencing a shift towards a shared resources model.
This can lead to significant cost savings for users of capital intensive
assets and also reduce overall greenhouse gas emissions. In the case of TCR,
which provides pooled ground support equipment ('GSE') at airports, this has
reduced the amount of equipment required.
Automation/digital operations
Technology is developing rapidly, changing operating models and digitalising
industrial processes to enhance efficiency, streamline processes, and improve
overall performance. Tampnet and GCX are benefitting from their customers'
increasing use of AI, automation, cloud computing, and other digital
technologies.
Demand for healthcare
Increasing life expectancy and an ageing population are increasing the demand
for healthcare-related services and infrastructure. Our investment in Ionisos,
which provides cold sterilisation services to the medical and pharmaceutical
industries amongst others, is aligned to this trend.
Smart cities
Technology is increasingly being used to enhance the efficiency and safety of
urban areas. SRL's products allow for more efficient control of traffic flows,
which in turn reduces congestion around roadworks, and improves safety.
Urbanisation
Migration from rural areas to urban centres continues, imposing higher
requirements on the infrastructure in and around cities. This imposes a need
for upgraded water, gas, electricity, transportation and communication
networks. For example, Joulz is offering integrated solutions to address
challenges such as grid congestion.
Our strategy
Our strategy is to maintain a balanced portfolio of infrastructure investments
delivering an attractive mix of income yield and capital appreciation for
shareholders.
Strategic priorities
Maintaining a balanced portfolio Delivering an attractive mix of income yield and capital growth for 16%
shareholders.
Largest single investment by value
Investing in a diversified portfolio in developed markets, with a focus on the
UK and Europe.
Disciplined approach to new investment Focusing selectively on investments that are value-enhancing to the Company's £104m
portfolio and with returns consistent with our objectives.
Follow-on investment in the financial year
Managing the portfolio intensively Driving value from our portfolio through our engaged asset management 5
approach.
Follow-on investments in portfolio companies in the financial year
Delivering growth through investment in platforms with growth potential.
5
Portfolio companies refinanced in the financial year
Maintaining an efficient balance sheet Minimising return dilution to shareholders from holding excessive cash, while £395m
retaining a good level of liquidity for future investment.
Total liquidity
Sustainability a key driver of performance Ensuring that our investment decisions and asset management approach consider 2
both the risks and opportunities presented by sustainability.
Companies with validated science-based targets
Our objectives and KPIs
Our objectives are to provide shareholders with: Our KPIs Rationale and definition Performance over the year
• Total return is how we measure the overall financial performance of • Total return of £347 million in the year, or 11.4% on opening NAV
the Company
• The portfolio showed good resilience overall with strong performance
• Total return comprises the investment return from the portfolio and in particular from TCR, Tampnet and Valorem, and the return generated from the
income from any cash balances, net of management and performance fees and sale of Attero
operating and finance costs. It also includes foreign exchange movement and
movement in the fair value of derivatives and taxes
• The performance of DNS:NET detracted from the portfolio return
• Total return, measured as a percentage, is calculated against the
opening NAV, net of the final dividend for the previous year, and adjusted (on
a time-weighted average basis) to take into account any equity issued and • The hedging programme continues to reduce the volatility in NAV from
capital returned in the year exchange rate movements
• Costs were managed in line with expectations
Total return (% on opening NAV)
2020 11.4%
2021 9.2%
2022 17.2%
a total return of 8% to 10% per annum, to be achieved over the medium term 2023 14.7%
2024 11.4%
Target 8%-10%
Target
To provide shareholders with a total return of 8% to 10% per annum, to be
achieved over the medium term.
Met or exceeded target for 2024 and every prior year shown
a progressive annual dividend per share Annual distribution Rationale and definition Performance over the year
(pence per share)
• This measure reflects the dividends distributed to shareholders • Proposed total dividend of 11.90 pence per share, or £110 million,
each year is in line with the target set at the beginning of the year
• The Company's business model is to generate returns from portfolio • Income generated from the portfolio and cash deposits, including
income and capital returns (through value growth and realised capital non-income cash distributions and other income from portfolio companies,
profits). Income, other portfolio company cash distributions and realised totalled £208 million for the year
capital profits generated are used to meet the operating costs of the Company
and to make distributions to shareholders
• Operating costs and finance costs used to assess dividend coverage
totalled £88 million in the year
• The dividend is measured on a pence per share basis, and is targeted
to be progressive
• The dividend was fully covered for the year
• Setting a total dividend target for FY25 of 12.65 pence per share,
6.3% higher than for FY24
2020 9.20p
2021 9.80p
2022 10.45p
2023 11.15p
2024 11.90p
2025 Target 12.65p
Target
Progressive dividend per share policy. FY25 dividend target of 12.65 pence per
share.
Dividend per share increased every year since IPO
Portfolio review
The portfolio is generating strong growth momentum supported by long-term
tailwinds. We are confident that it will continue to generate attractive
further investment opportunities and is well positioned to deliver our target
returns.
The Company's portfolio was valued at £3,842 million at 31 March 2024 (2023:
£3,641 million) and delivered a total portfolio return in the year of £460
million, including income and allocated foreign exchange hedging (2023: £501
million).
Table 1 summarises the valuations and movements in the portfolio, as well as
the return for each investment, for the year.
Table 1: Portfolio summary (31 March 2024, £m)
Portfolio
Directors' Directors' Allocated Underlying total
valuation Investment Accrued Foreign valuation foreign portfolio return
31 March in the Divestment income Value exchange 31 March exchange income in in the
Portfolio assets 2023 year in the year movement movement translation 2024 hedging the year year(1)
TCR 537 22(2) (25)(4) (5) 92 (13) 608 13 23 115
ESVAGT 485 48(2) - 2 7 (11) 531 12 49 57
Infinis 407 - (3)(4) (3) 20 - 421 - 18 38
GCX 323 29(2) - (6) 6 (7) 345 8 31 38
Tampnet 292 6(2) - - 54 (9) 343 10 13 68
Ionisos 298 14(2,3) - - 2 (8) 306 10 9 13
Joulz 287 7(2) (1)(4) - 22 (9) 306 9 7 29
Oystercatcher 254 - (12)(4) - 15 (9) 248 9 3 18
SRL 219 20(2) - - 1 - 240 - 21 22
Valorem 188 - - - 47 (5) 230 6 4 52
DNS:NET 179 44(3) - - (55) (4) 164 6 11 (42)
Future Biogas 28 66(2,3) - 2 4 - 100 - 3 7
Attero 144 - (183) (1) 44 (4) - 4 1 45
Total portfolio reported in the Financial statements 3,641 256 (224) (11) 259 (79) 3,842 87 193 460
1 This comprises the aggregate of value movement, foreign exchange translation,
allocated foreign exchange hedging and underlying portfolio income in the
year.
2 Capitalised interest totalling £152 million across the portfolio.
3 These amounts include follow-on investments in Ionisos (£5 million), DNS:NET
(£34 million) and Future Biogas (£65 million).
4 Shareholder loan repayment (non-income cash).
The total portfolio return in the year of £460 million was 12.3% (2023: £501
million, 15.1%) of the aggregate of the opening value of the portfolio and
follow-on investments (excluding capitalised interest), which totalled £3,745
million.
Performance was strong across the portfolio, driven by outperformance from a
number of portfolio companies, but particularly TCR, Tampnet and Valorem and
the return generated from the sale of Attero. Whilst progress has been made
during the year at DNS:NET, its fibre network rollout remains challenging.
Table 2 shows the portfolio return in the year for each asset as a percentage
of the aggregate of the opening value of the asset and investments in the
asset in the year (excluding capitalised interest). Note that this measure
does not time-weight for investments and syndications in the year and includes
foreign exchange movements net of hedging.
Table 2: Portfolio return by asset (year to 31 March 2024)
Total portfolio return 12.3%
TCR 21.4%
ESVAGT 12.0%
Infinis 9.4%
GCX 12.1%
Tampnet 23.4%
Ionisos 4.4%
Joulz 10.3%
Oystercatcher 7.1%
SRL 10.0%
Valorem 27.5%
DNS:NET (20.3)%
Future Biogas 8.1%
Attero* 30.5%
* Divested in November 2023 and return not annualised.
Movements in portfolio value
The movements in portfolio value were driven principally by the delivery of
planned cash flows and other asset outperformance as well as follow-on
investments made during the year. A reconciliation of the movement in
portfolio value is shown in Table 3. The portfolio summary shown in Table 1
details the analysis of these movements by asset. Changes to portfolio
valuations arise due to several factors, as shown in Table 4.
The portfolio generated a value gain of £259 million (2023: £320 million) in
the year, alongside income of £193 million (2023: £156 million).
Table 3: Reconciliation of the movement in portfolio value (year to 31 March
2024, £m)
Opening portfolio value at 1 April 2023 3,641
Investment(1) 256
Divestment/capital repaid (224)
Value movement 259
Exchange movement(2) (79)
Accrued income movement (11)
Closing portfolio value at 31 March 2024 3,842
1 Includes capitalised interest.
2 Excludes movement in the foreign exchange hedging programme (see Table 12 in
the Financial review section).
Portfolio activity
Our renewable energy generating companies; Infinis, Valorem and Future Biogas,
performed well in the year despite softer spot and forecast energy prices. All
have made substantial progress in developing their pipelines of new projects
towards and into operation. This is reflected in an overall increase in
installed capacity from 979MW to 1,147MW over the year, as shown in the
Sustainability section of the Annual Report and Accounts 2024.
Infinis had a strong financial performance despite lower UK power prices. It
generated a value gain of £20 million as its captured landfill methane
business outperformed expectations, compensating for lower margins from its
power response assets. Furthermore, Infinis is making significant progress in
developing its 1.4GW solar energy generation and battery storage pipeline,
with 103MW of solar capacity already operational.
Valorem had a very good year with revenues from electricity generation ahead
of expectations due to favourable wind conditions contributing to a value gain
of £47 million. The company's closed capacity now totals 853MW of wind, solar
and hydro projects, a 10% increase from the previous year.
Valorem completed the sale of a minority stake in part of its French
operational portfolio on attractive terms, demonstrating the strong appetite
for its projects and raising capital to finance development of future
projects. This was supplemented by issuance of euro private placement debt for
the first time.
In France, the market fundamentals for renewable developers remains strong, as
evidenced by the increase in recent auction tariff levels due to demand for
projects exceeding supply. The construction of Valorem's new projects in
Finland and Greece are progressing according to or ahead of plan. The company
has expanded its development pipeline from 5.7GW to 6.6GW, including securing
partnerships for co-developments in Poland and Sweden.
Future Biogas performed in line with expectations due to good services
revenues and index-linked contracts. The company has a promising pipeline of
organic growth and M&A opportunities.
During the year, Future Biogas signed a new 15-year gas supply agreement with
AstraZeneca ('AZ') for unsubsidised green gas. To deliver this green gas, it
is constructing the UK's first unsubsidised AD plant. In September 2023, 3iN
invested £35 million to fund the plant's construction, which will supply
100GWh of biomethane to AZ's UK sites.
In November 2023, 3iN invested a further £30 million to fund the acquisition
of two AD plants that Future Biogas was already managing. These strategic
investments continue to transition Future Biogas from a manager of third-party
biogas plants to a leading developer, asset owner and operator. The company is
actively exploring viable sites for constructing new AD plants, and the
interest from high-quality corporate partners is encouraging.
TCR materially outperformed expectations, resulting in a substantial increase
in value by £92 million. This performance was driven by several factors,
including significant contract wins, extensions and higher fleet utilisation
rates. The company is benefitting from the combination of the post-Covid
aviation recovery, high interest rate environment making on-balance sheet
options less attractive for customers, and the green agenda in Europe driving
strong demand for new electric ground service equipment.
In February 2024, TCR completed the bolt-on acquisition of KES, KLM Royal
Dutch Airline's ground equipment services subsidiary at Schiphol airport,
adding incremental contracted EBITDA with a flagship European carrier and
positioning TCR to support Schiphol's decarbonisation ambitions. TCR's
footprint now spans more than 200 airports, positioning it well to grow
organically with its existing clients as well as increasing market penetration
of its full-service rental offering. To support its next phase of expansion,
TCR successfully secured additional debt from existing and new lenders on
attractive terms.
ESVAGT performed well in the year, benefitting from strong contract rates and
high utilisation levels. As the clear market leader in European offshore wind
service operation vessels ('SOVs') provision, ESVAGT currently operates nine
vessels. A further four SOVs are under construction, specifically designed to
serve long-term charter agreements, and construction progress is on track.
Despite inflationary pressure causing delays and cancellations in wind farm
development, regulators and governments have become more supportive of
incentivising growth in offshore wind.
Inflation, while negatively impacting the construction cost of the near-term
pipeline, has a positive effect on ESVAGT due to its index-linked contracts,
which enhance the value of its operational SOV fleet. The offshore wind market
remains on a positive trajectory and this is reflected in the pipeline for
additional new SOVs in the North Sea and the rapidly expanding US wind market.
Over the next 12 months, we anticipate several tenders to take place.
ESVAGT's emergency rescue and response vessels ('ERRVs') segment also
maintained positive momentum, driven by favourable supply/demand dynamics, and
an increased emphasis on security of supply in Europe.
Joulz performed in line with expectations. It is benefitting from its
inflation-linked long-term contracts and the completion of new installations.
Joulz has seen significant interest in integrated energy transition solutions
from customers seeking to decarbonise their operations and overcome
constraints due to electricity grid congestion.
Our communications infrastructure investments, Tampnet, GCX and DNS:NET, are
taking advantage of the acceleration in digitalisation trends.
Tampnet performed extremely well in the year, generating a value gain of £54
million. It exceeded revenue and EBITDA targets, driven by increased offshore
activity and stronger demand for bandwidth upgrades.
Tampnet is continuing to expand its network infrastructure by pursuing new
fibre projects in both the North Sea and the Gulf of Mexico. Notably, Tampnet
secured significant new contracts in these regions.
Digitalisation of the offshore energy sector is gaining momentum and Tampnet's
digitisation proposition, which combines low-latency connectivity with
services such as private networks, is generating considerable interest.
Tampnet's private networks offer a secure, closed 4G/5G system deployed on
offshore platforms, providing robust connectivity and enhanced security
compared to traditional Wi-Fi solutions.
Furthermore, Tampnet is actively engaged in carbon capture and offshore wind
projects within its existing network in the North Sea. The business was
awarded its first offshore carbon sequestration connection in March 2024. The
potential for further comparable initiatives is substantial and Tampnet is
strategically positioned to contribute to their success.
GCX has shown strong year-on-year growth in lease revenues and has recently
signed several large bulk capacity deals on its Middle East and intra-Asia
subsea routes. Financial performance was held back by a high level of cable
cuts which have now been repaired. The sales pipeline is healthy and demand
for subsea data capacity continues to grow, driven by increasing adoption of
AI applications and substantial investments in capacity and route
diversification by the hyperscalers.
Looking ahead, GCX is evaluating several attractive growth opportunities, for
example, acquiring new subsea capacity and developing new edge data centres
near its cable landing stations that will drive additional data on its subsea
network.
DNS:NET received investment of £34 million during the year from 3iN to
continue the development of its FTTH network in areas around Berlin and in the
State of Brandenburg. A new CEO joined DNS:NET in July 2023. He has overseen
the preparation of an updated business plan that was agreed with shareholders
in December 2023. We are making good progress in building a strengthened and
experienced management team.
FTTH network rollouts in Germany remain challenging. Passing homes has been
the industry's primary focus to date. Connecting and activating customers to
the network on a timely basis is an industry-wide challenge. The negative
value movement in the year was driven by more conservative business plan
assumptions for DNS:NET's FTTH rollout. Throughout the year, DNS:NET has
focused on connecting backbone fibre infrastructure and home connections for
its owned network, as well as on securing the handover of leased networks
built by authorities in the neighbouring State of Saxony-Anhalt, making good
progress in the number of its connected and activated customers as a result.
The company is now preparing for the next stages in its network delivery in a
way that narrows the time lag between passing homes and connecting and
activating customers on that FTTH network to improve performance.
We have increased the discount rate to reflect uncertainties over available
debt pricing for fibre businesses in future years and the delay against the
original rollout timetable.
Ionisos performed below expectations due to reduced bio-processing and labware
volumes, which have returned to pre-Covid levels, and weaker demand in markets
connected to the construction industry which represents a small share of
treatment capacity. However, the majority of product categories sterilised by
Ionisos continue to exhibit strong volume growth. Ionisos is making progress
in its growth initiatives. The expansion of its new greenfield EO plant in
Kleve, Germany is progressing and the development of the new X-ray greenfield
facility in north east France is proceeding according to schedule and within
budget.
Oystercatcher performed well in the year. Advario Singapore Limited ('Advario
Singapore'), which is 45% owned by Oystercatcher, benefitted from high
utilisation levels for its storage capacity, high customer activity levels and
higher rates being secured at contract renewal. Whilst the oil products market
remains in backwardation, a tight storage market in Singapore and the wider
region provided a helpful backdrop to renewal discussions. Advario Singapore
remains the leading gasoline blending facility in Singapore and the wider
region.
The company has continued to pursue opportunities linked to sustainable fuels,
in line with its sustainability strategy. Building on its success to date with
Neste, which is blending sustainable aviation fuel ('SAF') at Advario
Singapore, the terminal had actively looked to expand its role in activities
to supply sustainable transport fuels.
SRL performed slightly behind expectations during the financial year. There
has been a reduction in general market activity levels due to delays in
capital expenditure programmes within the public sector in advance of the UK
general election, and in the telecom sector as the fibre rollout has slowed.
Despite this challenging market environment, SRL has shown resilience and
continued to grow its revenue and EBITDA. It has also been successful in
extending contract durations with customers, providing better revenue
visibility.
Summary of portfolio valuation methodology
Investment valuations are calculated at the half-year and at the financial
year end by the Investment Manager and then reviewed by the Board. Investments
are reported at the Directors' estimate of fair value at the relevant
reporting date.
The valuation principles used are based on International Private Equity and
Venture Capital ('IPEV') valuation guidelines, generally using a discounted
cash flow ('DCF') methodology (except where a market quote is available),
which the Investment Manager considers to be the most appropriate valuation
methodology for unquoted infrastructure equity investments.
Where the DCF methodology is used, the resulting valuation is checked against
other valuation benchmarks relevant to the particular investment, including,
for example:
• earnings multiples;
• recent transactions; and
• quoted market comparables.
In determining a DCF valuation, we consider and reflect changes to the two
principal inputs: being forecast cash flows from the investment; and discount
rates.
We consider both the macroeconomic environment and investment-specific value
drivers when deriving a balanced base case of cash flows and selecting an
appropriate discount rate.
The inflation rate in the UK and Europe gradually declined during the year but
remains above the long-term average, which has put pressure on supply chain
and employee costs.
Our inflation assumptions use market forecasts for 2024 and 2025, followed by
our long-term assumption of 2% CPI across all jurisdictions, or 2.5% for UK
RPI.
The portfolio is positively correlated to inflation, but the ability to pass
cost inflation to customers differs across portfolio companies. As a result,
we take an individualised approach to modelling the impact of inflation.
Longer-term power prices affect the valuation of our energy generating
portfolio companies. The majority of our power price exposure is hedged in the
short to medium term.
Future power price projections are taken from independent forecasters, and
changes in these assumptions will affect the future value of these
investments. Taxes on renewable electricity generators vary in their
applicability and we have considered their impact on each company
individually, based on their circumstances.
Table 4: Components of value movement (year to 31 March 2024, £m)
Value movement component Value movement in the year Description
Planned growth 162 Net value movement resulting from the passage of time, consistent with the
discount rate and cash flow assumptions at the beginning of the year less
distributions received and capitalised interest in the year.
Other asset performance 166 Net value movement arising from actual performance in the year and changes to
future cash flow projections, including financing assumptions and changes to
regulatory assumptions.
Discount rate movement (29) Value movement relating to changes in the discount rates applied to the
portfolio cash flows.
Macroeconomic assumptions (40) Value movement relating to changes to macroeconomic out-turn or assumptions,
eg. power prices, inflation, interest rates and taxation rates. This includes
changes to regulatory returns that are directly linked to macroeconomic
variables.
Total value movement before exchange 259
Foreign exchange retranslation (79) Movement in value due to currency translation to year-end date.
Total value movement 180
As a 'through-the-cycle' investor with a strong balance sheet, we consider
valuations in the context of the longer-term value of the investments. This
includes consideration of climate change risk and stranded asset risk.
Factors considered include physical risk, litigation risk linked to climate
change, and transition risk (for example, assumptions on the timing and extent
of decommissioning of North Sea oil fields, which affects Tampnet and ESVAGT).
We take a granular approach to these risks, for example, each relevant
offshore oil and gas field has been assessed individually to forecast the
market over the long term, and a low terminal value has been assumed at the
end of the forecast period.
In the case of stranded asset risk, we consider long-term threats that may
impact value materially over our investment horizon, for example,
technological evolution, climate change or societal change.
For ESVAGT, which operates ERRVs in the North Sea servicing sectors, including
the oil and gas market, we do not assume any new vessels or replacement
vessels in our valuation for that segment of the business.
A number of our portfolio companies are set to benefit from these long-term
megatrends and, in the base case for each of our valuations, we take a
balanced view of potential factors that we estimate are as likely to result in
underperformance as outperformance.
Discount rate
Table 5 shows the movement in the weighted average discount rate applied to
the portfolio at the end of each year since the Company's inception and the
position as at 31 March 2024. The weighted average discount rate remained
unchanged over the course of FY24.
The range of discount rates used in individual valuations at 31 March 2024 is
also shown, which is broadly consistent with the prior year (2023: 10.0% to
13.2%).
During the first half of the year, we witnessed an increase in risk-free rates
across Europe as central banks took action in response to higher inflation,
but this then decreased in the second half of the year as inflationary
pressure eased. Given the significant risk premium included in our long-term
discount rates and the continued appetite for high-quality infrastructure
businesses, the volatility we have seen in risk-free rates did not impact the
discount rates used to value our portfolio companies at 31 March 2024.
Table 5: Portfolio weighted average discount rate (31 March, %)
March 08 12.4
March 09 13.8
March 10 12.5
March 11 13.2
March 12 12.6
March 13 12.0
March 14 11.8
March 15 10.2
March 16 9.9
March 17 10.0
March 18 10.5
March 19 10.8
March 20 11.3
March 21 10.8
March 22 10.9
March 23 11.3
March 24 11.3
March 24 range 10.0 to 14.0
Portfolio company debt
Our portfolio companies are funded by long-term senior-secured debt alongside
equity from the Company and other shareholders. Valorem also uses project
financing in its portfolio of renewable energy projects. There were no
mezzanine or junior debt structures within our portfolio at 31 March 2024
(2023: none).
In recent years, the Investment Manager has proactively refinanced facilities
across the portfolio, extending the term of the debt and securing low fixed
rates or hedged interest rates.
When considering the appropriate quantum of debt for a portfolio company, we
typically look for an investment grade level of risk. Some portfolio companies
have an investment grade credit rating from a credit rating agency. Table 6
below shows the average loan-to-value ('LTV') ratio across the portfolio as
well as the portfolio value analysed across a range of LTV levels. The average
LTV ratio is 32% (2023: 33%).
Table 6: Portfolio company leverage* (3iN value as at 31 March 2024, £m)
Net debt / Enterprise value ('LTV') 3iN value
< 25% 588
26% - 30% 651
31% - 35% 1,070
36% - 40% 1,138
41% + 164
Average LTV(1) 32%
1 LTV is calculated as the aggregate Net Debt to Enterprise Value ratio of the
individual portfolio companies.
* This analysis excludes Valorem, which is financed at the project level.
Project financing typically employs higher levels of gearing.
Investment track record
As shown in Table 7, since its launch in 2007, 3i Infrastructure has built a
portfolio that has provided:
• significant income, supporting the delivery of a progressive
annual dividend;
• consistent capital growth; and
• strong capital profits from realisations.
These have contributed to an 18% annualised asset Internal Rate of Return
('IRR') since the Company's inception. The European portfolio has generated
strong returns, in line with, or in many cases ahead of, expectations.
These returns were underpinned by substantial cash generation in the form of
income or capital profits.
The value created through this robust investment performance has been
crystallised in a number of instances through well-managed realisations, shown
as 'Realised assets' in Table 7.
While the Company is structured to hold investments over the long term, it has
sold assets where compelling offers will generate additional shareholder
value.
Portfolio asset returns in Table 7 include an allocation of foreign exchange
hedging where applicable.
Table 7: Portfolio asset returns throughout holding period (since inception,
£m)
Value Proceeds on
including disposals/
Money Total accrued capital Cash
multiple IRR cost income returns income
Existing portfolio (Total return)
TCR 2.2 x 304 608 4 57
ESVAGT 1.6 x 329 531 - 2
Infinis 1.8 x 352 421 91 121
GCX 1.1 x 318 345 - 15
Tampnet 2.0 x 187 343 - 27
Joulz 1.7 x 195 306 3 24
Ionisos 1.7 x 191 306 - 10
Oystercatcher 3.3 x 139 248 47 168
SRL 1.3 x 191 240 1 4
Valorem 3.2 x 81 230 - 27
DNS:NET 0.7 x 239 164 - 6
Future Biogas 1.1 x 93 100 - -
Realised assets (Total return)
Attero 2.7 x 22% 88 - 207 29
WIG 1.7 x 27% 265 - 431 21
XLT 5.9 x 40% 63 - 332 38
Elenia 4.5 x 31% 195 - 766 106
AWG 3.3 x 16% 173 - 410 154
Eversholt 3.3 x 41% 151 - 391 114
Projects 1.9 x 22% 289 - 446 103
Others(1) 1.2 x 8% 138 - 145 24
India Fund(2) 0.6 x (6)% 108 - 61 -
Portfolio asset returns include allocation of foreign exchange hedging where
applicable.
1 Others includes junior debt portfolio, T2C and Novera.
2
India Fund refers to the 3i India Infrastructure Fund.
Asset IRR to 31 March 2024
18%
Since inception
Financial review
"We delivered another year of outperformance and an increased dividend."
James Dawes
CFO, 3i Infrastructure
The Company achieved robust growth in its NAV and increased its dividend per
share.
Key financial measures (year to 31 March) 2024 2023
Total return(1) £347m £394m
NAV £3,342m £3,101m
NAV per share 362.3p 336.2p
Total income(2) £194m £158m
Total income and non-income cash £208m £202m
Portfolio asset value £3,842m £3,641m
Cash balances £5m £5m
Total liquidity(3) £395m £404m
1 IFRS Total comprehensive income for the year.
2 Total income comprises Investment income and Interest receivable.
3 Includes cash balances of £5 million (2023: £5 million) and £390 million
(2023: £399 million) undrawn balances available under the Company's £900
million RCF.
The Company delivered another year of outperformance, with the portfolio
generating robust capital growth. The dividend was fully covered by net
income. The target dividend for FY25 of 12.65 pence per share is an increase
of 6.3% over FY24.
Total net investment in the year was £104 million, comprising two further
investments in both DNS:NET and Future Biogas and one further investment in
Ionisos. The Company maintained low levels of uninvested cash throughout the
year and actively managed its liquidity position through drawing on its £900
million RCF. Amounts drawn under the RCF at 31 March 2024 were £510 million
(2023: £501 million).
Returns
Total return
The Company generated a total return for the year of £347 million,
representing an 11.4% return on opening NAV net of the prior year final
dividend (2023: £394 million, 14.7% time-weighted for equity issued in the
year). This performance is again ahead of the target return of 8% to 10% per
annum, to be achieved over the medium term.
This outperformance was driven by strong performance across the portfolio,
particularly from TCR, Tampnet and Valorem, and the strong return generated
from the sale of Attero, partially offset by underperformance from DNS:NET.
Changes in the valuation of the Company's portfolio assets are described in
the Movements in portfolio value section of the Portfolio review. Our
portfolio companies continue to generate discretionary growth opportunities
that are accretive to our investment cases.
Total income and non-income cash of £208 million in the year was higher than
last year, due to a full year of income from new investments made last year in
GCX, TCR and Future Biogas, and strong income levels from Tampnet (2023: £202
million).
Non-income cash receipts reflect distributions from underlying portfolio
companies, which would usually be income to the Company, but which are
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 8, it is
included when considering dividend coverage.
An analysis of the elements of the total return for the year is shown in Table
8.
Table 8: Summary total return (year to 31 March, £m)
2024 2023
Capital return (excluding exchange) 259 320
Foreign exchange movement in portfolio (79) 19
Capital return (including exchange) 180 339
Movement in fair value of derivatives and exchange on EUR borrowings 87 6
Net capital return 267 345
Total income 194 158
Costs(1) (114) (109)
Total return 347 394
1 Includes non-portfolio related exchange movement of nil (2023: gain of £2
million).
Table 9: Reconciliation of the movement in NAV (year to 31 March 2024, £m)
Opening NAV at 1 April 2023(1) 3,050
Capital return 259
Net foreign exchange movement(2) 8
Total income 194
Net costs including management fees (114)
NAV before distributions 3,397
Distribution to shareholders (55)
Closing NAV at 31 March 2024 3,342
1 Opening NAV of £3,101 million net of final dividend of £51 million for the
prior year.
2 Foreign exchange movements are described in Table 12
Capital return
The capital return is the largest element of the total return. The portfolio
generated a value gain of £259 million in the year to 31 March 2024 (2023:
£320 million), as shown in Table 9. There was a positive contribution across
the majority of the portfolio and the largest contributors were TCR (£92
million), Tampnet (£54 million) and Valorem (£47 million). The only negative
contribution was from DNS:NET (£55 million). These value movements are
described in the Portfolio review section.
Income
The portfolio generated income of £193 million in the year (2023: £156
million). Of this amount, £9 million was through dividends (2023: £1
million) and £184 million through interest on shareholder loans (2023: £155
million). In addition, the Company earned £0.5 million of interest receivable
on deposits (2023: £0.1 million).
Total income and non-income cash is shown in Table 10.
Table 10: Total income and non-income cash (year to 31 March, £m)
2024 2023
Total income 194 158
Non-income cash 14 44
Total 208 202
A strong income contribution from Tampnet and a full year of income from the
new investment made in GCX in FY23 offset the reduction in income from the
sale of Attero. A breakdown of portfolio income is provided in Table 13,
together with an explanation of the change from prior year.
Interest income from the portfolio was higher than prior year due to a full
year of income from the new investments made in FY23 in GCX, TCR and Future
Biogas. Dividend income was higher than prior year due to dividend income from
Tampnet.
Foreign exchange impact
The portfolio is diversified by currency as shown in Table 11. We aim to
deliver steady NAV growth for shareholders, and the foreign exchange hedging
programme helps us to do this by reducing our exposure to fluctuations in the
foreign exchange markets.
Portfolio foreign exchange movements, after accounting for the hedging
programme, increased the net capital return by £8 million (2023: £25
million).
Table 11: Portfolio value by currency (as at 31 March 2024)
EUR 48%
GBP 20%
DKK 14%
USD 9%
NOK 9%
As shown in Table 12, the reported foreign exchange loss on investments was
£(79) million (2023: gain of £19 million). This was fully offset by an £87
million gain on the hedging programme (2023: £6 million). The positive hedge
benefit resulted from favourable interest rate differentials on the hedging
programme.
Table 12: Impact of foreign exchange ('FX') movements on portfolio value (year
to 31 March 2024, £m)
FX loss before hedging (79)
FX gain after hedging 8
Table 13: Breakdown of portfolio income (year to 31 March, £m)
Dividend Interest Dividend Interest Comments
(FY24) (FY24) (FY23) (FY23)
TCR - 23 - 18 Further investment in FY23
ESVAGT - 49 - 46
Infinis - 18 - 16
GCX - 31 - 18 Full year of ownership
Ionisos - 9 - 9
Tampnet 8 5 - 6 Dividend in FY24
Joulz - 7 - 6
Oystercatcher - 3 - 4
SRL - 21 - 19
Valorem 1 3 1 3
DNS:NET - 11 - 8 Further investment in FY23 and FY24
Attero - 1 - 1 Sold in the year
Future Biogas - 3 - - Full year of ownership
Costs
Management and performance fees
During the year to 31 March 2024, the Company incurred management fees of £49
million (2023: £47 million), including transaction fees of £1 million (2023:
£3 million). The fees, payable to 3i plc, consist of a tiered management fee,
and a one-off transaction fee of 1.2% payable in respect of new investments.
The management fee tiers range from 1.4%, reducing to 1.2% for any proportion
of gross investment value above £2.25 billion.
An annual performance fee is also payable by the Company, amounting to 20% of
returns above a hurdle of 8% of the total return. This performance fee is
payable in three equal annual instalments, with the second and third
instalments only payable if certain future performance conditions are met.
This hurdle was exceeded for the year ended 31 March 2024, resulting in a
performance fee payable to 3i plc in respect of the year ended 31 March 2024
of £26 million (2023: £45 million).
The first instalment of £9 million will be paid in May 2024, along with the
second instalment of £15 million relating to the previous year's performance
fee, and the third instalment of £18 million relating to the FY22 performance
fee.
For a more detailed explanation of how management and performance fees are
calculated, please refer to Note 18 of the accounts.
Other operating and finance costs
Operating expenses, comprising Directors' fees, service provider costs and
other professional fees, totalled £4 million in the year (2023: £3 million).
Finance costs of £35 million (2023: £16 million) in the year comprised
arrangement and commitment fees for the Company's £900 million RCF and
interest on drawings. Finance costs were higher than in FY23 due to an
increase in interest rates and a greater average drawn balance.
Ongoing charges ratio
The ongoing charges ratio measures annual operating costs, as disclosed in
Table 14, against the average NAV over the reporting period.
The Company's ongoing charges ratio is calculated in accordance with the
Association of Investment Companies ('AIC') recommended methodology and was
1.65% for the year to 31 March 2024 (2023: 1.64%). The ongoing charges ratio
is higher in periods where new investment levels are high, the Company is
drawn into its RCF and new equity is raised or capital is returned to
shareholders. Realisation of assets reduces the ongoing charges ratio. The
cost items that contributed to the ongoing charges ratio are shown below.
The AIC methodology does not include transaction fees, 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
ratio including the performance fee was 2.44% (2023: 3.19%). The total return
of 11.4% for the year is after deducting this performance fee and ongoing
charges.
Table 14: Ongoing charges (year to 31 March, £m)
2024 2023
Investment Manager's fee 49.3 44.6
Auditor's fee 0.8 0.8
Directors' fees and expenses 0.6 0.5
Other ongoing costs 2.3 1.9
Total ongoing charges 53.0 47.7
Ongoing charges ratio 1.65% 1.64%
Balance sheet
The NAV at 31 March 2024 was £3,342 million (2023: £3,101 million). The
principal components of the NAV are the portfolio assets, cash holdings, the
fair value of derivative financial instruments, borrowings under the RCF and
other net assets and liabilities. A summary balance sheet is shown in Table
15.
At 31 March 2024, the Company's net assets after the deduction of the proposed
final dividend were £3,287 million (2023: £3,050 million).
Table 15: Summary balance sheet (as at 31 March, £m)
2024 2023
Portfolio assets 3,842 3,641
Cash balances 5 5
Derivative financial instruments 77 39
Borrowings (510) (501)
Other net liabilities (72) (83)
NAV 3,342 3,101
Cash and other assets
Cash balances at 31 March 2024 totalled £5 million (2023: £5 million).
Cash on deposit was managed actively by the Investment Manager and there are
regular reviews of counterparties and their limits. Cash is principally held
in AAA-rated money market funds.
Other net assets and liabilities predominantly comprise a performance fee
accrual of £74 million (2023: £83 million), including amounts relating to
prior year fees.
The movement from March 2023 is due to a decrease in the performance fee
payable of £26 million. £35 million of prior year performance fees were paid
during the year.
Borrowings
The Company has a £900 million RCF in order to maintain a good level and
maturity of liquidity for further investment whilst minimising returns
dilution from holding excessive cash balances. This is a three-year facility,
with a maturity date of November 2026. At 31 March 2024, the total amount
drawn was £510 million (2023: £501 million).
During the year, the Company predominantly drew on the RCF in euros, which
reduced the cost of finance compared to borrowing in sterling and acted as a
natural currency hedge against our euro investments, reducing the size of the
FX hedging programme. Over the year, the average cost of RCF debt drawn was
6.1% (2023: 3.9%), considerably below the expected return from the portfolio
indicated by the weighted average discount rate of 11.3% at 31 March 2024
(2023: 11.3%).
NAV per share
The total NAV per share at 31 March 2024 was 362.3 pence (2023: 336.2 pence).
This reduces to 356.4 pence (2023: 330.6 pence) after the payment of the final
dividend of 5.95 pence (2023: 5.575 pence). There are no dilutive securities
in issue.
Dividend and dividend cover
The Board has proposed a dividend for the year of 11.90 pence per share, or
£110 million in aggregate (2023: 11.15 pence; £101 million). This is in line
with the Company's target announced in May last year.
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 year. 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.
Table 16 shows the calculation of dividend coverage and dividend reserves. The
dividend was fully covered for the year with a surplus of £10 million (2023:
£35 million).
Table 16: Dividend cover (year to 31 March, £m)
2024 2023
Total income, other income and non-income cash 208 202
Operating costs, including management fees (88) (66)
Dividends paid and proposed (110) (101)
Dividend surplus for the year 10 35
Dividend reserves brought forward from prior year 814 794
Realised gain over cost on disposed assets 82 30
Performance fees (26) (45)
Dividend reserves carried forward 880 814
The retained amount available for distribution, following the payment of the
final dividend, the realised gain over cost relating to the sale of Attero,
the realised loss from the sale of the final investments in the India Fund and
the performance fee will be £880 million (2023: £814 million). This is a
substantial surplus, which is available to support the Company's progressive
dividend policy, particularly should dividends not be fully covered by income
in a future year.
A shortfall could arise, for example, due to holding substantial uninvested
cash or through lower distributions being received from portfolio companies in
order to invest in accretive growth opportunities or to preserve liquidity.
Table 17 shows that the Company has consistently covered the dividend over the
last five years.
Table 17: Dividend cover (five years to 31 March 2024, £m)
Net Dividend
income(1)
March 2020 105 82
March 2021 87 87
March 2022 93 93
March 2023 136 101
March 2024 120 110
1 Net income is Total income, other income and non-income cash less operating
costs.
Sensitivities
The sensitivity of the portfolio to key inputs to our valuations is shown in
Table 18 and described in more detail in Note 7 to the accounts. The portfolio
valuations are positively correlated to inflation. The longer-term inflation
assumptions beyond two years remain consistent with central bank targets, eg.
UK CPI at 2%.
The sensitivities shown in Table 18 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.
Table 18: Portfolio sensitivities (year to 31 March 2024)
Sensitivity -1% (£m) -1% (%) +1% (£m) +1% (%)
Discount rate 404 10.5% (352) (9.2)%
Inflation (for two years) (56) (1.4)% 54 1.4%
Interest rate 214 5.6% (220) (5.7)%
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 year, and are all financial measures of historical performance.
The APMs are consistent with those disclosed in prior years.
• Total return on opening NAV reflects the performance of the
capital deployed by the Company during the year. This measure is not
influenced by movements in share price or ordinary dividends to shareholders.
This is a common APM used by investment companies
• The NAV per share is a measure of the underlying asset base
attributable to each ordinary share of the Company and is a useful comparator
to the share price. This is a common APM used by investment companies
• Total income and non-income cash is used to assess dividend
coverage based on distributions received and accrued from the investment
portfolio
• Investment value including commitments measures the total value of
shareholders' capital deployed by the Company
• Total portfolio return percentage reflects the performance of the
portfolio assets during the year
• Total liquidity is a measure of the Company's ability to make
further investments and meet its short-term obligations
• Portfolio debt to enterprise value is a measure of underlying
indebtedness of the portfolio companies
The definition and reconciliation to IFRS of the APMs is shown below.
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 £347 million, as shown in the The calculation uses IFRS measures.
Statement of comprehensive income, as a percentage of the opening NAV of
£3,101 million net of the final dividend for the previous year of £51
million.
For further information see the KPI section.
NAV per share A measure of the NAV per share in the Company. It is calculated as the NAV divided by the total number of shares in issue at The calculation uses IFRS measures and is set out in Note 14 to the accounts.
the balance sheet date.
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, being the repayment of shareholder loans not receivable. The non-income cash, being the proceeds from partial realisations
resulting from the disposal of an underlying portfolio asset. 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 31 March 2024, the Company had no investment loss reported under IFRS. The value of future commitments is set out in Note
commitments. 16 to the accounts.
Total portfolio return percentage A measure of the financial performance of the portfolio. It is calculated as the total portfolio return in the year of £460 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 (excluding capitalised interest) of £3,745 million. investment in the year. The reconciliation of all these items to IFRS is 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 £5 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 RCF of £390 million. balances available under the Company's RCF as described in Note 11 to the
accounts.
Portfolio debt to enterprise value A measure of underlying indebtedness of the portfolio companies. It is calculated as total debt, as a percentage of the enterprise value of the The calculation is a portfolio company measure and therefore cannot be
portfolio companies, and does not include indebtedness of the Company. reconciled to the Company's accounts under IFRS.
Risk Report
"Our consistent risk governance framework supports decision making during
periods of economic uncertainty."
Wendy Dorman
Chair, Audit and Risk Committee
We saw continued economic uncertainty during the year, with rising interest
rates on the back of high levels of inflation adversely affecting share prices
in the infrastructure investment trust market.
In this macroeconomic environment, effective risk management is essential for
the sustainable, long-term execution of the Company's strategy. The Audit and
Risk Committee (the 'Committee') operates a robust risk management framework,
which systematically evaluates the principal, key and emerging risks facing
the Company. This framework provides an objective context for Board decisions
related to performance, liquidity, capital structure and the overall business
model. Despite the challenges posed by the geopolitical and macroeconomic
landscape, the Company has maintained strong performance, supported by dynamic
and responsive decision-making facilitated by our risk management process. We
believe that the consistent application of this robust framework is an
important element in the continued superior performance of the Company.
Our risk review process follows a three-year cycle. Initially, each Director
independently assesses the risks facing the Company, a process we refer to as
the 'blank sheet of paper exercise'. Subsequently, we conduct two annual
updates.
In the current year, we completed the final stage of that three-year cycle of
risk reviews. The Committee, alongside the Investment Manager, conducted a
comprehensive assessment to identify and evaluate the impact and likelihood of
the key, principal and emerging risks facing the Company.
The following sections explain how we identify and address risks to the
Company. We outline the key risks, assess their potential impact on both the
Company and our portfolio, and discuss our mitigation strategies.
As we conclude this three-year cycle, we have re-evaluated several risks to
account for developments in the year. Additionally, we refreshed the list of
emerging risks. The Committee updated the risk register and risk matrix based
on the analysis conducted, ensuring alignment with the Company's strategic
objectives.
Risk framework
Risk-related reporting
Internal External
• Monthly management accounts • Risk appetite
• Internal and external audit reports • Viability statement
• Service provider control reports • Resilience statement
• Risk logs • Internal controls
• Compliance reports • Going concern
• Risk-related reporting • Statutory/accounting disclosures
Risk governance approach
The Board is ultimately responsible for the Company's risk management. It aims
to strike a suitable balance between risk mitigation and generating long-term
risk-adjusted returns for shareholders. Our approach to risk management is
underpinned by our Board values of integrity, objectivity, accountability and
legacy.
The Committee oversees the risk framework, methodology and process. This risk
framework ensures a structured and consistent approach to identifying,
assessing, and addressing risks. Consistency in risk management across the
Company's strategy, business objectives, policies and procedures is a key
objective of the Committee.
The Company is also reliant on the risk management frameworks of the
Investment Manager and other key service providers, as well as on the risk
management practices of each portfolio company.
Risk management reports are received from the Investment Manager and other
service providers. The Investment Manager's team members represent the Company
on all portfolio companies' boards which informs the risk-related reporting.
Risk appetite
The Committee reviews the Company's risk appetite annually, and this year
confirmed that it remained broadly stable. As an investment company, the
Company seeks to take investment risk. Our appetite for investment risk is
detailed in the Our business model section and the Investment policy later in
this document. All investments adhere to the Investment Manager's Responsible
Investment policy, a critical component of our risk approach. In a competitive
market for new investments, maintaining investment discipline remains
paramount. That investment discipline is equally important when considering
realisations, such as that of Attero during the year. Our investment
procedures are rigorous and comprehensive.
The target risk-adjusted objective of delivering 8% to 10% return per annum
over the medium term remains consistent with our current portfolio investment
cases.
Should our portfolio expand, the range of expected returns in individual
investment cases may widen.
This expansion could include both higher risk/return 'value add' cases and
lower risk/return 'core' investments. We acknowledge that this may introduce
greater volatility in returns on an individual asset basis. However,
diversification across sectors, countries and underlying economic risks
mitigates this volatility. Reflecting the Company's current liquidity
position, the current focus is on investing through the existing portfolio,
which we believe should generate better risk-adjusted returns than adding new
platform investments, and on repayment of drawings on the Company's RCF.
We have intentionally built a diverse portfolio while carefully assessing the
risks faced by our portfolio companies. The Committee reaffirmed that the
Company's risk appetite for core-plus infrastructure investments remains
unchanged and aligns with our investment mandate and target returns. The
recent macroeconomic uncertainty has tested the appropriateness of our
business model and risk appetite, and overall, our portfolio has demonstrated
resilience, benefitting from diversification across infrastructure subsectors
and underlying risk types.
The Company operates a flexible funding model and has been a relatively
infrequent issuer of new shares in the infrastructure investment trust market.
The Company's shares have traded at a discount to published net asset value
throughout the year. This restricted access to new equity issuance and
increased the importance of the RCF to bridge the cycle between investment and
realisation, as well as cash generation by underlying portfolio companies.
Risk review process
The key tools used by the Committee to assess the appetite for key risks are
the risk register and the risk matrix.
The process of creating and reviewing the risk register and risk matrix is
described below, together with a discussion of the Company's appetite for each
of the key risks.
In addition to investment risk, which is discussed above, the Company actively
manages and limits exposure to other risks to maintain acceptable levels.
The Company's risk review process includes the monitoring of key strategic and
financial metrics considered to be indicators of potential changes in its risk
profile.
The review takes place three times a year, with the last review in April 2024,
and includes, but is not limited to, the following:
• infrastructure and broader market overviews;
• key macroeconomic indicators and their impact on the performance
and valuation of portfolio companies;
• regular updates on the operational and financial performance of
portfolio companies;
• experience of investment and divestment processes;
• compliance with regulatory obligations, including climate-related
regulations;
• analysis of new and emerging regulatory initiatives;
• liquidity management;
• assessment of climate risks to the portfolio, including physical,
transition and litigation risks;
• consideration of scenarios that may impact the viability of the
Company;
• assessment of emerging risks; and
• review of the Company's risk log.
The Committee uses the risk framework to identify both emerging and key risks,
assessing changes in risks over time. This framework is designed to manage,
rather than eliminate, the risk of failing to achieve objectives or breaching
our risk appetite. Throughout the year, we closely monitor significant key
risks or 'principal risks', which have the potential to materially impact the
achievement of our strategic objectives.
The Committee evaluates the likelihood of each identified risk materialising
and the potential impact it may have, with reference to the Company's strategy
and business model. We assess risks over two timeframes: within three years;
and beyond three years. The results are presented on a risk matrix.
For each risk, we develop mitigating controls and assess their adequacy. If
necessary, additional controls are implemented and reviewed during subsequent
Committee meetings.
Risk categorisation
The Committee uses the following categorisation to describe risks that are
identified during the risk review process.
Emerging risks Key risks Principal risks
An emerging risk is one that may in future be likely to have a material impact A key risk is considered currently to pose the risk of a material impact on The Committee maintains a risk matrix, onto which the key risks are mapped by
on the performance of the Company and the achievement of our long-term the Company. Risks may be identified as emerging risks and subsequently become impact and likelihood. The principal risks are identified on the risk matrix
objectives, but that is not yet considered to be a key risk and is subject to key risks. Identified key risks may cease to be considered key risks over as those with the highest combination of impact and likelihood scores.
uncertainty as to nature, impact and timing. time.
The Committee considers the identified principal risks in greater detail in
the assessment of the Company's viability. This assessment considers a number
of plausible scenarios that could arise if these risks materialise, including
stressed scenarios that might jeopardise the Company's viability. As the
Company is an investment company, the stressed scenarios primarily focus on
reduced cash flows from our investment portfolio. These scenarios could lead
to debt covenant breaches and liabilities not met.
The Investment Manager models the impact of these scenarios on the Company and
reports the results to the Committee. The resulting viability assessment is
included in this Risk report.
Review during the year
In October 2023, the Committee conducted a comprehensive reassessment of the
identified key risks and considered any updates to the list of emerging risks
facing the Company. The Directors and several members of the Investment
Manager's team identified the top emerging risks, considered whether there
were any new key risks, and discussed changes to the impact and likelihood of
the principal risks.
In December 2023, the Investment Manager analysed the collected data and
identified both emerging and principal risks. The principal risks were scored
for impact and likelihood over both a three-year and beyond three-year period,
building upon the scoring of those risks in the prior year's assessment.
In January 2024, the Committee assessed the results of the principal risk
scoring and made additional adjustments.
In April 2024, the Committee reviewed the updated risk register and risk
matrix, along with the Company's appetite for each key risk.
We have a relatively diverse spread of assets in the portfolio and it is
important that risk diversity is maintained as we evolve the portfolio through
new investments, realisations and syndications.
Future realisations and syndications will continue to shape the portfolio's
risk profile in line with our strategy. This flexibility allows us to manage
exposure to more sensitive assets and adapt to changes in risk profiles over
time.
We remain confident that the portfolio remains defensive and resilient, and it
is well-positioned to benefit from accretive but discretionary growth
opportunities, as highlighted in the Review from the Managing Partners. Our
assessment indicates that the current risk appetite is appropriate.
Risk register review process
October 2023
Directors identify potential emerging or new key risks facing the Company
December 2023
Analysis and interpretation of responses
January 2024
Impact and likelihood of the identified risks considered
April 2024
Risk register and risk matrix updated
Emerging risks
As a long-term investor, the Company must carefully assess both identified key
risks, as detailed below, and emerging or longer-term risks. Risk
categorisation, including the definition of emerging risks, is outlined above.
The Board and the Investment Manager take these factors into account when
evaluating portfolio performance and assessing new investments. Their goal is
to identify potential risks that can either be mitigated or transformed into
opportunities.
As part of our ongoing risk management, the Committee evaluates whether
emerging risks should be added to the Company's risk register. This register
is a 'live' document, regularly reviewed and updated by the Committee as new
risks emerge and existing risks evolve. Examples of emerging risks considered
during the year include opportunities and challenges related to AI tools,
potential tax changes resulting from UK political changes, geopolitical
tensions (such as conflicts in the Middle East and Ukraine), emerging energy
technologies, including nuclear fusion, and heightened regulatory reporting
requirements (including climate-related disclosures). In some instances,
emerging risks may already be encompassed within broader identified key risks,
such as market and economic risk.
Key risks
The Committee assesses key risks by evaluating their impact and likelihood on
a risk matrix. Throughout the year, the Committee examined all the key risks
in detail. Within the category of key risks, the principal risks identified by
the Committee are outlined in the Principal risks and mitigation table. The
disclosures in the Risk report do not encompass an exhaustive list of risks
and uncertainties faced by the Company. Instead, they serve as a concise
summary of significant key risks actively reviewed by the Board, their
mitigating controls and developments in the year.
Our risk review demonstrated a high degree of consistency compared to the
previous year, with minimal changes in the identified key risks. The
assessment of likelihood and impact led to minor adjustments in the principal
risks facing the Company, as compared to the prior financial year.
Market and economic risk was considered the top risk facing the Company and
was considered to have increased during the year. This risk encompasses
consequences such as high inflation and interest rates, elevated or volatile
commodity and energy prices, supply chain constraints, and volatile capital
markets affecting pricing, valuations and portfolio performance.
The portfolio is not currently materially impacted by the instability in the
Middle East and Ukraine, but this was considered to have increased the overall
level of market and economic risk, and security of assets risk.
It was noted that the greatest impact on the Company was the decline in the
public valuation of listed companies in the infrastructure sector, which has
limited access to the equity capital market. The management of liquidity risk
is considered to have increased as a consequence.
While there were no significant changes in the remaining principal risks,
adjustments are reflected in the Principal risks and mitigations table.
Fraud and cyber risk
We remain vigilant to cyber- and other IT-related threats that could disrupt
the Company, compromise data, or harm our reputation. The Investment Manager
has a robust fraud risk assessment and anti-fraud programme in place. This
programme includes proactive fraud prevention work by their Internal Audit
team, mandatory training to enhance vigilance and awareness, and an
independent reporting service (accessible to all staff) known as the
'hotline'.
Additionally, the Investment Manager's cyber security programme focuses on
identifying and mitigating risks related to third-party frauds, such as
ransomware and phishing attacks. Regular staff training and the use of IT
security tools contribute to this effort.
Furthermore, we have a detailed business continuity and disaster recovery plan
in place to address significant events.
We also actively request our service providers to inform us promptly of any
significant cyber events that they experience.
Climate risk
Climate risk includes the short- to medium-term impacts, including
transitional changes (for example, regulation and financial) as well as the
long-term emerging risk of climate change (for example, flooding events).
Failing to identify and mitigate these risks could lead to reduced asset
attractiveness, reputational harm, and a decline in portfolio value over time.
While uncertainties persist regarding the precise impact and timing of climate
change, government actions, and future regulations, we recognise that
climate-related risk is not only a key risk but also an essential investment
theme for the Company. We categorise climate-related risk into two distinct
but related risks.
Climate regulation risk addresses the regulatory risk linked to the transition
toward a low-carbon economy. It encompasses the impact of evolving regulations
on the Company and the portfolio. Climate risk considers both physical risks
(direct impacts of climate change) and transition risks (changes arising from
the transition to a low-carbon economy).
As highlighted in the Sustainability section of the Annual Report and Accounts
2024, the climate-related risks - both physical and transition - are also
viewed as opportunities across our portfolio.
There are no immediate acute physical or transition risks identified in the
portfolio that would categorise climate risk as a principal risk. An example
of transition risk is the risk of early decommissioning of oil and gas assets,
which impacts certain customers of Tampnet and ESVAGT. A related transition
opportunity is the potential for prolonged life of offshore platforms to
facilitate sequestration of carbon dioxide in old oil or gas fields, which
could benefit Tampnet and ESVAGT.
We believe that the mitigating controls implemented by both the Company and
the Investment Manager effectively address climate regulation risk, preventing
it from being a principal risk at this time.
Principal risks and mitigations
External
Principal risk Risk description Risk mitigation Developments in the year
Market/economic • Macroeconomic or market volatility impacts general market • Resources and experience of the Investment Manager on deal-making, • Strong portfolio performance, demonstrating resilience, leading to
confidence and risk appetite which flows through to pricing, valuations and asset management and hedging solutions to market volatility an increase in portfolio value in the year
portfolio performance
• Periodic legal and regulatory updates on the Company's markets and • Foreign exchange exposures at the portfolio company level
• Fiscal tightening impacts market environment in-depth market and sector research from the Investment Manager and other monitored and hedged where appropriate
advisers
Risk exposure movement in the year • Risk of sovereign default lowers market sentiment and increases
• The Company's share price traded below NAV during the year and
volatility • Portfolio diversification to mitigate the impact of a downturn in this restricted the Company's ability to raise new capital
Increased
any geography or sector or portfolio company-specific effects
• Misjudgement of inflation and/or interest rate outlook
• Private equity market valuations typically less affected than
• The permanent capital nature of an investment trust allows us to public equity market valuations during periods of significant public market
look through market volatility and the economic cycle volatility
Link to Strategic priorities
• Conflict in the Middle East has increased the risk exposure in the
Manage portfolio intensively year
Competition • Increased competition for the acquisition of assets in the • Continual review of market data and review of Company return • Realisation of Attero at a c.31% premium to the March 2023
Company's strategic focus areas target compared to market returns valuation
• Deal processes become more competitive and prices increase • Ongoing analysis of the competitor landscape • No new platform investments added to the portfolio during the
year, with investment of £104 million in the existing portfolio
• New entrants compete with a lower cost of capital • Origination experience and disciplined approach of Investment
Risk exposure movement in the year Manager • Reduction in the number of private infrastructure market
transactions compared to prior year
Decreased • Strong track record and strength of the 3i Infrastructure brand
Link to Strategic priorities
Disciplined approach
Debt markets deteriorate • Debt becomes increasingly expensive, eroding returns • The Investment Manager maintains close relationships with a number • The maturity of the Company's RCF was extended by a further year
of banks and monitors the market through transactions and advice to November 2026 with the agreement of all lenders and no change in terms
• Debt availability is restricted
• Regular reporting of Company liquidity and portfolio company • There are no material refinancing requirements in the portfolio
• The Company's RCF or portfolio company debt cannot be refinanced refinancing requirements until 2027 and over 91% of long-term debt facilities are either hedged or
due to lack of appetite from banks
fixed rate at 31 March 2024
Risk exposure movement in the year
• Investment Manager has extensive experience in raising debt
finance for portfolio companies, alongside an in-house treasury team to • TCR, GCX, Ionisos, Valorem and Future Biogas all completed
No significant provide advice on treasury issues successful refinancings or new debt raises during the financial year
change • Active management of portfolio company debt facilities, with fixed
rates and long duration of debt
Link to Strategic priorities
Manage portfolio intensively
Operational
Principal risk Risk description Risk mitigation Developments in the year
Loss of senior Investment Manager staff • Members of the deal team at the Investment Manager leave, and • Performance-linked compensation packages, including an element of • The Investment Manager team has strength and depth, and the
'deal-doing' and portfolio management capability in the short to medium term deferred remuneration transition in senior management that took place in the prior financial year
is restricted
continues to be effective
• Notice periods within employment contracts
Risk exposure movement in the year
• Strength and depth of the senior team and strength of the 3i Group
No significant brand
change • Careful management and robust planning of senior management
transition
Link to Strategic priorities
Maintain balanced portfolio
Sustainability key driver
Management of liquidity • Failure to manage the Company's liquidity, including cash and • Regular reporting of current and projected liquidity • The Company has access to a £900 million RCF that expires in
available credit facilities
November 2026. Total liquidity comprised cash and deposits of £5 million and
• Investment and planning processes consider sources of liquidity undrawn facilities of £390 million at 31 March 2024, a decrease of £9
• Insufficient liquidity to pay dividends and operating expenses or
million during the financial year
Risk exposure movement in the year to make new investments • Flexible funding model, where liquidity can be sought from
available cash balances including reinvestment of proceeds from realisations, • No outstanding commitments at 31 March 2024
Increased • Hold excessive cash balances, introducing cash drag on the committed credit facilities which can be increased with approval from our
Company's returns lenders, and the issue of new share capital • Access to the equity capital markets was limited as a result of
share price declines in the listed infrastructure investment trust sector and
• Growth opportunities can be part or fully funded by portfolio this restricted the Company's ability to raise new capital
Link to Strategic priorities company cash balances and/or available debt facilities
Disciplined approach
Efficient balance sheet
Deliverability of return target • Failure to ensure the investment strategy can deliver the return • Market returns are reviewed regularly • Total return for the year of 11.4% outperforming target return of
target and dividend policy of the Company
8-10% per annum
• The Investment Manager and other advisers to the Company report on
• Failure to adapt the strategy of the Company to changing market market positioning • FY24 dividend of 11.90 pence per share, 6.7% higher than the
Risk exposure movement in the year conditions
previous year
• Investment process addresses expected return on new investments
No significant and the impact on the portfolio
change • Consideration of megatrends in the investment process
• Consideration of risks, including ESG and climate risks, in the
investment process
Link to Strategic priorities
Maintain balanced portfolio
Sustainability key driver
Investment
Principal risk Risk description Risk mitigation Developments in the year
Security of assets • An incident, such as a cyber or terrorist attack • Regular review of the Company and key service providers • Ongoing focus on IT security and staff training including
utilisation of specialist advisers by the key service providers
• Unauthorised access to information and operating systems • Regular review and update of cyber due diligence for potential
investments • Continued programme of phishing and penetration testing and
Risk exposure movement in the year • Regulatory and legal risks from failure to comply with
reviewed disaster recovery plans in the year
cyber-related laws and regulations, including data protection • Review of portfolio companies for cyber risk management and
Increased incident readiness • Portfolio company boards continued to focus on cyber risk
management. While some portfolio companies encounter fraud attempts (with
occasional success), none have materially impacted our companies
Link to Strategic priorities • Conflict in the Middle East has increased the risk exposure in the
year
Maintain balanced portfolio
Sustainability key driver
Poor investment performance • Misjudgement of the risk and return attributes of a new investment • Robust investment process with thorough challenge of the • Resilient performance from the portfolio overall
investment case supported by detailed due diligence
• Material issues at a portfolio company
• Increase in portfolio valuation, and a realisation at a premium to
• Investment Manager's active asset management approach, including last valuation
Risk exposure movement in the year • Poor judgement in the realisation of an asset proactive management of issues arising at portfolio company level
• Active asset management including implementing changes in the
No significant • Monthly portfolio monitoring to identify and address portfolio leadership team and the reassessment of strategy at portfolio companies as and
issues promptly when appropriate
change
• Experience of the Investment Manager's team in preparing for and • Progress by portfolio companies along their sustainability
executing realisations of investments pathways
Link to Strategic priorities
Maintain balanced portfolio
Sustainability key driver
Resilience
Our resilience comes from the effective implementation of our business model,
described above. Key elements of our business model relating to resilience
include the Investment Manager's disciplined approach to new investment and
engaged asset management, the defensive characteristics of our portfolio of
investments, high ESG standards, our flexible funding model and efficient
balance sheet, and the capability of the Investment Manager's team.
This is underpinned by the strong institutional culture and values of our
Investment Manager, high standards of corporate governance, and effective risk
management.
Over the life of the Company, the Investment Manager has built a resilient and
diversified portfolio with good growth potential and downside protection that
delivers an attractive mix of income yield and capital appreciation for
shareholders. This has been achieved through consistent delivery of our
strategic priorities, described above.
Short-term resilience
The Directors assess the Company's short-term resilience through monitoring
portfolio, pipeline and finance reports. These are prepared monthly, and
discussed at quarterly scheduled board meetings and board update calls held
between scheduled meetings. Six-monthly detailed investment reviews are
prepared by the Investment Manager and discussed with the Board, as part of
the half-yearly and annual valuation and reporting processes. These reviews
describe sources of risk at portfolio company level, and mitigating actions
being taken or considered.
The resilience of key suppliers, including the Investment Manager, is
considered annually, or more frequently if appropriate. The Audit and Risk
Committee is provided with relevant extracts of reports from the Investment
Manager's internal audit team, which includes an annual report on the
Investment Manager's European infrastructure investment team. Further detail
is included in the Governance section of the Annual Report and Accounts 2024.
The Directors manage the Company's liquidity actively, reviewing reports on
current and forecast liquidity from the Investment Manager, alongside
recommendations for seeking additional liquidity when appropriate. During the
year, the RCF was extended by one year to November 2026. Further discussion on
the RCF can be found in the Financial review.
The identification of material uncertainties that could cast significant doubt
over the ability of the Company to continue as a going concern forms the basis
of the Going concern statement below.
Going concern
The Company's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Strategic
report and in the Financial statements and related Notes to our Annual report
and accounts to 31 March 2024. The financial position of the Company, its
cash flows, liquidity position and borrowing facilities are also described in
the Financial statements and related Notes to the accounts.
In addition, Note 9 to the accounts includes the Company's objectives,
policies and processes for managing its capital, its financial risk
management objectives, details of its financial instruments and hedging
activities, and its exposures to credit risk and liquidity risk.
The Directors have made an assessment of going concern, taking into account
the Company's cash and liquidity position, current performance and outlook,
which considered the impact of the higher inflationary and interest rate
environment, using the information available up to the date of issue of these
Financial statements.
The Company has liquid financial resources and a strong investment portfolio,
providing a predictable income yield and an expectation of medium-term capital
growth.
The Company manages and monitors liquidity regularly, ensuring that it is
sufficient.
At 31 March 2024, liquidity remained strong at £395 million (2023: £404
million). Liquidity comprised cash and deposits of £5 million (2023: £5
million) and undrawn facilities of £390 million (2023: £399 million). The
£900 million RCF matures beyond 12 months of the date of this report.
The Company had no contracted investment commitment at 31 March 2024. However,
the Company expects to make follow-on investments in portfolio companies to
fund growth opportunities.
The Company had ongoing charges of £53 million in the year to 31 March 2024,
detailed in Table 14 in the Financial review, which are indicative of the
ongoing run rate in the short term. In addition, the FY24 performance fee of
£26 million (2023: £45 million) is due in three equal instalments, with the
first instalment payable in the next 12 months along with the second
instalment of FY23's performance fee and the third instalment of FY22's
performance fee, and a proposed final dividend for FY24 of £55 million which
is expected to be paid in July 2024.
Although not a commitment, the Company has announced a dividend target for
FY25 of 12.65 pence per share. Income and non-income cash is expected to be
received from the portfolio investments during the coming year, some of which
will be required to support the payment of this dividend target and the
Company's other financial commitments.
The Directors have acknowledged their responsibilities in relation to the
Financial statements for the year to 31 March 2024. After making the
assessment on going concern, the Directors considered it appropriate to
prepare the Financial statements of the Company on a going concern basis.
The Company has sufficient financial resources and liquidity and is
well-positioned to manage business risks in the current economic environment
and can continue operations for a period of at least 12 months from the date
of this report. This is supported by the scenario analysis and stress testing
described in the medium-term resilience section and the Viability statement.
Accordingly, the Directors continue to adopt the going concern basis in
preparing the Annual report and accounts.
Medium-term resilience
The assessment of medium-term resilience, which includes modelling of stressed
scenarios and reverse stress tests, considers the viability and performance of
the Company in the event of specific stressed scenarios, which are assumed to
occur over a three-year horizon. This stress testing forms the basis of the
Viability statement.
The Directors consider that a three-year period to March 2027 is an
appropriate period to review for assessing the Company's viability. This
reflects greater predictability of the Company's cash flows over that time
period and increased uncertainty surrounding economic, political and
regulatory changes over the longer term.
The stress testing focuses on the principal risks, but also reflects those new
and emerging risks that are considered to be of sufficient importance to
require active monitoring by the Audit and Risk Committee. The scenarios used
are described in the Viability statement. The medium-term resilience of the
Company is assessed through analysing the impact of these scenarios on key
metrics such as total return, income yield, net asset value, covenants on the
RCF and available liquidity.
Viability statement
The Directors consider the medium-term prospects of the Company to be
favourable. The Company has a diverse portfolio of infrastructure investments,
producing good and reasonably predictable levels of income which cover the
dividend and costs. The defensive nature of the portfolio and of the essential
services that the businesses in which we invest provide to their customers are
being demonstrated in the current climate. The Investment Manager has a strong
track record of investing in carefully selected businesses and projects and of
driving value through an engaged asset management approach. The Directors
consider that this portfolio can continue to meet the Company's objectives.
The Directors have assessed the viability of the Company over a three-year
period to March 2027. The Directors have taken account of the current position
of the Company, including its liquidity position, with £5 million of cash and
£390 million of undrawn credit facilities, and the principal risks it faces,
which are documented in this Risk report.
The Directors have considered the potential impact on the Company of a number
of scenarios in addition to the Company's business plan and recent forecasts,
which quantify the financial impact of the principal risks occurring. These
scenarios represent severe yet plausible circumstances that the Company could
experience, including a significant impairment in the value of the portfolio
and a reduction in the cash flows available from portfolio companies from a
variety of causes.
The assessment was conducted over several months, during which the proposed
scenarios were evaluated by the Board, the assumptions set, and the analysis
produced and reviewed. Analysis included the impact of an escalation of the
conflict in Ukraine or in the Middle East on our portfolio companies, and the
impact of a resulting economic downturn. Other considerations included the
possible impact of climate-related events and transition risks, widespread
economic turmoil, a reduction in cash distributions from portfolio companies
to the Company, a tightening of debt markets and the failure of a large
investment.
The assumptions used to model these scenarios included: a fall in value of
some or all of the portfolio companies; a reduction in cash flows from
portfolio companies; a reduction in the level of new investment and/or
realisations; the imposition of additional taxes on distributions from or
transactions in the portfolio companies; an increase in the cost of debt and
restriction in debt availability; and an inability for the Company to raise
equity. The implications of changes in the inflation, interest rate and
foreign exchange environment were also considered, separately and in
combination.
The results of this assessment showed that the Company would be able to
withstand the impact of these scenarios occurring over the three-year period.
The Directors also considered scenarios that would represent a serious threat
to its liquidity and viability in that time period. These scenarios were
considered to be remote, such as a fall in equity value of the portfolio of
materially more than 50% whilst being fully drawn on the RCF, or an equivalent
fall in income.
Based on this assessment, the Directors have a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due over the three-year period to March 2027.
Long-term resilience
As described above, the long-term resilience of the Company, beyond the
Viability statement period, comes from the effective implementation of our
business model and consistent delivery of our strategic objectives.
Our approach to origination and portfolio construction, focus on price
discipline, and engaged asset management approach enable us to adapt in
response to new and emerging risks and challenges, including climate change
and developments in megatrends.
The characteristics that are commonly found across our portfolio, described
above, support the long-term resilience of the Company.
The underlying megatrends supporting the longer-term resilience of each
portfolio company are identified in the Megatrends section.
We have a long-term investment time horizon made possible by our permanent
capital base that is unconstrained by the fixed investment period and
fundraising cycle seen in private limited partnership funds.
Although the scenarios and stress testing to support the Viability statement
are modelled over a three-year time horizon, the resilience shown by the
Company, and its ability to recover from these stressed situations, supports
the assessment of our resilience over a longer term than three years.
Directors' duties
Section 172 statement
The Company adheres to the AIC Code of Corporate Governance (the 'AIC Code'),
and it is the intention of the AIC Code that the matters set out in section
172 of the Companies Act 2006 ('s172') are reported to the extent they do not
conflict with Jersey law.
We recognise that our business can only grow and prosper by acting in the
long-term interests of our key stakeholders, and that a good understanding of
the issues affecting stakeholders should be an integral part of the Board's
decision-making process. The insights that the Board gains through the
stakeholder engagement mechanisms it has in place form an important part of
the overall context for all the Board's discussions and decision-making
processes.
As an externally managed investment trust, the Company has no employees or
customers and its key stakeholders are its shareholders, third-party
professional advisers and service providers (most notably the Investment
Manager), portfolio companies, lenders, and government and regulatory bodies.
Day-to-day engagement with our stakeholders is principally managed by the
Investment Manager, although, where appropriate, the Directors have direct
touchpoints with stakeholders during the year.
Pursuant to s172 a director of a company must act in a way they consider, in
good faith, would be most likely to promote the success of the company for the
benefit of its members as a whole, and in doing so have regard to the
following factors:
The likely consequences of any decision in the long term
Our purpose and strategy, combined with the responsible investment approach of
the Investment Manager focus on achieving long-term success.
The interests of the company's employees
Whilst we do not have any employees, our purpose includes the intention to
have a positive influence on our portfolio companies and their stakeholders,
which includes the employees of those portfolio companies.
The need to foster the company's business relationships with suppliers,
customers and others
We engage with all our stakeholders, whether directly or through the
Investment Manager, in an open and transparent way to foster strong business
relationships.
The impact of the company's operations on the community and the environment
As owners of infrastructure businesses with majority or significant minority
holdings and representation on their boards, we recognise our ability to
influence our portfolio companies to ensure they act responsibly.
The desirability of maintaining a reputation for high standards of business
conduct
Our success relies on maintaining a positive reputation, and our values and
ethics are aligned to our purpose, our strategy and our ways of working.
The need to act fairly towards members of the company
The Board actively engages with its shareholders and considers their interests
when implementing our strategy.
Read more in our Annual report and accounts 2024, available on our website.
Accounts and other information
Statement of comprehensive income
For the year to 31 March
2024 2023
Notes £m £m
Net gains on investments 7 180 339
Investment income 7 193 156
Interest receivable 1 2
Investment return 374 497
Movement in the fair value of derivative financial instruments 5 73 18
Management and performance fees payable 2 (75) (92)
Operating expenses 3 (4) (3)
Finance costs 4 (35) (16)
Exchange movements 14 (10)
Profit before tax 347 394
Income taxes 6 - -
Profit after tax and profit for the year 347 394
Total comprehensive income for the year 347 394
Earnings per share
Basic and diluted (pence) 14 37.6 44.0
Statement of changes in equity
For the year to 31 March
Stated Total
capital Retained Capital Revenue shareholders'
account reserves(1) reserve(1) reserve(1) equity
2024 Notes £m £m £m £m £m
Opening balance at 1 April 2023 879 1,282 940 - 3,101
Total comprehensive income for the year - - 233 114 347
Dividends paid to shareholders of the Company during the year 15 - - - (106) (106)
Closing balance at 31 March 2024 879 1,282 1,173 8 3,342
Stated Total
capital Retained Capital Revenue shareholders'
account reserves(1) reserve(1) reserve(1) equity
2023 Notes £m £m £m £m £m
Opening balance at 1 April 2022 779 1,282 643 - 2,704
Issue of shares 100 - - - 100
Total comprehensive income for the year - - 316 78 394
Dividends paid to shareholders of the Company during the year 15 - - (19) (78) (97)
Closing balance at 31 March 2023 879 1,282 940 - 3,101
1 The Retained reserves, Capital reserve and Revenue reserve are distributable
reserves. Retained reserves relate to the period prior to 15 October 2018.
Further information can be found in Accounting policy H.
Balance sheet
As at 31 March
2024 2023
Notes £m £m
Assets
Non-current assets
Investments at fair value through profit or loss 7 3,842 3,641
Derivative financial instruments 10 49 29
Total non-current assets 3,891 3,670
Current assets
Derivative financial instruments 10 33 28
Trade and other receivables 8 3 4
Cash and cash equivalents 5 5
Total current assets 41 37
Total assets 3,932 3,707
Liabilities
Non-current liabilities
Derivative financial instruments 10 - (10)
Trade and other payables 12 (32) (48)
Loans and borrowings 11 (510) (501)
Total non-current liabilities (542) (559)
Current liabilities
Derivative financial instruments 10 (5) (8)
Trade and other payables 12 (43) (39)
Total current liabilities (48) (47)
Total liabilities (590) (606)
Net assets 3,342 3,101
Equity
Stated capital account 13 879 879
Retained reserves 1,282 1,282
Capital reserve 1,173 940
Revenue reserve 8 -
Total equity 3,342 3,101
Net asset value per share
Basic and diluted (pence) 14 362.3 336.2
The Financial statements and related Notes were approved and authorised for
issue by the Board of Directors on 7 May 2024 and signed on its behalf by:
Richard Laing
Chair
Cash flow statement
For the year to 31 March
2024 2023
£m £m
Cash flow from operating activities
Purchase of investments (104) (729)
Proceeds from other financial assets - 98
Proceeds from partial realisations of investments 41 322
Proceeds from full realisations of investments 183 104
Investment income¹ 53 30
Fees rebated on investment activities - 1
Operating expenses paid (4) (3)
Interest received 1 3
Management and performance fees paid (86) (72)
Amounts received/(paid) on the settlement of derivative contracts 34 (13)
Net cash flow from operating activities 118 (259)
Cash flow from financing activities
Fees and interest paid on financing activities (35) (16)
Proceeds from issue of share capital - 102
Share issue expenses - (2)
Dividends paid (106) (97)
Drawdown of revolving credit facility 402 2,188
Repayment of revolving credit facility (379) (1,918)
Net cash flow from financing activities (118) 257
Change in cash and cash equivalents - (2)
Cash and cash equivalents at the beginning of the year 5 17
Effect of exchange rate movement - (10)
Cash and cash equivalents at the end of the year 5 5
1 Investment income includes dividends of £9 million (2023: £1 million) and
interest of £44 million (2023: £29 million).
Reconciliation of net cash flow to movement in net debt
For the year to 31 March
2024 2023
£m £m
Change in cash and cash equivalents - (2)
Drawdown of revolving credit facility (402) (2,188)
Repayment of revolving credit facility 379 1,918
Change in net debt resulting from cash flows (23) (272)
Movement in net debt (23) (272)
Net debt at the beginning of the year (496) (214)
Effect of exchange rate movement 14 (10)
Net debt at the end of the year (505) (496)
In the above reconciliation there were no non-cash movements.
Significant accounting policies
Corporate information
3i Infrastructure plc (the 'Company') is a company incorporated in Jersey,
Channel Islands. The Financial statements for the year to 31 March 2024
comprise the Financial statements of the Company as defined in IFRS 10
Consolidated Financial Statements.
The Financial statements were authorised for issue by the Board of Directors
on 7 May 2024.
Statement of compliance
These Financial statements have been prepared in accordance with UK adopted
International Financial Reporting Standards ('IFRS') and International
Accounting Standards.
These Financial statements have also been prepared in accordance with and in
compliance with the Companies (Jersey) Law 1991.
Basis of preparation
In accordance with IFRS 10 (as amended), entities that meet the definition of
an investment entity are required to fair value certain subsidiaries through
profit or loss in accordance with IFRS 9 Financial Instruments, rather than
consolidate their results. The Company does not have any consolidated
subsidiaries, which would include subsidiaries that are not themselves
investment entities and provide investment-related services to the Company.
The Financial statements of the Company are presented in sterling, the
functional currency of the Company, rounded to the nearest million except
where otherwise indicated.
The preparation of 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 experience
and other factors that are believed to be reasonable under the circumstances,
the results of which form the basis of determining the carrying values of
assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Going concern
The Financial statements are prepared on a going concern basis as disclosed in
the Risk report, as the Directors are satisfied that the Company has the
resources to continue in business for the foreseeable future. The Directors
have made an assessment of going concern, taking into account 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 higher 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. As part of this assessment the Directors considered:
• the analysis of the adequacy of the Company's liquidity, solvency
and capital position. The Company manages and monitors liquidity regularly,
ensuring it is adequate and sufficient. At 31 March 2024, liquidity remained
strong at £395 million (2023: £404 million). Liquidity comprised cash and
deposits of £5 million (2023: £5 million) and undrawn revolving credit
facilities of £390 million (2023: £399 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;
• uncertainty around the valuation of the Company's assets as set
out in the Key sources of estimation uncertainties section. The valuation
policy and process was consistent with prior years. This year a key focus of
the portfolio valuations at 31 March 2024 was an assessment of the impact of
the macroeconomic environment on the operational and financial performance of
each portfolio company. In particular, this focused on continued inflationary
pressures, higher current interest rates and the impact on the cost of debt,
volatility in power prices and ongoing geopolitical uncertainties. We have
incorporated into our cash flow forecasts a balanced view of future income
receipts and expenses; and
• the Company's financial commitments. The Company had no investment
commitments at 31 March 2024 (2023: none). The Company had ongoing charges of
£53 million in the year to 31 March 2024, detailed in Table 14 in the
Financial review, which are indicative of the ongoing run rate in the short
term. The Company has a FY24 performance fee accrual of £26 million, a third
of which is payable within the next 12 months. The Company has a FY23
performance fee accrual of £30 million relating to the second and third
instalments of the FY23 fee, the second instalment being due within the next
12 months, an accrual of £18 million relating to the third instalment of the
FY22 fee due within the next 12 months, and a proposed final dividend for FY24
of £55 million. In addition, while not a commitment at 31 March 2024, the
Company has a dividend target for FY25 of 12.65 pence per share.
In addition to the considerations listed above, there are a number of actions
within management control to enhance available liquidity. These include the
timing of certain income receipts from the portfolio, and the level and timing
of new investments or realisations.
Having performed the assessment of going concern, the Directors considered it
appropriate to prepare the Financial statements of the Company on a going
concern basis. The Company has sufficient financial resources and liquidity
and is well placed to manage business risks in the current economic
environment and can continue operations for a period of at least 12 months
from the date of approval of these Financial statements.
Key judgements
The preparation of financial statements in accordance with IFRS requires the
Directors to exercise judgement in the process of applying the accounting
policies defined below. The following policies are areas where a higher degree
of judgement has been applied in the preparation of the Financial statements.
(i) Assessment as investment entity - Entities that meet the definition of an
investment entity within IFRS 10 are required to measure their subsidiaries at
fair value through profit or loss rather than consolidate them unless they
provided investment-related services to the Company. To determine that the
Company continues to meet the definition of an investment entity, the Company
is required to satisfy the following three criteria:
(a) the Company obtains funds from one or more investors for the purpose
of providing those investor(s) with investment management services;
(b) the Company commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation, investment income,
or both; and
(c) the Company measures and evaluates the performance of substantially
all of its investments on a fair value basis.
The Company meets the criteria as follows:
• the stated strategy of the Company is to deliver stable returns to
shareholders through a mix of income yield and capital appreciation;
• the Company provides investment management services and has
several investors who pool their funds to gain access to
infrastructure-related investment opportunities that they might not have had
access to individually; and
• the Company has elected to measure and evaluate the performance of
all of its investments on a fair value basis. The fair value method is used to
represent the Company's performance in its communication to the market,
including investor presentations. In addition, the Company reports fair value
information internally to Directors, who use fair value as the primary
measurement attribute to evaluate performance.
The Directors are of the opinion that the Company has all the typical
characteristics of an investment entity and continues to meet the definition
in the standard. This conclusion will be reassessed on an annual basis.
(ii) Assessment of investments as structured entities - A structured entity is
an entity that has been designed so that voting or similar rights are not the
dominant factor in deciding who controls the entity. Additional disclosures
are required by IFRS 12 for interests in structured entities, whether they are
consolidated or not. The Directors have assessed whether the entities in which
the Company invests should be classified as structured entities and have
concluded that none of the entities should be classified as structured
entities as voting rights are the dominant factor in deciding who controls
these entities.
(iii) Assessment of consolidation requirements - The Company holds significant
stakes in the majority of its investee companies and must exercise judgement
in the level of control of the underlying investee company that is obtained in
order to assess whether the Company should be classified as a subsidiary.
The Company must also exercise judgement in whether a subsidiary provides
investment-related services or activities and therefore should be consolidated
or held at fair value through profit or loss. Further details are shown in
significant accounting policy 'A Classification' below.
The adoption of certain accounting policies by the Company also requires the
use of certain critical accounting estimates in determining the information to
be disclosed in the Financial statements.
Key sources of estimation uncertainties
Valuation of the investment portfolio
The key area where estimates are significant to the Financial statements and
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year is in the
valuation of the investment portfolio. The portfolio is well-diversified by
sector, geography and underlying risk exposures. The key risks to the
portfolio are discussed in further detail in the Risk report.
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, terminal value and the discount rate to be applied to these cash flows.
The methodology for deriving the fair value of the investment portfolio,
including the key estimates, is set out in the Summary of portfolio valuation
methodology section. Refer to Note 7 for further details of the valuation
techniques, significant inputs to those techniques and sensitivity of the fair
value of these investments to the assumptions that have been made.
The discount rate applied to the cash flows in each investment portfolio
company is a key source of estimation uncertainty. The acquisition discount
rate is adjusted to reflect changes in company-specific risks to the
deliverability of future cash flows and is calibrated against secondary market
information and other available data points, including comparable
transactions.
The discount rates applied to the investment portfolio at 31 March 2024 range
from 10.0% to 14.0% (2023: 10.0% to 13.2%) and the weighted average discount
rate applied to the investment portfolio is 11.3% (2023:11.3%). There is no
change to the weighted average discount rate in the year despite the evolution
of the portfolio mix following the realisation of Attero and the follow-on
investments in DNS:NET, Ionisos and Future Biogas.
The cash flows on which the discounted cash flow valuation is based are
derived from detailed financial models. These incorporate a number of
assumptions with respect to individual portfolio companies, including:
forecast new business wins or new orders; cost-cutting initiatives; liquidity
and timing of debtor payments; timing of non-committed capital expenditure and
construction activity; the terms of future debt refinancing; and macroeconomic
assumptions such as inflation and energy prices. Future power price
projections are taken from independent forecasters, and changes in these
assumptions will affect the future value of our energy generating portfolio
companies.
The Summary of portfolio valuation methodology section provides further
details on some of the assumptions that have been made in deriving a balanced
base case of cash flows.
The terminal value attributes a residual value to the portfolio company at the
end of the projected discrete cash flow period based on market comparables.
The terminal value assumptions consider climate change risk and stranded asset
risk. The valuation of each asset has significant estimation in relation to
asset-specific items but there is also consideration given to the impact of
wider megatrends such as the transition to a lower-carbon economy and climate
change.
The effects of climate change, including extreme weather patterns or rising
sea levels in the longer term, could impact the valuation of the assets in the
portfolio in different ways. The Summary of portfolio valuation methodology
section provides further details on some of the assumptions that have been
made in deriving terminal values and some of the risk factors considered in
the cash flow forecasts.
New and amended standards adopted for the current year
Standards and amendments to standards applicable to the Company that became
effective during the year and were adopted by the Company on 1 April 2023 are
listed below:
Amendments to IAS 1 Classification of Liabilities as Current or Non-current (1
January 2024)
Amendments to IAS 1 Non-current Liabilities with Covenants (1 January 2024)
International Tax Reform - Amendments to IAS 12 Pillar Two Model Rules (23 May
2023)
Standards and amendments issued but not yet effective
As at 31 March 2024, the following new or amended standards, applicable to the
Company, which have not been applied in these Financial statements, had been
issued by the International Accounting Standards Board ('IASB') but are yet to
become effective:
IFRS S1 General Requirements for Disclosure of Sustainability-related
Financial Information (1 January 2024)
IFRS S2 Climate-related Disclosures (1 January 2024)
Amendments to the Sustainability Accounting Standard Board ('SASB') standards
to enhance their international applicability (1 January 2025)
IFRS 18 Presentation and Disclosures in Financial Statements (1 January 2027)
The Company intends to adopt these standards when they become effective, but
does not currently anticipate that these standards will have a significant
impact on the Company's Financial statements. Current assumptions regarding
the impact of future standards will remain under consideration in light of
interpretation notes as and when they are issued.
A Classification
(i) Subsidiaries - Subsidiaries are entities controlled by the Company.
Control exists when the Company is exposed, or has rights, to variable returns
from its involvement with the subsidiary entity and has the ability to affect
those returns through its power over the subsidiary entity. In accordance with
the exception under IFRS 10 Consolidated Financial Statements, the Company
only consolidates subsidiaries in the Financial statements if they are deemed
to perform investment-related services and do not meet the definition of an
investment entity. Investments in subsidiaries that do not meet this
definition are accounted for as Investments at fair value through profit or
loss, with changes in fair value recognised in the Statement of comprehensive
income in the year. The Directors have assessed all entities within the
structure and concluded that there are no subsidiaries of the Company that
provide investment-related services or activities.
(ii) Associates - Associates are those entities in which the Company has
significant influence, but not control, over the financial and operating
policies. Investments that are held as part of the Company's investment
portfolio are carried in the Balance sheet at fair value, even though the
Company may have significant influence over those entities.
(iii) Joint ventures - Interests in joint ventures that are held as part of
the Company's investment portfolio are carried in the Balance sheet at fair
value. This treatment is permitted by IFRS 11 and IAS 28, which allows
interests held by venture capital organisations where those investments are
designated, upon initial recognition, as at fair value through profit or loss
and accounted for in accordance with IFRS 9, with changes in fair value
recognised in the Statement of comprehensive income in the year.
B Exchange differences
Transactions entered into by the Company in a currency other than its
functional currency are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are translated to the
functional currency at the exchange rate ruling at the balance sheet date.
Foreign exchange differences arising on translation to the functional currency
are recognised in the Statement of comprehensive income. Foreign exchange
differences relating to investments held at fair value through profit or loss
are shown within the line Net gains on investments. Foreign exchange
differences relating to other assets and liabilities are shown within the line
Exchange movements.
Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date
of the transactions. Non-monetary assets and liabilities denominated in
foreign currencies that are stated at fair value are translated to the
functional currency using exchange rates ruling at the date the fair value was
determined, with the associated foreign exchange difference being recognised
within the unrealised gain or loss on revaluation of the asset or liability.
C Investment portfolio
Recognition and measurement - Investments are recognised and de-recognised on
a date where the purchase or sale of an investment is under a contract whose
terms require the delivery or settlement of the investment.
The Company manages its investments with a view to profiting from the receipt
of investment income and obtaining capital appreciation from changes in the
fair value of investments. Therefore, all unquoted investments are measured at
fair value through profit or loss upon initial recognition and subsequently
carried in the Balance sheet at fair value, applying the Company's valuation
policy. Acquisition-related costs are accounted for as expenses when incurred.
Net gains or losses on investments are the movement in the fair value of
investments between the start and end of the accounting period, or investment
disposal date, or the investment acquisition date and the end of the
accounting period, including divestment-related costs where applicable,
converted into sterling using the exchange rates in force at the end of the
period; and are recognised in the Statement of comprehensive income.
Income
Investment income is that portion of income that is directly related to the
return from individual investments. It is recognised to the extent that it is
probable that there will be an economic benefit and the income can be reliably
measured.
The following specific recognition criteria must be met before the income is
recognised:
• dividends from equity investments are recognised in the Statement
of comprehensive income when the Company's rights to receive payment have been
established. Special dividends are credited to capital or revenue according to
their circumstances;
• interest income from loans that are measured at fair value through
profit or loss is recognised as it accrues by reference to the principal
outstanding and the effective interest rate applicable, which is the rate that
exactly discounts the estimated future cash flows through the expected life of
the financial asset to the asset's carrying value or principal amount. The
remaining changes in the fair value movement of the loans are recognised
separately in the line Net gains on investments in the Statement of
comprehensive income;
• distributions from investments in Limited Partnerships are
recognised in the Statement of comprehensive income when the Company's rights
as a Limited Partner to receive payment have been established; and
• fees receivable represent amounts earned from investee companies
on completion of underlying investment transactions and are recognised on an
accruals basis once entitlement to the revenue has been established.
D Fees
(i) Fees - Fees payable represent fees incurred in the process of acquiring an
investment and are measured on the accruals basis.
(ii) Management fees - A management fee is payable to 3i plc, calculated as a
tiered fee based on the gross investment value of the Company, and is accrued
in the period it is incurred. Further details on how this fee is calculated
are provided in Note 18.
(iii) Performance fee - The Investment Manager is entitled to a performance
fee based on the total return generated in the period in excess of a
performance hurdle of 8%. The fee is payable in three equal annual instalments
and is accrued in full in the period it is incurred. Further details are
provided in Note 18.
(iv) Finance costs - Finance costs associated with loans and borrowings are
recognised on an accruals basis using the effective interest method.
E Treasury assets and liabilities
Short and long-term treasury assets and short and long-term treasury
liabilities are used to manage cash flows and the overall costs of borrowing.
Financial assets and liabilities are recognised in the Balance sheet when the
relevant company entity becomes a party to the contractual provisions of the
instrument.
(i) Cash and cash equivalents - Cash and cash equivalents in the Balance sheet
and Cash flow statement comprise cash at bank, short-term deposits with an
original maturity of three months or less and AAA-rated money market funds.
Money market funds are accounted for at amortised cost under IFRS 9. However,
due to their short-term and liquid nature, this is the same as fair value.
Interest receivable or payable on cash and cash equivalents is recognised on
an accruals basis.
(ii) Bank loans, loan notes and borrowings - Loans and borrowings are
initially recognised at the fair value of the consideration received, net of
issue costs associated with the borrowings. Where issue costs are incurred in
relation to arranging debt finance facilities, these are capitalised and
disclosed within Trade and other receivables and amortised over the life of
the loan.
After initial recognition, loans and borrowings are subsequently measured at
amortised cost using the effective interest method, which is the rate that
exactly discounts the estimated future cash flows through the expected life of
the liabilities. Amortised cost is calculated by taking into account any issue
costs and any discount or premium on settlement.
(iii) Derivative financial instruments - Derivative financial instruments are
used to manage the risk associated with foreign currency fluctuations in the
valuation of the investment portfolio. This is achieved by the use of forward
foreign currency contracts. Such instruments are used for the sole purpose of
efficient portfolio management. All derivative financial instruments are held
at fair value through profit or loss.
Derivative financial instruments are recognised initially at fair value on the
contract date and subsequently remeasured to the fair value at each reporting
date. All changes in the fair value of derivative financial instruments are
taken to the Statement of comprehensive income.
The maturity profile of derivative contracts is measured relative to the
financial contract settlement date of each contract, and the derivative
contracts are disclosed in the Financial statements as either current or
non-current accordingly.
F Other assets
Assets, other than those specifically accounted for under a separate policy,
are stated at their consideration receivable less impairment losses. Such
assets are short-term in nature and the carrying value of these assets is
considered to be approximate to their fair value. Assets are reviewed for
recoverability and impairment using the expected credit loss model simplified
approach. The Company will recognise the asset's lifetime expected credit
losses at each reporting period where applicable in the Statement of
comprehensive income. An impairment loss is reversed at subsequent financial
reporting dates to the extent that the asset's carrying amount does not exceed
its carrying value, had no impairment been recognised.
Assets with maturities less than 12 months are included in current assets and
assets with maturities greater than 12 months after the balance sheet date are
classified as non-current assets.
G Other liabilities
Liabilities, other than those specifically accounted for under a separate
policy, are stated based on the amounts which are considered to be payable in
respect of goods or services received up to the financial reporting date. Such
liabilities are short-term in nature and the carrying value of these
liabilities is considered to be approximate to their fair value.
H Equity and reserves
(i) Share capital - Share capital issued by the Company is recognised at the
fair value of proceeds received and is credited to the Stated capital account.
Direct issue costs net of tax are deducted from the fair value of the proceeds
received.
(ii) Equity and reserves - The Stated capital account of the Company
represents the cumulative proceeds recognised from share issues or new equity
issued on the conversion of warrants made by the Company net of issue costs
and reduced by any amount that has been transferred to Retained reserves, in
accordance with Jersey Company Law, in previous years.
Share capital is treated as an equity instrument, on the basis that no
contractual obligation exists for the Company to deliver cash or other
financial assets to the holder of the instrument.
On 15 October 2018, the Company became UK tax domiciled and, with effect from
that date, was granted UK-approved investment trust status. Financial
statements prepared under IFRS are not strictly required to apply the
provisions of the Statements of Recommended Practice issued by the UK
Association of Investment Companies for the financial statements of Investment
Trust Companies (the 'AIC SORP'). However, where relevant and appropriate, the
Directors have looked to follow the recommendations of the AIC SORP. From this
date, the retained profits of the Company have been applied to two new
reserves, being the Capital reserve and the Revenue reserve. These are in
addition to the existing Retained reserves which incorporate the cumulative
retained profits of the Company (after the payment of dividends) plus any
amounts that have been transferred from the Stated capital account of the
Company to 15 October 2018.
The Directors have exercised their judgement in applying the AIC SORP and a
summary of these judgements is as follows:
• Net gains on investments are applied wholly to the Capital reserve
as they relate to the revaluation or disposal of investments;
• Dividends are applied to the Revenue reserve, except under
specific circumstances where a dividend arises from a return of capital or
proceeds from a refinancing, when they are applied to the Capital reserve;
• Fees payable are applied to the Capital reserve where the service
provided is, in substance, an intrinsic part of an intention to acquire or
dispose of an investment;
• Movement in the fair value of derivative financial instruments is
applied to the Capital reserve as the derivative hedging programme is
specifically designed to reduce the volatility of sterling valuations of the
non-sterling denominated investments;
• Management fees are applied to the Revenue reserve as they reflect
ongoing asset management. Where a transaction fee element is due on the
acquisition of an investment, it is applied to the Capital reserve;
• Performance fees are applied wholly to the Capital reserve as they
arise mainly from capital returns on the investment portfolio;
• Operating costs are applied wholly to the Revenue reserve as there
is no clear connection between the operating expenses of the Company and the
purchase and sale of an investment;
• Finance costs are applied wholly to the Revenue reserve as the
existing borrowing is not directly linked to an investment; and
• Exchange movements are applied to the Revenue reserve where they
relate to exchange on non-portfolio assets.
(iii) Dividends payable - Dividends on ordinary shares are recognised in the
period in which the Company's obligation to make the dividend payment arises.
For the period to 15 October 2018, dividends were deducted from Retained
reserves. For subsequent periods, dividends are deducted first from the
Revenue reserve, then from the Capital reserve, and finally from the Retained
reserves if required.
I Income taxes
Income taxes represent the sum of the tax currently payable, withholding taxes
suffered and deferred tax. Tax is charged or credited in the Statement of
comprehensive income, except where it relates to items charged or credited
directly to equity, in which case the tax is also dealt with in equity.
The tax currently payable is based on the taxable profit for the year. This
may differ from the profit included in the Statement of comprehensive income
because it excludes items of income or expense that are taxable or deductible
in other years, and it further excludes items that are never taxable or
deductible.
To enable the tax charge to be based on the profit for the year, deferred tax
is provided in full on temporary timing differences, at the rates of tax
expected to apply when these differences crystallise. Deferred tax assets are
recognised only to the extent that it is probable that sufficient taxable
profits will be available against which temporary differences can be set off.
In practice, some assets that are likely to give rise to timing differences
will be treated as capital for tax purposes.
Given that capital items are exempt from tax under the Investment Trust
Company rules, deferred tax is not expected to be recognised on these
balances. All deferred tax liabilities are offset against deferred tax assets,
where appropriate, in accordance with the provisions of IAS 12.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Notes to the accounts
1 Operating Segments
In previous years, the Directors reviewed information on a regular basis that
was analysed by portfolio segment; being Economic Infrastructure businesses,
the Projects portfolio and the India Fund, and by geography. Following the
sale of the Projects portfolio and the India Fund reaching the end of its
life, these segments are no longer relevant, and 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 year or the
financial position of the Company at 31 March 2024.
2 Management and performance fees payable
2024 2023
Year to 31 March £m £m
Management fee 49 47
Performance fee 26 45
75 92
Total management and performance fees payable by the Company for the year to
31 March 2024 were £75 million (2023: £92 million). Note 18 provides further
details on the calculation of the management fee and performance fee.
3 Operating expenses
Operating expenses include the following amounts:
2024 2023
Year to 31 March £m £m
Audit fees 0.8 0.6
Directors' fees and expenses 0.6 0.5
In addition to the fees described above, audit fees of £0.05 million (2023:
£0.05 million) are payable by unconsolidated subsidiary entities for the year
to 31 March 2024 to the Company's auditor.
Services provided by the Company's auditor
During the year, the Company obtained the following services from the
Company's auditor, Deloitte LLP.
2024 2023
Audit services £m £m
Statutory audit¹ Company 0.63 0.52
UK and Jersey unconsolidated subsidiaries² 0.05 0.05
0.68 0.57
1 Amounts exclude VAT.
2 These amounts are payable from unconsolidated subsidiary entities and do not
form part of operating expenses but are included in the Net gains on
investments.
Non-audit services
Deloitte LLP and their associates provided non-audit services for fees
totalling £103,902 for the year to 31 March 2024 (2023: £95,891). This
related to agreed-upon procedures work in respect of the management and
performance fees £8,981 (2023: £8,316), agreed-upon procedures work in
respect of Sustainability KPIs for the RCF reporting £29,500 (2023: £27,000)
and the review of the interim financial statements £65,421 (2023: £60,575).
In line with the Company's policy, Deloitte LLP provided non-audit services to
certain investee companies. The fees for these services are ordinarily borne
by the underlying investee companies or unconsolidated subsidiaries, and
therefore are not included in the expenses of the Company. Details on how such
non-audit services are monitored and approved can be found in the Governance
section of the Annual Report and Accounts 2024.
4 Finance costs
2024 2023
Year to 31 March £m £m
Finance costs associated with the debt facilities 32 14
Professional fees payable associated with the arrangement of debt financing 3 2
35 16
The finance costs associated with the debt facilities have increased for the
year to 31 March 2024 as a result of higher average drawings, increased SONIA
and EURIBOR rates and increases in the total available facilities during the
prior year. The average monthly drawn position during the year was £586
million (2023: £368 million) and the average monthly total available
facilities was £314 million (2023: £562 million).
5 Movement in the fair value of derivative financial instruments
2024 2023
Year to 31 March £m £m
Movement in the fair value of foreign exchange forward contracts 73 18
The movement in the fair value of derivative financial instruments is included
within Profit before tax but not included within Investment return.
6 Income taxes
2024 2023
Year to 31 March £m £m
Current taxes
Current year - -
Total income tax charge in the Statement of comprehensive income - -
Reconciliation of income taxes in the Statement of comprehensive income
The tax charge for the year is different from the standard rate of corporation
tax in the UK, currently 25% (2023: 19%), and the differences are explained
below:
2024 2023
Year to 31 March £m £m
Profit before tax 347 394
Profit before tax multiplied by rate of corporation tax in the UK of 25% 87 75
(2023: 19%)
Effects of:
Non-taxable capital profits due to UK-approved investment trust company status (63) (67)
Non-taxable dividend income (2) -
Dividends designated as interest distributions (21) (9)
Unrecognised deferred tax asset on temporary differences - 1
Utilisation of previously unrecognised tax losses (1) -
Total income tax charge in the Statement of comprehensive income - -
The Company's affairs are directed so as to allow it to meet the requisite
conditions to continue to operate as an approved investment trust company for
UK tax purposes. The approved investment trust status allows certain capital
profits of the Company to be exempt from tax in the UK and also permits the
Company to designate the dividends it pays, wholly or partly, as interest
distributions. These features enable approved investment trust companies to
ensure that their investors do not ultimately suffer double taxation of their
investment returns, ie once at the level of the investment fund vehicle and
then again in the hands of the investors.
With effect from 1 April 2023, the UK corporation tax rate applicable to large
companies increased from 19% to 25%. Should the Company recognise any deferred
tax assets and liabilities, a rate of 25% would be used.
7 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 31 March 2024. For all other assets and
liabilities, their carrying value approximates to fair value. During the year
ended 31 March 2024, there were no transfers of financial instruments between
levels of the fair value hierarchy (2023: none).
Trade and other receivables in the Balance sheet includes £2 million of
deferred finance costs relating to the arrangement fee for the RCF (2023: £4
million). This has been excluded from the table below as it is not categorised
as a financial instrument.
Financial instruments classification
As at 31 March 2024
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)
As at 31 March 2023
Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets
Investments at fair value through profit or loss - - 3,641 3,641
Trade and other receivables - - - -
Derivative financial instruments - 57 - 57
- 57 3,641 3,698
Financial liabilities
Derivative financial instruments - (18) - (18)
- (18) - (18)
Reconciliation of financial instruments categorised within Level 3 of fair
value hierarchy
As at 31 March
2024 2023
Level 3 fair value reconciliation £m £m
Opening fair value 3,641 2,873
Additions 256 824
Disposal proceeds and repayment (224) (426)
Movement in accrued income (11) 31
Fair value movement (including exchange movements) 180 339
Closing fair value 3,842 3,641
The fair value movement (including exchange movements) is equal to the Net
gains on investments shown in the Statement of comprehensive income. All
unrealised movements on investments and foreign exchange movements are
recognised in profit or loss in the Statement of comprehensive income during
the year and are attributable to investments held at the end of the year.
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 or other third-party approvals have been received. It
is not possible to identify with certainty whether any investments may be sold
within one year.
Investment income of £193 million (2023: £156 million) comprises dividend
income of £9 million (2023: £1 million) and interest of £184 million (2023:
£155 million).
Unquoted investments
The Company invests in private companies which are not quoted on an active
market. These are measured in accordance with the IPEV 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 Summary of portfolio valuation methodology
section.
The Company's policy is to fair value both the equity and shareholder debt
investments in infrastructure assets together where they will be managed and
valued as a single investment, were invested at the same time and cannot be
realised separately. The Directors consider that equity and debt share the
same characteristics and risks and they are therefore treated as a single unit
of account for valuation purposes and a single class for disclosure purposes.
As at 31 March 2024, the fair value of unquoted investments was £3,842
million (2023: £3,641 million). Individual portfolio asset valuations are
shown in the Portfolio summary.
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 rates assumption used to project the
future cash flows, and the forecast cash flows themselves. The sensitivity to
the inflation rate and interest rates is described below, and the sensitivity
to the forecast cash flows is captured in the Market risk section in Note 9.
A discussion of discount rates applied can be found in the Summary of
portfolio valuation methodology section. Increasing the discount rate used in
the valuation of each asset by 1% would reduce the value of the portfolio by
£352 million (2023: £296 million). Decreasing the discount rate used in the
valuation of each asset by 1% would increase the value of the portfolio by
£404 million (2023: £343 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
inflation rate assumption across all jurisdictions is 2.0% (2023: 2.0%). The
long-term RPI assumption for the UK is 2.5% (2023: 2.5%). The impact of
increasing the short-term inflation rate assumption by 1% for the next two
years would increase the value of the portfolio by £54 million (2023: £47
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 £56 million (2023: £52 million). The 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 result in
consequential changes to other assumptions used in the valuation of each
asset.
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 £220 million (2023:
£182 million). Decreasing the interest rate assumption for unhedged
borrowings used in the valuation of each asset by 1% would increase the value
of the portfolio by £214 million (2023: £175 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.
8 Trade and other receivables
As at 31 March
2024 2023
£m £m
Current assets
Other receivables 1 -
Capitalised finance costs 2 4
3 4
9 Financial risk management
A full review of the Company's objectives, policies and processes for managing
and monitoring risk is set out in the Risk report. This Note provides further
detail on financial risk management, cross-referring to the Risk report where
applicable and providing further quantitative data on specific financial
risks.
Each investment made by the Company is subject to a full risk assessment
through a consistent investment approval process. The Board's Management
Engagement Committee, Audit and Risk Committee and the Investment Manager's
investment process are part of the overall risk management framework of the
Company.
The funding objective of the Company is that each category of investment ought
to be broadly matched with liabilities and shareholders' funds according to
the risk and maturity characteristics of the assets, and that funding needs
are to be met ahead of planned investment.
Capital structure
The Company has a continuing commitment to capital efficiency. The capital
structure of the Company consists of cash held on deposit and in AAA-rated
money market funds, borrowing facilities and shareholders' equity. The
Company's Articles require its outstanding borrowings, including any financial
guarantees to support subsequent obligations, to be limited to 50% of the
gross assets of the Company. The type and maturity of the Company's borrowings
are analysed in Note 11 and the Company's equity is analysed into its various
components in the Statement of changes in equity. Capital is managed so as to
maximise the return to shareholders, while maintaining a strong capital base
that ensures that the Company can operate effectively in the marketplace and
sustain future development of the business. The Board is responsible for
regularly monitoring capital requirements to ensure that the Company is
maintaining sufficient capital to meet its future investment needs.
The Company is regulated by the Jersey Financial Services Commission under the
provisions of the Collective Investment Funds (Jersey) Law 1988 as a listed
closed-ended collective investment fund and is not required as a result of
such regulation to maintain a minimum level of capital.
Capital is allocated for investment in infrastructure across the UK and
continental Europe. As set out in the Company's investment policy, the maximum
exposure to any one investment is 25% of gross assets (including cash
holdings) at the time of investment.
Credit risk
The Company is subject to credit risk on the debt component of its unquoted
investments, cash, deposits, derivative contracts and receivables. The maximum
exposure to credit risk as a result of counterparty default equates to the
current carrying value of these financial assets. Throughout the year and the
prior year, the Company's cash and deposits were held with a variety of
counterparties, principally in AAA-rated money market funds. The
counterparties selected for the derivative financial instruments were all
banks with a minimum of a BBB+ credit rating with at least one major rating
agency.
The credit quality of unquoted investments, which are held at fair value and
include debt and equity elements, is based on the financial performance of the
individual portfolio companies. The credit risk relating to these assets is
based on their enterprise value and is reflected through fair value movements.
This incorporates the impact from macroeconomic factors such as inflation and
interest rate rises and the volatility in energy prices. The performance of
underlying investments is monitored by the Board to assess future
recoverability.
For those assets and income entitlements that are not past due, it is believed
that the risk of default is small and capital repayments and interest payments
will be made in accordance with the agreed terms and conditions of the
investment. If the portfolio company has failed and there is no expectation to
recover any residual value from the investment, the Company's policy is to
record an impairment for the full amount of the loan. When the net present
value of the future cash flows predicted to arise from the asset, discounted
using the effective interest rate method, implies non-recovery of all or part
of the Company's investment, a fair value movement is recorded equal to the
valuation shortfall.
As at 31 March 2024, the Company had no loans or receivables or debt
investments considered past due (2023: nil).
The Company actively manages counterparty risk. Counterparty limits are set
and closely monitored by the Board and a regular review of counterparties is
undertaken by the Investment Manager and reported to the Board. As at 31 March
2024, the Company did not consider itself to have a significant exposure to
any one counterparty and held deposits and derivative contracts with a number
of different counterparties to reduce counterparty risk (2023: same).
Due to the size and nature of the investment portfolio, there is the potential
for concentration risk. This risk is managed by diversifying the portfolio by
sector and geography.
Liquidity risk
Further information on how liquidity risk is managed is provided in the Risk
report. The table below analyses the maturity of the Company's contractual
liabilities.
As at 31 March 2024
Payable Due within Due between Due between
on demand 1 year 1 and 2 years 2 and 5 years Total
£m £m £m £m £m
Liabilities
Loans and borrowings¹ - (29) (29) (528) (586)
Trade and other payables (1) (42) (23) (9) (75)
Derivative contracts - - - (5) (5)
Total undiscounted financial liabilities (1) (71) (52) (542) (666)
1 Loans and borrowings include undrawn commitment fees and interest payable on
the RCF referred to in Note 11.
As at 31 March 2023
Payable Due within Due between Due between
on demand 1 year 1 and 2 years 2 and 5 years Total
£m £m £m £m £m
Liabilities
Loans and borrowings¹ - (26) (26) (517) (569)
Trade and other payables (4) (35) (33) (15) (87)
Derivative contracts - (4) (6) (8) (18)
Total undiscounted financial liabilities (4) (65) (65) (540) (674)
1 Loans and borrowings include undrawn commitment fees and interest payable on
the RCF referred to in Note 11.
The derivative contracts liability shown is the net cash flow expected to be
paid on settlement. In order to manage the contractual liquidity risk, the
Company has free cash and debt facilities in place.
Market risk
The valuation of the Company's investment portfolio is largely dependent on
the underlying trading performance of the companies within the portfolio, but
the valuation of the portfolio and the carrying value of other items in the
Financial statements can also be affected by interest rate, currency and
market price fluctuations. The Company's sensitivities to these fluctuations
are set out below.
(i) Interest rate risk
Further information on how interest rate risk is managed is provided in the
Risk report.
An increase of 100 basis points in interest rates over 12 months (2023: 100
basis points) would lead to an approximate decrease in net assets and net
profit of the Company of £5 million (2023: £5 million). This exposure
relates principally to changes in interest payable on the drawn RCF balance at
the year end. The average cash balance of the Company, which is more
representative of the cash balance during the year, was £30 million (2023:
£29 million) and the weighted-average interest earned was 3.8% (2023:1.6%).
In addition, the Company has indirect exposure to interest rates through
changes to the financial performance of portfolio companies caused by interest
rate fluctuations as disclosed in Note 7. This risk is considered a component
of market risk described in section (iii). The Company does not hold any fixed
rate debt investments or borrowings and is therefore not exposed to fair value
interest rate risk.
(ii) Currency risk
Further information on how currency risk is managed is provided in the Risk
report. The currency denominations of the Company's net assets are shown in
the table below. The sensitivity analysis demonstrates the exposure of the
Company's net assets to movements in foreign currency exchange rates. The
hedging strategy is discussed in the Financial review.
As at 31 March 2024
Sterling(1) Euro NOK DKK US dollar Total
£m £m £m £m £m £m
Net assets 693 1,408 346 539 356 3,342
Sensitivity analysis
Assuming a 10% appreciation in sterling against the euro, Norwegian krona,
Danish krona and US dollar exchange rates:
Impact of exchange movements on net profit and net assets 104 (128) (31) (49) (32) (136)
1 Sterling impact relates to the impact of fair value movement in derivatives
held by the Company to hedge foreign currency fluctuations in the valuation of
the investment portfolio. The notional amount of the derivatives is disclosed
in Note 10.
As at 31 March 2023
Sterling(1) Euro NOK DKK US dollar Total
£m £m £m £m £m £m
Net assets 506 1,486 293 489 327 3,101
Sensitivity analysis
Assuming a 10% appreciation in sterling against the euro, Norwegian krona,
Danish krona and US dollar exchange rates:
Impact of exchange movements on net profit and net assets 159 (135) (27) (44) (30) (77)
1 Sterling impact relates to the impact of fair value movement in derivatives
held by the Company to hedge foreign currency fluctuations in the valuation of
the investment portfolio. The notional amount of the derivatives is disclosed
in Note 10.
The impact of an equivalent depreciation in sterling against the euro, NOK,
DKK and US dollar exchange rates has the inverse impact on net profit and net
assets from that shown above. The risk exposure at the year end is considered
to be representative of this year as a whole.
(iii) Market risk
Further information about the management of external market risk and its
impact on price or valuation, which arises principally from unquoted
investments, is provided in the Risk report. A 10% increase in the fair value
of those investments would have the following direct impact on net profit and
net assets. The impact of a change in all cash flows has an equivalent impact
on the fair value, as set out below.
2024 2023
Year to 31 March £m £m
Increase in net profit and net assets 384 364
The impact of a 10% decrease in the fair value of those investments would have
the inverse impact on net profit and net assets from that shown above. The
risk exposure at the year end is considered to be representative of this year
as a whole.
By the nature of the Company's activities, it has large exposures to
individual assets that are susceptible to movements in price. This risk
concentration is managed within the Company's investment strategy, as
discussed in the Risk report.
(iv) Fair values
The fair value of the investment portfolio is described in detail in the
Summary of portfolio valuation methodology section and in Note 7. The fair
values of the remaining financial assets and liabilities approximate to their
carrying values (2023: same).
The sensitivity analysis in respect of the interest rate, currency and market
price risks is considered to be representative of the Company's exposure to
financial risks throughout the period to which they relate (2023: same).
10 Derivative financial instruments
As at 31 March
2024 2023
£m £m
Non-current assets
Foreign exchange forward contracts 49 29
Current assets
Foreign exchange forward contracts 33 28
Non-current liabilities
Foreign exchange forward contracts - (10)
Current liabilities
Foreign exchange forward contracts (5) (8)
Foreign exchange forward contracts
The Company uses foreign exchange forward contracts to minimise the effect of
fluctuations in the investment portfolio from movements in exchange rates, and
also to fix the value of certain expected future cash flows arising from
distributions made by investee companies.
The fair value of these contracts is recorded in the Balance sheet. No
contracts are designated as hedging instruments and consequently all changes
in fair value are taken through profit or loss.
As at 31 March 2024, the notional amount of the forward foreign exchange
contracts held by the Company was £1,814 million (2023: £1,982 million).
11 Loans and borrowings
The Company has a £900 million RCF at 31 March 2024. In September 2023, the
maturity of the RCF was extended by a year to November 2026 with no changes to
terms.
The RCF is secured by a floating charge over the bank accounts of the Company.
Interest is payable at SONIA or EURIBOR 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 31 March 2024, the
Company had £510 million of drawings under the RCF (2023: £501 million). The
RCF has one financial covenant: 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.
12 Trade and other payables
As at 31 March
2024 2023
£m £m
Non-current liabilities
Performance fee 32 48
Current liabilities
Management and performance fees 42 37
Accruals and other creditors 1 2
75 87
The carrying value of all liabilities is representative of fair value (2023:
same).
13 Issued capital
As at 31 March 2024 As at 31 March 2023
Number £m Number £m
Authorised, issued and fully paid
Opening balance 922,350,000 1,598 891,434,010 1,496
Issue of ordinary shares - - 30,915,990 102
Closing balance 922,350,000 1,598 922,350,000 1,598
Reconciliation to Stated capital account
As at 31 March 2024 As at 31 March 2023
£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
As at 31 March 2024, the residual value on the Stated capital account was
£879 million (2023: £879 million).
14 Per share information
The earnings and net asset value per share attributable to the equity holders
of the Company are based on the following data:
Year to 31 March 2024 2023
Earnings per share (pence)
Basic and diluted 37.6 44.0
Earnings (£m)
Profit after tax for the year 347 394
Number of shares (million)
Weighted average number of shares in issue 922.4 895.2
Number of shares at the end of the year 922.4 922.4
As at 31 March
2024 2023
£m £m
Net asset value per share (pence)
Basic and diluted 362.3 336.2
Net assets (£m)
Net assets 3,342 3,101
15 Dividends
Declared and paid during the year Year to 31 March 2024 Year to 31 March 2023
Pence per share £m Pence per £m
share
Interim dividend paid on ordinary shares 5.950 55 5.575 50
Prior year final dividend paid on ordinary shares 5.575 51 5.225 47
11.525 106 10.800 97
The Company proposes paying a final dividend of 5.950 pence per share (2023:
5.575 pence) which will be payable to those shareholders that are on the
register on 14 June 2024. On the basis of the shares in issue at year end,
this would equate to a total final dividend of £55 million (2023: £51
million).
The final dividend is subject to approval by shareholders at the AGM in July
2024 and has therefore not been accrued in these Financial statements.
16 Commitments
As at 31 March 2024, the Company had no commitments (2023: nil).
17 Contingent liabilities
As at 31 March 2024, the Company had no contingent liabilities (2023: nil).
18 Related parties
Transactions between 3i Infrastructure and 3i Group
3i Group holds 29.2% (2023: 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 year, 3i Group received dividends of £31
million (2023: £29 million) from the Company.
In 2007 the Company committed US$250 million to the India Fund to invest in
the Indian infrastructure market. 3i Group also committed US$250 million to
the India Fund. The India Fund has reached the end of its life and moved into
liquidation and the outstanding commitment is no longer callable. Therefore,
no commitments were drawn down by the India Fund from the Company during the
year (2023: nil).
3i Investments plc, a subsidiary of 3i Group, is the Company's Alternative
Investment Fund Manager and provides its services under an Investment
Management Agreement ('IMA'). 3i Investments plc also acts as the Investment
Manager of the India Fund. 3i plc, another subsidiary of 3i Group, together
with 3i Investments plc, provides support services to the Company (which are
ancillary and related to the investment management service), which it is doing
pursuant to the terms of the IMA.
Fees under the IMA consist of a tiered management fee and time weighting of
the management fee calculation and a one-off transaction fee of 1.2% payable
in respect of new investments. The applicable tiered rates are shown in the
table below. The management fee is payable quarterly in advance.
Gross investment value Applicable tier rate
Up to £1.25bn 1.4%
£1.25bn to £2.25bn 1.3%
Above £2.25bn 1.2%
For the year to 31 March 2024, £49 million (2023: £47 million) was payable,
including one-off transaction fees payable in respect of new investments, and
advance payments of £49 million were made, resulting in an amount due to 3i
plc of nil (2023: £2 million). In consideration of the provision of support
services under the IMA, the Company pays the Investment Manager an annual
fixed fee. The cost for the support services incurred for the year to 31 March
2024 was £1 million (2023: £1 million). There was no outstanding balance
payable as at 31 March 2024 (2023: 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 exceeded for the year to 31 March 2024
and therefore a performance fee of £26 million was recognised (2023: £45
million). The outstanding balance payable as at 31 March 2024 was £74 million
(2023: £83 million), which includes the second and third instalments of the
FY23 fee and the third instalment of the FY22 fee.
Year Performance Outstanding Payable
fee
balance at 31 March
in FY25
(£m)
(£m)
(£m)
FY24 26 26 9
FY23 45 30 15
FY22 54 18 18
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.
Regulatory information relating to fees
3i Investments plc acts as the AIFM to the Company. In performing the
activities and functions of the AIFM, the AIFM or another 3i company may pay
or receive fees, commissions or non-monetary benefits to or from third parties
of the following nature:
• Payments for third-party services: The Company may retain the
services of third-party consultants; typically this is for an independent
director or other investment management specialist expertise. The amount paid
varies in accordance with the nature of the service and the length of the
service period and is usually, but not always, paid or reimbursed by the
portfolio companies. The payment may involve a flat fee, retainer or success
fee. Such payments, where borne by the Company, are included within Operating
expenses. In some circumstances, the AIFM may retain the services of
third-party consultants which are paid for by the AIFM and not recharged to
the Company; and
• Payments for services from 3i companies: Other 3i companies may
provide investment advisory and other services to the AIFM or other 3i
companies and receive payment for such service.
19 Unconsolidated subsidiaries and related undertakings
Name Place of incorporation and operation Ownership
interest
Investment holding companies:
3i Tampnet Holdings Limited UK 100%
3iN Attero Holdco Limited UK 100%
3i Amalthea Topco Limited UK 100%
3i Green Gas Limited Jersey 100%
3i Envol Limited Jersey 72%
Oystercatcher Holdco Limited UK 100%
Oystercatcher Luxco 1 S.à r.l. Luxembourg 100%
Oystercatcher Luxco 2 S.à r.l. Luxembourg 100%
3i Infrastructure (Luxembourg) S.à r.l. (Dissolved in the year) Luxembourg 100%
3i Infrastructure (Luxembourg) Holdings S.à r.l. (Dissolved in the year) Luxembourg 100%
3i India Infrastructure Fund A LP UK 100%
DNS:NET Group:
DNS Holdings GmbH Germany 64%
DNS Bidco GmbH Germany 64%
DNS:NET Internet Service GmbH Germany 64%
DNS:NET Netzgesellschaft I Verwalkungs GmbH Germany 64%
DNS:NET Netzgesellschaft I GmbH & Co. KG Germany 64%
DNS:NET Breitband Internet GmbH Germany 64%
Antennen-Schulze GmbH Germany 64%
ESVAGT Group:
ERRV Holdings ApS Denmark 83%
ERRV ApS Denmark 83%
ESVAGT A/S Denmark 83%
ESVAGT Holdings Inc USA 83%
ESVAGT Norge AS Norway 83%
ESVAGT Holdings Ltd UK 83%
ESVAGT UK Ltd UK 83%
Future Biogas Group:
Future Biogas Holdco Limited UK 81%
Future Biogas Midco Limited UK 81%
Future Biogas Bidco Limited UK 81%
Future Biogas Group Limited UK 81%
Future Biogas Limited UK 81%
Future Biogas Systems Limited UK 81%
Ironstone Energy Limited UK 81%
Moor Bio-Energy Limited UK 81%
Little Oak Biogas Limited UK 81%
Heath Farm Energy Limited UK 81%
Ridge Road Energy Limited UK 81%
GCX Group:
GCX Topco Limited UK 98%
GCX Midco Limited UK 98%
GCX Bidco Limited UK 98%
GCX Holdings Limited Bermuda 98%
GCX Global Limited Bermuda 98%
FLAG Telecom Limited Bermuda 98%
FLAG Telecom Asia Limited Hong Kong 98%
FLAG Telecom UK Limited UK 98%
GCX India Services Limited India 98%
FLAG Atlantic France SAS France 98%
FLAG Telecom Deutschland GmbH Germany 98%
FLAG Atlantic UK Limited UK 98%
FLAG Telecom Nederland B.V. The Netherlands 98%
FLAG Telecom Singapore Pte Limited Singapore 98%
GCXG India Private Limited India 98%
FLAG Telecom Taiwan Limited Taiwan 59%
FLAG Telecom Development Limited Bermuda 98%
FLAG Telecom Hellas AE Greece 98%
FLAG Telecom Development Services Company LLC Egypt 98%
FLAG Telecom Network Services DAC Ireland 98%
FLAG Telecom Ireland DAC Ireland 98%
FLAG Telecom Ireland Network DAC Ireland 98%
FLAG Telecom Network USA Limited USA 98%
FLAG Telecom España Network SAU Spain 98%
FLAG Telecom Japan Limited Japan 98%
GCX Managed Services Limited Bermuda 98%
Vanco Group Limited UK 98%
Vanco UK Limited UK 98%
Vanco Global Limited UK 98%
Vanco International Limited UK 98%
Vanco ROW Limited UK 98%
Vanco GmbH Germany 98%
Vanco SAS France 98%
Vanco (Asia Pacific) Pte Limited Singapore 98%
Vanco SpZoo Poland 98%
Vanco NV Belgium 98%
Euronet Spain SA Spain 98%
Vanco Switzerland A.G. Switzerland 98%
Vanco Sweden AB Sweden 98%
Vanco Srl Italy 98%
Net Direct SA (Proprietary) Limited South Africa 98%
Vanco (Shanghai) Co. Ltd China 98%
Vanco Japan KK Japan 98%
Vanco South America Ltda Brazil 98%
Vanco Australasia Pty Limited Australia 98%
Vanco BV The Netherlands 98%
Vanco Deutschland GmbH Germany 98%
VNO Direct Limited UK 98%
Vanco US, LLC USA 98%
Vanco Solutions Inc. USA 98%
Yipes Holdings, Inc. USA 98%
Reliance Globalcom Services Inc. USA 98%
YTV Inc. USA 98%
Infinis Group:
Infinis Energy Group Holdings Limited UK 100%
Infinis Energy Management Limited UK 100%
Infinis Limited UK 100%
Infinis (Re-Gen) Limited UK 100%
Novera Energy (Holdings 2) Limited UK 100%
Novera Energy Generation No. 1 Limited UK 100%
Novera Energy Operating Services Limited UK 100%
Gengas Limited UK 100%
Bidston Methane Limited UK 100%
Novera Energy Generation No. 2 Limited UK 100%
Renewable Power Generation Limited UK 100%
Costessey Energy Limited UK 100%
Infinis Alternative Energies Limited UK 100%
Infinis Energy Services Limited UK 100%
Infinis Energy Storage Limited UK 100%
Infinis (Shoreside) Limited UK 100%
Balbougie Energy Centre II Limited UK 100%
Barbican Holdco Limited UK 100%
Barbican Bidco Limited UK 100%
Alkane Energy Limited UK 100%
Alkane Energy UK Limited UK 100%
Seven Star Natural Gas Limited UK 100%
Regent Park Energy Limited UK 100%
Leven Power Limited UK 100%
Rhymney Power Limited UK 100%
Alkane Energy CM Holdings Limited UK 100%
Alkane Energy CM Limited UK 100%
Infinis Solar Holdings Limited UK 100%
Infinis Solar Developments Limited UK 100%
Durham Solar 1 Limited UK 100%
Infinis Solar Limited UK 100%
ND Solar Enterprise Limited UK 100%
Aura Power Solar UK6 Limited UK 100%
Ionisos Group:
Epione Holdco SAS France 96%
Epione Bidco SAS France 96%
Financière 3TA SAS France 96%
Financière 3TB SAS France 96%
Ionisos Holdco SAS France 96%
Ionisos Bidco SAS France 96%
Ionisos Mutual Services SAS France 96%
Ionisos SAS France 96%
Ionisos GmbH Germany 96%
Ionmed Esterilizacion SA Spain 96%
Scandinavian Clinics Estonia OÜ Estonia 96%
Steril Milano Srl (in liquidation as of 31 March 2024) Italy 96%
EBD Irradiation Services AG Switzerland 96%
Joulz Group:
Joulz Holdco B.V. The Netherlands 99%
Joulz Manco B.V. The Netherlands 83%
Joulz Bidco B.V. The Netherlands 99%
Joulz Diensten B.V. The Netherlands 99%
Joulz Meetbedrijf B.V. The Netherlands 99%
Joulz Infradiensten B.V. The Netherlands 99%
Joulz Laadoplossingen B.V. The Netherlands 99%
Joulz Zonne-energie B.V. The Netherlands 99%
Joulz Zonne-energie Beheer B.V. The Netherlands 99%
Dutch Durables Energy 2 B.V. The Netherlands 99%
Dutch Durables Energy 5 B.V. The Netherlands 99%
Dutch Durables Energy 6 B.V. The Netherlands 99%
SRL Traffic Systems Group:
Amalthea Holdco Limited UK 92%
Amalthea Midco Limited UK 92%
Amalthea Bidco Limited UK 92%
Jupiter Bidco Limited UK 92%
SRL Traffic Systems Limited UK 92%
SRL GmbH Germany 92%
SRL Traffic Systems Limited Ireland 92%
TCR Group:
Envol Holdings Limited Jersey 69%
Envol Midco Limited UK 69%
Envol Investments Limited UK 69%
TCR Group Shared Services SDN, BHD. Malaysia 69%
TCR New Zealand New Zealand 69%
TCR APAC (Singapore) Pte Limited Singapore 69%
TCR Ground Support Equipment Canada Inc. Canada 69%
DCL Aviation Group Inc. Canada 69%
TCR GSE Singapore Pte Limited Singapore 69%
TCR AD LLC UAE 69%
TCR Middle East LLC Saudi Arabia 69%
TCR CapVest S.A. Belgium 69%
TCR GSE Australia PLY Limited Australia 69%
EEM Solution PLY Limited Australia 69%
Adaptalift GSE Pty Limited Australia 69%
Adaptalift GSE Singapore Pte Limited Singapore 69%
TCR Solution SDN, BHD. Malaysia 69%
TCR International USA, Inc. USA 69%
TCR Americas LLC USA 69%
TCR International N.V. Belgium 69%
KES B.V. The Netherlands 69%
Trailer Construction & Repairing Netherland (TCR) B.V. The Netherlands 69%
TCR Belgium N.V. Belgium 69%
TCR France SAS France 69%
Aerobatterie SAS France 69%
Aerolima IMMS S.à.r.l. Luxembourg 69%
Aerolima Ingénierie SAS France 69%
TCR UK Limited UK 69%
Technical Maintenance Solutions UK Limited UK 69%
TCR-GmbH Trailer, Construction, Repairing and Equipment Rental Germany 69%
Trailer Construction & Repairing Ireland Limited Ireland 69%
TCR Italia S.p.A. Italy 69%
TCR Norway AS Norway 69%
TCR Sweden AB Sweden 69%
TCR Denmark ApS Denmark 69%
TCR Finland OY Finland 69%
Trailer Construction and Repairing Iberica S.A.U. Spain 69%
Dormant entities:
3i WIG Limited Jersey 100%
3i Osprey LP UK 69%
The list above comprises the unconsolidated subsidiary undertakings of the
Company as at 31 March 2024.
There are no current commitments or intentions to provide financial or other
support to any of the unconsolidated subsidiaries, including commitments or
intentions to assist the subsidiaries in obtaining financial support, except
for those disclosed in Note 16 (2023: none). No such financial or other
support was provided during the year (2023: none).
Investment policy (unaudited)
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 making the
investment. It is expected that most individual investments will exceed £50
million. In some cases, the total amount required for an individual
transaction may exceed the maximum amount that the Company is permitted to
commit to a single investment. In such circumstances, the Company may consider
entering into co-investment arrangements with 3i Group (or other investors who
may also be significant shareholders), pursuant to which 3i Group and its
subsidiaries (or such other investors) may co-invest on the same financial and
economic terms as the Company. The suitability of any such co-investment
arrangements will be assessed on a transaction-by-transaction basis.
Depending on the size of the relevant investment and the identity of the
relevant co-investor, such a co-investment arrangement may be subject to the
related party transaction provisions contained in the Listing Rules and may
therefore require shareholder consent.
The Company's Articles require its outstanding borrowings, including any
financial guarantees to support subsequent obligations, to be limited to 50%
of the gross assets of the Company (valuing investments on the basis included
in the Company's accounts).
In accordance with Listing Rules requirements, the Company will only make a
material change to its investment policy with the approval of shareholders.
Statement of Directors' responsibilities
In accordance with the FCA's Disclosure Guidance and Transparency Rules, the
Directors confirm to the best of their knowledge that:
a) the Financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company taken as a whole; and
b) the Annual report and accounts include a fair review of the development
and performance of the business and the position of the Company taken as a
whole, together with a description of the principal risks and uncertainties
faced by the Company.
The Directors of the Company and their functions are listed below. The
Directors have acknowledged their responsibilities in relation to the
Financial statements for the year to 31 March 2024.
Richard Laing
Chair
7 May 2024
Board of Directors and their functions
Richard Laing, Non-executive Chair and Chair of the Nominations Committee and
the Management Engagement Committee.
Stephanie Hazell, Senior Independent Director and Chair of the Remuneration
Committee.
Wendy Dorman, Independent non-executive Director and Chair of the Audit and
Risk Committee.
Doug Bannister, Independent non-executive Director.
Samantha Hoe-Richardson, Independent non-executive Director.
Martin Magee, Independent non-executive Director.
Jennifer Dunstan, Non-executive Director.
Portfolio valuation methodology (unaudited)
A description of the methodology used to value the investment portfolio of the
Company is set out below in order to provide more detailed information than is
included within the accounting policies and the Investment Manager's review
for the valuation of the portfolio. The methodology complies in all material
aspects with the International Private Equity and Venture Capital valuation
guidelines which are endorsed by the British Private Equity and Venture
Capital Association and Invest Europe.
Basis of valuation
Investments are reported at the Directors' estimate of fair value at the
reporting date in compliance with IFRS 13 Fair Value Measurement. Fair value
is defined as 'the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date'.
General
In estimating fair value, the Directors seek to use a methodology that is
appropriate in light of the nature, facts and circumstances of the investment
and its materiality in the context of the overall portfolio. The methodology
that is the most appropriate may consequently include adjustments based on
informed and experience-based judgements, and will also consider the nature of
the industry and market practice. Methodologies are applied consistently from
period to period, except where a change would result in a better estimation of
fair value. Given the uncertainties inherent in estimating fair value, a
degree of caution is applied in exercising judgements and making necessary
estimates.
Investments may include portfolio assets and other net assets/liabilities
balances. The methodology for valuing portfolio assets is set out below. Any
net assets/liabilities within intermediate holding companies are valued in
line with the Company accounting policy and held at fair value or approximate
to fair value.
Quoted investments
Quoted equity investments are valued at the closing bid price at the reporting
date. In accordance with International Financial Reporting Standards, no
discount is applied for liquidity of the stock or any dealing restrictions.
Quoted debt investments will be valued using quoted prices provided by
third-party broker information where reliable or will be held at cost less
fair value adjustments.
Unquoted investments
Unquoted investments are valued using one of the following methodologies:
• Discounted Cash Flow ('DCF');
• Proportionate share of net assets;
• Sales basis; and
• Cost less any fair value adjustments required.
DCF
DCF is the primary basis for valuation. In using the DCF basis, fair value is
estimated by deriving the present value of the investment using reasonable
assumptions and estimation of expected future cash flows, including contracted
and uncontracted revenues, expenses, capital expenditure, financing and
taxation, and the terminal value and date, and the appropriate risk-adjusted
discount rate that quantifies the risk inherent to the investment. The
terminal value attributes a residual value to the investee company at the end
of the projected discrete cash flow period. The discount rate will be
estimated for each investment derived from the market risk-free rate, a
risk-adjusted premium and information specific to the investment or market
sector.
Proportionate share of net assets
Where the Company has made investments into other infrastructure funds, the
value of the investment will be derived from the Company's share of net assets
of the fund based on the most recent reliable financial information available
from the fund. Where the underlying investments within a fund are valued on a
DCF basis, the discount rate applied may be adjusted by the Company to reflect
its assessment of the most appropriate discount rate for the nature of assets
held in the fund. In measuring the fair value, the net asset value of the fund
is adjusted, as necessary, to reflect restrictions on redemptions, future
commitments, illiquid nature of the investments and other specific factors of
the fund.
Sales basis
The expected sale proceeds will be used to assign a fair value to an asset in
cases where offers have been received as part of an investment sales process.
This may either support the value derived from another methodology or may be
used as the primary valuation basis. A marketability discount is applied to
the expected sale proceeds to derive the valuation where appropriate.
Cost less fair value adjustment
Any investment in a company that has failed or, in the view of the Board, is
expected to fail within the next 12 months, has the equity shares valued at
nil and the fixed income shares and loan instruments valued at the lower of
cost and net recoverable amount.
Glossary
AI refers to artificial intelligence.
Alternative Investment Fund ('AIF') 3i Infrastructure plc is an AIF managed by
3i Investments plc.
Alternative Investment Fund Manager ('AIFM') is the regulated manager of an
AIF. For 3i Infrastructure plc, this is 3i Investment plc.
AIFMD refers to the Alternative Investment Fund Managers Directive, a
regulatory framework that applies to EU-registered private equity funds.
Approved Investment Trust Company This is a particular UK tax status
maintained by 3i Infrastructure plc. An approved Investment Trust company is a
UK tax resident company which meets certain conditions set out in the UK tax
rules, which include a requirement for the company to undertake portfolio
investment activity that aims to spread investment risk and for the company's
shares to be listed on an approved exchange. The 'approved' status for an
investment trust must be agreed by the UK tax authorities and its benefit is
that certain profits of the company, principally its capital profits, are not
taxable in the UK.
Asset IRR refers to the internal rate of return of the existing and realised
portfolio since the inception of the Company. The asset IRR to 31 March 2024
is 18% (2023: 19%). This calculation incorporates the cost of each investment,
cash income, proceeds on disposal, capital returns, valuation as at 31 March
2024, including accrued income and an allocation of foreign exchange hedging.
Association of Investment Companies ('AIC') The Association of Investment
Companies is a UK trade body for
closed-ended investment companies.
Board the Board of Directors of the Company.
Capex refers to capital expenditure which is money a company uses to acquire,
upgrade, and maintain physical assets such as property, plants, buildings,
technology, or equipment. Capex is often used to undertake new projects or
investments by a company which add some future economic benefit to the
operation.
Capital reserve recognises all profits that are capital in nature or have been
allocated to capital. These profits are distributable by way of a dividend.
Company 3i Infrastructure plc.
CPI refers to the consumer price index and is a measure of inflation.
Discounting The reduction in present value at a given date of a future cash
transaction at an assumed rate, using a discount factor reflecting the time
value of money.
E-Beam refers to electron beams, a method of sterilisation used by Ionisos.
EBITDA, or earnings before interest, taxes, depreciation and amortisation, is
a measure of a company's financial performance.
EO refers to ethylene oxide, a method of sterilisation used by Ionisos.
ERRV is an Emergency Rescue and Response Vessel.
ESG refers to environmental, social and governance.
EV or electric vehicle a vehicle that can be powered by an electric motor.
External auditor the independent auditor, Deloitte LLP.
Fair value through profit or loss ('FVTPL') is an IFRS measurement basis
permitted for assets and liabilities which meet certain criteria. Gains and
losses on assets and liabilities measured as FVTPL are recognised directly in
the Statement of comprehensive income.
FTTC refers to fibre-to-the-cabinet. This describes the fibre-optic cable in
place from the local telephone exchange to a distribution point, commonly
called a roadside cabinet.
FTTH refers to fibre-to-the-home. This describes the fibre-optic connection to
individual homes or buildings.
FY15, FY16, FY19, FY22, FY23, FY24, FY25 refers to the financial years to 31
March 2015, 31 March 2016, 31 March 2019, 31 March 2022, 31 March 2023, 31
March 2024 and 31 March 2025, respectively.
GAAP refers to generally accepted accounting principles.
GHG refers to greenhouse gases.
GDP or gross domestic product is the standard measure of the value created
through the production of goods and services in a country during a certain
period.
Initial Public Offering ('IPO') is the mechanism by which a company admits its
stock to trading on a public stock exchange. 3i Infrastructure plc completed
its IPO in March 2007.
International Financial Reporting Standards ('IFRS') are accounting standards
issued by the International Accounting Standards Board ('IASB'). The Company's
Financial statements are required to be prepared in accordance with IFRS, as
adopted by the UK.
Investment income is that portion of income that is directly related to the
return from individual investments and is recognised as it accrues. It is
comprised of dividend income, income from loans and receivables, and fee
income. It is recognised to the extent that it is probable that there will be
an economic benefit and the income can be reliably measured.
IRR refers to the internal rate of return and is a metric used to estimate the
profitability of investments.
Key Performance Indicator ('KPI') is a measure by reference to which the
development, performance or position of the Company can be measured
effectively.
Long-term sustainable returns are returns that can be sustained into the long
term.
M&A or mergers and acquisitions refers to the consolidation of companies
or their major assets through financial transactions between companies.
Money multiple is calculated as the cumulative distributions or realisation
proceeds plus any residual value divided by invested or paid-in capital.
MWp refers to a Megawatt peak, a unit of measurement for the output of power
from a source such as solar or wind where the output may vary according to the
strength of sunlight or wind speed. MWp is a measure of the maximum potential
output of power.
Net annualised return is the annualised growth rate in NAV per share to 31
March 2024, including ordinary and special dividends paid. The net annualised
return since the inception of the Company to 31 March 2024 was 14% (2023: 14%)
and since the change in strategy in FY16 to 31 March 2024 was 18% (2023: 19%).
Net asset value ('NAV') is a measure of the fair value of all the Company's
assets less liabilities.
Net assets per share ('NAV per share') is the NAV divided by the total number
of shares in issue.
Net gains on investments is the movement in the fair value of investments
between the start and end of the accounting period, or investment disposal
date, or the investment acquisition date and the end of the accounting period,
including divestment-related costs where applicable, converted into sterling
using the exchange rates in force at the end of the period.
Ongoing charges is a measure of the annual recurring operating costs of the
Company, expressed as a percentage of average NAV over the reporting period.
Paris Agreement is an international treaty on climate change, adopted in 2015.
Public Private Partnership ('PPP') is a government service or private business
venture which is funded and operated through a partnership of government and
one or more private sector companies.
Retained reserves recognise the cumulative profits to 15 October 2018,
together with amounts transferred from the Stated capital account.
Revenue reserve recognises all profits that are revenue in nature or have been
allocated to revenue.
Revolving credit facility ('RCF') is a £900 million facility provided by the
Company's lenders with a maturity date in November 2026.
RPI refers to the retail price index and is a measure of inflation.
SBTi refers to the Science Based Targets initiative, a corporate climate
action organisation.
SORP means the Statement of Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts.
SOV is a service operation vessel.
Stated capital account the Stated capital account of the Company represents
the cumulative proceeds recognised from share issues or new equity issued on
the conversion of warrants made by the Company net of issue costs and reduced
by any amount that has been transferred to Retained reserves, in accordance
with Jersey Company Law, in previous years.
Sustainability KPIs Sustainability metrics in relation to the
sustainability-linked revolving credit facility. The facility includes targets
across ESG themes aligned with our purpose.
TCFD is the Task Force on Climate-related Financial Disclosures.
Total return measured as a percentage, is calculated against the opening NAV,
net of the final dividend for the previous year, and adjusted (on a
time-weighted average basis) to take into account any equity issued and
capital returned in the year.
Total shareholder return ('TSR') is the measure of the overall return to
shareholders and includes the movement in the share price and any dividends
paid, assuming that all dividends are reinvested on their ex-dividend date.
For further information see our website
www.3i-infrastructure.com
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