REG - BBGI Global Infrast. - Half-year Report
31/08/2023 07:00
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RNS Number : 8665K BBGI Global Infrastructure S.A. 31 August 2023
The information contained within this Announcement is deemed by the Company to constitute inside information. Upon the publication of this Announcement via a Regulatory Information Service this inside information is now considered to be in the public domain.
31 August 2023
BBGI Global Infrastructure S.A.
("BBGI" or the "Company")
Interim results for the six months ended 30 June 2023
Strong operational and resilient financial performance
BBGI Global Infrastructure S.A. (LSE ticker: BBGI), the global infrastructure investment company, is pleased to announce its interim results for the six months ended 30 June 2023.
Sarah Whitney, Non-Executive Chair of BBGI, commented:
"I am pleased to report the strong operational performance of our globally
diversified portfolio of social infrastructure assets for the first six months
of 2023. These results reflect the low-risk investment strategy, prudent
financial management and value driven asset management approach that we have
successfully deployed since our IPO in 2011.
Our financial performance was resilient throughout H1 2023, despite the
ongoing challenging macroeconomic environment. The defensive and global nature
of our portfolio has again provided stable, predictable and inflation-linked
cash flows, and we have continued to generate secure, high-quality
inflation-linked income and increased dividends that are expected to remain
well covered.
BBGI has not been immune to the uncertain market and economic backdrop that
has impacted investor sentiment on almost all UK listed investment companies.
The Board does not believe the current share price adequately reflects the
value of the portfolio and its high-quality inflation linkage, nor does it
reflect our strong financial position and operational performance."
Duncan Ball and Frank Schramm, Co-CEOs of BBGI, said:
"Our results for H1 2023 demonstrate our continued strong operational
performance despite the challenging economic times. Through our consistent,
disciplined approach to active asset management and prudent financial
management, our investments have continued to deliver during the period, with
a resilient financial performance.
In the current macro-economic environment, our strategy focuses on directing
surplus capital towards the repayment of any outstanding drawings on the
revolving credit facility. We will continue to maintain a disciplined approach
to capital allocation and transaction activity, only participating in the
market and evaluating potential investment opportunities when they are clearly
value accretive.
Preserving and enhancing the value of our portfolio remain our top priorities.
The strength of our assets is evidenced by the continued strong market demand
for similar assets, thanks to their high-quality, secure, and long-term
inflation-linked contracts, which generate predictable cash flows. This, in
turn, enables us to deliver attractive returns to our shareholders over the
long term. We approach the future with confidence."
Six months in numbers
Financial highlights i
Investment Basis NAV NAV per share Annualised total NAV return per share since IPO
( )
£1,056.7m 147.8pps 8.8%
down 1.2% as at 30 June 2023 down 1.4% as at 30 June 2023 FY 2022: 9.1%
(31 Dec 2022: £1,069.2m) (31 Dec 2022: 149.9pps ii )
High-quality inflation linkage Annualised ongoing charges Cash dividend cover
0.6% 0.92% 1.68x
FY 2022: 0.5% FY 2022: 0.87% FY 2022:1.47x
2023 target dividend 2024 target dividend 2025 target dividend
7.93pps 8.40pps 8.57pps
+6% +6% +2%
Financial and operational highlights
Strong operational performance
§ Strong operational performance of our globally diversified portfolio of 56
high-quality, 100 per cent availability-style infrastructure assets.
§ Maintained a consistently high asset availability rate of 99.9 per cent.
§ At the period end, BBGI's investment portfolio was 99.5 per cent
operational. We have one asset under construction; Highway 104 in Nova Scotia,
Canada, and substantial completion is scheduled for Q3 2023.
§ Our portfolio investments are the essential assets on which people rely
every day, such as schools, hospitals, fire and police stations, affordable
housing, modern correctional facilities and transport.
§ We partner with the public sector, underpinned by government or
government-backed counterparties, to help deliver and manage responsibly these
assets for the long term.
§ Located in Australia, Canada, Germany, the Netherlands, Norway, the UK, and
the US, all Portfolio Companies are in stable, well-developed, and
highly-rated investment grade countries.
§ As at 30 June 2023, BBGI had a weighted average portfolio life of 19.8
years. By prioritising acquiring assets with a long residual life, we have
maintained a portfolio with a long weighted average life.
§ Disciplined approach to capital allocation and potential acquisitions and
will only consider transactions that are accretive to our shareholders.
Generating secure, inflation-linked income
§ Our asset portfolio delivers attractive, predictable and inflation-linked
cash flows.
§ Contracted high-quality inflation linkage of 0.6 per cent.
§ Reaffirmed dividend targets of 7.93 pps for 2023 and 8.40 pps for 2024,
representing a 6 per cent increase year on year, and a dividend target of 8.57
pps for 2025. All dividends are expected to be fully cash-covered.
§ Cash receipts ahead of projections, with no material lockups or defaults
reported.
§ Strong cash dividend cover of 1.68x in H1 2023.
§ Half-year dividend declared of 3.965 pps for H1 2023, to be paid in October
2023, in-line with target.
§ Average dividend increase of 3.4 per cent on a compound annual growth rate
from 2012 to 2023. BBGI's progressive dividend outpaced UK CPI delivering
positive real returns to shareholders.
Global portfolio and financial performance resilient despite market volatility
and uncertainty
§ There has been market rerating across all sectors in the alternative asset
space in H1 2023.
§ During the period, we have observed a modest decrease in the NAV per share
of 1.4 per cent to 147.8 pps (2022: 149.9 pps), impacted by macroeconomic
variables beyond our control. This reduction is mainly attributed to an
increase in discount rates and negative foreign exchange movements. The
negative valuation effects have been partly mitigated by increased deposit and
inflation rates, as well as the value enhancements or team has delivered
across our portfolio.
o The weighted average discount rate increased from 6.9 per cent to 7.2 per
cent over H1 2023, largely due to the rise in long-term gilt yields in the UK
impacting our UK assets, which constitute 33 per cent of our portfolio.
o In the UK, the risk-free rate has materially increased during H1 2023,
with c. 0.5 per cent added to 20-year gilt yields since 31 December 2022.
Conversely, outside the UK, long-term government bond yields have declined in
all jurisdictions except Norway.
o The weighted average risk-free rate has remained stable at c. 3.8 per cent
since December 2022. The discount rate of 7.2 per cent represents a risk
premium of c. 340 basis points, which the Company views to be adequate and
towards the conservative end for low-risk availability-style investments.
o The negative net effect of foreign exchange movements, after adjusting for
the offsetting effect of the Company's hedging strategy, resulting in a NAV
decrease of £12.9 million or 1.2 per cent.
§ During the period, the Company recognised an increase in the portfolio
value of £13.8 million, or a 1.3 per cent increase in the NAV, resulting from
changes in macroeconomic assumptions. The main drivers were short-term and
long-term deposit rates accounting for £12.9 million of this increase, with
the balance reflecting marginal changes in short-term inflation forecasts.
§ Annualised total NAV return per share since IPO of 8.8 per cent.(( iii ))
Prudent financial and risk management
§ Our liquidity position remains robust, with a net debt position of £7.9
million and £25.8 million of cash drawings under our £230 million
multi-currency RCF, maturing in May 2026. By using excess cash generated by
the Company's portfolio of investments, these drawings could be repaid by 31
December 2023.
§ Fund level leverage remains modest, representing only 2.4 per cent of NAV
with no investment transaction commitments.
§ No structural gearing at Group level.
§ Portfolio-level borrowings are non-recourse with the vast majority having
fixed base rates during the concession period. Of the 56 assets in our
portfolio, only one has a refinancing obligation for a tranche of debt.
§ Our proportionate share of Portfolio Company deposits total approximately
£385 million iv . Through our proactive asset management strategy, we have
secured competitive deposit rates, which currently average around c. 4.5 per
cent. The interest generated from these deposits acts as a cushion, providing
a counterbalance against the negative impact on our portfolio's valuation
caused by the increased weighted average discount rate.
§ No outstanding commitments to acquire assets and no requirement to raise
capital in the foreseeable future.
§ Disciplined approach to capital allocation and potential acquisitions.
§ Hedging strategy aimed to reduce NAV foreign exchange ('FX') sensitivity to
c. 3 per cent for a 10 per cent movement in FX.
Value-driven asset management
§ We focus on operational performance to drive efficiencies and generate
portfolio optimisation. Our hands-on approach preserves and enhances the value
of our investments, delivering well-maintained social infrastructure for
communities and end-users, and attractive returns over the long term for
shareholders.
§ Value-accretive activities, including effective lifecycle cost management,
Portfolio Company cost savings, and optimised cash reserving, contributed
approximately £7.6 million to the NAV.
§ We maintain our track record of no reported lock-ups or material defaults
at our Portfolio Companies, and we continue to generate a consistently high
asset availability rate of 99.9 per cent.
§ As the sole internally managed equity infrastructure investment company on
the London Stock Exchange, our structure ensures our interests are fully
aligned with our investors. We are not incentivised by assets under
management, but rather value creation.
Sustainability
§ During the period, a comprehensive data collection exercise was conducted
to capture Scope 1, 2 and material Scope 3 GHG emissions data from all our
Portfolio Companies between 2019 to 2022, a crucial step in the journey to net
zero.
§ Our objective is to have 70 per cent of our Portfolio Companies by value to
be 'net zero' 'aligned', or 'aligning', by 2030, with these principles
embedded in our executive remuneration targets.
§ Our asset management approach is aligned to six Sustainable Development
Goals ('SDGs') with a focused ESG approach fully integrated into our business
model, which is led by our purpose. In June 2023, we published our 2022 ESG
report, which provides detailed information on our ESG progress and showcases
achievements at our 56 Portfolio Companies.
§ Under Sustainable Finance Disclosure Regulation ('SFDR'), we fall within
the scope of Article 8, where the investment product promotes social
characteristics and follows good governance practices. In June 2023, we filed
our latest SFDR disclosures, including details on how we measure our
performance in engaging with our stakeholders and our contributions to meeting
our social characteristics.
Market trends and pipeline
§ We believe infrastructure will remain an attractive asset class due to its
defensive nature, predictable cash flows, and inflation linkage. Looking
ahead, the availability-style infrastructure asset class shows promising
prospects, driven by the need for decarbonisation, digitalisation, and the
upgrade or replacement of ageing infrastructure.
§ In the current macro-economic environment, our strategy focuses on
directing surplus capital towards the repayment of any outstanding drawings on
the revolving credit facility. However, when appropriate opportunities arise,
we have a structured process for considering potential new investments. These
opportunities are evaluated with a focus on both dividends and returns,
illustrating our commitment to pursuing selective and disciplined growth.
§ We will continue to maintain a disciplined approach to capital allocation
and transaction activity, only participating in the market and evaluating
potential investment opportunities when they are clearly value accretive.
Preserving and enhancing the value of our portfolio remain our top priorities.
Company presentation for analysts and investors
A Company presentation for analysts and investors will take place today,
Thursday, 31 August 2023, at 9.00am (BST) time via an in-person meeting and a
live webcast and audio only dial in conference call.
For those analysts and investors who wish to attend the in-person presentation
or live conference call, please contact InvestorServices@bb-gi.com
(mailto:InvestorServices@bb-gi.com)
To access the live webcast, please register in advance here:
https://www.lsegissuerservices.com/spark/BBGISICAVSA/events/9a49493e-5908-4e1b-902b-55f19a7739e1
(https://urldefense.com/v3/__https:/www.lsegissuerservices.com/spark/BBGISICAVSA/events/9a49493e-5908-4e1b-902b-55f19a7739e1__;!!IHJ3XrWN4X8!PdR_NUHT9ieEtHCYSNfFAPCEQvLSrZt-dkoou2Qw_GEWE02XigzmRDdd6Zco5m_nFF27xct-h-m85ConEPtBPk_LwWc5wEQn-Ctml2E$)
Webcast participants can type questions into the question box.
The recording of the interim results presentation and slides will be made
available later in the day via the Company website: www.bb-gi.com
(http://www.bb-gi.com) *
FOR FURTHER INFORMATION, PLEASE CONTACT:
BBGI Management Team +352 263 479-1
Duncan Ball
Frank Schramm
H/Advisors Maitland (Communications advisor) +44(0) 20 7379 5151
James Benjamin BBGI-maitland@h-advisors.global
Rachel Cohen
NOTES
BBGI Global Infrastructure S.A. (BBGI) is a responsible infrastructure
investment company and a constituent of the FTSE 250. We invest in and
actively manage for the long-term a globally diversified, low-risk portfolio
of essential social infrastructure investments. Our purpose is to deliver
healthier, safer and more connected societies, while creating sustainable
value for all our stakeholders.
BBGI is committed to delivering stable and predictable cash flows with
progressive long-term dividend growth and attractive, sustainable, returns for
shareholders. Through our proactive and disciplined approach to active asset
management and prudent financial management, and with a strong focus on ESG,
we preserve and enhance the value of our investments, and deliver well
maintained social infrastructure that serve and support local communities and
end users.
All of BBGI's investments are availability-style and supported by secure
public sector-backed contracted revenues, with high quality inflation-linkage.
Availability-style means that our revenues are paid so long as the assets are
available for use, and we maintain a consistently high level of asset
availability of 99.9%.
BBGI's investment portfolio is over 99% operational with all its investments
located across highly rated investment grade countries with stable, well
developed operating environments.
BBGI's in-house management team is incentivised by shareholder returns and
consistently maintains low comparative ongoing charges to shareholders.
BBGI is targeting dividends of 7.93 pence and 8.40 pence per ordinary share
for the twelve months ending 31 December 2023 and 31 December 2024,
respectively, representing a 6% increase year on year, and a dividend target
of 8.57pps for 2025: all are expected to be fully cash-covered**.
Further information about BBGI is available on its website at www.bb-gi.com
(http://www.bb-gi.com/) *
The Company's LEI: 529900CV0RWCOP5YHK95
Any reference to the Company or BBGI refers also to its subsidiaries (where
applicable).
* Neither the Company's website nor the content of any website
accessible from hyperlinks on its website (or any other website) is (or is
deemed to be) incorporated into, or forms (or is deemed to form) part of this
announcement.
** These are guidance levels or targets only and not a profit forecast and
there can be no assurance that they will be met.
BBGI Global Infrastructure S.A. Interim Results for the Six Months Ended 30
June 2023
About BBGI
BBGI Global Infrastructure S.A. (BBGI, the 'Company', and together with its
consolidated subsidiaries, the 'Group') is a global infrastructure investment
company helping to provide responsible capital to build and maintain critical
social infrastructure(( v )).
From hospitals to schools, to affordable housing and safer roads, we partner
with the public sector to deliver social infrastructure that forms the
building blocks of local economies, while creating sustainable value for all
stakeholders.
Our purpose: To deliver social infrastructure for healthier, safer, and more
connected societies, while creating sustainable value for all stakeholders.
Our vision: We invest to serve and connect people.
Our values:
· Trusted to deliver.
· Dependable partner.
· Investor with impact.
· Present-focused, future-ready.
Six months in numbers
Financial highlights
Investment Basis NAV NAV per share Annualised total NAV return per share since IPO
( )
£1,056.7m 147.8pps 8.8%
down 1.2% as at 30 June 2023 down 1.4% as at 30 June 2023 FY 2022: 9.1%
(31 Dec 2022: £1,069.2m) (31 Dec 2022: 149.9pps)
High-quality inflation linkage Annualised ongoing charges Cash dividend cover
0.6% 0.92% 1.68x
FY 2022: 0.5% FY 2022: 0.87% FY 2022:1.47x
2023 target dividend 2024 target dividend 2025 target dividend
7.93pps 8.40pps 8.57pps
+6% +6% +2%
Portfolio highlights
§ Strong operational performance of our globally diversified portfolio of 56
high-quality, 100 per cent availability-style infrastructure assets.
§ Maintained a consistently high asset availability rate of 99.9 per cent.
§ Contracted high-quality inflation linkage of 0.6 per cent.
§ 6 per cent dividend growth targets for 2023 and 2024 reaffirmed.
§ Cash receipts ahead of projections, with no material lockups or defaults.
§ Fund level leverage remains modest with £25.8 million of RCF cash
drawings, representing only 2.4 per cent of NAV, which could be repaid with
excess cash by 31 December 2023. Net debt of £7.9 million.
§ No structural gearing at Group level, and, with limited exceptions only,
borrowing costs are fixed at the Portfolio Company level, providing stability
and predictability. 55 of 56 projects have no refinancing risk during the
concession period.
§ No outstanding commitments to acquire assets and no requirement to raise
capital in the foreseeable future.
§ Disciplined approach to capital allocation and potential acquisitions.
§ Weighted average discount rate increased to 7.2 per cent from 6.9 per cent
as at 31 December 2022, reflecting an equity risk premium of c. 3.4 per cent,
mainly reflecting an increase in UK risk-free rates.
§ Hedging strategy aimed to reduce NAV foreign exchange ('FX') sensitivity to
c. 3 per cent for a 10 per cent movement in FX.
§ Completed a comprehensive data collection process to assess our portfolio's
Scope 1, 2 and material Scope 3 greenhouse gas ('GHG') emissions, carbon
footprint and carbon intensity, a crucial step in the journey to net zero.
Portfolio at a Glance
The fundamentals
Based on portfolio value as at 30 June 2023.
Investment type
100 per cent availability-style vi revenue stream.
Investment type
Availability-style revenue assets 100%
100%
Investment status
Low-risk operational portfolio.
Investment status
Operations 99.4%
Construction 0.6%
100%
Geographical split
Geographically diversified in stable developed countries.
Geographic split
Canada 35%
UK 33%
Continental Europe 12%
US 10%
Australia 10%
100%
Sector split
Well-diversified sector exposure with large allocation to lower-risk
availability-style road and bridge investments.
Sector split
Transport 53%
Healthcare 21%
Blue light and modern correctional facilities 12%
Education 8%
Affordable housing 3%
Clean energy 2%
Other 1%
100%
Investment life
Long investment life with 46 per cent of portfolio by value with a duration of
greater than or equal to 20 years; weighted average life of 19.8 years.
Average portfolio debt maturity of 15.9 years.
Investment life
≥25 years 24%
≥20 years and <25 years 22%
≥10 years and <20 years 48%
<10 years 6%
100%
Our top five investments
Well-diversified portfolio with no major single asset exposure.
Top-five investments
Ohio River Bridges (US) 10.1%
Golden Ears Bridge (Canada) 9.3%
Northern Territory Secure Facilities (Australia) 4.4%
A7 Motorway (Germany) 4.3%
A1/A6 Motorway (Netherlands) 4.1%
Next five largest investments 16.1%
Remaining investments 51.7%
100%
Investment ownership
78 per cent of assets by value in the portfolio are 50 per cent owned or
greater.
Investment ownership
100% 45%
≥75% and <100% 7%
≥50% and <75% 26%
<50% 22%
100%
Country rating
All assets located in countries with ratings between AA and AAA vii .
Country rating
AAA 57%
AA+ 10%
AA 33%
100%
Projected portfolio cash flow
Our underlying assets generate a consistent and long-term stream of
inflation-linked cash flows, extending up to 2051. These cash flows are
predictable due to the involvement of government or government-backed
counterparties and the contractual nature of the agreements.
Based on current estimates, and assuming no further acquisitions for
illustrative purposes only, the portfolio is forecasted to enter the capital
repayment phase in September 2039. After this, cash inflows from the portfolio
are paid to our shareholders as capital and the portfolio valuation reduces as
assets reach the end of their concession term.
As at 30 June 2023, BBGI had a weighted average portfolio life of 19.8 years,
a decrease of 0.4 years compared with 31 December 2022. By prioritising the
acquisition of assets with a long residual life, we have maintained a
portfolio with a long weighted average life.
This illustrative chart is a target only, as at 30 June 2023, and is not a
profit forecast. There can be no assurance this target will be met. The
hypothetical target cash flows do not consider any unforeseen costs, expenses
or other factors that may affect the portfolio assets and therefore the impact
on the cash flows to the Company. As such, the chart above should not in any
way be construed as forecasting the actual cash flows from the portfolio.
There are minor cash flows extending beyond 2051 but for illustrative
purposes, these are excluded from the chart above.
Chair's statement
On behalf of the Supervisory Board, I am pleased to report the strong
operational performance of our globally diversified portfolio of social
infrastructure assets for the first six months of 2023. These results reflect
the low-risk investment strategy, prudent financial management and value
driven asset management approach that we have successfully deployed since our
IPO in 2011.
Our financial performance was resilient throughout H1 2023, despite the
ongoing challenging macroeconomic environment, which has been characterised by
high inflation and rising interest rates, general market uncertainty and the
volatile geopolitical backdrop.
The defensive and global nature of our portfolio has again provided stable,
predictable and inflation-linked cash flows, and we have continued to generate
secure, high-quality inflation-linked income and increased dividends that are
expected to remain well covered.
Revenue from our 56 assets is 100 per cent availability-style, meaning
revenues are paid so long as the assets are available for use. We are
insulated from demand risk which can be subject to the volatility of the
economic cycle. At the period end, BBGI's investment portfolio was 99.4 per
cent operational, underlining the strength of our portfolio and the quality of
the operational management delivered by our teams. We have only one asset
under construction, Highway 104 in Nova Scotia, Canada, where completion is
scheduled for Q3 2023.
Global portfolio resilient despite market volatility and uncertainty
There has been market rerating across all sectors in the alternative asset
space in H1 2023. During this period, we have observed a modest decrease in
the NAV per share of 1.4 per cent to NAV 147.8pps, impacted by macroeconomic
variables beyond our control. This reduction is mainly attributed to an
increase in discount rates and negative foreign exchange movements. The
increase in discount rates particularly impacted our UK assets, which
constitute 33 per cent of our portfolio. In the UK, the risk-free rate has
materially increased during H1 2023, with c. 0.5 per cent added to 20-year
gilt yields since 31 December 2022. Conversely, outside the UK, long-term
government bond yields have declined in all jurisdictions except Norway.
The negative valuation effects have been partly mitigated by increased deposit
and inflation rates, as well as the value enhancements our team has delivered
across our portfolio.
Strong liquidity position and robust portfolio-level debt financing
arrangements
We continue to benefit from a robust liquidity position - of the 56 assets in
our portfolio, only one has a refinancing obligation for a small tranche of
debt. We are therefore largely insulated from recent increases in interest
rates. Our fund level leverage also remains modest. Drawings on our RCF could
be repaid using excess cash generated by the Company's portfolio of
investments by 31 December 2023. We have no investment transaction
commitments.
Re-affirming our progressive dividend policy and dividend targets
In March 2023, we provided revised dividend targets for 2023 and 2024 of
7.93pps and 8.40pps, respectively. These revised dividend targets will
increase the dividend growth rate to 6 per cent, ensuring our shareholders
benefit from the increased value created by our high-quality, inflation-linked
portfolio. We had strong cash dividend cover of 1.68x in H1 2023, with cash
receipts ahead of projections, and no reported lock-ups or material defaults
reported at any of our Portfolio Companies. We expect our dividend targets to
be fully cash covered.
Strengthening our environmental, social and governance processes and progress
Our purpose is to focus on delivering social infrastructure for healthier,
safer and more connected societies, while creating sustainable value for all
stakeholders. Our portfolio investments are the essential assets on which
people rely every day, such as schools, hospitals, fire and police stations,
affordable housing, modern correctional facilities and transport. We partner
with the public sector, underpinned by government or government-backed
counterparties, to help deliver and manage responsibly these assets for the
long term.
Given our role as a steward of essential infrastructure, ESG is a fundamental
part of how we do business and we are focused on embedding our environmental
and social commitments as part of our sustainability obligations. We are
developing our ESG reporting processes and now report Scope 1, 2 and material
Scope 3 GHG emissions, where possible, for all our Portfolio Companies. We
believe that the measuring and reporting of emissions is the first step
towards meaningful progress on our journey to net zero.
Outlook
BBGI has not been immune to the uncertain market and economic backdrop that
has impacted investor sentiment on almost all UK listed investment companies.
The Board does not believe the current share price adequately reflects the
value of the portfolio and its high-quality inflation linkage, nor does it
reflect our strong financial position and operational performance. As part of
its overall capital allocation strategy, the Board will continue to closely
monitor the discount and will take it into consideration. However, any
potential actions to reduce the discount will only be undertaken after
thorough consideration and taking into account the long-term implications.
The macroeconomic environment is expected to remain volatile, particularly in
the UK, and inflation is likely to remain high at least for the near term. As
an internally-managed investment company, our leadership team's alignment of
interest with our shareholders is clear. In this period of economic
volatility, we will continue to be disciplined in our approach to capital
allocation and will only consider transactions that are accretive to our
shareholders.
Sarah Whitney
Chair
Co-CEO's statement
Our investment proposition is robust and defensive: we invest in creditworthy,
government-backed assets, with high-quality inflation-linked cash flows, that
perform well throughout market and economic cycles.
Our results for H1 2023 demonstrate our continued strong operational
performance despite the challenging economic times. Through our consistent,
disciplined approach to active asset management and prudent financial
management, our investments have continued to deliver during the period, with
a resilient financial performance. Over the past six months, we have continued
to generate high-quality, predictable and inflation-linked cash flows, and
strong dividend cover for our shareholders.
We are creating a positive sustainable impact on the local communities served
by our 56 infrastructure assets, helping to provide the responsible capital
required to build and maintain critical social infrastructure in the countries
where we do business.
Key highlights for H1 2023
· Half-year dividend declared of 3.965 pps for H1 2023, to be paid
in October 2023, in-line with target.
· Strong cash dividend cover of 1.68x (2022: 1.47x).
· Cash receipts from portfolio distributions ahead of projections.
· Reaffirmed dividend targets of 7.93 pps for 2023 and 8.40 pps for
2024, representing a 6 per cent increase year on year, and a dividend target
of 8.57 pps for 2025: all expected to be fully cash-covered.
· NAV per share decreased 1.4 per cent to 147.8 pps (2022: 149.9
pps), impacted by a rise in discount rates and negative foreign exchange
movements, and partly offset by increases in interest earned on deposits,
positive impact of inflation on revenues and value enhancements.
· Annualised total NAV return per share since IPO of 8.8 per
cent.(( viii ))
· Annualised ongoing charges of 0.92 per cent (2022: 0.87 per
cent).
· Fund level leverage remains modest with £25.8 million of cash
drawings, representing only 2.4 per cent of NAV, which could be repaid with
excess cash by 31 December 2023. Net debt of £7.9 million. The company has no
investment transaction commitments.
· Completed a comprehensive data collection process to assess our
portfolio's Scope 1, 2 and material Scope 3 GHG emissions, carbon footprint
and carbon intensity, an important step in the journey to net zero.
Valuation and NAV update
As at 30 June 2023, our NAV per share decreased by 1.4 per cent to 147.8pps
(31 December 2022: 149.9pps). There are several market-specific factors that
contributed to the net decrease in the NAV, the more notable being:
· The weighted average discount rate increased from 6.9 per cent to 7.2
per cent over H1 2023, largely due to the rise in long-term gilt yields in the
UK impacting our UK assets.
· The negative net effect of foreign exchange movements, after
adjusting for the offsetting effect of the Company's hedging strategy,
resulting in a NAV decrease of £12.9 million or 1.2 per cent.
· These valuation impacts have been partly mitigated by updated
inflation and deposit rate assumptions and value enhancements to our
portfolio.
The number of availability-style transactions and available market data points
have increased in H1 2023 compared to H2 2022, and these data points support
our revised discount rate of 7.2 per cent. Notwithstanding, the Company
complements its market-based approach by using the Capital Asset Pricing Model
where government risk-free rates plus an equity risk premium are used to
calculate discount rates. This method is used as a reasonability check to our
market-based approach.
During H1 2023, short-term interest rates continued to rise. The most
significant impact on long-term government bond yields, and subsequently on
the discount rates used in the valuation process, was observed in the UK,
where we have seen an increase of c. 0.5 per cent on the risk-free rate
thereby contributing to an increase in the UK discount rate for stable
operational projects to 7.5 per cent. In contrast, in all other countries
where we invest with the exception of Norway, long-term government bond yields
have declined and as a result the weighted average risk-free rate across the
portfolio remained flat. We benefitted from the global nature of our portfolio
of investments with no singular concentration risk in any one country.
Capital Allocation Policy
In the current macro-economic environment, our strategy focuses on directing
surplus capital towards the repayment of any outstanding drawings on the
revolving credit facility. However, when appropriate opportunities arise, we
have a structured process for considering potential new investments. These
opportunities are evaluated with a focus on both dividends and returns,
illustrating our commitment to pursuing selective and disciplined growth.
Prudent financial and risk management
Our approach to risk management remains unchanged and there has been no
material movement in our risk profile over the past year. Our portfolio is not
directly impacted by the conflict in Ukraine or energy price volatility.
Through our effective hedging strategy, we have managed to limit foreign
exchange losses.
As of 30 June 2023, our liquidity position remains robust, with a net debt
position of £7.9 million and £25.8 million of cash drawings under our £230
million multi-currency RCF, maturing in May 2026. Fund level leverage remains
modest, representing only 2.4 per cent of NAV with no investment transaction
commitments. All cash drawings at 30 June 2023 were in Euros, with an all-in
debt rate of 5.08 ix per cent. By using excess cash generated by the
Company's portfolio of investments, these drawings could be repaid 31 December
2023.
Furthermore, we have benefitted from strong liquidity and our portfolio-level
debt financing arrangements, therefore rising debt costs have had a limited
impact on our financial health, as evidenced by:
· No structural gearing
· Portfolio-level borrowings are non-recourse with the vast
majority having fixed base rates during the concession period. Of the 56
assets in our portfolio, only one has a refinancing obligation for a tranche
of debt. This minor refinancing risk exists in relation to changes in the
lending margin only as the base market rate has been hedged for the entire
debt term. If the lending margin increases by 1 per cent from the current
forecast, the NAV could be negatively impacted by £7.9 million (0.7 per cent
of NAV).
· Our proportionate share of Portfolio Company deposits total
approximately £385 million x . Through our proactive asset management
strategy, we have secured competitive deposit rates across all currencies and
currently earn c. 4.5 per cent on weighted average basis. The interest
generated from these deposits provides a counterbalance against the negative
impact on our portfolio valuation caused by the increased weighted average
discount rate.
Value-driven asset management
We focus on operational performance to drive efficiencies and generate
portfolio optimisation. Our hands-on approach preserves and enhances the value
of our investments, delivering well-maintained social infrastructure for
communities and end-users, and attractive returns over the long term for
shareholders.
Value-accretive activities, including effective lifecycle cost management,
Portfolio Company cost savings, and optimised cash reserving, contributed
approximately £7.6 million to the NAV.
We maintain our track record of no reported lock-ups or material defaults at
our Portfolio Companies, and we continue to generate a consistently high asset
availability rate of 99.9 per cent.
As the sole internally managed equity infrastructure investment company on the
London Stock Exchange, our structure ensures our interests are fully aligned
with our investors. We are not incentivised by assets under management, but
rather value creation.
Dividend
We declared a half-year dividend of 3.965pps for H1 2023, in line with our
target. We are reconfirming our progressive dividend policy and our dividend
targets, which we revised in March 2023 for 2023 and 2024, increasing the
dividend growth rate to 6 per cent. This ensures our shareholders benefit from
the increased value created by our high-quality, inflation-linked portfolio.
We also introduced a new dividend target of 8.57pps for 2025 and we expect all
our dividend targets to be fully cash covered. While our dividend growth
target is set at 6 per cent for 2023 and 2024 in response to higher short term
inflation assumptions, our 2025 target projects a 2 per cent growth under our
progressive dividend policy, predicated on an assumption of a more stable
macroeconomic environment. Assuming a scenario where no additional investments
are made, the projected cash flows generated in the income phase from BBGI's
current portfolio of 56 investments would sustain the Company's progressive
dividend policy xi for at least 15 years.
Contributing to a net-zero future
Our asset management approach is aligned to six Sustainable Development Goals
('SDGs') with a focused ESG approach fully integrated into our business model,
which is led by our purpose. In June 2023, we published our 2022 ESG report,
which provides detailed information on our ESG progress and showcases
achievements at our 56 Portfolio Companies.
Under Sustainable Finance Disclosure Regulation ('SFDR'), we fall within the
scope of Article 8, where the investment product promotes social
characteristics and follows good governance practices. In June 2023, we filed
our latest SFDR disclosures, including details on how we measure our
performance in engaging with our stakeholders and our contributions to meeting
our social characteristics.
During the period, a comprehensive data collection exercise was conducted to
capture Scope 1, 2 and material Scope 3 GHG emissions data from all our
Portfolio Companies between 2019 to 2022.
Our objective is to have 70 per cent of our Portfolio Companies by value to be
'net zero' 'aligned', or 'aligning', by 2030, with these principles embedded
in our executive remuneration targets.
Looking ahead
We would like to thank our team once again for their hard work over the past
six months. Their dedication and approach are outstanding and remain a
fundamental part of our success.
We will continue to maintain a disciplined approach to capital allocation and
transaction activity, only participating in the market and evaluating
potential investment opportunities when they are clearly value accretive.
Preserving and enhancing the value of our portfolio remain our top priorities.
The strength of our assets is evidenced by the continued strong market demand
for similar assets, thanks to their high-quality, secure, and long-term
inflation-linked contracts, which generate predictable cash flows. This, in
turn, enables us to deliver attractive returns to our shareholders over the
long term. We approach the future with confidence.
Duncan Ball Frank Schramm
Co-CEO Co-CEO
Our investment strategy
BBGI provides access to a globally diversified portfolio of infrastructure
investments, which generate long-term and sustainable returns and serve a
critical social purpose in their local communities. Our portfolio is well
diversified across sectors in education, healthcare, blue light (fire and
police), affordable housing, modern correctional facilities, clean energy and
transport infrastructure assets.
Our business model is built on four strategic pillars:
Low-risk
· Availability-style investment strategy.
· Secure, public sector-backed contracted revenues.
· Stable, predictable cash flows, with high-quality inflation
linkage and progressive long-term dividend growth.
Globally diversified
· Focus on highly rated investment grade countries.
· Stable, well-developed operating environments.
· A global portfolio, serving society through supporting local
communities.
Strong ESG approach
· ESG fully integrated into the business model.
· Focus on delivering positive social impact - SFDR Article
8(( xii )) - and high degree of climate resilience.
· Executive compensation linked to ESG performance.
Internally managed
· In-house management team focused on delivering shareholder value
first, portfolio growth second.
· Management interests aligned with those of shareholders.
· Strong pricing discipline and portfolio management.
· Lowest comparative ongoing charges. xiii
Our business model is the bedrock of our success, enabling us to deliver:
o Robust shareholder returns
o Low correlation to other asset classes
o Sustainable growth
Operating model
We follow a proven operating model based on three principles: value-driven
active asset management, prudent financial management and a selective
acquisition strategy, which are fundamental to our success. This model aims to
preserve and create value, while achieving portfolio growth, ensuring that ESG
considerations are embedded in our processes.
Our active asset management approach seeks to ensure stable operational
performance, preservation of value and, where possible, identification and
incorporation of value enhancements over the lifetime of the assets under our
stewardship. Our approach aims to reduce costs to our public sector clients
and asset end-users, to enhance the operational efficiency of each asset and
to generate a high level of asset availability, underpinning the social
purpose of our portfolio.
Our prudent financial management approach focuses on efficient cash and
corporate cost management and the implementation of our foreign exchange
hedging strategy. Due to our portfolio's extensive geographical
diversification, we are exposed to foreign exchange volatility, which we
actively seek to mitigate.
We pursue a selective acquisition strategy, so our Management Board's focus
remains within its area of expertise, and we uphold the strategic pillars
defined by our investment proposition. We actively seek, through portfolio
construction, acquisitions with long-term, predictable, and
inflation-protection characteristics that support our contracted,
high-quality, inflation linkage of 0.6 per cent.
Value-driven active asset management
We pursue a standardised approach across our portfolio to preserve value, to
derive operational and value enhancements, and to improve clients' experience,
including:
· Strong client relationships, by prioritising regular meetings to
achieve high rates of client satisfaction.
· Focused asset management, to ensure distributions are on time,
and on or above budget.
· Focused cost management and portfolio-wide cost-saving
initiatives, to leverage economies of scale or outperform the base case, such
as portfolio insurance and standardised management contracts for Portfolio
Companies, and lifecycle cost reviews.
· Comprehensive monitoring, to ensure we fulfil our contractual
obligations.
· Detailed climate risk assessment and ESG KPI tracking tool, which
includes over 100 KPIs and questions, to evaluate the sustainable performance
of each of our investments.
· Maintaining high availability levels by proactively managing any
issues, including site visits to all significant investments.
· Monitoring and periodically reviewing Portfolio Company debt
facilities and investigating potential refinancing benefits.
· Measured exposure to construction risk to support NAV uplift by
de-risking assets over the construction period.
Prudent financial management
We focus on cash performance at both the asset and portfolio level to drive
efficiencies, including:
· Progressive future dividend growth, underpinned by high-quality
inflation linkage and strong portfolio distributions. Assuming a scenario
where no additional investments are made, the projected cash flows in the
income phase from BBGI's current portfolio of 56 investments could sustain the
Company's progressive dividend policy for at least 15 years.
· Low ongoing charges through our efficient and cost-effective
internal management structure.
· Managing and mitigating foreign exchange risk through our hedging
strategy: hedging forecast portfolio distributions, balance sheet hedging
through foreign exchange forward contracts, and borrowing in non-Sterling
currencies.
· Euro-denominated running costs, which provide a natural hedge
against Euro-denominated portfolio distributions.
· Efficient treasury management system for cash in the underlying
Portfolio Companies to maximise interest income on deposits.
· Maintaining modest cash balances at the corporate level to limit
cash drag, facilitated through access to the RCF.
Selective acquisition strategy and strategic investment partnership
We maintain strategic discipline in our acquisition strategy and portfolio
composition to ensure we pursue growth that builds shareholder value, not just
for growth's sake, including:
· Broad industry relationships throughout multiple geographies.
· Pre-emption rights to acquire co-shareholders' interests.
· Visible pipeline through a North American strategic partnership,
which offers an option, but not an obligation, to transact.
· Global exposure to benefit from geographical diversification.
· Robust framework embedding ESG principles into investment due
diligence.
· Revolving corporate debt facility to support transaction
execution.
· Focus on the Management Board's core areas of expertise.
We leverage strong relationships with leading construction companies to source
potential pipeline investments, which support our low-risk and globally
diversified investment strategy. Typically, these contractors have secured the
mandate to design and build new assets, but look to divest financially after
the construction period has finished - thereafter often maintaining facility
management contracts through a long-term partnership. BBGI is an attractive
partner for several reasons:
· Our cost of capital is typically lower than construction
companies, so involving BBGI can make the bid more competitive.
· We are a long-term investor with a publicly-listed status, which
is attractive to government and government-backed counterparties.
· We are considered a reliable source of liquidity should a
construction partner decide to sell.
· Having a financial partner is a prerequisite for some
construction companies so they can avoid consolidating Portfolio Company debt
onto the balance sheet of their parent company.
· We have extensive asset credentials and a strong track record,
which can assist with the shortlisting process for new projects.
Portfolio review
Portfolio summary
Our investments as at 30 June 2023 consisted of interests in 56 high-quality,
availability-style social infrastructure assets, 99.9 per cent of which are
fully operational (by portfolio value). The portfolio is well diversified
across sectors in education, healthcare, blue light (fire and police),
affordable housing, modern correctional facilities, clean energy, and
transport infrastructure assets.
Located in Australia, Canada, Germany, the Netherlands, Norway, the UK, and
the US, all Portfolio Companies are in stable, well-developed, and
highly-rated investment grade countries.
No. Asset Country Percentage holding %
1 A1/A6 Motorway Netherlands 37.1
2 A7 Motorway Germany 49
3 Aberdeen Western Peripheral Route UK 33.3
4 Avon & Somerset Police HQ UK 100
5 Ayrshire and Arran Hospital UK 100
6 Barking Dagenham & Havering Primary Care (LIFT) UK 60
7 Bedford Schools UK 100
8 Belfast Metropolitan College UK 100
9 Burg Correctional Facility Germany 90
10 Canada Line Canada 26.7
11 Champlain Bridge Canada 25
12 Clackmannanshire Schools UK 100
13 Cologne Schools Germany 50
14 Coventry Schools UK 100
15 E18 Motorway Norway 100
16 East Down Colleges UK 100
17 Frankfurt Schools Germany 50
18 Fürst Wrede Barracks Germany 50
19 Gloucester Royal Hospital UK 50
20 Golden Ears Bridge Canada 100
21 Highway 104 Canada 50
22 John Hart Generating Station Canada 80
23 Kelowna and Vernon Hospital Canada 100
24 Kent Schools UK 50
25 Kicking Horse Canyon Highway Canada 50
26 Lagan College UK 100
27 Lisburn College UK 100
28 Liverpool & Sefton Primary Care (LIFT) UK 60
29 M1 Westlink UK 100
30 M80 Motorway UK 50
31 McGill University Health Centre Canada 40
32 Mersey Care Hospital UK 79.6
33 Mersey Gateway Bridge UK 37.5
34 N18 Motorway Netherlands 52
35 North Commuter Parkway Canada 50
36 North East Stoney Trail Canada 100
37 North London Estates Partnerships Primary Care (LIFT) UK 60
38 North West Fire and Rescue UK 100
39 North West Regional College UK 100
40 Northwest Anthony Henday Drive Canada 50
41 Northern Territory Secure Facilities Australia 100
42 Ohio River Bridges US 66.7
43 Poplar Affordable Housing & Recreational Centres UK 100
44 Restigouche Hospital Centre Canada 80
45 Rodenkirchen Schools Germany 50
46 Royal Women's Hospital Australia 100
47 Scottish Borders Schools UK 100
48 South East Stoney Trail Motorway Canada 40
49 Stanton Territorial Hospital Canada 100
50 Stoke & Staffs Rescue Service UK 85
51 Tor Bank School UK 100
52 Unna Administrative Centre Germany 90
53 Victoria Correctional Facilities Australia 100
54 Westland Town Hall Netherlands 100
55 William R. Bennett Bridge Canada 80
56 Women's College Hospital Canada 100
Projects listed above are in alphabetical order
Operating model in action
Preserving and enhancing value through active asset management
Increasing short-term interest rates across all jurisdictions over the past 12
to 18 months has led to a renewed emphasis on treasury management and
optimisation. During the reporting period, we have finalised cash pooling
arrangements in the UK and Canada to maximise interest generated on cash
deposits of our Portfolio Companies.
Value-accretive activities, including effective lifecycle cost management,
Portfolio Company savings, and optimised cash reserving, contributed
approximately £7.6 million to the NAV.
The operational performance of the Portfolio Companies continued to be strong.
Through our active value-driven approach to asset management and the
robustness of our portfolio we have achieved an asset availability level of
approximately 99.9 per cent. Deductions were either borne by third-party
facility management companies and road operators or were part of planned
expenditures.
There were no material lock-ups, default events or covenant breaches in the
underlying debt financing agreements reported in the six months to 30 June
2023. This means that all our investments contributed to our strong dividend
cover with distributions ahead of projections. We are very proud of this
achievement.
High-quality inflation linkage
During the reporting period, inflation and interest rates continued to remain
at elevated levels in all jurisdictions where BBGI invests. The rise in
long-term interest rates had an impact on discount rates, but it has become
clear that not all asset classes perform identically in a rising interest rate
environment.
Our equity cash flows are positively linked to inflation at approximately 0.6
per cent. If long‑term inflation is 1 per cent higher than our assumptions
for all future periods, returns should increase from 7.2 per cent to 7.8 per
cent. We achieve this high-quality inflation linkage through contractual
indexation mechanics in our Project Agreements with our public sector clients
at each Portfolio Company, and update the inflation adjustment at least
annually.
We pass on the indexation mechanism to our subcontractors - on whom we rely to
support our assets' operations - providing an inflation cost hedge to
effectively manage our cost base. The Portfolio Companies enter facilities
management and operating subcontracts that mirror the inflation arrangements
contained in the Project Agreement. In the UK, Project Agreements tend to have
a Retail Price Index (RPI) adjustment factor, while other regions commonly use
Consumer Price Index (CPI) indexation. However, some Project Agreements have
bespoke inflation indexes that reflect expected operations and maintenance
costs.
The extent of a Portfolio Company's linkage to inflation is determined by the
portion of income and costs linked to inflation. In most cases, cash flows are
positively inflation-linked as the indexation of revenues is greater than the
indexation of expenses.
The high-quality and defensive nature of our inflation linkage is underpinned
by:
Contractual increases: The adjustment for inflation is a
contractual component of the availability-style cash flows for each Portfolio
Company, supported by creditworthy government or government-backed
counterparties in AA to AAA-rated countries. While other types of assets may
offer a strong theoretical inflation linkage (e.g., the ability to raise
prices in response to an increase in CPI), they may be subject to changes in
elasticity of demand. For example, toll roads and student accommodation
projects may have the potential to increase prices in response to an increase
in CPI but may be hindered by market demand from increasing revenue, while
costs may simultaneously rise. Such assets would therefore need to be priced
at an appropriate risk-adjusted basis.
Protection against rising costs: We transfer the indexation
mechanism to our subcontractors, who are crucial in supporting the operations
of our assets. This arrangement serves as an inflation cost hedge, helping us
to efficiently control our cost base. Similarly, in most cases, the risk of
energy cost increases rests with our public sector client or has been passed
down to the subcontractor.
Not dependent on regulatory review: The inflation adjustment is
automatic and contractual and is not subject to regulatory review. Once the
relevant reference factor is published, the adjustment is mechanical.
Portfolio approach: Our inflation linkage comes from diverse
Portfolio Companies in different countries.
Prudent financial management
Our assets continued to perform well during the reporting period with cash
receipts during the period ahead of projections.
Our net debt position as of 30 June 2023 was £7.9 million with drawings
outstanding under the RCF representing 2.4 per cent of NAV.
We have efficient cash management in place, which aims to avoid cash drag. We
use the proven financing methodology of drawing on our RCF before raising new
equity to repay the temporary debt. The committed amount available to the
Company from the RCF is £230 million, which matures in 2026. Furthermore, the
Company has the possibility of increasing the quantum to £300 million by
means of an accordion provision. This provides us with the ability to execute
larger acquisitions in an efficient manner, and ensures we are a trusted and
repeat partner in our key markets.
Despite increasing cost pressures resulting from heightened levels of
inflation, our diligent approach to cost management has enabled us to maintain
our ongoing charges at a competitive level of 0.92 per cent.
Selective acquisition strategy
During the period, we remained active in the market and carefully assessed new
investment opportunities. Although we evaluated several opportunities, the
Management Board chose not to pursue them as they did not meet our criteria
for accretive inflation-linkage, yield, or residual life.
Supply chain monitoring
The Management Board consistently monitors the potential concentration risk
posed by operations and maintenance (O&M) contractors that provide
counterparty services to our assets. The table below depicts the level of
O&M contractor exposure as a percentage of portfolio value.(( xiv ))
O&M contractors
Portfolio Company in-house 13%
SNC-Lavalin O&M Inc 10%
Capilano Highway Services 10%
Cushman and Wakefield 6%
Black & McDonald 6%
Integral FM 5%
Honeywell 5%
Hochtief Solutions AG 4%
Carmacks Maintenance Services 4%
Graham AM 3%
Intertoll Ltd. 3%
BEAR Scotland 3%
Guildmore Ltd. 3%
Amey Community Ltd. 3%
Galliford Try FM 3%
Remaining investments 19%
100%
The Management Board has thoroughly assessed the risk exposure and has not
identified any significant risks. We have a strict supply chain monitoring
policy in place and maintain a diverse contractor base and supply chain, with
no concentrated exposure. Additionally, we have implemented risk mitigation
measures to address any potential supply chain issues proactively.
Construction defects
We proactively monitor the quality of our assets to promptly identify any
construction defects. When necessary, we take appropriate remediation measures
to ensure the highest standard of our portfolio. The responsibility for, and
the cost of remediation and related deductions lie with the relevant
construction subcontractor on each asset, in line with statutory limitation
periods. This plays an important role in our effective counterparty risk
management.
Latent defects risk was mitigated during the reporting period, with 58 per
cent of portfolio value covered by either limitation or warranty periods and
there were no material defects reported on any of our portfolio assets.
Latent defects limitations / Warranty period remaining
Expired 42%
Within 1 year 10%
1-2 years 8%
2-5 years 19%
5-10 years 15%
10+ years 6%
100%
Project hand back
At the end of a concession, the private partner transfers control and
management of the project back to the public sector. This process is termed
'hand back'. The concessions for two of the Company's UK accommodation assets
will expire in January 2026 and August 2027. Preparations for their hand back
is underway. Following the Infrastructure and Projects Authority UK's
guidelines, collaborative working groups have been established, comprising
representatives from the Authority, the FM contractor, and the Portfolio
Companies, each involved in the projects. The FM contractor bears the hand
back risk for both assets.
The hand back process is progressing positively, with notable advancements
made so far. Interactions and cooperation among all parties are robust,
fostering strong relationships. As of now, no risks that could affect either
of the Portfolio Companies have been detected in the process.
Market trends and pipeline
BBGI continues to operate in an unpredictable macroeconomic and geopolitical
environment. Financial markets remain volatile, and peak inflation and
interest rate levels and timing remain uncertain.
As rising long-term risk-free rates were predominantly observed in the UK
during the reporting period, we have seen robust demand and only a moderate
increase in pricing for high-quality availability-style infrastructure assets,
as evidenced by third-party transactions. However, the changing macroeconomic
conditions have negatively impacted the share prices of listed infrastructure
companies, limiting sector participants' short-term access to equity capital
markets. Therefore, we will continue to exercise discipline and only pursue
transactions that are accretive and enhance our portfolio construction.
We believe infrastructure will remain an attractive asset class due to its
defensive nature, predictable cash flows, and inflation linkage. Looking
ahead, the social infrastructure asset class shows promising prospects, driven
by the need for decarbonisation, digitalisation, and the upgrade or
replacement of ageing infrastructure.
With a healthy balance sheet and a largely untapped RCF, we are well
positioned to navigate the evolving core infrastructure landscape with
discipline and ambition. Our objective is to deliver accretive long-term
predictable and inflation-linked cash flows to our shareholders.
As many market participants are evaluating the prospects of an economic
recession, we take comfort in the resilience of the contractual nature of our
cash flows, which are paid by high credit-quality government clients, in
return for delivering essential social infrastructure.
Within the broader infrastructure sector, there has been a wide variation in
how different types of assets have performed. Going forward, economic
infrastructure investments may be impacted if the economy grows at lower rates
than forecast. However, the availability-style infrastructure assets in which
we invest are less cyclical, and thus more resilient during potential economic
downturns.
New opportunities
While BBGI's primary focus remains on the secondary market, we recognise that
primary market activity serves as an essential indicator for future secondary
opportunities in the medium to longer term. Although there is no guarantee
that the planned infrastructure spending will result in investment
opportunities, we expect that governments will seek private sector capital to
support their ambitious plans, especially considering the significant strain
on government balance sheets following the Covid pandemic.
Numerous countries have announced substantial infrastructure investments in
response to climate change targets. The OECD forecasts a need for US$6.9
trillion in global investment annually until 2030 to meet climate and
development objectives. xv
Canada: The 'Investing in Canada Plan' commits over C$180 billion until 2035
for infrastructure projects benefitting Canadians. Over C$136 billion has been
invested to date. The Investing in Canada Plan is designed to achieve three
objectives: create long-term economic growth to build a stronger middle class;
support the resilience of communities and transition to a clean growth
economy; and build social inclusion and socio-economic outcomes for all
Canadians. Investments will be directed towards infrastructure to support a
resilient recovery, focusing on public transit, low-carbon transition
initiatives, and a national infrastructure fund.
UK: The UK Infrastructure Bank, established in 2021, aims to stimulate growth
and transition to net zero by 2050. Together with the private sector and local
government, the bank is leading a shared mission to accelerate investment in
the UK's infrastructure. The government expects to support at least £40
billion of investments in various sectors, including transport, water, waste
and digital.
US: The Infrastructure Investment and Jobs Act, a US$1.2 trillion bipartisan
bill approved in November 2021, commits significant funding to infrastructure
development across various areas, including roads, bridges, public transit and
broadband. It is the largest such investment programme in more than a
generation and raises federal infrastructure spending to its highest share of
GDP since the early 1980s.
EU: The European Commission unveiled a major infrastructure investment
strategy aimed at mobilising up to €300 billion of investments in global
development between 2021 and 2027 xvi . The strategy will seek to develop
physical infrastructure in five key sectors: digital; climate and energy;
transport; health; and education and research and allows the EU to leverage
public and private investment in priority areas. The European Commission said
the European Fund for Sustainable Development will make up to €135 billion
available for guaranteed investments for infrastructure projects between 2021
and 2027.
Australia: The Australian Government is investing A$120 billion over ten years
from 2022-2033 in land transport infrastructure through its rolling
infrastructure pipeline, most of which is delivered under the Infrastructure
Investment Program. The government has committed to upgrading key freight
routes in the regions, reducing traffic congestion in cities, developing
faster rail, improving road safety, and empowering local councils to support
projects that matter to local communities.
2023 and beyond: BBGI's pipeline for transactions
BBGI remains committed to expanding its essential social infrastructure
portfolio. From 19 availability-style assets in 2011, our portfolio has grown
to 56 assets, including roads, schools, healthcare facilities, transport and
modern correctional facilities.
Our focus remains on assets with long-term predictable and inflation-linked
revenues, often with public sector counterparties, either through concessions
or direct ownership. These opportunities will further diversify and strengthen
our portfolio, ensuring sustainable returns for our shareholders.
Operating and financial review
The Management Board is pleased to present the Operating and Financial Review
for the six months ended 30 June 2023.
Highlights and key performance indicators
Certain key performance indicators ('KPIs') for the past 3.5 years are
outlined below:
KPI Target Dec-20 Dec-21 Jun-23 Commentary
Dec-22
Dividends Progressive long-term dividend growth in pps 7.18 7.33 7.48 3.965 50% of the 2023 target declared
(paid or declared)
NAV per share Positive NAV per share growth 1.2% 2.1% 6.6% (1.4%) Not achieved during the reporting period
Annualised total shareholder return since IPO 7% to 8% annualised on IPO issue price of £1 per share 11.0% 10.4% 8.8% 7.4% Achieved
Ongoing charge Competitive cost position 0.86% 0.86% 0.87% 0.92% xvii Achieved
Cash dividend cover >1.0x 1.27x 1.31x 1.47x 1.68x Achieved
Asset availability > 98% asset availability P P P P Achieved
Single asset concentration risk To be less than 25% of portfolio immediately post-acquisition 9% 11% 11% 10 % Achieved
(as a percentage of portfolio)
(GEB) (ORB) (ORB) (ORB)
Availability-style assets Maximise availability-style assets 100% 100% 100% 100% Achieved
(as a percentage of portfolio)
Asset management
Cash performance
Our portfolio of 56 high-quality, availability-style PPP infrastructure
investments performed well during the period, with total cash flows ahead of
projections and the underlying financial models.
Construction exposure
Our investment policy is to invest principally in assets that have completed
construction and are operational. Accordingly, investments in assets that are
under construction are limited to 25 per cent of the portfolio's value. We aim
to produce a stable dividend, while gaining exposure to the potential NAV
uplift that occurs when assets move from successful construction to the
operational phase.
As at 30 June 2023, 99.4 per cent of our assets were operational. Highway 104
in Canada is the only project in construction. We reached financial close on
our Highway 104 project in May 2020, with substantial completion scheduled for
Q3 2023. The Management Board believes measured construction exposure will not
compromise our ability to meet our dividend targets.
Investment performance
Return track record
Like many other listed companies in the infrastructure and renewables sectors,
macro uncertainty has weighed on investor sentiment and our shares have traded
at a discount to NAV for a notable portion of the reporting period.
The share price weakness and associated discount to Net Asset Value, has been
seen across BBGI's UK listed peers and reflects amongst other things the
markets concern about the effects of higher inflation, higher interest rates
and potential consumer recessions, on areas such as discount rates, the
availability and price of debt and the volume and price of infrastructure
transactions going forward. However, the Board does not believe the current
share price accurately reflects the value of our portfolio or its prospects.
Since going public in 2011, BBGI shares have only briefly traded at a discount
to NAV, namely at the start of the global pandemic in March 2020, during the
UK Prime Minister Truss 'Mini budget', and more recently during H1 2023 amidst
concerns about the impact of rising interest rates on the valuations of
infrastructure and renewable investments. The Company is focused on long-term
investing with its low-risk portfolio of long duration assets providing the
opportunity to look beyond these periods of market stress. The Board closely
monitors the discount and takes it into consideration as part of its overall
capital allocation strategy, however, actions to try to reduce the discount
will only be undertaken after thorough consideration and taking into account
the long-term implications.
Against the FTSE All-Share, the Company has shown a low ten-year correlation
of 26.3 per cent and a beta of 0.2620.
The share price closed at 138.0 pence on 30 June 2023, representing a 6.6 per
cent discount to the NAV per share at the period-end.
The total NAV return per share from IPO to 30 June 2023 was 163.8 per cent or
8.8 per cent on an annualised basis(( xviii )).
Distribution policy
Distributions on the ordinary shares are planned to be paid twice a year,
normally in respect of the six months to 30 June and the six months to 31
December.
Dividends
On 5 April 2023, we paid a second interim dividend of 3.74pps for the period 1
July 2022 to 31 December 2022. Together with the first interim dividend (which
was paid in October 2022), the total dividend for the year ended 31 December
2022 amounted to 7.48pps. The Board approved a 2023 interim dividend of
3.965pps to be paid on 19 October 2023, which is in line with its dividend
target for the year of 7.93pps. Furthermore, the Board is reaffirming its 2024
dividend target of 8.40pps and a dividend target for 2025 of 8.57 pence per
share.
· Average dividend increase of 3.4 per cent on a compound annual
growth rate from 2012 to 2023.
Valuation
The Management Board is responsible for carrying out the fair market valuation
of the Company's investments, which is then presented to the Supervisory Board
for consideration as part of its approval of the Annual and Interim Reports.
The valuation occurs semi-annually on 30 June and 31 December and is reviewed
by an independent third-party valuation expert.
The Company's investments are principally non-market traded investments with
predictable long-term availability-style revenue; therefore, the valuation is
determined using the discounted cash flow methodology. Our forecast
assumptions for key macroeconomic factors impacting cash flow include
inflation rates and deposit rates, and enacted changes in taxation rates
during the reporting period. These assumptions are based on market data,
publicly available economic forecasts, and long-term historical averages. We
also exercise judgement in assessing the future cash flows from each
investment, using detailed financial models produced by each Portfolio Company
and adjusting these models where necessary to reflect our assumptions as well
as any specific cash flow assumptions. The Company's consolidated valuation is
a sum-of-the-parts valuation with no further adjustments made to reflect
scale, scarcity, or diversification of the overall portfolio.
The fair value of each investment is then determined by applying an
appropriate discount rate, alongside contracted foreign exchange rates, or
reporting period-end foreign exchange rates and withholding taxes (as
applicable).
The discount rates applied considers investment risks, including the phase of
the investment (construction, ramp-up or stable operation),
investment-specific risks and opportunities, and country-specific factors.
Our determination of appropriate discount rates involves judgement based on
market knowledge, insights from investment and bidding activities, benchmark
analysis with comparable companies and sectors, discussions with advisers, and
publicly available information and analysing the equity risk premium over
government bond yields. As a reasonability check to our market-based approach
and providing further guidance to determine the appropriate market discount
rates, the Company complements its market-based approach by using the Capital
Asset Pricing Model where government risk-free rates plus an equity risk
premium are used to calculate discount rates.
The table below illustrates the breakdown of movements in the NAV.
NAV movement 31 December 2022 to 30 June 2023
The NAV at 30 June 2023 was £1,056.7 million (31 December 2022: £1,069.2
million), representing a decrease of 1.2 per cent.
NAV movement 31 December 2022 to 30 June 2023 £ million
NAV at 31 December 2022 1,069.2
Deduct: other net assets at 31 December 2022(i) (27.9)
Portfolio value at 31 December 2022 1,097.0
Distributions from investments(ii) (51.9)
Rebased opening portfolio value at 1 January 2023 1,045.2
Portfolio return(iii) 45.0
Change in market discount rate (26.8)
Change in macroeconomic assumptions 13.8
Foreign exchange net movement(iv) (12.9)
Portfolio value at 30 June 2023 1,064.2
Add: Other net liabilities at 30 June 2023(i) (7.5)
NAV at 30 June 2023 1,056.7
(i) These figures represent the net assets of the Group after excluding the
investments at fair value through profit or loss ('Investments at FVPL') and
the net position on currency hedging instruments. Refer to the Pro Forma
Balance Sheet in the Financial Results section of this Interim Report for
further detail.
(ii) While distributions from investments at FVPL reduce the portfolio value,
there is no impact on the Company's NAV as the effect of the reduction in the
portfolio value is offset by the receipt of cash at the consolidated Group
level. Distributions in the above table are shown net of withholding tax.
(iii) Portfolio return comprises the unwinding of the discount rate, portfolio
performance, the net effect of actual inflation, and updated operating
assumptions to reflect current expectations.
( iv) Includes the positive unrealised mark-to-market movement on the balance
sheet hedge of £8.1 million. Under IFRS, the related asset is recorded
separately as a derivative financial asset in the Condensed Consolidated
Interim Statement of Financial Position.
Key drivers for NAV change
The rebased opening portfolio value, after cash distributions from investments
of £51.9 million, was £1,045.2 million.
Portfolio return consists of several components, including the unwinding of
the discount rate, portfolio performance, the net effect of actual inflation,
and updated operating assumptions:
During the period, the Company recognised a £45.0 million portfolio return,
representing a 4.2 per cent increase in the NAV resulting from the unwinding
of discount rates, and portfolio performance, which reflects current
expectations based on the Company's hands-on active asset management. As the
Company moves closer to forecasted investment distribution dates, the time
value of those cash flows increases on a net present value basis and this
effect is called unwinding. £7.6 million of the £45.0 million is
attributable to value enhancements delivered by our active asset management
approach. These value-accretive activities included effective lifecycle cost
management, Portfolio Company cost savings, and optimised cash reserving.
Change in market discount rates supported by transactional data points:
The number of availability-style transactions and available market data points
have increased in the H1 2023 compared to H2 2022. Our objective when using
market data points is to provide further validation of the discount rates
applied in the valuation process. The Company has obtained at least one
relevant transactional data point for each currency in which we invest, except
for the Norwegian krone. Each data point considered represents a transaction
closed in December 2022 or later; therefore, each data point considers recent
macroeconomic changes. In the case of Norway, where no transactional data was
available, a risk premium of 3.0 per cent has been adopted.
We continue to complement our market-based approach for this reporting period
by using the Capital Asset Pricing Model where government risk-free rates plus
an equity risk premium are used to construct discount rates. This analysis is
used as a reasonability check for our market-based approach. While there is no
direct correlation between government bond yields and the risk premium on the
one hand and market discount rates on the other, the equity risk premium is a
useful additional data point.
Based on data from transactional activity, benchmark analysis with comparable
companies and sectors, discussions with advisers in the relevant markets, and
publicly available information gathered over the period, we have increased the
weighted average discount rate to 7.2 per cent (31 December 2022: 6.9 per
cent), which management believes to be conservative for a portfolio of
availability-style social infrastructure investments. This perspective is
further informed by our recent participation in auction processes in North
America. While we ultimately decided not to proceed, reliable feedback from
the sell-side advisor indicates that discount rates from bidders were c. 7.0
per cent. This methodology calculates the weighted average based on the value
of each investment in proportion to the total portfolio value, that is, based
on the net present value of their respective future cash flows.
The demand for availability style transactions remained robust, with
transactional data points outside the UK indicating a modest increase in
discount rates with only the UK showing a different trend. As a result, the
UK, which represents 33 per cent of our portfolio value, displays the most
significant discount rate increase, rising by approximately 0.7 per cent to
7.5 per cent for stable operational projects. In contrast, the increase in
other jurisdictions is up to a maximum of 0.2 per cent.
While individual risk-free rates have moved in a heterogenous manner during
the period (see table below), the weighted average risk-free rate has remained
stable at c. 3.8 per cent since December 2022. The discount rate of 7.2 per
cent represents a risk premium of c. 340 basis points, which the Company views
to be adequate and towards the conservative end for low-risk
availability-style investments. The Company believes that a risk premium in
the range of 250 to 350 basis points is appropriate for the low-risk
availability-style assets in our portfolio. This view is supported by an
announcement of the German Network Agency, which calculated equity risk
premium for regulated gas and assets of around 300 basis points. As it is
generally accepted that PPP/PFI assets have a lower risk profile than
regulated assets, on this basis the risk premium for PPP/PFI assets should be
generally around the 300 basis points mark.
In Canada, representing 35 per cent of the Company's investment portfolio, the
20-year government bond rate decreased c. 0.2 per cent xix over the period
with broadly similar movements in Australia, Germany, the US and the
Netherlands. The single material outlier has been the UK, representing 32 per
cent of the Company's investment portfolio, with the 20-year government gilt
rate increasing c. 0.5 per cent xx over the period with a broadly similar
movement in Norway. This divergence across jurisdictions has a stabilising
effect on the overall weighted average discount rate applied in the valuation
process, which further emphasises the benefits of a global investment strategy
with no singular concentration risk to any one country.
Country Risk-free rate Risk-free rate Movement in period
December 2022- June 2023
United Kingdom 4.0% 4.5% 0.5%
Canada 3.4% 3.2% (0.2%)
Australia 4.3% 4.2% (0.1%)
US 4.2% 4.1% (0.1%)
Germany 2.6% 2.5% (0.1)
Netherlands 2.9% 2.7% (0.2%)
Norway 3.3% 3.9% 0.6%
Portfolio weighted average risk-free rate 3.8% 3.8% --
Going forward, the Company is confident that investment demand for
availability-style social infrastructure, offering long-term, predictable and
inflation-linked cash flows will remain strong.
Specific discount rates consider risks associated with the investment
including the phase the investment is in, such as construction, ramp-up or
stable operation, investment-specific risks and opportunities, and
country-specific factors. For investments in the construction phase, we apply
a risk premium to reflect the higher-risk inherent during this stage of the
investment's lifecycle. Currently, the portfolio has one investment in
construction, Highway 104, which represents approximately 0.5 per cent of the
overall portfolio value. Construction is expected to be completed in H2 of
2023.
Furthermore, we have applied risk premiums or discounts to a limited number of
other investments based on their individual circumstances. For example, we
have made adjustments to acute hospitals in the UK, where a risk premium of
50bps continues to be applied. The only UK acute hospital in the portfolio is
Gloucester Royal Hospital, representing less than 1 per cent of the overall
NAV. This risk premium reflects the ongoing situation in the UK, where some
public health clients are facing cost pressures and are actively seeking cost
savings, including deductions. To date, BBGI has not been affected.
Change in macroeconomic assumptions:
During the period, the Company recognised an increase in the portfolio value
of £13.8 million, or a 1.3 per cent increase in the NAV, resulting from
changes in macroeconomic assumptions. The main drivers were short-term and
long-term deposit rates accounting for £12.9 million of this increase, with
the balance reflecting marginal changes in short-term inflation forecasts.
The Company's forecasted inflation rates were broadly in line with actual
inflation, delivering on the projected growth in the portfolio value. See the
Alternative Performance Measures section for further details on our inflation
linkage.
Short-term deposit rates have risen in conjunction with the increase in
underlying benchmark rates and are expected to remain at elevated levels in
most jurisdictions. We also believe it appropriate to update some of our
long-term deposit rate assumptions to reflect the current rate environment,
bringing them in line with long-term averages. The effect of revised deposit
rate assumptions resulted in a £12.9 million, or a 1.2 per cent increase in
NAV.
Foreign exchange:
A significant proportion of the Company's underlying investments are
denominated in currencies other than Sterling. The Company maintains its
accounts, prepares the valuation and pays dividends in Sterling. Accordingly,
fluctuations in exchange rates between Sterling and the relevant local
currencies will affect the value of the Company's underlying investments.
The forecasted distributions from investments are converted to Sterling at
either the contracted foreign exchange rate, for 100 per cent of non-Sterling
and non-Euro-denominated cash flows forecast to be received over the next four
years, or at the closing foreign exchange rate for the unhedged future cash
flows.
During the period ended 30 June 2023, the appreciation of Sterling ('GBP')
against the Canadian Dollar ('CAD'), Australian Dollar ('AUD'), the Euro
('EUR'), the US Dollar ('USD'), and the Norwegian Krone ('NOK') accounted for
a net decrease in the portfolio value of £12.9 million, which includes the
positive unrealised mark-to-market movement on the Company's balance sheet
hedge of £8.1 million. Since IPO in December 2011, the net cumulative effect
of foreign exchange movements on the portfolio value, after considering the
effect of balance sheet hedging, has been a decrease of £1.0 million, or 0.1
per cent of the 30 June 2023 NAV.
The table below shows the closing exchange rates, which were used to convert
unhedged future cash flows into the reporting currency at 30 June 2023.
GBP/ Valuation impact FX rates as of FX rates as of FX rate change
30 June 2023 31 December 2022
AUD Negative 1.9070 1.7743 (7.48%)
CAD Negative 1.6777 1.6386 (2.39%)
EUR Negative 1.1633 1.1298 (2.97%)
NOK Negative 13.6169 11.9150 (14.28%)
USD Negative 1.2663 1.2097 (4.68%)
Although the closing rate is the required conversion rate to use for the
unhedged future cash flows, it is not necessarily representative of future
exchange rates as it reflects a specific point in time.
The Group uses forward currency swaps to (i) hedge 100 per cent of forecasted
cash flows over the next four years on an annual rolling basis, and (ii) to
implement balance sheet hedging in order to limit the decrease in the NAV to
approximately 3 per cent, for a 10 per cent adverse movement in foreign
exchange rates. xxi This is achieved by hedging a portion of the non-Sterling
and non-Euro portfolio value. xxii It is worth noting that forecasted
distributions in Euro are not hedged, as a natural hedge is in place due to a
significant portion of the running costs incurred at the consolidated level
being denominated in Euro. The effect of the Company's hedging strategy can
also be expressed as a theoretical or implicit portfolio allocation to
Sterling exposure. In other words, on an unhedged basis, the portfolio
allocation to Sterling exposure at 30 June 2023 would need to be approximately
77 per cent to obtain the same NAV sensitivity to a 10 per cent adverse change
in foreign exchange rates, as shown in the Foreign Exchange Sensitivity table
below.
Macroeconomic events
The quality and predictability of portfolio cash flows has come into sharper
focus given uncertainty in the markets generally and continued elevated
inflation levels. Against this backdrop, the Company is well-positioned
through its high-quality contracted inflation linkage, which is achieved
through annually updated contractual indexation in the Company's Project
Agreements.
Additionally, there has been no material adverse effect on the portfolio
valuation resulting from the war in Ukraine. This is primarily because the
Company holds a low-risk, 100 per cent availability-style portfolio, coupled
with strong stakeholder collaboration to identify and mitigate any potential
adverse effects.
Macroeconomic assumptions
In addition to the discount rates, we use the following assumptions
('Assumptions') for the cash flows:
30 June 2023 31 December 2022
Inflation UK((i)) RPI/CPIH 6.30% for 2023; 3.90% for 2024 then 2.75% (RPI) / 2.0% (CPIH) 13.40% (actual) for 2022; 5.80% for 2023 then 2.75% (RPI) / 2.00% (CPIH)
Canada 2.80% for 2023; 2.30% for 2024 then 2.00% 6.30% (actual) for 2022; 4.00% for 2023; 2.30% for 2024 then 2.0%
Australia 4.50% for 2023; 3.25% for 2024 then 2.50% 8.00% for 2022; 4.75% for 2023 3.25% for 2024 then 2.50%
Germany/ Netherlands((ii)) 5.40% for 2023; 3.00% for 2024 then 2.00% 8.40% for 2022; 6.30% for 2023; 3.40% for 2024 then 2.00%
Norway((ii)) 5.00% for 2023; 2.30% for 2024 then 2.25% 5.90% (actual) for 2022; 4.90% for 2023 then 2.25%
US 3.00% for 2023 then 2.50% 6.50% (actual) for 2022; 3.40% for 2023 then 2.50%
Deposit rates (p.a.) UK 3.55% to 2024, then 2.00% 2.00% to 2024, then 1.50%
Canada 5.30% to 2024, then 2.00% 3.50% to 2024, then 1.75%
Australia 4.25% to 2024, then 3.50% 3.25% to 2024, then 3.00%
Germany/ Netherlands 2.75% to 2024, then 1.00% 0.50% to 2024, then 1.00%
Norway 3.20% to 2024, then 2.25% 2.00% to 2024, then 2.00%
US 4.90% to 2024, then 1.75% 3.75% to 2024, then 1.50%
Corporate tax rates (p.a.) UK 25.00% 19.00% until March 2023 then 25.00%
Canada((iii)) 23.00% / 26.50% / 27.00% / 29.00% 23.00% / 26.50% / 27.00% / 29.00%
Australia 30.00% 30.00%
Germany((iv)) 15.83% (incl. Solidarity charge) 15.83% (incl. solidarity charge)
Netherlands 25.80% 25.80%
Norway 22.00% 22.00%
US 21.00% 21.00%
((i)) On 25 November 2020, the UK Government announced the phasing out of RPI
after 2030 to be replaced with CPIH. The Company's UK portfolio indexation
factor changes from RPI to CPIH beginning on 1 January 2031.
((ii)) CPI indexation only. Where investments are subject to a basket of
indices, a projection for non-CPI indices is used.
((iii)) Individual tax rates vary among Canadian provinces: Alberta; Ontario;
Quebec; Northwest Territories; Saskatchewan; British Columbia; New Brunswick.
((iv)) Individual local trade tax rates are considered in addition to the tax
rate above.
Sensitivities
Discount rate sensitivity
The weighted average discount rate applied to the Company's portfolio of
investments is the single most important judgement and variable.
The following table shows the sensitivity of the NAV to a change in the
discount rate.
Discount rate sensitivity((i)) Change in NAV 30 June 2023
Increase by 1% to c. 8.2% (£80.6) million, i.e. (7.6)%
Decrease by 1% to c. 6.2% £92.7 million, i.e. 8.8%
((i)) Based on the weighted average rate of 7.2 per cent.
Inflation has increased in all jurisdictions across BBGI's geographies, and
interest rates have risen from historical lows, although in some jurisdictions
these trends have reversed over the period. Should long-term interest rates
rise substantially further, this is likely to further affect discount rates,
and as a result, negatively impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount rates
It is reasonable to assume that if discount rates increase, then deposit rates
and inflation would also be affected. To illustrate the effect of this
combined movement on the Company's NAV, a scenario was created assuming a one
percentage point increase in the weighted average discount rate to 8.2 per
cent, and a one percentage point increase in both deposit and inflation above
the macroeconomic assumptions.
Combined sensitivity: inflation, deposit rates and discount rates Change in NAV 30 June 2023
Increase by 1% (£17.2) million, i.e. (1.6)%
Inflation sensitivity
The Company's investments are contractually entitled to receive
availability-style revenue streams from public sector clients, which are
typically adjusted every year for inflation. Facilities management
subcontractors for accommodation investments and operating and maintenance
subcontractors for transport investments have similar indexation arrangements.
The portfolio cash flows are positively linked with inflation (e.g. RPI, CPI,
or a basket of indices).
This inflation linkage is achieved through contractual indexation mechanics in
the various Project Agreements with the public sector clients at the Portfolio
Companies and the inflation adjustment updated at least annually.
Inflation sensitivity
The table below shows the sensitivity of the NAV to a change in inflation
rates compared to the assumptions in the table above:
Inflation sensitivity Change in NAV 30 June 2023
Inflation +1% £50.2 million, i.e. 4.7%
Inflation −1% (£43.4) million, i.e. (4.1)%
Short-term inflation sensitivity
Inflation may continue to be elevated for the short-term before diminishing.
To illustrate the effect of persistent higher short-term inflation on the
Company's NAV, three scenarios were created assuming inflation is two
percentage points above our assumptions for the next one, three and five
years.
Short-term inflation sensitivity Change in NAV 30 June 2023
Inflation +2% for one year £11.8 million, i.e. 1.1%
Inflation +2% for three years £32.1 million, i.e. 3.0%
Inflation +2% for five years £48.6 million, i.e. 4.6%
Foreign exchange sensitivity
As described above, a significant proportion of the Company's underlying
investments are denominated in currencies other than Sterling.
The following table shows the sensitivity of the NAV to a change in foreign
exchange rates:
Foreign exchange sensitivity((i)) Change in NAV 30 June 2023
Increase by 10% (£24.8) million, i.e. (2.3)%
Decrease by 10% £25.8 million, i.e. 2.4%
((i)) Sensitivity in comparison to the spot foreign exchange rates at 30 June
2023 and considering the contractual and natural hedges in place, derived by
applying a 10 per cent increase or decrease to the Sterling/foreign currency
rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are required to be
maintained as part of the senior debt funding requirements (e.g. six-month
debt service reserve accounts and maintenance reserve accounts). As at 31
March 2023, BBGI's proportionate share in the total deposits held by the
Portfolio Companies exceeds £375 million. The asset cash flows are positively
correlated with the deposit rates.
The table below shows the sensitivity of the NAV to a percentage point change
in long-term deposit rates compared to the long-term assumptions in the table
above:
Deposit rate sensitivity Change in NAV 30 June 2023
Deposit rate +1% £20.5 million, i.e. 1.9%
Deposit rate −1% (£20.2) million, i.e. (1.9)%
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or replacing material
parts of an asset to maintain it over the concession term. They involve larger
items that are not covered by routine maintenance and, for roads, it will
include items such as replacement of asphalt, rehabilitation of surfaces, or
replacement of equipment. Lifecycle obligations are generally passed down to
the facility maintenance provider, except for transportation investments,
where these obligations are typically retained by the Portfolio Company.
Of the 56 investments in the portfolio, 20 investments retain the lifecycle
obligations. The remaining 36 investments have this obligation passed down to
the subcontractor.
The table below shows the sensitivity of the NAV to a change in lifecycle
costs:
Lifecycle costs sensitivity((i)) Change in NAV 30 June 2023
Increase by 10% (£23.4) million, i.e. (2.2)%
Decrease by 10% £21.7 million, i.e. 2.1%
((i)) Sensitivity applied to the 20 investments in the portfolio that retain
the lifecycle obligation i.e. the obligation is not passed down to the
subcontractor.
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation tax in the
country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to a change in corporate tax
rates compared to the assumptions in the table above:
Corporate tax rate sensitivity Change in NAV 30 June 2023
Tax rate +1% (£10.8) million, i.e. (1.0)%
Tax rate −1% £10.7 million, i.e. 1.0%
Refinancing: senior debt rate sensitivity
Assumptions are used where a refinancing of senior debt is required for an
investment during the remaining investment concession term. There is a risk
that such assumptions may not be achieved.
The table below shows the sensitivity of the NAV to a one percentage point
increase in the forecasted debt rate.
Senior debt refinancing sensitivity Change in NAV 30 June 2023
Debt rate +1% (£7.9) million, i.e. (0.7)%
Refinancing sensitivity relates to the Northern Territory Secure Facilities,
as it is common practice in the Australian infrastructure market to have
senior debt durations that are typically between five and seven years. We
assume three refinancings for the Northern Territory Secure Facilities,
between December 2025 and December 2038. Long-term interest rate hedges fully
mitigate base rate risk, leaving exposure only to potential changes in margin.
Gross Domestic Product sensitivity
Our portfolio is not sensitive to GDP.
The principal risks faced by the Group and the mitigants in place are outlined
in the Risk section.
Key Portfolio Company and portfolio cash flow Assumptions underlying the NAV
calculation include:
· The discount rates and the Assumptions, as set out above,
continue to be applicable.
· The updated financial models used for the valuation accurately
reflect the terms of all agreements relating to the Portfolio Companies and
represent a fair and reasonable estimation of future cash flows accruing to
the Portfolio Companies.
· Cash flows from and to the Portfolio Companies are received and
made at the times anticipated.
· Non-UK investments are valued in local currency and converted to
Sterling at either the period-end spot foreign exchange rates or the
contracted foreign exchange rate.
· Where the operating costs of the Portfolio Companies are
contractually fixed, such contracts are performed, and where such costs are
not fixed, they remain within the current forecasts in the valuation models.
· Where lifecycle costs/risks are borne by the Portfolio Companies,
they remain in line with current forecasts in the valuation models.
· Contractual payments to the Portfolio Companies remain on track
and contracts with public sector or public sector-backed counterparties are
not terminated before their contractual expiry date.
· Any deductions or abatements during the operations period of
Portfolio Companies are passed down to subcontractors under contractual
arrangements or are part of the planned (lifecycle) forecasts.
· Changes to the concession period for certain investments are
realised.
· In cases where the Portfolio Companies have contracts which are
in the construction phase, they are either completed on time or any delay
costs are borne by the construction contractors.
· Enacted tax rates or regulatory changes, or forecast changes with
a high probability, on or prior to this reporting period-end with a future
effect materially impacting cash flow forecasts, are reflected in the
financial models.
In forming the above assessments, BBGI uses its judgement and works with our
Portfolio Company management teams, as well as using due diligence information
from, or working with, suitably qualified third parties such as technical,
legal, tax and insurance advisers.
Financial results
Basis of accounting
We have prepared the Group's Condensed Consolidated Interim Financial
Statements in accordance with International Financial Reporting Standards
('IFRS') as adopted by the European Union ('EU'). In accordance with IFRS, the
Company qualifies as an Investment Entity and, therefore, does not consolidate
its investments in subsidiaries that qualify as investments at fair value
through profit or loss. However, certain subsidiaries that are not investments
at FVPL, but instead provide investment-related services or activities that
relate to the investment activities of the Group, are consolidated. As an
Investment Entity, the Company recognises distributions from Investments at
FVPL as a reduction in their carrying value. These distributions reduce the
estimated future cash flows which are used to determine the fair value of the
investments at FVPL. The accounting principles applied are consistent with
those principles applied in the prior year reporting.
Income and costs
Period ended 30 June 2023 Period ended 30 June 2022
Pro forma Income Statement £ million £ million
Investment basis
Income from investments at FVPL 19.7 100.4
Other operating income 1.6 0.2
Operating income 21.3 100.6
Administrative expenses (6.3) (5.8)
Other operating expenses (0.2) (0.4)
Net finance result (1.4) (0.9)
Profit before tax 13.4 93.5
Tax expense - net (2.3) (1.0)
Profit for the year 11.1 92.5
Other comprehensive income 1.1 -
Total comprehensive income 12.2 92.5
Basic earnings per share (pence) 1.55 12.98
During the six-month period, the Group recognised a net income from
investments at FVPL amounting to £19.7 million (30 June 2022: £100.4
million). This income is derived from a combination of factors, including the
positive effect of inflation and deposit interest rate increases, the net
effect of foreign exchange, the unwinding of discount and value enhancements.
The movement in income from investments at FVPL on a comparative basis can be
primarily attributed to foreign exchange fluctuations and changes in discount
rates. In the June 2022 reporting period, we recorded a net foreign exchange
income, after considering the net effect of unrealised results from balance
sheet hedging, of £32.4 million. However, in the June 2023 reporting period,
we recognised a loss of £12.9 million, resulting in a significant swing of
£45.3 million. Additionally, discount rates remained unchanged in the June
2022 reporting period; however, in the June 2023 reporting period, we
recognised a loss of £26.8 million. Together, these factors contributed to a
total swing of £72.1 million on a comparative basis.
During the reporting period, the Company recognised a net gain of £8.1
million on balance sheet hedging and £5.7 million on cash flow hedging (30
June 2022: £13.6 million net loss on balance sheet hedging and £14.1 million
net loss on cash flow hedging). For pro-forma purposes, the net result of
balance sheet and cash flow hedging is included in income from investments at
FVPL.
Further detail on the income generated by the Group's Investments at FVPL is
provided in the Valuation section of this Interim Report.
Administrative expenses include personnel expenses, legal and professional
fees and office and administration expenses. See further detail in the Group
level corporate cost analysis.
Profit for the six-month period decreased to £11.1 million (30 June 2022:
£92.5 million). This reduction is primarily attributable to those factors
outlined above, being the adverse effects of foreign exchange movements on our
non-Sterling denominated portfolio and the increase in UK risk-free-rates,
which has led to an increase in the discount rates applied in valuing our UK
assets.
Group level corporate cost analysis
The table below is prepared on an accrual basis.
Period ended 30 June 2023 Period ended 30 June 2022
£ million £ million
Corporate costs
Personnel expenses 4.1 3.7
Taxes 2.3 1.0
Legal and professional fees 1.5 1.5
Net finance result 1.4 0.9
Office and administration 0.7 0.5
Acquisition-related costs 0.2 0.4
Corporate costs 10.2 8.0
Personnel expenses for the six-month period were £4.1 million (30 June 2022:
£3.7 million) with the increase driven largely by inflation adjustments to
staff salaries.
The net finance result for the six-month period was £1.4 million (30 June
2022: £0.9 million). This figure reflects borrowing costs, commitment fees
and other fees relating to the Group's RCF. At 30 June 2023, the Group had
£25.8 million of borrowings outstanding under the RCF.
Acquisition-related costs incurred during the six-month period amounted to
£0.2 million (30 June 2022: £0.4 million), which relates to unsuccessful bid
costs amounting to £0.2 million (30 June 2022: less than £0.1 million).
Ongoing charges
Using costs incurred to 30 June 2023, the Company's estimated annualised
ongoing charges ('OGC') percentage at 30 June 2023 is 0.92 per cent (31
December 2022: 0.87 per cent).
The OGC has increased slightly compared to the reported figure as of 31
December 2022. This increase is primarily due to underlying cost increases
driven by inflationary pressures, including staff salaries, with limited
offsetting denominator effect from the average NAV.
The estimated annualised OGC percentage is prepared in accordance with the
Association of Investment Companies ('AIC') recommended methodology. The
percentage represents the annualised reduction or drag on shareholder returns
as a result of recurring operational expenses incurred in managing the Group's
consolidated entities and provides an indication of the level of recurring
costs likely to be incurred in managing the Group in the future.
Period ended 30 June 2023 (annualised)
Year ended 31 Dec 2022
Ongoing charges information
Ongoing charges (using AIC recommended methodology) 0.92% 0.87%
In accordance with the AIC recommended methodology, fees that are linked to
investment performance could be viewed as analogous to performance fees paid
by externally managed investment companies and should therefore be excluded
from the principal OGC calculation.
Annualised fees directly linked to investment performance as a percentage of
average NAV are estimated to be 0.11 per cent. Combined therefore, the
estimated annualised aggregate of ongoing charges plus investment performance
fees is 1.03 per cent.
Cash flows
The table below summarises the sources and uses of cash and cash equivalents
for the Group.
Period ended 30 June 2023 Period ended 30 June 2022
£ million £ million
Distributions from Investments at FVPL((i)) 53.9 62.1
Net cash flows used in operating activities (11.7) (11.1)
Additional Investments at FVPL and other assets - (23.7)
Net cash flows used in financing activities (55.7) (15.2)
Impact of foreign exchange gain/(loss) on cash and cash equivalents 0.2 1.2
Net cash inflow (outflow) (13.3) 13.3
(()(i)) Distributions in the above table are shown gross of withholding tax.
The associated withholding tax outflow is included in 'Net cash flows used in
operating activities'.
The Group's portfolio of investments continued to perform strongly over the
six-month period, with gross distributions exceeding projections. However, on
a comparative basis, the distributions were down due to the previously
reported opportunistic refinancing completed in H1 2022, which resulted in a
one-off distribution of proceeds.
Cash dividends paid during the six months ended 30 June 2023 amounted to
£25.1 million (30 June 2022: £25.1 million).
Cash dividend cover
For the six months ended 30 June 2023, the Group achieved a cash dividend
cover ratio of 1.68x (period ended 30 June 2022: 2.03x) calculated as follows:
30 June 2023 30 June 2022
£ million (except ratio) £ million (except ratio)
Distributions from investments at FVPL 53.9 62.1
Less: Net cash flows used in operating activities (11.7) (11.1)
Net distributions 42.2 51.0
Divided by cash dividends paid 25.1 25.1
Cash dividend cover (ratio) 1.68x 2.03x
The strong cash dividend coverage for the period was underpinned by BBGI's
high-quality, contracted, inflation linked cash flows. The cash dividend cover
for FY 2023 is forecast to be in the range of 1.30x to 1.40x. The projected
reduction on an annual basis is due to the front-ended distribution profile of
the portfolio.
Pro forma balance sheet
30 June 2023 31 Dec 2022
Investment basis £ million £ million
Investments at FVPL 1,064.2 1,097.0
Trade and other receivables 2.3 0.9
Other assets and liabilities (net) (1.9) (2.4)
Net debt (7.9) (26.3)
NAV attributable to ordinary shares 1,056.7 1,069.2
As at 30 June 2023, cash and cash equivalents amounted to £17.9 million
(£31.2 million as at 31 December 2022). A reconciliation of cash and cash
equivalent to net debt is provided below:
30 June 2023 31 Dec 2022
£ million £ million
Cash and cash equivalent 17.9 31.2
Loans and borrowings (24.9) (56.4)
Unamortised debt issue costs (0.9) (1.1)
Outstanding loan drawdown (25.8) (57.5)
Net debt (7.9) (26.3)
Three-year comparative of investment basis NAV 30 June 2023 31 Dec 2022 31 Dec 2021
NAV (millions) 1,056.7 1,069.2 1,001.6
NAV per share (pence) 147.8 149.9 140.7
The Investment Basis NAV decreased by 1.2 per cent to £1,056.7 million as at
30 June 2023 (31 December 2022: £1,069.2 million) and by 1. 4 per cent on an
Investment Basis NAV per share basis). The NAV total return on a per share
basis for the six months to 30 June 2023 was 1.1 per cent.
Alternative performance measures ('APM')
APM is understood as a financial measure of historical or future financial
performance, financial position, or cash flows, other than a financial measure
defined or specified under IFRS. The Group reports a selection of APM as
summarised in the table below and as used throughout this Interim Report. The
Management Board believes that these APM provide additional information that
may be useful to the users of this Report.
The APM presented here should supplement the information presented in the
Financial Statement section of this Report. The APM used are not measures of
performance or liquidity under IFRS and should not be considered in isolation
or as a substitute for measures of profit, or as an indicator of the Group's
operating performance or cash flows from operating activities, as determined
in accordance with IFRS.
APM Explanation 30 June 2023 31 December 2022
Annualised total NAV return On a compounded annual growth rate basis. This represents the steady-state 8.8% 9.1%
annual growth rate based on the NAV per share at 30 June 2023 assuming
per share dividends declared since IPO in December 2011 have been reinvested.1
Annualised total On a compounded annual growth rate basis. This represents the steady state 7.4% 8.8%
annual growth rate based on share price as at 30 June 2023, assuming dividends
shareholder declared since IPO in December 2011 have been reinvested. Investment
performance can be assessed by comparing this figure to the 7 per cent to 8
return since IPO per cent TSR target set at IPO.
('Annualised TSR')
Asset availability Calculated as a percentage of actual availability payments received, as a 99.9% 99.9%
percentage of scheduled availability fee payments. The Company targets a rate
in excess of 98 per cent. A high asset availability rate can be viewed as a
proxy to strong underlying asset performance.
Cash dividend cover ratio The cash dividend cover ratio is a multiple that divides the total net cash 1.68x 1.47x
generated in the period (available for distribution to investors) by the total
cash dividends paid in the period based on the cash flow from operating
activities under IFRS. A high cash dividend cover ratio reduces the risk that
the Group will not be able to continue making fully covered dividend payments.
Inflation linkage Represents the contractual, index-linked provisions, which adjust annually to 0.6% 0.5%
provide a positive and high-quality link to inflation. The measure represents
the increase in portfolio returns if inflation is one percentage point higher
than our modelled assumptions for all future periods. Under current
assumptions, the expected portfolio return would increase from 7.2 per cent to
7.8 per cent for a one percentage point increase to our inflation assumptions.
Net debt This amount, when considered in conjunction with the available commitment £(7.9) million £(26.3) million
under the Group's RCF (unutilised RCF amount of £203 million as at 30 June
2023), is an indicator of the Group's ability to meet financial commitments,
to pay dividends, and to undertake acquisitions.
Ongoing charges Represents the estimated reduction or drag on shareholder returns as a result 0.92% 0.87%
of recurring operational expenses incurred in managing the Group's
consolidated entities and provides an indication of the level of recurring
costs likely to be incurred in managing the Group in the future.
Target dividend Represents the forward-looking target dividend per share. These are targets 7.93 for 2023 7.93 for 2023
only and are not a profit forecast. There can be no assurance that these
targets will be met or that the Company will make any distribution at all. 8.40 for 2024 8.40 for 2024
8.57 for 2025 8.57 for 2025
Ten-year beta Calculated using the FTSE All-Share, ten-year data representing the ten years 0.26 0.24
preceding 30 June 2023. This performance measure demonstrates the level of
volatility of the Company's shares in comparison to the wider equity market.
Total shareholder The TSR combines share price appreciation and dividends 128.2% 152.6%
paid since return since IPO IPO in December 2011 to represent
the total return to the shareholder ('TSR') expressed as a percentage. This is
based on share price at 30 June
2023 and after adding back dividends paid or declared since IPO.
Weighted average Represents the weighted average, by value, of the remaining 19.8 20.2
individual
portfolio life project concession lengths in years.
Calculated by reference to the existing portfolio at 30 June 2023, assuming no
future portfolio additions.
(1) Calculated using the Morningstar methodology.
Reconciliation of investment basis to IFRS
Reconciliation of condensed consolidated
Interim Income
Statement
30 June 2023 30 June 2022
Investment Consolidated Investment Consolidated
basis(i) Adjust IFRS basis(i) Adjust IFRS
£ million £ million £ million £ million £ million £ million
Income from Investments at FVPL 19.7 (13.8) 5.9 100.4 27.7 128.1
Other operating income 1.6 5.7 7.3 0.2 - 0.2
Operating income 21.3 (8.1) 13.2 100.6 27.7 128.3
Administrative expenses (6.3) - (6.3) (5.8) - (5.8)
Other operating expenses (0.2) - (0.2) (0.4) (14.1) (14.5)
Net finance result (1.4) - (1.4) (0.9) - (0.9)
Net gain (loss) on balance sheet hedging - 8.1 8.1 - (13.6) (13.6)
Profit before tax 13.4 - 13.4 93.5 - 93.5
Tax expense - net (2.3) - (2.3) (1.0) - (1.0)
Profit from continuing operations 11.1 - 11.1 92.5 - 92.5
Reconciliation of Condensed Consolidated
Interim Statement of Financial Position
30 June 2023 31 December 2022
Investment Consolidated Investment Consolidated
basis(i) Adjust IFRS basis(i) Adjust IFRS
£ million £ million £ million £ million £ million £ million
Investments at FVPL 1,064.2 (9.2) 1,055.0 1,097.0 5.8 1,102.8
Trade and other receivables 2.3 - 2.3 0.9 - 0.9
Other net liabilities (1.9) - (1.9) (2.4) - (2.4)
Net debt (7.9) - (7.9) (26.3) - (26.3)
Derivative liability - 9.2 9.2 - (5.8) (5.8)
NAV attributable to ordinary shares 1,056.7 - 1,056.7 1,069.2 - 1,069.2
((i)) Represents the value of the Group's total net assets under the
Investment Basis NAV. The Investment Basis NAV represents the residual
interest of the shareholders in the Group, after all the liabilities of the
Group, if any, have been settled.
Risk
We follow a risk-based approach to internal controls. Our risk management
function facilitates the Management Board's duty to effectively govern and
manage the risks we face. Given the nature of our assets and our interaction
with the capital markets, we do not operate in a risk-free environment. In an
uncertain environment, we take proactive action to address risks, and to
achieve our business and investment objectives.
We identify, analyse, assess, report, and manage all material risks, and aim
to identify risks we face as early as possible, so we can minimise their
impact.
We classify risks into the following risk categories:
· Market risks
· Credit risks
· Counterparty risks
· Liquidity risks
· Operational risks
· Sustainability risks
We analyse all identified risks during the risk reporting process to
understand the range of possible impacts on BBGI. By undertaking this risk
review, we can determine material risks to analyse and respond to, and which
risks require no further attention. This gives the Management Board a
universal interpretation of risk.
Our risk management function performs a risk assessment to determine the
likelihood that a predefined event will occur and any subsequent impact; it
also estimates risk levels for a particular situation, compares these against
benchmarks or standards, and determines an acceptable level of risk.
In the risk profile all identified risks are classified according to risk
type, in line with the risk categories above. For material risks identified,
BBGI's Risk Manager advises on key risk indicators to include in the risk
profile and suggests appropriate quantitative and qualitative limits to
mitigate the potential impact of those risks, which are discussed and approved
by the Management Board before being formally included in the Risk Profile.
We have assessed inherent risk and have applied relevant mitigating factors to
arrive at a remaining residual risk that the Management Board deems manageable
and acceptable.
The following table summarises our material risks but is not an exhaustive
list of all the potential risks BBGI faces. There may be other unknown risks,
or those regarded as less material, that could, in the future, materially
impact our performance, our assets, and our capital resources.
Risk description Risk mitigation
MARKET RISKS
Volatility of discount rates We use a discounted cash flow methodology to value our portfolio of BBGI uses a market-based valuation to determine a base discount rate for
investments. Higher discount rates have a negative impact on valuation and the steady-state, operational investments in the different jurisdictions we
ultimate rate of return realised by our investors, while lower discount rates operate, and we use our judgement in arriving at the appropriate discount
may have a positive impact. rates. We may apply adjustments to the base rate to reflect variances from the
average benchmark when we determine investment-specific characteristics and
Our most important judgement and variable is the discount rate we apply to our risk profile.
portfolio of investments. Appropriate discount rates are key to deriving a
fair and reasonable portfolio valuation. Government bond yields have continued to increase during the reporting period
in the UK and in Norway. Conversely, in the same period, we have seen
Changes in market rates of interest (in particular, government bond yields) long-term government bond yields decrease in Australia, Canada, Germany, the
may impact the discount rate used to value our future projected cash flows, Netherlands, and US thereby reinforcing the benefits of having a globally
and thus our valuation. diversified portfolio. Over the same period transaction activity has increased
with market data points available. Nevertheless, and consistent with the
valuation at 31 December 2022, BBGI has complemented its market-based approach
by additionally using the capital asset pricing model where risk-free rates
plus an equity risk premium are used to calculate discount rates. This method
is used as a reasonability check for our market-based approach.
Our NAV is sensitivity-tested periodically for changes in discount rates.
Inflation rates are positively linked to the NAV. An increase in discount
rates due to increased government bond yields coincides currently with
significantly higher inflation rates. Together with higher short-term and
long-term forecasted deposit rates offset, partially at least, increased
discount rates in our portfolio valuation calculation.
An increase in long-dated government bond yields will not necessarily result
in an equivalent increase in discount rates with historical data indicating
that in periods where long-dated government bond yields have largely trended
downwards, the market discount rate applied to secondary transactions has not
followed in lockstep.
A sensitivity analysis to changes in discount rates, and the resulting effect
on NAV, is provided in the valuation section of this report.
Foreign exchange A significant proportion of our underlying investments - 67 per cent of the Currency-hedging arrangements for portfolio distributions denominated in
portfolio value at 30 June 2023 - are denominated in currencies other than Australian Dollar, Canadian Dollar, Norwegian Krone and US Dollar are in place
Sterling. for a rolling period of four years to mitigate some foreign exchange risk.
We maintain our financial statements, prepare the portfolio valuation, and pay In addition to cash flow hedging, we also hedge a portion of the non-Sterling,
dividends in Sterling. non-Euro portfolio value, and aim to reduce NAV sensitivity to approximately 3
per cent for a 10 per cent adverse foreign exchange movement.
There is a risk that fluctuations in exchange rates between Sterling and
relevant local currencies will adversely affect the value of our underlying Euro-denominated fund running costs currently provide a natural hedge against
investments, distributions and the ultimate rate of return realised by our the Euro-denominated portfolio distributions.
investors.
Furthermore, the ability to draw on the RCF in the currency of the underlying
asset distributions provides an additional hedging alternative.
BBGI has investments in five currencies other than Sterling, resulting in some
natural diversification among underlying currencies.
A sensitivity analysis to the movement in foreign exchange rates, and the
resulting effect on NAV, is provided in the valuation section of this report.
Interest and deposit rates Our performance may be adversely affected by changes in interest rates. BBGI Our Portfolio Companies have sought to hedge substantially all their floating
has an exposure to interest rates through borrowings under the RCF, debt at rate interest liabilities against changes in underlying interest rates with
the Portfolio Company level and cash deposits. interest rate swaps.
The Portfolio Companies typically have some cash reserves and deposits. From a At the Group level, we maintain deposits at low levels and only raise capital
financial modelling perspective, we assume that deposits can be placed at a when there is a clear strategy for deploying proceeds.
forecast rate, which varies depending on country.
A sensitivity analysis to movement in the senior debt rate, and the resulting
If deposit rates exceed or fall below projections for short-term and long-term effect on NAV, is provided in the valuation section of this report.
rates, the effect on investment returns will depend on the amount of deposits.
Inflation We have observed varied levels of inflationary pressure, and the resulting A scenario of persistent high inflation across our jurisdictions presents the
valuation effects, across the portfolio. Our valuation and the ultimate rate risk of declining real returns to investors.
of return realised by our investors may be adversely or positively affected by
lower or higher than expected inflation. Prolonged periods of deflation could We typically mitigate inflation risk for our Portfolio Companies to some
result in defaults under Portfolio Company loan arrangements. extent by seeking to match the indexation of the revenues to the indexation of
the operational cost.
The revenues and expenditure of our Portfolio Companies developed under
availability-style schemes are often partly or wholly subject to indexation. It is also important to note that BBGI's equity cash flows are positively
linked to inflation.
From a financial modelling perspective, an assumption is usually made that
inflation will increase at an assumed rate (which may vary depending on A sensitivity analysis to movements in inflation rates, and the resulting
country). The effect on investment returns, if inflation exceeds or falls effect on NAV, is provided in the valuation section of this report.
below the projections for this rate, typically depends on how each Portfolio
Company's costs are affected by inflation, and any unitary charge indexation However, the level of inflation linkage across the investments held varies and
provisions agreed with the client on any investment. is inconsistent. The consequences of higher or lower levels of inflation than
that assumed by the Company will not be uniform across our investments.
Changes to tax legislation, treaties, and rates There is a continued risk that enacted changes in tax law, tax rates and Certain risks, such as changes to corporation tax rates (including due to
global tax initiatives, including the OECD's recommendations in relation to fiscal constraints), cannot be prevented or mitigated.
base erosion and profit shifting or tax treaty eligibility, could have an
adverse effect on our cash flows, and reduce investors' returns.
We value our portfolio of investments based on enacted tax rates. Our
management team works closely with our global tax advisers and is briefed
periodically on relevant tax developments.
We continue to monitor the evolution of draft legislation for excessive
interest and financing expenses limitation ('EIFEL') rules in Canada and
potential impact on our investments.
These draft EIFEL rules aim to limit the deduction of 'interest and financing
expenses' to a fixed percentage of earnings before interest, tax,
depreciation, and amortisation for Canadian income tax purposes. Over the past
12 months the private sector, through a PPP industry representative body, made
several submissions to the Department of Finance on the proposed legislation.
Following a review of submissions and open consultations, the Department of
Finance released a revised draft of the legislation in November 2022. This
revised draft provides for an exemption for third-party debt financing on PPP
type projects, similar to the public benefit entity concept in the UK.
In December 2022 we provisioned c. £9.8 million and until the revised
legislation is finalised it is unclear if an additional provision is required.
Generally, BBGI has a globally diversified portfolio of assets, thereby
reducing the tax concentration risk of any one country.
A sensitivity analysis to movement in corporate tax rates, and the resulting
effect on NAV, is provided in the valuation section of this report.
Lifecycle or operational cost risk During the life of an investment, components of our assets (such as asphalt or Of the 56 assets in the BBGI portfolio, 20 Portfolio Companies retain the
concrete for roads and bridges; or roofs and air handling plants for lifecycle obligations and hand back obligations at the end of the concession
buildings) are likely to need to be replaced or undergo a major refurbishment. period and two Portfolio Companies self-deliver the operations. The remaining
36 assets have these lifecycle and hand back obligations passed down to the
There is a risk that the actual cost of replacement or refurbishment of these subcontractor.
lifecycle obligations will be greater than the forecasted cost, or that the
timing of the intervention may be earlier than forecast. Each Portfolio Company forecasts, models, and provides for the timing and
costs of such replacements or refurbishments. This is based on internal or
Additionally, a potential risk arises if there is a disparity in the external technical advice to assist in forecasting of lifecycle timings, scope
interpretation of hand-back obligations at the end of the concession period of work and costs. We experienced some limited supply chain pressure affecting
between the public sector client and the Portfolio Company, which could lead lifecycle cost which were typically outweighed by higher inflation-linked
to a budgetary overrun in lifecycle or operational costs. revenues.
There is also the general risk that costs may be higher than budgeted. This
typically relates to insurance costs and management service contracts or where
Portfolio Company management teams are responsible for operational service As part of acquisition due diligence, we review budgeted costs and assess
delivery. their adequacy.
A sensitivity analysis to movements in lifecycle costs is provided in the
valuation section of this report.
The risk of insurance cost increases is partly mitigated by a contractual
premium risk-sharing mechanism with certain public sector clients. For other
Portfolio Companies, the risk is borne entirely by the public sector client
but for a limited number of Portfolio Companies there is no mitigation
available.
COUNTERPARTY RISKS
Failure of subcontractor performance or credit risk (construction contractors, The risk of a subcontractor service failure, poor performance or subcontractor For assets under construction (c. 0.5 per cent of the portfolio value), there
facility managers, operation, and maintenance contractors) insolvency, which is sufficiently serious to cause a Portfolio Company to are several mitigants and steps we take to manage this risk:
terminate or to be required by the client or lenders to terminate a
subcontract. · A construction joint venture with two or more counterparties is
typically jointly and severally liable: if one party fails, the other is
There may be a loss of revenue during the time taken to find a replacement obligated to take over the obligations.
subcontractor. The replacement subcontractor may also levy a surcharge to
assume the subcontract, or charge more to provide the services. · We perform a contractor replacement analysis as part of our
initial investment due diligence. Most subcontractors on our investments are
well established, with several competing providers. Therefore, we expect that
a pool of potential replacement supplier counterparties is available if a
service counterparty fails, although not necessarily at the same cost.
· Construction subcontractors are typically required by lenders to
provide a robust security package, often consisting of letters of credit,
parent company guarantees or performance bonding.
The latter two mitigants are also in place for investments once they become
operational. However, any liability of subcontractors is typically capped at
contractually agreed amounts.
Other mitigants during operations include:
· Periodic benchmarking of defined soft facility services on some
investments.
· A diversified group of subcontractors, with no substantial
concentration risk.
· Ongoing subcontractor monitoring for our investments, as well as
contingency plans as appropriate, to ensure we mitigate the risk of
counterparty failure.
LIQUIDITY RISKS
Access to capital There is a risk that a continued disruption to the equity markets could lead The need to issue new equity capital primarily relates to the repayment of
to an inability to raise new capital. Such a disruption could limit our drawings under the RCF. As at 30 June 2023, the Company was in a modest net
ability to grow and our ability to repay debt drawn under our RCF. debt position of £7.9 million with £203 million available to draw under the
RCF, and has no investment transaction commitments.
To the extent that we do not have cash reserves pending investment, we expect
to bridge finance further investments using the RCF.
Although we have had an RCF since July 2012 (subsequently refinanced), we Our RCF expires in May 2026. The Management Board can seek to refinance the
cannot guarantee this will always be the case, or that we will be able to RCF to extend its maturity and reduce the near-term requirement to repay
issue further shares in the market. drawings, though we do not intend to be drawn for substantial periods of time.
The Board and our Company's brokers regularly assess market sentiment. Where
there is a prolonged disruption to the equity markets the Company can also
consider, as part of an effective portfolio construction strategy, the sale of
one or more investments to repay any outstanding amounts under the RCF.
Premium or discount to NAV The risk of share price volatility, or trading at a discount to NAV, leading To assist BBGI in managing any temporary or permanent share price discounts to
to lower returns to shareholders. NAV, we can make annual market purchases of up to 14.99 per cent of the
ordinary shares in issue.
We offer a continuation vote to shareholders every two years; the next will be
proposed at our Annual General Meeting on 30 April 2025.
The Management Board meets regularly with shareholders and receives regular
briefings from our Company's brokers to manage investor relations.
OPERATIONAL RISKS
Poor investment due diligence There is a risk that errors may be made in the assumptions, calculations, or BBGI has developed a robust asset acquisition due diligence process. Our
methodology applied during an acquisition due diligence process. typical due diligence includes model, legal, tax, technical, anti-money
laundering, ESG, sustainability and insurance reviews.
In such circumstances, the figures and/or the returns generated by the
Portfolio Company and the ultimate rate of return realised by our investors
may be lower than those estimated or projected.
Valuation The most significant risk of material misstatement in our financial statements Our portfolio valuation is prepared semi-annually by an experienced internal
applies to the fair valuation of the investment portfolio and in particular team, overseen by our Management Board.
the discount rates used and key assumptions applied when valuing these
investments. Furthermore, the valuation is reviewed by an independent, third-party
valuation expert, and is also reviewed and audited by the Company's external
There is a risk that errors may be made in the assumptions, calculations or auditor.
methodology used in a periodic valuation process.
All key assumptions used in the valuation process are outlined in the
Financial models, either for the Group or our underlying Portfolio Companies, valuation section of this report, some of which are subject to sensitivity
may also contain errors, or incorrect inputs, resulting in inaccurate testing.
projections of distributions. These could adversely impact the valuation on
individual investments and the overall assessment of our financial position. Financial models are typically reviewed or audited by external advisers.
However, sensitivity testing has its limitations: it cannot provide a
comprehensive assessment of every risk we face and should be considered
accordingly.
Construction defects The risk of certain operational costs in relation to construction defects lies In general, Portfolio Companies can submit claims against construction
with the Portfolio Company. subcontractors for defects in the design, construction or commissioning of
project assets. This 'right to claim' applies for a pre-determined period
following the completion of construction ('statutory limitations period'), and
this may differ between jurisdictions.
If disputes arise, an arbitration or court process may be used. Once the
statutory limitations period has ended, the remediation of construction
defects identified after this point typically falls to the Portfolio Company
itself, and thus becomes the risk of the Portfolio Company. In addition, there
may be other situations where the risk would lie with the Portfolio Company,
for example where a subcontractor becomes insolvent, and may no longer be able
to fulfil its obligations to correct these defects.
Change in law or regulation Different laws and regulations apply in the countries where BBGI and our The Management Board seeks regular briefings from its legal and tax advisers
Portfolio Companies are located. There is a risk that changes in laws and to stay abreast of impending or possible changes in law.
regulations may have an adverse effect on the performance of the underlying
investment, which will then affect the cash flows derived from the investments Change in law provisions are included in some contracts, thus providing
and/or the valuation of the investments. further mitigation.
BBGI has a globally diversified portfolio of assets, thereby reducing the
Group's exposure to changes in any single country.
Inadequate succession planning Inadequate succession planning poses a significant risk to our organisation's Co-CEO structure: this structure reduces any potential for key man risk
long-term stability and growth. The absence of robust succession strategies considerably.
could potentially disrupt key leadership transitions, impacting our ability to
ensure seamless operations and strategic continuity. Succession Planning: Proactive succession plans are in place to contribute to
smooth transitions and continuity in leadership roles. By regularly reviewing
and assessing the talent within the company, the Board can identify and
develop pathways for key individuals and also identify areas where there may
be over reliance on a single individual.
Contractual Notice Periods: Adequate notice periods are included in each of
the Management Board members.
Competitive Compensation Packages: The Company offers benchmarked compensation
packages to attract and retain top talent.
Deferred Remuneration: The Company has implemented a deferred remuneration
strategy ensuring that Management Board and key individuals have a vested
interest in the long-term success and stability of the company.
Failing IT systems or cyber-attacks A breach of data security could occur by accident or because of an external BBGI has taken several measures to reduce the risk of a cyber-attack.
cyber-attack. A cyber-attack could affect our IT systems or those of our
Portfolio Companies, causing theft, loss of data, or damage to the We have outsourced the hosting of our IT platform to an industry specialist.
infrastructure's control systems and equipment. In doing so, we benefit from access to IT security experts, with our platform
monitored by an advanced IT security system. This approach would be less
A cyber-attack could affect not only BBGI's reputation, but could also have cost-effective if our IT infrastructure was maintained onsite.
legal, financial, and operational repercussions for the Group.
Every year, we engage an external expert to carry out an intrusion test on our
IT platform to identify and patch any vulnerabilities.
We perform business continuity tests, carry out disaster recovery tests every
year, and our employees periodically undergo cyber security training.
In a typical PPP structure, public sector clients have their own IT systems.
However, most of our Portfolio Companies do not maintain their own IT systems.
Instead, subcontractors of a Portfolio Company (such as management service
providers, facility maintenance contractors for accommodation assets, and
maintenance contractors for transport assets) will have their own IT systems,
which will likely house data relating to a project.
In a typical PPP structure, such as those in BBGI's portfolio, risks are
passed down to subcontractors by the Portfolio Company.
However, any liability is capped to contractually agreed amounts, including
risks relating to design and construction, warranties for IT systems (such as
a warranty that the system will meet specifications requiring it to meet
robust security requirements), and the risk of a cyber-attack interrupting the
provision of services to a project.
Voluntary termination There remains a risk that public sector clients of our Portfolio Companies The Management Board believes there are mitigants or deterrents to the risk of
choose to exercise their right to voluntarily terminate the contracts. voluntary termination of contracts:
When this happens, the public sector is typically contractually obliged to pay · In cases where debt or bond facilities were agreed when interest rates were
compensation on termination to equity holders, debt providers, and other higher than current levels interest rate swaps remain largely 'out of the
parties, depending on the circumstances. money' for our Portfolio Companies, and any public body wishing to terminate a
contract in the current interest rate environment would also need to cover the
While provisions vary between contracts, they generally ensure that our cost of the swap breakage fee. Conversely, the cost of unwinding Project
investors are paid either market value for their equity interests, or a value Agreements and repaying senior debt in a rising interest rate environment
to achieve the originally projected IRR, and in these cases, where the could also prove a mitigant to early termination.
compensation amount is less than current valuation levels, we would suffer a
material loss. · Our Portfolio Company equity investors would, depending on the contractual
provisions, also need to be compensated, as well as the public sector being
required to budget for the ongoing provision of the service.
SUSTAINABILITY RISKS
Sustainability risk Sustainability risk has been defined in Article 2(22) of the Sustainable We seek to integrate and appraise material sustainability risks into our
Financial Disclosure Regulation as 'an environmental, social or governance processes in several ways:
event or condition that, if it occurs, could cause an actual or potential
material negative impact on the value of the investment'. · Alongside traditional financial criteria, we systematically consider
whether - and to what extent - financially material sustainability risks might
For example, climate change can give rise to a range of sustainability risks. meaningfully impact our investments.
Financial risks from climate change can arise through two primary channels: · In 2021 and 2022, we undertook a formal portfolio climate risk
assessment to better understand the impact of climate risk on BBGI. The
(i) physical risk, from abrupt and acute weather events, or chronic findings demonstrate a high degree of climate resilience across our asset
longer-term shifts in climate patterns, each causing disruptions to businesses portfolio, both today and under different climate warming scenarios.
and economic activities (and the value of investments in them); and
· Although climate change is projected to increase physical risk
(ii) transition risk, from a shift to low carbon and climate resilient impacts across our portfolio, many of our assets, due to the vital services
policies, laws and technologies and changes in societal attitudes. Failure to they provide, have been designed and constructed in consideration of potential
acknowledge climate change may also alienate certain investors and reduce our physical risk impacts, and are inherently more resilient to climate change.
access to capital.
· We typically mitigate events arising from adverse climate change
All sustainability risks can be broken down into physical and transition through insurance coverage, pass-down to subcontractors and public sector
risks, which could both impact the performance of an asset or of BBGI itself client relief events. However, in severe cases, adverse climate change events
and have a material negative impact on investment returns. could lead to early termination of concession agreements and compensation
payments, which are materially lower than our valuation.
For example, infringements of human rights could have a significant impact on
the financial performance of an investment. · Aligned with our SFDR Article 8 product classification, our focused
approach of investing in core social infrastructure assets that serve society
should mitigate sustainability risk linked to a social event or condition.
Environmental, social and governance ('ESG') highlights
We are committed to creating a positive impact on society and the environment
through our portfolio of social infrastructure investments. As we continue to
improve our monitoring and reporting of ESG performance, we are pleased to
share our progress and achievements during H1 2023.
ESG Report for 2022: In June, we published our third standalone annual
Environmental, Social and Governance (ESG) Report, with detailed information
on the progress we made during 2022 and showcases the achievements delivered
at our Portfolio Companies.
The report focuses on our most material ESG topics, an approach we have
developed based on stakeholder engagement and materiality assessment. It also
aims to complement the Task Force on Climate-Related Financial Disclosures
('TCFD') reporting, included in our 2022 Annual Report, and discloses our
climate metrics and scenario analysis.
Read more: https://www.bb-gi.com/media/2253/bbgi_esg-report-2022.pdf
Portfolio emissions: During the reporting period we completed a
comprehensive data collection exercise to assess our portfolio's GHG
emissions, carbon footprint, and carbon intensity. This is a significant step
towards understanding and reducing our portfolio's environmental impact. We
quantified GHG emissions (Scope 1, Scope 2, and Scope 3) using primary utility
data obtained directly from our Portfolio Companies, following recognised
standards such as GHG Protocol and PCAF guidance. xxiii xxiv The reported
GHG emissions can be split to distinguish emissions related to assets under
construction or undergoing major expansion works and avoided emissions.
Going forward, we will work closely with our Portfolio Companies and their
operations and maintenance contractors to streamline their data collection and
reporting efforts. Additionally, over time we plan to develop net zero plans
at the Portfolio Companies to support our own net zero targets.
PAI Statement for SFDR Reporting: In June 2023, we published our first
Statement on Principal Adverse Impacts of investment decisions on
sustainability factors (PAI Statement) for the SFDR. This new disclosure
showcases how we assess and measure the sustainability impacts of our
investment decisions.
The EU Sustainable Finance Disclosure Regulation (SFDR) is a set of European
Union rules which came into effect on 10 March 2021, and aims to provide
transparency regarding sustainability within financial markets. The goal of
SFDR is to make the sustainability profile of funds more comparable and easier
to understand. SFDR focuses on categorising products into specific types,
providing information with regards to the integration of sustainability risks
and pre-defined metrics for assessing the ESG impacts of the investment
process.
We are an Article 8 fund under SFDR, where the investment product promotes
social characteristics and follows good governance practices.
We remain committed to aligning with best practice reporting standards. We
will closely monitor regulatory developments and actively engage with our
peers from the infrastructure investment sector to stay at the forefront of
sustainable governance practices.
Read more:
https://www.bb-gi.com/media/2277/bbgi_sfdr-pai-statement_30062023.pdf
Auditors Review Report
Report on Review of Condensed Consolidated Interim Financial Statements
To the Management Board of
BBGI Global Infrastructure S.A.
6E, Route de Trèves
L-2633 Senningerberg
Grand Duchy of Luxembourg
We have reviewed the accompanying condensed consolidated interim financial
statements of BBGI Global Infrastructure S.A. (the "Company") and its
subsidiaries (the "Group"), which comprise the condensed consolidated interim
statement of financial position as at 30 June 2023, and the condensed
consolidated interim income statement, the condensed consolidated interim
statement of other comprehensive income, the condensed consolidated interim
statement of changes in equity and the condensed consolidated interim
statement of cash flow for the six-month period then ended, and a summary of
significant accounting policies and other explanatory information.
Management Board's responsibility for the condensed consolidated interim
financial statements
The Management Board is responsible for the preparation and fair presentation
of these condensed consolidated interim financial statements in accordance
with International Financial Reporting Standards as adopted by the European
Union, and for such internal control as the Management Board determines is
necessary to enable the preparation of condensed consolidated interim
financial statements that are free from material misstatement, whether due to
fraud or error.
Responsibility of the "Réviseur d'entreprises agréé"
Our responsibility is to express a conclusion on these condensed consolidated
interim financial statements based on our review. We conducted our review in
accordance with International Standard on Review Engagements (ISRE 2410) as
adopted for Luxembourg by the "Institut des Réviseurs d'Entreprises". This
standard requires us to comply with relevant ethical requirements and conclude
whether anything has come to our attention that causes us to believe that the
condensed consolidated interim financial statements, taken as a whole, are not
prepared in all material respects in accordance with the applicable financial
reporting framework.
A review of condensed consolidated interim financial statements in accordance
with ISRE 2410 is a limited assurance engagement. The "Réviseur d'entreprises
agréé" performs procedures, primarily consisting of making inquiries of
management and others within the Company, as appropriate, and applying
analytical procedures, and evaluates the evidence obtained.
The procedures performed in a review are substantially less than those
performed in an audit conducted in accordance with International Standards on
Auditing. Accordingly, we do not express an audit opinion on these condensed
consolidated interim financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying condensed consolidated interim financial
statements do not give a true and fair view of the financial position of BBGI
Global Infrastructure S.A. as of 30 June 2023, and of its financial
performance and its cash flows for the six month period then ended in
accordance with International Financial Reporting Standards as adopted by the
European Union.
PricewaterhouseCoopers, Société coopérative
Luxembourg, 30 August 2023
Represented by
Emanuela Sardi
Condensed Consolidated Interim Income Statement
For the six months ended 30 June 2023 (Unaudited)
In thousands of Sterling Notes 30 June 2023 30 June 2022
Income from investments at fair value through profit or loss 9 6,064 128,059
Other operating income 8 7,250 248
Operating income 13,314 128,307
Administrative expenses 5 (6,337) (5,789)
Other operating expenses 6 (231) (14,501)
Operating expenses (6,568) (20,290)
Results from operating activities 6,746 108,017
Net finance result 7 (1,419) (890)
Net gain (loss) on balance sheet hedging 16 8,057 (13,592)
Profit before tax 13,384 93,535
Tax expense 11 (2,321) (1,057)
Profit for the period 11,063 92,478
Earnings per share
Basic earnings per share (pence) 13 1.55 12.98
Diluted earnings per share (pence) 13 1.55 12.97
The accompanying notes form an integral part of the unaudited condensed
consolidated interim financial statements.
Condensed Consolidated Interim Statement of Other Comprehensive Income
For the six months ended 30 June 2023 (Unaudited)
In thousands of Sterling Note 30 June 2023 30 June 2022
Profit for the period 11,063 92,478
Other comprehensive income for the period that may be reclassified to profit
or loss in subsequent periods
Exchange difference on translation of foreign operations 12 1,124 55
Total comprehensive income for the period 12,187 92,533
The accompanying notes form an integral part of the unaudited condensed
consolidated interim financial statements.
Condensed Consolidated Interim Statement of Financial Position
As at 30 June 2023
30 June 31 December
2023 2022
In thousands of Sterling Notes (Unaudited) (Audited)
Assets
Property and equipment 101 123
Investments at fair value through profit or loss 9 1,055,024 1,102,844
Deferred tax assets 149 153
Other non-current assets 244 275
Non-current assets 1,055,518 1,103,395
Trade and other receivables 17 2,348 909
Other current assets 1,307 994
Derivative financial assets 16 10,942 2,885
Cash and cash equivalents 10 17,880 31,157
Current assets 32,477 35,945
Total assets 1,087,995 1,139,340
Equity
Share capital 12 852,255 850,007
Additional paid-in capital 12, 17 2,294 2,502
Translation and other capital reserves 12 3,873 14,371
Retained earnings 198,304 202,298
Equity attributable to the owners of the Company 1,056,726 1,069,178
Liabilities
Loans and borrowings 14 24,857 56,390
Derivative financial liabilities 16 1,397 5,687
Non-current liabilities 26,254 62,077
Loans and borrowings 14 206 230
Trade and other payables 15 2,894 3,242
Derivative financial liabilities 16 338 3,006
Tax liabilities 11 1,577 1,607
Current liabilities 5,015 8,085
Total liabilities 31,269 70,162
Total equity and liabilities 1,087,995 1,139,340
Net asset value attributable to the owners of the Company 12 1,056,726 1,069,178
Net asset value per ordinary share (pence) 12 147.84 149.89
The accompanying notes form an integral part of the unaudited condensed
consolidated interim financial statements.
Condensed Consolidated Interim Statement of Changes in Equity
For the six months ended 30 June 2023 (Unaudited)
Translation and other capital
Additional paid-in capital reserves
In thousands of Sterling Notes Share capital Retained earnings Total equity
Balance as at 31 December 2022 (Audited) 850,007 2,502 14,371 202,298 1,069,178
Total comprehensive income for the six months ended 30 June 2023
Profit for the period - - - 11,063 11,063
Other comprehensive income - - (10,498) 11,622 1,124
Total comprehensive income for the period - - (10,498) 22,685 12,187
Transactions with the owners of the Company, recognised directly in equity
Scrip dividends 12 1,536 - - (1,536) -
Cash dividends 12 - - - (25,143) (25,143)
Equity settlement of share-based compensation 12,17 742 (1,283) - - (541)
Share-based payment 17 - 1,075 - - 1,075
Share issuance costs 12 (30) - - - (30)
Balance as at 30 June 2023 (Unaudited) 852,255 2,294 3,873 198,304 1,056,726
Translation and other capital
Additional paid-in capital reserves
In thousands of Sterling Notes Share capital Retained earnings Total equity
Balance at 31 December 2021 (Audited) 847,858 1,833 (8,809) 159,661 1,000,543
Total comprehensive income for the six months ended 30 June 2022
Profit for the period - - - 92,478 92,478
Other comprehensive income - - 35,518 (35,463) 55
Total comprehensive income for the period - 1.833 35,518 57.015 92,533
Transactions with the owners of the Company, recognised directly in equity
Scrip dividends 12 964 - - (964) -
Cash dividends 12 - - - (25,135) (25,135)
Equity settlement of share-based compensation 12,17 1,084 (1,068) - - 16
Share-based payment 17 - 770 - - 770
Share issuance costs 12 (27) - - - (27)
Balance as at 30 June 2022 (Unaudited) 849,879 1,535 26,709 190,577 1,068,700
The accompanying notes form an integral part of the unaudited condensed
consolidated interim financial statements.
Condensed Consolidated Interim Statement of Cash Flows
For the six months ended 30 June 2023 (Unaudited)
In thousands of Sterling Notes 30 June 2023 30 June 2022
Operating activities
Profit for the period 11,063 92,478
Adjustments for:
Depreciation expense 5 25 14
Net finance result 7 1,419 890
Income from investments at fair value through profit or loss 9 (6,064) (128,059)
Net loss (gain) on derivative financial instruments 16 (13,761) 27,684
Foreign currency exchange gain - net 8 (1,511) (186)
Share-based compensation 17 1,075 770
Tax expense 11 2,321 1,057
Working capital adjustments:
Trade and other receivables (1,108) (316)
Other assets (204) (536)
Trade and other payables (55) (828)
Cash used in operating activities (6,800) (7,032)
Interest paid and other borrowing costs (1,589) (747)
Interest received 308 6
Realised loss on derivative financial instruments - net 16 (1,255) (1,825)
Taxes paid (2,347) (1,518)
Net cash flows used in operating activities (11,683) (11,116)
Investing activities
Acquisition of/additional investments at fair value through profit or loss 9 - (23,619)
Distributions received from investments at fair value through profit or loss 9 53,884 62,097
Acquisition of property and equipment (3) (78)
Net cash flows from investing activities 53,881 38,400
Financing activities
Dividends paid 12 (25,143) (25,135)
Repayment of loans and borrowings 14 (45,520) -
Proceeds from issuance of loans and borrowings 14 15,000 10,000
Debt and equity instruments issue costs 12 (30) (27)
Net cash flows used in financing activities (55,693) (15,162)
Net increase (decrease) in cash and cash equivalents (13,495) 12,122
Impact of foreign exchange gain on cash and cash equivalents 218 1,211
Cash and cash equivalents as at 1 January 31,157 26,862
Cash and cash equivalents as at 30 June 10 17,880 40,195
The accompanying notes form an integral part of the unaudited condensed
consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial Statements
For the six months ended 30 June 2023
1. Corporate information
BBGI Global Infrastructure S.A.,('BBGI', or the 'Company' or, together with
its consolidated subsidiaries, the 'Group') is an investment company
incorporated in Luxembourg in the form of a public limited liability company
(société anonyme) with variable share capital (société d'investissement à
capital variable, or 'SICAV') and regulated by the Commission de Surveillance
du Secteur Financier ('CSSF') under Part II of the amended Luxembourg law of
17 December 2010 on undertakings for collective investments with an indefinite
life. The Company qualifies as an alternative investment fund within the
meaning of Article 1 (39) of the amended law of 12 July 2013 on alternative
investment fund managers ('2013 Law') implementing Directive 2011/61/EU of the
European Parliament and of the Council of 8 June 2011 on Alternative
Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and
Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and is authorised as an
internal alternative investment fund manager in accordance with Chapter 2 of
the 2013 Law. The Company was admitted to the official list of the UK Listing
Authority (premium listing, closed-ended investment company) and to trading on
the main market of the London Stock Exchange on 21 December 2011.
As at 1 January 2021, the main market of the London Stock Exchange is not
considered as an EU regulated market (as defined by the MiFID II). As a
result, Directive 2004/109/EC of the European Parliament and of the Council of
15 December 2004, on the harmonisation of transparency requirements in
relation to information about issuers whose securities are admitted to trading
on a regulated market, and amending Directive 2001/34/EC (the Transparency
Directive) as implemented in Luxembourg law by the act dated 11 January 2008
on transparency requirements for issuers (the Transparency Act 2008), among
other texts, do not apply to the Company.
The Company's registered office is 6E, route de Trèves, L-2633 Senningerberg,
Luxembourg.
The Company is a closed-ended investment company that invests principally in a
diversified portfolio of Public Private Partnership ('PPP')/Private Finance
Initiative ('PFI') infrastructure or similar style assets. As at 30 June 2023,
the Company has one investment that is under construction.
As at 30 June 2023, the Group employed 25 staff (30 June 2022: 25 staff).
Reporting period
The Group's interim reporting period runs from 1 January to 30 June each year.
The Group's condensed consolidated interim income statement, condensed
consolidated interim statement of other comprehensive income, condensed
consolidated interim statement of financial position, condensed consolidated
interim statement of changes in equity, and condensed consolidated interim
statement of cash flows include comparative figures as at 31 December 2022 and
30 June 2022, as appropriate.
These condensed consolidated interim financial statements were approved by the
Management Board on 30 August 2023.
2. Basis of preparation
Statement of compliance
The condensed consolidated interim financial statements of the Group for the
six-month period have been prepared in accordance with International
Accounting Standards ('IAS') 34 Interim Financial Reportingin accordance with
International Financial Reporting Standards ('IFRS'), as adopted by the
European Union, and do not include all information required for full annual
consolidated financial statements. Accordingly, these condensed consolidated
interim financial statements are to be used in conjunction with the annual
consolidated financial statements for the year ended 31 December 2022.
The Group follows, to the fullest extent possible, the provisions of the
Standard of Recommended Practices issued by the Association of Investment
Companies ('AIC SORP'). If a provision of the AIC SORP is in direct conflict
with IFRS as adopted by the EU, the standards of the latter prevail.
The condensed consolidated interim financial statements have been prepared on
a historical cost basis, except for investments at fair value through profit
or loss ('Investments at FVPL') and derivative financial instruments that have
been measured at fair value.
Changes in accounting policy
The accounting policies, measurement and valuation principles applied by the
Group in these condensed consolidated interim financial statements are
consistent with those applied by the Group in its annual consolidated
financial statements as at and for the year ended 31 December 2022, except for
the adoption of new standards effective as at 1 January 2023.
New and amended standards applicable to the Group starting on 1 January 2023
are as follows:
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting policies
The amendments aim to help entities provide accounting policy disclosures that
are more useful by replacing the requirement for entities to disclose their
'significant' accounting policies with a requirement to disclose their
'material' accounting policies and adding guidance on how entities apply the
concept of materiality in making decisions about accounting policy
disclosures.
Definition of Accounting Estimate - Amendments to IAS 8
The amendments introduce a definition of 'accounting estimates' and clarify
the distinction between changes in accounting estimates and changes in
accounting policies and the correction of errors. Also, they clarify how
entities use measurement techniques and inputs to develop accounting
estimates.
These amendments have no significant impact on the condensed consolidated
interim financial statements of the Group.
Functional and presentation currency
These condensed consolidated interim financial statements are presented in
Sterling, the Company's functional currency. All amounts presented in tables
throughout the report have been rounded to the nearest thousand, unless
otherwise stated.
The Company as an Investment Entity
The Management Board has assessed that the Company is an Investment Entity in
accordance with the provisions of IFRS 10. The Company meets the following
criteria to qualify as an Investment Entity:
a) Obtains funds from one or more investors for the purpose of
providing those investors with investment management services - The Group is
internally managed with management focused solely on managing those funds
received from its shareholders in order to maximise investment income/returns.
b) Commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or
both. - The investment objectives of the Company are to:
- Provide investors with secure and highly predictable long-term cash
flows whilst actively managing the investment portfolio with the intention of
maximising return over the long term.
- Target an annual dividend payment with the aim to increase this
distribution progressively over the longer term.
- Target an IRR which is to be achieved over the longer term via active
management and to enhance the value of existing investments.
The above-mentioned objectives support the fact that the main business purpose
of the Company is to seek to maximise investment income for the benefit of its
shareholders.
c) Measures and evaluates performance of substantially all of its
investments on a fair value basis - The investment policy of the Company is to
invest in equity, subordinated debt or similar interests issued in respect of
infrastructure assets that have been developed predominantly under the PPP/PFI
or similar styled procurement models. Each of these assets is valued at fair
value. The valuation is carried out on a six-monthly basis as at 30 June and
31 December each year.
Based on the Management Board's assessment, the Company also meets the typical
characteristics of an Investment Entity as follows:
a) it has more than one investment - as at 30 June 2023, the Company has
56 investments;
b) it has more than one investor - the Company is listed on the London
Stock Exchange with its shares held by a broad pool of investors;
c) it has investors that are not related parties of the entity - other
than those shares held by the Supervisory Board and Management Board
Directors, and certain other employees, all remaining shares in issue (more
than 99 per cent) are held by non-related parties of the Company; and
d) it has ownership interests in the form of equity or similar interests
- ownership in the Company is through equity interest.
3. Material accounting judgements, estimates and assumptions
The preparation of condensed consolidated interim financial statements in
conformity with IFRS requires the Management Board to make judgements,
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
In the process of applying the Group's accounting policies, the Management
Board has made the following judgements that would have the most significant
effect on the amounts recognised in the condensed consolidated interim
financial statements.
3.1 Assessment as an investment entity
Refer to Note 2 for the discussion on this topic.
3.2 Fair value determination
The Group accounts for its investments in PPP/PFI entities ('Portfolio
Companies') as Investments at FVPL. The valuation is determined using the
discounted cash flow methodology. The cash flows forecasted to be received by
the Company or its consolidated subsidiaries, generated by each of the
underlying Portfolio Companies, and adjusted as appropriate to reflect the
risk and opportunities, have been discounted using asset-specific discount
rates. The valuation methodology is the same one used in previous reporting
periods.
The fair value of other financial assets and liabilities, other than current
assets and liabilities, is determined by discounting future cash flows at an
appropriate discount rate and with reference to recent market transactions,
where appropriate. Further information on assumptions and estimation
uncertainties are disclosed in Note 16.
Fair values are categorised into different levels in a fair value hierarchy
based on the inputs in the valuation methodology, as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical
assets and liabilities.
- Level 2: inputs other than quoted prices included in Level 1, that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that are not based on
observable market data ('unobservable inputs').
If the inputs to measure fair value of an asset or a liability fall into
different levels of the fair value hierarchy, then the fair value measurement
is categorised in its entirety at the same level of the fair value hierarchy
as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of fair value hierarchy at the
end of the reporting period in which the change has occurred.
3.3 Going concern basis of accounting
The Management Board has satisfied itself that the Group has adequate
resources to continue in operational existence for at least 12 months from the
date of approval of the condensed consolidated interim financial statements.
After due consideration, the Management Board believes it is appropriate to
adopt the going concern basis of accounting in preparing the condensed
consolidated interim financial statements.
3. Segment reporting
IFRS 8 - Operating Segments adopts a 'through the eyes of the management'
approach to an entity's reporting of information relating to its operating
segments, and also requires an entity to report financial and descriptive
information about its reportable segments.
Based on a review of information provided to the Management Board, the Group
has identified five reportable segments based on the geographical
concentration risk. The main factor used to identify the Group's reportable
segments is the geographical location of the asset.
The Management Board has concluded that the Group's reportable segments are:
(1) UK; (2) North America; (3) Australia; (4) Continental Europe; and (5)
Holding activities. These reportable segments are the basis on which the Group
reports information to the Management Board.
Profit or loss for the period for the six months ended are presented below:
For the six months ended 30 June 2023 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Income from investments at FVPL 8,062 (2,980) (3,642) 4,624 - 6,064
Administrative expenses - - - - (6,337) (6,337)
Other operating income - net - - - - 7,019 7,019
Results from operating activities 8,062 (2,980) (3,642) 4,624 682 6,746
Net finance result - - - - (1,419) (1,419)
Net gain on balance sheet hedging - - - - 8,057 8,057
Tax expense - net - - - - (2,321) (2,321)
Profit or loss for the period 8,062 (2,980) (3,642) 4,624 4,999 11,063
For the six months ended 30 June 2022 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Income from investments at FVPL 47,696 65,982 9,509 4,872 - 128,059
Administration expenses - - - - (5,789) (5,789)
Other operating expenses - net - - - - (14,253) (14,253)
Results from operating activities 47,696 65,982 9,509 4,872 (20,042) 108,017
Net finance result - - - - (890) (890)
Net loss on derivative financial instruments - - - - (13,592) (13,592)
Tax expense - - - - (1,057) (1,057)
Profit or loss for the period 47,696 65,982 9,509 4,872 (35,581) 92,478
Statement of financial position segment information as at 30 June 2023 and 31
December 2022 are presented below:
As at 30 June 2023 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Assets
Property and equipment - - - - 101 101
Investments at FVPL 343,559 476,880 102,717 131,868 - 1,055,024
Other non-current assets - - - - 393 393
Current assets - - - - 32,477 32,477
Total assets 343,559 476,880 102,717 131,868 32,971 1,087,995
Liabilities
Non-current - - - - 26,254 26,254
Current - - - - 5,015 5,015
Total liabilities - - - - 31,269 31,269
As at 31 December 2022 North Continental Holding Total
In thousands of Sterling UK America Australia Europe Activities Group
Assets
Property and equipment - - - - 123 123
Investments at FVPL 354,002 504,408 112,414 132,020 - 1,102,844
Other non-current assets - - - - 428 428
Current assets - - - - 35,945 35,945
Total assets 354,002 504,408 112,414 132,020 36,496 1,139,340
Liabilities
Non-current - - - - 62,077 62,077
Current - - - - 8,085 8,085
Total liabilities - - - - 70,162 70,162
The Holding activities of the Group include the activities which are not
specifically related to a specific asset or region but to those companies
which provide services to the Group. The total current assets classified under
Holding activities mainly represent cash and cash equivalents.
Transactions between reportable segments are conducted at arm's length and are
accounted for in a similar way to the basis of accounting used for third
parties. The accounting methods used for all the segments are similar and
comparable with those of the Company.
4. Administrative expenses
Six months ended Six months ended
In thousands of Sterling 30 June 2023 30 June 2022
Personnel expenses
Short-term benefits 2,843 2,812
Share-based compensation expenses 1,075 770
Supervisory Board fees 158 115
4,076 3,697
Legal and professional fees 1,496 1,529
Office and other expenses 740 549
Depreciation expense 25 14
6,337 5,789
Short-term benefits relate to the Management Board and staff, and include
basic salaries, Short-Term Incentive Plan ('STIP'), staff bonus, social
security contributions and other related expenses.
The Group has engaged certain third parties to provide legal, depositary,
audit, tax and other services. The expenses incurred in relation to such
services are treated as legal and professional fees.
Included in the legal and professional fees are audit fees and other related
services amounting to £242,000 (30 June 2022: £181,000). There were no
non-audit-related services for the six months ended 30 June 2023 (30 June
2022: £7,000).
5. Other operating expenses
Six months ended Six months ended
In thousands of Sterling 30 June 2023 30 June 2022
Acquisition-related costs 231 409
Net loss on derivative financial instruments((i)) (Note 16) - 14,092
231 14,501
((i))Relates to foreign exchange hedging on forecasted distributions from
Investments at FVPL.
6. Net finance result
Six months ended Six months ended
In thousands of Sterling 30 June 2023 30 June 2022
Finance costs on loan and borrowings (Note 14) (1,727) (896)
Interest income on bank deposits 308 6
(1,419) (890)
7. Other operating income
Six months ended Six months ended
In thousands of Sterling 30 June 2023 30 June 2022
Gain on derivative financial instruments((i)) - net (Note 16) 5,704 -
Foreign currency exchange gain - net 1,511 186
Others 35 62
7,250 248
( )
((i))Relates to foreign exchange hedging on forecasted distributions from
Investments at FVPL.
8. Investments at FVPL
30 June 31 December
In thousands of Sterling 2023 2022
Balance at 1 January 1,102,844 975,225
Acquisitions of/additions in Investments at FVPL - 64,407
Income from investments at FVPL((i)) 6,064 159,545
Distributions received from Investments at FVPL (53,884) (96,333)
1,055,024 1,102,844
((i)) This account reflects the unrealised gains on the valuation of
Investments at FVPL. For the six months ended 30 June 2022, the income from
investments at FVPL amounted to £128,059,000)
Income from investments at FVPL include the impact of foreign exchange for the
six months ended 30 June 2023 amounting to a net loss of £21.0 million (six
months ended 30 June 2022: net gain of £45.1 million).
Refer to Note 16 of the condensed consolidated interim financial statements
for further information on Investments at FVPL.
Distributions from Investments at FVPL are received after either: (a)
financial models have been tested for compliance with certain ratios; or (b)
financial models have been submitted to the external lenders of the Portfolio
Companies; or (c) approvals of the external lenders on the financial models
have been obtained.
As at 30 June 2023 and 31 December 2022, loans and interest receivable from
unconsolidated subsidiaries are embedded within Investments at FVPL.
The valuation of Investments at FVPL considers all cash flows related to each
individual Portfolio Company.
10. Cash and cash equivalents
Cash and cash equivalents relate to bank deposits amounting to £17,880,000
(31 December 2022: £31,157,000).
11. Taxes
The Company, as an undertaking for collective investment, is exempt from
corporate income tax in Luxembourg and instead pays an annual subscription tax
of 0.05 per cent on the value of its net assets.
For the six months ended 30 June 2023, the Company incurred a subscription tax
expense of £267,000 (30 June 2022: £249,000). The Company as a collective
investment vehicle is not subject to taxes on capital gains or income. All
other consolidated companies are subject to taxation at the applicable rate in
their respective jurisdictions.
A significant portion of the profit before tax relates to the movement in fair
valuation of Investments at FVPL, which are only recognised in the
consolidated financial statements and are therefore not included in the
taxable income of the standalone accounts of consolidated entities.
The Company has adopted IFRS 10, resulting in its designation as an Investment
Entity (see Note 2). Consequently, tax expenses of unconsolidated subsidiaries
are not shown as a separate line item in these condensed consolidated interim
financial statements. Instead, they are incorporated into the fair value
calculation of Investments at FVPL with the net income of each Portfolio
Company taxed in its respective jurisdictions.
During the six months ended 30 June 2023, the Group recognised a tax expense
of £2,321,000 (30 June 2022: £1,057,000). The tax liability as at 30 June
2023 is £1,577,000 (31 December 2022: £1,607,000).
12.Capital and reserves
Share capital
Changes in the Company´s share capital are as follows:
30 June 31 December
In thousands of Sterling 2023 2022
Share capital as at 1 January 850,007 847,858
Share capital issued through scrip dividends 1,536 1,092
Equity settlement of share-based compensation (see Note 17) 742 1,084
Share issuance costs (30) (27)
852,255 850,007
The changes in the number of ordinary shares of no-par value issued by the
Company are as follows:
30 June 31 December
In thousands of shares 2023 2022
In issue at beginning of the year 713,331 712,126
Shares issued through scrip dividends 1,017 649
Shares issued as share-based compensation - net ((i)) 439 556
714,787 713,331
(i) Being the net share entitlement after adjustments to settle taxes.
All shares rank equally with regard to the Company's residual assets. The
holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at general meetings of the
Company.
The Company meets the minimum share capital requirement as imposed under the
applicable Luxembourg regulation.
Additional paid-in capital
This account amounting to £2,294,000 (30 June 2022: £2,502,000) relates to
fair value of the awards recognised under share-based payment arrangements
with the Management Board and selected employees.
Translation and other capital reserve
Intragroup foreign currency differences are recognised in other comprehensive
income and presented in the foreign currency translation reserve in equity
except for exchange differences from intragroup monetary items which are
reflected in the consolidated income statement. The translation reserve
amounts to a credit balance of £3,650,000 (31 December 2022: debit balance of
£14,153,000). The remaining balance, being the other capital reserve, relates
to reserve required for statutory purposes, which may not be distributed.
Dividends
The dividends declared and paid by the Company during the six months ended 30
June 2023 and 2022 are as follows:
In thousands of Sterling except as otherwise stated 30 June 2023
2022 2(nd) interim dividend of 3.740 pence per qualifying ordinary share - 26,679
for the period 1 July 2022 to 31 December 2022
The 31 December 2022 2nd interim dividend was paid in April 2023. The value
of the scrip election was £1,536,000, with the remaining amount of
£25,143,000 paid in cash to those investors that did not elect for scrip.
In thousands of Sterling except as otherwise stated 30 June 2022
2021 2(nd) interim dividend of 3.665 pence per qualifying ordinary share - for 26,099
the period 1 July 2021 to 31 December 2021
The 31 December 2021 2nd interim dividend was paid in April 2022. The value
of the scrip election was £964,000, with the remaining amount of
£25,135,000 paid in cash to those investors that did not elect for scrip.
Net Asset Value ('NAV')
The consolidated NAV and NAV per share as at 30 June 2023, 31 December 2022
and 31 December 2021 were as follows:
In thousands of Sterling 2023 2022 2021
NAV attributable to the owners of the Company 1,056,726 1,069,178 1,000,543
NAV per ordinary share (pence) 147.84 149.89 140.50
13. Earnings per share
a) Basic earnings per share
The basic earnings per share is calculated by dividing the profit for the
period by the weighted average number of ordinary shares outstanding.
Six months ended Six months ended
In thousands of Sterling 30 June 2023 30 June 2022
Profit for the period 11,063 92,478
Weighted average number of ordinary shares in issue 714,368 712,340
Basic earnings per share (in pence) 1.55 12.98
The weighted average number of ordinary shares outstanding for the purpose of
calculating the basic earnings per share is computed as follows:
Six months ended Six months ended
In thousands of shares 30 June 2023 30 June 2022
Shares outstanding as at 1 January 713,331 712,126
Effect of scrip dividends issued 763 144
Shares issued as share-based compensation 274 70
Weighted average - outstanding shares 714,368 712,340
b) Diluted earnings per share
The diluted earnings per share is calculated by dividing the profit for the
period by the weighted average number of ordinary shares outstanding, after
adjusting for the effects of all potential dilutive ordinary shares.
The weighted average number of potential diluted ordinary shares for the
purpose of calculating the diluted earnings per share is computed as follows:
Six months ended Six months ended
In thousands of shares 30 June 2023 30 June 2022
Weighted average number of ordinary shares for basic earnings per share 714,368 712,340
Effect of potential dilution from share-based payment 1,212 565
Weighted average number of ordinary shares for diluted earnings per share 715,580 712,905
The price of the Company's shares for the purpose of calculating the potential
dilutive effect of award letters (Note 17) was based on the average market
price for the six months ended 30 June 2023 and 30 June 2022, respectively,
during which period the awards were outstanding.
14. Loans and borrowings
The Group has a multi-currency RCF with ING Bank, KfW IPEX Bank, DZ Bank,
Frankfurt Am Main and SMBC Bank EU AG for a total commitment of £230 million.
The tenor of the RCF is five years (maturing in May 2026). The borrowing
margin is 165 bps over the reference bank rate. Under the RCF, the Group
retains the possibility to consider larger transactions by virtue of having
structured a further £70 million incremental accordion tranche, for which no
commitment fees will be paid.
Outstanding drawdowns under the RCF as at 30 June 2023 amounted to £25.8
million (31 December 2022: £57.5 million). As at 30 June 2023, the
Group has utilised £1.3 million (31 December 2022: £1.3 million) of the
£230 million RCF, which was being used to cover letters of credit.
The RCF unamortised debt issuance cost amounted to £932,000 as at 30 June
2023 (31 December 2022: £1,094,000). The unamortised debt issuance cost is
netted against the outstanding amount drawn under the credit facility.
The total finance cost incurred under the RCF for the six months ended 30 June
2023 amounted to £1,727,000 (30 June 2022: £892,000) which includes the
amortisation of debt issuance costs of £162,000 (30 June 2022: £162,000).
RCF related fees payable as at 30 June 2023 amounted to £206,000 (31 December
2022: £230,000).
Changes in liabilities arising from financing activities
1 January Foreign 30 June
In thousands of Sterling 2023 Proceeds Repayment Exchange Others 2023
Loans and borrowings - non-current 56,390 15,000 (45,520) (1,174) 161 24,857
1 January Foreign 31 December
In thousands of Sterling 2022 Proceeds Repayment Exchange Others 2022
Loans and borrowings - non-current - 72,512 (17,000) 1,972 (1,094) 56,390
Pledges and collaterals in relation to the RCF
As at 30 June 2023 and 31 December 2022, certain consolidated subsidiaries,
that are classified as Obligors under the RCF, have provided a pledge over all
shares issued, over receivables between the Obligors and over the bank
accounts of the Obligors.
Based on the provisions of the RCF, in the event of continuing event of
default, the lender, among other things, will have the right to cancel all
commitments and declare all or part of utilisations to be due and payable,
including all related outstanding amounts, and exercise or direct the security
agent to exercise any or all of its rights, remedies, powers or discretions
under the RCF.
The Group operated comfortably within covenant limits of the RCF during the
six months ended 30 June 2023 and year ended 31 December 2022.
15. Trade and other payables
Trade and other payables amounting to £2,894,000 as at 30 June 2023 (30 June
2022: £3,242,000) are non-interest bearing and are usually settled within six
months.
16. Fair value measurements and sensitivity analysis
The fair values of financial assets and liabilities, together with the
carrying amounts shown in the condensed consolidated interim statement of
financial position are presented below. It does not include fair value
information for financial assets and financial liabilities not measured at
fair value if the carrying amount is a reasonable approximation of fair value
(i.e., cash and cash equivalents, trade and other receivables, trade payables,
accruals and other payables and loans and borrowings).
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined under Note 3.2 Fair
value determination:
30 June 2023 Fair value
In thousands of Sterling
Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Investments at FVPL - - 1,055,024 1,055,024
Derivative financial assets - 10,942 - 10,942
Financial liabilities measured at fair value
Derivative financial liabilities - (1,735) - (1,735)
31 December 2022 Fair value
In thousands of Sterling
Level 1 Level 2 Level 3 Total
Financial assets measured at fair value
Investments at FVPL - - 1,102,844 1,102,844
Derivative financial assets - 2,885 - 2,885
Financial liabilities measured at fair value
Derivative financial liabilities - (8,693) - (8,693)
There were no transfers between any levels during the year.
Investments at FVPL
The Management Board is responsible for carrying out the fair market valuation
of the Company's investments, which it then presents to the Supervisory Board.
The valuation is carried out on a six-monthly basis as at 30 June and 31
December each year. The valuation is reviewed by an independent third-party
valuation expert.
The valuation is determined using the discounted cash flow methodology. The
cash flow forecasts, generated by each of the underlying Portfolio Companies,
are received by the Company or its subsidiaries, adjusted as appropriate to
reflect risks and opportunities, and discounted using asset- specific discount
rates. The valuation methodology remains unchanged from previous reporting
periods.
Key Portfolio Company and portfolio cash flow assumptions underlying NAV
calculation include:
- Discount rates and the Assumptions, as set out below, continue to be
applicable.
- The updated financial models used for the valuation accurately
reflect the terms of all agreements relating to the Portfolio Companies and
represent a fair and reasonable estimation of future cash flows accruing to
the Portfolio Companies.
- Cash flows from and to the Portfolio Companies are received and made
at the times anticipated.
- Non-UK investments are valued in local currency and converted to
Sterling at either the period-end spot exchange rates or the contracted hedge
rate.
- Where the operating costs of the Portfolio Companies are
contractually fixed, such contracts are performed, and where such costs are
not fixed, they remain within the current forecasts in the valuation models.
- Where lifecycle costs/risks are borne by the Portfolio Companies,
they remain in line with the current forecasts in the valuation models.
- Contractual payments to the Portfolio Companies remain on track and
contracts with public sector or public sector backed counterparties are not
terminated before their contractual expiry date.
- Any deductions or abatements during the operations period of
Portfolio Companies are passed down to subcontractors under contractual
arrangements or are part of the planned (lifecycle) forecasts.
- Changes to the concession period for certain investments are
realised.
- In cases where the Portfolio Companies have contracts which are in
the construction phase, they are either completed on time or any delay costs
are borne by the construction contractors.
- Enacted tax or regulatory changes on or prior to this reporting
period end with a future effect impacting cash flow forecasts are reflected in
the financial models.
In forming the above assessments, BBGI works with Portfolio Company management
teams, as well as using due diligence information from, or working with,
suitably qualified third parties such as technical, legal, tax and insurance
advisers.
The Group uses the following assumptions ('Assumptions') for the cash flows:
30 June 2023 31 December 2022
Inflation UK((i)) RPI/CPIH 6.30% for 2023; 3.90% for 2024 then 2.75% (RPI) / 2.00% (CPIH) 13.40% (actual) for 2022; 5.80% for 2023 then 2.75% (RPI) / 2.00% (CPIH)
Canada 2.80% for 2023; 2.30% for 2024 then 2.00% 6.30% (actual) for 2022; 4.00% for 2023; 2.30% for 2024 then 2.00%
Australia 4.50% for 2023; 3.25% for 2024 then 2.50% 8.00% for 2022; 4.75% for 2023 3.25% for 2024 then 2.50%
Germany/ Netherlands((ii)) 5.40% for 2023; 3.00% for 2024 then 2.00% 8.40% for 2022; 6.30% for 2023; 3.40% for 2024 then 2.00%
Norway((ii)) 5.00% for 2023; 2.3% for 2024 then 2.25% 5.90% (actual) for 2022; 4.90% for 2023 then 2.25%
US 3.00% for 2023 then 2.50% 6.50% (actual) for 2022; 3.40% for 2023 then 2.50%
Deposit rates (p.a.) UK 3.55% to 2024, then 2.00% 2.00% to 2024, then 1.50%
Canada 5.30% to 2024, then 2.00% 3.50% to 2024, then 1.75%
Australia 4.25% to 2024, then 3.50% 3.25% to 2024, then 3.00%
Germany/ Netherlands 2.75% to 2024, then 1.00% 0.50% to 2024, then 1.00%
Norway 3.20% to 2024, then 2.25% 2.00% to 2024, then 2.00%
US 4.90% to 2024, then 1.75% 3.75% to 2024, then 1.50%
Corporate tax rates (p.a.) UK 25.00% 19.00% until March 2023 then 25.00%
Canada((iii)) 23.00% / 26.50% / 27.00% / 29.00% 23.00% / 26.50% / 27.00% / 29.00%
Australia 30.00% 30.00%
Germany((iv)) 15.83% (incl. Solidarity charge) 15.83% (incl. Solidarity charge)
Netherlands 25.80% 25.80%
Norway 22.00% 22.00%
US 21.00% 21.00%
(i) On 25 November 2020, the UK Government announced the phasing out of RPI
after 2030 to be replaced with CPIH; the Company's UK portfolio indexation
factor changes from RPI to CPIH beginning on 1 January 2031.
(ii) CPI indexation only. Where investments are subject to a basket of
indices, a projection for non-CPI indices is used.
(iii) Individual tax rates vary among Canadian Provinces: Alberta; Ontario,
Quebec, Northwest Territory; Saskatchewan, British Columbia; New Brunswick.
(iv) Individual local trade tax rates are considered in addition to the tax
rate above.
Discount rate sensitivity
The weighted average discount rate that is applied to the Company's portfolio
of investments is the single most important judgement and variable.
The following table shows the sensitivity of the NAV to a change in the
discount rate:
+1% to 8.22% in 2023(i) -1% to 6.22% in 2023(i)
Effects In thousands of Sterling NAV Profit or loss NAV Profit or loss
30 June 2023 (80,591) (80,591) 92,719 92,719
31 December 2022 (87,101) (87,101) 100,702 100,702
( )
((i)) Based on the weighted average discount rate of 7.2 per cent (31 December
2022: 6.9 per cent)
Inflation has increased in all jurisdictions across BBGI's geographies, and
interest rates have risen from historical lows, although in some jurisdictions
these trends have reversed over the period. In the event long-term interest
rates rise substantially further, this is likely to further affect discount
rates, and as a result, negatively impact portfolio valuation.
Combined sensitivity: inflation, deposit rates and discount rates
It is reasonable to assume that if discount rates increase, then deposit rates
and inflation would also be affected. To illustrate the effect of this
combined movement on the NAV, a scenario was created assuming a one percentage
point increase in the weighted average discount rate to 8.2 per cent, and a
one percentage point increase in both deposit and inflation above the
macroeconomic assumptions.
+1%
Effects In thousands of Sterling NAV Profit or loss
30 June 2023 (17,239) (17,239)
31 December 2022 (22,796) (22,796)
Inflation sensitivity
The Company's investments are contractually entitled to receive
availability-based income streams from public sector clients, which are
typically adjusted every year for inflation. Facilities management
subcontractors for accommodation investments and operating and maintenance
subcontractors for transport investments have similar indexation arrangements.
The portfolio cash flows are positively correlated with inflation (e.g. RPI,
CPI, or a basket of indices).
This inflation-linkage is achieved through contractual indexation mechanics in
the various project agreements with the public sector clients at the Portfolio
Companies and the inflation adjustment updated at least annually.
The following table shows the sensitivity of the NAV to a change in the
inflation rates compared to the assumptions in the table above:
+1% -1%
Effects in thousands of Sterling NAV Profit or loss NAV Profit or loss
30 June 2023 50,193 50,193 (43,428) (43,428)
31 December 2022 51,508 51,508 (45,524) (45,524)
Short-term inflation sensitivity
Inflation may continue to be elevated for the short-term before diminishing.
To illustrate the effect of persistent higher short-term inflation on the
Company's NAV, three scenarios were created assuming inflation is two
percentage points above our assumptions for the next one, three and five
years.
+2%
Effects In thousands of Sterling NAV Profit or loss
Inflation +2% for one year 11,774 11,774
Inflation +2% for three years 32,073 32,073
Inflation +2% for five years 48,636 48,636
Foreign exchange sensitivity
A significant proportion of the Group's underlying investments are denominated
in currencies other than Sterling. The Group maintains its accounts, prepares
the valuation and pays dividends in Sterling.
The following table shows the sensitivity of the NAV to a change in foreign
exchange rates:
Increase by
10%(i)
Decrease by 10%(i)
Effects in thousands of Sterling NAV Profit or loss NAV Profit or loss
30 June 2023 (24,778) (24,778) 25,770 25,770
31 December 2022 (23,665) (23,665) 31,488 31,488
(i) Sensitivity in comparison to the spot foreign exchange rates at 31
December 2022 and considering the contractual and natural hedges in place,
derived by applying a 10 per cent increase or decrease to the Sterling/foreign
currency rate.
Deposit rate sensitivity
Portfolio Companies typically have cash deposits that are required to be
maintained as part of the senior debt funding requirements (e.g. six months'
debt service reserve accounts, maintenance reserve accounts). The asset cash
flows are positively correlated with the deposit rates.
The table below shows the sensitivity of the NAV to a percentage-point change
in long-term deposit rates compared to the long-term assumptions in the table
above:
+1% -1%
Effects in thousands of Sterling NAV Profit or loss NAV Profit or loss
30 June 2023 20,510 20,510 (20,230) (20,230)
31 December 2022 51,508 51,508 (45,524) (45,524)
Lifecycle costs sensitivity
Lifecycle costs are the cost of planned interventions or replacing material
parts of an asset to maintain it over the concession term. It involves larger
items that are not covered by routine maintenance, and for roads, it will
include items such as replacement of asphalt, rehabilitation of surfaces, or
replacement of electromechanical equipment. Lifecycle obligations are
generally passed down to the facility maintenance provider with the exception
of transportation investments where these obligations are typically retained
by the Portfolio Company.
Of the Group's 56 Investments at FVPL, 20 Investments at FVPL retain the
lifecycle obligations. The remaining 36 investments have this obligation
passed down to the subcontractor.
The following table shows the sensitivity of the NAV to a change in lifecycle
costs:
Increase by 10%(i) Decrease by 10%(i)
Effects In thousands of Sterling NAV Profit or loss NAV Profit or loss
30 June 2023 (23,374) (23,374) 21,722 21,722
31 December 2022 (25,956) (25,956) 23,459 23,459
(i) Sensitivity applied to the 20 Investments at FVPL which retain the
lifecycle obligation i.e. the obligation is not passed down to the
subcontractor.
Corporate tax rate sensitivity
The profits of each Portfolio Company are subject to corporation tax in the
country where the Portfolio Company is located.
The table below shows the sensitivity of the NAV to a change in corporate tax
rates compared to the assumptions in the table above:
+1% -1%
Effects In thousands of Sterling NAV Profit or loss NAV Profit or loss
30 June 2023 (10,835) (10,835) 11,346 11,346
31 December 2022 (11,150) (11,150) 11,011 11,011
Refinancing: senior debt rate sensitivity
Assumptions are used where a refinancing of senior debt financing is required
for an investment during the remaining concession term. There is a risk that
such assumptions may not be achieved.
The table below shows the sensitivity of the NAV to a one percentage point
increase to the forecasted debt rate.
Debt rate +1%
Effects In thousands of Sterling NAV Profit or loss
30 June 2023 (7,875) (7,875)
31 December 2022 (9,051) (9,051)
Derivative financial instruments
The fair value of derivative financial instruments ('foreign exchange forward
contracts') is calculated by the difference between the contractual forward
rate and the estimated forward exchange rates at the maturity of the forward
contract. The foreign exchange forward contracts are fair valued periodically
by the counterparty bank. The fair value of foreign exchange forward contracts
as at 30 June 2023 amounted to a net receivable of £9,207,000 (31 December
2022: £5,808,000 - net liability). The counterparty bank has an
S&P/Moody's credit rating of A+/Aa3.
The Group uses forward currency swaps to (i) hedge 100 per cent of forecasted
cash flows over the next four years on an annual rolling basis ('cash flow
hedging'), and (ii) to implement balance sheet hedging in order to limit the
decrease in the NAV to approximately 3 per cent, for a 10 per cent adverse
movement in foreign exchange rates ('balance sheet hedging').
During the six months ended 30 June 2023, the Group recognised the following
net gain(loss) on derivative financial instruments at FVPL:
Six months ended Six months ended
30 June 2023 30 June 2023 30 June 2022 30 June 2022
In thousands of Sterling Realised Unrealised Realised Unrealised
Cash flow hedging (1,255) 6,959 (1,825) (12,267)
Balance sheet hedging - 8,057 - (13,592)
(1,255) 15,016 (1,825) (25,859)
The Group has exposure to the following risks from financial instruments:
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Group, resulting in:
1) impairment or reduction in the amounts recoverable from receivables and
other current and non-current assets; and
2) non-recoverability, in part or in whole, of cash and cash equivalents
deposited with banks.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
the obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset.
The Group's policy over liquidity risk is that it will seek to have sufficient
liquidity to meet its liabilities and obligations when they fall due.
The Group manages liquidity risk by maintaining adequate cash and cash
equivalents and access to borrowing facilities to finance day-to-day
operations and medium to long-term capital needs. The Group also regularly
monitors the forecast and actual cash requirements and matches the maturity
profiles of the Group's financial assets and financial liabilities.
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices, will affect the Group's
income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the returns.
17. Related parties and key contracts
All transactions with related parties were undertaken on an arm's length
basis.
Supervisory Board fees
The members of the Supervisory Board of the Company were entitled to a total
of £158,000 in fees for the six months ended 30 June 2023 (30 June 2022:
£115,000).
Directors' shareholding in the Company
30 June 31 December
In thousands of shares 2023 2022
Management Board
Duncan Ball 1,049 871
Frank Schramm 1,001 829
Michael Denny 630 504
Supervisory Board
June Aitken 56 31
Andrew Sykes 40 40
Sarah Whitney 39 39
Christopher Waples 17 17
2,832 2,331
Remuneration of the Management Board
The Management Board members are entitled to a fixed remuneration under their
contracts and are also entitled to participate in a short-term incentive plan
('STIP') and a long-term incentive plan ('LTIP'). Compensation under their
contracts is reviewed annually by the Remuneration Committee.
The total short-term and other long-term benefits recorded in the condensed
consolidated interim income statement for key management personnel are as
follows:
Six months ended 30 June 2023 Six months ended 30 June 2022
In thousands of Sterling
Short-term benefits 1,411 1,352
Share-based payment 951 687
2,362 2,039
Share-based compensation
Each of the members of the Management Board participates in the Group's LTIP.
During the six months ended 30 June 2023, the Company settled the outstanding
obligation under the 2019 LTIP Award and the 2022 Deferred STIP, on a net
basis after taking into account the expected tax liability, through the
issuance of 175,242 shares and 263,720 shares respectively. The total accrued
amount prior to current period settlement under the 2019 LTIP Award and the
2022 Deferred STIP was £445,000 and £708,000 respectively.
Trade and other receivables
As at 30 June 2023, trade and other receivables include short-term net
receivables from non-consolidated subsidiaries amounting to £2,348,000 (31
December 2022: £909,000).
18. Standards issued but not yet effective
A number of new standards and amendments to standards are effective for annual
periods beginning after 1 January 2023 and earlier application is permitted;
however, the Group has not early adopted any of the forthcoming new or amended
standards in preparing these condensed consolidated interim financial
statements. The Group intends to adopt these new and amended standards, if
applicable, when they become effective.
Board Members, Agents & Advisers
Supervisory Board Management Board
· Sarah Whitney (Chair) · Duncan Ball
· Jutta af Rosenborg · Michael Denny
· Christopher Waples · Frank Schramm
· Andrew Sykes
· June Aitken
Registered Office Receiving Agent and UK Transfer Agent
6E route de Trèves Link Market Services Trustees Limited
L-2633 Senningerberg
10(th) Floor
Grand Duchy of Luxembourg
Central Square
29 Wellington Street
Leeds LS1 4DL
United Kingdom
Central Administrative Agent, Luxembourg Registrar Communications Adviser
and Transfer Agent, Depositary and Principal Paying Agent H/Advisors Maitland
CACEIS Investor Services Bank S.A. (formerly RBC Investor Services Bank S.A.) 3 Pancras Square
14 Porte de France
L-4360 Esch-sur-Alzette London N1C 4AG
Grand Duchy of Luxembourg
United Kingdom
Depository Auditors
Link Market Services Trustees Limited PricewaterhouseCoopers, Société cooperative
10(th) Floor
2 rue Gerhard Mercator
Central Square
B.P. 1443
29 Wellington Street
L-1014 Luxembourg
Leeds LS1 4DL
United Kingdom Grand Duchy of Luxembourg
Corporate Brokers Corporate Brokers
Jefferies International Limited Winterflood Securities Limited
100 Bishopsgate
Cannon Bridge House
25 Dowgate Hill
London EC2N 4JL
London EC4R 2GA
United Kingdom
United Kingdom
EEA based Centralised Securities Depository Luxembourg CSD Principal Agent
LuxCSD Banque Internationale à Luxembourg
42 Avenue John F. Kennedy
L-1855 Luxembourg 69 route d'Esch
Grand Duchy of Luxembourg Office PLM 018A
L-2953 Luxembourg
Grand Duchy of Luxembourg
Registre de Commerce et des Sociétés Luxembourg B163879
Listing Chapter 15 premium listing, closed-ended investment company
Trading Main Market
ISIN LU0686550053
SEDOL B6QWXM4
Ticker BBGI
Indices FTSE 250, FTSE 350, FTSE 350 High Yield and FTSE All-Share
Glossary
Abbreviation / Term Definition
AIC The UK Association of Investment Companies, the trade association for
closed-ended investment companies in the UK
AIC Code The 2019 AIC Code of Corporate Governance
APM Alternative Performance Measures
AUD, A$ Australian Dollar
Availability-style Availability-style, unlike 'demand-based' means that revenues are paid
provided the asset is available for use
BBGI / Company BBGI Global Infrastructure S.A.
CAD, C$ Canadian Dollar
CPI Consumer Price Index
ESG Environmental, Social and Governance
EUR, € Euro
FCA the UK Financial Conduct Authority
Financed Emissions GHG emissions from our investments
FX Foreign Exchange
GBP, Sterling, £ Great British Pounds Sterling
GDP Gross Domestic Product
GHG Greenhouse Gas
Group The Company and its subsidiaries
IFRS International Financial Reporting Standards as adopted by the European Union
Investments at FVPL Investments at fair value through profit or loss
IPO Initial Public Offering
KPI Key Performance Indicator
LIFT The UK's Local Improvement Finance Trust
Management Board The Executive Directors of the Company
NAV Net Asset Value
NED Independent Non-Executive Director, a member of the Supervisory Board
NOK Norwegian Krone
O&M Operation and Maintenance
OGC Ongoing Charges
PFI Private Finance Initiative
PPP Public Private Partnership
pps British pence per share
PwC PricewaterhouseCoopers société cooperative, the Company's External Auditor
RCF Revolving Credit Facility
RPI Retail Price Index
SDG, SDGs Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
Supervisory Board The independent Non-Executive Directors of the Company
TCFD Task Force on Climate-Related Financial Disclosures
TSR Total Shareholder Return
USD, US$ US Dollar
Cautionary Statement
Certain sections of this Interim Report, including, but not limited to, the
Chair's Statement and the Strategic Report of the Management Board, have been
prepared solely to provide additional information to shareholders to assess
the Group's strategies and the potential for those strategies to succeed. This
additional information should not be relied on by any other party or for any
other purpose.
These sections may include statements that are, or may be deemed to be,
'forward-looking' statements. These forward-looking statements can be
identified using forward-looking terminology, including the terms: 'believes',
'estimates', 'anticipates', 'forecasts', 'projects', 'expects', 'intends',
'may', 'will' or 'should' or, in each case, their negative or other variations
or comparable terminology.
These forward-looking statements include matters that are not historical
facts. They appear throughout this document and include statements regarding
the intentions, beliefs or current expectations of the Management and
Supervisory Boards concerning, among other things, the investment objectives
and investment policy, financing strategies, investment performance, results
of operations, financial condition, liquidity, prospects and distribution
policy of the Group, and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. Forward-looking statements are not a guarantee of future
performance. The Group's actual investment performance, results of operations,
financial condition, liquidity, distribution policy and the development of its
financing strategies may differ materially from the impression created by the
forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Management and
Supervisory Boards expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions, or
circumstances on which any statement is based.
In addition, these sections may include target figures and guidance for future
financial periods. Any such figures are targets only and are not forecasts.
This report has been prepared for the Group, and therefore gives greater
emphasis to those matters that are significant to BBGI Global Infrastructure
S.A. and its subsidiaries when viewed as a whole.
i Refer to the Alternative Performance Measurement section of this Interim
Report for further details.
ii Pence per share ('pps').
iii Refer to the Alternative Performance Measures section of this Interim
Report for more detail.
iv At 31 March 2023.
v Social infrastructure refers to public infrastructure assets and services.
It includes education, healthcare, blue light (fire and police), affordable
housing, modern correctional facilities, clean energy and transport
infrastructure assets. In exchange for providing these assets and services,
BBGI receives a revenue stream that is paid directly by the public sector.
vi Availability-style means revenues are paid provided the assets are
available for use, so our portfolio has no exposure to demand-based or
regulated investments.
vii Source: Standard & Poor's credit ratings.
viii Refer to the Alternative Performance Measures section of this Interim
Report for more detail.
ix Euribor 3.43 per cent plus margin of 1.65 per cent.
x At 31 March 2023.
xi Assumes a 2 per cent dividend growth from 2025 onwards.
xii SFDR disclosure requirements. The Company is designated as an Article 8
Fund under SFDR and reports on criteria for a socially beneficial investment.
(( xiii )) In comparison to the latest publicly available information for all
closed-ended, LSE-listed equity infrastructure investment companies.
(( xiv )) For this illustration, when a project has more than one FM
contractor and/or O&M contractor, the exposure is allocated equally among
the contractors.
xv
https://www.europarl.europa.eu/RegData/etudes/BRIE/2021/679081/EPRS_BRI(2021)679081_EN.pdf
xvi https://ec.europa.eu/commission/presscorner/detail/en/ip_21_6433
xvii The June 2023 ongoing charge is calculated on an annualised basis.
Refer to the Alternative Performance Measurement section of this Interim
Report for further details.
xviii Refer to the Alternative Performance Measurement section of this
Interim Report for further details.
xix Reference bond: Canadian Government 20-year bond (GTCAD20Y Govt).
xx Reference bond: UK Government Debt - 20-year bond (GUKG20 Index).
xxi Based on the portfolio composition on the date the balance sheet hedge
contracts are entered into.
xxii The Company assumes a natural hedge between Euro denominated fund
running costs and Euro denominated distributions received into the future,
thereby providing a natural hedge.
xxiii Greenhouse Gas Protocol Corporate Standard (2004), Revised Edition
('GHG Protocol').
xxiv Partnership for Carbon Accounting Financials ('PCAF') standard for
Financed Emissions: PCAF (2022), The Global GHG Accounting and Reporting
Standard Part A: Financed Emissions. Second Edition.
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