REG - International PPL - Full year results to year ended 31 December 2024

International Public PartnershipsAnnouncement

27/03/2025 07:15

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RNS Number : 3971C  International Public Partnerships  27 March 2025

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RELEASE, OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN, OR INTO, THE UNITED
STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH
THE SAME WOULD BE UNLAWFUL OR TO US PERSONS. THE INFORMATION CONTAINED HEREIN
DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION.

 

27 March 2025

 

INTERNATIONAL PUBLIC PARTNERSHIPS LIMITED

('INPP', 'the Company')

FULL-YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024

 

International Public Partnership, the FTSE 250-listed infrastructure
investment company ('INPP' or the 'Company'), is pleased to announce its
results for the year to 31 December 2024.

2024 KEY DEVELOPMENTS

·    Declared a fully cash covered dividend of 4.19 pence per share for
the six months to 31 December 2024 taking the dividends paid in respect of
2024 to 8.37 pence per share, reflecting dividend growth of 3.0% compared to
the previous year i 

·    Provided dividend guidance covering 2025 and 2026, targeting further
annual dividend growth of c.2.5% which continues the Company's track record of
growing dividends each year since the IPO in 2006 ii 

·    Announced an increase in the frequency of dividends from
semi-annually to quarterly from June 2025 to provide investors with a more
regular income stream iii 

·    Achieved excellent operational performance with asset availability of
99.7% for the year iv 

·    Realised an additional c.£44 million of proceeds during the year,
taking total realised proceeds to c.£260 million over the 18 months to 31
December 2024. Importantly, all divestments have taken place at prices in line
with the most recently published valuations prior to disposal, supporting the
Company's approach to valuations

·    Established a share buyback programme in January 2024, with c.£55m
of shares having been acquired to date, generating 0.5 pence of additional
value per share

·    Completed c.£92 million of new and strategic follow-on investments,
where the projected returns were greater than the returns of the divested
assets and of those implied by a share buyback

·    Fully repaid the cash drawings under the corporate debt facility
('CDF') in order to lower the interest costs arising, and subsequently reduced
the CDF from £350 million to £250 million

·    Published a dynamic target return framework to better enable
stakeholders to understand how it assesses the relative attractiveness of new
investment opportunities v 

·    Retained strong inflation-linkage of 0.7% vi  generating long-term
real rates of shareholder returns

 

Mike Gerrard, Chair of International Public Partnerships, said: "The Company's
portfolio continued to show resilience during the year with strong underlying
performance, despite a persistently challenging market environment for listed
investment companies."

"The Board continues to believe the share price at which the Company is
currently trading relative to the NAV materially undervalues the Company.
Reallocating capital to enhance value for shareholders continues to be the
primary focus for the Board and Investment Adviser, having realised c.£260
million through asset recycling in the 18 months to 31 December 2024. The
realisation proceeds achieved were in line with the last published valuations.
The Company is continuing its divestment programme in order to increase the
quantum of capital able to be returned to shareholders with an enhanced target
of returning up to £200 million."

NEW MEASURES TO FURTHER OPTIMISE THE PORTFOLIO

As set out above, the Company has undertaken a number of actions in the past
18 months to reduce the discount to NAV at which its shares are trading and
enhance shareholder returns. Although the drivers of the recent share price
movements are principally exogenous factors, unrelated to the performance of
the Company's assets, the Board and Investment Adviser recognise the
importance of taking further action to support the narrowing of the discount
and restore value for its shareholders. Taking this, the current market
environment for investment trusts and the range of views shared through our
engagement with shareholders over the course of the year into account, the
Board is implementing the following package of measures. It believes these
will further strengthen the Company's position in the current environment and
ensure it is well-positioned for the longer-term.

1.   Further alignment of interest

·    The Board and the Investment Adviser have agreed, subject to
finalisation of contractual arrangements, the following changes to the
Investment Advisory Agreement which will be effective from 1 July 2025

·    The base fee payable in respect of each quarter will be based on the
equal weighting of:

(i) the average of the closing daily market capitalisation of the Company
during that quarter; and

(ii) the most recently published NAV

·    The base fee payable under the new arrangements will be capped such
that the base fee payable will be no higher than under the existing
arrangements

·    Based on the current share price discount to the NAV, this fee change
is expected to reduce the ongoing management fee by approximately 10% per
year, providing additional value for shareholders, and further increasing the
alignment of interests between the Company and the Investment Adviser

·    Given current market conditions including the potential for the
Investment Adviser's pipeline of possible investment opportunities to exceed
the current capacity of the Company to invest, the Board and the Investment
Adviser have agreed to update the policy relating to the allocation of new
investment opportunities to the Company. Relatedly, the Company's formal right
of first refusal over relevant investment opportunities that come to the
attention of the Investment Adviser or its US-based shareholders (Hunt
Companies and Boyd Watterson) will be ended

·    This will remove potentially redundant and time consuming processes
between the Investment Adviser and the Company. Both the Company and the
Investment Adviser stress that these changes are not expected to alter the
quality, suitability, diversity or volume of investment opportunities being
made available to the Company in circumstances where the Company has the
capacity to invest in such opportunities

2.   Enhanced divestment programme

·    To demonstrate the underlying value of the Company's assets and fund
up to an additional £140 million of capital returns to investors, the Company
continues to actively pursue further divestments across its portfolio

·    Post-period end, in March 2025, the Company agreed to sell its
minority interests in seven UK education PPPs to an existing co-shareholder
for total proceeds of c.£8 million which is in line with the most recent
valuations

·    There are a number of further processes already in progress and the
next realisation is expected to conclude in the second quarter of 2025

·    The Company's divestment programme may exceed the amount of capital
it intends to return to investors over the period to 31 March 2026 as it
continues to consider other capital allocation options

3.   Increased capital returns

·    The Board intends to increase the quantum of capital being returned
to shareholders from the current programme of up to £60 million, to a
programme of up to £200 million, over the period to 31 March 2026

·    These increased capital returns will be funded by a combination of
divestments and surplus operating cash flow generated by the Company. While it
is expected that the programme may be delivered through share buybacks, other
forms of capital returns may also be considered

4.   Disciplined approach to investments

·    Whilst the Board currently prioritises the return of capital to
shareholders given the market trading environment, it will carefully consider
opportunities to reinvest divestment proceeds into new and follow-on
investment opportunities

·    Such investments will only be made where they are considered to
provide significant broader portfolio or strategic benefits which, taken
together with the projected long-term returns, substantially exceed the
short-term benefits available through share buybacks

5.   Commitment to dividend growth

·    The Board is forecasting to continue its long-term projected annual
dividend growth rate of c.2.5% such that the 2025 and 2026 annual dividend
targets are 8.58 pence per share and 8.79 pence per share respectively

VALUATION

·    The Company's Net Asset Value ('NAV') decreased to £2.7 billion (31
December 2023: £2.9 billion) and the NAV per share decreased to 144.7 pence
(31 December 2023: 152.6 pence)

·    This movement in NAV was primarily driven by an increase in discount
rates, reflecting the sharp rise in underlying government bond yields during
the period. As a result, the weighted average discount rate ('WADR') has
increased from 8.4% as at 31 December 2023 to 9.0% at 31 December 2024

·    IFRS profit before tax for the year to 31 December 2024 was £0.5
million (31 December 2023: £28.0 million)

·    The Company's shares maintained a low correlation to the FTSE All
Share Index of 0.4 over the 12 months to 31 December 2024 (31 December 2023:
0.4)

 

INVESTMENT ACTIVITY AND ASSET STEWARDSHIP

Investment activity

During the year, the Company made two divestments totalling c.£44 million in
the UK and US PPP sector, this included:

·    The Three Shires portfolio: In August 2024, the Company divested its
50% interest in the Three Shires Portfolio realising c.£14 million; and

·    Family Housing for Service Personnel ('FHSP'): In September 2024, the
Company made a partial disposal of FHSP realising c.£30 million

The sales price for both were in line with the Company's 30 June 2024
valuation. Further information on these divestments can be found in the 2024
Annual Report.

Investment activity during the year totalled £107.8 million. This included
the acquisition of Moray East OFTO, a further investment into BeNEX, as well
as funding long-standing investment commitments to Flinders University Health
and Medical Research Building ('HMRB'), Gold Coast Light Rail - Stage 3 and
toob.

·    Moray East OFTO: The Company's eleventh OFTO investment, totalling
c.£77 million, was completed in February 2024 using the proceeds from the
previous OTFO realisations and will further increase the Company's
contribution to the UK's transition to a net zero carbon economy

·    BeNEX: In October 2024, BeNEX announced the successful completion of
its acquisition of Abellio's regional rail operations in Germany ('Abellio
Germany') which was facilitated by a strategic follow-on investment by the
Company into BeNEX of c.£15 million. This transaction involved BeNEX
acquiring 100% of Abellio Germany from the Dutch State Railway

The projected returns from acquiring Moray East OFTO and BeNEX were considered
to be significantly more attractive relative to alternative capital allocation
options.

The Company does not need to make additional investments to deliver current
projected returns and reconfirms that the projected cash receipts from the
existing portfolio are such that even if no further investments are made, the
Company currently expects to be able to continue to meet its existing
progressive dividend policy for at least the next 20 years vii .

Further information on the Company's investment activity can be found on pages
18 to 20 of the 2024 Annual Report.

Notable Portfolio Updates

East Anglia One OFTO, UK

·    The Company had previously reported that the East Anglia One OFTO
('EA1') was operating at half of its physical capacity having suffered an
offshore cable fault in April 2024

·    Due to the efforts of the Investment Adviser's asset management team,
the repair works were completed and EA1 returned to full service in October
2024. The team worked closely with Ofgem throughout, who expedited their own
investigations into both the reasons for the fault and EA1's response. Post
period end, Ofgem determined that the fault was beyond the OFTO's reasonable
control and, taking into account EA1's actions in responding to and repairing
the fault, concluded that existing regulatory protections would be available
such that EA1 would not be subject to any revenue loss for the impact of the
offshore cable fault on asset availability

Tideway, UK

·    During the year, major construction works were completed on the
Tideway project and in September 2024, the tunnel started to prevent sewage
from entering the River Thames for the first time

·    In February 2025, it was confirmed that the 'super sewer' had been
fully connected and it should therefore now be able to prevent 95% of the
sewage spills that would have otherwise polluted the River, dramatically
improving the water quality of the River Thames and delivering significant
environmental benefits

·    Data shows that from September 2024 until the time of writing, the
system has prevented more than 6 million cubic metres of sewage from entering
the river viii 

·    Tideway continues to monitor developments in relation to the
well-publicised financial position of Thames Water. The matter is not expected
to have a material impact on the Company's investment in Tideway. Whilst
Thames Water has a licence obligation to pass revenues to Tideway, statutory
and regulatory protections are afforded to Tideway which are designed to
mitigate the risk of disruption to the receipt of revenues and would continue
to apply should Thames Water's status change

 

For updates and information on the wider portfolio, please refer to the Asset
Management section of the 2024 Annual Report.

OUTLOOK

Despite the persistent challenges facing the sector, which are contributing to
sustained upward pressure on discount rates and consequent valuation
challenges, listed infrastructure continues to represent an attractive
long-term investment.

The Board believes that the implied projected net returns of 10.7% ix  on an
investment in the Company's shares, with a current dividend yield of 7.6% x ,
represents an attractive 5.6% premium to that offered by a 30-year UK
government bond xi .

The Board and Investment Adviser remain confident in the long-term
attractiveness of infrastructure investment, with INPP offering a
well-diversified portfolio that delivers stable, inflation-linked returns
while supporting economic growth and climate resilience.

The global presence of the Investment Adviser and its deep expertise in the
sectors likely to shape infrastructure investment in the coming years means
the Company is well-positioned to continue to meet its long-term goals, while
also meeting the diverse needs of its shareholders.

Successful infrastructure investment relies on diligent asset selection,
investment and divestment; active asset management; and prudent financial
management. In order to remain well positioned in the current market
environment, the Board will continue to balance these principles while
considering investor interests and stakeholder needs. The Board remains
focused on delivering sustainable value, and appreciates your continued
support.

 

OTHER INFORMATION

The 2024 Annual Report and financial statements has today been published on
the Company's website, along with a copy of the results presentation, and can
be accessed and downloaded at
https://www.internationalpublicpartnerships.com/investors/reports-and-publications/
(https://www.internationalpublicpartnerships.com/investors/reports-and-publications/)

In compliance with LR 9.6.1, a copy of the 2024 Annual Report has been
submitted to the National Storage Mechanism and will shortly be available for
inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. In
accordance with DTR 6.3.5(1A), the regulated information required under DTR
6.3.5 is available in unedited full text within the 2023 Annual Report as
uploaded and available on the National Storage Mechanism and on the Company's
website as noted above.

 

ENDS

 

NOTES TO EDITORS

 

 For further information:

Erica Sibree/Amy Edwards
   +44 (0) 7557 676 499 / (0) 7827 238 355

Amber Fund Management
Limited

Hugh Jonathan
                +44 (0)20 7260 1263

Numis Securities

Mitch Barltrop/ Jenny Boyd
   +44 (0) 7703 330 199 / (0) 7971 005 577

FTI Consulting

 

About International Public Partnerships ('INPP'):

INPP is a listed infrastructure investment company that invests in global
public infrastructure projects and businesses, which meets societal and
environmental needs, both now, and into the future.

INPP is a responsible, long-term investor in over 140 infrastructure projects
and businesses. The portfolio consists of utility and transmission, transport,
education, health, justice and digital infrastructure projects and businesses,
in the UK, Europe, Australia and North America. INPP seeks to provide its
shareholders with both a long-term yield and capital growth.

Amber Infrastructure Group ('Amber') is the Investment Adviser to INPP and
consists of over 180 staff who are responsible for the management of, advice
on and origination of infrastructure investments.

Visit the INPP website at www.internationalpublicpartnerships.com
(http://www.internationalpublicpartnerships.com/)  for more information.

 

Important Information

This announcement contains information that is inside information for the
purposes of the UK version of the Market Abuse Regulation (EU) No. 596/2014
which is part of UK law by virtue of the European Union (Withdrawal) Act 2018
(as amended and supplemented from time to time).

This announcement does not constitute a prospectus relating to the Company and
does not constitute, or form part of, any offer or invitation to sell or
issue, or any solicitation of any offer to purchase or subscribe for, any
shares in the Company in any jurisdiction nor shall it, or any part of it, or
the fact of its distribution, form the basis of, or be relied on in connection
with or act as any inducement to enter into, any contract therefor. The
issuance programme, as described in Part VI of the Prospectus issued by the
Company on 8 April 2022, available on the website, is closed.

Forward-looking statements are subject to risks and uncertainties and
accordingly the Company's actual future financial results and operational
performance may differ materially from the results and performance expressed
in, or implied by, the statements. These forward-looking statements speak only
as at the date of this announcement. The Company, Amber and Numis Securities
Limited expressly disclaim any obligation or undertaking to update or revise
any forward-looking statements contained herein to reflect actual results or
any change in the assumptions, conditions or circumstances on which any such
statements are based unless required to do so by the Financial Services and
Markets Act 2000, the Prospectus Regulation Rules of the Financial Conduct
Authority or other applicable laws, regulations or rules.

 

 

 

 

 i  The H2 2024 dividend of 4.19p is expected to be paid on 9 June 2025.

 ii  Future profit projection and dividends cannot be guaranteed. Projections
are based on current estimates and may vary in future.

 iii  The second and final dividend in respect of 2024 is expected to be paid
in June 2025. This will be the final dividend paid on a six-monthly basis.
Following this, dividends will be paid quarterly, commencing with the first of
four interim dividends for the financial year 2025 in September 2025.

 iv  See pages 26 to 27 of the 2024 Annual Report for further information.

 v  The target return for any new investment is informed by several factors,
including (i) the Company's share price relative to its NAV, (ii) the
Company's weighted average discount rate, and (iii) any pertinent economic or
strategic considerations. Further information can be found on page 32 of the
2024 Annual Report.

 vi  Calculated by running a 'plus 1.0%' inflation sensitivity for each
investment and solving each investment's discount rate to return the original
valuation. The inflation-linked return is the increase in the weighted average
discount rate.

 vii  This is reflective of the 2025 and 2026 dividend targets, and 2.5%
annual dividend growth thereafter.

 viii  Tideway has launched a tracker to show the volume of sewage being
prevented from entering the River Thames: https://www.tideway.london.

 ix  As at 28 February 2025. This is calculated based on INPP's weighted
average discount rate, less the Ongoing Charges Ratio, adjusted to reflect the
share price discount to the NAV using published sensitivities.

 x  Dividends projected to be paid over the 12 months from 28 February 2025
divided by the Company's share price as at 28 February 2025.

 xi  As at 28 February 2025. 30-year bond used owing to the UK weighting of
the portfolio and the weighted average investment tenor of c.38 years.

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