REG - RM Infrastructure RM SecDirect - RMDC - Half-year Report
19/08/2024 07:00
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RNS Number : 8266A RM Infrastructure Income PLC 19 August 2024
RM INFRASTRUCTURE INCOME PLC
HALF-YEARLY REPORT ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2024
LEI: 213800RBRIYICC2QC958
HALF-YEARLY REVIEW
ABOUT US
Following the approval by Shareholders at a General Meeting held on 20
December 2023, RM Infrastructure Income plc ("RMII" or the "Company") adopted
a revised Investment Objective in order to facilitate a managed wind-down of
the Company.
The Company aims to conduct an orderly realisation of the assets of the
Company, to be effected in a manner that seeks to achieve a balance between
returning cash to Shareholders promptly and maximising value.
Prior to this, the Company's investment objective was to generate attractive
and regular dividends through investment in secured debt instruments of UK
Small and Medium sized Enterprises ("SMEs") and mid-market corporates
including any loan, promissory notes, lease, bond, or preference share (such
debt instruments being "Loans") sourced or originated by RM Capital Markets
Limited (the "Investment Manager") with a degree of inflation protection
through index-linked returns where appropriate.
COMPANY HIGHLIGHTS (AS AT 30 JUNE 2024)
3.25p
Dividend pence per share
+2.52%
NAV Total Return
£15.9m
Cash at period end
25
Number of investments
£103.3m
Gross assets
1.24 years
Average life of investments*
* Based on Investment Manager's maturity profile assessment.
Portfolio at a glance
Financial information
As at As at
30 June 2024
31 December 2023
Gross asset value (£'000)(1) £103,285 £104,516
Net Asset Value ("NAV") (£'000) £103,285 £104,516
NAV per Ordinary Share (pence) 87.84p 88.88p
Ordinary Share price (pence) 78.00p 74.25p
Ordinary Share price discount to NAV(1) (11.20%) (16.46%)
Dividend paid in respect of the Period (pence) 3.25p 6.50p
========= =========
Performance summary
For the six months ended For the six months ended
30 June 2024
30 June 2023
% change(2,4)
% change(3,4)
Total Return - Ordinary Share NAV and dividends(1) +2.5% +2.7%
Total Return - Ordinary Share price and dividends(1) +9.6% -15.4%
========= =========
1. These are Alternative Performance Measures ("APMs").
2. Total Returns for the period to 30 June 2024, including dividend
reinvestment.
3. Total Returns for the period to 30 June 2023, including dividend
reinvestment.
4. Source: The Company's Factsheet.
Alternative Performance Measures ("APMs")
The financial information and performance summary data highlighted in the
footnote to the above tables represent are considered to represent the APMs of
the Company. Definitions of these APMs together with how these measures have
been calculated can be found within the Report.
PORTFOLIO (AS AT 30 JUNE 2024)
Largest 10 loans by drawn amounts across the entire portfolio
Business activity Investment type Valuation(†) Percentage of
(Private/Public/Bond)
£'000
gross asset (%)
Care home Private Loans 13,057 12.6
Auto Parts Manufacturer Private Loans 9,878 9.6
Health and Well-being Private Loans 9,020 8.7
Hotel Private Loans 6,908 6.7
Hotel Private Loans 4,500 4.4
Student accommodation Private Loans 4,483 4.3
Specialist Care Public Bond 4,350 4.2
Hotel Private Loans 4,133 4.0
Hotel Private Loans 3,837 3.7
Construction Private Loans 3,453 3.3
--------------- ---------------
Ten largest holdings 63,619 61.5
Other private loan investments 18,084 17.6
Wholly owned asset 2,966 2.9
--------------- ---------------
Total holdings 84,669 82.0
Other net current assets 18,616 18.0
--------------- ---------------
Gross assets* 103,285 100.0
========= =========
† Valuation conducted by external Valuation Agent.
* The Company's gross assets comprise the net asset value of the Company's
Ordinary Shares and the Bank loan, which had been repaid at the period end,
calculation can be found within the Report.
Chair's statement
On behalf of the Board, I am pleased to present RM Infrastructure Income plc's
("RMII" or "the Company") Half-yearly Report and Accounts for the first half
of 2024 (the "Period").
45.13%
Inception to June 2024 / NAV Total Return
45.35p
Total dividend declared or paid / inception to June 2024
87.84p
NAV June 2024
Introduction
On behalf of the Board, I am pleased to present RM Infrastructure Income plc's
Half-yearly Report and Accounts for the first half of 2024 (the "Period").
Significant progress has been made during the Period on the managed wind-down.
The highlights have been:
· Receipt of circa £850k net of legal fees after the Investment
Manager successfully pursued a legal claim against a third-party contractor
regarding loan reference 68.
· Full repayment at par of five Investment Loans with a nominal
value of circa £14m over the Period.
· Partial Repayment at par of six Investment Loans with a nominal
value of circa £750k over the Period.
· Increase in cash balance held at Period end of circa £15.9m or
15% of NAV.
It is pleasing that the Period's NAV Total Return has been 2.52%. At the
Period end the NAV per Ordinary Share was 87.84 pence, the mid-price of the
Ordinary Share was 78.00 pence, correspondingly the share price to NAV traded
at circa an 11.2% discount.
The share price Total Return has been 9.55% which is largely attributable to
the reduction in the discount to NAV from 16.46% at the beginning of the
Period to 11.20% at the end of the Period, combined with the declared and
distributed dividend of 3.25 pence per Ordinary Share during the Period.
Regarding the Period, the Company paid the dividend for the first quarter of
2024 of 1.625 pence per Ordinary Share on 28 June 2024 and in addition the
Board has declared a second interim dividend of 1.625 pence per Ordinary Share
for Q2 2024, which will be paid on 16 September 2024. Therefore, the
aggregate dividend declared and paid in respect of the Period was 3.250 pence
per Ordinary Share. Given the portfolio is in managed wind-down, the portfolio
has seen a reduction in outstanding Investment Loans that generate income. As
such, the dividend is expected to reduce over time, in line with reduction of
the invested portfolio. As outlined to investors during the consultations
undertaken during H2 2023, the dividend reduction could be material given the
size of the fixed costs of the Company versus the forecasted size of the
portfolio.
Shareholders voted at the General Meeting held on 20 December 2023 for the
implementation of the managed wind-down of the Company and since then the
Board has consulted with the Company's advisers to agree the best way to
return capital to Shareholders. Our intention is to undertake a series of
tender offers for shares when there are sufficient cash balances to make these
tender offers cost effective. As this process is relatively costly, the Board
has decided to plan to undertake one tender offer later in 2024 and likely two
tender offers during 2025, however this is contingent on loan repayments which
are expected by the Investment Manager and could be subject to change if such
loans do not repay as expected or if recoveries take longer than envisaged.
As of 30 June 2024, the issued share capital of the Company consisted of
117,586,359 Ordinary Shares with voting rights and 4,638,222 Ordinary Shares
held in Treasury.
Portfolio
The number of loans reduced materially during the Period, from 31 at year end
to 25 at Period end. Invested nominal outstanding totalled circa £93.2m with
cash of £15.9m (£101m in December 2023 with cash of £7.8m). Within the
loans repaid during the Period, it is pleasing that the Company has had the
full repayment of loan capital back from two borrowers i.e. references 71 and
97 that were materially ahead of legal maturity.
The Investment Manager's report will go into further details on Loan
references 66 and 67 that are of material size and were due for repayment in
April 2024. The Annual Report for 2023 noted that these loans were likely not
to be repaid in April 2024 and they have been extended to allow further
discussions with the borrower.
Outlook
The Board is appraised regularly by the Investment Manager on the portfolio.
The Board and the Investment Manager continue to seek to expediently return
capital to Shareholders. The Board are benchmarking the return of capital to
the schedule that was used on the Company presentations during the
consultation process undertaken during 2024. Good progress has been made
during the Period and we are expecting this to accelerate in the second half
of the year.
Please do not hesitate to contact me through Singer Capital Markets if any
additional information is required.
NORMAN CRIGHTON
Chair
16 August 2024
Investment Manager's report
OVERVIEW
Income Performance & NAV % Total Return
RM Funds ("RM" or the "Investment Manager") is satisfied with the Company's
continued positive performance in the Period. The portfolio delivered a steady
net interest income with two further dividends declared for the Period
totalling 3.25 pence per Ordinary Share. Overall, since inception there have
been 29 distributions totalling 45.35 pence per Ordinary Share to
Shareholders.
The focus is now very much on the expedient return of capital to Shareholders
and as outlined in the Chair's statement, the income profile is expected to
reduce materially over the coming months given the significant reduction in
the portfolio size and the relatively large fixed costs attributable to a
listed company. The Company will continue to stream the income and distribute
the net income to investors; however, the future dividends are difficult to
forecast given the relatively high fixed cost base of the Company relative to
the size of the invested portfolio. Small changes to the forecasted repayment
schedule, combined with the concentration of the Loans remaining relative to
the size of the portfolio can have material effect on the income returns for
the Company.
The NAV Total Return for the Period was 2.52%.
Share price
The share price performance has been positive with the Company's shares
opening the Period at 74.25 pence and closing the Period at 78.00 pence,
delivering a positive Total Return of 9.55%. Share price discount to NAV has
reduced during the Period from -16.46% to -11.20%.
Investment Manager aligned with shareholder interests
RM owns shares in the Company. Also, as part of the managed wind-down process
Shareholders approved in December 2023 an amendment to the Investment
Management Agreement ("IMA") such that there is an incentive fee paid to the
Investment Manager for Loans realised during 2024 and 2025. Half of the
incentive fee is retained by the Company and used to buy Company shares if
trading at a discount to NAV. These shares and their proceeds are then
released to the Investment Manager upon the liquidation of the Company subject
to a schedule relating to a Reference NAV.
Market environment
Government bond yields have traded in a range during the Period and overall
have remained largely unchanged. We have seen the first interest rate cut by
the Bank of England during July and it is highly likely that base rates will
be lowered further from the current level of 5.00% during the second half of
the year. This is a supportive backdrop for borrowers when it comes to
facilitating refinancing as the overall cost, affordability and the
availability of credit for those portfolio borrowers who are seeking a
refinance.
Credit spreads hae been largely steady with the Markit iTraxx Europe Crossover
index opening at 310 and closing the Period marginaly wider at around 320.
Our base case forecasts are that there will be credit weakness to follow
through in the second half of the year, specifically as we see stress within
the Commercial Real Estate "CRE" market. Despite Bank of England moving
rates on a lower trajectory, the current level of base rates are still putting
extreme pressure on CRE loan metrics for historic transactions, especially
those originated during the post Covid-19 period.
Portfolio update
As at the Period end, the Company held a cash balance of circa £15.9m
reflecting the loan repayments from the portfolio. Over the first 6 months,
there have been 5 full loan repayments totalling circa £14m nominal and
further partial repayments totalling circa £750k nominal. Thus, in total
circa £14.75m has been repaid to the Company.
RM Infrastructure Income - Premium/Discount to NAV
Highlight of these repayments:
· Loan reference 97 (97a and 97b) prepaid substantially ahead of
the scheduled repayment date of December 2025. Further, the Company was
holding a sizeable, committed balance as cash of circa £4.4m to be drawn as
construction was progressing. This early prepayment has meant that said
committed balance no longer needs to be held by the Company and can be
distributed to Shareholders. This was the final construction asset exposure
within the portfolio.
· Loan reference 71 whose scheduled maturity was 31 May 2027
prepaid in full the €2m exposure in January 2024, almost 3.5 years earlier
than its legal final maturity.
Overall, there was income generation of £4.72m, split between cash pay and
Payment in Kind ("PIK") of 85%/15%, which is similar to the same period last
year. This amount excludes an additional £241k in 'Other Income' which
comprises of borrower prepayment fees and bank interest.
As of 30 June 2024, there were two loans which were under enhanced monitoring
by the investment team and these remain at the end of the Period. A summary of
these loans is detailed below:
1. Hotel development & contractor, Glasgow
(Loan References 58, 79, 80 & 92)
Overview: The Company has four investment loans totalling circa £15.5m
secured on the hotel development and contractor in Glasgow. In December the
senior lender appointed an administrator. As such, these loans are now in
workout and remain on the watchlist. The Investment Manager believes these
loans are appropriately marked. Workout and recovery are progressing as
envisaged.
2. Hospitality and Leisure
(Loan References 66 & 67)
Overview: The Company has two investment loans totalling circa £14m secured
on a junior ranking basis on two portfolios of 5 operational hotels in the UK.
The loans were due for repayment in April 2024, however, in line with RM's
previous communications to Shareholders we expected these loans to be
extended. Two short-term extensions have been documented with the borrower
whilst financing discussions continue. These loans have paid their interest in
cash on time since inception in 2019 and RM is liaising with the senior lender
and borrower about an appropriate solution that protects value for The Company
and delivers the pathway for a return of capital to Shareholders.
Outlook
As described within the market environment section, the macro outlook appears
to be more constructive for those borrowers seeking refinance as 3 and 5 year
yields have fallen due to market expectations on the likely timings and
trajectory of interest rates. This is helpful although set against this we
expect credit spreads to widen so all in funding costs could remain neutral.
The investment team at RM continue to work diligently and are seeking the
first shareholder capital return during the second half of the year.
RM Capital Markets Limited
16 August 2024
Interim Management report
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Chair's Statement and the Investment
Manager's Report in this Half-yearly report provide details of the important
events which have occurred during the Period and their impact on the financial
statements. The following statements on Principal and emerging risks and
uncertainties, Related party transactions, Going concern and the Statement of
Directors' Responsibility for the Half-yearly Report, together, constitute the
Interim Management Report for the Company for the six months ended 30 June
2024. The outlook for the Company for the remaining six months of the year
ending 31 December 2024 is discussed in the Chair's Statement and the
Investment Manager's Report.
Principal and emerging risks and uncertainties
The Board has a dynamic risk management register in place to help identify
principal and emerging risks in the business and oversee the effectiveness of
internal controls and processes. The principal and emerging risks and
uncertainties facing the Company are as follows:
· Market risk - rates of inflation (counterparty affordability),
rates of interest;
· Liquidity risk - liquidity opportunity and discount control;
· Leverage and borrowing risk - the Company's investment policy
involves the use of leverage, which exposes the company to risks associated
with borrowings;
· Credit/counterparty risk - counterparty default, borrower
default, loan non-performance and collateral risk; and
· Interest Rate risk - since the writing of a number of investment
loans, there has been a material increase in interest rates.
Emerging risks are considered by the Board at its quarterly meetings and by
the Audit and Management Engagement Committee as part of its risk management
and internal control review. Failure to identify emerging risks may cause
reactive actions rather than being proactive and the Company could be forced
to change its structure, objective or strategy and, in worst case, could cause
the Company to become unviable.
A detailed explanation of the principal and emerging risks and uncertainties
to the Company are detailed in the Company's most recent Annual Report for the
year ended 31 December 2023, published on 23 April 2024, which can be found on
the Company's website at
https://rm-funds.co.uk/rm-infrastructure-income/investor-relations
(https://rm-funds.co.uk/rm-infrastructure-income/investor-relations/) /. The
Board is of the opinion that these principal and emerging risks are equally
applicable to the remaining six months of the financial year as they were to
the six months being reported on.
Since the publication of the 2023 Annual Report and Accounts, there continues
to be increased risk levels within the global economy. The Investment Manager
believes the key risk factors that have increased during the period are:
Interest rate risk - Since the initial underwriting of the majority of loans
held within the portfolio, there has been a material increase in the Sterling
Overnight Index Average ("SONIA"). This could make the refinancing of loans
due for repayment over the next two years more challenging for borrowers given
the increased cost of the "risk free" rate. This causes specific risk in two
areas: portfolio borrowers seeking refinancing, as the materially higher
funding cost could affect the interest cover on the loan thus making new
funding difficult to obtain. On portfolio exposures where a borrower is
seeking to refinance a third-party debt ranking senior to the Company, this
could also increase the likelihood of any of the Company's Mezzanine loan
covenants being breached.
Collateral risk - real estate values as evidenced by price performance within
the Real Estate Investment Trust ("REIT") segment have reduced over the
period. Whilst these price falls have not been reflected fully by these REITS
or other real estate indices, the Investment Manager believes that the
probability has increased that the realisable market valuations are lower at
the end of the period than the beginning of the period. Given that the
Company's portfolio has extensive security over real estate this could
negatively affect recoveries in any enforcement scenarios.
Availability of credit - the Investment Manager believes that credit is less
available at the end of the period than the start of the period and this will
potentially negatively affect borrowers who are seeking refinance. Given the
Company's portfolio is exposed to loans with a final maturity date this will
increase the refinancing risk.
The Board closely monitors and assesses these continued uncertainties as to
how they could impact and affect the Company's trading position with regards
to our investment objective, portfolio and thus our Shareholders and where
appropriate, endeavours to mitigate the risk.
The Investment Manager and other key service providers provide periodic
reports to the Board on operational resilience. The Board is satisfied that
the key service providers have the ability to continue their operations
efficiently in a hybrid working environment.
Related party transactions
The Company's Investment Manager, RM Capital Markets Limited is considered a
related party under the Listing Rules. Details of the amounts paid to the
Company's Investment Manager and the Directors during the Period are detailed
in the Notes to the Financial Statement.
Going concern
The Directors, as at the date of this report, are required to consider whether
they have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. Following the
General Meeting held on 20 December 2023 at which Shareholders unanimously
voted in favour of a change in the Company's Objective and Investment Policy
in order to facilitate a managed wind-down, the process for an orderly
realisation of the Company's assets and a return of capital to shareholders
has begun. The Company is therefore preparing its financial statements on a
basis other than going concern due to the Company being in a managed
wind-down.
The Board will endeavour to realise all of the Company's investments in a
manner that achieves a balance between maximising the net value received from
those investments and making timely returns to Shareholders.
Whilst the Directors are satisfied that the Company has adequate resources to
continue in operation throughout the winding down period and to meet all
liabilities as they fall due, given the Company is now in managed wind-down,
the Directors considered it appropriate to adopt a basis other than going
concern in preparing the financial statements. No material adjustments to
accounting policies or the valuation basis have arisen as a result of ceasing
to apply the going concern basis. All of the balance sheet items have been
recognised on a realisation basis, which is not materially different from the
carrying amount. The Directors have also made appropriate provisions in order
to bring about the orderly wind-down of the Company and its operations.
Statement of Directors' responsibility for the Half-yearly Report
The Directors confirm to the best of their knowledge that:
· The condensed set of financial statements contained within the
Half-yearly report has been prepared in accordance with IAS 34 Interim
Financial Reporting.
· The Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance and
Transparency Rules.
NORMAN CRIGHTON
Chair
16 August 2024
Financial statements
Condensed unaudited statement of comprehensive income For the six months ended
30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023*
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Losses on investments - (947) (947) - (936) (936) - (2,441) (2,441)
Income 4 4,965 - 4,965 5,524 - 5,524 10,876 - 10,876
Investment management fee 5 (525) - (525) (476) - (476) (944) - (944)
Other expenses 5 (902) - (902) (649) - (649) (1,521) (1,567) (3,088)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Return before finance costs and taxation 3,538 (947) 2,591 4,399 (936) 3,463 8,411 (4,008) 4,403
Finance costs - - - (597) - (597) (1,004) - (1,004)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Return on ordinary activities before taxation 3,538 (947) 2,591 3,802 (936) 2,866 7,407 (4,008) 3,399
Taxation 6 - - - - - - - - -
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Return on ordinary activities after taxation 3,538 (947) 2,591 3,802 (936) 2,866 7,407 (4,008) 3,399
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Return per ordinary share (pence) 8 3.01p (0.81p) 2.20p 3.23p (0.80p) 2.43p 6.30p (3.41p) 2.89p
========= ========= ========= ========= ========= ========= ========= ========= =========
* Audited.
The total column of this Statement represents the profit and loss account of
the Company. The supplementary revenue and capital columns are prepared under
guidance issued by the Association of Investment Companies.
'Return on ordinary activities after taxation' is also the Total comprehensive
income for the period/year.
The notes form an integral part of these financial statements.
Condensed unaudited statement of financial position
Notes As at As at As at
30 June 2024
30 June 2023
31 December 2023*
£'000
£'000
£.000
Fixed assets
Investment as fair value through profit or loss 3 84,669 116,186 93,932
--------------- --------------- ---------------
Current assets
Cash and cash equivalents 15,895 880 7,791
Receivables 9,023 7,293 7,969
--------------- --------------- ---------------
24,918 8,173 15,760
Payables: amounts falling due within one year
Payables (6,302) (2,567) (5,176)
Bank loan - Credit facility - (13,987) -
--------------- --------------- ---------------
(6,302) (16,554) (5,176)
--------------- --------------- ---------------
Net current assets/(liabilities) 18,616 (8,381) 10,584
========= ========= =========
Total assets less current liabilities 103,285 107,805 104,516
========= ========= =========
Net assets 103,285 107,805 104,516
========= ========= =========
Capital and reserves: equity
Share capital 7 1,175 1,175 1,175
Share premium 70,168 70,168 70,168
Special reserve 44,597 44,597 44,597
Capital reserve (15,176) (11,157) (14,229)
Revenue reserve 2,521 3,022 2,805
--------------- --------------- ---------------
Total shareholders' funds 103,285 107,805 104,516
========= ========= =========
NAV per share - Ordinary Shares (pence) 9 87.84p 91.68p 88.88p
========= ========= =========
* Audited.
The financial statements of the Company were approved and authorised for issue
by the Board of Directors on 16 August 2024 and signed on their behalf by:
Norman Crighton
Chair
RM Infrastructure Income plc incorporated in England and Wales with registered
number 10449530.
The notes form an integral part of these financial statements.
Condensed unaudited statement of changes in equity
For the six months ended 30 June 2024
Notes Share Share Share Capital Revenue Total
capital
premium
reserve
reserve
reserves
£'000
£'000
£'000
£'000
£'000
£'000
Balance as at beginning of the period 1,175 70,168 44,597 (14,229) 2,805 104,516
Return on ordinary activities - - - (947) 3,538 2,591
Buy back of shares 7 - - - - - -
Shares buy back costs - - - - - -
Dividend paid 10 - - - - (3,822) (3,822)
--------------- --------------- --------------- --------------- --------------- ---------------
Balance as at 30 June 2024 1,175 70,168 44,597 (15,176) 2,521 103,285
========= ========= ========= ========= ========= =========
For the six months ended 30 June 2023
Notes Share Share Share Capital Revenue Total
capital
premium
reserve
reserve
reserves
£'000
£'000
£'000
£'000
£'000
£'000
Balance as at beginning of the period 1,176 70,168 44,640 (10,221) 3,042 108,805
Return on ordinary activities - - - (936) 3,802 2,866
Buy back of shares 7 (1) - (42) - - (43)
Shares buy back costs - - (1) - - (1)
Dividend paid 10 - - - - (3,822) (3,822)
--------------- --------------- --------------- --------------- --------------- ---------------
Balance as at 30 June 2023 1,175 70,168 44,597 (11,157) 3,022 107,805
========= ========= ========= ========= ========= =========
For the year ended 31 December 2023*
Notes Share Share Share Capital Revenue Total
capital
premium
reserve
reserve
reserves
£'000
£'000
£'000
£'000
£'000
£'000
Balance as at beginning of the period 1,176 70,168 44,640 (10,221) 3,042 108,805
Return on ordinary activities - - - (4,008) 7,407 3,399
Buy back of shares 7 (1) - (42) - - (43)
Shares buy back costs - - (1) - - (1)
Dividend paid 10 - - - - (7,644) (7,644)
--------------- --------------- --------------- --------------- --------------- ---------------
Balance as at 30 June 2023 1,175 70,168 44,597 (14,229) 2,805 104,516
========= ========= ========= ========= ========= =========
* Audited.
Distributable reserves comprise: the revenue reserve; capital reserve
attributable to realised profits; and the special reserve.
Share capital represents the nominal value of shares that have been issued.
The share premium includes any premium received on the issue of share capital.
Any transaction costs associated with the issuing of shares are deducted from
share premium.
The notes form an integral part of these financial statements.
Condensed unaudited statement of cash flows For the six months ended 30 June
2024
Six months ended Six months ended Year ended
30 June 2024
30 June 2023
31 December 2023*
Notes
£'000
£'000
£'000
Operating activities
Return on ordinary activities before finance costs and taxation** 2,591 3,463 4,403
Adjustments for movements not generating operating cash flow:
Adjustment for losses on investments 1,437 845 2,247
PIK adjustments to the operating cash flow (835) (1,256) (2,637)
Adjustments for balance sheet movements:
Increase in receivables (1,054) (1,872) (2,548)
Increase in payables 1,126 259 2,868
--------------- --------------- ---------------
Net cash flow from operating activities 3,265 1,439 4,333
========= ========= =========
Investing activities
Private loan repayments/bonds sales proceeds 9,647 9,426 33,494
Private loans issued/bonds purchases (986) (5,231) (7,066)
--------------- --------------- ---------------
Net cash flow from investing activities 8,661 4,195 26,428
========= ========= =========
Financing activities
Finance costs - (597) (1,004)
Ordinary Share bought back 7 - (43) (43)
Ordinary Share buyback costs - (1) (1)
Oaknorth loan facility drawdown - 4,266 6,621
Oaknorth loan facility repaid - (7,550) (23,892)
Dividends paid 10 (3,822) (3,822) (7,644)
--------------- --------------- ---------------
Net cash flow used in financing activities (3,822) (7,747) (25,963)
--------------- --------------- ---------------
Increase/(decrease) in cash 8,104 (2,113) 4,798
--------------- --------------- ---------------
Opening balance at beginning of the period/year 7,791 2,993 2,993
--------------- --------------- ---------------
Balance as at the period/year end 15,895 880 7,791
========= ========= =========
* Audited.
** Cash inflow from interest on investment holdings was £2,413,000 (30 June
2023: £2,429,000; 31 December 2023: £8,743,000). Included in return on
ordinary activities before finance costs and taxation was finance costs of nil
(30 June 2023: £597,000: 31 December 2023: £1,004,000).
The notes form an integral part of these financial statements.
Notes to the financial statements
1. General information
RM Infrastructure Income plc (the "Company") was incorporated in England and
Wales on 27 October 2016 with registered number 10449530, as a closed-ended
investment company. The Company commenced its operations on 15 December 2016.
The Company intends to carry on business as an investment trust within the
meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.
The Company aims to conduct an orderly realisation of the assets of the
Company, to be effected in a manner that seeks to achieve a balance between
returning cash to Shareholders promptly and maximising value.
The registered office is 6th Floor, 125 London Wall, Barbican, London EC2Y
5AS.
2. Basis of preparation and accounting policies
Statement of compliance
The interim unaudited financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting and the Disclosure Guidance and
Transparency Rules ("DTRs") of the UK's Financial Conduct Authority. They do
not include all of the information required for full annual financial
statements and should be read in conjunction with the financial statements of
the Company as at and for the year ended 31 December 2023. The financial
statements for the year ended 31 December 2023 have been prepared in
accordance with the UK adopted international accounting standards. The
financial information for the year ended 31 December 2023 in the interim
unaudited financial statements has been extracted from the audited Annual
Report and Accounts.
When presentational guidance set out in the Statement of Recommended Practice
("SORP") for Investment Companies issued by the Association of Investment
Companies ('the AIC') in July 2022 is consistent with the requirements of UK
adopted international accounting standards, the Directors have sought to
prepare the financial statements on a basis compliant with the recommendations
of the SORP.
Going concern
Given the Company is now in managed wind down, the Directors considered it
appropriate to adopt a basis other than going concern in preparing the
financial statements. Details of the Directors' assessment of the going
concern status of the Company are given within the Report.
Accounting policies
The accounting policies used by the Company in preparing these interim
unaudited financial statements are the same as those applied by the Company in
its financial statements as at and for the year ended 31 December 2023.
3. Investment at fair value through profit or loss
Notes Six months ended Six months ended Year ended
30 June 2024
30 June 2023
31 December 2023
£'000
£'000
£'000
Financial assets held:
Equity investments 2,966 3,119 2,966
Bond investments 4,350 4,020 3,654
Private loan investments 77,353 109,047 87,312
--------------- --------------- ---------------
84,669 116,186 93,932
========= ========= =========
4. Income
Notes Six months ended Six months ended Year ended
30 June 2024
30 June 2023
31 December 2023
£'000
£'000
£'000
Income from investments
Bond and loan interest 4,577 3,950 10,352
Bond and loan PIK interest 147 1,403 294
Arrangement fees 149 17 42
Other income 92 154 188
--------------- --------------- ---------------
Total 4,965 5,524 10,876
========= ========= =========
5. Investment management fee and other expenses
Notes Six months ended Six months ended Year ended
30 June 2024
30 June 2023
31 December 2023
£'000
£'000
£'000
Expenses charged to revenue:
Investment management fees 525 476 944
Other administration charges 902 649 1,521
--------------- --------------- ---------------
Total revenue expenses 1,427 1,125 2,465
========= ========= =========
Expenses charged to capital:
Wind-down costs* - - 1,567
--------------- --------------- ---------------
Total capital expenses - - 1,567
========= ========= =========
* The Company has estimated the costs of the managed wind-down process and
accordingly made a provision during the year ended 31 December 2023 amounting
to £1.6 million.
The Company's Investment Manager is RM Capital Markets Limited. Under the
previous amended IMA, effective 1 April 2020, the Investment Manager is
entitled to receive a management fee payable monthly in arrears or as soon as
practicable after the end of each calendar month an amount one-twelfth of:
(a) 0.875 per cent. of the prevailing NAV in the event that the prevailing
NAV is up to or equal to £250 million; or
(b) 0.800 per cent. of the prevailing NAV in the event that the prevailing
NAV is above £250 million but less than £500 million; or
(c) 0.750 per cent. of the prevailing NAV in the event that the prevailing
NAV is above £500 million.
The management fee shall be payable in sterling on a pro-rata basis in respect
of any period which is less than a complete calendar month.
There is no performance fee payable to the Investment Manager.
Following the General Meeting held on 20 December 2023 at which shareholders
voted to place the Company into managed wind-down, the IMA was further amended
so that the management fee will continue to be calculated at the rate of 0.875
per cent. of NAV per annum (payable monthly in arrears), but subject to a
minimum fee of £33,300 payable monthly in arrears, subject to renegotiation
with the Board, until the earlier of:
· the Company's liquidation;
· the value of the Company's portfolio (excluding cash and other
liquid assets) being less than or equal to £35 million; or
· 31 December 2026.
Additionally, an incentive fee will be accrued from 20 December 2023, being
the date the Company entered managed wind-down, on any loan that is repaid or
sold at or above the NAV as at that date, save for those loans where the
capital is used to repay any leverage or held as a cash balance for future
commitments, of 1.375 per cent. on loans repaid or sold from now until 31
December 2024 and 1.125 per cent. on loans repaid during 2025.
To incentivise the Investment Manager to continue to work on the tail of the
portfolio, the Incentive Fee will be subject to the following escrow and
payment mechanism: (i) 50 per cent. of the fee will be paid in cash to the
Investment Manager at the end of each month when a loan is repaid or sold and
(ii) the remaining 50 per cent. will, so long as the Shares trade at a
discount to the latest published NAV, be used by the Company to buy back
shares on the market, and otherwise held by the Company in escrow.
The newly acquired shares purchased as a result of the payment of the
Incentive Fee under (ii) above will be held by the Company in treasury until
the Company is liquidated, and, together with cash amounts held in escrow will
vest to the Investment Manager in the following proportions depending on the
amount of aggregated net proceeds distributed to Shareholders:
· 100 per cent. - at or above the Reference NAV; or
· 90 per cent. - at or greater than 99 per cent. and less than 100
per cent. of the Reference NAV; or
· 80 per cent. - at or greater than 98 per cent. and less than 99
per cent. of the Reference NAV; or
· 70 per cent. - at or greater than 97 per cent. and less than 98
per cent. of the Reference NAV; or
· 60 per cent. - at or greater than 96 per cent. and less than 97
per cent. of the Reference NAV; or
· 50 per cent. - at or greater than 95 per cent. and less than 96
per cent. of the Reference NAV; or
· 40 per cent. - at or greater than 94 per cent. and less than 95
per cent. of the Reference NAV; or
· 30 per cent. - at or greater than 93 per cent. and less than 94
per cent. of the Reference NAV; or
· 20 per cent. - at or greater than 92 per cent. and less than 93
per cent. of the Reference NAV; or
· 10 per cent. - at or greater than 91 per cent. and less than 92
per cent. of the Reference NAV; or
· 0 per cent. - below 91 per cent. of the Reference NAV.
Any shares held in treasury which vest to the Investment Manager will be
transferred to it to settle the Company's obligation to pay the remaining part
of the Incentive Fee. The Board notes that for companies with a premium
listing, the Investment Association's preference is for no more than 10 per
cent. of their shares to be held in treasury but, given the special use of
treasury shares in this case, believes the use of treasury shares in this
manner is in the best interests of the Company. In the event that the number
of treasury shares to be transferred to the Investment Manager were to be
equal to or greater than 20 per cent. of the Company's issued share capital at
the time, the Company would not deliver those shares and instead accrue a
liability to the Investment Manager equal to the number of undelivered shares
multiplied by the amount distributed per other ordinary share in the
liquidation, to be paid pro rata alongside all other distributions to
Shareholders.
In the event that the Shares are trading at a premium to the prevailing NAV,
the remaining 50 per cent. of the fee under (ii) above will be held in escrow
in liquid funds by the Company. Any dividends paid or declared in respect of
the Shares acquired under (ii), together with any capital distributions made
to Shareholders, will be held by the Company in escrow until the incentive
vests as set out above.
In accordance with the Directors' policy on the allocation of expenses, 100%
of the management fee payable is charged to revenue.
6. Taxation
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December2023
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Analysis of tax charge/(credit) for the period/year:
Corporation tax - - - - - - - - -
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total tax charge for the period - - - - - - - - -
========= ========= ========= ========= ========= ========= ========= ========= =========
7. Share capital
As at 30 June 2024 As at 30 June 2023 As at 31 December 2023
Notes No. of Shares £'000 No. of Shares £'000 No. of Shares £'000
Allotted, issued & fully paid:
Ordinary Shares of 1p 117,586,359 1,175 117,586,359 1,175 117,586,359 1,175
========== ========== ========== ========== ========== ==========
As at 30 June 2024, the Company has 117,586,359 (30 June 2023: 117,586,359; 31
December 2023: 117,586,359) Ordinary Shares in issue with voting rights and
4,638,222 (30 June 2023: 4,638,222; 31 December 2023: 4,638,222) Ordinary
Shares held in Treasury.
Share movement
The table below sets out the share movement for the six months ended 30 June
2024.
Opening balance Shares issued Shares bought back Shares in issue at
30 June 2024
Ordinary Shares 117,586,359 - - 117,586,359
========= ========= ========= =========
The table below sets out the share movement for the six months ended 30 June
2023.
Opening balance Shares issued Shares bought back Shares in issue at
30 June 2023
Ordinary Shares 117,636,359 - (50,000) 117,586,359
========= ========= ========= =========
The table below sets out the share movement for the six months ended 31
December 2023.
Opening balance Shares issued Shares bought back Shares in issue at
30 June 2023
Ordinary Shares 117,636,359 - (50,000) 117,586,359
========= ========= ========= =========
8. Return per ordinary share
Total Return per Ordinary Share is based on the gain on ordinary activities
after taxation of £2,591,000 (30 June 2023: gain of £2,866,000; 31 December
2023: gain of £3,399,000).
Based on the weighted average of number of 117,586,359 (30 June 2023:
117,589,381; 31 December 2023: 117,587,862) Ordinary Shares in issue for the
six months ended 30 June 2024, the returns per share were as follows:
Six months ended 30 June 2024 Six months ended 30 June 2023
Revenue Capital Total Revenue Capital Total
Return per ordinary share 3.01p (0.81p) 2.20p 3.23p (0.80p) 2.43p
========= ========= ========= ========= ========= =========
Year ended 31 December 2023
Revenue Capital Total
Return per ordinary share 6.30p (3.41p) 2.89p
========= ========= =========
9. Net asset value per share
The net asset value per share is based on Company's total shareholders' funds
of £103,285,000 (30 June 2023: £107,805,000; 31 December 2023:
£104,516,000), and on 117,586,359 (30 June 2023: 117,586,359; 31 December
2023: 117,586,359) Ordinary Shares in issue at the period/ year end.
10. Dividend
On the 29 February 2024, the Directors approved the payment of a final interim
dividend for year ended 31 December 2023 to Ordinary Shareholders at the rate
of 1.625 pence per Ordinary Share. The dividend had a record date of 8 March
2024 and was paid on 2 April 2024. The dividend was funded from the Company's
revenue reserve.
On 30 May 2024, the Directors approved the payment of an interim dividend at
the rate of 1.625 pence per Ordinary Share. The dividend had a record date of
7 June 2024 and was paid on 28 June 2024. The dividend was funded from the
Company's revenue reserve.
On 13 August 2024, the Directors approved the payment of an interim dividend
at the rate of 1.625 pence per Ordinary Share. The dividend will have a record
date of 23 August 2024 and will be payable on 16 September 2024. The dividend
will be funded from the Company's revenue reserve.
11. Related party transaction
Fees payable to the Investment Manager are shown in the Statement of
Comprehensive Income. As at 30 June 2024, the fee outstanding to the
Investment Manager was £75,000 (30 June 2023: £79,000; 31 December 2023:
£155,000).
With effect from 1 January 2024, Directors fees are payable at an annual rate
of £38,880 to the Chair, £35,640 to the Chair of the Audit and Management
Engagement Committee and £32,500 to the other Directors.
The Directors had the following shareholdings in the Company, all of which are
beneficially owned.
As at 30 June 2024 As at 30 June 2023 Year ended
Ordinary shares
Ordinary shares
31 December 2023
Ordinary shares
Norman Crighton 29,982 29,982 29,982
Guy Heald 20,000 20,000 20,000
Marlene Wood 20,000 20,000 20,000
========= ========= =========
12. Classification of financial instruments
IFRS 13 requires the Company to classify its investments in a fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS 13 establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The three levels of
fair value hierarchy under IFRS 13 are as follows:
Level 1
Inputs are quoted prices in active markets for identical assets or liabilities
that the entity can access at the measurement date.
Level 2
Inputs other than quoted market prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly.
Level 3
Inputs are unobservable for the asset or liability.
The classification of the Company's investments held at fair value through
profit or loss is detailed in the table below:
30 June 2024 30 June 2023
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Financial assets:
Financial assets - Bond investments - 4,350 - 4,350 - 4,020 - 4,020
Financial assets - Private loans - - 77,353 77,353 - - 109,047 109,047
Financial assets - Equity investment - - 2,966 2,966 - - 3,119 3,119
Forward contract unrealised loss* - 190 - 190 - 197 - 197
--------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net financial assets - 4,540 80,319 84,859 - 4,217 112,166 116,383
========= ========= ========= ========= ========= ========= ========= =========
* The forward exchange contract has been presented in the fair value
hierarchy at net exposure with the net unrealised loss of £190,000 (30 June
2023: £197,000) recognised within prepayments and other debtors in the
Statement of Financial Position.
31 December 2023
Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
Financial assets:
Financial assets - Bond investments - 3,654 - 3,654
Financial assets - Private loans - - 87,312 87,312
Financial assets - Equity investment - - 2,966 2,966
Forward contract unrealised loss* - 47 - 47
--------------- --------------- --------------- ---------------
Net financial assets - 3,701 90,278 93,979
========= ========= ========= =========
* The forward exchange contract has been presented in the fair value
hierarchy at net exposure with the net unrealised loss of £47,360 recognised
within prepayments and other debtors in the Statement of Financial Position.
Investments that trade in markets that are not considered to be active but are
valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within Level 2.
Level 3 holdings are valued using a discounted cash flow analysis and
benchmarked discount/interest rates appropriate to the nature of the
underlying loan and the date of valuation.
There have been no transfers between levels during the reporting period (30
June 2023: none and 31 December 2023: none).
13. Post balance sheet events
On 18 July 2024, the Board published the "Confirmation of Capital Reduction"
to announce the reduction of capital involving the cancellation of the share
premium account of the Company (the "Capital Reduction"), which was confirmed
on 12 July 2024 by the High Court of Justice of England and Wales (the
"Court"). Further details can be found on
https://rm-funds.co.uk/rm-infrastructure-income/regulatory-news/
(https://rm-funds.co.uk/rm-infrastructure-income/regulatory-news/) .
There are no other post period end events other than those disclosed in this
report.
14. Status of this report
These financial statements are not the Company's statutory accounts for the
purposes of section 434 of the Companies Act 2006. They are unaudited. The
Half-yearly report will be made available to the public at the registered
office of the Company. The report will be available in electronic format on
the Manager's website (https://rm-funds.co.uk/ (https://rm-funds.co.uk/) ).
The Half-yearly report was approved by the Board on 16 August 2024.
Other information
Alternative Performance Measures ("APMs")
Gross asset
The Company's gross assets comprise the net asset values of the Company's
Ordinary Shares and the bank loan-credit facility, with the breakdown as
follows:
As at 30 June 2024 Page £'000 Per Share (Pence)
Ordinary Shares - NAV a 2 103,285 87.84
Bank Loan-Credit facility b 13 - -
--------------- --------------- ---------------
Gross asset value a+b 103,285 87.84
========= ========= =========
Discount
The amount, expressed as a percentage, by which the share price is less than
the Net Asset Value per share.
As at 30 June 2024 Page Per Share
NAV per Ordinary Share (pence) a 2 87.84
Share price (pence) b 2 78.00
--------------- ---------------
Discount (b/a)-1 -11.20%
========= =========
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into its Ordinary Shares on the ex-dividend date.
As at 30 June 2024 Page NAV Per Share
Opening at 1 January 2024 (pence) a n/a 88.88 74.25
Closing at 30 June 2024 (pence) b 2 87.84 78.00
Dividend adjustment factor c n/a 1.0373 1.0428
Adjusted closing (d = b x c) (pence) d n/a 91.12 81.34
--------------- --------------- ---------------
Total Return (d/a)-1 +2.52% +9.55%
========= ========= =========
Glossary
Admission Admission of the Ordinary Shares to the premium listing segment of the
Official List of the UKLA and admission of the Shares to trading on the main
market for listed securities of the London Stock Exchange.
AIC Association of Investment Companies.
Alternative Investment Fund or "AIF" An investment vehicle under AIFMD. Under AIFMD (see below) the Company is
classified as an AIF
Alternative Investment Fund Managers Directive of "AIFMD" A European Union directive which came into force on 22 July 2013 and has been
implemented Managers Directive or "AIFMD" in the UK.
Annual General Meeting or "AGM" A meeting held once a year which Shareholders can attend and where they can
vote on resolutions to be put forward at the meeting and ask directors
questions about the Company in which they are invested.
CTA 2010 Corporation Tax Act 2010.
Custodian An entity that is appointed to safeguard a company's assets.
Discount The amount, expressed as a percentage, by which the share price is less than
the net asset value per share.
Dividend Income receivable from an investment in shares.
Ex-dividend date The date from which you are not entitled to receive a dividend which has been
declared and is due to be paid to Shareholders.
Financial Conduct Authority or "FCA" The independent body that regulates the financial services industry in the UK.
Gearing A way to magnify income and capital returns, but which can also magnify
losses. A bank loan is a common method of gearing.
Index A basket of stocks which is considered to replicate a particular stock market
or sector.
Investment company A company formed to invest in a diversified portfolio of assets.
Investment Trust An investment company which is based in the UK and which meets certain tax
conditions which enables it to be exempt from UK corporation tax on its
capital gains. The Company is an investment trust.
Leverage An alternative word for "Gearing".
Under AIFMD, leverage is any method by which the exposure of an AIF is
increased through borrowing of cash or securities or leverage embedded in
derivative positions.
Under AIFMD, leverage is broadly similar to gearing, but is expressed as a
ratio between the assets (excluding borrowings) and the net assets (after
taking account of borrowing). Under the gross method, exposure represents the
sum of the Company's positions after deduction of cash balances, without
taking account of any hedging or netting arrangements. Under the commitment
method, exposure is calculated without the deduction of cash balances and
after certain hedging and netting positions are offset against each other.
Liquidity The extent to which investments can be sold at short notice.
Loans or Secured Debt Instruments Secured debt instruments of UK SMEs and mid-market corporates and/or
individuals including any loan, promissory notes, lease, bond, or preference
share such debt instruments.
Net Assets An investment company's assets less its liabilities.
Net asset value (NAV) per Ordinary Share Net assets divided by the number of Ordinary Shares in issue (excluding any
shares held in treasury).
Ordinary Shares The Company's Ordinary Shares of 1 pence each in the capital of the Company.
Reference NAV The value at which the loan or asset as included in the Net Asset Value on the
reference date (being 90.35 pence per Ordinary Share or 106,233,875 in
aggregate). The Reference NAV shall be calculated by deducting from the
Reference NAV any cash amounts held in escrow at the Termination Date and the
net assets of the Company as at the Termination Date (including an accrual for
an estimate of the costs of the Company as determined by the Company's board
of directors in its sole discretion acting reasonably and in good faith until
its liquidation is completed) but adding back the costs and expenses incurred
by the Company in returning cash to shareholders and any other extraordinary
expenses or costs outside of the ordinary course of realising the portfolio
and operating the Company in accordance with past practice.
Portfolio A collection of different investments held in order to deliver returns to
Shareholders and to spread risk.
Share buyback A purchase of a company's own shares. Shares can either be bought back for
cancellation or held in treasury.
Share price The price of a share as determined by a relevant stock market.
Total Return A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into its Ordinary Shares on the ex-dividend date.
Treasury shares A company's own shares which are available to be sold by a company to raise
funds.
Volatility A measure of how much a share moves up and down in price over a period of
time.
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