3i Infrastructure H2 2025 Earnings Report

3i Infrastructure EPS Results

• Actual EPS: GBX 36.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

3i Infrastructure Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

3i Infrastructure Announcement Details

• Quarter: H2 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00AM ET

3i Infrastructure (LON:3IN) is a Jersey-incorporated, closed-ended investment company, an approved UK Investment Trust, listed on the London Stock Exchange and regulated by the Jersey Financial Services Commission. The Company's purpose is to deliver a long-term sustainable return to shareholders from investing in infrastructure. 3i Investments plc, a wholly-owned subsidiary of 3i Group plc, is authorised and regulated in the UK by the Financial Conduct Authority and acts as Investment Manager to 3i Infrastructure plc.

3i Infrastructure H2 2025 Earnings Call Transcript

Key Takeaways

• We delivered a 6.3% dividend increase to 12.65p per share and set a new target of 13.45p for the coming year, backed by strong income and cash distributions.
• Portfolio EBITDA grew 13% year-on-year—fuelled by £390 million of self-funded growth CapEx—and has compounded at 16% annually over the last three years.
• Our realized exit track record shows an average premium of 37% and a 3.2× money multiple, with the Valoram sale alone delivering a 3.6× multiple and a 21% IRR.
• The traffic management business SRL was marked down due to local authority and telecom slowdowns, rising UK labor costs, and competitive rental pressures despite levers to boost infrastructure characteristics.
• TCR’s expansion continues, including winning the exclusive JFK Terminal 1 contract, unlocking significant white-space opportunities across around 200 unpenetrated airports globally and a growing US market.

Presentation

[Richard Laing, Non-executive Chair at 3i Infrastructure]

Good morning, everybody, and thank you very much for attending our annual results presentation. Welcome to you all. In every year over the last 10 years, we have either met or exceeded our objective to provide shareholders with a total return of 8-10%. We are proud of that consistency over a long period of time. This year, our total return of 10.1% is just ahead of that range. We continue to see strong value growth in real terms, with the net asset value finishing the year at GBP 3.862 per share. Despite this strong growth in our NAV, our share price has not kept pace. The total shareholder return was only 1.3% in the year, albeit slightly ahead of the FTSE 250 return of 1.1% over the same period.

[Richard Laing, Non-executive Chair at 3i Infrastructure]

We are also announcing our delivery of the full-year dividend target of GBP 0.1265 per share, which is up 6.3% on the prior year. James will give some additional detail on dividends later, but I am pleased to report that our dividend was very well covered by both income and cash distributions. We are setting a higher target for the new financial year of GBP 0.1345 per share. That is up 6.3% year on year. I'll now hand over to Bernardo.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Thank you, Richard, and good morning, everyone. I want to start by restating the equity story for 3i Infrastructure. It is a compelling investment case. We provide public market investors with something unique. Through a liquid investment trust, you gain exposure to a diverse portfolio of private infrastructure investments. Your manager, a top FTSE 100 company with a high-performing team, has carefully sourced and built this portfolio of resilient core plus infrastructure companies. This universe can usually only be accessed by large private institutional investors that have the scale and time horizon to invest in our sector through illiquid private infrastructure funds. You can get that access through 3iN, with the liquidity of a publicly traded share. Alongside the protection from portfolio diversification and resilient business models, you are also buying control of these businesses, which is fundamentally different from investing in a pool of infrastructure-listed companies.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

That level of control is what allows us to implement our active portfolio management approach, using a long-established playbook to drive growth. That growth is supported by long-term tailwinds provided by some of the most significant megatrends in the world today. For example, we built our portfolio of digital assets before advances in artificial intelligence were becoming obvious. Here is a short video illustrating that theme. It is worth pausing a bit on our track record graph. We have delivered a return of 17% per annum since 2015. This is unique in the listed infrastructure sector, and James will come back to that. Returning now to the elements of the equity story that I set out at the start. First, 3iN is well invested across Europe and the U.K. The companies in the portfolio today are the ones that will drive returns for the medium term.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

This is a high-quality, diverse portfolio. We are diversified across megatrends, sectors, countries, and vintages. No one could easily replicate this portfolio today. Second, we bought controlling stakes in these companies, and we actively exercise control. We do it not only through board representation, but through the active involvement of our team in a number of vital aspects of the day-to-day activity of our companies, including defining their commercial strategies, pushing efficiency gains where required, defining compensation and incentive schemes, reviewing and approving significant CapEx decisions, and finally, putting in place the appropriate capital structures. Our companies are complex businesses, not just a collection of assets or projects. This level of control and active management is in the hands of a high-performing, long-standing leadership group.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

The partners shown on this slide are in the room here today, and they are supported by a high-caliber and experienced team of 36 professionals who all contribute to the successful running of this portfolio. At a board level, we also appoint sector experts to complement our own executives, such as Magnus Magnusson, the chair of Tampnet, and more recently appointed by us as chair of DNS:NET. He has held top positions, including CEO of IKEA Southeast Asia, several other CEO roles, and Executive Vice President at Ericsson. His expertise in driving growth and innovation is a real asset to our business. Another expert, our colleague and my predecessor, Phil White, continues to act as Vice Chair for infrastructure and provides valuable experience on the boards of Joulz and Ionisos.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Like many of our peers, the control we have gives us the ability to drive the strategy of our companies and create real value growth. To achieve that, we implement our long-established playbook. We start by strengthening the downside protection, de-risking the businesses, and enhancing infrastructure characteristics. We then back growth plans, seeking accretive returns above our investment case. Finally, we find the white space available for future growth and prepare companies for exit at the optimal time. Taking this in turn, we start by buying businesses that give downside protection through the essential nature of what they provide for the customers, their strong market positions, and their asset basis, which would be very difficult to replicate. Evidence of that is the return margin they can achieve. On average, across our portfolio, that metric stands at 42%.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

It is also important to note that we have generally invested in providers of essential infrastructure services operating mostly locally, not businesses normally trading goods across borders. As a result, we expect limited direct exposure to the recent U.S. tariffs. Once invested, we ensure we have the right management teams and that these teams are properly incentivized and aligned. In most cases, they invest their own personal money alongside us, that is, alongside you. We work with them to extend contract duration, diversify the customer base, and generally de-risk the business models away from the less infrastructure-like products or services. Crucially, we put in place an optimal debt structure that lets us sleep soundly at night, but also provides flexibility to fund growth through available CapEx facilities. Going after accretive growth is the second pillar of our playbook.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

We invested over GBP 390 million of growth CapEx in 2024, largely self-funded by our companies. This growth CapEx is expected to deliver accretive returns, typically in the mid-teens. This, in turn, drives earnings growth, and in the period, the overall portfolio EBITDA was up 13% year on year. Over the last three years, EBITDA has grown at a compounded rate of 16% per annum. With stronger infrastructure credentials and larger earnings, our businesses then become more and more attractive to bigger infrastructure fund managers. This slide shows our realized track record. We have consistently achieved a premium at exit, on average a 37% uplift, and we've achieved an overall money multiple of 3.2 times. I find it helpful to compare this with the average unrealized money multiple for the current portfolio, 1.8 times.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

There is still plenty of value to go for if we maintain our exit track record of 3.2 times. This year, we added Valorem to this track record. We invested in Valorem with a clear strategy to support its transition from a pure developer of onshore wind farm projects to third parties into a diversified pan-European operator of renewable energy capacity. With this new develop-to-own strategy, the company quadrupled EBITDA in eight years and grew generation capacity almost five-and-a-half-times. The development pipeline grew tenfold, and the technology is broadened to include solar and hydro. The company extended beyond France into Finland and Greece, with Poland coming next. All this made the company very attractive to core infrastructure investors looking to access a top-tier pan-European champion.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

At completion of the exit, we achieved realized proceeds of EUR 310 million, with a gross annual IRR of 21% over the life of our investment and the money multiple of 3.6x cost. Right, moving on to the current portfolio now. Overall, we are pleased with the performance of our investments, which returned 11.2% in the year. The strongest performances came from TCR, Infinis, and Tampnet at the larger end, alongside Oystercatcher and Future Biogas at the smaller end. We have reflected a substantial markdown in the value of SRL, and you can see the early start of recovery in value at DNS:NET. TCR, the growth story of TCR is quite remarkable. When we acquired the business in 2016, TCR was present in 96 airports. It is now operating in over 230 airports across more than 20 countries. The U.S. is a key growth target.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

The great progress and great progress was achieved this year, with TCR winning the exclusive contract to supply an all-electric GSE pool at the new Terminal 1 of New York's JFK International Airport. We think this is a step change that will open many doors to the TCR team in the years to come. Looking ahead, penetration rates have room to grow at these airports. Beyond that, within the geographies TCR currently operates in, there are almost another 200 airports in which TCR is not yet present, and many other countries it could enter. To finance this growth potential, we completed a debt refinancing on attractive terms. We also made a substantial distribution of GBP 60 million to 3iN. Infinis also had another strong year, driven by higher-than-forecast levels of exported power from its captured-methane business.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Strategically, Infinis is ideally placed to scale its electricity generation capabilities by developing solar and battery projects. The company is making material progress there. During the year, Infinis commenced construction on 150 megawatts of solar capacity and secured planning consent for an additional 134 megawatts. Its total pipeline, sitting at 1.4 gigawatts, demonstrates the remaining white space to grow into. Moving on to our digital assets. FLAG, formerly known as GCX, is performing well, driven by strong demand for subsea fiber capacity fueled by hyperscaler needs, AI-driven workloads, and the expansion of global cloud infrastructure. During the year, FLAG acquired new capacity on the India-Asia and India-Europe Express systems. This investment enhances its network in the core Europe to Middle East to Asia routes. On these routes, we expect demand for subsea capacity to grow over 20% a year for the next 10 years.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Another one of our investments driven by digitalization, Tampnet outperformed expectations again this year. It exceeded both revenue and EBITDA targets, driven by increased offshore activity, particularly in the Gulf of Mexico, and ongoing demand for bandwidth upgrades. Beyond its core business, the company is pursuing several key growth initiatives, including connectivity solutions for carbon-sequestration projects in the North Sea and private networks for offshore customers. Tampnet has now secured 40 such contracts, which we believe is less than 5% of the addressable market. As trailed in the pre-close, SRL performed significantly behind expectations during the year, caused by a slowdown in activity from local authorities and the telecom sector, combined with competitive pressure impacting rental rates. The increase in costs seen across the U.K. labor market, including from minimum wage and national insurance increases, has also put significant cost pressure on the business.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

The new management team is focused on controlling costs as part of a revised business plan. These macroeconomic challenges have been reflected in the projected cash flows and impacted the full year valuation. However, we do believe there are a number of levers to pull to enhance the infrastructure characteristics of the business and open up new avenues for growth. SRL remains a leader in its market with good growth prospects in the medium term. Finally, since we last updated you on DNS:NET, we are pleased to say that significant progress was made to strengthen its operational capabilities and to develop its network, which is now providing high-speed broadband to 100,000 customers in Brandenburg and Saxony-Anhalt. In the year, DNS:NET has addressed historical build-out challenges, including connecting previously built networks to the backbone.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Furthermore, it has worked with contractors to improve the rate at which it can convert homes passed to homes connected and activated. This included introducing changes to the lineup of contractors and renegotiating incentives to create alignment towards the main objective of increasing the number of active paying connections. Our penetration rate is now well above the German average. These place DNS:NET in the position of strength from which it is now continuing its rollout into new areas. The approach to sales and marketing has also been improved, most notably seeing a step up in the proportion of web sales, with the resulting reduction in customer acquisition costs. Customer care has been outsourced to a specialized service provider, recognizing the importance to DNS:NET of having a team able to respond to customer questions quickly and effectively.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

All these changes require the active and intense involvement of our team and senior leadership, alongside the new management team at DNS:NET, who is to be highly credited for the turnaround. We are pleased to see the value of our stake growing again. This is a compelling equity story. 3iN is well invested in a portfolio of majority control holdings that we are actively managing. We believe there is considerable latent value in our current portfolio, and we have a repeatable strategy to deliver that value over time. I'll now hand over to James.

[James Dawes, CFO at 3i Infrastructure]

Thanks, Bernardo. You heard from Richard at the start that 3iN has met or exceeded our target return every year over the last decade. In fact, our track record is of consistent growth in NAV per share since the start of the company, alongside a dividend that's grown every single year.

[James Dawes, CFO at 3i Infrastructure]

That's an excellent long-term track record. I want to start by talking to you about the last three years. Earnings across our portfolio have grown by 56% over that period. That's the 16% per annum compounded growth that Bernardo mentioned earlier. Portfolio earnings growth is a key driver for the increase in NAV per share, which has grown by 27% over the last three financial years. That's a great performance for 3iN and well ahead of other listed infrastructures. Our net asset value is GBP 3.6 billion. This chart shows the progression in NAV for the year. Working from the left-hand side, you can see our opening NAV was GBP 3.3 billion, or 356.4 pence per share. That's after paying the final dividend for last year. We delivered a capital return of GBP 219 million.

[James Dawes, CFO at 3i Infrastructure]

That's the largest part of the portfolio return of 11.2% we talked about earlier. Moving on to the next bar, we had an FX gain of GBP 10 million after hedging. Our hedging program continues to insulate the company from FX volatility. Total income added GBP 204 million, supporting the dividend and costs of running the company. After we deduct costs of GBP 100 million, the NAV is GBP 3.6 billion, or 386.2 pence per share. The final dividend of 6.325 pence per share meets our target for the year, as Richard announced. That will be paid to shareholders on the 11th of July. We'll go ex-div on the 12th of June. Our dividend is two and a half times covered for the year. We're consistent in our valuation approach. You've heard me talk about this many times before.

[James Dawes, CFO at 3i Infrastructure]

We make long-term assumptions for inflation and interest rates, and we haven't changed those assumptions over the life of the company. Our long-term inflation assumption remains 2% for U.K. and European CPI after the first two years. We take consensus forecasts for the first two years. We have long-term cash flow models, around 19 years as a weighted average. At the end of these models, we apply a prudent terminal value, which is materially below what we might expect on exit today. Our modeled cash flows represent a long-term hold scenario, balanced between up and downsides. Where we reflect changes in circumstances, we believe that the best practice is to do so in the cash flow projections where possible, rather than through our discount rates.

[James Dawes, CFO at 3i Infrastructure]

As I said earlier, the growth in portfolio value and NAV for 3iN comes from delivering our projected cash flows and the growing earnings in our companies, not from changes in long-term assumptions and discount rates. The weighted average discount rate today is still 11.3%, same as last year. We actively manage the debt profile within the portfolio, as you can see here, with successful refinancing at five of our portfolio companies in the year. Looking ahead, we have no significant refinancing requirements in the next three financial years. Our average loan-to-value ratio has risen slightly to 35% following recent refinancings. When the interest rate environment changed, we were well placed. We'd secured low rates and long tenor during favorable debt markets. We have an attractive weighted average cost of debt of 4.8%.

[James Dawes, CFO at 3i Infrastructure]

In fact, as interest rates have started to come down again, we recently raised fixed-rate debt at TCR at 4.2%, below our long-term assumptions and below that weighted average cost for the portfolio. We remain consistent in targeting investment-grade senior debt structures, or the equivalent where we do not seek a rating. There is no junior or mezzanine debt in the portfolio. Almost all our drawn long-term debt, 92%, is either fixed-rate or hedged. Now moving up to the 3iN level, we have a flexible funding model. You have heard that from me before. We aim to be symmetrical around zero cash over time, and we made significant progress during the year to achieve this. The sale of Valorem, strong cash generation from the portfolio, and capital distributions from refinancing activity during the year has reduced our net debt materially.

[James Dawes, CFO at 3i Infrastructure]

We ended the year with net drawings of GBP 256 million, less than 7% of portfolio value. We refinanced our GBP 900 million RCF last week, which now matures in June 2028. This is a sector-leading facility, both in pricing and terms. We're drawing on the facility in EUR, which acts as a natural hedge against our euro portfolio and is cheaper than drawing in sterling. The rate is around 3.5% all in at the moment. That leaves us with a good level of liquidity, GBP 644 million. We expect drawings on the RCF to be repaid by selective realization of assets at the right time. As Bernardo said, we continue to see value-accretive CapEx opportunities in the portfolio, which are often self-funded by the companies. We may also equity fund some of the CapEx if appropriate.

[James Dawes, CFO at 3i Infrastructure]

This year, equity funding was around 10% of the growth CapEx. If we see compelling returns from making new investments, then we can consider them. As we've said before, reducing net debt and funding existing portfolio companies have priority for available capital. We've increased the dividend per share every year since the start of the company. Over the last five years, we've been growing it at around 6.5% per annum. We're continuing that trend into the new financial year, with the target up another 6.3%. The listed infrastructure sector has had a difficult three years as the interest rate cycle turned. For 3iN, we've seen a growing disconnect between NAV growth and share price performance.

[James Dawes, CFO at 3i Infrastructure]

This chart shows that 3iN is the clear outperformer in the sector, with NAV per share growth of 27% over the last three years, based on the latest published data. Over the last ten years, our outperformance is even greater, with NAV per share up 157%. That's more than triple the second-best-performing company in the sector. The investment case for 3i infrastructure is compelling.

[Operator]

Thank you. We'll now move to Q&A. Microphone going around. Appreciate it if you could state your name and firm.

[Alex Wheeler, Director of Wealth Manager at RBC]

Right, Sir, Alex Wheeler, RBC. Two from me, please. The first one on TCR, you spoke about opportunities in the U.S. and in existing markets. Firstly, which part of that is the bigger focus? Secondly, is the volatility in U.S. politics likely to have an impact on the opportunity set you see for TCR in the U.S.?

[Alex Wheeler, Director of Wealth Manager at RBC]

Secondly, on SRL, can you just elaborate on what you're doing to drive growth in that business following a number of headwinds that appear to be outside of your control? Thank you.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Thanks, Alex. I'll answer on TCR and let James do SRL. I think in terms of growth outlook for TCR, the U.S. is still only part of it. It's not even the larger part, but it's a relatively new market, and it's the size of Europe in itself. It's about 10% of TCR's revenue today, but with immense white space. The JFK win is a big contract, is a very visible piece of business, especially to other terminal operators, which in the U.S. tend to be not owned by the airport itself, tend to be owned sometimes by airlines.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Either way, other terminal operators are looking very closely to what JFK Terminal 1 is doing as something they could potentially look to replicate, which is basically having a single operator of a pool of GSE assets as opposed to having different ground handlers and airlines maneuvering their own fleets across the airport. There is always airport operators are always looking for efficiency gains. Sometimes it is led by greenification of the equipment, but sometimes it is just logistically having less traffic on the airport and forcing ground handlers to share equipment. That is where the idea of a shared pool comes from. We emphasize this win because it is exactly that, and it gets other American airport operators to start inquiring into us, "Okay, how are you going to do that? Can you look at us?" That sort of opportunity that arises from that.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Otherwise, the bulk of our growth is still coming, if anything, also from Europe. We have a big presence in Australia, some from the Middle East, and where we already operate, but there's still a lot of white space. You might be operating at an airport with one ground handler, but there's sometimes two or three others operating in the same airport with whom you can do business. That is what we mean by white space within the regions we already operate. There are big bits of the globe that we're not even present. If you think of places like Japan or Korea or even India or China, there's a massive amount of passenger volume that's completely unpenetrated. Trump doing what he does, it might have an impact on PAX numbers into and out of the U.S. at the moment.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

We have not seen much of an impact elsewhere. What really drives the growth in TCR is the white space, is penetrating the white space.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Okay, on SRL,

[James Dawes, CFO at 3i Infrastructure]

yeah, thanks for the question. The first thing was strengthening the management team when business started underperforming, and we have done that with material upgrade across the key roles in the business. We are working through improving with that management team, improving the efficiency and effectiveness of the operations. Some of that is where we are spending money, making sure we are spending it on the right things and not spending money on wasteful things. We talk about infrastructure characteristics a lot. It was in Bernardo's presentation. I think two of the key things that we can do for SRL to improve the infrastructure characteristics. One is greater engagement with the end customers.

[James Dawes, CFO at 3i Infrastructure]

This is a market where there are traffic management companies that sit in the middle. They are the people that go and put the barriers out and set up the roadworks ready for the workmen to go and dig the hole. The end customers are the local authorities or the utilities doing whatever they are doing with their network or repairing the roads. They care about the safety of the people working on the roads. They care about congestion on the roads, making sure there is a smooth traffic flow. They care about emissions in a way that the traffic management companies who sit in the middle, they are sort of more price and their own margin focused. We are doing a lot of work engaging with the end customers, making sure we are delivering products and now services that matter to them.

[James Dawes, CFO at 3i Infrastructure]

The more we can get in with them, then the stickier the business can become. I think that's a key area. One of the most recent products which we're excited about is remotely monitored signals. You can see how much the congestion's building up at different parts of the junctions, and you can then change the timing of when the lights turn green. SRL runs the monitoring service with the control room. That, we think, has got a lot of growth ahead of it.

[Bernardo Sottomayor, Managing Partner and Head of European Infrastructure at 3i Infrastructure]

Nothing. Everybody's happy. Thank you very much for coming then. Pleasure to see you all. Thank you.

Participants

Executives

• James Dawes, CFO
• Richard Laing, Non-executive Chair
• Bernardo Sottomayor, Managing Partner and Head of European Infrastructure

Analysts

• Alex Wheeler, Director of Wealth Manager at RBC