GCP Infrastructure Investments H1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
June 11, 2026

Key Takeaways

  • Positive Sentiment: Dividend coverage remains supportive, with adjusted earnings covering the half-year dividend at 0.97x and management reiterating the full-year target of GBP 0.07 per share.
  • Positive Sentiment: The company continued its capital return program, completing GBP 73 million of buybacks so far and returning GBP 54 million to shareholders, while reducing net debt to just GBP 5 million.
  • Neutral Sentiment: Management outlined a capital allocation framework tied to the share price discount to NAV: below a roughly 15% discount, they prioritize buybacks; within a “gray zone,” they may also consider new investments; and they will keep recycling assets while the shares trade below NAV.
  • Neutral Sentiment: The portfolio remains well diversified across 47 investments, with 28% in PFI, just under 60% in renewables, and 15% in supported social housing, plus an 11-year weighted average loan life and an 8% weighted average annualized yield.
  • Negative Sentiment: NAV moved down modestly over the half year, with net negative revaluations of GBP 2 million driven mainly by the shift from RPI to CPI indexation for renewables support payments, partly offset by higher power prices.
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Earnings Conference Call
GCP Infrastructure Investments H1 2026
00:00 / 00:00

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Cameron Gardner
Director and Head of Distribution at Gravis Capital Management

Morning, everyone. Thank you very much for joining us for today's webinar following the publishing of the GCP Infrastructure Investments half-yearly report and financial statements as of 31st of March 2026. To introduce myself quickly, my name is Cameron Gardner. I'm joined this morning by Phil Kent and Robyn MacHugh. Before I hand over to Phil and Robyn, a couple of bits of housekeeping. If you'd like a copy of the presentation or the link to the replay, then please do get in touch with your usual Gravis contact who'll be able to share this. Additionally, please do feel free to ask any questions you may have using the chat box on the bottom right-hand side of your screen, and I'll put these to Phil and Robyn either through the presentation or at the end as is more appropriate. I'll hand over to you, Phil.

Phil Kent
CEO at Gravis Capital Management

Great. Thank you, Cam. Good morning, everyone. Thank you for joining this webinar for GCP Infrastructure for the six months period to 31st of March 2026. The NAV had been pre-announced for this period. Today we'll repeat some of the analysis and presentation that we provided in respect of the quarterly NAV, then we'll provide more detail in line with the interim financial statements that were published last week. In terms of agenda, I'll give the briefest of introductions to the company and a reminder of what this company does. I'll talk through a strategic update, which will focus on the capital allocation framework that we set out at the Capital Markets Day earlier this year. It defines the what next framework for the use of the company's capital.

Phil Kent
CEO at Gravis Capital Management

Robyn will then talk through the company's portfolio before I'll go into a bit more detail on the financial results presented as part of the interims and draw together by way of conclusion. I would emphasize what Cameron said earlier. Please do put any questions or comments or things you'd like us to cover more in the chat room. We're very happy to make these sessions as interactive and relevant for participants as we can. By way of the briefest reminder of what GCP Infrastructure does, the company invests in U.K.-based infrastructure, where that infrastructure has some form of public sector-backed cash flows, and in doing so, focuses on debt as part of the capital structure rather than equity. The company IPOed back in 2010. We celebrated our 15th anniversary from that IPO last year. We've been a constituent of the FTSE 250 for a long time now.

Phil Kent
CEO at Gravis Capital Management

Market cap of GBP 600 million at the end of the period. It's around GBP 630 million where we sit today. Net asset value of GBP 829 million. Total investment value of GBP 851 million. In terms of the company's objectives, these have remained entirely consistent since that IPO just over 15 years ago. Income for me is absolutely core to what we're delivering to shareholders. The company has now paid a stable and sustainable dividend for the last 15 years. The portfolio, I would argue, and as we'll go on to describe, being well-diversified and operational across a range of different asset classes, is as well-placed as it's ever been to continue to service that income. The dividend target for this financial year of GBP 0.07 per share was reaffirmed as a target in the financial statements. Diversification has always been core to this strategy.

Phil Kent
CEO at Gravis Capital Management

The fact that we have targeted a range of different asset classes within a broader infrastructure definition has meant that the company can adapt to changing market conditions. Actually, looking back over the company's life, there's been quite a big evolution in the risk profile and the understanding of certain infrastructure asset classes, and certainly those sectors that the government are seeking to support at any time. An ability to move into new asset classes, capture at any point what we think are the most attractive risk-adjusted returns, has been core and I think remains fundamental to this strategy moving forward. Capital preservation is also key. I think there's two aspects to this. The fact infrastructure, by its nature, is a defensive asset class.

Phil Kent
CEO at Gravis Capital Management

It benefits from the intrinsic value of physical assets and long-dated cash flows associated with the provision of a good or a service from that asset. Secondly, the fact we focus on debt means we're very focused in an investment process on how we get paid back. The vast majority of the debt in our portfolio amortizes based on the cash flows generated from a project over its life. We have very limited or no residual value exposure across the portfolio to refinances or asset sales at the end of their useful life. Finally, ESG. Whilst ESG wasn't an explicit objective on day one, where we've ended up is a portfolio of GBP 850 million in investments, all of which has some form of core environmental or social purpose.

Phil Kent
CEO at Gravis Capital Management

We've worked really hard to try and draw that out in quantitative terms over the last three or four years. You'll see in the annual report, the result of our annual data collection exercise, where we ask all of our borrowers to provide a suite of data, and that provides an assessment of the positive and also the adverse impacts that assets might be having, so we can measure and quantify that and look to improve that over time. To draw out some highlights from the period. Dividend paid during the period is GBP 0.035 per share. That's in line with that dividend target of GBP 0.07 per share for the financial year. Total shareholder return of 5% during the period and total NAV return since IPO has been 192%.

Phil Kent
CEO at Gravis Capital Management

Profits of GBP 17 million, that was materially increased relative to the prior period, and that's really a result of lower negative revaluations incurred this period versus the reference period. 10.2 million shares were purchased during the period, GBP 7.6 million in capital terms returned to shareholders. We're now over, in aggregate terms, GBP 50 million of total capital return by way of buybacks to shareholders, through the capital allocation program. I wanted to pause for a moment and just look to the wider peer group and hopefully draw out where this company is positioned relative to that peer group. This company is often compared with the broader infrastructure equity names, also the renewable equity names. The first distinction I'd make on this chart is the difference between debt and equity. You're obviously very aware of the other infrastructure debt fund.

Phil Kent
CEO at Gravis Capital Management

I think they have their annual results webinar at the same time as ours. First of all, thank you for choosing to join this one. Apologies for the clash. We'll make sure we speak to each other moving forward to make sure that doesn't happen again. We like SEQI. We invest in them elsewhere in our business. They do something, I think, quite different to GCP and they focus on economic infrastructure. Infrastructure that perhaps has more GDP linkage in terms of the revenue makeup of the projects or assets in which they're investing in. It's a shorter duration instrument, it's more geographically diverse, and I would argue it's probably more debt that's been structured and procured elsewhere in which they've participated.

Phil Kent
CEO at Gravis Capital Management

In terms of GCP as a comparator, we focus on long-dated availability-based cash flows, where the revenues generated by projects are not a function of the use of the asset. They're a function of the availability of those assets. We're U.K.-focused, have no foreign currency risk as part of the portfolio. The investment team here, I would argue, are U.K. specialists and very focused on the U.K. market. It is a longer duration instrument, perhaps there's more interest rate sensitivity as a result of that. You can see the arrows here is the target change in direction that will result from the capital allocation plan and the disposals that we're targeting that I'll go on to talk about in a moment.

Phil Kent
CEO at Gravis Capital Management

Elsewhere on this chart, I won't run through each of the underlying names, the distinction I wanted to draw out is that between a private equity style risk investing in infrastructure versus what I would consider to be a more asset-based risk. If we take my definition of infrastructure, it's an asset that does a job over its life. Our job as investors is to assess the cash flows that we forecast will be generated by that asset off the back of a relatively limited set of parameters of volume and a price and an operating cost and a tax base. Compare that with, say, a business that has multiple strategies, maybe very capital intensive, infrastructure heavy balance sheet, multiple strategies that might span multiple geographies.

Phil Kent
CEO at Gravis Capital Management

It has a management team, it has multiple employees, pension liabilities, a very different capital structure that might rely on refinancing or new debt issuance over its life. That's more of a business equity risk versus what I would consider to be a pure asset risk. I think it's fair to say that we've seen some of the renewable funds in particular, as they've expanded into more development-based assets, increase the risk profile of their underlying portfolio. This is in no sense a comment on good or bad or better or worse. I think it's an appreciation of risk and therefore understanding what the appropriate return from those underlying portfolios should be. To move on to the strategic update.

Phil Kent
CEO at Gravis Capital Management

We set out back at the end of 2023. I would argue we were one of the first to set out a structured framework for capital allocation, really in response to the discount to NAV that the company share price was trading at the time. We set out to embark on an accelerated set of disposals from the underlying portfolio with a set of objectives that were summarized on this slide. First and foremost, to demonstrate that NAV is a more appropriate valuation point than the valuation point that's otherwise implied by share price. To date, we've completed or announced disposals of just under GBP 130 million, which on average are at NAV. We've reduced leverage. When we set out on this program, debt was drawn at around GBP 104 million net debt. At the end of March, it was GBP 5 million.

Phil Kent
CEO at Gravis Capital Management

We committed to return a minimum of GBP 50 million back to shareholders. We've completed GBP 73 million buybacks so far. That's GBP 54 million in capital returned to shareholders. That buyback program, as you can see from the announcements, is ongoing. I think it's important to all of that is thinking about what the portfolio looks like coming out of this program. Therefore, I think we've been quite targeted about those assets that we want to dispose of or recycle out of as part of this. We've explicitly targeted supported social housing as a sector where whilst it's been a good performer for us, we acknowledge there's a wider public market perception challenge, and I think we'd be well-served by reducing our exposure and exiting that space. It's also at the lower yielding end of our portfolio and, as we'll see through the slides, at the longer duration end.

Phil Kent
CEO at Gravis Capital Management

Coming out of some of the more equity-like exposures in the portfolio to reduce the NAV sensitivity to long-dated power prices has also been an explicit objective of this program and one that we have completed several disposals in. One of the questions that we sought to address as part of the recent Capital Markets Day, being quite close to the target of GBP 150 million of disposals that we set out previously is, well, what happens next? The company still trades at a discount to NAV. I think that discount today is around 23%, not as wide as it has been in the past, but certainly not where we think it should be.

Phil Kent
CEO at Gravis Capital Management

What we've set out on this chart as part of the framework for trying to address that question of what next is two different scenarios. These are really at the extreme ends as we would see it in the spectrum of options that are available to the company. In scenario 1 there, this is effectively a runoff scenario where you can see on the green line the distributions from the company are effectively swept, in this case by way of dividends to return capital to shareholders in a runoff. The NAV on the gray line in the right-hand side of the chart, therefore, trends to zero over time. In scenario 2, we've set out an alternative model that sees the use of capital for reinvestment, in this case, reinvestment at 10% until the end of 2040. After 2040, we model that runoff.

Phil Kent
CEO at Gravis Capital Management

I think it's important to model a runoff or realization at some point, otherwise, the IRR comparative that I'll go on to describe doesn't work. A period of reinvestment before runoff. We've then sought to address is, well, at what point do those two things have equivalence in mathematical terms from an IRR perspective if you consider an input negative share price? This chart, I acknowledge, is quite busy, so I'll do my best to step through it. On the x-axis, we've shown different entry share prices. On the y-axis, we've shown the outturn IRR at that share price in those two different scenarios. The natural amortization or runoff scenario 1 is the black line. Clearly, that's a shorter duration scenario, so therefore, is more sensitive in terms of the input IRR number.

Phil Kent
CEO at Gravis Capital Management

The reinvestment scenario, being slightly longer duration, is less sensitive, so a shallower line as share price changes. Those intersects of the IRR effectively matches in one scenario versus the other at around the GBP 0.90 per share price. We've then set out around that is this zone we've termed the gray zone. That acknowledges that whilst the math is important, it's not the only consideration I think we should be thinking about here. For many shareholders, the scale of the company and associated liquidity of the shares is really important to maintain some sense of scale is a consideration. As we get smaller, clearly, there's a concentration of overheads and costs.

Phil Kent
CEO at Gravis Capital Management

Some shareholders have different holding period expectations. The characteristics of this company for many shareholders, a stable, updated, non-correlated defensive income that's been paid for the last 15 years and performs a really important role as part of the portfolio. The ESG characteristics for some investors of the portfolio are all important characteristics that don't necessarily want to be lost. There's a gray zone that I think is a more qualitative consideration that, I guess, builds on that mathematical analysis. What we've set out is between a discount of around 15% versus the NAV today to a discount of 5% is an area, is the gray zone. Below that level, so below that gray zone, we will continue to return capital to shareholders by way of buybacks.

Phil Kent
CEO at Gravis Capital Management

Within that gray zone, there'll be a balance of returning capital, but also the possibility of considering attractive new investments where we think that's accretive to overall dividend coverage risk characteristics of the portfolio. Rather than set out a strategy where we're targeting certain asset classes or we're going to change investment policy and objectives of the company, I don't think we need to do any of that. I think we've done here is been very clear about the framework we use for the use of companies' capital. In all cases, and critically, regardless of where the share price is, whilst we're still at a discount to NAV, we will be recycling assets more quickly than the natural amortization of the portfolio. We maintain a pipeline of disposal activities to feed into this capital allocation framework.

Phil Kent
CEO at Gravis Capital Management

To summarize, continued recycling in all cases whilst we're at a discount. We maintain a pipeline today of around GBP 200 million in disposals that I'll describe in more detail in a moment. Below that gray zone, 15ish% discount to NAV. We'll be returning capital by way of buybacks, and you can see that continues in terms of the company strategy today. In terms of above the 15%, there will still be a return of capital by way of buybacks, but also we'll be considering new attractive investment opportunities. At the bottom there, we have given a nod to scale. The headline target is to maintain NAV at over GBP 750 million, I think that gives an indication versus the NAV today of GBP 829 of the capacity for the company, which is in scale through this framework that we've set out.

Phil Kent
CEO at Gravis Capital Management

Hopefully, that's clear in terms of the framework. Please do put any questions on it in the chat room, I'd be very happy to address it. In terms of that pipeline for disposals, what we've set out on this chart is at the top, the process, a relatively generalized process, for the disposal of illiquid assets. I think it's fair to say that that process does take a fairly long time, is very involved from a due diligence perspective in the specific characteristics of that asset. Being a predominantly debt portfolio, the disposal of assets can come about from a number of different circumstances. We can just sell the debt, assign the debt, or transfer the debt to other parties so there's a new lender of record in terms of a lending instrument.

Phil Kent
CEO at Gravis Capital Management

We can also look to work with the underlying borrowers to sell the asset and the equity in that asset. As part of that sales process, there's a repayment of debt that's relevant to the supported social housing disposal that was announced at the end of January, for example. In terms of the pipeline, perhaps focused on the right-hand side of the pipeline, the near-term disposal opportunities. Supported social housing, that's a portfolio of around GBP 47 million in disposals that we announced had exchanged at the end of January and is due to complete either later this month or early next month. The solar refinance of around GBP 40 million is due to complete in the next couple of weeks. The disposal of the onshore wind assets, which will generate around GBP 10 million, is due to complete by the end of this month.

Phil Kent
CEO at Gravis Capital Management

There's some very active processes, I think shareholders can expect announcements to the extent they complete on those over the coming weeks. If we aggregate that up, we'd expect between all of those, if we look to, say, mid-July, to have around GBP 100 million of cash that's been realized through those disposals coming back to the company to feed into that capital allocation program or framework, I should say, that I just set out. At which point I will hand over to Robyn to talk through the portfolio. Robyn.

Robyn MacHugh
Associate Director at Gravis Capital Management

Great. Thanks, Phil. We presented this portfolio overview at the last NAV webinar. By way of reminder, as of the 31st of March 2026, the portfolio can be broken down into three sectors. PFI represents about 28% of the portfolio, renewables just shy of 60%, and the remaining 15% is invested in supported social housing. We've also tried to illustrate in this chart here through the orange segments where we have ongoing disposals and refinancing processes, and in the yellow segments we've represented where the company has some sort of equity-like exposures. As of the 31st of March, the portfolio was valued at just over GBP 850 million across 47 different investments. The weighted average life of loans was 11 years, and the weighted average annualized yield was 8%.

Robyn MacHugh
Associate Director at Gravis Capital Management

The construction exposure of the portfolio remains at 0%, and 49% of the portfolio has some form of inflation protection. In the charts on this slide, we've tried to demonstrate the significant diversification that the company benefits from, whether it's through its underlying revenue streams, which is represented by the chart on the left-hand side there, or through the number of underlying assets in the portfolio, which is illustrated by the chart on the right-hand side there. You can see that the top 20 assets make up about 44% of the portfolio. Here we've tried to highlight the forecast interest and principal repayments over the remaining life of the loans in the portfolio, and this is split by sector. You can also see the different durations of the underlying sectors.

Robyn MacHugh
Associate Director at Gravis Capital Management

As we've discussed, we are planning on exiting the supported social housing sector, and as you can see from the pink and orange bars in this chart, this would have a fairly material impact on the overall duration of the portfolio. We also want to highlight in this slide that the company is forecast to receive GBP 280 million of principal repayments over the next four years, and this is just through the normal course of amortizing of the loans. This does not include any of the disposals or refinancing processes that we've indicated. As part of the disposals and refinancing processes that we've discussed as part of the capital allocation program, we've presented here an indicative portfolio, which includes the expected outcome of these processes. As shown in the forecast cash flows, the company's supported living exposure has the longest duration of investments in the portfolio.

Robyn MacHugh
Associate Director at Gravis Capital Management

Accordingly, if the company were to exit from this sector, it would actually reduce the duration by about four years. The weighted average life of the loans would reduce to eight years. Similarly, it's also got one of the lowest coupons in the portfolio, exiting out of the supported living sector would also increase the weighted average annualized yield by about 0.3%. We continue to see divergent approaches and views with respect to a number of the valuation assumptions, and we find it quite helpful to present this chart on a semi-annual basis to show the significance of these valuations.

Robyn MacHugh
Associate Director at Gravis Capital Management

By way of reminder, if I go from left to right, we've included here in this table the company's approach to these four valuation assumptions, we've included the impact of using a more conservative valuation approach, also using a more aggressive valuation approach. We have shown the four key assumptions here, but this list is by no means exhaustive. We've clearly shown that power prices, and discussed that power prices have a pretty significant impact on valuation, and I'll go on to discuss this in a bit more detail on the next slide. The other assumption that we wanted to highlight that has a significant impact on valuation is the asset life.

Robyn MacHugh
Associate Director at Gravis Capital Management

If the company were to assume the technical asset life of the solar and wind portfolio, that would be increasing the solar asset life to 40 years and increasing the wind asset lives to 30 years. This would have an over GBP 0.03 per share impact to NAV. Lastly, we also wanted to highlight the chart at the bottom of this slide, this essentially shows the total valuation impact of varying these valuation assumptions. It shows nearly GBP 0.11 per share swing depending on the most conservative and most aggressive assumptions here.

Phil Kent
CEO at Gravis Capital Management

We have presented this chart now probably for the last three or four years, effectively, this shows the company's sensitivity to the factors that we've set out here, as well as the kind of boundaries of assumptions. Associated with the capital allocation process and the disposals coming out of more equity-like instruments, the sensitivities have come down over time. That's another characteristic that shareholders can expect to see when we present this analysis, that the impact on the company will be smaller, that's a function of having less direct exposure to some of these aspects.

Robyn MacHugh
Associate Director at Gravis Capital Management

Just to dive a bit deeper into the electricity price forecasts. The chart on the left-hand side shows the two external consultants' forecasts as of Q1 2026. The solid lines on the left-hand side show the baseload curves for both AFRY and Aurora, whereas the dotted lines show the wind capture prices. There's a fairly stark difference. At its peak, there's about a GBP 20-GBP 25 per megawatt difference in power price forecasts. We also want to show on the right-hand side the evolution of the futures curve. As you can see from the gray line on the chart on the right-hand side, the futures curve has remained elevated in the short term as the conflict in the Middle East continues. Although we do see there is a drop in the power price forecasts from 2028 onwards compared to that of prior periods.

Robyn MacHugh
Associate Director at Gravis Capital Management

Lastly, we have shown that table at the bottom of this chart previously, but we think this summarizes the last two slides quite well and is a real example of the difference in valuations that we will see and the divergence of valuation assumptions. If we take the company's solar portfolio, we see about a 20% difference in valuation on an enterprise value per megawatt basis, compared to the average of other solar funds in the listed space.

Phil Kent
CEO at Gravis Capital Management

I think perhaps there's a couple of questions, sorry, Robyn, too, that I think have come in, thank you for those, that we can deal with now. Ian, thanks for your question. Given the U.K. electricity price has been high at around GBP 100 per megawatt hour for much of half one, is there any sign that the forecasters are revising up their short-term price forecasts? I guess I can't speak on behalf of the forecasters. I think we're expecting their Q2 forecasts to come out in the next couple of weeks. I think they do tend to look to match the short term of their curve with the futures curve. You can see on the right-hand side of this. Yes, we would expect that to increase.

Phil Kent
CEO at Gravis Capital Management

We do use a futures curve for the next, I think, three to four years in our forecast and then flip to the longer-dated forecasts. Our view is that the traded futures prices are better indications in the long-term fundamental forecasts that are really based on longer-term, less granular assumptions than perhaps has flowed through into the futures. Yes, I think we would expect that to increase. I think the core question, however, is probably to what extent does the effects of what's happened in the Middle East persist over time and therefore have a more structural long-term change in power prices. I think my view, given looking at some of the damage to infrastructure, it will take quite a long time to rebuild, particularly some of the energy infrastructure that's been damaged.

Phil Kent
CEO at Gravis Capital Management

I think we're talking about three, four, five years here to get back to the place that we were at going into the conflict in terms of LNG regasification, regas capacity where that exists, mini liquefaction capacity. I think the longevity of the impacts will perhaps be longer than the forward curve, and you can see it remains elevated going into summer and winter 2027, 2028. I think the effects will be felt perhaps longer than that. And I guess part of that is the extent to which supply from places like the U.S. adjusts to compensate, which we've kind of seen it partially has. I think we'll obviously incorporate the Q2 analysis and present this in the Q2 webinar from that. I think there's one other question on power price. What's the effect if you use AFRY low, if there is one?

Phil Kent
CEO at Gravis Capital Management

There absolutely is one as opposed to central low. I think the low curve is sort of broadly set out as the P90 type assumptions, the 90th percentile of the, I guess, distribution outcomes of price forecasts that they come up with. We can certainly, Tim, get that across to you. We don't have that number off the top of my head. It is a pretty conservative scenario. As a lender, and I think commercial banks more broadly, if they're looking to lend against power curves, would typically take an average of the center and the low curves. Somewhere between the 50th percentile and the 90th percentile is their sort of lending case before they apply a cover ratio. We'll come back to you on that, Tim. Shantanu, thank you for your question in relation to asset life assumptions.

Phil Kent
CEO at Gravis Capital Management

Are we exploring technical analysis which could enable extensions similar to the other funds in the sector? We absolutely are, and there's some very detailed work that's gone on across our wind assets by DNV, which is a technical advisor, to assess the extent to which the technical capacity of the projects can go beyond the design life of 25 years. I guess there's other considerations from a commercial perspective along the, in terms of the land rights and the leases typically, or the planning rights that you have to assets, in some cases, grid connection agreements. I think we are absolutely looking to put in place the enabling factors where we control that for assets life to extend.

Phil Kent
CEO at Gravis Capital Management

Where we don't control it or we're a lender, we're absolutely encouraging the borrowers, and it's indeed in their interest to make sure those enabling characteristics, whether that's property and technical life or planning, are in place to extend the life of assets. I think it's been interesting to see the announcements on the wholesale CFD. I think that's the first time it's been pointed to, and there's a lot more detail around that that needs to come out. The government have pointed to potentially support mechanisms that will be eligible for existing accredited assets, in that case, to reduce the exposure to merchant power prices, which can be really attractive to some of the assets in this portfolio to the extent we still hold them. I think this is still very relevant to the extent where we're disposing of assets.

Phil Kent
CEO at Gravis Capital Management

I think one of the core equity stories that we're looking to make when we're looking to sell assets is that a life extension case is absolutely possible. Actually, we as owners or lenders to those assets would expect some value from that because of the additional security it provides or the additional value and cash flow. That's absolutely something that we are looking at. Another one from Tim. Thank you. Can we just talk in a bit more detail about how the solar refinance works in practice? What that is we have a portfolio of ground-mounted solar assets across around 20 sites in the U.K. It's valued around GBP 100 million or so. That's unlevered. This goes to the enterprise value calculation that's at the bottom right of the slide on the screen.

Phil Kent
CEO at Gravis Capital Management

What we're doing in the solar refi is effectively introducing some third-party senior debt at a relatively modest level of gearing, sort of 35%-40%-ish loan to enterprise value. That cash is therefore released to the owners of those assets, so it's distributed back to the fund. That's how it works in practice. Hopefully, that answers the question, Tim. Cameron, is there anything else that makes sense to answer now or?

Robyn MacHugh
Associate Director at Gravis Capital Management

There are a couple, I think maybe that's covered slightly as well.

Phil Kent
CEO at Gravis Capital Management

Sorry, Robyn, I've interrupted you there.

Robyn MacHugh
Associate Director at Gravis Capital Management

No.

Robyn MacHugh
Associate Director at Gravis Capital Management

No worries. Maybe just to summarize the NAV movements over the six-month period to the 31st of March 2026. There were GBP 6.5 million of upward revaluation movements, which were offset by GBP 8.5 million of downward revaluation movements, resulting in net negative movement of GBP 2 million in the six-month period. The most significant driver of this movement was the impact of the government's decision to amend the indexation of Renewables Obligation buyout prices and the feed-in tariffs to CPI from April 2026, and that had a GBP 0.005 per share negative movement. Other key drivers in the period include the GBP 0.003 per share positive impact of higher electricity prices, driven by the elevated futures curve in the short term.

Robyn MacHugh
Associate Director at Gravis Capital Management

This was offset by the negative movement of the company getting an updated assessment of the curtailment and constraint levels that impact two onshore wind farms in Northern Ireland. This was also offset by the lower OBR inflation forecast that was released as part of the spring budget, which we note did not incorporate any of the short-term inflation impacts of the escalation and the geopolitical tension in the Middle East. I'll now hand back to Phil to run through the financial update.

Phil Kent
CEO at Gravis Capital Management

Great. Thanks, Robyn. I think there was one question on just the effect of the capital allocation program. The weighted average yield of the portfolio goes up as a result of the disposal, but cash income will go down. Can we give more detail on this in the context of the cash cover on the dividend in the 15% discount scenario, no new investments to rebuild operational portfolio, but buybacks reduce the share count and therefore cash required to meet a certain key dividend. I think that's exactly the right dynamic as you set it out. Actually, buying back shares at the discount to NAV is strongly accretive to dividend cover.

Phil Kent
CEO at Gravis Capital Management

The effect of concentrating the share base disproportionately to the change in net asset value from use of cash will mean that overall, the disposal program, if the entirety of that is used to buy back shares, will be positive from a dividend coverage perspective. Actually, when you do the modeling on that, it's actually quite significant potentially for the scale of buybacks that both we've undertaken, but also potentially will undertake in the future. Yes, whilst the portfolio will get smaller, the overall total, I guess, aggregate in cash terms income will be less. I think the effect of dividend coverage on the GBP 0.07 per share because there'll just be less shares outstanding disproportionately to the reduction in NAV from cash and income will be positive. Hopefully, that answers the question.

Robyn MacHugh
Associate Director at Gravis Capital Management

There's one more clarifying question on the solar refinance. In terms of the solar refinance, will the company therefore retain a now levered equity stake?

Phil Kent
CEO at Gravis Capital Management

Correct. Yes. I think that, and this was quite strongly debated, as you'd expect, between us and the board. I think overall, we think that is in line with the objectives that we've set out. We are reducing the aggregate company's exposure to equity-like instruments, and the exposure in this case will go down from GBP 100 million in aggregate terms to GBP 50 million-GBP 60 million. Whilst that GBP 50 million or GBP 60 million might be more sensitive because it's levered, it is an overall reduction in exposure to power prices across the company. We thought that was consistent in terms of recycling capital. I think there's also an argument to say that we are positioning the solar portfolio more broadly for looking at potential options after that, and we think a levered portfolio is potentially more marketable given the scale of what's left. Thank you.

Phil Kent
CEO at Gravis Capital Management

In terms of the financial updates, and I'll run through this relatively quickly, but please do stop me if I go too quickly. As always, we've presented the detailed outcomes of the interim report. On the left-hand side, the balance sheet outcome, so the total NAV of GBP 829 million, NAV per share at the end of the period of GBP 1.0026. On the right-hand side there, you can see the P&L. Total income of GBP 24.2 million generated a profit of GBP 17 million. The costs were in line with budget, nothing exceptional to report from a cost perspective in the period.

Phil Kent
CEO at Gravis Capital Management

I think it's notable looking at the comparator of 12 months ago, the finance and expenses have come down by GBP 1 million or so as a result of the reduced debt outstanding. As we always do, we've broken down in the first instance the P&L by, I guess, its two constituent components. I very much think about the P&L as income on one hand from the underlying portfolio of assets and then the effect of revaluation movement. To deal with income first and in a debt portfolio that is interest income from the underlying portfolio assets. There was just over GBP 26 million of interest paid and capitalized in the period. As always, we've broken down that GBP 26 million into what was received by way of cash, which was GBP 19.5 million, and I'll come back to that number in a moment.

Phil Kent
CEO at Gravis Capital Management

Capitalized based on a planned basis and an unscheduled basis, it is notable that the unscheduled capitalized interest is pretty small and certainly smaller than the reference period 12 months ago and in recent history here. I think that's a factor of the evolution of the portfolio and some of the disposals that have occurred over the last 12 months or so. That GBP 19.5 million of cash interest on the bottom right waterfall chart we've shown how that's adjusted for cash received after the relevant interest payment date. This is really where for administrative reasons or otherwise if an interest payment date, say, sits on the 31st of December, but we don't actually receive that cash until, say, late January or February. Usually for administrative reasons, the interest is automatically capitalized on the 31st of December and therefore it's recognized as a capitalized number.

Phil Kent
CEO at Gravis Capital Management

When that cash is ultimately received, because it's capitalized into principle, it's shown as a repayment rather than an interest payment in cash. To get to our adjusted interest received number, we've added back GBP 4.7 million of repayments that were received that effectively were in lieu of interest to get to a total adjusted interest received number of GBP 24.2 million. So that I think hopefully addresses the income side of the P&L. To turn to the revaluation side, I think Robyn's run through much of this already in terms of the NAV bridge for the upward and downward revaluation movements that you can see there. These aren't exactly the same categorizations as Robyn's analysis. I think we've included the loss on derivatives from our hedging in the numbers Robyn presented.

Phil Kent
CEO at Gravis Capital Management

Overall, the main downward revaluation was at GBP 0.005 per share driven by the effect of the change from RPI to CPI indexation that was partially offset by positive power prices in the period. Not a material set of revaluations overall over the six-month period, certainly when compared with the same period 12 months ago. In terms of moving to the balance sheet side and the investment side of the balance sheet, what this shows is the net investment repayment activity as it's flowed through the balance sheet. This includes capitalized interest of the net GBP 8.9 million of net repayments. Of the GBP 8.7 million of further advances, so this is the investment activity, GBP 6.6 million of that was associated with effectively investment through capitalized interest.

Phil Kent
CEO at Gravis Capital Management

The company didn't make any new investments during the six-month period so everything you can see here from an investment perspective is either that GBP 6.6 million of capitalized interest or additional investments in existing assets. The bottom chart hopefully is helpful in showing where that investment repayment activity sits from a sector basis. To draw out I think a couple of points, most of the capitalized interest came from the PFI/PPP portfolio. That's in line with expectations where we've invested subject in those assets. For the early life of those assets or where there's senior debt outstanding, there's a period of capitalization with the amortization of those capitalized amounts happening at the back end of a project life.

Phil Kent
CEO at Gravis Capital Management

Similarly supported social housing which are, as Robyn set out earlier, the longer duration aspects or loans in the portfolio and therefore have an element of capitalization in the front period that's then repaid later down the line. To move on to dividend coverage, to take the GBP 26.1 million number of interest paid and received by way of capitalizations in the period, which is the number from the previous slide. There's an effective accrual timing difference, so the GBP 26.1 is really what interest periods fell within the six months that we're talking about here from a payment obligation or capitalization perspective. We then need to add on the effect of the accruals of interest that didn't have a payment or capitalization trigger during the periods, which totaled just over GBP 9 million in the period to get to a total interest accrued number of GBP 35.4 million.

Phil Kent
CEO at Gravis Capital Management

Operating and financing costs at the fund level are deducted from that to get to an adjusted earnings number of GBP 28.4 million versus GBP 29.2 million of dividends paid. 0.97 times covered on that basis. I think critically, and we get this question a lot is, why is your dividend coverage not higher? In my view, at a headline perspective, as an income-generating vehicle, objective one of this company is to generate income for shareholders. We should absolutely be paying out all of our income by way of dividends. If we're not doing that and we have dividend coverage in excess of one, I think there's an argument to increase the income we're paying out. In terms of what we target from a dividend coverage perspective, I think at or around one is, in my view, where it should be.

Phil Kent
CEO at Gravis Capital Management

I think the other critical piece of this analysis, as distinct from perhaps how we see dividend coverage quoted elsewhere in the alternative income space, is that we're looking at income in less costs versus income out by way of dividend. We're not taking an operating cash flow from a depreciating asset, where really operating cash flow is all you've got to both pay your income or your return, but also repay the capital value of your asset on day one. There's no capital included in this. Actually, as we look at the next slide, perhaps you can see if we add up the total income plus principal that we forecast to receive, versus a dividend bill of between GBP 50 million and GBP 60 million per year at GBP 0.07 per share, then dividends are strongly covered from cash flows.

Phil Kent
CEO at Gravis Capital Management

This is in a one-off type scenario, there's no reinvestment assumed that would further increase future cash flows were it to occur. Hopefully, that's helpful analysis on dividend coverage. Again, if there's any questions on that or if anyone would like to go into it in any more detail, please do let us know. At which point, I just wanted to make a couple of remarks by way of conclusions, and I know there's a couple of questions that have come in that we'll deal with. The first comment I wanted to make is we have, over the last 12 months or so, released an investor portal.

Phil Kent
CEO at Gravis Capital Management

This is an online system, which is a subset of our investment management system that we've built here at Gravis over the last 10 years that we use to do the full end-to-end management of the life cycle of our assets and management of our pipeline through to the valuation and reporting the outputs of which you see in this presentation. This window hopefully provides investors with much more granular and real-time information on each investment and what assets critically make up that investment and then the performance of those assets. I think the feedback we've had on this has been hugely positive over the last 12 months, and it's pretty actively used by shareholders. As ever, we welcome any feedback on this.

Phil Kent
CEO at Gravis Capital Management

I guess firstly, if you don't have access and would like it, please do get in touch and we'd be very happy to provide you with access. Similarly, if you have used it and you have feedback on what would be helpful to see or additions, then please let us know. To draw by way of conclusion, it's been a relatively business as usual six months for the company. The portfolio continues to do what we expect from an operational perspective. We've set out that framework for the use of the company's capital moving forward, which is really a function of where the share price is trading relative to the company's net asset value.

Phil Kent
CEO at Gravis Capital Management

In all circumstances, whilst we're at a discount, we will continue with the pipeline of accelerated disposals and cycling out of, for want of a better word, the legacy portfolio and into that framework. We do expect further updates on disposals in the coming weeks as those near-term opportunities that I highlighted earlier hopefully complete. Please do look out for those, and if anyone would like a discussion either before or once you've seen those announcements, we're always happy to speak to shareholders. Please do get in touch with your relevant Gravis contact, and we're always happy to talk. I think there's a couple of questions that have come in. Shantanu, thank you for yours. Can we comment on the demand for GCP shares with new or existing shareholders post the progress on the capital allocation program?

Phil Kent
CEO at Gravis Capital Management

I guess we don't have a perfect window into the shareholder base at any point in time. We had the shareholder register for May that came through last week. Well, equally, I am not going to sit here and comment on different types of shareholder and the makeup. I think we see value in the shares at the current level, and I have spent probably the last three years making the point or complaining that there's not enough liquidity in U.K. investment trusts that perhaps also see that value. Any shareholder is welcome, and we'll engage with any shareholder equally in terms of how we treat their shareholders. I think there has been a bit of an evolution in the shareholder base. Some of the shareholders that perhaps have a shorter-term holding horizon, we've seen reduce.

Phil Kent
CEO at Gravis Capital Management

We've seen a large new shareholder that's a local government pension scheme come on, that we would consider to be sort of longer-dated, perhaps more sticky in terms of allocations to this space, which is, I think, really positive. I think we've also seen a growth in the retail holdings across the platforms at Hargreaves, Interactive Investor, AJ Bell. I think that's really been a response to a lot of work on the Carapace team and elsewhere to market the fund to retail investors. Cam, you're probably better placed to answer this question than me. I don't know if you have any comments to answer that.

Cameron Gardner
Director and Head of Distribution at Gravis Capital Management

No, I think that's pretty accurate. I think we've definitely, from a marketing activity, been focusing on that retail client base. We have seen that start to come through. I think Hargreaves are now in the top three shareholder within the fund, which is good to see. As Phil mentioned, we have seen a bit of rotation with some of our longer-term shareholders adding to their allocations, also a large new name coming to the register in the last few months.

Phil Kent
CEO at Gravis Capital Management

Just to add, we are grateful to all shareholders for their ongoing support. I know many, Shantanu, yourself included on the call, have been really long-term supporters of the company through what has been, and remains to some extent, a difficult period from a trading perspective. Thank you for that support. We are continuing to be entirely focused on communication and disclosure and the investor portal hopefully shows that, absolutely trying to do the right things by shareholders in terms of returning capital where it makes sense to do so, also recognizing said shareholders' demand for scale and the characteristics of the company.

Cameron Gardner
Director and Head of Distribution at Gravis Capital Management

There's been one more question on the capital allocation policy. With regards to the capital allocation policy, a 15% discount implies 8.2% yield. Do you think this is enough premium over risk-free given moving parts of the portfolio?

Phil Kent
CEO at Gravis Capital Management

I guess what that probably implies is somewhere between a sort of three and a half to four-ish over risk-free rate of trades at the moment for a sort of equivalent duration. I don't think it's a million miles off, Ben. I think this is predominantly debt at the end of the day, so should be stable, well-covered, predictable, non-correlated, defensive long term. I don't think that's an unfair assessment. I think perhaps the other way to look at it is at that sort of 15, and I'd have to check that analysis, a 15% discount to NAV implies an 8.2% yield. I think if we look at NAV, the yield on the portfolio is 8%. I think a 15% discount would probably imply a slightly higher yield.

Phil Kent
CEO at Gravis Capital Management

I think if you look at the run-off IRR from where we are now, it's probably closer to 14%. I'd want to check that 8% and let me know where you got that and happy to be sort of challenged and proved wrong on that. I think that number, just off the top of my head, should probably be closer to 10%-15% discount. I think at that level it certainly kind of reconciles with where risk-free is. If I've misunderstood the question, I apologize. Please let me know and happy to expand.

Cameron Gardner
Director and Head of Distribution at Gravis Capital Management

So far, no more questions coming in, please do feel free to pop one in in the next minute or so. Just a quick reminder, if you'd like a copy of the presentation, a link to the replay, access to Carapace, please do let us know. We'll be happy to share any of those with you. Don't see any other questions. Thank you very much everyone for joining. Thank you, Phil. Thank you, Robyn.

Phil Kent
CEO at Gravis Capital Management

Thanks all.

Robyn MacHugh
Associate Director at Gravis Capital Management

Thanks all.

Analysts
    • Cameron Gardner
      Director and Head of Distribution at Gravis Capital Management
    • Phil Kent
      CEO at Gravis Capital Management
    • Robyn MacHugh
      Associate Director at Gravis Capital Management
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