3i Infrastructure H1 Earnings Call Highlights

Key Points

• 3i Infrastructure reported a 4.5% first-half total return and remains on track for its 8%–10% full-year return target. NAV rose to 416.4 pence per share, and the interim dividend was set at 7.15 pence, half the fiscal 2027 target.
• Like-for-like portfolio EBITDA grew more than 12%, while portfolio companies invested over £300 million in growth projects. The £3.6 billion portfolio returned almost 6% during the period.
• The TCR sale and subsequent LMD investment left the company with £269 million in cash at September-end and up to £1.2 billion in total available liquidity. Management said the fiscal 2027 dividend target is expected to be well covered.

3i Infrastructure LON: 3IN reported a 4.5% total return for its fiscal first half and said it remained on track to meet its full-year return and dividend targets, as portfolio earnings growth and the sale of TCR strengthened its financial position.

Net asset value rose to 416.4 pence per share, while total income and non-income cash distributions reached £195 million, up 61% from the same period a year earlier. The company announced an interim dividend of 7.15 pence per share, half its fiscal 2027 target of 14.3 pence.

Bernardo Sottomayor, managing partner and head of European infrastructure, said the company was on track to achieve its annual return target of 8% to 10%. He attributed the first-half result to a diversified portfolio in which gains from some businesses offset flat valuations at two others.

Portfolio earnings and investment

Underlying portfolio company earnings before interest, taxes, depreciation and amortization grew more than 12% on a like-for-like basis in the 12 months to June, Sottomayor said. The calculation includes only businesses held throughout both comparison periods and excludes TCR, which was sold during the first half.

Portfolio companies invested more than £300 million in growth capital expenditure over the same 12 months, largely against contracted revenues, he said. At June, the portfolio had an average EBITDA margin of 43% and cash conversion of 87%. The figures did not include a contribution from newly acquired LMD.

The portfolio was valued at £3.6 billion at the half-year point and delivered a return of almost 6% during the period. Sottomayor said 3i had completed its acquisition of LMD and subsequently bought most of a minority co-investor’s remaining stake, taking the holding managed by 3i to 90%.

The company also identified potential expansion opportunities at LMD, including the acquisition of rights to two nearby plots already in the queue for power, he said.

Liquidity boosted by TCR sale

CFO James Dawes said the completion of the TCR sale, followed by the investment in LMD, left 3i Infrastructure with £269 million in cash at the end of September. Including its undrawn revolving credit facility, the company had up to £1.2 billion of available liquidity.

Dawes said the company had realized £4.4 billion from asset sales since fiscal 2016, at an average uplift of 37% over their valuations. He said the proceeds had helped fund acquisitions without relying on new equity to grow.

Five portfolio companies have refinanced since March, raising or refinancing a total of £1.3 billion in debt. Dawes said the portfolio had no significant refinancing requirements over the next three years. Its average loan-to-value ratio remained at 35%, while the weighted average cost of debt rose to 5.5% from the previous year-end, an increase of 0.7 percentage points.

Net asset value totaled £3.8 billion at the half-year end. Dawes said a £26 million foreign-exchange gain after hedging more than offset adverse currency movements reflected in the capital return. The company’s weighted average valuation discount rate was 11.3%, slightly higher than at the prior year-end.

Infrastructure projects and outlook

At power producer Infinis, 3i acquired three ready-to-build solar projects in Northamptonshire during the period. Sottomayor said the business expected to bring 274 megawatts of new solar capacity into operation in 2027 and had started construction on a 42-megawatt battery storage project backed by a 10-year floor power purchase agreement.

After the period ended, Future Biogas announced the acquisition of the remaining 49% stake in six anaerobic digestion plants from FGEN. Sottomayor said full ownership would allow the business to pursue expansions and upgrades while retaining the full economics for 3i Infrastructure.

In response to an analyst’s question, Sottomayor said demand for connectivity across FLAG’s Europe-to-Asia network was strong and extended beyond artificial intelligence workloads to hyperscalers, telecom carriers and data-center connections. “All signs point to continued strong demand,” he said.

At offshore services business ESVAGT, trading was robust, particularly in emergency response vessels, but completion of three offshore wind service vessels under construction had been delayed. Sottomayor said revised timing had been reflected in cash-flow projections and that the company expected a busy period for new vessel tenders next year.

Dawes said the fiscal 2027 dividend target was expected to be well covered, including by non-income cash distributions. The interim dividend is scheduled to be paid on Jan. 11, with the shares going ex-dividend on Nov. 26.

About 3i Infrastructure (LON:3IN)

3i Infrastructure plc 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.

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