GCP Infrastructure Investments has announced its annual results for the year ended 03 September 2016. During the year, the company says it provided a share price total return of 15.6% and a total return since its IPO of 91.1%. Profit for the year was £54.4m, an increase of 11.7% year-on-year (2015: £48.7m), and the company paid dividends of 7.6p per share (the fourth consecutive year of dividend increases). At the year end, the company’s shares were trading at a premium to net asset value of 20%.
The company’s net asset value per share increased over the year from 107.47 to 109.67 pence per share, which it says was primarily driven by the accretive nature of shares issued at a premium to prevailing net asset values and investment valuation uplifts. The company says that valuation discount rate reductions over the year, relating to mature renewable energy and PFI investments with operational track records, were driven by comparable market transactions and wider credit market conditions. Net valuation movements accounted for a 1.05% increase in the Company’s net asset value at 30 September 2016.
During the year, the Company raised gross proceeds of £95m through placings of 16.9m and 64.4m shares issued at 118.00 and 116.50 pence per share respectively (both share issuances were oversubscribed). The Board says that it believes that considered and conservative growth benefits shareholders through increased share liquidity, economies of scale, and further investment diversification. The Company made loan investments totalling £92.8 million over the period with £53.6 million advanced post year end.
In terms of investment performance, the company says that its loan investments accrued an average yield of c.9.0% throughout the year, with the operational and construction performance of most of the projects that support the Company’s investment portfolio being materially in line with expectations. It says that two biomass projects have encountered operational and grid connection challenges, which have been reflected in valuation reductions, but the Board are instigating in both cases a clear plan to achieve much improved performance. The Company’s investment portfolio is 26% exposed to PFI projects, 64% to renewable energy assets and 9% to social housing transactions.
In terms of outlook, the company says that the Chancellor’s Autumn Statement, on 23 November 2016, was full of positive sentiment toward future UK infrastructure development, with infrastructure spending still seen as a key tool to boost economic growth. It says that there seems to have been a policy shift towards smaller projects that, it is hoped, will have a more immediate impact on productivity. The Chancellor gave particular mention to areas such as road and rail improvements, ultra-fast fibre networks and social housing. Given the Government’s commitment to announce a new PF2 pipeline early next year and the long-awaited second contracts for difference auction for renewable energy projects in April 2017, the company says that there is room for cautious optimism that a meaningful infrastructure development pipeline will emerge. The company says that, over the last few years, the influx of capital seeking both debt and equity exposure to UK infrastructure has driven up prices in many of its target investment sectors. This has resulted in valuation uplifts on some of the Company’s existing assets, a reduction in available investment yields and a challenging investment environment. However, the company says that most investors, institutional investors in particular, tend to be restricted to opportunities larger in size and profile and that this has meant that the Company still remains well positioned to achieve attractive returns by investing in smaller infrastructure projects in areas that continue to be poorly served by the broad lending market. The Company says that it has also found an increasing number of opportunities to lend at attractive rates against well-performing operational assets supported by legacy subsidy regimes as asset owners seek to refinance existing debt or lenders look to sell down positions. Particular areas of focus are social housing for vulnerable adults, small‑scale PFI and established areas within the renewable energy sector.
GCP returns 15.6% during year and continues to grow :GCP