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Sequoia Economic Infrastructure Income Fund increases dividend target

Sequoia Economic Infrastructure-SEQI

Sequoia Economic Infrastructure Income Fund (SEQI) has announced its annual results for the year ended 31 March 2019, in which it says it is increasing its dividend target to 6.25p per share. The chairman, Robert Jennings, describes these as “another strong set of results for the year, underpinned by the continued portfolio performance. In light of ongoing confidence in the Company’s portfolio and strong NAV growth to 103.41p, the Board has increased the target dividend to 6.25p per Share per annum”. Including dividends of 6p per share, SEQI has provided a total return for the year of 8.0%.

Key Highlights

SEQI has provided the following summary highlights from its results:

  • Annualised portfolio yield-to-maturity of 8.6% as at 31 March 2019
  • Dividend of 6p per Ordinary Share paid during the year in line with target. Increased annual target dividend of 6.25p per Ordinary Share per annum announced in May 2019
  • Over 2p per Ordinary Share NAV accretion achieved during the year after payment of dividends
  • Raised gross proceeds of £75.7 million through an over-subscribed  capital raise in May 2018
  • Announced an additional capital raise in August 2018 which closed, significantly over-subscribed, in October 2018 with gross proceeds of £253 million
    • Proceeds used to repay the outstanding balance of approximately £116 million of the £150 million multi-currency revolving credit facility (“RCF”)
    • Remaining proceeds have since been fully deployed into the strong pipeline of attractive investment opportunities
  • Diversified portfolio of 69 investments across 8 sectors, 26 sub-sectors and 13 mature jurisdictions
    • 85% of investments in private debt
    • 69% floating rate investments, capturing short-term rate rises
    • Short weighted average life of 4.4 years creating re-investment opportunities
    • Weighted average equity cushion of 35%
  • Ongoing charges ratio of 1.02% (calculated in accordance with AIC guidance)

The company has also provided the following post-year end highlights:

  • Successful oversubscribed capital raise in June 2019 raised gross proceeds of £216 million
  • Revolving credit facility (“RCF”) increased to £200 million from £150 million in August 2018
  • In line with the Company’s commitment to implementing an ESG policy, the Investment Adviser signed up to the United Nations Principles of Responsible Investment (“UNPRI”)

 

Comments from the investment advisers report

The Investment Advisor’s Objectives for the Year

Over the course of the financial year ended 31 March 2019, Sequoia Investment Management Company Limited (“Sequoia”) has had a number of objectives for the Company:

  • Gross portfolio return of 8-9% – The Company is fully invested with a portfolio that yields in excess of 8%
  • Capital growth to deliver economies of scale and broader benefits – Gross proceeds of £328.7 million raised during the year across two over-subscribed capital raises
  • Timely and transparent investor reporting – Factsheet, commentary, and the full portfolio are provided monthly for full transparency
  • Dividends of 6p per Share – The Company paid 6p of dividends per Ordinary Share during the year

Capital Raised and Share Performance

The Company completed two capital raises during the financial year ended 31 March 2019, both of which were very significantly oversubscribed: an Ordinary Share placing in May 2018 which raised gross proceeds of £75.7 million, and an Ordinary Share open offer, placing and offer for subscription in October 2018 which raised gross proceeds of £253.0 million.

As at 31 March 2019, the Company had 1,060,975,849 Ordinary Shares in issue. The closing Share price on that day was 113.0p per Share, implying a market capitalisation for the Company of approximately £1.2 billion, compared to £793.2 million a year previously.

The Company announced on 20 August 2018 that it was proposing an additional capital raise to repay existing debt and acquire assets from the strong pipeline of potential investments for the Company. The open offer, placing and offer for subscription, which closed in October, was significantly oversubscribed and the Shares were issued at a premium to NAV, resulting in total gross proceeds of £253.0 million. Of the total gross proceeds raised, approximately £116.0 million was subsequently used to repay all the sums drawn under the RCF and the accordion facility. The remaining proceeds have since been fully deployed to acquire investments from the attractive pipeline of opportunities.

About Sequoia Economic Infrastructure Income Fund

Sequoia Economic Infrastructure Income Fund aims to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments.

 

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