RM Infrastructure Income’s results for 2021 show an NAV total return for the year of 7.6% and a return to shareholders of 16.7%. Dividends for the year totalled 6.5p.
The overall portfolio size remained largely unchanged during the year, closing at £130.8m across 34 loans and one wholly owned asset.
Eight new loans were made during the year alongside further drawdowns from existing facilities and there were repayments and divestments totalling £39.7m. The weighted average life of the portfolio reduced from 3.04 years to 2.23 years which is reflective of a desire to keep duration relatively short as we move into a more inflationary environment.
Overall, the credit quality of the portfolio improved as the percentage of the portfolio benefiting from the Coronavirus Business Interruption Loan Scheme (CBILS) or Recovery Loan Scheme (RLS) increased from c.11% to c.26% and the amount invested with junior or holding company debt reduced from c.54% to c.39%. The list of borrowers under enhanced monitoring reduced from four to three.
Negative valuation adjustments largely taken during March 2020 were partially reversed during 2021. There are further valuation adjustments totalling £4.3m or 3.64p per share, which are largely from the three companies within enhanced monitoring.
Furthermore, post year end there have been two valuation adjustments. The first of £1.5m was taken to reflect the cost of cladding replacement within the wholly owned student accommodation asset in Coventry. These replacement costs were received in March 2022 and taken in the March 2022 NAV, however under accounting principles this cost is recognised as an adjusting event in the 2021 results. The second was to an accrual taken in January 2022 that has been moved to Dec 2021, for £199,500.
The manager says that total income generation for the year was £11.2m (2020: £10.9m) and this was split between cash interest of £9.3m and £2m of Payment In Kind (PIK), 82%/18% which was largely similar to 2020. Its expectation for 2022 is that the PIK/cash ratio will reduce, and this is largely due to loan references 39 and 76.
- Loan reference 39, the Auto Parts Manufacturer: during 2020 and 2021, this borrower elected to PIK the whole loan which was more expensive for them but within the original loan agreement. This has now returned to 50% cash / 50% PIK which was the original loan term.
- Loan reference 76, the Gym Franchise: this was allowed to PIK interest for periods during 2020 and 2021; however since September 2021 has returned to cash pay.
Total operating costs were £2.6m; these were slightly above budget as the costs for addressing the issues of the Coventry student accommodation asset were charged to the P&L during the year.
The board has set three clear targets for the future:
1. Return to a premium rating as measured by the share price versus the NAV;
2. Seek overall NAV growth during the year after target dividend distributions; and
3. Continue to deliver on the company’s dividend target of 6.5p per share
RMII : RM Infrastructure Income shareholders had a good 2021