International Public Partnerships has announced results for the six months ended 30 June 2023. The main highlight of these was the dividend increase but the other salient points were:
- The NAV reduced by 2.4% to 155.2 pence per share. The decline was driven principally by an increase in the discount rates used to value the forecast cashflows, partially offset by the positive impact of the portfolio’s inflation-linkage and higher cash deposit rates.
- The portfolio continued to perform in line with expectations with 100% of the investment portfolio’s overall forecast distributions received by the company.
- IFRS profit before tax was £0.3m, reflective of the unrealised fair value loss on the portfolio (from the higher discount rate) in the period.
- The company maintained strong inflation-linkage at 0.7%, generating long-term real rates of shareholder returns notwithstanding volatile macroeconomic conditions.
Dividend
- Recognising the inflationary environment, the board announced a 5% increase in the 2023 target dividend to 8.13p per share. This compares to a long-term dividend growth rate of 2.5% since inception.
- Beyond 2023, the board will keep the dividend policy under review, nevertheless currently it is forecasting to continue its long-term projected dividend growth rate of about 2.5%, such that the 2024 dividend target is 8.33p.
- The company has maintained its cash dividend cover in the period of 1.2x (31 December 2022: 1.2x).
In other news, the Thames Tideway (super sewer) construction works are said to be 90% complete. This is the company’s largest investment. The overall cost has risen by 2% to £4.5bn. Given Thames Water’s precarious finances, the statement says “Thames Water and Tideway are completely separate companies. Whilst Thames Water possesses a licence requirement to collect Tideway’s revenues from its customers and pass those amounts to Tideway, statutory and regulatory protections are in place to mitigate the risk of disruption to the receipt of revenues in the event that Thames Water’s financial position worsens. The matter is not expected to have a material impact on the company’s investment in Tideway.”
[QD comment: It was starting to look odd that International Public Partnerships’ dividend growth was so anaemic, given where inflation rates are and its claim that it captures 70% of inflation in revenue uplifts. This 5% hike is a good start to redressing that, but investors’ income will still have declined in real terms over the past few years.]
INPP : International Public Partnerships hikes dividend by 5%