3i Infrastructure shares up after pre-close update

3i Infrastructure posted a trading update on Tuesday, as it entered the close period for the six months to 30 September 2016.

The AIM-traded firm said between 1 April and 2016 September, it raised £385m of new equity - specifically on 8 June 2016 - increased from the target size of £350m, with the offer significantly oversubscribed.

“In a market which remains competitive, the company achieved a strong level of investment in the period, completing four new investments from the investment adviser's previously identified pipeline for a total consideration of £287m,” the board said in a statement.

“Most of the proceeds from the equity raise have thus been deployed within four months.”

It compared that to a total investment of £187m for the six-month period ending 30 September 2015.

“Consistent with the company's strategy, we have secured three investments in mid-market economic infrastructure businesses which can benefit from the investment adviser's engaged asset management approach and ability to deploy follow-on capital: Wireless Infrastructure Group, TCR and Valorem.

“In addition, the company made an investment commitment to the Hart van Zuid greenfield PPP project in the Netherlands.”

The board said those investments are expected to deliver attractive risk-adjusted returns, in line with the company's objectives.

“Finally, the Company has been appointed as the preferred bidder and subsequently achieved commercial close for the A27/A1 greenfield PPP project in the Netherlands, with financial close expected shortly.”

3i’s European portfolio was continuing to perform broadly in line with expectation, the board said, delivering planned cash flows and with the newer portfolio companies performing as expected since acquisition.

“The investment adviser is focused on actively managing the portfolio to maximise value and is currently executing the 100-day plans for the new investments made in the period.

“The India Fund remains focused on realisations: it achieved the sale of 85% of the holding in Adani Power and received the proceeds from the sale of Ind-Barath Utkal,” the board explained.

It said the India Fund now represented less than 3% of the portfolio value.

Portfolio income totalled £28.2m in the period, in line with expectations, with further income of approximately £7.1m expected by 30 September.

Non-income cash of £12.5m was received, which the board compared to portfolio income of £27.1m and £0.2m of non-income cash received in the six-month period ending 30 September 2015.

“The increase reflects a full period of income from the investments made in the second half of FY2016 as well as a contribution from the transactions which closed during the period.”

The company's cash balance was £133.9m at 26 September, and the undrawn balance of its revolving credit facility was £274.9m.

“The company has a good level of liquidity for future investment,” the board said.