BBGI Global Infrastructure S.A. (LON:BBGI), the global infrastructure investment company, has announced its full year results for the year ended 31 December 2023.
Key Highlights
· Strong operational performance of our globally diversified portfolio of 56 high-quality, 100 per cent availability-style infrastructure assets.
· Increased dividends by 6 per cent to 7.93pps for 2023, in line with our previously stated target.
· Fully repaid Revolving Credit Facility as of 31 December 2023.
Sarah Whitney, Non-Executive Chair of BBGI, commented:
“I am pleased to report on our strong operational performance for 2023. Our results underscore the robustness of our approach, our sound business model and the enduring strength within our globally diversified portfolio of high-quality, core social infrastructure assets.
Our low-risk investment strategy and well-managed portfolio have continued to produce a well-covered and growing dividend for our investors. BBGI takes a careful approach to capital allocation and directed controlled growth. During the year we have utilised surplus cash flows generated from our investment portfolio to pay down in full our revolving credit facility in 2023, positioning ourselves well for the future.”
Duncan Ball, CEO of BBGI Global Infrastructure, said:
“Our results for 2023 demonstrate our strong portfolio and operational performance, despite a period of significant macroeconomic and market shifts. We continued to manage our portfolio responsibly to generate high-quality, stable, predictable and inflation-linked cash flows, with distributions ahead of our target. These cash flows supported our strong dividend cover of 1.4x in 2023, and allowed us to increase dividends by 6 per cent to 7.93pps for the year, in line with our previously stated target. We have also reconfirmed our dividend target of 8.40pps for 2024, representing a 6 per cent increase year-on-year, and a target of 8.57pps for 2025. We take pride in our track record of meeting or exceeding all dividend targets set since IPO and providing our investors with a progressive dividend, which has always been fully cash covered and has increased every year since 2013.
Our consistent and disciplined approach to capital allocation, combined with our value driven active asset management, ensures our investments continue to perform well and in line with our expectations. Moving forward, we remain committed to optimising our portfolio construction to maximise value for our shareholders.
I remain optimistic about the long-term prospects for BBGI Global Infrastructure. As governments continue to run deficits and demand for maintaining, repairing, and constructing new infrastructure grows, there is an increasing need for private sector investment in infrastructure, presenting long-term opportunities for BBGI.
With our robust balance sheet, a portfolio that generates secure, predictable cash flows surpassing our dividend objectives, and an undrawn £230 million RCF maturing in May 2026, we are well-equipped to navigate evolving markets, with both discipline and ambition, and to deliver attractive value to all our stakeholders.”
Financial highlights
| Investment Basis NAV£1,056.6 milliondown 1.2% as at 31 December 2023(31 December 2022: £1,069.2 million) | NAV per share147.8ppsdown 1.4% as at 31 December 2023(31 December 2022: 149.9pps) | Annualised total NAV return per share since IPO8.6%(FY 2022: 9.1%) |
| High-quality inflation linkage0.5%(FY 2022: 0.5%) | Ongoing charges0.93%(31 December 2022: 0.87%) | Cash dividend cover1.40x(FY 2022: 1.47x) |
| 2023 dividend declared7.93pps+6% | 2024 target dividend8.40pps+6% | 2025 target dividend8.57pps+2% |
Financial and operational highlights
Strong operational performance
· Strong operational performance of our globally diversified portfolio of 56 high-quality, 100 per cent availability-style infrastructure assets.
· Maintained a consistently high asset availability rate of 99.9 per cent.
· Our portfolio investments are the essential assets on which people rely every day, such as schools, healthcare facilities, police and fire stations, affordable housing, roads and bridges, modern correctional facilities, a clean energy investment and other types of social infrastructure.
· We partner with the public sector, underpinned by government or government-backed counterparties, to help deliver and responsibly manage these assets for the long term.
· Located in Australia, Canada, Germany, the Netherlands, Norway, the UK, and the US, all Portfolio Companies are in stable, well-developed, and highly-rated investment grade countries with credit ratings between AA and AAA.
· Disciplined approach to capital allocation and will only consider transactions that are accretive to our shareholders, while considering their attractions against alternative capital allocation options.
Generating high-quality, stable, predictable and inflation-linked cash flows
· Contracted high-quality inflation linkage of 0.5 per cent.
· Cash receipts ahead of projections, with no material lock-ups or defaults.
· These cash flows supported our strong dividend cover of 1.4x in 2023.
· Increased dividends by 6 per cent to 7.93pps for 2023, in line with our previously stated target.
· Reconfirmed our dividend target of 8.40pps for 2024, representing a 6 per cent increase year-on-year, and a target of 8.57pps for 2025.
· All target dividends expected to be fully cash-covered.
· We take pride in our track record of meeting or exceeding all dividend targets set since IPO and providing our investors with a progressive dividend, which has always been fully covered and has increased every year since 2013.
· Based on current estimates, and if there were to be no further acquisitions, the portfolio could continue to generate a progressive dividend for the next 15 years, after which the existing portfolio is forecasted to enter into the capital repayment phase.
· In March 2024, BBGI joined The Association of Investment Companies’ (AIC) “Next generation of dividend heroes”, in recognition of our achieving 10 or more consecutive years of dividend growth.
Net Asset Valuation
· As of 31 December 2023, NAV per share stood at 147.8pps, a slight decrease of 1.4 per cent from the previous year, and flat since 30 June 2023. This was attributable to macro-economic drivers beyond our control, including the increase in the weighted average discount rate (a knock-on effect from rising global interest rates and general macro-economic volatility), adverse foreign exchange rate movements (although our hedging strategy provided a partial buffer against these fluctuations), and the negative effect of proposed Canadian tax legislation that we have fully provisioned for.
· These negative impacts on the portfolio valuation were partially offset by our proactive asset management, which increased our NAV by 1.7 per cent, along with changes in our macro-economic assumptions, driven largely by the effect of revised deposit rate assumptions, contributing to an increase of 2.6 per cent.
· Both the Management Board and the Supervisory Board continue to believe that BBGI’s share price does not adequately reflect the value of our portfolio, our high-quality inflation linkage, our strong financial position and operational performance. We continue to see a disparity between the private market valuations of high-quality core infrastructure assets and the value ascribed by public markets and there were a number of market transactions that substantiate our reported NAV.
· The weighted average discount rate increased from 6.9 per cent to 7.3 per cent as of 31 December 2023, with BBGI’s implied risk premium as of 31 December 2023 3.7 per cent above the weighted average government risk-free rate for our portfolio. We view this as attractive for a low-risk investment portfolio with high-quality inflation protection, delivering real returns, and progressive dividend growth, particularly when compared with fixed income products.
Value-driven active asset management
· Our active asset management activities included applying high-quality corporate governance frameworks, which helped enable us to maintain our track record of no reported lock-ups or material defaults at any of our Portfolio Companies and generated a consistently high asset availability rate of 99.9 per cent.
· Our equity investment in Highway 104 in Nova Scotia, Canada achieved substantial completion in September 2023 and significantly improves efficiency and safety of travel, the flow of goods and services, and connects communities in the region.
· In 2023, we achieved a strong overall net promoter scores from our project clients, demonstrating our ability to maintain strong client relationships and to deliver superior performance.
Prudent financial management
· All our Portfolio Companies are financed on a non-recourse basis with 55 out of our 56 assets securely financed with fully amortising fixed rate debt through the length of the concession period (without the need for refinancing), and only one asset has a refinancing obligation for a tranche of debt.
· Our strategic hedging policy has enabled us to mitigate the effects of foreign exchange fluctuations. Moreover, we have adopted a proactive treasury management approach to optimise the interest earned on the reserve accounts of our Portfolio Companies.
· Our liquidity position remains robust, with net cash of £9.7 million at 31 December 2023. By using excess cash that we have generated from our portfolio of investments, we repaid all cash drawings under our £230 million RCF by 31 December 2023. Additionally, we have no outstanding acquisition commitments, placing the Company in a strong financial position.
Environmental, social and governance progress
· Our sustainable investment portfolio benefits from a strong social purpose and the Company is classified as SFDR Article 8.
· BBGI is committed to net zero both operationally and with our portfolio, and in 2023 we enhanced our proprietary ESG database, including greenhouse gas (‘GHG’) emissions data, and published our first SFDR Principal Adverse Impact Statement. All our Portfolio Company assets have a high degree of climate risk resilience, and we now have a complete overview of their emissions profiles, which will facilitate future decarbonisation programmes.
· We believe that a strong commitment to ESG principles plays a crucial role in mitigating risks and supporting our business over the long term. Moreover, it not only fosters solid relationships with clients and partners but also motivates and engages our employees. Moreover, it plays a crucial role in mitigating risks and supporting our business over the long term.
Focus on disciplined growth and capital allocation strategy
· We used our RCF to acquire two new assets for c. £64.4 million in 2022, which we have now paid off in full using free cashflows we have generated from our portfolio. This demonstrates our ability to grow organically without the need to access the equity markets for funds.
· Our current return projections, all else remaining equal, are not contingent on new investments. If we were to abstain from further investments, our existing portfolio alone would sustain our progressive dividend policy for the next 15 years. We continue to pursue disciplined growth that builds shareholder value first, encouraged by our internal management structure, and not growth in assets under management for its own sake.
· Furthermore, we are investigating portfolio diversification prospects with desirable traits, such as consistent long-term cash flows and inflation correlation, aligning with our existing investment policy. Any new investment opportunity will be evaluated by comparing its potential benefits to other ways of allocating our capital.
