Member Info for blackfriars1

GS, thanks for your summary.

Given the discount is now 28% to nav I’m still at a loss to see where the board go with the fund.

Other large ongoing buybacks from TRIG and UKW have had no material difference on their share prices and other renewable/debt infrastructure funds, ie, SEQI, GCP etc etc tell a similar story. One thing I thought the board might have reported but didn’t was a valuation re-appraisal of the assets held in the fund. I noted recently that a major shareholder in Assura had written to the board to do exactly this as a way of conveying the hidden value within the portfolio. However, the fact that the board have sold assets in excess of £260 million for nav or slightly above leads me to believe that the nav is a true reflection of the portfolio. One thing for sure, the 28% discount on the fund won’t be allowed to continue indefinitely, to my mind only a matter of time before an activist or pension fund turns up with an offer.

MTB, unless another bidder appears. Can’t for the life of me think that Assura only has one suitor given their debt profile.

Think Aviva picked up a bargain when they bought Probitas last year and this could be a really significant business in its own right in the years ahead………

https://www.insurancetimes.co.uk/news/probitas-announces-best-ever-result-after-aviva-acquisition/1454692.article

SB, that’s a really interesting point you mentioned there about the external managers and possibly something the board should be looking at………internalisation, ie, bringing the management in-house as SUPR are in the process of doing. In effect they are paying Atrato, the managers £19.7 million to buy-out their contract and bring the management of the fund in-house. The IRR is over 19% on the buy-out cost which the board thought was the best use of a portion of the capital from a recent Tesco supermarket sale. The pay back is 5 years on the buy-out and the cost saving is £4 million per annum. In the context of a £2 billion fund I’d need to look at the Amber contract in more detail but definitely worth asking the question at the upcoming results presentation.

Slikoil, thanks for your post, interesting.

For FY 2025 the dividend is 8.58p which equates to 7.9% at todays closing price.

I’d be interested to know where the yield would need to be to get you buying back in?

Thanks GS and as Maureen Lipman used to say in the BT adverts way back, “it’s good to talk”. I asked that very question a few weeks back, ie, “who is selling?” which SB kindly answered. For several weeks INPP were buying huge amounts of shares, ie, 250k and 500k per day. This has dropped to 40k which coincides nicely with the £60 million buyback ending in Q1.

The 300 basis point incremental gain on the 10 year and 250 basis points on the 30 year is probably the reason for the share price being sold off. If you can get almost 5% and over 5% buying fixed income or gilts then I think that’s a huge barrier for all these funds. The question all 3 of us are asking, what’s next? Well we don’t need to wait too long with the results 2 weeks today. I for one am looking forward to the company presentation and the analysts q&a, should be really informative with the new ISA season approx a week later. Good Luck.

SB, thanks for that. I was thinking around 40p per share and likewise I think there is hidden value in the portfolio. The reply I received from IR earlier says nothing that isn’t in the public domain. Here are 4 bullet points from their reply. ……..

Increasing the 2024 dividend target by 3% compared to the full-year 2023 dividend;

Realising proceeds of c.£260 million through asset recycling;

Fully repaying the cash drawings under the Company’s Corporate Debt Facility (‘CDF’) in January 2024 and reducing the size of the CDF from £350m to £250m in August 2024;

Initiating a share buyback programme in January 2024 and extending that programme to up to £60m in September 2024; and

Revising the Company’s target return, such that the assessment of any new investment opportunities takes into account the relative merits of a share buyback

GS, I’m pretty sure the £260 million realisations was used to pay down the CDF. As far as I can see the fund is now debt free which is quite something for an infra/renewable fund.

SB, I’ve gotta be honest I dont think the board have many options open to them. The 10 & 30 year gilt are currently 4.75% & 5.36% respectively so unless we get several rate cuts then risks assets like INPP and others are gonna struggle to attract buyers. The £800 million discount you mention is staggering and equates to how much per share? Be interesting to know what the uplift would be if the business was sold at nav. I agree that they need to look at further realisations and also make a statement to the effect that they are exploring all options.

I’ve literally just received a reply from their investor relations department, let me read through and I’ll come back to you, best wishes, blackfriars

Hi SB, think we posted within a minute of each other……….

Given the relentless share price capitulation over any time frame you care to look at, ie, 1,3,5 years, management must come up with something with their results on the 27th March other than another larger buyback to arrest the decline. The annual increased dividend is to be applauded but this has come at the cost of large capital losses for shareholders. Management have been talking enthusiastically about the £260 million raised from asset sales over the past 18 months at or above nav. That being the case and given the fund is debt free and with a discount to nav approaching 30% its possibly time for the board to hoist the for sale sign. BBGI being sold above nav is surely a guide to what could be achievable. Seems pointless to continue running the fund to pay a dividend at the cost of a continued capital losses.

Cpt Hornblower, I should have mentioned the 9% yield and support from the buybacks, I can see these easily going thru £3.00 again. Thisis the first buyback I can remember in the 20 odd years I’ve been holding them and the recent past you mention will have zero bearing on the future given the scale of the buybacks this financial year.

Hi Cpt. Hornblower,

You’re very definite about the shares being much lower later in the year.

Historically this may have been the case but with a £500 million buy back commencing today and another £1 billion commencing when the Japanese deal goes through this isn’t a share I’d want to be short on. As a read across I was buying Aviva shares below £3.00 before similar corporate action took place, ie, businesses sold off and large buy backs. Not too dissimilar to what’s currently going on at LGEN with the CALA and American insurance sales.

From this mornings RNS, the board are looking to return over 40% of market cap from 2025 to 2027. This has echoes of the Aviva turnaround and not a share I’d be selling………

Returning capital to shareholders

As noted, the Board intends to return more to shareholders over 2024-2027 than the equivalent of maintaining a 5% per annum growth in dividend per share (DPS). This is intended to be achieved through a combination of dividends, ongoing and incremental buybacks. In line with that, full year DPS growth is confirmed at 5%, with a final dividend of 15.36p and a full year dividend of 21.36p. As stated previously, from 2025 we intend to grow DPS at 2% per annum out to 2027.

In 2024, we completed the announced buyback of £200m and today we announce a buyback of £500m. The increase compared to 2024 reflects more capital efficient UK PRT written in 2024 and a return of the capital release from the sale of Cala.

In February this year, we announced the intention to carry out an additional £1bn buyback commencing after the completion of the sale of our US protection business and creation of our strategic partnership with Meiji Yasuda.

Overall, we intend to return the equivalent of c. 40% of market cap[13] to shareholders over 2025-2027 through a combination of dividends and buybacks. All future capital returns will be subject to the market environment, our views on solvency buffers, and regulatory approval.

Just released at 1pm………

Morning Guitarsolo and likewise, good to read some informative and reasoned thought from others on this board. Funnily enough I have a strange feeling that the new Achilles vehicle is looking at INPP with a view to some sort of activism. I could be completely wide of the mark as the same could be said for a dozen other renewable/infra funds but given their highly quality portfolio it would be remiss of them not to be looking. As an aside I noticed 50 million + shares in INPP were traded yesterday which is multiples of the average daily volume, best wishes, blackfriars

SB, thanks for your take on INPP. I emailed them this morning to ask for more colour on their other plans outwith the “extend and expand” buyback. So close to results there will be nothing informative from them but I like to make them aware that their shareholder base is made up of more than institutional shareholders. I was hoping that given the BBGI takeover above nav management would be re-examining the valuations of their top 10/20 holdings like Cadent and Thames Tideway as a means of providing support for the investment case. However I guess that might be counterintuitive as these assets might be more valuable than INPP’s carrying value thus providing more ammunition for a break up of the fund.

Hi SB,

One other thing, is the 25% share price discount to nav the new normal with 10 year and 30 year gilts at 4.72% and 5.28% respectively and inflation on an upward curve? A number of renewable infrastructure funds have signalled recently that all options are being considered (see BSIF and FSFL). My take on recent RNS is that both are considering M&A and a possible outright sale. With 30 year gilts yielding over 5% you can see why there are no buyers for infrastructure investment funds and it may be a case that there is more value in breaking up INPP than soldiering on with a huge discounts to nav. Interesting to hear your take, thanks, Blackfriars

The £60million buyback hasn’t touched the sides and I’ve noticed it coming to and at the end of Q1 they are only purchasing around 40k shares per day. For an IT with a £2 billion capitalisation the current buyback has had no effect whatsoever. If they are going to repeat into Q2 they really need to up the ante in terms of the size of the buyback, ie, £100 million. The CDF facility was fully re-paid in Jan 24 and remains undrawn so they could facilitate a larger buyback using the proceeds from any further assets sales.

Can’t for the life of me think that there is only one suitor out there for AGR.

Given their long term inflation linked rents, high occupancy levels, low cost of debt and annuity type returns there must be other pension schemes looking at AGR and PHP.

I guess we’ll find out on or before the 15th March but as I’ve mentioned before, not sure why AGR and PHP are not trying to merger and create a really substantial business. The cost savings would be significant and given PHP’s focus on the Irish market an obvious area for growth with lower cost of EU debt and inflation linked rents. SUPR have expanded into the French supermarket market sighting lower cost of debt and higher margins.

28k shares purchased by Senior Executive of the Operations Manager today