3i Infrastructure Posts 4.5% Half-Year Return, NAV at 416.4p

3i Infrastructure (LON:3IN) delivered a 4.5% total return for its fiscal first half and confirmed it remains on track to meet full-year return and dividend targets, with net asset value rising to 416.4 pence per share. Total income and non-income cash distributions reached £195 million, up 61% year on year, while the portfolio itself returned almost 6% over the period on a £3.6 billion valuation. The board declared an interim dividend of 7.15 pence per share — exactly half of the 14.3 pence fiscal 2027 target.

For practitioners, the half-year numbers signal a fund executing without recourse to new equity. "We remain on track to achieve our annual return target of 8% to 10%," Bernardo Sottomayor, managing partner and head of European infrastructure, told the earnings call. He credited a diversified portfolio in which gains at some businesses offset flat valuations at two others.

What drove portfolio earnings?

Underlying portfolio company EBITDA (earnings before interest, taxes, depreciation and amortization) grew more than 12% on a like-for-like basis in the 12 months to June — a calculation covering only businesses held through both comparison periods and excluding TCR, which was sold during the half. Portfolio companies invested more than £300 million in growth capital expenditure over the same window, largely against contracted revenues.

At June the portfolio carried an average EBITDA margin of 43% and cash conversion of 87%, figures that exclude any contribution from newly acquired LMD. The portfolio was valued at £3.6 billion at the half-year point.

On LMD, 3i completed the acquisition and then bought most of a minority co-investor's remaining stake, lifting its managed holding to 90%. Sottomayor flagged potential expansion, including rights to two nearby plots already in the queue for power.

How did the TCR sale reshape liquidity?

CFO James Dawes said the completed TCR sale, followed by the LMD investment, left the company with £269 million in cash at the end of September. Including an undrawn revolving credit facility, available liquidity reached up to £1.2 billion.

Dawes put the longer track record in context: 3i has realized £4.4 billion from asset sales since fiscal 2016, at an average uplift of 37% over carrying valuations — a comparison that frames how disposals have funded acquisitions without new equity issuance.

Debt metrics moved in opposite directions. Five portfolio companies have refinanced since March, raising or refinancing £1.3 billion in total, and Dawes said no significant refinancing requirements fall due over the next three years. Average loan-to-value held at 35%, while the weighted average cost of debt rose 0.7 percentage points from the prior year-end to 5.5%.

Net asset value totaled £3.8 billion at the half-year end. A £26 million foreign-exchange gain after hedging more than offset adverse currency movements in the capital return. The weighted average valuation discount rate stood at 11.3%, slightly above the prior year-end.

What are the pipeline and outlook signals?

At power producer Infinis, 3i acquired three ready-to-build solar projects in Northamptonshire. Sottomayor said the business expects to bring 274 megawatts of new solar capacity into operation in 2027 and has started construction on a 42-megawatt battery storage project backed by a 10-year floor power purchase agreement.

After the period closed, Future Biogas agreed to acquire the remaining 49% stake in six anaerobic digestion plants from FGEN. Full ownership, Sottomayor said, allows the business to pursue expansions and upgrades while retaining the full economics for 3i Infrastructure.

Asked by an analyst about FLAG, the Europe-to-Asia cable network, Sottomayor said demand extends beyond AI workloads to hyperscalers, telecom carriers and data-center connections. "All signs point to continued strong demand," he said.

At offshore services business ESVAGT, trading was robust — particularly in emergency response vessels — but completion of three offshore wind service vessels under construction slipped. Revised timing is reflected in cash-flow projections, with a busy period of new vessel tenders expected next year.

Dawes said the fiscal 2027 dividend target is expected to be well covered, including by non-income cash distributions. The interim dividend goes ex-dividend on Nov. 26 and is payable on Jan. 11.

3i Infrastructure plc is a Jersey-incorporated, closed-ended investment company and approved UK Investment Trust, listed on the London Stock Exchange and regulated by the Jersey Financial Services Commission. Its investment manager, 3i Investments plc, a wholly-owned subsidiary of 3i Group plc, is authorized and regulated by the UK Financial Conduct Authority.