Net Asset Value(s)

RNS Number : 9964C

RM Infrastructure Income PLC

17 October 2022

 

RM Infrastructure Income Plc

("RMII" or the "Company")

LEI: 213800RBRIYICC2QC958

Net Asset Value

NAV & Share price performance The Company's NAV % Total Return for the month of September was -0.37%, which brings the NAV % Total Return for the quarter to +0.72%. The NAV % Total Return over the last twelve months was +2.73%, since January 2020 pre-COVID-19 pandemic the NAV % Total Return has been +14.81%, since January 2022 the NAV % Total Return has been +3.42% and inception to date has been +35.19%. The Ordinary Share NAV as at 30th September 2022 was 92.726 pence per share. This monthly NAV return of -1.971 pence per share arose primarily from the ex-dividend effect of the 1.625 pence per share ordinary dividend for the period Q2 2022, declared in August 2022 and paid in September 2022. Otherwise, there was positive interest income, net of expenses, of 0.469 pence per share and a decrease in portfolio valuations of 0.815 pence per share. The decrease in portfolio valuations arose due to the mark to market of Level 2 assets and an increase of 50bps of yield attributed to the fixed rate Level 3 assets to reflect some of the increase in the underlying government yield curve which moved dramatically higher over the month of September, particularly after the mini budget. Summary for September 2022 (pence per share) Net interest income +0.469p Change in portfolio valuations -0.815p Payment of Dividend (Q2 2022) -1.625p Net NAV Movement -1.971 p The net interest income includes an accounting adjustment during the month of September, and would have been circa +0.523p without it. The closing mid-market share price at the quarter-end was 85 pence which is 2 pence lower than the opening mid-market share price at the start of the year and represents a total shareholder return12 of +2.53% over the twelve months to 30th September 2022.   Market Update Credit spreads closed the period slightly wider and saw significant volatility with an initial Markit ITRX European Crossover Index tightening from 590 into 460 before moving to close the quarter at 640. The real story was in the rates markets as UK government bond yields rose steadily through the quarter and then accelerated significantly after the mini budget. As the yield increases accelerated, Liability Driven Investment "LDI" strategies sold assets to meet margin calls which put further pressure across all risk assets and in particular UK government bonds. This doom loop was stabilised by the Bank of England intervening in the UK government bond market, however, systemic risk is now back on investors' minds. It is also notable that the shape of the UK yield curve moved as the spread between 2 year and 10 year gilts started the quarter at circa +35bps and closed the period at -20bps. This is a leading indicator of recession within the UK and is an indicator of weak credit and growth.  RMII has significantly outperformed benchmark loan and bond indices year to date, in FY2022 with a share price total return of -5.56% versus  -13.60% for the S&P European Leverage Loan Index Total Return and -25.74% for the Ishares Core Corp Bond UCITS ETF GBP. Total Return YTD ITD RM Infrastructure Income NAV +3.42% +35.19% RM Infrastructure Income Share Price -5.56% +22.40% S&P European Leveraged Loan Index -13.60% -0.10% Ishares Core Corp Bond UCITS ETF GBP -25.74% -21.65% Portfolio Update The Investment Manager remains confident with regards to the low interest rate sensitivity of the portfolio, despite the persistently high inflation levels and likely further interest rate hikes by global central banks. This is largely driven by the short duration nature of the portfolio which is currently 1.70 years which in turn means that loans can be repaid relatively quickly and reinvested at higher yields. The Investment Manager has continued to focus on investments under its enhanced monitoring list and during the third quarter of 2022 the Investment Manager, reached positive outcomes for two of the three investments: · Social Infrastructure - Student Accommodation, Ref 68 : A wholly-owned purpose-built student accommodation property based in Coventry (80 beds). After extensive remedial works, predominantly required by non-compliant cladding, the Company has now successfully received approval from the relevant authorities to occupy the property which is now being tenanted by students. We note that the property benefits from a number of key attributes that will enable it to outperform in a stagflation environment; namely (i) the property offers low weekly rates (sub £100/week) which should lead to high demand with residents with lower disposable income and (ii) the property benefits from solar rooftop panels providing direct power to the building and its appliances. In addition, the Company has served its legal claim letter to the former main contractor, with a claim amount in excess of £3m (c.2.5p/share). This claim has not been valued yet within the Company's NAV. · Environmental Infrastructure - Energy Efficiency, Ref 62 & 63 : Loans to a business that sells energy-efficient heating & cooling devices (electric boilers, air source heat pumps etc.). The loan has been reduced by approximately £600,000 over the quarter as the borrower has conducted asset sales. It is expected that this loan balance will continue to reduce over the final quarter. Operationally the business is trading well with several new material buyers of zero carbon home heating products (electric boilers & Air Source Heat Pumps "ASHP") contributing to profitability. The last investment remaining under RM's enhanced monitoring list relates to the Clyde St investment, a Glasgow-based hotel development (Ref 58, 79, 80 & 92). The Borrower has been facing well-publicised construction delays driven by inflationary pressures, supply chain issues and labour shortages within the construction sector. The result of this is evidenced by their inability to reach practical completion within the previously forecasted timing. Limited works remain to be completed on site, as such, with practical completion now confirmed to be at year-end 2022, and, the Operator, Virgin Hotels, has started to market the rooms for this year-end. In terms of new investments, scheduled drawdowns and repayments / prepayments during the reporting quarter, activity was limited as outlined below: Increased investments · Social Infrastructure - Aged Care, Ref 88 : c.£950,000 · Social Infrastructure - Health & Well-being, Ref 76 : £12,500 · Environmental Infrastructure - Energy Efficiency, Ref 96 : £400,000 New Investments · Social Infrastructure - Childcare, Ref 95 : £3,000,000 Repayment: · Non-Core - Other Manufacturing, Ref 62: c.£780,000 · Social Infrastructure - Health and Well-being, Ref 94: c.£56,000 · Environmental Infrastructure - Renewable Heat Incentive, Ref 9&52 : £140,000 Partial Divestment · Social Infrastructure - Health and Well-being, Ref 15 (Voyage Care 1L): £2,500,000 A quarterly update webinar from the Investment Manager can be viewed via the following link https://rm-funds.co.uk/2022/10/rmii-third-quarter-investor-update/ and on the RM Funds website.

The Company also announces that the Monthly Report for the period to 30 September 2022 is now available to be viewed on the Company website:

https://rm-funds.co.uk/rm-infrastructure-income/rm-funds-investor-monthly-fact-sheets-2/

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For further information, please contact:

RM Capital Markets Limited - Investment Manager

James Robson

Thomas Le Grix De La Salle

Tel: [phone]

Sanne Fund Management (Guernsey) Limited - AIFM

Chris Hickling

Shaun Robert

Tel: [phone]

Tulchan Group - Financial PR

Elizabeth Snow

Oliver Norgate

Tel: [phone]

Sanne Fund Services (UK) Limited - Administrator and Company Secretary

Brian Smith

Ciara McKillop

Tel: [phone]

Singer Capital Markers Advisory LLP - Financial Adviser and Broker

James Maxwell

Asha Chotai

Tel: [phone]

Peel Hunt LLP - Financial Adviser and Broker

Luke Simpson

Liz Yong

Tel: [phone]

About RM Infrastructure Income

RM Infrastructure Income Plc ("RMII" or the "Company") is a closed-ended investment trust established to invest in a portfolio of secured debt instruments.

The Company aims to generate attractive and regular dividends through loans sourced or originated by the Investment Manager with a degree of inflation protection through index-linked returns where appropriate. Loans in which the Company invests are predominantly secured against assets such as real estate or plant and machinery and/or income streams such as account receivables.

For more information, please see

https://rm-funds.co.uk/rm-infrastructure-income/

 

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