3i Infrastructure (3IN ) has outpaced its return target again but eyes are on the disposal of its waste management asset Attero, which will help it pay down its large debt pile.

Full-year results for the £2.9bn infrastructure giant announced yesterday showed its underlying net asset value (NAV) rose 10.8% in the year to 31 March, incuding a 3.2% gain since September. With dividends included, there was a total investment return of 14.7%, outstripping the 8-10% annual target return 3i fund managers Scott Moseley and Bernardo Sottomayor aim for.

The 3.4%-yielder declared a fully-covered full-year 2023 dividend of 11.15p and a 6.7% increase in the 2024 dividend target to 11.9p per share.

The returns add to the strong track record laid down by the investment company since it adopted a ‘core-plus infrastructure’ investment strategy in 2015, with NAV total returns of 19% a year since then.

The managers said the focus is on identifying companies that benefit from ‘long-term structural growth trends’ and that typically have earnings ‘positively correlated to inflation, as well as growing in real terms’.

Renewable energy-generating companies Infinis, Valorem, and Attero all performed strongly in the year and progressed their pipelines. Offshore fibre optic cabling group Tampnet also reported higher forecast revenues on new network contracts as well as the identification of new potential growth opportunities, including increased focus on security of energy supply by government in Europe and the US. Communications service provide Global Cloud Exchange increased lease revenues and secured a managed services contract during the year. It is expected increased demand for bandwidth capacity across its network.

The active management approach of Moseley and Sottomayor also ensured they locked in debt financing at ‘attractive’ levels before the recent increases in interest rates.

‘The average level of gearing within our portfolio companies is a relatively modest 33% of enterprise value and there are no material refinancing requirements within the portfolio before 2026,’ they said.

However, Numis analyst Colette Ord, noted the company has a ‘relatively high drawn balance under the revolving credit facility’, with £501m of a £900m facility drawn down. It also has £100m of cash available from its scaled back equity raise in February.

Ord said investors will be hoping for a swift sale of Attero, which went on the market earlier this year and was valued at £144m at the end of March.’

‘The disposal process for Attero is still ongoing, and will be the next key news from 3IN,’ she added.

Christopher Brown, analyst at JPMorgan Cazenove, a joint broker to 3IN, agreed on the desirability of reducing gearing, although he said debts at a third of enterprise value were relatively modest. In a note yesterday, he lowered his estimate for the current NAV to 339.6p per share which against Tuesday’s closing price offered a discount of 4.3%.

The statement showed 3IN’s managers had invested £28m to acquire Future Biogas and invested a further £30m in Infinis to fund the development of its solar roll-out programme.

They said the portfolio is ‘generating strong earnings growth which we are confident is set to continue’.

‘Additionally, we continue to see demand for high quality infrastructure investments…among private market investors,’ they said.

‘Our active management strategy includes planning selectively to divest our portfolio companies at an optimal moment in time. The scarcity value of our assets and favourable growth positioning provide confidence in the outlook for continued value creation.’

3IN shares have traded sideways over the past year but over five years have provided a 72% total return including dividends.