GCP Infrastructure (GCP) is poised to repay its remaining debts and hit a target of returning £50m to investors after exchanging contracts for the £47.5m sale of social housing properties.  

The disposals to one buyer represent the large transaction that shareholders were waiting for as the £634m investment company pursues a capital allocation policy adopted just over two years ago to de-risk the portfolio and prioritise returns. 

The transaction should complete next month when the acquirer finalises its lending arrangements.

GCP said the proceeds would repay £47.5m of loans and generate an immediate cash payment of £43m which was “materially” in line with net asset value (NAV) at both 30 September and 31 December. 

That would enable the company to clear the £24m drawn on its rolling credit facility. It takes total disposals and cash proceeds since December 2023 to £128m and closer to the £150m target. Further announcements on how capital will be returned to shareholders will follow in due course. GCP has returned £24m through share buybacks as well as paying 7p in annual dividends, for which it today declared a 1.75p per share payment for the last quarter.

The portfolio was comparatively stable in the last quarter of the year with NAV per share dipping 1.3p to 100.27p at 31 December from 101.4p at 30 September. 

Last week’s government announcement that ROC and FIT incentive payments would switch from the retail prices index to the lower consumer prices index reduced NAV per share by 0.53p, as previously indicated. 

Further falls in power price forecasts also knocked 0.53p off the valuation, while curtailment of wind farms in Northern Ireland and the unwinding of discount valuation rates lowered NAV per share by 0.44p.

These were partly offset by 0.37p in gains to NAV per share from higher inflation forecasts, power generation and buybacks of GCP’s cheap shares, which at 75.6p stand around 25% below the new NAV.

GCP Asset Backed Income (GABI), a sister fund run by Gravis Capital, also benefited from the property sales which enable it to repay £19.2m of loans.

Our view

James Carthew, head of investment company research at QuotedData, said: “It is great to see GCP Infrastructure delivering on its asset sale programme and without a hit to NAV. The sale generates enough cash to repay the balance of its revolving credit facility and fund its ongoing share buyback programme. The very modest impact of the change to subsidy inflation and falling power prices reflects the deals it has already done to reduce sensitivity to power prices. The discount is too wide but, as a shareholder, I am very happy with a solid-looking 9%+ yield.”