Foresight Environmental Infrastructure (LSE:FGEN), the environmental infrastructure investor, has reported what it described as a “solid” first half as its mix of green-energy projects continued to throw off cash despite a tougher backdrop for the sector.
Ed Warner, the company’s chair, said the portfolio “continues to generate strong cash flows, providing a dependable foundation for dividend growth and long-term value creation.”
He added: “We remain on track to meet our full-year dividend target, supported by proactive portfolio management and disciplined follow-on investments that unlock further value.”
FGEN invests in privately-owned environmental assets across the UK and Europe.
These include anaerobic digestion plants, which turn organic waste into gas, as well as aquaculture projects and renewable-fuel infrastructure.
These sorts of assets tend to produce steady returns once they are up and running, although valuations can be sensitive to changes in power-price forecasts and wider shifts in the energy market.
The company’s net asset value, or NAV, which represents the total value of its assets minus its liabilities, stood at 104.7 pence per share at the end of September.
This compared with 106.5 pence at the end of March. After paying dividends, that worked out as a NAV total return of 2.0% for the half-year. Since listing, the annualised NAV total return has been 7.2%.
FGEN said it was still on course to deliver its full-year dividend target of 7.96 pence. On the company’s share price at the reporting date of 70 pence, which represented a yield of 12%.
Operationally, the business delivered what it described as strong performance, with the portfolio generating dividend cover of 1.22 times during the period after accounting for debt repayments at the project level.
Where assets beat budget, the company said this was driven in part by its anaerobic digestion facilities, which continued to perform well.
Its growth assets, meaning newer projects that are expected to increase in value over time, also moved forward.
CNG Fuels, which supplies renewable biomethane for heavy goods vehicles, increased the number of trucks using its network and “maintained profitability”.
FGEN said its Rjukan aquaculture site had become fully operational and delivered its first trout harvest. The Glasshouse, a large indoor horticulture facility, continued to add new customers and is targeting cash-flow breakeven later this year.
The change in NAV over the period reflected several pushes and pulls. Lower power-price forecasts reduced the NAV per share by 1.0 pence, while inflation added 0.8 pence.
Share buybacks, which reduce the number of shares in circulation and can lift the NAV per share, contributed a 0.7 pence uplift. Other movements, including the impact of discount-rate unwinding and fund costs, added 1.8 pence.
Net assets stood at £652.7 million, compared with £678.7 million in March. Profit before tax for the half-year was £9.5 million. This compared with a £2.8 million loss for the previous full financial year.
Warner reiterated that FGEN was “fully committed, alongside our investment manager, to closing the discount to NAV and ensuring that FGEN’s share price more accurately reflects the intrinsic value of its portfolio.”
The discount refers to the gap between the value of the underlying assets and the lower price at which the shares trade. This has become a persistent issue for many listed investment trusts in the current market.
The company said its half-year report had been submitted to the National Storage Mechanism and would shortly be available there and on its website.