Sequoia Economic Infrastructure Income Fund reports resilient FY25 results

Sequoia Economic Infrastructure Income Fund Limited (LON:SEQI) has annnounced its final Results for the year ended 31 March 2025

* Cum dividend

** Includes the dividend paid in May 2025 in respect of the quarter ended 31 March 2025 and excludes the dividend paid in May 2024 in respect of the quarter ended 31 March 2024 (2024: includes the dividend paid in May 2024 in respect of the quarter ended 31 March 2024 and excludes the dividend paid in May 2023 in respect of the quarter ended 31 March 2023)

KEY HIGHLIGHTS

·    Diversified portfolio of predominantly senior secured loans targeting yields of 9-10%

o  Additional £328 million of new loans made favouring highly defensive sectors to retain diversification and capture attractive income opportunities

o  Improved credit quality of portfolio; increased proportion of senior secured loans to 59.9% (2024: 58.6%) 

·    Reduced proportion of NPLs to 1% of NAV (2024: 5.4%) following successful recovery

o  Change in NAV driven by interest income, offset by a 1.45p Ordinary Share write-down of one NPL and operating costs of c.1%

o  Full recovery, including accrued interest, expected on Bulb Energy loan, exited Glasgow property loan with potential for future earn outs, and received final payment on Salt Lake loan 

·    Resilient portfolio generating substantial cash, despite challenging market environment

o  Dividends totalling 6.875p per Ordinary Share (2024: 6.875p); Dividend cash cover of 1.00x (2024: 1.06x) 

·    Proactive management of share price discount to NAV with share buyback delivering a positive NAV gain of 0.70p per Ordinary Share

o  70.4 million Shares repurchased over the financial year representing £55.9 million (2024: £88.2 million) and 213.2 million Shares repurchased since the beginning of the programme 

·    Well positioned for falling interest rates with 59.4% of portfolio in fixed rate investments (2024: 57.9%), locking in current higher interest rates

o  Short weighted average maturity of 3.6 years enables ongoing reinvestment of capital at higher prevailing rates 

·    ESG score of the portfolio increased to 64.70∆ (2024: 62.77)​

o  Driven by new loans and active engagement with borrowers

James Stewart, Sequoia Economic Infrastructure Income Fund Chair, commented:

“Our performance demonstrates the resilience of the Fund in the face of a challenging market environment. We continue to generate significant cash and have continued to deploy funds into the pipeline of opportunities, further diversifying and enhancing the credit quality of the portfolio through new loans. This is in addition to our ongoing share buyback programme that has been active throughout the year.

The Fund remains well positioned against the ongoing volatile macroeconomic conditions, and with 59% of our portfolio locked in at fixed interest rates, we are well placed to meet target returns even if interest rates continue to fall. The high levels of global demand for infrastructure capital mean we have a strong pipeline of investment opportunities, and we will maintain our highly selective approach, focusing on infrastructure assets with defensive characteristics.

SEQI celebrated its tenth anniversary of listing on 3 March 2025. We have come a long way over the past decade, and I would like to thank our shareholders for their continued support. We operate in challenging times but remain confident in our continued ability to deliver strong risk-adjusted returns for investors.”

Randall Sandstrom, Director and CEO/CIO, SIMCo, said:

“Demand for infrastructure funding remains significant, and levels will only increase over the next year, driven by global mega-trends of decarbonisation, digitalisation, and deglobalisation. Private debt has a vital role in bridging the persistent funding gaps, as regulatory constraints have reduced the capacity of banks to meet borrower needs. This is encouraging for the Fund’s pipeline and future performance.

As central banks in the US, UK and Europe continue to implement interest rate cuts, the Fund’s floating rate investments should continue to de-risk. The transition towards a lower-rate environment will enable our investments to benefit from an accelerated pull-to-par, with market prices rising more quickly towards par value as the discount rate used to value future cash flows falls. We remain confident that the dividend is sustainable, reflecting the strong pipeline of investment opportunities and the yields available on private infrastructure debt.”