Earnings call transcript: INPP reports strong H2 2025 performance with dividend growth

NAV per share rose 4.7% to 151.5p at 31 Dec 2025, producing a total NAV return of 10.6% for the year. Dividend for 2025 was 8.58p (yield ~7.1%) with targets of 8.79p for 2026 and 9.01p for 2027; operational cash dividend cover ~1.1x and ongoing charges fell to 1.09% (from 1.14%). INPP committed £254m to Sizewell C (3% stake, ~6% cash yield on invested capital) while executing ~£136m of buybacks to date (board target up to £225m); portfolio is 98% government-backed with ~70% inflation linkage, though risks include regulatory, execution and market volatility.

Analysis

INPP’s recent moves (capital recycling, share buybacks and a large regulated construction exposure) should be read as a shift in where and how listed infrastructure captures inflation and regulatory rent. The structural benefit is less about near-term NAV optics and more about stretching the duration of insured, inflation-linked cash flows versus peers that still carry higher merchant or demand risk; that subtle change makes the stock behave more like a long-duration real asset than a run-of-the-mill dividend trust.

Second-order winners are largely upstream: large-scale UK nuclear delivery will reprice and concentrate demand for specialist EPC contractors, heavy civils suppliers and long-lead mechanical components for the next 3–7 years, improving bargaining power for incumbents and creating tighter capacity that raises replacement costs for late entrants. Conversely, diversified PPP funds with higher exposure to service-performance risk will see relative valuation pressure if capital pivots into regulated-RAB projects that offer more predictable CPI-linked returns.

Key risks are political/regulatory reversal and construction execution. A policy change that reduces RAB protections or a headline construction overrun could quickly erase the “inflation hedge” premium and reopen a significant discount to intrinsic value; this is a medium-term (12–36 month) tail risk given political election cycles and program timelines. Interest-rate volatility is a nearer-term catalyst: if real yields fall, re-rating is plausible; if real yields rise, income-rich but illiquid structures can underperform despite cash generation.

For portfolio implementation, think of INPP exposure as a hybrid of long-duration real yield and concentrated project-execution risk: size exposures accordingly, hedge policy/execution risk with short-dated event-option structures or reduce per-position cash exposure, and prefer pair trades that isolate the regulated-RAB premium from broad listed infrastructure beta.

Key Decisions for Investors

• Long INPP.L (12–24 months): establish a core position size = 1–2% NAV; intent to capture RAB/regulatory repricing and dividends. Hedge construction/political tail risk by buying a 9–12 month out-of-the-money put (cost = insurance). Target IRR 8–15% net if market narrows discount and dividends are maintained; downside: headline construction or regulatory shock could compress equity by >20% in months.
• Pair trade (6–12 months): Long INPP.L / Short HICL.L (or another pure-PPP fund) to isolate RAB/inflation-linked spread. Use equal notional exposure sized to capture 200–400bp relative total return if capital rotation continues; stop-loss: 7–10% on either leg. Rationale: captures premium for regulated, long-dated cash flows vs higher operational/merchant risk.
• Options collar to express convexity (9–15 months): Buy INPP.L 12-month call spread (buy lower strike / sell higher strike) funded by selling a nearer-term call or collecting premium; simultaneously sell a deep OTM put to reduce cost. This structure offers asymmetric upside if real yields compress or Sizewell C passes key milestones, with limited premium outlay; risk = assignment on downside and loss of downside protection if put is exercised.
• Tactical supply-chain pair (3–18 months): Long select UK-listed EPC/construction suppliers with direct exposure to nuclear/civils (size small positions) and short broader construction names lacking specialist capability. Time the entry around confirmed project milestones to ride order-book re-rating; primary risk is single-project cancellations or subcontractor margin pressure.