Distributable income is better metric for assessing Keppel Infrastructure Trust’s performance
Profit after tax not as relevant a metric for business trusts such as KIT
I REFER to the article “Keppel Infrastructure Trust reverses into the red with a loss of S$23.9 million in H1 2024” (BT, Jul 26), which highlights profit after tax (PAT), a metric that is not as relevant to a business trust such as Keppel Infrastructure Trust (KIT).
As investors in a business trust, KIT’s unitholders are more focused on steady, predictable and recurring cash distributions, which are paid out of the trust’s operating cash flows. This is unlike companies, which may only make dividend payments out of accounting profit.
Therefore, the ability to pay distributions from cash flows is important for business trusts, such as KIT, which is focused on generating stable and resilient operating cash flows that support distributions to unitholders.
Due to depreciation, which is non-cash in nature, some of KIT’s infrastructure assets may record lower accounting PAT or even a loss, while their cash flows remain positive and contribute to the pool of distributable income (DI) from which KIT pays out distributions.
The more relevant indicator of KIT’s performance to unitholders is therefore DI, which is derived from the cash flows generated by the trust’s underlying assets and businesses.
To help our stakeholders better understand KIT’s performance from a DI perspective, the trustee-manager regularly discloses the reconciliation of PAT to DI by segments in KIT’s financial results presentations.
For the first half of 2024, the trust reported very good operational performance as well as contributions from new acquisitions, such as Ventura and the German solar portfolio, which were completed earlier this year.
The trust’s H1 2024 DI, after adjusting for timing differences as well as one-offs, was S$117.8 million, 2.1 per cent higher year on year compared to H1 2023’s DI of S$115.4 million on the same basis, reflecting the better underlying operational performance.
Accordingly, KIT declared a higher distribution per unit (DPU) of 1.95 Singapore cents for H1 2024, an increase of 1 per cent year on year.
It would thus have been preferable for the article to highlight KIT’s DI and DPU, which are more meaningful indicators of KIT’s performance as a business trust.
Kevin Neo Chief executive officer, Keppel Infrastructure Fund Management Trustee-Manager of Keppel Infrastructure Trust
