HICL Infrastrct PLC - Interim Update Statement
"HICL" or "the Company" and, together with its subsidiaries, "the Group", the
Interim Update Statement
"I am pleased with the solid progress the Company has made in the period, in both the management of the existing portfolio and the execution of its investment strategy. Importantly, we have continued to ensure that our infrastructure assets have remained available for the communities they serve throughout the pandemic.
"Operational performance of HICL's demand-based assets has been reassuring in the context of the gradual easing of travel restrictions. Revenue on the toll roads is ahead of expectations at the current time, underlining that these investments benefit from strategically important positioning in their respective regions.
"There is continued market appetite for high quality, core infrastructure assets. The Investment Manager has been actively pursuing attractive investment opportunities, with the Company announcing accretive acquisitions in the period, demonstrating HICL's commitment to its strategy of delivering stable and socially responsible long-term returns from core infrastructure investments at the lower end of the risk spectrum.
"The Company has today announced an equity fund raising at an issue price of 164p, a discount to the pre-announcement share price of 5.7%, to pay down the Revolving Credit Facility in respect of these investments and to provide additional resources to fund HICL's near-term pipeline of attractive opportunities."
- The Group has a portfolio of 118 investments located in the
UK, continental Europeand North America.
June 2020, the Company announced the completion, by Diamond Transmission Partners("DTP"), of the acquisition of the transmission assets associated with the Walney Extension Offshore Windfarm located in the Irish Sea. DTP is a consortium comprising HICLand Diamond Transmission Corporation Limited(a subsidiary of Mitsubishi Corporation) and Chubu Electric Power Company Netherlands B.V.(a subsidiary of Chubu Electric Power Co., Inc).
June 2020, the Company also announced the acquisition of a further 74% interest in Holdfast Training Services Limited("Holdfast"), a public-private partnership ("PPP") project that supports the Royal School of Military Engineering. The 30-year PPP was signed in August 2008and covers the design, construction, refurbishment and maintenance of a number of buildings and training areas across three UKlocations on behalf of the UK Ministry of Defence.
- PPP projects represented 72% of portfolio value at
31 March 2020. Activity during the period has been focused on active asset management, particularly ensuring that the portfolio's hospitals, emergency services and schools projects have been fully supported as they deal with stakeholder requirements to respond to the Covid-19 pandemic and subsequently to transition back to business as usual operations over time.
- The Group's demand-based investments represented 20% of portfolio value at
31 March 2020. The table below shows the reduction in revenue levels versus budgeted pre-Covid-19 levels for the quarter ended 30 June 2020, across the three largest GDP-linked demand-based assets:
(for the period
31 Mar -
(for the period
31 Mar -
| || |
High Speed 1,
1 Traffic volumes used as a proxy for revenue over these time frames for Northwest Parkway.
2 Estimate, based on latest available management information.
- The gradual easing of lockdown conditions in
Europeand North Americahas enabled traffic on the Company's two toll roads, the A63 Motorway ( France) and Northwest Parkway ( USA), to commence their recovery earlier than assumed in the March 2020Valuation. The improvement in traffic levels is encouraging and has added to the financial resilience of the assets. Importantly, this recovery reconfirms the strategic positioning of these assets in their respective regions to facilitate, and benefit from, the resumption of movement and economic activity in these areas. Notwithstanding the positive trajectory, we remain mindful that the recovery has a significant course to run and any resumption of restrictions to contain further pandemic waves would weigh on asset performance.
- In relation to High Speed 1 ("HS1"):
¾ Contracted train path access charges in relation to HS1's international and domestic services (32% and 68% respectively of annual track access revenue in the year to
¾ In relation to international services beyond this point,
¾ Domestic train path bookings remain at 100% of the budgeted level, with pre-bookings received out to
¾ Contracted track access charges to
- Regulated assets represented 8% of portfolio value at
31 March 2020. The acquisition of the Walney OFTO in June 2020marks the fourth offshore transmission asset in the portfolio. These facilitate, in aggregate, the transmission of green energy to over 1.7m UKhomes and are actively supporting the UK'stransition to a low carbon future.
- While Covid-19 has presented challenges to the performance of Affinity Water in some areas, something which the regulator has acknowledged across the water sector, the company has been agile in its response to the virus and continues to engage with the wider industry and Ofwat. The company has implemented working from home for many staff and rigorously developed and implemented Covid-19 safe working protocols for water production and network operations, to be able to continue to deliver essential activities, outside of work in customers' homes. Affinity Water has been working closely with communities and other utilities, supporting customers through payment plans, prioritising vulnerable customers and supporting those facing financial difficulties possibly for the first time, which the company has provisioned for.
Dividends and Financing
- The Company announced a final quarterly interim dividend for the financial year ended
31 March 2020of 2.07 penceper Ordinary Share (the "Q4 Dividend") on 13 May 2020. The shares went ex-dividend on 4 June 2020and the Q4 Dividend was paid on 30 June 2020. The interest streaming percentage for the Q4 Dividend was 39%, bringing the total streaming percentage for the financial year ended 31 March 2020to 54%, in line with the Directors' expectation of approximately 60%, as outlined in the Company's Prospectus dated 4 March 2019.
- The Company announced a first quarterly interim dividend for the financial year ending
31 March 2021of 2.06 penceper Ordinary Share (the "Q1 Dividend") on 15 July 2020. The interest streaming percentage for the Q1 Dividend will be 56%.
- The Board remains comfortable that cash generation from the portfolio remains in line with forecast and re-affirms the target dividend guidance of
8.25 penceper Ordinary Share for the financial year to 31 March 20213.
- Based on previously announced acquisition activity and advanced pipeline opportunities, the Company has announced today its proposal to raise additional equity capital through the issue of new Ordinary Shares by way of non-pre-emptive tap issuance, priced at 164.0p per Ordinary Share.
- As at 15
July 2020, the Company's issued share capital consists of 1,863,642,769 ordinary shares of 0.01p each, all of which carry voting rights.
- Following the Company's
July 2020Annual General Meeting ("AGM") when shareholders granted the Board authority to issue up to 10% of outstanding shares on a non pre-emptive basis, the Company's current tap capacity is approximately 186.4m shares (limited by the AGM authority), prior to the proposed additional capital raising announced today.
- The next valuation of the Group's portfolio will be as at
30 September 2020and will be published as part of the Company's Interim Results in November 2020.
- Institutional investors continue to view core infrastructure as an important source of stable income during a time of uncertainty, and current asset pricing reflects this. If current market conditions are sustained, and the downward pressure on discount rates observed at the beginning of the year (as discussed in the Company's
May 2020Annual Report) persists, this would be expected to be recognised in the September 2020Valuation.
- After a period of volatility during
March 2020, interest rates have settled at a lower level than earlier in the year which, if sustained to September 2020, are expected to be reflected in the valuation assumptions.
- Within the portfolio, based on current information, each of the following is expected to have an immaterial impact on the
¾ An increase in the liability for the remediation of construction quality issues at one of the portfolio's healthcare assets, where the responsibility for resolution resides with the Group.
¾ The remainder of the PPP portfolio is expected to deliver outperformance in the period, driven by accretive investment and lifecycle savings.
¾ As disclosed in the Company's
Company and Governance
- The Company's Annual Report for the year ended
31 March 2020was published on 20 May 2020, and copies were posted to shareholders who elected to receive a printed copy.
- The Company held its Annual General Meeting ("AGM") on
14 July 2020. All resolutions were passed with a substantial majority.
- As in previous years, and aligned to corporate governance best practice, the existing Directors offered themselves for re-election at the AGM on
14 July 2020and were duly re-elected. Ms Rita Akushie was appointed to the Board effective from 1 January 2020. She was proposed for election at the July 2020AGM, and was duly elected by shareholders.
- An updated Key Information Document, based on the costs disclosed in the
May 2020Annual Report, was published on the Company's website on 4 June 2020.
Market and Outlook
- Whilst uncertainty stemming from Covid-19 continues to create a degree of volatility in financial markets, the resumption of transaction activity in the sector demonstrates continued investor appetite for core infrastructure assets. InfraRed has, and will continue to, pursue acquisitions in line with HICL's stated strategy and execute on its attractive pipeline of opportunities, in line with HICL's objective of growing a diversified portfolio of investments in assets that share underlying characteristics of cash flow quality, defensive market positioning and criticality.
- The pipeline remains focused on HICL's core geographies (
UK, Europe, North Americaand Australia/ New Zealand) and comprises further investments within HICL's existing sectors, as well as sectors essential to the functioning of a modern economy (e.g. infrastructure to support the energy transition and communications infrastructure), where these meet the Company's clearly defined core infrastructure characteristics.
- The Investment Manager and the Board will also continue to consider opportunities to make accretive disposals where these improve portfolio construction. Overall, the Company continues to be well-positioned to identify and act on new opportunities to further enhance the Company's portfolio construction and improve key portfolio metrics.
3 This is a target only and not a profit forecast. There can be no assurance that this target will be met.
Teneo +44 (0) 7342 031051 / [email protected]
With a current portfolio of over 100 infrastructure investments, HICL is seeking further suitable opportunities, which are positioned at the lower end of the risk spectrum within core infrastructure.
Further details can be found on the HICL website www.hicl.com.
Investment Manager (
The Investment Manager to HICL is
The infrastructure investment team at InfraRed consists of over 90 investment professionals, all with an infrastructure investment background and a broad range of relevant skills, including private equity, structured finance, construction, renewable energy and facilities management.
InfraRed implements best-in-class practices to underpin asset management and investment decisions, promotes ethical behaviour and has established community engagement initiatives to support good causes in the wider community. InfraRed is a signatory of the Principles of
Further details can be found on InfraRed's website www.ircp.com.
This information is provided by RNS, the news service of the
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