HICL Infrastructure PLC · LSE:HICL
HICL Infrastructure — H1 2023 Earnings Presentation
47 slides from HICL Infrastructure's earnings presentation, Nov 23, 2022
Slide 1: HICL Infrastructure PLC Interim Results Presentation
HICL Infrastructure PLC Interim Results Presentation: Six Months to 30 September 2022 23 November 2022 hicl.com |
Slide 2: Important information
Important information For Investment Professionals (as defined under FSMA 2000). Individuals without professional experience in matters relating to investments should not rely on this information By attending the meeting where this presentation is made, or by reading the presentation slides, you agr
Slide 3: Agenda
Agenda Section Page Highlights and Investment Proposition 4 Financial Performance 9 Portfolio Performance 18 Investment Activity and Market Outlook 24 Concluding Remarks 30 Appendices 32 hicl.com | 3
Slide 4: Highlights and Investment Proposition
Highlights and Investment Proposition hicl.com |
Slide 5: Results Overview
Results Overview Resilient financial and operational performance ▲ 1.2p increase in NAV per share to 164.3p ▲ Annualised Total Shareholder Return of 6.7%1 despite uncertain macroeconomic and geopolitical environment ▲ Resilient performance driven by a diverse portfolio, which offers the highest infl
Slide 6: Performance Highlights
Performance Highlights Strong performance for interim period to 30 September 2022 164.3p 6.7% 0.38 NAV1 per share Annualised Shareholder Return2 Beta against FTSE All-Share3 Up 1.2p September 2021: 9.8% March 2022: 0.32 March 2022: 163.1p 9.0% annualised since IPO 1.58x / 1.03x 1.05% 8.25p Dividend
Slide 7: Compelling Investment Proposition
Compelling Investment Proposition Sustainable income and capital growth from a diversified core infrastructure portfolio >100 assets Specialist infrastructure investment manager Diversification Largest asset 7%1 $14bn+ 25+ 20m+ people Sustainability Equity under Years of investment access HICL’s inf
Slide 8: HICL's Vision
HICL’s Vision Enriching lives through infrastructure 46% of portfolio Developing strong social foundations 39% of portfolio connecting communities 15% of portfolio supporting sustainable modern economies By value using Directors’ Valuation of £3,865.6m as at 30 September 2022 hicl.com | 8
Slide 9: Financial Performance
Financial Performance hicl.com |
Slide 10: NAV Progression
NAV Progression As at 30 September 2022 180.0 p Value Enhancement Accretive Investment ▼(5.6) ▲5.0 ▲1.9 ▼(1.1) 170.0 p ▼(4.1) ▲5.1 160.0 p Value Preservation 150.0 p 167.6 164.3 163.1 168.4 164.3 140.0 p 167.6 130.0 p 120.0 p 1 31 March 2022 Performance Change in discount Forex gain Expenses Dividen
Slide 11: Financial Performance
Financial Performance As at 30 September 2022 Income Statement Six Months to 30 September 2022 Six Months to 30 September 2021 Investment Basis1 £m £m Total income 125.8 157.2 Fund expenses & finance costs (23.2) (18.0) Tax - 0.3 Total return 102.6 139.5 Earnings per share 5.2p 7.2p Ongoing charge
Slide 12: Portfolio Performance: Directors' Valuation
Portfolio Performance Directors’ Valuation1 of £3,865.6m as at 30 September 2022 £4,300m £4,100m ▲618.9 ▼(113.1) ▲198.7 ▼(180.6) ▲65.3 ▲5.8 3,865.6 £3,900m ▼(105.4) ▲65.0 3,711.4 £3,700m 583.5 £3,500m 577.7 3,311.0 £3,300m 6.3% (5.8)% 2.1% 2.1% 94.4 3,711.4 3,729.5 Income Statement Revenue 3,859.8 3
Slide 13: Weighted Average Discount Rate I
Weighted Average Discount Rate I Increase driven by 70 bps movement in the UK and 30 bps increase in the rest of the world Risk-free rates Risk premia ▲ Market volatility means that view of fair value range likely to be wider than normal 4.0% 3.2% UK 1.8% 4.7% ▲ Discount rate movement predominately
Slide 14: Weighted Average Discount Rate II
Weighted Average Discount Rate II 0.5% increase to 7.1%1 results in an implied equity risk premium of 3.4% Risk premium = 3.3% Risk premium = 3.4% 10% Risk premium = 2.5% Risk premium = 6.4% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep
Slide 15: Sensitivities
Sensitivities Well diversified portfolio reflected in impact of macro-economic sensitivities Discount Rate +/- 0.5% (9.5) 10.6 Inflation -/+ 0.5% (9.1) 10.4 2 GDP -/+ 0.5% (5.8) 5.9 Tax Rate +/- 5% (5.2) 5.3 3 Foreign Exchange Rates -/+ 5% (1.0) 1.0 Deposit Rates -/+ 0.5% (0.7) 1.0 -12p -10p -8p -6p
Slide 16: Sensitivities: Inflation Scenario
Sensitivities Well diversified portfolio that is positioned to benefit from inflation ▲ Impact of a scenario where inflation is 3% above HICL’s forecast assumptions for the next one, three and five years NAV impact in p/share Annual cashflow impact (£'000’s) 18.0 17.0 16.1 16.0 450,000 14.0 350,000
Slide 17: Cash Flow Profile
Cash Flow Profile Sustainable long-term cash flows and a stable portfolio valuation in the medium term 500,000 5,000 450,000 4,500 The valuation of the current 400,000 portfolio (RHS) at any time is a 4,000 function of the present value of the Annual project distributions (£'000's) expected future c
Slide 18: Portfolio Performance
Portfolio Performance hicl.com |
Slide 19: Diversified Portfolio
Diversified Portfolio Mix of sector exposure, ten largest assets account for c. 49% of the portfolio1 Communications Affinity Water 7% Water and Electricity Health >100 Northwest Parkway 7% Assets in the portfolio A63 Motorway 7% 6% 22% 15% 49% Texas Nevada Fire, Law & Top 10 assets Transmission Ord
Slide 20: Operational Update – Affinity Water
Operational Update – Affinity Water Affinity Water represents 7% of the portfolio, by value, as at 30 September 2022 ▲ Operational performance in line with expectations despite challenges posed by extremely hot summer ‒ No restrictions of usage imposed on customers but increased vulnerability to fut
Slide 21: Operational Update – Northwest Parkway and A63 Motorway
Operational Update – Northwest Parkway and A63 Motorway HICL’s toll roads represent 14% of the portfolio1, by value, at 30 September 2022 Northwest Parkway (7% of portfolio) A63 Motorway (6% of portfolio) ▲ Traffic over the six months broadly in line with ▲ Traffic over the six months broadly in lin
Slide 22: Operational Update – High Speed 1
Operational Update – High Speed 1 High Speed 1 (“HS1”) represents 4% of the portfolio, by value, as at 30 September 2022 ▲ International train path bookings slightly ahead of expectations over the 6 month period at 77% of pre-Covid levels ‒ Strong passenger demand, particularly from leisure travel ‒
Slide 23: Operational Update – Public Private Partnerships
Operational Update – Public Private Partnerships (“PPPs”) PPP projects represent 58% of the portfolio, by value, at 30 September 2022 ▲ Completion of investment into Cross London Trains (“XLT”, 3% of portfolio) on 21 September 2022 ‒ 115 trains fully delivered in 2018; strong operational track recor
Slide 24: Investment Activity and Market Outlook
Investment Activity and Market Outlook hicl.com |
Slide 25: HICL's Core Infrastructure Focus
HICL’s Core Infrastructure Focus ▲ Core infrastructure is a distinct market segment at the lower end of the infrastructure risk spectrum Cash Flow Quality Market Positioning Criticality Stable revenues Defensive positioning Essential assets Lower operational Stable, high barriers to complexity entry
Slide 26: Investment Activity
Investment Activity Market coverage filtered by focused acquisition strategy and investment discipline EVALUATION 34 New deals reviewed in the period DUE Transactions subject to detailed DILIGENCE 7 due diligence in the period 1 New transactions in period TRANSACTIONS 4 and 4 live2 opportunities Inv
Slide 27: New Acquisition – Texas Nevada Transmission
New Acquisition – Texas Nevada Transmission (“TNT”) New investment commitment1 representing 6% of portfolio as at 30 September 2022 ▲ Meaningful stake acquired in two transmission line systems, delivering regulated and contracted revenues respectively ▲ Located in areas of high renewable energy reso
Slide 28: New Acquisition – Aotearoa Towers
New Acquisition – Aotearoa Towers1 New investment commitment2 representing 5% of portfolio as at 30 September 2022 ▲ Outright ownership of the largest portfolio of passive mobile tower infrastructure in NZ, covering 98% of the population ▲ VFNZ3 act as anchor tenant and provide 96% of current revenu
Slide 29: Market and Outlook
Market and Outlook Significant market opportunity; investment discipline remains paramount ▲ InfraRed continues to curate an attractive pipeline for HICL: ‒ Spanning modern economy and traditional infrastructure sectors and HICL’s core geographies ‒ c. £300m1 of equity at exclusivity, preferred bidd
Slide 30: Concluding Remarks
Concluding Remarks hicl.com |
Slide 31: Concluding Remarks
Concluding Remarks Delivering Real Value ▲ Resilient performance in the period, with TSR of 6.7% amidst an uncertain macroeconomic environment ▲ Increase in discount rate more than offset by higher inflation and deposit rates plus Sterling weakness ▲ Active recycling of capital with four new investm
Slide 32: Appendix I: The Investment Manager
Appendix I The Investment Manager hicl.com |
Slide 33: Overview of InfraRed Capital Partners Ltd
Overview of InfraRed Capital Partners Ltd (“InfraRed”) InfraRed is the Investment Manager and Operator Strong, 25+ year track record of launching 11 infrastructure funds (including HICL and TRIG) Currently over US$14bn of equity under management1 London based, with offices in New York, Seoul and Syd
Slide 34: InfraRed – Infrastructure Team Skills and Experience
InfraRed – Infrastructure Team Skills and Experience ▲ Proven track record in target markets of UK, Europe, North America, Latin America and Australia / New Zealand ▲ Focused teams including: − Origination and Execution Team responsible for sourcing, diligencing and acquiring new investment opportun
Slide 35: Appendix II: Company Information
Appendix II Company Information hicl.com |
Slide 36: Board of Directors I
Board of Directors I Non-executive Directors with a broad range of relevant experience and qualifications Mike Bane Frank Nelson Rita Akushie Liz Barber Chair Senior Independent Director Audit Committee Chair Director Mike is a chartered accountant with over Frank Nelson is a qualified accountant. R
Slide 37: Board of Directors II
Board of Directors II Non-executive Directors with a broad range of relevant experience and qualifications Frances Davies Martin Pugh Simon Holden Kenneth D. Reid Remuneration Committee Chair Director Risk Committee Chair Director Frances has more than 30 years of Martin Pugh has over 35 years in th
Slide 38: Investment Manager
Investment Manager Senior InfraRed team, experienced in making and managing infrastructure investments Edward Hunt Helen Price Head of Core Income Funds, InfraRed CFO, Core Income Funds, InfraRed Edward leads the InfraRed team that Helen is responsible for managing the financial manages HICL activit
Slide 39: Appendix III: The Investment Portfolio
Appendix III The Investment Portfolio hicl.com |
Slide 40: HICL's Top Assets I
HICL’s Top 10 Assets I Sector: Electricity & Water Affinity Water Location: UK % of portfolio: 7% (March 2022: 9%) Affinity Water Limited is the largest water-only supplier in the UK HICL holding: 33.2% 1 by revenue and population served covering an area of 4,515 square kilometres. Concession length
Slide 41: HICL's Top Assets II
HICL’s Top 10 Assets II Sector: Transport High Speed 1 Location: UK % of portfolio: 4% (March 2022: 5%) HS1 is the rail link between London St Pancras station and the HICL holding: 21.8% Channel Tunnel. It is currently the UK’s only high-speed rail line in 6 operation. Concession length: 30 years St
Slide 42: Sustainable Thinking
Sustainable Thinking HICL has a role in society that extends beyond its shareholders 3rd party review of existing InfraRed to broaden stakeholder Policies against external Engagement through client sustainability frameworks surveys and follow-up initiatives InfraRed set interim greenhouse Align repo
Slide 43: Portfolio Diversification
Portfolio Diversification HICL’s Portfolio, as at 30 September 20221 MARKET SEGMENT GEOGRAPHIC LOCATION ▲ Contracted Projects 64% ▲ UK 62% ▲ Demand-based Assets 19% ▲ Europe (exc UK) 18% ▲ Regulated Assets 17% ▲ North America 15% ▲ Australia / New Zealand 5% INVESTMENT STATUS SECTOR ▲ Fully operatio
Slide 44: Portfolio – Key Attributes
Portfolio – Key Attributes Evolution of the Group’s portfolio Geographically Diverse Portfolio Diverse Sector Spread 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE HY FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE HY 2012 2013 2014 2015 2016 2017 2018 2019 2
Slide 45: Evolution of HICL NAV vs UK RPI since IPO
Evolution of HICL NAV vs UK RPI since IPO 300 250 200 150 100 Mar 2006 Sep 2007 Mar 2009 Sep 2010 Mar 2012 Sep 2013 Mar 2015 Sep 2016 Mar 2018 Sep 2019 Mar 2021 Sep 2022 HICL NAV growth, excl. dividend UK RPI HICL NAV growth, incl. dividend Share price growth plus dividend hicl.com | 45
Slide 46: Key Valuation Assumptions
Key Valuation Assumptions Movement 30 September 2022 31 March 2022 Discount Rate Weighted Average 7.1% 6.6% UK (RPI2 & RPIx2) 10% to March 2023, 5% to March 2024 6% to March 2023, 3.5% to March 2024, 2.75% 2.75% to 2030, 2.0% thereafter to 2030, 2% thereafter CPIH3 9.25% to March 2023, 4.25% to Marc
Slide 47: Summary Cash Flow Statement
Summary Cash Flow Statement Figures presented on an Investment Basis1 Six months to 30 Six months to 30 Cash Flow September 2022 September 2021 £m £m Opening net (debt) / cash (46.2) 4.7 Net cash flow before capital movements 84.3 81.3 Investments (126.7) (4.1) Disposals 96.8 11.3 Short term inter-c