HICL Infrastructure PLC · LSE:HICL
HICL Infrastructure — Investor Presentation (July 2017)
55 slides from HICL Infrastructure's investor presentation, July 2017
Slide 1: HICL Infrastructure Company Limited
HICL Infrastructure Company Limited Introductory Presentation - the Investment Adviser, HICL Overview & Recent Performance Summer 2017 hicl.com |
Slide 2: Important information
Important information By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: This document is an advertisement and is not a prospectus. Any decision to purchase shares in HICL Infrastructure Company Limited
Slide 3: Contents
Contents Section Page Investment Adviser 4 Infrastructure as an Asset Class 7 HICL - Overview 14 Case Study: A Decade of Outperformance 23 Case Studies: Recent Acquisitions 26 Portfolio, Asset Management and Risk 29 Portfolio Valuation 38 Recent Performance: 2017 Full Year Results 45 hicl.com | 3
Slide 4: Investment Adviser
Investment Adviser hicl.com |
Slide 5: Overview of InfraRed Capital Partners Ltd
Overview of InfraRed Capital Partners Ltd (‘InfraRed’) InfraRed is the Investment Adviser and Operator Strong, 25+ year track record of launching 17 infrastructure and real estate funds (including HICL and TRIG) Currently over US$9bn of equity under management Independent manager owned by senior man
Slide 6: 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, Australia and New Zealand ▲ Focussed teams including: − Origination and Transaction team responsible for business development; − Asset Management team responsible
Slide 7: Infrastructure as an Asset Class
Infrastructure as an Asset Class hicl.com |
Slide 8: Infrastructure Market Map
Infrastructure Market Map Showing HICL’s Investment Policy1 Scope INCREASING RISK Examples: hospitals, schools, government Examples: gas and electricity accommodation and availability transport transmission and distribution; water (e.g. road/rail) utilities; district heating INCREASING RISK INCREASI
Slide 9: Typical PPP Project Structure
Typical PPP Project Structure Client Project agreement HICL Infrastructure Company Limited Construction Shareholder Project Financing Bonds/Loans Partner agreement Company agreement Operational Partner Construction Operating MSA contract sub-contract sub-contract Maintenance Project Company Construc
Slide 10: Illustrative Investment Cashflow Profile – PPP Project
Illustrative Investment Cashflow Profile – PPP Project Example: Social infrastructure return derived from an ‘availability’ revenue stream Typical PPP Project Investment Cashflow Profile Bidding Construction Operation & Maintenance Phase Phase Phase Value Typical timing for Illustrative Chart invest
Slide 11: Illustrative Investment Cashflow Profile – Demand-based Asset
Illustrative Investment Cashflow Profile – Demand-based Asset Example: Toll road return derived from a demand-based asset revenue stream Typical Toll Road Investment Cashflow Profile Bidding Construction Ramp- Phase Phase Up Operation & Maintenance (Steady State) Value Illustrative Chart Typical tim
Slide 12: Illustrative Investment cashflow profile – Regulated Asset
Illustrative Investment cashflow profile – Regulated Asset Example: Utility company return derived from a regulated revenue stream Typical Regulated Asset Investment Cashflow Profile Operational Network Illustrative Chart Value 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Slide 13: Valuation – Methodology
Valuation – Methodology Determining the net asset value of the portfolio and the Group (illustrative example) £100m Concession Contract Revenue + Deposit Interest Key Variables/Assumptions £80m Forecast £60m Long-term Inflation Rate Project £40m Deposit Interest Rate Inflows £20m • Whole-of-life con
Slide 14: HICL - Overview
MEAN Infrastructure =—Birmingham New Hospital, UK
Slide 15: Group Structure Diagram
Group Structure Diagram Services Equity Management HICL’s Shareholders Independent Directors1 ▪ Governance Investment ▪ Oversight Company Secretary ▪ Strategy HICL – Listed Company Aztec Financial Services (Guernsey) Limited Investment Adviser Other Company Advisers and Service Providers HICL Infras
Slide 16: HICL’s Characteristics
HICL’s Characteristics Mandate ▲ To generate long-term, stable income from a portfolio of infrastructure investments ▲ Focused on assets at the lower end of the risk spectrum, which generate inflation-linked returns History ▲ Over eleven years since IPO, ten successive years of dividend growth ▲ Fir
Slide 17: Historic Performance: Cumulative Total Return
Historic Performance HICL has grown its dividend for last 10 years Total Return (NAV growth and dividends) of 9.6% p.a. since IPO 9.0p 250p 8.0p 7.0p 200p 6.0p 150p 5.0p 4.0p 100p 3.0p 2.0p 50p 1.0p 0.0p 0p IPO FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE IPO FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE F
Slide 18: Governance
Governance Independent board of non-executive Directors ▲ Approves and monitors adherence to strategy ▲ Fulfils Company’s AIFM responsibilities under the European Commission’s Alternative Investment Fund Managers Directive ▲ Monitors risk through Risk Committee, separate to Audit Committee ▲ Additio
Slide 19: Board of Directors
Board of Directors Non-executive Directors with a broad range of relevant experience and qualifications Ian Russell CBE, Chairman Simon Holden, Director Ian, HICL’s Chairman, is resident in the UK and is a qualified Simon, a Guernsey resident, has over 15 years of experience in private accountant. H
Slide 20: Investment Proposition and Business Model
Investment Proposition and Business Model Delivering Real Value. TO DELIVER TO SHAREHOLDERS A LONG-TERM, STABLE INCOME FROM A PORTFOLIO OF INFRASTRUCTURE INVESTMENTS THAT IS POSITIONED AT THE LOWER END OF THE RISK SPECTRUM ACCRETIVE INVESTMENT VALUE ENHANCEMENT VALUE PRESERVATION Purchasing assets t
Slide 21: Accretive Investment – Current Acquisition Strategy
Accretive Investment – Current Acquisition Strategy ▲ Acquisition Strategy reviewed and agreed between Board and Investment Adviser in October 2016 – confirmed existing focus ▲ Progressed origination activity across all core market segments during the year ▲ Infrastructure market dynamics continue (
Slide 22: Investment and Capital Raising
Investment and Capital Raising ▲ Acquisitions driven by demand for HICL shares and availability of further investments which fit the Investment Strategy ▲ Acquisitions are initially debt-funded (using £400m committed revolving credit facility at Group level), to avoid cash drag and to give sharehold
Slide 23: Case Study: A Decade of Outperformance
Case Study: A Decade of Outperformance hicl.com |
Slide 24: A Decade of Outperformance I
A Decade of Outperformance I Significant NAV growth – IPO to 31 March 2016 NAV growth to 31 March 2016 of 44.2p per share higher than expected at IPO NAV growth comprised of 30.0p due to Portfolio Outperformance and 14.2p due to economic factors and discount rates Economic factors largely driven by
Slide 25: A Decade of Outperformance II
A Decade of Outperformance II Total return1 of 9.5% p.a. vs. IPO target of 7-8% p.a. (IPO to 31 March 2016) Portfolio Outperformance1 30.0p per share of NAV outperformance Other Lifecycle savings Distribution Delivered by the Investment Adviser’s team efficiency Wide range of small incremental initi
Slide 26: Case Studies: Recent Acquisitions
Case Studies: Recent Acquisitions hicl.com |
Slide 27: Toll Roads
Toll Roads Two recent acquisitions of operational demand-based assets During 2016 and 2017, HICL invested in two Illustrative sensitivities on combined equity returns1 operational toll-roads: the A63 Motorway in France and Northwest Parkway in Colorado, USA Inflation -/+ 1% p.a. ▲ Strategic position
Slide 28: Affinity Water
Affinity Water HICL’s first investment in a regulated asset £244m1 investment completed in May 2017 Affinity Water Group: Key Facts ▲ Good inflation correlation − Increases portfolio inflation correlation by approximately 0.1% (from 0.7% to 0.8%) ▲ Long-term income − Increases average concession lif
Slide 29: Portfolio, Asset Management and Risk
Portfolio, Asset Management and Risk hicl.com |
Slide 30: Current Portfolio I
Current Portfolio I Portfolio of 116 assets at 31 July 2017 Education 17% of Directors’ Valuation1 Fire, Law & Order 6% Northern European Bangor & Nendrum Gloucester Project Tyne & Wear Fire Ealing Schools Kent Schools Rhondda Schools Addiewell Prison Schools Fire & Rescue (details subject to Statio
Slide 31: Current Portfolio II
Current Portfolio II Portfolio of 116 assets at 31 July 2017 Health 29% of Directors’ Valuation1 Accommodation 10% Allenby & Doncaster Mental Oxford John South West Connaught Miles Platting Northwood MoD Royal School of Military Barnet Hospital Health Hospital Radcliffe Hospital Hospital Enniskillen
Slide 32: Portfolio Characteristics
Portfolio Characteristics At 31 July 2017 (31 March 2017 Portfolio Value plus Affinity Water and HS11) MARKET SEGMENT OWNERSHIP STAKE at 31 July 2017 at 31 July 2017 PPP Projects 74% 100% ownership 28% Demand-based Assets 17% 50%-100% ownership 27% Regulated Assets 9% Less than 50% ownership 45% GEO
Slide 33: Current Portfolio – Key Attributes
Current Portfolio – Key Attributes Seven year evolution of the Group’s portfolio Geographically Spread Portfolio Good Sector Spread 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017 FYE 2011 FYE 2012
Slide 34: The Portfolio, Performance and Asset Management I
The Portfolio, Performance and Asset Management I 10 Largest Investments1 ▲ Including the post year-end investments Affinity Water in Affinity Water and High Speed 1: − 116 investments HS1 − 10 largest assets account for 44%1 of the portfolio by value Northwest Parkway Southmead ▲ At 31 March 2017:
Slide 35: The Portfolio, Performance and Asset Management II
The Portfolio, Performance and Asset Management II ▲ General approach and background − Value Preservation: Active and regular engagement with all project stakeholders − Value Enhancement: Continue to work with clients and contractors to drive cost efficiencies and utilise lessons learnt from project
Slide 36: Portfolio Overview - Contractor Counterparty Exposure
Portfolio Overview - Contractor Counterparty Exposure Ensuring diversification of supply chain providers 10 Largest Exposures at 31 March 20171 Diversity of contractors ensures no over- Carillion reliance on any single entity Other contractors Quarterly reviews by Investment Adviser Investment Advis
Slide 37: Risk Management and Reporting
Risk Management and Reporting Implementation of new tools following external advice Residual Risk Valuation Impact 12 months Cashflow Rating (NAV/share) Impact Residual v Inherent (Dividend/share) Residual v Inherent Key: Inherent Risk Political risk Medium Residual Risk Financial/market risk Low Po
Slide 38: Portfolio Valuation at March 2017
Portfolio Valuation at 31 March 2017 hicl.com |
Slide 39: Portfolio Overview – Cashflow Profile
Portfolio Overview – Cashflow Profile1 31 March 2017 £300m £3,000m The valuation of the Current Portfolio (RHS) at any time is a function of the present value £250m £2,500m of the expected future cash flows1,2 Annual Project distributions £200m £2,000m Portfolio Value £150m £1,500m £100m £1,000m £50
Slide 40: Analysis of Change in Directors’ Valuation
Analysis of Change in Directors’ Valuation 31 March 2017 Future commitments £2,500m £2,400m 2,380.02 40.4 (7.2) 17.8 £2,300m 272.73 (148.9) 173.3 £2,200m 2,154.1 £2,100m 2,030.3 £2,000m £1,900m £1,800m 1,932.9 2,123.2 2,347.5 £1,700m 1 8.2% 1.9% (0.3%) 0.8% £1,600m £1,500m 31 Mar 2016 Investments Ca
Slide 41: Discount Rate Analysis
Discount Rate Analysis 31 March 2017 Market valuation of assets increased in Appropriate Total Discount Rate2 the year long-dated Risk government Premium ▲ Discount rates for investments range between bond yield1 31 March 2017 30 September 2016 31 March 2016 5.6% and 9.8% (March 2016: 7.0% and 10.1%
Slide 42: Key Valuation Assumptions
Key Valuation Assumptions 31 March 2017 Movement 31 March 2017 31 March 2016 Discount Rate Weighted Average 7.4% 7.5% UK (RPI2 & RPIx2) 2.75% 2.75% Eurozone (CPI) 1.0% to 2019 and 2.0% thereafter 1.0% until 2018 and 2.0% thereafter Inflation1 Canada (CPI) 2.0% 2.0% (p.a.) Australia (CPI) 2.5% 2.5% (
Slide 43: Key Valuation Sensitivities
Key Valuation Sensitivities Sensitivity to key macroeconomic assumptions at 31 March 2017 ▲ Sensitivities presented in the chart, with the Discount Rate +/- 0.5% (6.9) 7.5 exception of the discount rate, FX rates and GDP analysis, are based on the largest 25 investments in the HICL portfolio by valu
Slide 44: Valuation Methodology
Valuation Methodology The Company’s valuation methodology is consistent with industry standard Semi-annual valuation and NAV reporting: ▲ Carried out by Investment Adviser ▲ Independent opinion for Directors from third-party valuation expert ▲ Approved by Directors Non traded - DCF methodology on in
Slide 45: Recent Performance: 2017 Full Year Results
Recent Performance: 2017 Full Year Results hicl.com |
Slide 46: Highlights: For the year to March 2017
Highlights For the year to 31 March 2017 149.0p £2,380.0m 10.3% NAV per share Directors’ Valuation1 annual shareholder return2 Increased by 6.8p (4.8%) from NAV per Value of the Company's investment based on interim dividends paid plus share of 142.2p at portfolio up 17.2% in the year from uplift in
Slide 47: Highlights
Highlights For the year to 31 March 2017 Performance ▲ Portfolio performance exceeded expectations ▲ Robust cashflow New Investments1 ▲ 10 new and five follow-on investments committed in the year ▲ Total new investments of £266.6m ▲ Post year-end, £269m2 Affinity Water acquisition – HICL’s first UK
Slide 48: Summary Financials I
Summary Financials I Figures presented on an Investment Basis1 Income Statement (year ended) 31 March 2017 31 March 2016 Total income £207.6m £182.9m Fund expenses & finance costs (£30.5m) (£25.5m) Profit before tax £177.1m £157.4m Earnings per share2 12.4p 11.9p Ongoing charges3 1.06% 1.12% Balance
Slide 49: Summary Financials II
Summary Financials II Figures presented on an Investment Basis1 Cashflow (year ended) 31 March 2017 31 March 2016 Opening net cash £52.7m £33.5m Net operating cash flow £122.8m £107.3m2 Investments (net of disposals) (£339.5m) (£165.7m) Equity raised (net of costs) £369.7m £176.8m Forex movements an
Slide 50: Summary Investment Activity
Summary Investment Activity Investment activity during the year ▲ 10 new and five incremental investments during the year for £266.6m (set out below and on page 51) Investment Activity Stake Overall Amount Type Stage Project Sector Market Segment Date Acquired Stake £14.5m New Operational M1-A1 Link
Slide 51: Summary Investment Activity II
Summary Investment Activity II Investment activity during the year (continued) and since year end Investment Activity Stake Overall Amount Type Stage Project Sector Market Segment Date Acquired Stake New Construction A9 Road Transport PPP 20.0% 20.0% Dec-16 £19.8m Follow-on Operational Zaanstad Pris
Slide 52: Analysis of Change in NAV per Share
Analysis of Change in NAV per Share 160.0 p Value Enhancement Accretive Investment Refers to HICL’s Business 1.6 (5.7) Model (see page 20) 155.0 p 150.0 p Value Preservation (1.9) 8.4 2.8 (0.5) 145.0 p (1.9) 2.1 140.0 p 135.0 p 130.0 p 142.2 140.3 149.0 147.1 125.0 p 120.0 p 115.0 p 110.0 p The sum
Slide 53: Company’s Key Performance Indicators (“KPIs”)
Company’s Key Performance Indicators (“KPIs”) KPI Measure 31 March 2017 31 March 2016 Objective Commentary Aggregate interim An annual distribution Dividends dividends declared per 7.65p 7.45p of at least that achieved Achieved share in the year in the prior year NAV growth and A long-term IRR targe
Slide 54: Company’s Key Quality Indicators (“KQIs”)
Company’s Key Quality Indicators (“KQIs”) KQI Measure 31 March 2017 31 March 2016 Objective Commentary Percentage of the portfolio represented by the ten largest 40% 39% Maintain a diversified portfolio of Investment investments1 investments (thereby mitigating Concentration concentration risk) and,
Slide 55: Summary of 2017 Full Year Results
Summary of 2017 Full Year Results ▲ Portfolio performance exceeded expectations ▲ Robust cashflow performance ▲ Significant capital both raised and deployed ▲ Clear strategy to deliver sustainable long-term income through investing in a portfolio of infrastructure investments positioned at the lower
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