HICL Infrastructure PLC · LSE:HICL
HICL Infrastructure — Investor Presentation (May 2016)
48 slides from HICL Infrastructure's investor presentation, May 2016
Slide 1: HICL Infrastructure Company Limited Introductory Presentation Summer 2016
HICL Infrastructure Company Limited Introductory Presentation – HICL Overview, the Investment Adviser & Recent Performance Summer 2016 hicl.com |
Slide 2: Disclaimer
Disclaimer 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 (the "Comp
Slide 3: Contents
Contents Section Slide No. Investment Adviser 4 Infrastructure as an Asset Class 7 HICL - Overview 13 HICL - Portfolio 21 Portfolio Valuation 29 Market Conditions and Outlook 36 Recent Performance – FYE 31 March 2016 40 hicl.com | 3
Slide 4: Investment Adviser
Investment Adviser hicl.com |
Slide 5: Overview of InfraRed Capital Partners Limited
Overview of InfraRed Capital Partners Limited InfraRed is the Investment Adviser and Operator ▲ InfraRed is the investment adviser to HICL and is authorised and regulated by the Financial Conduct Authority ▲ Strong, 15+ year track record in raising and managing 15 value-add infrastructure and real e
Slide 6: InfraRed – Infrastructure Team Skills and Experience
InfraRed – Infrastructure Team Skills and Experience Depth and breadth of skills, proven track record and proactive value management ▲ Experienced infrastructure professionals with proven track record in target markets of UK, Europe, North America, Australia and New Zealand ▲ Well established and re
Slide 7: Infrastructure as an Asset Class
Infrastructure as an Asset Class hicl.com |
Slide 8: What Defines Infrastructure
What Defines Infrastructure Low Revenue risk High Risk class Availability Regulatory Demand based Market Investment risks ► Operating costs Regulatory risk Volume risk (high) Competitive risks are incremental ► Delivery (e.g. service Volume risk (low) Known pricing risk performance) Exampl
Slide 9: Typical Infrastructure Project Structure
Typical Infrastructure Project Structure Client Project agreement HICL Project Construction Shareholder Financing Company Bonds/Loans Partner agreement agreement (“SPV”) Operational Partner Construction Operating MSA contract sub-contract sub-contract Maintenance Project Company Construction and FM
Slide 10: Illustrative Investment Cashflow Profile over a Project's Life
Illustrative Investment Cashflow Profile over a Project’s Life Example: Social infrastructure return derived from an ‘availability’ revenue stream Typical Social Infrastructure Investment Cash Flow Profile Bidding Construction Operation & Maintenance Phase Phase Phase Value Typical timing for Illust
Slide 11: Illustrative Investment Cashflow Profile over a Project's Life
Illustrative Investment Cashflow Profile over a Project’s Life Example: Toll road return derived from a ‘demand’ revenue stream Typical Toll Road Investment Cash Flow Profile Bidding Construction Ramp- Phase Phase Up Operation & Maintenance (Steady State) Illustrative Chart Value Typical timing for
Slide 12: 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 13: HICL - Overview
HICL - Overview hicl.com |
Slide 14: HICL's Characteristics
HICL’s Characteristics Mandate ▲ To generate long-term, stable income from infrastructure assets ▲ Focused on infrastructure projects at lower end of risk spectrum, generating inflation-linked returns History ▲ Tenth anniversary and ninth successive year of dividend growth ▲ First infrastructure inv
Slide 15: Historic Performance
Historic Performance HICL has grown its dividend for last 10 years Total Return (NAV growth and dividends) of 9.7% p.a. since IPO 8.0p 200p 7.0p 6.0p 150p 5.0p 4.0p 100p 3.0p 2.0p 50p 1.0p 0.0p 0p IPO FYE MarFYE MarFYE Mar FYE MarFYE MarFYE MarFYE Mar FYE MarFYE MarFYE Mar IPO FYE FYE FYE FYE FYE FY
Slide 16: 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 ▲ Determines risk appetite through Risk Committee ▲ Additional committees in
Slide 17: Board of Directors
Board of Directors1 Non-executive Directors with a broad range of relevant experience and qualifications Ian Russell (CBE), Chairman Frank Nelson, SID Sarah Evans, Director Susie Farnon, Director Ian, HICL’s Chairman, is Frank, a UK resident, is a Sarah, a Guernsey resident, is a Sally-Ann (known as
Slide 18: HICL Group Strategy
HICL Group Strategy Delivering Real Value Manage existing portfolio: ▲ Value Preservation − Active asset management of the operational and financial performance of the portfolio to deliver the expected base case return ▲ Value enhancement − Engage with public sector clients to generate cost savings
Slide 19: 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 £200m committed revolving credit facility at Group level), to avoid cash drag and to give sharehold
Slide 20: Summary at HICL's 10 year anniversary
Summary at HICL’s 10 year anniversary A brief look back at what the Company set out to do, and what it’s delivered so far… Targeted Delivered ▲ From 15 to 100+ investments ▲ Value accretive ▲ Further diversification: Complementary Acquisitions Territories (2 to 6) Asset concentration − 2016: 10
Slide 21: HICL - Portfolio
HICL - Portfolio hicl.com |
Slide 22: Current Portfolio
Current Portfolio Portfolio of 104 investments as at 31 March 2016 Fire, Law Education Health Accommodation Transport & Order Barking & Dagenham Addiewell Prison Barnet Hospital Birmingham Hospitals Allenby & Connaught Boldon School Bradford Schools 1 A249 Road Schools MOD Accommodation Birmingham &
Slide 23: Portfolio Characteristics
Portfolio Characteristics As at 31 March 2016 Geographic Location Investment Status 1% 3% 3% 10% Construction 84% 5% UK Fully operational EU Australia 95% Demand risk Canada Availability-based 99% revenue Ownership Analysis Sector 8% 27% 14% 38% Health 40% 100% Education 50% to 100% Accommodation le
Slide 24: Current Portfolio – Key Attributes
Current Portfolio – Key Attributes Evolution of the Group’s portfolio – last 6 years to 31 March 20161 Geographically spread portfolio Good sector spread 100% 100% 90% 95% 80% 70% 90% 60% 50% 85% 40% 30% 80% 20% 10% 75% 0% FYE 2010 FYE 2011 FYE 2012 FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2010 FYE 2
Slide 25: The Portfolio, Performance and Asset Management
The Portfolio, Performance and Asset Management 104 investments1 at 31 March 2016, valued at Ten largest Investments £2,030.3m2 ▲ 10 largest assets represent 39% of portfolio by value Southmead Pinderfields & Hospital Home Pontefract Weighted average concession life of 21.5 years Office Hospitals (2
Slide 26: 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 27: Portfolio Overview - Contractor Counterparty Exposure
Portfolio Overview - Contractor Counterparty Exposure Diversified spread of quality supply chain providers ▲ Counterparties continue to perform Spread of supply chain providers1 ▲ Diversity of contractors ensures no over-reliance on any single entity Carillion 20% Balance 27% ▲ Quarterly reviews by
Slide 28: Principal Risks and Uncertainties
Principal Risks and Uncertainties Project Company revenues and costs ▲ Deductions for unavailability or poor performance – borne almost exclusively by subcontractors ▲ Adequacy of lifecycle budgets – budget reassessment, condition surveys and reprofiling Strict interpretation of contractual terms ▲
Slide 29: Portfolio Valuation
Portfolio Valuation hicl.com |
Slide 30: Portfolio Overview - Cashflow Profile
Portfolio Overview - Cashflow Profile1 Long-term income phase Capital repayment phase £400m £2,400m Annual Project distributions The valuation of the portfolio (RHS) at any time is a £350m function of the present value of the expected future £2,100m Portfolio value cash flows1,2 £300m £1,800m £250m
Slide 31: Analysis of Change in Directors' Valuation
Analysis of Change in Directors’ Valuation £2,100m 2,030.3 £2,000m 242.1 (129.1) 60.2 (18.7) 14.5 £1,900m 138.0 1,836.3 £1,800m 1,732.2 (8.9) 1,932.9 £1,700m 1,738.9 £1,600m 1,709.7 7.9% 3.5% (1.1%) 0.8% £1,500m 31 Mar 2015 Divestments Investments Cash Rebased Return Change in Change in Change in FX
Slide 32: Discount Rate Analysis
Discount Rate Analysis Weighted average discount rate Market valuation of assets increased in Appropriate Total the year long-dated Risk discount Total Total government premium rate1 30 Sep 2015 31 Mar 2015 ▲ Discount rates for projects range between 7.0% bond yield 31 Mar 2016 and 10.1% (2015: 7.4%
Slide 33: Key Valuation Assumptions
Key Valuation Assumptions Movement 31 March 2016 31 March 2015 Discount Rate Weighted Average 7.5% 7.9% UK (RPI2 & RPIx2) 2.75% 2.75% Eurozone (CPI) 1.0% until 2018, thereafter 2.00% 0.0% until 2017, thereafter 2.00% Inflation1 (p.a.) Canada (CPI) 2.00% 2.00% (exc. EU) Australia (CPI) 2.50% 2.50% UK
Slide 34: Key Valuation Sensitivities
Key Valuation Sensitivities Sensitivity to key macroeconomic assumptions ▲ Weighted average discount rate of 7.5%, down from 7.7% at 30 September 2015 and 7.9% at 31 Discount rate +/- 0.5% March 2015 ▲ If the UK inflation assumption was 3.75% p.a. (i.e. up 1.0%), the expected return2 from the portfo
Slide 35: 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 ▲ Approved by Directors ▲ Independent opinion for Directors from third-party valuation expert Non traded - DCF methodology on in
Slide 36: Market Conditions and Outlook
Market Conditions and Outlook hicl.com |
Slide 37: Market Developments
Market Developments Demand Supply ▲ Continued strong appetite for infrastructure investments UK globally ▲ Secondary market generally muted ▲ Not limited to market segments where the Group is active ▲ No substantive pick-up in primary procurement activity ▲ Applies equally to primary and secondary m
Slide 38: Sourcing and Pipeline
Sourcing and Pipeline Origination ▲ Acquisition Strategy − source assets that add value to the existing portfolio, assessed using accretion tests − continue to build a portfolio positioned at the lower end of the risk spectrum ▲ Target market segments1 − Secondary PPP − Primary PPP: focused on key r
Slide 39: Concluding Remarks
Concluding Remarks Delivering Real Value Long-term income ▲ Key Objective is to offer shareholders long-term, stable income ▲ Consistently delivered real value for shareholders over 10 years since IPO ▲ New dividend guidance reflects confidence in the portfolio A clear strategy ▲ Preserve the value
Slide 40: Recent Performance – FYE 31 March 2016
Recent Performance – FYE 31 March 2016 hicl.com |
Slide 41: Key Financial Achievements
Key Financial Achievements Financial Year Ended 31 March 2016 Net Asset Value1 Dividend – FYE March 16 Total Shareholder Return2 142.2p / share 7.45p / share 9.6% p.a. (2015: 136.7p / share) (2015: 7.30p / share) (NAV/share + dividends reinvested basis) Investments Dividend Targets3 Ongoing Charges
Slide 42: Summary of Key Achievements
Summary of Key Achievements Financial Year Ended 31 March 2016 Performance ▲ Solid portfolio performance in line with projections ▲ Cashflows in line with expectations, despite low inflation Financials ▲ Total return of 12.95p per share for the year to 31 March 2016 – equates to a 9.6% TSR1 ▲ NAV/sh
Slide 43: Summary Financials
Summary Financials Financial Year Ended 31 March 2016 Income Statement (year ended) 31 March 2016 31 March 2015 Total Income £182.9m £253.6m Fund expenses & finance costs (£25.5m) (£22.6m) Profit before tax £157.4m £231.0m Earnings per share 11.9p 18.6p Ongoing Charges (as defined by the AIC) 1.12%
Slide 44: Summary Financials II
Summary Financials II Financial Year Ended 31 March 2016 Cash Flow (year ended) 31 March 2016 31 March 2015 Opening net cash £33.5m £42.7m Net Operating Cashflow 1 £107.3m £162.6m Investments (net of disposals) (£165.7m) (£153.8m) Equity Raised (net of costs) £176.8m £75.1m Forex movements and debt
Slide 45: Summary Investment Activity
Summary Investment Activity Investment activity during the year Investment Activity (FYE March 16) Stake Overall Amount Type Stage Project Sector Date Acquired Stake Follow-on Operational Salford & Wigan BSF Schools (Phase 1) Education 40.0% 80.0% £16.0m1 Apr-15 Follow-on Operational Salford & Wigan
Slide 46: Analysis of Change in NAV per Share
Analysis of Change in NAV per Share Twelve months to 31 March 2016 150.0 p Project outperformance 0.2 145.0 p Expected EPS (5.58) 8.1 140.0 p (1.87) 4.6 (1.0) 135.0 p (1.87) 1.0 130.0 p 125.0 p 142.2 140.3 136.7 134.8 120.0 p 115.0 p 110.0 p 1. The sum of the movements (red and bronze bars) may not
Slide 47: Company's Performance
Company’s Performance Key Performance Indicators (“KPIs”) KPI Measure 31 March 2016 31 March 2015 Objective Commentary An annual distribution of at Aggregate interim dividends Dividends 7.45p 7.30p least that achieved in the Achieved declared per share in the year prior year NAV growth and dividends
Slide 48: Company's Performance II
Company’s Performance II Key Quality Indicators (“KQIs”) KQI Measure 31 March 2016 31 March 2015 Objective Commentary Ten largest investments1 39% 40% Investment Maintain a diversified portfolio of Achieved Concentration Risk investments Single largest investment1 6% 6% Appropriate Projects with con
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