HICL Infrastructure PLC · LSE:HICL
HICL Infrastructure — H1 FY2017 Earnings Presentation
55 slides from HICL Infrastructure's earnings presentation, Nov 16, 2016
Slide 1: HICL Infrastructure Company Limited Interim Results Presentation
HICL Infrastructure Company Limited Interim Results Presentation: six months to 30 September 2016 16 November 2016 hicl.com |
Slide 2: Agenda
Agenda Section Slide No. Interim Results 3 Investment Activity 13 Portfolio, Asset Management and Risk 17 Market Conditions and Pipeline 22 Performance and Summary 25 Appendices 29 This presentation and subsequent discussion may contain certain forward looking statements with respect to the financia
Slide 3: Interim Results
3 \ Infrastructure [~~ Interim Radclyffe. School (Oldham Schools); UK
Slide 4: Highlights
Highlights For the six months ended 30 September 2016 145.7p £2,189.9m 10.4% NAV per share Directors’ valuation1 annualised shareholder return2 Increased by 3.5p (2.5%) from NAV Value of the Company's investment based on interim dividends declared per share of 142.2p at portfolio up 7.9% in the peri
Slide 5: Highlights
Highlights For the six months ended 30 September 2016 Performance ▲ Robust portfolio performance in line with projections ▲ Cashflows slightly ahead of expectations, despite low inflation Financials ▲ Total return of 7.3p per share for the period to 30 September 2016 – 10.4 % p.a. TSR1 ▲ NAV/share o
Slide 6: Summary Financials I
Summary Financials I Figures presented on an Investment Basis1 Six months to 30 September Six months to 30 September Income Statement (£m) 2016 2015 Total Income 99.5 84.4 Fund expenses & finance costs (13.9) (12.7) Profit before tax 85.6 71.7 Earnings per share2 6.1p 5.6p Ongoing Charges (as define
Slide 7: Summary Financials II
Summary Financials II Cash Flow (six months ended) (£m) 30 September 2016 30 September 2015 Opening net cash 52.7 33.5 Net Operating Cashflow 60.9 58.9 Investments (net of disposals) (75.8) (128.4) Equity Raised (net of costs) 112.5 90.5 Forex movements and debt issue costs (18.9) 1.9 Dividends Paid
Slide 8: Portfolio Overview - Cashflow Profile
Portfolio Overview - Cashflow Profile1 £400m £2,400m The valuation of the portfolio (RHS) at any time is a function of the present value of the expected future £2,200m £350m cashflows1,2 £2,000m Portfolio value Annual Project distributions £300m £1,800m £1,600m £250m £1,400m £200m £1,200m £1,000m £1
Slide 9: Analysis of Change in Directors' Valuation
Analysis of Change in Directors’ Valuation £2,300m Future commitments 2,189.92 £2,200m 102.5 (73.0) £2,100m 2,059.8 22.4 2,030.3 40.4 (16.6) 75.4 £2,000m £1,900m £1,800m 1,932.9 1,935.2 2,056.8 £1,700m 3.9% 2.1% (0.9%) 1.2% £1,600m £1,500m 31 Mar 2016 Investments Cash Rebased Return1 Change in Chang
Slide 10: Discount Rate Analysis
Discount Rate Analysis Weighted average discount rate Market valuation of assets increased in Appropriate Total discount Total Total the year long-dated Risk rate 31 March 30 September government premium 30 September 2016 2015 ▲ Discount rates for projects range between 6.5% bond yield 20161 and 9.9
Slide 11: Key Valuation Assumptions
Key Valuation Assumptions Movement 30 September 2016 31 March 2016 Discount Rate Weighted Average 7.3% 7.5% UK (RPI2 & RPIx2) 2.75% 2.75% Eurozone (CPI) 1.0% until 2018, thereafter 2.00% 1.0% until 2018, thereafter 2.00% Inflation1 (p.a.) Canada (CPI) 2.00% 2.00% Australia (CPI) 2.50% 2.50% UK 1.0%
Slide 12: Key Valuation Sensitivities
Key Valuation Sensitivities Sensitivity to key macroeconomic assumptions ▲ Weighted average discount rate of 7.3%, down Discount Rate +/- 0.5% from 7.5% at 31 March 2016 and 7.7% at 30 September 2015 ▲ All sensitivities presented in the chart, with the exception of the discount rate analysis, are ba
Slide 13: Investment Activity
Investment Activity hicl.com |
Slide 14: Investment Activity I
Investment Activity I Five investments completed in the period to 30 September 2016 Investment Activity Stake Overall Amount Type Stage Project Sector Date Acquired Stake £14.5m New Operational M1-A1 Road Transport 30.0% 30.0% Apr-16 New Operational Hinchingbrooke Health 37.5% 37.5% Apr-16 £5.3m Fol
Slide 15: Investment Activity II
Investment Activity II Contract signed in period to acquire a portfolio of six assets, subject to limited conditions Investment Activity Stake Overall Amount Type Stage Project Sector Acquired Stake New Operational Bangor & Nendrum Schools Education 20.4% 20.4% New Operational East Ayrshire Schools
Slide 16: A13 Thames Gateway Bonds
A13 Thames Gateway Bonds Case study of a recent acquisition Investment made in September 2016 in a portion of the Road Management Services (A13) PLC Index-Linked Guaranteed Secured Bonds 2028 ▲ £50.1m investment made ▲ Used to finance 30-year PFI concession to design, build, finance and operate a 20
Slide 17: Portfolio, Asset Management and Risk
Portfolio, Asset Management and Risk hicl.com |
Slide 18: The Portfolio, Performance and Asset Management I
The Portfolio, Performance and Asset Management I 30 September Ten Largest Investments 31 March 2016 2016 Southmead Number of Hospital Home Investments 1121 104 Office Pinderfields & Pontefract Hospitals Percentage of portfolio by value – Dutch High 10 largest assets 38% 39% Speed Rail Link AquaSure
Slide 19: The Portfolio, Performance and Asset Management II
The Portfolio, Performance and Asset Management II One project completed construction during Priority Schools Building Programme North East Batch the period Five projects under construction at 30 RD901 road in France: financial close in 2014 with construction progress well advanced September 2016 N1
Slide 20: Portfolio Characteristics
Portfolio Characteristics At 30 September 2016 Geographic Location Investment Status 2% 4% 3% 10% Construction 83% UK 6% Fully operational EU Australia 94% Demand risk North America Availability-based 98% revenue Ownership Analysis Sector 7% 30% 17% 35% Health 38% 100% Education 50% to 100% Accommod
Slide 21: Risks and Uncertainties
Risks and Uncertainties Strict interpretation of contractual terms ▲ Some examples of clients alleging asset-wide defects, leading to material deductions – often disputed, takes time to resolve ▲ Impact currently immaterial; if matters deteriorate and not solved, could lead to an impairment ▲ Workin
Slide 22: Market Conditions and Pipeline
Market Conditions and Pipeline hicl.com |
Slide 23: HICL Group Strategy
HICL Group Strategy Delivering Real Value. Acquisition Strategy – focus on Target Market Segments HICL invests in infrastructure investments at the lower end of the risk spectrum. Target market segments are: PPP ▲ availability payments remain attractive due to lack of correlation with GDP Regulated
Slide 24: Market Developments and Bidding Activity
Market Developments and Bidding Activity Demand ▲ Continued strong appetite for infrastructure investments globally ▲ Not limited to market segments where the Group is active ▲ Applies equally to primary and secondary markets ▲ Impact has been to increase asset pricing and reduce yields – more chall
Slide 25: Performance and Summary
Performance and Summary hicl.com |
Slide 26: Analysis of Change in NAV per Share
Analysis of Change in NAV per Share Six months to 30 September 2016 150.0 p Project outperformance 0.2 Expected EPS 4.2 (1.91) 145.0 p (1.91) (1.2) 2.9 1.2 (1.87) 140.0 p 135.0 p 142.2 140.3 145.7 143.8 130.0 p 125.0 p 120.0 p 1. The sum of the movements (red and grey bars) may not equate to the ove
Slide 27: Company's Performance
Company’s Performance Key Performance Indicators (“KPIs”) KPI Measure 30 September 2016 30 September 2015 Objective Commentary An annual distribution of at Aggregate interim dividends Dividends 3.82p 3.72p least that achieved in the Achieved declared per share in the year prior year NAV growth and d
Slide 28: Concluding remarks
Concluding remarks Track Record Consistently delivering real value for shareholders for over 10 years since IPO A Clear Strategy Deliver sustainable long term income through investing in a portfolio of infrastructure investments positioned at the lower end of the risk spectrum Active Management Achi
Slide 29: Appendix I
Appendix I Valuation Methodology and Sensitivities hicl.com |
Slide 30: 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 31: Portfolio Valuation – Sensitivities
Portfolio Valuation – Sensitivities Sensitivities - 0.5% change Base Case + 0.5% change 7.3% Discount Rate Directors’ valuation, and change + £108.4m £2,189.9m - £100.1m Implied change in NAV1 per Ordinary Share + 7.4 pence - 6.9 pence 2.75% Inflation Rates2 Directors’ valuation, and change - £72.0m
Slide 32: Inflation
Inflation Positive Inflation Correlation Sensitivity to inflation depends on a project’s initial structuring1 ▲ Projects’ income and costs linked (partially or wholly) to RPI/RPIx2 in UK and CPI elsewhere − Availability payments fully or partially indexed to inflation − Operating costs also indexed
Slide 33: Inflation
Inflation Positive Inflation Correlation UK year-on-year RPI growth was 2.0% in September 2016, with range of forecasts for December 2017 with a median of 3.2% and spread from 0.7% to 4.4% 1,2 Valuation assumptions are a simple proxy of possible outcomes 7% RPI 6% 5% 4% 3% 2% RPIX (excluding 1% mort
Slide 34: Appendix II
Appendix II The Investment Adviser hicl.com |
Slide 35: Overview of InfraRed Capital Partners
Overview of InfraRed Capital Partners www.ircp.com InfraRed is the Investment Adviser and Operator of HICL Strong, 15+ year track record in raising and managing 15 value-add infrastructure and real estate funds (including HICL and TRIG) Currently over US$9bn of equity under management – infrastructu
Slide 36: Appendix III
Appendix III The Company and Group hicl.com |
Slide 37: 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 ▲ Ten years since IPO, nine successive years of dividend growth ▲ First infr
Slide 38: 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 9.0p 250p 8.0p 7.0p 200p 6.0p 5.0p 150p 4.0p 100p 3.0p 2.0p 50p 1.0p 0.0p IPO FYE FYE FYE FYE FYE FYE FYE FYE FYE FYE HYE 0p Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar
Slide 39: Group Structure Diagram
Group Structure Diagram Third party Investors Management administration Independent Directors1 HICL Infrastructure Administrator Company (Guernsey) InfraRed Guernsey company (Investment Adviser) Administrator Luxco1 Independent Directors1 (Luxembourg) (Sarl/SOPARFI) Luxco2 (Limited partner, Independ
Slide 40: 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 ▲ Additional committees in respect of
Slide 41: Board of Directors I
Board of Directors I 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 resident in Frank, a UK resident, is a qualified Sarah, a Guernsey resident, is
Slide 42: Board of Directors II
Board of Directors II Non-executive Directors with a broad range of relevant experience and qualifications Simon Holden, Director Kenneth D. Reid, Director Chris Russell, Director Simon, a Guernsey resident, has Kenneth, a Singapore resident, has Chris, a Guernsey resident, is a non- over 15 years o
Slide 43: 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 44: Appendix IV
Appendix IV The Investment Portfolio hicl.com |
Slide 45: Current Portfolio
Current Portfolio Portfolio of 112 assets Education Fire, law and order Health Accommodation Transport Bangor & Nendrum Barking & Dagenham Birmingham Allenby & Connaught Boldon School Addiewell Prison Barnet Hospital A13 Road Schools Schools Hospitals MOD Accommodation Birmingham & Solihull Bishop A
Slide 46: Current Portfolio – Key Attributes
Current Portfolio – Key Attributes 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 Sep 2016 FYE 2011 FYE 2012 FYE 2013 F
Slide 47: Portfolio Overview - Contractor Counterparty Exposure
Portfolio Overview - Contractor Counterparty Exposure Ensuring diversification of supply chain providers Counterparties continue to perform Carillion 20% Other Contractors Diversity of contractors ensures no over-reliance on any 27% single entity Quarterly reviews by Investment Adviser Engie (Cofely
Slide 48: Financial Review
Financial Review Income Statement Reconciliation of Investment Basis to IFRS basis Six months ended 30 September 2016 Six months ended 30 September 2015 Investment Consolidation Investment Consolidation £m Basis adjustments IFRS basis Basis adjustments IFRS basis Total Income 99.5 (13.3) 86.2 84.4 (
Slide 49: Financial Review
Financial Review Balance Sheet Reconciliation of Investment Basis to IFRS basis at 30 September 2016 at 31 March 2016 Investment Consolidation Investment Consolidation £m IFRS basis IFRS basis Basis adjustments Basis adjustments Investments at fair value 2,056.8 66.5 2,123.3 1,932.9m 40.8 1,973.9 Wo
Slide 50: Appendix V
Appendix V The Infrastructure Asset Class hicl.com |
Slide 51: What Defines Infrastructure
What Defines Infrastructure Low High Revenue risk 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 52: 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 Construction SPV management and FM s
Slide 53: Illustrative Investment Cashflow Profile over a Project's Life I
Illustrative Investment Cashflow Profile over a Project’s Life I 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 Illu
Slide 54: Illustrative Investment Cashflow Profile over a Project's Life II
Illustrative Investment Cashflow Profile over a Project’s Life II Example: Toll road return derived from a demand-based revenue stream Typical Toll Road Investment Cash Flow Profile Bidding Construction Ramp- Phase Phase Up Operation & Maintenance (Steady State) Illustrative Chart Value Typical timi
Slide 55: 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
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