HICL Infrastructure (LSE:HICL) — Interim Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the HICL INFRASTRUCTURE PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it is appropriate to do so.

0:30 And before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the team from HICL INFRASTRUCTURE PLC. Ed, good afternoon, sir. Thank you very much, and good afternoon to you all. Welcome to this set of interim results for HICL INFRASTRUCTURE PLC. I'm Edward Hunter, partner at INFRASTRUCTURE I lead the team that looks after HICL. I'm joined, as usual, by Ross Gurney Reid, Director of Fund Management for HICL and Hugo Atkins in our Investor Relations team. I'm going to start off on Slide four of the presentation. In challenging markets, it's appropriate that companies reflect on their central purpose and utility for investors. HICL's purpose is clear, straightforward, and differentiated.

1:17 The company invests in equity investments, in infrastructure assets, in private markets. These are core assets defined by their quality and risk profile. We take a hands on approach to managing them both at asset level and as a portfolio. And we do this to best utilize INFRASTRUCTURE PLC's twenty five year plus track record to deliver outperformance for shareholders. Each of these factors is at the fore of this set of interim results, which we turn to on Slide five. The result reflects delivery against significant capital allocation milestones alongside a broadly solid operating performance from the underlying portfolio. On the left hand side of this slide, the completion of the final two asset divestments agreed in the prior period enabled the full repayment of HICL's revolving credit facility as well as the commencement of the company's £50,000,000 share buyback with the excess proceeds.

2:15 At period end, 17,600,000 had been spent on buybacks. And as at yes as at close on Friday, that figure was £26,500,000 These capital allocation milestones were enabled by over £500,000,000 of accretive asset disposals over the last eighteen months, significantly enhancing the balance sheet and providing over £400,000,000 of liquidity available for selective capital deployment. Turning to the middle column. HICL's portfolio continues to show resilient overall performance with growth in both underlying cash flows and considerable asset level expansion CapEx, and that's to the benefit of future earnings.

3:01 The company's growth assets continue to deliver against their business plans, providing valuable diversification and complementing the robust yields that we continue to see from our PPP portfolio. As a result, dividend cash cover continues to trend higher, improving to 1.07 times in the period, 2.06 times including profits on disposal. This positive trend is expected to continue, supported by historic inflation flowing into cash receipts and our growth assets increasing their yield contribution over time. On the right of the slide, it is this cash flow profile that positions the company for long term growth, both in income and capital appreciation. Organic growth continues to be driven at asset level through expansion CapEx.

3:50 And at portfolio level, HICL's scale and maturity ensures increasing levels of free cash can be directed back into the portfolio compounding returns. The current share price indicates an expected steady state return from the portfolio of 9.2% net of costs with a 6.8% down payment on that total return via the dividend alone against a twenty nine year asset life that is a compelling return proposition across asset classes, let alone for a core infrastructure strategy of this quality. Our job is to enhance that further with active management and by pushing the share price back towards the NAV through both sound capital allocation as well as delivering against our compelling forward looking strategy.

4:45 Slide six sets out some further metrics for these annual results. Top left, a 1% reduction in NAV per share brought about mainly by the lower underlying return from the portfolio at 5.5% annualized, and that's in the top right tile. This lagged expectations and principally reflected a forward looking increase in expected cost risk in the PPP portfolio applied to those assets which retain life cycle risk and reward. Following an internal review, this adjustment took the form of costs applied to certain assets where there are ongoing capital works as well as a blanket 15 basis point increase on the discount rate for 36 assets across sectors, reflecting risk around PPP life cycle delivery over the long run.

5:34 Together, these reduced NAV by 1.4p or the return by 1.8p 1.8%, rather, in the period. Bottom left, the company's the continued improvement in cash generation from the portfolio underpins HICL's dividend, enabling the Board to reaffirm that HICL is on track to deliver its target dividend of 8.25p per share for the financial year ending March 25 and to reiterate that dividend guidance at 8.35p for the financial year ending March thirty six. On the bottom right of the slide, the company's weighted average discount rate has increased to 8.1%, mainly due to that PPP life cycle adjustment, notwithstanding the volatility in government bond yields post period end, with the commencement of rate cutting cycles in The UK, The US and Europe, and in FRED's assessment of infrastructure asset pricing in private markets, we remain comfortable that the 8.1% discount rate remains appropriate.

6:38 We look at that discount rate further on slide seven. This slide shows a bottom up analysis of HICL's return profile. So HICL's discount rate is now 8.1%, and that is the best indicator of the expected gross return from the underlying assets in... If the company was trading at net asset value. The current share price adds to that further for a marginal buyer. So at period end, the return implied by the share price had increased to 8.6 net, which is the far right bar on the page. Based on Friday's closing share price, this increases to 9.2% net, a 5% premium over long term risk free rates.

7:27 And similarly, the 6.3% dividend yield increases to 6.8 on recent trading, with the remainder going to expected capital growth.

7:38 Finally, it's also important to note that this is a steady state return analysis, which assumes no reduction in the discount to NAV. A reversion back to NAV from here would add just over 28% to the return profile. Turning now to the financial result on Slide nine. Here, you can see the breakdown of the 1% reduction in NAV over the period to 156.5p. Portfolio performance contributed 4.3p. While the portfolio performed well operationally in the period, performance lagged expectations due to that forward looking adjustment for PPP facility condition risk, reducing NAV by 1.4p, and the disposal at Tameside Hospital following a prolonged dispute with the client reduced NAV by 0.3p.

8:31 HICL's growth assets, on the other hand, showed greater resilience, contributing more than half of the 4.3p of performance. Adjustments to macroeconomic assumptions resulted from a reduction in deposit rate assumptions across all jurisdictions, in particular in Canada, The US and New Zealand, and that was offset by marginally higher short term inflation in The US and New Zealand for the remainder of this financial year only. 0.2p accretion from the £17,600,000 of buybacks in the period of the total £50,000,000 program, which commenced in May and is scheduled to run to February. 0.6p for forex loss due to sterling strengthening in the period against the euro, Canadian and US dollar, and that's duly mitigated by the company's hedging policy.

9:31 The company incurred expenses of 1.4p, which were down by £11,800,000 versus the previous September period due to the positive impact of disposals on both finance costs and management costs. This dynamic also translates into the figures on the right hand side of the page in the gray boxes. With the full repayment of the company's revolving credit facility, net debt simply reflects the company's £150,000,000 private placement net of balance sheet cash. And with the addition of its outstanding equity commitments towards the construction assets, this equates to 7% gearing at the holdco level. Overall, NAV has remained resilient and relatively stable over the period, and this outcome is also supported by what we're seeing in the broader market, which we turn to now on slide 10.

10:28 The first thing to note here is that private market for infrastructure assets remains open and liquid. So looking at the top left of this page, we see a good number of transactions with 53 transactions in the core infrastructure space recorded last quarter. This remains subdued versus longer term averages, no doubt impacted by economic and political volatility, but it represents a healthy market. Across the bottom of the slide, we've updated the secondaries data that we've now included in the results for the last last couple of times, and this shows where secondaries are trading. So this is the trades between limited partners in unlisted funds. Infrastructure is at an 8% discount, while the discount in public markets remains particularly elevated at 14% at September 30 and 19% at Friday's close for infrastructure.

11:25 This continues to highlight that disconnect that we observed between public and private market valuations for high quality infrastructure assets. The top right chart is a new addition this time around, and this sets out infrastructure strategy preferences among institutions investing in private markets. Core infrastructure now leads versus other strategies and shows material growth quarter on quarter. This also ties with the latest data we have from Campbell Lutchens, which shows capital raised for core strategies in 2024 is already double 2023 and showing the greatest pickup versus other strategies, namely core plus and value add. All of this ties with a view that with interest rates having, peaked, greater amounts of private capital is moving into the core segment where HICL resides and provides leading indicators for core infrastructure asset demand, and the natural rate across to asset pricing.

12:29 This also tallies with HICL's own direct transaction experience, both the 500,000,000 plus of disposals traded at an average 11% premium to NAV over the last eighteen months, as well as INFRASED's activities on the buy side for both HICL and other infrared vehicles. While conditions remain variable, we are continuing to observe competitive bids for quality assets, and that data is very current. With that, I'm going to take a breath, pass over to Ross, who'll talk to you more about the portfolio and asset performance. Thanks very much, Ed. Good afternoon, everyone. So turning first to the left hand side of page 11, it's important to say that when it comes to setting the portfolio discount rate, our methodology is unchanged. First and foremost, the discount rate is informed by transaction activity, which, as Ed just set out, is still happening but at lower volumes than in previous years.

13:23 INFRASTRUCTURE's investment team has good visibility of the market, not just for HICL, but for other funds too. We also look at government bond yields to ensure that the company maintains an adequate risk premium. In the period, twenty to thirty year bond yields across HICL's jurisdictions did not materially change with a weighted average risk free rate of 4.2% as at September 30. Overall, conditions remained largely unchanged in the period with no obvious evidence that discount rates should move either way. The slight increase in the headline discount rate to 8.1 reflects a specific adjustment to some of The UK PPP assets, which I'll speak about later.

14:04 This results in an equity risk premium of 3.9%, unchanged from March. We'll continue to monitor this carefully in light of the recent increase in UK bond yields after the period end, noting though that reducing interest rates should result in downward pressure on discount rates over time. On the subject of interest rates, it's worth highlighting that the portfolio itself is very well insulated. None of the debt within the underlying portfolio companies is floating rate, and therefore, the only residual exposure is to refinancing. As you can see, only 14% of the portfolio level debt needs to be refinanced at all, of which 2.2% is due in the next two years. During the period, a portion of debt held within Texas Nevada transmission was refinanced successfully in line with our expectation.

14:54 Portfolio company gearing now stands at 66%. This is expected to gradually reduce over time. And in this period alone, a £160,000,000 of amortizing debt was repaid. The gearing of the five assets that do need refinancing is lower at 50%, and these are all growth assets. And if we move into the next section, I'll cover some of these in a bit more detail. So just before I do dive into that portfolio performance, it is always worth revisiting the company's market positioning, and that's set out here on slide 13. HICL is fundamentally a core infrastructure investor. All of our assets are positioned at the lower end of the infrastructure risk spectrum and benefit from three key attributes, high cash flow quality, defensive market positioning, and criticality.

15:42 This framework guides our approach to portfolio construction, and we summarize that over the page on slide 14. Many of you will be familiar with the charts on this slide. They really draw out quite how diversified HICL's portfolio is, and that's across sectors, geographies, and revenue types. Our active approach to portfolio construction is a central part of the company's business model. We will continue to refine this with selective acquisitions and disposals provided that these meet certain key metrics. You'll see concentration risk is well managed. The 10 largest assets represent half of the total portfolio, the five largest around a third. And so as usual, I'll run through the performance of those five assets in detail and then cover the PVPs as a whole.

16:29 Starting then with Affinity Water on slide 15. This is HICL's largest investment at just under 9% of the portfolio by value, and always worth highlighting that Affinity is a water only company with no responsibility for sewage services. Operational performance in the period was solid, with both revenues and costs slightly better than we expected. The management team continues to be very focused on leakage, with a sector leading reduction of over 18%, since the start of this regulatory period. Ofwat's latest annual assessment, of all water company performance was published in October, and this highlighted the broader progress that Affinity has made on service delivery. Notably, achieved the largest largest percentage reduction in

17:14 water supply interruptions of any company and met or exceeded the majority of its performance commitments. Looking ahead, the p r 24 process is now on the home straight. Affinity received its draft determination on the July 11, and this contained both positive and negative adjustments to the original business plan as you'd expect at this stage of the process. The company then submitted its response in late August, and a drafted... And a final determination is expected on the December 19. The valuation at September 30 largely reflects the draft determination, and the discount rate applied to the asset reflects the uncertainty, which remains over the final outcome. Importantly, we do continue to expect that distributions will resume in the next regulatory period.

18:03 In the longer term, a key attraction of Affinity Water is the growth that will come, from investment in the network. Although much of this CapEx will be self funded, HICL remains willing to support growth with a 50,000,000 equity investment in the next regulatory period subject, of course, to receiving a fair and balanced final determination. On slide 16, we have some detail on HICL's two large demand based assets. So starting with the A 63, this continues to perform well operationally. In the first half of the year, light and heavy vehicle traffic grew 42% respectively compared with the same period in 2023. You can see that this was broadly in line with our valuation assumption, although poor weather in July did have a minor impact on leisure traffic.

18:49 Tolls are contractually linked to a blended inflation rate made up of CPI and a specific construction index. This period, that latter index fell faster than expected resulting in a negative valuation impact. During the period, the French constitutional court validated the levy on long distance transport revenues, which was enacted at the start of the year. The portfolio company is therefore going to progress a legal challenge alongside other motorway operators. If this is unsuccessful, there is clear precedent for an adjustment to toll rates to compensate. And even in the worst case scenario, the impact on HICL's valuation would be immaterial. Moving across to high speed one, we saw international train path bookings continue to grow strongly, reaching ninety five percent of pre COVID levels on average over the six month period.

19:40 Again, the peak summer period fell slightly behind our forecast. In this case, it was due to fewer spot bids during the Olympics than we expected. However, EuroStar continued to book the vast majority of its train parts well in advance, which significantly reduces revenue variability for HICL. Border congestion does continue to constrain international services, but HS one and Eurostar, were working very closely to install 49 EU entry exit kiosks at Saint Pancras, which should improve passenger processing time in the medium term.

20:14 More strategically, securing a second international operator is a key priority to unlock the full growth potential of this investment. Discussions continue with several interested parties at various stages of readiness. Our valuation forecast continues to take a probability weighted view, and we would review that if a firm order for rolling stock was placed by one of the bidders. On the domestic side, bookings remained below the contractual underpin, but did increase by 16% compared with h one twenty three. We have retained our valuation assumption of a return to pre COVID levels in 2028. But if the current growth trajectory continues, there is a good chance of outperforming that.

20:58 Turning to slide 17, we cover the third and fourth largest assets in the portfolio. These are good examples of HICL's growth assets. When Ed talked about expansion CapEx earlier on, these are exactly the kind of projects he was referring to. So starting with Forty South, financial performance here over the first six months was slightly ahead of HICL's valuation assumption, which reflects the management team's focus on reducing overheads and improving the efficiency of planned maintenance. Although over 90% of Forty South's revenue was underpinned by the long term anchor tenancy contract with one n zed, securing incremental income through colocation is a key strategic priority. During the period, over 30 new agreements were signed on improved terms with third party network operators. That's compared to 20 assumed in the previous valuation.

21:49 Crucially, the agreements reached with these MNOs ensures that colocation contracts are now over a longer term, which enhances revenue visibility and credit quality for HICL. More broadly, the company is performing well as a standalone entity as demonstrated by the progress with tower upgrades and new tower deployments, which you can see on the slide. Forty South remains on track to deliver nearly 300 new towers over the first five years of its life, which are contractually agreed with one n zed, and will support the rollout of five g across New Zealand. Moving on to TNT, both Cross Texas transmission and One Nevada transmission continued to perform very well operationally, as you can see from the availability on the slide.

22:34 Since HICL's investment in 2022, INFRASTRUCTURE been working closely with co shareholder and operator LS Power to refine CTT's business plan ahead of its regulatory rate case submission, is due in January 2025. Notably, the management team has identified new energy generation projects, which could come online in the next few years at a faster rate than originally forecast. As such, the company's business plan is expected to include an acceleration of CapEx to facilitate these new interconnection opportunities. This would reduce shareholder distributions from TMT in the short term but should enhance long term value by expanding the capital base, which attracts the regulated return. The incremental interconnection opportunities, reflect the asset strategic positioning and the important role it plays in bringing power from Texas's rural energy generation centers to its main population hubs.

23:32 And then finally, PPPs on slide 18. These represented 58% of the portfolio by value at the end of September. These assets benefit from availability based contracted revenues, which tend to be linked to inflation, and fixed rate long term debt structures. They are also more mature than the growth assets I just spoke about. We have higher yields but shorter asset lives. INFRAS takes a highly active approach to managing the condition of its social infrastructure facilities. Some good progress was made on major works programs across these assets over the first period as we've set out in the interim reports. However, we've also observed that in The UK, there is increased risk around defect remediation and life cycle delivery.

24:19 The market for capital works is challenging, and client expectations will start to increase as hand back approaches. As a result, we've increased the discount rate by 15 basis points on the 36 UK PPPs, which do bear life cycle risk and also made some specific adjustments to the cash flow forecast for a selection of these assets. This was informed by a thorough review process over the last six months, drawing on detailed technical analysis by the portfolio company teams, a third party specialist advisers, and our own handbag readiness surveys. INFRASTRUCTURE has an extensive track record in managing construction works, and we've demonstrated this, through the Blankenburg Tunnel case study you can see on the right hand side of the page. This was a highly complex project, spanning six years and involving the submersion of two two hundred meter long concrete tunnel sections, 18 meters below one of the busiest shipping lanes in the world.

25:16 Despite the significant supply chain pressures caused first by COVID then by the war in Ukraine, full avail... Full availability was achieved this summer, in line with the original time frames. The upside we recognized, in the period adds to the 5p of outperformance INFRAS has now generated through derisking construction assets, demonstrating the important role that this segment plays in supporting long term earnings growth. So on that note, I'll hand you back over to Ed, who will explain how we approach capital allocation and touch on the outlook going forward. Thanks very much, Ross. So I'm now on Slide 20. Effective capital allocation continues to be front of mind. HICL has successfully delivered against its stated priorities over the last eighteen months.

26:02 As we look ahead, these achievements allow us a more balanced posture towards opportunities for disciplined and selective growth where this aligns with strategic objectives and short term constraints. Starting at the bottom of the chart here and, working our way up the pyramid, organic cash flow generation is the lifeblood of HICL's equity story. We intend to bolster it with asset level expansion CapEx as we're seeing on 40 South, Affinity, Altitude, TNT, and to enhance it further with active hands on management. Increasing levels of cash cover as observed in the period enables HICL to both increase its dividend as we've reiterated today and increase the level of reinvestment in the portfolio over time, compounding returns.

26:53 These efforts to enhance long term cash flows will be further supported by selective disposals and accretive portfolio rotation. Moving up to balance sheet management, we've achieved the key objective of returning... Of reducing HICL short term floating rate debt to nil. We achieved this with over £500,000,000 of accretive asset sales, enabling us to apply the excess proceeds to a £50,000,000 share buyback. Looking ahead, the prudent capital structure employed by HICL means that portfolio level debt is steadily reducing over time, which alongside growing portfolio cash flows provides a valuable source of organic funding. Now at the top of the pyramid.

27:39 The market continues to present investment opportunities which would enhance equity returns. In the short term, our investment focus remains on special situations where risk and return dynamics are particularly favorable and exceed those provided by further share buybacks.

27:57 Longer term, we expect the strong structural tailwinds driving infrastructure investment to continue to expand HICL's addressable market and provide opportunity for highly selective additions to the portfolio, enabling enhanced returns within a core infrastructure risk profile. And finally, some final thoughts on slide 21 before we go to questions. It's been a solid six months for the company, which has seen growth in underlying cash flow generation, debt reduction, progress on share buybacks and substantial available liquidity to pursue selective investment opportunities. Market conditions remain challenging, and investors right across the sector are feeling this, but we remain confident that the underlying quality of HICL's portfolio will shine through, provide a compelling total return for investors over the long term and with the potential for further support as the macro environment stabilizes.

28:55 That concludes the presentation. And now very happy to turn over to Q and A. Perfect. Ed, Ross, if I may just jump back in there. And thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments just to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Guys, as you can see there, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But, Hugo, at this point, sir, if I may hand over to you to chair the q and a with the team. And if I pick up from you at the end, that'd be great. Thank you. Of course. Thanks.

29:43 And and just to reiterate, thanks to those of you online for taking the time to watch and for sending your questions through. So just to start with a couple around asset selection and investment, say, one spread. Around the 400,000,000 of liquidity available, what types of assets or sectors are being prioritized for these investments? And as a follow on to that, what exactly is meant by growth assets in the context of HICL? Sure. So, yeah, good good question. So right now, as I said, our focus remains on special special situations, and that is sector agnostic. So whilst over the long term, we're seeing a continued build out of sectors due to those megatrends of decarbonization, digitalization, demographic change.

30:30 They're going to be drivers of long term pipeline. But in the short term, it's really around finding the right situations where we can get favorable risk return dynamics and though... And and in situations where those dynamics exceed share buybacks. So the types of things we're looking at in particular, to just provide some texture on that, is incremental investments through existing assets, bolt on acquisitions to existing assets where we can actually expand the asset. We're also looking at our relationships across the infrared piece to uncover special situations where someone needs to do something quite quickly. A good example of that would be the small investment that we made in the a 63 at December last year. So this was a a relatively small investment from a co shareholder who wanted to transact quite quickly, and we were able to do so, increase our governance position, and acquire the incremental stake at at higher returns.

31:26 So that should give a little bit of color about how we're thinking about about special situations and the investment pipeline. In terms of growth assets, what we're talking about there is assets that are, still developing their asset base and, as a result, continuing to build out their earnings base for the portfolio. So that generally translates to us as a lower yield because capital is being reinvested but a higher return. And so those assets that are actually yielding lower than their discount rate, their valuation should actually increase over time, and they're assets that we would define as growth assets. So as Ross went through in the presentation then, things like Forty South, Texas Nevada Transmission, Affinity Water, they're all very good examples of assets that have lower average yields, building out their CapEx base, and should provide longer term earnings to the portfolio over over time.

32:19 Thanks, Ed. And then as a follow on to that, perhaps one for Ross to add to as well. Are you able to elaborate on the decision to allocate the further 50,000,000 towards Affinity Water versus other potential opportunities?

32:33 Yeah. So maybe I'll start with the Affinity Water specifically, and then Ed can comment, in terms of broader capital allocation. I think what's important to mention with the 50,000,000 potential equity investment into Affinity Water is that it is very much not a commitment at this stage. It's something we've flagged, since the business plan submission that went into Ofwat last year. And this is something that we would look at, on a stand alone basis on its own merits with the clear advantage that it would be value accretive for HICL as it's funding the substantial, CapEx program at Affinity. The conditions behind that investment are very much a fair and balanced final determination, which is due on the December 19. And for the avoidance of doubt, that would include a a resumption of equity distributions for Affinity at a reasonable level. So we still have some time to make that decision. We'll clearly do that based on what we receive on the December 19.

33:28 And then once we have all the information, we'll take that decision on its own merit. Ed, do wanna comment on broader capital allocation?

33:35 I'd I'd just add to that. I mean, as Ross says, it's a stand alone investment, so it needs to stack up from a return on yield perspective. Perspective. But the particular attraction of making an investment like that is where a smaller incremental investment could unlock yield across the entire investment. And so the the yield on the marginal investment is very high. So that's something that we would look at in in those terms, and that would create significant increase in cash generation from the portfolio should Affinity come back online for distributions in the way that we expect it will, but still a few steps to go there before before that turns into anything intangible. But more broadly, you know, we we would look at the effectiveness of making that investment versus other opportunities, and that's a decision we make on return, of course, but also on risk. And investing in an asset that we already know well in a business plan that we understand and believe we can generate outperformance from going forward is is clearly advantageous to investing in something new with a risk profile that's not being tested within our portfolio.

34:45 Thanks, Faith. And then there's just a final two questions, which are around the macro environment. So wrap those together. Firstly, what would this morning's inflation use have... What impact would that have on the dividends? And then how do you anticipate the current geopolitical environment to impact investment strategy going forward?

35:06 Yeah. So on inflation, so that... And it's very current, but, that's come in slightly above expectations and, an increase on on last month. And there's good reasons for that, and economists can can can dwell there. We had increased our long term inflation forecast for The UK, recognizing that we felt that the resting heart rate of The UK economy was likely to increase as we're also seeing in in The US. And so therefore, it's it's not, you know, completely out with our expectations for UK inflation. In terms of the way the portfolio is positioned for inflation, there is a positive correlation to the extent that inflation increases above our expectations.

35:51 And that takes some time to come through into the dividend cash flows, but there is a correlation there to the benefit of underlying cash flows across all of our assets. In respect of geopolitical uncertainty and unrest, what I would say there is that the portfolio has no direct link to some of the unrest that we see in The Middle East and in Eastern Europe. What I would say is, though, of course, there are secondary implications of that, which includes disruption to supply chain. And what we've seen in the past is that these can be inflationary. So we do expect that these geopolitical events will interact with the macroeconomic environment. But what's important to say is that we have a well diversified portfolio that is, well insulated at an asset level from these macroeconomic events. We don't have floating rate debt. We have generally long term fixed rate debt in the portfolio.

36:48 And the cash flows that we benefit from in these assets are generally contracted or under long term regulatory frameworks. So we don't expect this type of activity to affect the portfolio in any material way. Perfect. And we've just had a couple more come in. So the first one is around the PPP projects. And have you considered around growing populations, building extensions to the PPP projects or or enlarging those?

37:19 Yeah. Very good question. So the way that these contracts are set up is that they're very limited to the scope of the project that we currently own. What we do see very often within the portfolio is what's called variations where the client decides that it wants to change the part of a building or actually, in some cases, extend the building. And that's something that HICL and INFRASTRUCTURE a regular basis. I think more broadly, if there was going to be a decision to make a material change to the contract, that was something that would probably be... Need to be considered in light of a new framework for investment in social infrastructure projects. Clearly, there has been some discussion with the new incoming government around what a new infrastructure model might look like. There are some examples of this, but I think that's very much a live conversation at the moment. So, in terms of what we're doing, it's very much playing that role as supportive, to the client, where we can help by changing the facility or expanding the facility. We we very much do that. A good example of that is Southmead Hospital, which is our largest PPP, where we recently converted some administrative space into new clinical areas, and that was very much well received by the client.

38:35 Thanks. And then one final question around is headway being made in adding more institutional investors to the share register?

38:48 It's a it's a good question. So we benefit from a a nicely diversified shareholder register, which has a mix of direct retail, indirect retail, and institutions, including insurance, pension, multi asset money. And so we continue to see fluctuations in that, as you'd expect, in line with some of the macroeconomic developments over the last year. But we continue to meet with new investors. We continue to bring new investors onto the register. We certainly want to attract marginal buying to the company. We think that that's in the interest of all shareholders. And in order to do that, we need to continue to set out our stall in terms of a forward looking positive equity strategy.

39:33 That's about getting that balance right between doing that, growing the portfolio, making some good investments as much as it is about looking at the portfolio, selling assets, and buying back shares. So we're going to continue to get that balance right, of course, taking feedback from investors and in interaction with HICL's independent board to make sure that we get that balance right to attract new capital to the register as that's going be really important to moving the share price on from here. Perfect. Thanks, Ed. And that's all we've got time for at the moment. So I'll hand back to Jake and best of me. Perfect. Hugo, Ed, Ross, if I may just come back in there. Thank you very much indeed for being so generous of your time there and addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do

40:20 come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the platform. But, Ed, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company, If I could please just ask you for a few closing comments to wrap up with, that'd be great. Yes. Of course. So maybe just to reiterate the key messages. This result really reflects delivery against key capital allocation milestones alongside a broadly solid operating performance from the underlying portfolio. It's been a solid six months for the company. We've seen growth in underlying cash flow generation, debt reduction, share buybacks, substantial available liquidity to go on from here.

41:10 We recognize that investors are frustrated with share price performance right across the sector, and we and we share that. But we do have a lot of confidence in the quality of HICL's portfolio and that it will continue to deliver for investors going forward. Thank you very much for your time. Perfect, Ed. That's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of HICL INFRASTRUCTURE PLC, we would like to thank you for attending today's presentation.

41:55 That now concludes today's session. So good afternoon to you all.