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Flat year for HICL Infrastructure

Flat year for HICL Infrastructure – HICL Infrastructure has published results for the year ended 31 March 2021. The NAV was flat at 152.3p and the NAV total return for the year was 5.5%. The company met its 8.25p dividend target for the year and says that it hopes to maintain it at this level for both 2022 and 2023. At the top level, the company has no debt and £322m of available liquidity.

Factors affecting returns

The underlying annual return from the portfolio was 7.7%, ahead of the weighted average discount rate used to value the portfolio. The NAV remained flat despite several external factors negatively impacting the company. Returns in the period were supported by:

  • purchases and sales made within the portfolio;
  • a positive outcome from the Competition and Markets Authority’s PR19 redetermination, relevant to Affinity Water; and
  • continued evidence of strong asset pricing.

These were offset by several external factors

  • the UK budget’s increase in corporation tax rates; the alignment of the UK Retail Price Index (RPI) with the Consumer Prices Index including owner occupiers’ housing costs (CPIH) from 2030;
  • a further softening of long-term interest rates;
  • negative movements in foreign exchange (net of hedging); and
  • government restrictions on travel within the period.

The ramifications of the pandemic continue to impact High Speed 1 (the Channel tunnel rail link, which was 4% of portfolio value at 31 March 2021) in particular, given continued restrictions on international travel.

New debt structure

Echoing JLEN’s announcement this morning, HICL also renegotiated its revolving credit facility this month to convert the loan to a Sustainability Linked Loan (SLL) and transition from LIBOR to SONIA for GBP drawings. The SLL structure links the loan’s margin to the company’s performance against five sustainability targets, across Environmental, Social and Governance dimensions. [However, it isn’t using this money. The company raised £120m from investors in July 2020. We are slightly surprised to see that, net, it hasn’t invested that money yet. HICL’s last acquisition was made in August 2020. Its £322m of available liquidity could have been deployed into income producing assets.]

Flat year for HICL Infrastructure

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