News

HICL Infrastructure reports on a resilient performance

230524 HICL Resillient

HICL Infrastructure (HICL) has announced its annual results for the year ended 31 March 2023. The chair, Mike Bane, describes the financial performance in the year as being resilient, with NAV growth of 1.8p per share to 164.9p. The return from the portfolio was 10.2% (March 2022: 9.6%), outperforming the company’s expected return of 6.6% for the period (the company’s weighted average discount rate as at 31 March 2022).

NAV growth in the year was primarily driven by the impact of higher actual and forecast inflation on the company’s cash flows. HICL’s strong inflation correlation of 0.8x helps to protect investors’ capital in higher inflationary environments such as those experienced over the past 12 months. The chair comments that strong inflation correlation is a deliberate part of portfolio composition and its positive effect more than offset the associated impact of higher long-term government bond yields in the year, which saw the portfolio’s weighted average discount rate increase from 6.6% to 7.2%.

Key highlights are as follows:

  • Total shareholder return was 6.3% (2022: 12.8%) delivering long-term value for shareholders against an uncertain macroeconomic environment.
  • 8p increase in NAV per share to 164.9p (31 March 2022: 163.1p), driven by the portfolio’s high (0.8x) inflation correlation, partially offset by a 0.6% increase in the weighted average portfolio discount rate.
  • Portfolio return of 10.2% (2022: 9.6%), demonstrating the inherent defensive characteristics of the portfolio and the strong inflation linkage.
  • 14% uplift in the directors’ valuation of the portfolio to £3,772.8m (31 March 2022: £3,311.0m). This increase was largely driven by the £435m of net investment activity in the year.
  • This investment activity refined the portfolio and enhanced the company’s ability to generate sustainable long-term earnings, with:
    • £545m invested across three assets with an additional investment agreed post year-end in Altitude Infra. These modern core infrastructure investments have added valuable diversification and improved portfolio metrics.
    • £108m of disposal proceeds received from QAH, and a further partial disposal of Northwest Parkway agreed post year-end for USD 86m. Both disposals undertaken at a price in excess of carrying value, realising outperformance and providing an alternative source of funding for attractive investments.
  • The company strengthened its balance sheet with an increase in its Revolving Credit Facility (RCF) to £650m expiring on 30 June 2026 and an oversubscribed equity issue of £160m.
  • In May 2023 HICL completed a £150m private placement, effectively converting existing short-term drawings to a longer maturity, reducing interest rate risk and diversifying the company’s sources of funding.
  • The dividend guidance of 8.25pps confirmed for the year to 31 March 20244 and extended to 31 March 2025 (this is a target not a forecast) at the same level, reflecting the strength of the underlying cash flows. The extended guidance reflects the board’s priority to continue to invest in building a healthy and sustainable long-term earnings base, particularly as its PPP concessions mature and redeem capital.
  • HICL has published its Sustainability Report today, with enhanced disclosure and demonstrating significant progress against objectives. HICL’s Sustainability Report can be found at: https://www.ircp.com/SustainabilityReport2023
  • The outlook for core infrastructure investment remains buoyant, powered by key growth drivers, including decarbonisation and digitalisation. Equipped with a healthy balance sheet, diversified sources of funding and InfraRed’s global capability, HICL is well placed pursue its strategy with discipline and ambition.

Leave a Reply

Your email address will not be published. Required fields are marked *

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…

Exit mobile version