HICL Infrastructure (HICL) has announced its annual results for the year ended 31 March 2025, delivering robust operational performance despite macroeconomic headwinds and continued pressure on its share price. However, HICL’s net asset value (NAV) per share declined by 3.2% over the year to 153.1p (from 158.2p), largely due to a 40bps rise in the portfolio’s weighted average discount rate to 8.4%, reflecting higher government bond yields across key markets. Despite this, the portfolio generated an annualised underlying return of 7.7%, driven by outperformance from growth assets, notably Affinity Water. Earnings per share rose to 2.3p (FY24: 1.5p), with profit before tax increasing to £46.0m from £30.6m. The total shareholder return for the year was 2.0%.
Dividend guidance increased for FY27
HICL declared a fourth-quarter dividend of 2.07p, bringing the full-year total to 8.25p. The board reiterated guidance of 8.35p for FY26 and introduced a new target of 8.50p for FY27, underpinned by stronger portfolio cash generation and a 1.56x cash cover ratio (1.07x excluding disposal profits).
Capital allocation and disposals
The company completed £244m of divestments during the year, contributing to £509m sold over the last 20 months, all at or above carrying value. A further £200m of disposals is targeted for FY26 to support capital recycling into higher-return opportunities and fund share buybacks.
The initial £50m buyback programme was completed, contributing 0.9p of NAV accretion. The board has expanded the programme by a further £100m, with the current implied return on repurchases at 11.1%, highlighting the accretive opportunity presented by the share price discount.
Fee structure revision
In a move designed to strengthen alignment with shareholders, the board and manager InfraRed have agreed a revised fee structure. From 1 July 2025, fees will be calculated 50% on NAV and 50% on market capitalisation, capped at the current GAV-based arrangement. Based on today’s market levels, this change reduces the ongoing charges ratio from 1.10% to 0.95%.
Portfolio and operational highlights
The portfolio remains well-diversified, with 45% by value in growth assets. Key developments include:
- Affinity Water’s regulatory determination for AMP8, enabling resumed distributions in FY26;
- London St. Pancras Highspeed launching incentives to attract a second international operator;
- Robust performance from US and European growth investments, with £450m in expected capex over the next five years;
- Over 99% availability from the PPP portfolio.
The Blankenburg Tunnel also reached availability during the year, adding to HICL’s strong construction delivery track record.
Outlook
Despite persistent share price weakness, HICL remains confident in the long-term value of its portfolio and strategy. InfraRed continues to focus on asset rotation, buybacks, and selective reinvestment. The group remains well-capitalised, with £441.8m of liquidity on its revolving credit facility and net debt of £102.2m.
InfraRed believes the infrastructure sector presents enduring opportunities, driven by structural megatrends and growing demand for private capital. HICL’s positioning as a long-term investor in critical infrastructure leaves it well-placed to benefit from this evolving landscape.
[QD comment MR: HICL’s FY25 results illustrate the strength of its core infrastructure portfolio, despite a challenging macro backdrop. While the 5.1p drop in NAV per share reflects rising discount rates – a common theme across the listed alternatives space – the operational performance remains solid, and the company continues to deliver on cash generation, asset sales, and capital discipline. The modestly increased dividend guidance for FY27, underpinned by improved cash cover and the maturing contribution of growth assets like Affinity Water, is a welcome development, as is the revised management fee structure that should see the ongoing charges ratio fall modestly.
What continues to weigh heavily, however, is the disconnect between NAV and share price. HICL is leaning into buybacks to address this, with the return on capital from repurchases now arguably more attractive than new investments. InfraRed’s proven ability to deliver value-accretive disposals gives it the firepower to continue this strategy, but highlights that the discount is unjustified. However, the wider sector rerating investors are hoping for may still hinge on a broader macro reset – especially with interest rates and bond yields playing such a critical role in listed infrastructure valuations.In the meantime, HICL looks to be doing most of the right things to demonstrate value and capitalise on its long-term structural strengths.]
