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Share Name Share Symbol Market Type Share ISIN Share Description
Hicl Infrastructure Plc LSE:HICL London Ordinary Share GB00BJLP1Y77 ORD 0.01P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.40 -0.24% 169.20 169.00 169.40 169.80 168.40 168.40 669,688 09:47:25
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 0.0 49.5 2.7 62.7 3,277

HICL Infrastructure PLC Interim Update Statement

16/07/2020 7:01am

UK Regulatory (RNS & others)


Hicl Infrastructure (LSE:HICL)
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TIDMHICL

RNS Number : 1419T

HICL Infrastructure PLC

16 July 2020

16 July 2020

HICL Infrastructure PLC

"HICL" or "the Company" and, together with its subsidiaries, "the Group", the London-listed infrastructure investment company managed by InfraRed Capital Partners Limited ("InfraRed" or "the Investment Manager".)

Interim Update Statement

The Board of HICL is issuing this Interim Update Statement, which relates to the period from 1 April 2020 to 15 July 2020.

Ian Russell, Chairman of HICL Infrastructure PLC, said:

"I am pleased with the solid progress the Company has made in the period, in both the management of the existing portfolio and the execution of its investment strategy. Importantly, we have continued to ensure that our infrastructure assets have remained available for the communities they serve throughout the pandemic.

"Operational performance of HICL's demand-based assets has been reassuring in the context of the gradual easing of travel restrictions. Revenue on the toll roads is ahead of expectations at the current time, underlining that these investments benefit from strategically important positioning in their respective regions.

"There is continued market appetite for high quality, core infrastructure assets. The Investment Manager has been actively pursuing attractive investment opportunities, with the Company announcing accretive acquisitions in the period, demonstrating HICL's commitment to its strategy of delivering stable and socially responsible long-term returns from core infrastructure investments at the lower end of the risk spectrum.

" The Company has today announced an equity fund raising at an issue price of 164p, a discount to the pre-announcement share price of 5.7%, to pay down the Revolving Credit Facility in respect of these investments and to provide additional resources to fund HICL's near-term pipeline of attractive opportunities ."

Investment Activity

   -- The Group has a portfolio of 118 investments located in the UK, continental Europe and North America. 
 
   -- In June 2020, the Company announced the completion, by Diamond Transmission Partners ("DTP"), of the acquisition 
      of the transmission assets associated with the Walney Extension Offshore Windfarm located in the Irish Sea. DTP 
      is a consortium comprising HICL and Diamond Transmission Corporation Limited (a subsidiary of Mitsubishi 
      Corporation) and Chubu Electric Power Company Netherlands B.V. (a subsidiary of Chubu Electric Power Co., Inc). 
 
   -- In June 2020, the Company also announced the acquisition of a further 74% interest in Holdfast Training Services 
      Limited ("Holdfast"), a public-private partnership ("PPP") project that supports the Royal School of Military 
      Engineering. The 30-year PPP was signed in August 2008 and covers the design, construction, refurbishment and 
      maintenance of a number of buildings and training areas across three UK locations on behalf of the UK Ministry of 
      Defence. 

Portfolio Performance

   -- PPP projects represented 72% of portfolio value at 31 March 2020. Activity during the period has been focused on 
      active asset management, particularly ensuring that the portfolio's hospitals, emergency services and schools 
      projects have been fully supported as they deal with stakeholder requirements to respond to the Covid-19 pandemic 
      and subsequently to transition back to business as usual operations over time. 
 
   -- The Group's demand-based investments represented 20% of portfolio value at 31 March 2020. The table below shows 
      the reduction in revenue levels versus budgeted pre-Covid-19 levels for the quarter ended 30 June 2020, across 
      the three largest GDP-linked demand-based assets: 
 
                           Valuation            Actual              Week to 
                           Assumptions 
                         (for the period                          30 June 2020 
                           31 Mar - 30      (for the period    (latest available) 
                             Jun 20) 
                                              31 Mar - 30 
                                                Jun 20 ) 
A63 Motorway, France          -60%               -36%                -8% 
Northwest Parkway, 
 USA(1)                       -75%               -59%                -44% 
High Speed 1, UK(2)           -12%               -14%                -14% 
---------------------  -----------------  -----------------  -------------------- 
 

(1) Traffic volumes used as a proxy for revenue over these time frames for Northwest Parkway .

   (2)   Estimate , based on latest available management information . 
   -- The gradual easing of lockdown conditions in Europe and North America has enabled traffic on the Company's two 
      toll roads, the A63 Motorway (France) and Northwest Parkway (USA), to commence their recovery earlier than 
      assumed in the March 2020 Valuation. The improvement in traffic levels is encouraging and has added to the 
      financial resilience of the assets. Importantly, this recovery reconfirms the strategic positioning of these 
      assets in their respective regions to facilitate, and benefit from, the resumption of movement and economic 
      activity in these areas. Notwithstanding the positive trajectory, we remain mindful that the recovery has a 
      significant course to run and any resumption of restrictions to contain further pandemic waves would weigh on 
      asset performance. 
   -- In relation to High Speed 1 ("HS1"): 

3/4 Contracted train path access charges in relation to HS1's international and domestic services (32% and 68% respectively of annual track access revenue in the year to 31 March 2020) continue to provide a high degree of visibility over short-term revenues out to December 2020.

3/4 In relation to international services beyond this point, Eurostar International Limited ("EIL") has elected not to pre-book train paths beyond December 2020 and instead utilise the more flexible 'spot' booking provisions available to it. Principally this impacts timing of receipt of revenues, as well as train path visibility beyond December 2020. From week commencing 20 July 2020, EIL is scheduling services at approximately 40% of the pre-Covid-19 budgeted level and, from December 2020, for services equivalent to 60% of pre-Covid-19 levels; we expect these levels to continue to increase in line with the broader recovery.

3/4 Domestic train path bookings remain at 100% of the budgeted level, with pre-bookings received out to May 2021.

3/4 Contracted track access charges to December 2020 are sufficient to cover debt service payments in 2020 and the project benefits from significant liquidity to cover debt service through 2021 in a range of plausible downside scenarios.

   -- Regulated assets represented 8% of portfolio value at 31 March 2020. The acquisition of the Walney OFTO in June 
      2020 marks the fourth offshore transmission asset in the portfolio. These facilitate, in aggregate, the 
      transmission of green energy to over 1.7m UK homes and are actively supporting the UK's transition to a low 
      carbon future. 
 
   -- While Covid-19 has presented challenges to the performance of Affinity Water in some areas, something which the 
      regulator has acknowledged across the water sector, the company has been agile in its response to the virus and 
      continues to engage with the wider industry and Ofwat. The company has implemented working from home for many 
      staff and rigorously developed and implemented Covid-19 safe working protocols for water production and network 
      operations, to be able to continue to deliver essential activities, outside of work in customers' homes. Affinity 
      Water has been working closely with communities and other utilities, supporting customers through payment plans, 
      prioritising vulnerable customers and supporting those facing financial difficulties possibly for the first time, 
      which the company has provisioned for. 

Dividends and Financing

   -- The Company announced a final quarterly interim dividend for the financial year ended 31 March 2020 of 2.07 pence 
      per Ordinary Share (the "Q4 Dividend") on 13 May 2020. The shares went ex-dividend on 4 June 2020 and the Q4 
      Dividend was paid on 30 June 2020. The interest streaming percentage for the Q4 Dividend was 39%, bringing the 
      total streaming percentage for the financial year ended 31 March 2020 to 54%, in line with the Directors' 
      expectation of approximately 60%, as outlined in the Company's Prospectus dated 4 March 2019. 
 
   -- The Company announced a first quarterly interim dividend for the financial year ending 31 March 2021 of 2.06 
      pence per Ordinary Share (the "Q1 Dividend") on 15 July 2020. The interest streaming percentage for the Q1 
      Dividend will be 56%. 
 
   -- The Board remains comfortable that cash generation from the portfolio remains in line with forecast and 
      re-affirms the target dividend guidance of 8.25 pence per Ordinary Share for the financial year to 31 March 
      20213. 
 
   -- Based on previously announced acquisition activity and advanced pipeline opportunities, the Company has announced 
      today its proposal to raise additional equity capital through the issue of new Ordinary Shares by way of 
      non-pre-emptive tap issuance , priced at 164.0p per Ordinary Share. 

Issued Capital

   -- As at 15 July 2020, the Company's issued share capital consists of 1,863,642,769 ordinary shares of 0.01p each, 
      all of which carry voting rights. 
 
   -- Following the Company's July 2020 Annual General Meeting ("AGM") when shareholders granted the Board authority to 
      issue up to 10% of outstanding shares on a non pre-emptive basis, the Company's current tap capacity is 
      approximately 186.4m shares (limited by the AGM authority), prior to the proposed additional capital raising 
      announced today . 

September 2020 Valuation

   -- The next valuation of the Group's portfolio will be as at 30 September 2020 and will be published as part of the 
      Company's Interim Results in November 2020. 
 
   -- Institutional investors continue to view core infrastructure as an important source of stable income during a 
      time of uncertainty, and current asset pricing reflects this. If current market conditions are sustained, and the 
      downward pressure on discount rates observed at the beginning of the year (as discussed in the Company's May 2020 
      Annual Report) persists, this would be expected to be recognised in the September 2020 Valuation. 
 
   -- After a period of volatility during March 2020, interest rates have settled at a lower level than earlier in the 
      year which, if sustained to September 2020, are expected to be reflected in the valuation assumptions. 
 
   -- Within the portfolio, based on current information, each of the following is expected to have an immaterial 
      impact on the September 2020 Valuation: 

3/4 An increase in the liability for the remediation of construction quality issues at one of the portfolio's healthcare assets, where the responsibility for resolution resides with the Group.

3/4 The remainder of the PPP portfolio is expected to deliver outperformance in the period, driven by accretive investment and lifecycle savings.

3/4 As disclosed in the Company's May 2020 Annual Report, the Company's three GDP-linked demand-based assets (18% by value as at 31 March 2020) were valued using the median of economist forecasts for GDP for the calendar years 2020 and 2021, collated up to 27 April 2020. In the period, the Investment Manager has seen a deterioration in median GDP forecasts for 2020 and 2021 in each of the USA, France and the UK. Additionally, the trajectory for the recovery of international train paths on HS1 is behind HICL's expectation, which is expected to negatively impact the Company's forecast train paths beyond the current contracted period to December 2020.

Company and Governance

   -- The Company's Annual Report for the year ended 31 March 2020 was published on 20 May 2020, and copies were posted 
      to shareholders who elected to receive a printed copy. 
 
   -- The Company held its Annual General Meeting ("AGM") on 14 July 2020. All resolutions were passed with a 
      substantial majority. 
 
   -- As in previous years, and aligned to corporate governance best practice, the existing Directors offered 
      themselves for re-election at the AGM on 14 July 2020 and were duly re-elected. Ms Rita Akushie was appointed to 
      the Board effective from 1 January 2020. She was proposed for election at the July 2020 AGM, and was duly elected 
      by shareholders. 
 
   -- An updated Key Information Document, based on the costs disclosed in the May 2020 Annual Report, was published on 
      the Company's website on 4 June 2020. 

Market and Outlook

   -- Whilst uncertainty stemming from Covid-19 continues to create a degree of volatility in financial markets, the 
      resumption of transaction activity in the sector demonstrates continued investor appetite for core infrastructure 
      assets. InfraRed has, and will continue to, pursue acquisitions in line with HICL's stated strategy and execute 
      on its attractive pipeline of opportunities, in line with HICL's objective of growing a diversified portfolio of 
      investments in assets that share underlying characteristics of cash flow quality, defensive market positioning 
      and criticality. 
 
   -- The pipeline remains focused on HICL's core geographies (UK, Europe, North America and Australia / New Zealand) 
      and comprises further investments within HICL's existing sectors, as well as sectors essential to the functioning 
      of a modern economy (e.g. infrastructure to support the energy transition and communications infrastructure), 
      where these meet the Company's clearly defined core infrastructure characteristics. 
 
   -- The Investment Manager and the Board will also continue to consider opportunities to make accretive disposals 
      where these improve portfolio construction. Overall, the Company continues to be well-positioned to identify and 
      act on new opportunities to further enhance the Company's portfolio construction and improve key portfolio 
      metrics. 

(3) This is a target only and not a profit forecast. There can be no assurance that this target will be met.

-Ends-

Enquiries

   InfraRed Capital Partners Limited                             +44 (0) 20 7484 1800 / info@hicl.com 

Harry Seekings

Keith Pickard

Edward Hunt

Kirsty MacCallum

Teneo +44 (0) 7342 031051 / HICL@teneo.com

George Hutchinson

Haya Herbert-Burns

   Investec Bank plc                                                             +44(0) 20 7597 4952 

David Yovichic

   RBC Capital Markets                                                       +44 (0) 20 7653 4000 

Darrell Uden

   Aztec Financial Services (UK) Limited                     +44(0) 203 818 0246 

Chris Copperwaite

Sarah Felmingham

HICL Infrastructure PLC

HICL Infrastructure PLC ("HICL" or the "Company", and together with its subsidiaries the "Group") is a long-term investor in infrastructure assets which are predominantly operational and yielding steady returns. It was the first infrastructure investment company to be listed on the London Stock Exchange.

With a current portfolio of over 100 infrastructure investments, HICL is seeking further suitable opportunities, which are positioned at the lower end of the risk spectrum within core infrastructure.

Further details can be found on the HICL website www.hicl.com .

Investment Manager (InfraRed Capital Partners)

The Investment Manager to HICL is InfraRed Capital Partners Limited ("InfraRed") which has successfully invested in over 200 infrastructure projects since 1997. InfraRed is a leading international investment manager focused on infrastructure and real estate. It operates worldwide from offices in London, Hong Kong, New York, Seoul and Sydney. With over 190 professionals it manages in excess of US$12bn of equity capital in multiple private and listed funds, primarily for institutional investors across the globe. InfraRed is authorised and regulated by the Financial Conduct Authority.

The infrastructure investment team at InfraRed consists of over 90 investment professionals, all with an infrastructure investment background and a broad range of relevant skills, including private equity, structured finance, construction, renewable energy and facilities management.

InfraRed implements best-in-class practices to underpin asset management and investment decisions, promotes ethical behaviour and has established community engagement initiatives to support good causes in the wider community. InfraRed is a signatory of the Principles of Responsible Investment.

Further details can be found on InfraRed's website www.ircp.com .

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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