HICL income slides but NAV makes gains in first half

HICL Infrastructure reported “resilient” portfolio performance in its interim results on Wednesday, underpinning continued growth in its net asset value per share of 0.3p, to 157.8p at the end of its first half ended 30 September.

The FTSE 250 company said it was on target to deliver aggregate target dividends of 8.25p per share for the current financial year, as its board re-affirmed the 8.45p per share target dividend guidance for the next financial year to 31 March 2021.

It also gave new target dividend guidance for the financial year ending 31 March 2022 of 8.65p per share, which the board said reflected its confidence in the resilience of the long-term forecast cash flows from HICL's portfolio.

Looking at its finances, HICL reported income of £97.9m for the six months ended 30 September, compared to £211m at HICL Guernsey - from which the company transferred its assets to a UK base- in the prior comparative period.

Profit before tax fell to £79.5m from £192.8m, and earnings per share slid to 4.4p from 10.8p.

The board declared a quarterly interim dividend of 2.06p, up from the 2.02p shareholders received for the same period in 2018.

Its board explained that portfolio optimisation remained a core focus, with two accretive investments and two strategic disposals delivering improvements in its key portfolio metrics.

HICL said that, with a total return featuring “strong” inflation correlation, low sensitivity to deposit rate changes and a low correlation to UK GDP, HICL's portfolio provided a “measure of mitigation” against ongoing political uncertainty in the UK.

The infrastructure asset class was continuing to hold unique attractions for yield investors in a low interest rate environment, the board claimed, adding that HICL has “differentiated characteristics” such as low single asset concentration, a well-diversified portfolio and a pipeline of opportunities for growth.

Steady share price progression over the period had seen the company's shares move to a healthy premium to net asset value, it also noted, reflecting renewed appetite for yield as a low interest rate environment persists, as well as the “increasing relevance” of investments such as HICL that had a “meaningful sustainability profile”, and a more supportive political backdrop in the UK.

The board said the investment manager was continuing to progress a healthy pipeline of core infrastructure opportunities, including public-private partnerships in Northern Europe and North America, and regulated assets in selected geographies, including additional offshore transmission owner opportunities.

“With a long-term mindset at its core, the directors believe the company's strategy will continue to deliver responsibly managed, core infrastructure for communities and sustainable returns for shareholders,” said HICL Infrastructure chairman Ian Russell.

Harry Seekings, co-head of infrastructure at HICL’s investment manager InfraRed Capital Partners, added that portfolio optimisation was a core component of HICL's strategy, and an important driver of shareholder value.

“This strategy has continued to be successfully implemented, with InfraRed both making accretive acquisitions and utilising favourable market conditions to undertake strategic disposals.

“HICL has a uniquely well-diversified portfolio of sustainable and resilient core infrastructure investments.

“InfraRed recognises that taking a long-term, stakeholder-led view unlocks the potential of investments, reduces risk in the portfolio, and creates enduring benefits for local communities.”

Seekings explained that the acquisition pipeline for HICL remained “healthy”, with InfraRed leveraging its expertise and network of relationships to generate new investment opportunities for the group.

“These include PPPs in Northern Europe and North America and regulated assets in selected geographies, including additional OFTOs.

“The company has a current funding requirement of approximately £90m and the board continues to assess market conditions with regards to managing this.”

At 1054 GMT, shares in HICL Infrastructure were up 0.19% at 169.72p.