HICL Infrastructure maintains dividend in tough market
By Josh White
Date: Wednesday 22 May 2024
(Sharecast News) - HICL Infrastructure reported a challenging but resilient performance in a difficult macroeconomic environment in its annual results on Wednesday, as income fell to £105.4m from £254.2m year-on-year.
The FTSE 250 company said profit before declined to £30.6m for the 12 months ended 31 March, from £198.5m in the 2023 financial year.
Earnings per share dropped to 1.5p compared to 9.9p last year.
Despite the reductions, HICL maintained its dividend per share at 8.25p, consistent with the prior year.
The net asset value (NAV) per share decreased by 6.7p, ending the year at 158.2p, down from 164.9p.
After deducting the fourth-quarter dividend, the NAV per share stood at 156.1p, with the decrease primarily driven by an increase in the portfolio's weighted average discount rate to 8.0%.
Looking ahead, HICL introduced new dividend guidance of 8.35p per share for the 2026 financial year, and reaffirmed its guidance for 8.25p per share for the year ending 31 March 2025.
The return to dividend growth reflected the board's confidence in HICL's future distributable cash flow and long-term earnings potential.
"I am pleased to present yet another resilient set of results for HICL," said chairman Mike Bane.
"The significant level of transactions completed over the year has materially reduced gearing and enabled a share buyback programme, whilst enhanced cash flow generation and improved prospects for longer term earnings support a return to sustainable dividend growth."
Operationally, the company made strategic progress during the year with £736m in accretive transactions.
That included £509m in asset divestments at an average 11% premium to carrying value, contributing about 2.5p to HICL's NAV per share.
Additionally, £227m was invested in three targeted assets, adding about 0.7p to NAV per share.
HICL highlighted the robustness of its NAV through selling 13.5% of its portfolio at or above carrying value across various sectors and geographies.
Proceeds from the divestments enabled the repayment of its revolving credit facility (RCF) in May 2024, which had peaked at £494m in April 2023.
The company also initiated a £50m share buyback programme.
Despite challenging macroeconomic conditions, HICL said its active management had provided the financial strength and flexibility needed to execute its strategy.
Its outlook remained positive, with the portfolio continuing to perform well.
"Underlying portfolio performance was resilient, helping to offset the impact of an increase in portfolio discount rates that reduced NAV overall," said Edward Hunt, head of core infrastructure funds at HICL's investment manager, InfraRed Capital Partners.
"Delivering a portfolio return of 9.0% in a challenging environment demonstrates the robust nature of the company's investments and InfraRed's active management approach."
Hunt said that was supported with £736m of accretive asset rotation in the year, with over £500m of disposals achieving an average 11% premium to carrying value.
"This activity improved key portfolio metrics, captured value from market dislocation and supports the company's ability to deliver long-term income and capital growth for shareholders."
At 0830 BST, shares in HICL Infrastructure were up 0.46% at 123.96p.
Reporting by Josh White for Sharecast.com.
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