Interim Results
HSBC Infrastructure Company Limited
18 November 2008
INTERIM RESULTS
The Directors of HSBC Infrastructure Company Limited announce the results for the six months ended 30 September 2008.
Highlights
for the six months ended 30 September 2008
Results on an Investment basis
|
for the six months to |
30 September 2008 |
30 September 2007 |
|
• Profit before tax (Revenue) |
£10.9m |
£4.5m |
|
• (Loss)/Profit before tax (Capital) |
£(6.4)m |
£5.6m |
|
• Profit before tax |
£4.5m |
£10.1m |
|
• Earnings per share |
1.5p |
4.0p |
|
• Interim distribution per share |
3.125p |
3.05p |
Net Asset Values
|
|
Consolidated IFRS basis |
Investment basis |
|
• Net Asset Value (NAV) per share at listing |
98.4p |
98.4p |
|
• Net Asset Value (NAV) per share at 30 September 2008 |
118.8p |
121.4p |
|
• Interim distribution per share (declared 13 November 2008) |
3.125p |
3.125p |
|
• NAV per share at 30 September 2008 after deducting the second interim distribution |
115.7p |
118.3p |
|
• NAV per share at 31 March 2008 after deducting the final distribution |
117.7p |
119.9p |
Results on a Consolidated IFRS basis
|
for the six months to |
30 September 2008 |
30 September 2007 |
|
• Profit/(Loss) before tax (Revenue) |
£7.5m |
£2.1m |
|
• (Loss) before tax (Capital) |
£(8.9)m |
(£4.6m) |
|
• (Loss) before tax |
£(1.4)m |
(£2.5m) |
|
• Earnings per share |
0.4p |
0.9p |
|
• Interim distribution per share |
3.125p |
3.05p |
Graham Picken, Chairman of the Board, said: 'Despite the momentous dislocation of global financial markets in recent times, the Company's progress continues un-interrupted.
The Group's portfolio of investments with their predictable income streams and range of good counterparties is performing as we expected and is proving resilient in the face of the worsening economic climate. Since our successful equity capital raising in May, the Group has acquired an additional PFI investment and increased its holdings in 3 projects by acquiring the minority stakes.
The Investment Adviser and the Board are still seeing good opportunities to acquire attractive additional investments that will complement the current portfolio. We will remain however careful in the deployment of the Group's capital by balancing new investments with our ability to access further capital in a timely manner.
The Company has declared an Interim distribution of 3.125p, which is in line with our aim of achieving 7.0p within seven years of launch.'
Contacts for the Investment Adviser on behalf of the Board:
HSBC Specialist Fund Management Limited: +44 (0) 20 7991 8888
Sandra Lowe
Keith Pickard
Tony Roper
Contacts for M: Communications: +44 (0) 20 7153 1530
Edward Orlebar
Tilly von Twickel
Chairman's Statement
On behalf of the Board, I am pleased to be able to report that the Company has continued to make good progress in the six months to 30 September 2008. The portfolio of 28 investments is performing as expected, and there has been no material impact on the Group's performance from the wider financial and economic climate.
Financial results
On a consolidated IFRS basis, the loss before tax was £1.4m (2007: £2.5m loss). The loss before tax has arisen due to a 0.5% increase in the discount rate used to value the portfolio and recognition on an IFRS basis of a £5.5m adverse mark to market movement on inflation swaps used to hedge the Company's inflation rate exposures. The earnings per share on a consolidated IFRS basis were 0.4p per share (2007: 0.9p). Recognition of an income tax credit and losses attributable to the minority interests result in positive earnings per share not withstanding the loss before tax.
As in previous periods, the Company has also prepared pro-forma accounts on an Investment basis (treating all 28 holdings as investments). Profit before tax on an Investment basis was £4.5m (2007: £10.1m) and earnings per share on an Investment basis were 1.5p (2007: 4.0p). This reduction has arisen primarily due to the recognition of a loss on investments (capital) related to a 0.5% increase in the discount rates used to value the portfolio.
Cash received from the portfolio by way of distributions, capital repayments and fees was £23.0m, and after Group costs, this was a net £18.4m, which more than covers the Interim distribution. The good performance in cash generation relates mainly to timing, with active management leading to receipt of investment cashflows ahead of budget. Cashflow receipts in the second half of the year are expected to be correspondingly lower, and the full year projections remain unchanged.
Total fees accruing to HSBC Specialist Fund Management Limited (the Investment Adviser) totalled £2.7m in the six months, relating to their 1.1% pa management fee and the 1.0% fee on the acquisitions made, and £0.1m advisory fees. In addition, the Group contracted with other parts of the HSBC Group on an arms length basis for the provision of bank accounts, foreign exchange hedges, and insurance broking.
Distributions
As announced on 13 November 2008, the Board has declared an Interim distribution of 3.125p per share, with a scrip dividend alternative (3.05p 30 September 2007). A circular is being sent to shareholders to explain the scrip dividend alternative. Shareholders need to decide by 15 December 2008 on whether to take up the scrip dividend offer in part or in full. The payment of a scrip dividend is expected to be beneficial to a number of shareholders. The distribution (or scrip dividend) will be paid to those shareholders on the register as at 21 November 2008, and will be settled at the end of December.
At the Annual General Meeting ('AGM') in July 2008, shareholders gave the Board the power to offer a scrip dividend alternative and this power runs until the next AGM. Depending on the take-up and feedback from shareholders, the Board will consider seeking re-approval of this power at the next AGM.
Valuation
As in previous periods, the Investment Adviser has prepared a fair market valuation for each investment in the portfolio as at 30 September 2008. For the PFI/PPP investments, this valuation is based on a discounted cashflow analysis of the future expected equity and loan note cashflows accruing to the Group from each investment.
The Directors have satisfied themselves with the methodology used, the discount rates applied, and have taken independent third party advice.
The Directors have approved the valuation of the portfolio of 28 investments to be £450.5m as at 30 September 2008. All outstanding capital contributions have now been invested.
The valuation of £450.5m compares with £437.9m at 31 March 2008 and £384.1m as at 30 September 2007. An analysis of the growth in the valuation is detailed in the Investment Adviser's Summary Report.
The resulting NAV per share on an IFRS basis at 30 September 2008 is 118.8p (31 March 2008: 120.9p, and 98.4p at 31 March 2006).
On an Investment basis the NAV per share is 121.4p at 30 September 2008 (31 March 2008: 123.1p, and 98.4p at 31 March 2006). The Investment basis NAV per share after the second interim distribution at 31 March 2008 was 119.9p and the decline of 1.6p (to 118.3p, being the 121.4p less the interim distribution of 3.125p) is primarily due to the changes in the valuation of the investments, as described in more detail in the Investment Adviser's Summary Report.
Gearing
The Group has a £200m five year revolving facility from Bank of Scotland plc ('BoS'), which has been used to fund acquisitions. The interest rate has been partially hedged for the duration of the facility.
As at 30 September 2008, the Group had drawn down £56.3m of this debt facility, and had net debt on an Investment basis of £37.5m (31 March 2008: £105.6m).
There are no outstanding equity subscription obligations on any project and the Group no longer has any outstanding letters of credit, the investment in Colchester Garrison having now been paid.
The BoS facilities are on a recourse basis to the Group and are 12.5% (excluding cash and cash equivalents) of the Directors' Valuation of £450.5m as at 30 September 2008.
On a consolidated IFRS basis, the Group had net debt of £524.1m at 30 September 2008 (31 March 2008: £248.8m). This increase in net debt results from the consolidation of £345.8m of net debt in relation to the recognition of three projects as subsidiaries rather than as investments following the acquisitions of incremental stakes in three projects in the period.
As previously reported, all the PFI projects have either long term bank borrowings with interest rate hedges, or bonds with fixed or indexed coupon payments. This ensures the Group's investments have minimal exposure to interest rate volatility or debt market appetite.
The Company's Articles of Association limit the Group's recourse debt to 50% of gross asset value.
Portfolio development
The portfolio of projects owned by the Group continues to perform satisfactorily. The Colchester Garrison project successfully completed its final phase of construction in April. The client has transitioned to the second phase of the project, so releasing the old buildings and land for redevelopment.
The Group has made the following acquisitions in the six months to 30 September 2008:
-
In July, the Group acquired additional stakes in three existing projects for a total consideration of £8.3m, taking the Group's economic interest in each project to 100%. These projects are: the Home Office, the Central Middlesex Hospital and the West Middlesex Hospital.
-
In August, the Group acquired a 50% interest in The Hospital Company (Oxford John Radcliffe) Holdings Ltd from Carillion PLC for a consideration price of £18m.
The Group continues to look selectively for further acquisitions. Whilst the Company has a broad Investment Policy, the Board and Investment Adviser believe it is currently prudent to focus on new investments with similar revenue and risk profiles to the existing portfolio. Revenues need to be contractual (as opposed to demand-based infrastructure which is reliant on user volumes) and costs need to be certain. Where services are subcontracted, specific attention is paid to the counter-parties' ability to perform.
This will mean that the Group is unlikely to acquire investments in assets such as toll roads, airports and ports in the near term. PFI projects in the UK, Europe and the rest of the World remain attractive, as do certain other infrastructure assets which have contractual income streams and predictable cost structures.
Accounting
At 30 September 2008, the Group had seven investments which it was deemed to control by virtue of having the power, directly or indirectly, to govern the financial and operating policies of the project entities. This is an increase from the four investments at 31 March 2008, due to the incremental acquisitions in July. Under International Financial Reporting Standards ('IFRS'), the results of these companies are required to be fully consolidated in the Group's financial statements on a line-by-line basis.
As in previous periods, in order to provide shareholders with a more meaningful representation of the Group's net asset value, coupled with greater transparency in the Company's capacity for investment and ability to make distributions, the results have been restated in proforma tables which are presented in the Investment Adviser's Summary Report. The proforma tables are prepared with all investments accounted for on an Investment basis. By deconsolidating the subsidiary investments, the performance of the business under consolidated IFRS basis may be compared with the results under the Investment basis.
Corporate Governance and Support
As previously announced, we strengthened the Board in June with the appointment of Sarah Evans as a director of the Company. Sarah is a qualified accountant with many years experience working in financial institutions, and is a Guernsey resident. Sarah was appointed to the Audit Committee on 12 November 2008.
The Company has recently appointed Collins Stewart Europe Limited as joint broker to the Company, alongside Oriel Securities Limited. This is the same team that supported the Company in its C Share capital raising in May.
In September, the Company announced it had changed its administrator and company secretary to Dexion Capital (Guernsey) Limited. The Board made this decision after the annual review of all service providers and having evaluated various options.
During the course of the C Share capital raising programme, a number of investors asked if the Company could provide a distribution which could be treated as capital. After taking advice, the Company sought shareholder approval in July to amend its Articles of Association, and the Company is offering shareholders a scrip dividend alternative to this interim distribution. A circular is being sent to shareholders, and whilst shareholders should take their own tax advice, the scrip alternative should be attractive to certain investors.
Risks and uncertainties
The principal risks and uncertainties facing the Company and its portfolio of investments are summarised in the Company's Annual Report for the year to 31 March 2008, and are also detailed in the Company's April 2008 C Share Prospectus (both available from the Company's website). Each of the PFI projects in the portfolio has long term funding in place and so does not need access to new debt capital. These projects do have exposures to banks in the form of interest rate swaps and deposit accounts. There has been no exposure to any bank that has failed. As previously reported, the portfolio has limited exposure to monoline insurers. There is one project where a downgrade of the monoline will trigger a margin step-up of the European Investment Bank loan. Analysis shows this will have a negligible impact on the valuation of the portfolio.
The final phase of construction on the Colchester Garrison PFI project has been successfully completed in the period. This has released the remaining surplus land on the project and this is due to be sold later this year under a contract signed at the time the project was commenced with Taylor Wimpey Developments Limited (previously called Taylor Woodrow Developments Limited). The sale proceeds are to be redeployed in the funding of the project.
The projects in the portfolio rely on contracting partners to provide services to each project. There is a good spread of service partners with no material performance issues to date. In the changing economic climate, it is possible that suppliers might encounter difficulties in their wider businesses that could impact on the performance on the Group's projects. The Investment Adviser monitors project performance. Should any performance issues arise, prompt action would be taken to ensure performance at the project level is not compromised.
Outlook
The momentous dislocation of global financial markets has given investors pause for thought on how best to manage risk relative to returns. There is no doubt that we are witnessing the emergence of a new and very different financial landscape. In investment markets, the emphasis will clearly be on the degree of certainty attached to the delivery of the investment proposition on offer. There will be fresh perspectives.
In the current economic climate, both the Board and the Investment Adviser believe the current portfolio of 28 investments will continue to deliver yield and to maintain their value, due to the nature of the concessions with public bodies, the mitigation of risk through subcontracting with well respected counterparties, and with long term financing in place. No investment in the portfolio requires refinancing to achieve its current forecast business plan.
There are likely to be a number of opportunities in the next year for further acquisitions, some of which are likely to be from vendors who need to sell quickly. The Group's approach continues to be one of finding investments with similar risk and return profiles to those in the current portfolio. Whilst the Group has the resources available to make further suitable acquisitions, care continues to be taken over the screening and analysis of these opportunities.
The Investment Adviser has a wealth of experience in managing, structuring, financing and sourcing these types of investments. This, combined with a conservative ethos and reputation for balancing risk and returns, gives the Board great comfort in these uncertain times.
The unprecedented conditions of the last twelve months have already encouraged a flight to quality. In this context, I am sure that in future debt will be more judiciously dispensed and accepted. In turn, this will have implications for capital markets. We are mindful of the need to balance our opportunity for growth against access to new capital, which in the past we have bridged with debt. That said, it is clear that we remain very well placed to grow the business and maintain the distribution policy adopted at launch.
Graham Picken
Chairman
17 November 2008
Investment Adviser's Summary Report
Portfolio performance
All the projects are now fully operational, following the successful completion of Phase 2 of the Colchester Garrison project in April 2008. The Colchester Garrison project achieved practical completion within budget and 5 months ahead of the original programme.
We continue to actively manage and monitor the projects to ensure both efficiency and the quality of service provision to their clients. We are working on a number of variations on our projects at the client's request. In the period these variations have included:
-
On the Stoke Mandeville Hospital project, the project has modified the paediatric ward to suit the Trust's operational requirements. This variation was funded by the Trust as a capital project and was completed in August.
-
On the Helicopter Training project, at the MoD's request, one of the simulators is being modified to be configured as a Chinook Mk3R simulator. The variation is being funded by the MoD as a capital project.
-
On the Sussex Custodial project, the project company is working with the client on a variation to substantially increase the maximum level of detainees that the project can accommodate. The unitary charge on the project is due to increase by approximately 30% as a result of the variation.
The asset managers in the Investment Adviser's team continue to manage the implementation of certain identified efficiency enhancements. These include savings on insurance premia, cash management, treasury efficiencies, adding incremental income, bulk buying opportunities and maintaining costs to agreed operational budgets.
A planned area of value enhancement previously identified on selected projects was to optimise the debt repayments and reduce the overall cost of debt in these projects. As a result of the current turmoil in the debt markets these have been put on hold (and hence no longer feature in the portfolio valuation). All of the PFI/PPP projects in the portfolio have long term debt in place and do not need any refinancing to meet their current financial targets. The weighted average PFI/PPP project concession length remaining is 25 years at 30 September and the weighted average debt tenor is 23 years.
The Investment Adviser has undertaken a detailed review of the portfolio's counter-party exposure to the banking and financial sector, including providers of bank deposit accounts and interest rate swaps. This review has demonstrated that the portfolio has a broad spread of financial counterparties with no material issues to report. The potential risk in relation to the interest rate swaps is further mitigated by the fact that the majority of these are net liabilities for the projects concerned, and therefore less reliant on the counterparty.
The Portfolio does not contain any transportation infrastructure investments known as 'demand based' projects where income is wholly dependent on usage. It is therefore not exposed to changes in consumer usage or spending. All of the Group's PFI/PPP investments have concessions where the contractual revenues are fixed in real terms and then increased annually with reference to specific inflation indices. In the case of UK projects, this is normally RPI (Retail Price Index) or RPIx (RPI excluding mortgage payments). In calculating the Directors' valuation, UK inflation of 2.75% per annum remains the long term assumption.
Acquisitions
As reported in the Chairman's Statement, the Group made two acquisitions in the six months to 30 September 2008. In July, the Group acquired investment interests in three existing projects from subsidiaries of Bouygues UK for combined consideration of £8.3m. These projects are the Home Office, the Central Middlesex PFI Hospital, and the West Middlesex PFI Hospital. The acquisition takes HICL's economic interest in these three projects to 100%. All of these projects are now operational and were developed by HSBC managed infrastructure funds and Bouygues UK. Ecovert FM, a Bouygues Construction subsidiary provides the facilities management services for each of these projects.
These incremental acquisitions support the Company's strategy of acquiring additional stakes in existing projects when suitable opportunities arise, and bring to ten the number undertaken by the Group since launch. The acquisition increases the number of projects consolidated under IFRS from four to seven.
In August, the Group acquired a 50% interest (comprising equity and loan notes) in The Hospital Company (Oxford John Radcliffe) Holdings Ltd for £18.0m from a subsidiary of Carillion plc. The pricing of this acquisition is in line with the Directors' Valuation of the portfolio as at 30 September 2008. The project is a 33 year concession to design, build and operate a new wing adjacent to the former Radcliffe Infirmary as well as a new children's hospital in Oxford. Construction was successfully completed in December 2006 by Carillion Construction, and the project has been operational since then. Services are being provided by a subsidiary of Carillion plc, and Royal Bank of Scotland is the other 50% shareholder.
Market
The Investment Adviser continues to seek new investments with return and risk profiles comparable to those in the existing portfolio. In the current economic climate there is an expectation that a number of suitable investments may come to market as holders of these assets either seek to realise cash or to generate profit on disposal.
As the Chairman has noted in his statement, the approach to any new investment remains selective and value driven. Counter-party exposure and good project performance are equally important considerations.
Whilst new PFI/PPP projects are still being signed up, the rate of deals closing globally has slowed considerably due to the current limited availability of debt funding. This does not directly affect the Company for the foreseeable future since any new investments are likely to be already operational or in their construction phase.
Valuation
The Investment Adviser is responsible for carrying out the fair market valuation of the Group's investments on an Investment basis, and this is presented to the Directors for their approval and adoption. The valuation is carried out on a six monthly basis as at 31 March and 30 September each year. The Directors receive an independent third party opinion and report on this valuation.
The valuation principles used are based on a discounted cash flow methodology, and adjusted in accordance with the European Venture Capital Association's valuation guidelines where appropriate, given the nature of infrastructure investments.
This is the same method used at the time of launch and each subsequent six month reporting period (further details can be found in the Company's Annual Report and Consolidated Financial Statements for the year to 31 March 2008, available from the Company's website).
The Directors' Valuation of the portfolio as at 30 September 2008 is £450.5m. This portfolio valuation compares to £437.9m as at 31 March 2008 (up 2.9%) and £250.4m at the time of launch (a reconciliation between the valuation at 31 March 2008 and that shown in the financial statements is given in Note 1 to the unaudited proforma financial statements, the principle difference being the £20.5m of unfunded loan stock commitments that were invested in April 2008).
Netting out acquisitions in the period of £26.3m, and investment receipts of £22.4m, the growth over the rebased value of £441.8m was 2.0%. This increase arose due to a strong project performance from improved operational and financial efficiencies which more than off-set the effect of an increase of 0.5% in the average discount rate applied to PFI/PPP projects.
Fair value for each investment is derived from the present value of the investment's expected future cash flows, using reasonable assumptions and forecasts and an appropriate discount rate. The Investment Adviser exercises its judgment in assessing the expected future cash flows from each investment based on the detailed concession life financial models produced by each Project Company.
The discount rates used for valuing each investment are based on the appropriate risk free rate (derived from the relevant government bond or gilt) and a risk premium. The risk premium takes into account risks and opportunities associated with the project earnings (e.g. predictability and covenant of the concession income), all of which may be differentiated by project phase, and market participants appetite for these risks.
The discount rates used for valuing the projects in the portfolio are as follows:
|
Period ending |
Whole portfolio |
excluding Kemble mezzanine debt |
||
|
Range |
Weighted average |
Range |
Weighted average |
|
|
30 September 2008 |
7.6% to 10.8% |
7.9% |
7.6% to 8.3% |
7.9% |
|
31 March 2008 |
7.0% to 12.0% |
7.5% |
7.0% to 7.8% |
7.4% |
The Investment Adviser uses its judgement in arriving at the appropriate discount rate. This is based on its knowledge of the market, taking into account intelligence gained from its bidding activities, discussions with financial advisers in the appropriate market and publicly available information on relevant transactions. The increase in the weighted average rate (excluding Kemble) reflects both an increase in the long term gilt rates (of around 10bps) and an increase in the risk premium applied to these types of assets.
The long term economic assumptions applied across the portfolio are unchanged from previously, specifically for UK investments, the Retail Price Index of 2.75% per annum and cash deposit rates of 5.0% per annum.
Financing
The Company successfully raised £103.6m (before expenses) by way of a C Share issue in May. These new C Shares converted into Ordinary Shares and commenced trading on 4 June 2008 at a Conversion Ratio of 0.8143 Ordinary Shares for every one C Share. The proceeds of the C Share issue were used to reduce the Group's debt. As at 30 September 2008, the Group had £143m of undrawn debt capacity available to fund further acquisitions in line with the Company's stated strategy.
Accounting
As explained in the Chairman's statement the results of the Company are restated in proforma tables. The proforma tables show all investments accounted for on an Investment basis, which are reconciled to the consolidated financial statements on a line by line basis.
Unaudited consolidated proforma income statements
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for the six months ended 30 September 2008
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Six months ended 30 September 2008
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Six months ended 30 September 2007
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Investment basis
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Consolidation
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Consolidated
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Investment basis
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Consolidation
|
Consolidated
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Revenue
|
Capital
|
Total
|
adjustments
|
IFRS basis
|
|
Revenue
|
Capital
|
Total
|
adjustments
|
IFRS basis
|
|
|
£million
|
£million
|
£million
|
£million
|
£million
|
|
£million
|
£million
|
£million
|
£million
|
£million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services revenue
|
-
|
-
|
-
|
21.7
|
21.7
|
|
-
|
-
|
-
|
10.6
|
10.6
|
|
Gains/losses on finance receivables
|
-
|
-
|
-
|
7.7
|
7.7
|
|
-
|
-
|
-
|
(6.4)
|
(6.4)
|
|
Gains/(loss) on investments
|
16.8
|
(7.7)
|
9.1
|
1.4
|
10.5
|
|
9.1
|
5.6
|
14.7
|
(2.7)
|
12.0
|
|
Total income
|
16.8
|
(7.7)
|
9.1
|
30.8
|
39.9
|
|
9.1
|
5.6
|
14.7
|
1.5
|
16.2
|
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|
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Services costs
|
-
|
-
|
-
|
(17.0)
|
(17.0)
|
|
-
|
-
|
-
|
(8.1)
|
(8.1)
|
|
Administrative expenses
|
(3.4)
|
-
|
(3.4)
|
(0.8)
|
(4.2)
|
|
(3.0)
|
-
|
(3.0)
|
(0.4)
|
(3.4)
|
|
Profit/(loss) before net finance costs and tax
|
13.4
|
(7.7)
|
5.7
|
13.0
|
18.7
|
|
6.1
|
5.6
|
11.7
|
(7.0)
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Finance costs
|
(2.7)
|
1.3
|
(1.4)
|
(19.3)
|
(20.7)
|
|
(1.7)
|
-
|
(1.7)
|
(5.8)
|
(7.5)
|
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Finance income
|
0.2
|
-
|
0.2
|
0.4
|
0.6
|
|
0.1
|
-
|
0.1
|
0.2
|
0.3
|
|
Profit/(loss) before tax
|
10.9
|
(6.4)
|
4.5
|
(5.9)
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(1.4)
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4.5
|
5.6
|
10.1
|
(12.6)
|
(2.5)
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Income tax credit
|
-
|
-
|
-
|
0.8
|
0.8
|
|
-
|
-
|
-
|
3.0
|
3.0
|
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Profit/(loss) for the period
|
10.9
|
(6.4)
|
4.5
|
(5.1)
|
(0.6)
|
|
4.5
|
5.6
|
10.1
|
(9.6)
|
0.5
|
|
|
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Attributable to:
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|
Equity holders of the parent
|
10.9
|
(6.4)
|
4.5
|
(3.4)
|
1.1
|
|
4.5
|
5.6
|
10.1
|
(7.8)
|
2.3
|
|
Minority interests
|
-
|
-
|
-
|
(1.7)
|
(1.7)
|
|
-
|
-
|
-
|
(1.8)
|
(1.8)
|
|
|
10.9
|
(6.4)
|
4.5
|
(5.1)
|
(0.6)
|
|
4.5
|
5.6
|
10.1
|
(9.6)
|
0.5
|
|
|
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|
|
|
|
|
|
|
|
|
|
Earnings per share – basic and diluted (pence)
|
3.5
|
(2.0)
|
1.5
|
(1.1)
|
0.4
|
|
1.8
|
2.2
|
4.0
|
(3.1)
|
0.9
|
See Note 2 to the condensed unaudited consolidated financial statements for the definition of revenue and capital items.
|
Unaudited consolidated proforma balance sheet
|
|||||||
|
as at 30 September 2008
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
30 September 2008
|
|
31 March 2008
|
||||
|
|
Investment basis
|
Consolidation adjustments
|
Consolidated IFRS basis
|
|
Investment basis
|
Consolidation adjustments
|
Consolidated IFRS basis
|
|
|
£million
|
£million
|
£million
|
|
£million
|
£million
|
£million
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Investments at fair value through profit or loss
|
450.5
|
(150.7)
|
299.8
|
|
417.4
|
(32.7)
|
384.7
|
|
Finance receivables at fair value through profit or loss
|
-
|
588.1
|
588.1
|
|
-
|
170.4
|
170.4
|
|
Intangible assets
|
-
|
125.0
|
125.0
|
|
-
|
28.0
|
28.0
|
|
Other financial assets (fair value of derivatives)
|
0.3
|
-
|
0.3
|
|
-
|
-
|
-
|
|
Deferred tax assets
|
-
|
28.2
|
28.2
|
|
-
|
8.0
|
8.0
|
|
Total non-current assets
|
450.8
|
590.6
|
1,041.4
|
|
417.4
|
173.7
|
591.1
|
|
Current assets
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
0.6
|
7.9
|
8.5
|
|
2.9
|
6.2
|
9.1
|
|
Cash and cash equivalents
|
16.8
|
30.4
|
47.2
|
|
16.8
|
10.4
|
27.2
|
|
Total current assets
|
17.4
|
38.3
|
55.7
|
|
19.7
|
16.6
|
36.3
|
|
Total assets
|
468.2
|
628.9
|
1,097.1
|
|
437.1
|
190.3
|
627.4
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Trade and other payables
|
(5.4)
|
(18.9)
|
(24.3)
|
|
(5.5)
|
(15.6)
|
(21.1)
|
|
Loans and borrowings
|
-
|
(18.5)
|
(18.5)
|
|
-
|
(8.6)
|
(8.6)
|
|
Total current liabilities
|
(5.4)
|
(37.4)
|
(42.8)
|
|
(5.5)
|
(24.2)
|
(29.7)
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Loans and borrowings
|
(54.3)
|
(498.5)
|
(552.8)
|
|
(122.4)
|
(145.0)
|
(267.4)
|
|
Other financial liabilities (fair value of derivatives)
|
-
|
(46.7)
|
(46.7)
|
|
(1.4)
|
(10.0)
|
(11.4)
|
|
Deferred tax liabilities
|
-
|
(54.1)
|
(54.1)
|
|
-
|
(13.1)
|
(13.1)
|
|
Total non-current liabilities
|
(54.3)
|
(599.3)
|
(653.6)
|
|
(123.8)
|
(168.1)
|
(291.9)
|
|
Total liabilities
|
(59.7)
|
(636.7)
|
(696.4)
|
|
(129.3)
|
(192.3)
|
(321.6)
|
|
Net assets
|
408.5
|
(7.8)
|
400.7
|
|
307.8
|
(2.0)
|
305.8
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
408.5
|
(8.9)
|
399.6
|
|
307.8
|
(5.6)
|
302.2
|
|
Minority interests
|
-
|
1.1
|
1.1
|
|
-
|
3.6
|
3.6
|
|
Total equity
|
408.5
|
(7.8)
|
400.7
|
|
307.8
|
(2.0)
|
305.8
|
|
Net assets per share (pence)
|
121.4
|
(2.6)
|
118.8
|
|
123.1
|
(2.2)
|
120.9
|
|
Unaudited consolidated proforma cash flow |
|||||||
|
for the six months ended 30 September 2008
|
|||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
|
Six months ended
30 September 2008
|
|
Six months ended
30 September 2007
|
||||
|
|
Investment basis
|
Consolidation adjustments
|
Consolidated IFRS basis
|
|
Investment basis
|
Consolidation adjustments
|
Consolidated IFRS basis
|
|
|
£million
|
£million
|
£million
|
|
£million
|
£million
|
£million
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Profit/(loss) before tax
|
4.5
|
(5.9)
|
(1.4)
|
|
10.1
|
(12.6)
|
(2.5)
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
Gains on investments
|
(9.1)
|
(1.4)
|
(10.5)
|
|
(14.7)
|
2.7
|
(12.0)
|
|
(Gains)/losses on finance receivables
|
-
|
(7.7)
|
(7.7)
|
|
-
|
6.4
|
6.4
|
|
Interest payable and similar charges
|
2.7
|
11.0
|
13.7
|
|
1.4
|
5.4
|
6.8
|
|
Changes in fair value of derivatives
|
(1.3)
|
8.3
|
7.0
|
|
0.3
|
0.4
|
0.7
|
|
Interest income
|
(0.2)
|
(0.4)
|
(0.6)
|
|
(0.1)
|
(0.2)
|
(0.3)
|
|
Amortisation of intangible assets
|
-
|
2.0
|
2.0
|
|
-
|
1.1
|
1.1
|
|
Operating cash flow before changes in working capital
|
(3.4)
|
5.9
|
2.5
|
|
(3.0)
|
3.2
|
0.2
|
|
|
|
|
|
|
|
|
|
|
Changes in working capital:
|
|
|
|
|
|
|
|
|
(Increase)/decrease in receivables
|
1.1
|
(2.3)
|
(1.2)
|
|
(0.1)
|
0.7
|
0.6
|
|
Increase/(decrease) in payables
|
0.2
|
(5.1)
|
(4.9)
|
|
0.4
|
0.1
|
0.5
|
|
Cash flow from operations
|
(2.1)
|
(1.5)
|
(3.6)
|
|
(2.7)
|
4.0
|
1.3
|
|
|
|
|
|
|
|
|
|
|
Interest received on bank deposits and finance receivables
|
0.2
|
0.4
|
0.6
|
|
0.1
|
3.7
|
3.8
|
|
Cash received from finance receivables
|
-
|
17.4
|
17.4
|
|
-
|
4.3
|
4.3
|
|
Interest paid
|
(2.6)
|
(11.6)
|
(14.2)
|
|
(0.4)
|
(5.3)
|
(5.7)
|
|
Corporation tax paid
|
(0.1)
|
(0.1)
|
(0.2)
|
|
-
|
(0.2)
|
(0.2)
|
|
Net cash from operating activities
|
(4.6)
|
4.6
|
-
|
|
(3.0)
|
6.5
|
3.5
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchases of investments
|
(46.8)
|
8.3
|
(38.5)
|
|
(34.7)
|
0.1
|
(34.6)
|
|
Interest received on investments
|
14.3
|
(0.5)
|
13.8
|
|
5.2
|
(0.6)
|
4.6
|
|
Dividends received
|
3.0
|
(0.5)
|
2.5
|
|
0.5
|
(0.4)
|
0.1
|
|
Fees and other operating income
|
3.5
|
(1.0)
|
2.5
|
|
0.1
|
-
|
0.1
|
|
Cash acquired on acquisition of subsidiaries net of acquisition costs
|
-
|
18.0
|
18.0
|
|
-
|
-
|
-
|
|
Loan stock and equity repayments received
|
2.2
|
-
|
2.2
|
|
0.6
|
(0.1)
|
0.5
|
|
Net cash used in investing activities
|
(23.8)
|
24.3
|
0.5
|
|
(28.3)
|
(1.0)
|
(29.3)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issue of share capital
|
104.3
|
-
|
104.3
|
|
-
|
-
|
-
|
|
Proceeds from issue of loans and borrowings
|
39.0
|
-
|
39.0
|
|
37.1
|
-
|
37.1
|
|
Repayment of loans and borrowings
|
(106.9)
|
(8.1)
|
(115.0)
|
|
-
|
(4.1)
|
(4.1)
|
|
Distributions paid to Company shareholders
|
(8.0)
|
-
|
(8.0)
|
|
(8.1)
|
-
|
(8.1)
|
|
Distributions paid to minorities
|
-
|
(0.8)
|
(0.8)
|
|
-
|
(0.8)
|
(0.8)
|
|
Net cash from financing activities
|
28.4
|
(8.9)
|
19.5
|
|
29.0
|
(4.9)
|
24.1
|
|
Net increase/(decrease) in cash and cash equivalents
|
-
|
20.0
|
20.0
|
|
(2.3)
|
0.6
|
(1.7)
|
|
Cash and cash equivalents at beginning of period
|
16.8
|
10.4
|
27.2
|
|
13.8
|
10.3
|
24.1
|
|
Cash and cash equivalents at end of period
|
16.8
|
30.4
|
47.2
|
|
11.5
|
10.9
|
22.4
|
|
|
|||||||
Notes to the unaudited consolidated proforma financial statements
for the six months ended 30 September 2008
1. Investments
The valuation of the Group's portfolio at 30 September 2008 reconciles to the condensed consolidated balance sheet as follows:
|
|
30 September 2008
|
31 March 2008
|
|
|
£million
|
£million
|
|
|
|
|
|
Portfolio valuation
|
450.5
|
437.9
|
|
Less : undrawn loanstock commitments
|
-
|
(20.5)
|
|
Portfolio valuation on an investment basis
|
450.5
|
417.4
|
|
Less : equity and loanstock investments in operating subsidiaries eliminated on consolidation
|
(150.7)
|
(32.7)
|
|
Investments per consolidated balance sheet
|
299.8
|
384.7
|
Directors' statement of responsibilities
The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union, and that the Chairman's statement and Investment Adviser's summary report (together constituting the Interim management report) includes a fair review of the information as required by 4.2.7R and 4.2.8R of the Disclosure and Transparency Rules.
The Directors of the Company are stated in the Group's Annual Report for the year ended 31 March 2008.
On behalf of the Board
G Picken
Chairman
17 November 2008
Independent review report to HSBC Infrastructure Company Limited (HICL)
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2008 which comprise the Condensed Unaudited Consolidated Income Statement, the Condensed Unaudited Consolidated Statement of Changes in Shareholders' Equity, Condensed Unaudited Balance Sheet, Condensed Unaudited Consolidated Cash Flow Statement and the related notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the period ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the EU and the DTR of the UK FSA.
KPMG Channel Islands Limited
Chartered Accountants
20 New Street, St Peter Port
Guernsey GY1 4AN
17 November 2008
|
Condensed unaudited consolidated income statement |
||||||||
|
for the six months ended 30 September 2008 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
Six months ended 30 September 2008 |
|
Six months ended 30 September 2007 |
||||
|
|
|
Unaudited |
|
Unaudited |
||||
|
|
Note |
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
|
|
£million |
£million |
£million |
|
£million |
£million |
£million |
|
|
|
|
|
|
|
|
|
|
|
Services revenue |
|
21.7 |
- |
21.7 |
|
10.6 |
- |
10.6 |
|
Gains/(losses) on finance receivables |
|
8.0 |
(0.3) |
7.7 |
|
1.6 |
(8.0) |
(6.4) |
|
Gains/(losses) on investments |
|
12.1 |
(1.6) |
10.5 |
|
7.9 |
4.1 |
12.0 |
|
Total income |
|
41.8 |
(1.9) |
39.9 |
|
20.1 |
(3.9) |
16.2 |
|
|
|
|
|
|
|
|
|
|
|
Services costs |
3 |
(17.0) |
- |
(17.0) |
|
(8.1) |
- |
(8.1) |
|
Administrative expenses |
3 |
(4.2) |
- |
(4.2) |
|
(3.4) |
- |
(3.4) |
|
Profit/(loss) before net finance costs and tax |
|
20.6 |
(1.9) |
18.7 |
|
8.6 |
(3.9) |
4.7 |
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
(13.7) |
(7.0) |
(20.7) |
|
(6.8) |
(0.7) |
(7.5) |
|
Finance income |
|
0.6 |
- |
0.6 |
|
0.3 |
- |
0.3 |
|
Profit/(loss) before tax |
|
7.5 |
(8.9) |
(1.4) |
|
2.1 |
(4.6) |
(2.5) |
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense)/credit |
|
(2.0) |
2.8 |
0.8 |
|
(1.2) |
4.2 |
3.0 |
|
Profit/(loss) for the period |
|
5.5 |
(6.1) |
(0.6) |
|
0.9 |
(0.4) |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
8.5 |
(7.4) |
1.1 |
|
2.3 |
- |
2.3 |
|
Minority interests |
|
(3.0) |
1.3 |
(1.7) |
|
(1.4) |
(0.4) |
(1.8) |
|
|
|
5.5 |
(6.1) |
(0.6) |
|
0.9 |
(0.4) |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic (pence) |
4 |
2.7 |
(2.4) |
0.4 |
|
0.9 |
- |
0.9 |
All results are derived from continuing operations. See Note 2 to the condensed unaudited consolidated financial statements for the definition of revenue and capital items.
|
Condensed unaudited consolidated balance sheet
|
|||
|
as at 30 September 2008
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
30 September 2008
|
31 March 2008
|
|
|
|
Unaudited
|
Audited
|
|
|
Note
|
£million
|
£million
|
|
Non-current assets
|
|
|
|
|
Investments at fair value through profit or loss
|
8
|
299.8
|
384.7
|
|
Finance receivables at fair value through profit or loss
|
|
588.1
|
170.4
|
|
Intangible assets
|
|
125.0
|
28.0
|
|
Other financial assets (fair value of derivatives)
|
|
0.3
|
-
|
|
Deferred tax assets
|
|
28.2
|
8.0
|
|
Total non-current assets
|
|
1,041.4
|
591.1
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Trade and other receivables
|
|
8.5
|
9.1
|
|
Cash and cash equivalents
|
|
47.2
|
27.2
|
|
Total current assets
|
|
55.7
|
36.3
|
|
|
|
|
|
|
Total assets
|
|
1,097.1
|
627.4
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
(24.3)
|
(21.1)
|
|
Loans and borrowings
|
11
|
(18.5)
|
(8.6)
|
|
Total current liabilities
|
|
(42.8)
|
(29.7)
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
Loans and borrowings
|
11
|
(552.8)
|
(267.4)
|
|
Other financial liabilities (fair value of derivatives)
|
|
(46.7)
|
(11.4)
|
|
Deferred tax liabilities
|
|
(54.1)
|
(13.1)
|
|
Total non-current liabilities
|
|
(653.6)
|
(291.9)
|
|
Total liabilities
|
|
(696.4)
|
(321.6)
|
|
Net assets
|
|
400.7
|
305.8
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Ordinary share capital
|
10
|
-
|
-
|
|
Retained reserves
|
|
399.6
|
302.2
|
|
Total equity attributable to equity holders of the parent
|
|
399.6
|
302.2
|
|
Minority interests
|
|
1.1
|
3.6
|
|
Total equity
|
|
400.7
|
305.8
|
|
Net assets per share (pence)
|
6
|
118.8
|
120.9
|
|
Condensed consolidated unaudited statement of changes in shareholders' equity |
|
for the six months ended 30 September 2008 |
|
|
Six months ended 30 September 2008
|
|||||
|
|
Attributable to equity holders of the parent
|
Minority interests
|
Total equity
|
|||
|
|
Share capital
|
Share Premium
|
Retained reserves
|
Total shareholders’ equity
|
|
|
|
|
£million
|
£million
|
£million
|
£million
|
£million
|
£million
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity at beginning of period
|
-
|
-
|
302.2
|
302.2
|
3.6
|
305.8
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period
|
-
|
-
|
1.1
|
1.1
|
(1.7)
|
(0.6)
|
|
Total recognised income and expense for the period
|
-
|
-
|
1.1
|
1.1
|
(1.7)
|
(0.6)
|
|
|
|
|
|
|
|
|
|
Distributions paid to Company shareholders
|
-
|
-
|
(8.0)
|
(8.0)
|
-
|
(8.0)
|
|
Distributions paid to minorities
|
-
|
-
|
-
|
-
|
(0.8)
|
(0.8)
|
|
Ordinary shares issued
|
-
|
106.1
|
-
|
106.1
|
-
|
106.1
|
|
Costs of share issue
|
-
|
(1.8)
|
-
|
(1.8)
|
-
|
(1.8)
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity at 30 September 2008
|
-
|
104.3
|
295.3
|
399.6
|
1.1
|
400.7
|
|
|
Six months ended 30 September 2007
|
|||||
|
|
Attributable to equity holders of the parent
|
Minority interests
|
Total equity
|
|||
|
|
Share capital
|
Share Premium
|
Retained reserves
|
Total shareholders’ equity
|
|
|
|
|
£million
|
£million
|
£million
|
£million
|
£million
|
£million
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity at beginning of period
|
25.0
|
-
|
286.1
|
311.1
|
3.5
|
314.6
|
|
|
|
|
|
|
|
|
|
Profit/(loss) for the period
|
-
|
-
|
2.3
|
2.3
|
(1.8)
|
0.5
|
|
Total recognised income and expense for the period
|
-
|
-
|
2.3
|
2.3
|
(1.8)
|
0.5
|
|
|
|
|
|
|
|
|
|
Distributions paid to Company shareholders
|
-
|
-
|
(8.1)
|
(8.1)
|
-
|
(8.1)
|
|
Distributions paid to minorities
|
-
|
-
|
-
|
-
|
(0.8)
|
(0.8)
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity at 30 September
|
25.0
|
-
|
280.3
|
305.3
|
0.9
|
306.2
|
|
Restatement: (See note 2)
|
|
|
|
|
|
|
|
Correction of share capital
|
(25.0)
|
25.0
|
-
|
-
|
-
|
-
|
|
Transfer of share premium to retained earnings
|
-
|
(25.0)
|
25.0
|
-
|
-
|
-
|
|
Shareholders’ equity at 30 September as restated
|
-
|
-
|
305.3
|
305.3
|
0.9
|
306.2
|
|
Condensed unaudited consolidated cash flow statement
|
|||
|
for the six months ended 30 September 2008
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 30 September 2008
|
Six months ended
30 September 2007
|
|
|
|
Unaudited
|
Unaudited
|
|
|
|
£million
|
£million
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
Loss before tax
|
|
(1.4)
|
(2.5)
|
|
Adjustments for:
|
|
|
|
|
Gains on investments
|
|
(10.5)
|
(12.0)
|
|
(Gains)/losses on finance receivables
|
|
(7.7)
|
6.4
|
|
Interest payable and similar charges
|
|
13.7
|
6.8
|
|
Changes in fair value of derivatives
|
|
7.0
|
0.7
|
|
Interest income
|
|
(0.6)
|
(0.3)
|
|
Amortisation of intangible assets
|
|
2.0
|
1.1
|
|
Operating cash flow before changes in working capital
|
|
2.5
|
0.2
|
|
|
|
|
|
|
Changes in working capital:
|
|
|
|
|
(Increase)/decrease in receivables
|
|
(1.2)
|
0.6
|
|
(Decrease)/increase in payables
|
|
(4.9)
|
0.5
|
|
Cash flow from operations
|
|
(3.6)
|
1.3
|
|
|
|
|
|
|
Interest received on bank deposits and finance receivables
|
|
0.6
|
3.8
|
|
Cash received from finance receivables
|
|
17.4
|
4.3
|
|
Interest paid
|
|
(14.2)
|
(5.7)
|
|
Corporation tax paid
|
|
(0.2)
|
(0.2)
|
|
Net cash from operating activities
|
|
-
|
3.5
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
Purchases of investments
|
|
(38.5)
|
(34.6)
|
|
Interest received on investments
|
|
13.8
|
4.6
|
|
Dividends received
|
|
2.5
|
0.1
|
|
Fees and other operating income
|
|
2.5
|
0.1
|
|
Cash acquired on acquisition of subsidiaries net of acquisition costs
|
|
18.0
|
-
|
|
Loanstock and equity repayments received
|
|
2.2
|
0.5
|
|
Net cash used in investing activities
|
|
0.5
|
(29.3)
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from issue of share capital
|
|
104.3
|
-
|
|
Proceeds from issue of loans and borrowings
|
|
39.0
|
37.1
|
|
Repayment of loans and borrowings
|
|
(115.0)
|
(4.1)
|
|
Distributions paid to Company shareholders
|
|
(8.0)
|
(8.1)
|
|
Distributions paid to minorities
|
|
(0.8)
|
(0.8)
|
|
Net cash from financing activities
|
|
19.5
|
24.1
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
20.0
|
(1.7)
|
|
Cash and cash equivalents at beginning of period
|
|
27.2
|
24.1
|
|
Cash and cash equivalents at end of period
|
|
47.2
|
22.4
|
|
|
|
|
|
|
|
|||
Notes to the condensed unaudited consolidated financial statements
1. Reporting entity
HSBC Infrastructure Company Limited (the 'Company') is a company domiciled in Guernsey, Channel Islands, whose shares are publicly traded on the London Stock Exchange. The interim condensed unaudited consolidated financial statements of the Company (the 'interim statements') as at and for the six months ended 30 September 2008 comprise the Company and its subsidiaries (together referred to as 'the Group'). The Group invests in infrastructure projects in the UK and Europe.
Certain items of the accounting policies apply only to those investments of the Group which are classified for accounting purposes as subsidiaries ('the operating subsidiaries'). Where applicable, this is noted in the relevant accounting policy note.
The statutory accounts for the year ended 31 March 2008 were approved by the Directors on 27 May 2008 and are available from the Company's Administrator and on the Company's website www.hicl.hsbc.com. The auditor's report on these accounts was unqualified.
2. Key accounting policies
Basis of preparation
The interim condensed consolidated financial statements were approved by the Board of Directors on 17 November 2008.
The interim financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and in accordance with International Accounting Standard ('IAS') 34 'Interim Financial Reporting'.
The interim financial statements have been prepared using the historical cost basis, except that the following assets and liabilities are stated at their fair values: derivative financial instruments and financial instruments classified at fair value through profit or loss. The interim statements are presented in sterling, which is the Company's and the subsidiaries functional currency.
The same accounting policies, presentation and methods of computation are followed in these interim statements as were applied in the preparation of the Group's financial statements for the year ended 31 March 2008, except for the adoption of new Interpretations, noted below. Adoption of these Interpretations did not have any effect on the financial position or performance of the Group.
-
IFRIC 10 'Interim Financial Reporting and Impairment'
-
IFRIC 11/IFRS 2 'Group and Treasury Share Transactions'
Supplementary information has been provided analysing the income statement between those items of a revenue nature and those of a capital nature, in order to better reflect the Group's activities as an investment company. Those items of income and expenditure which relate to the interest and dividend yield of investments and annual operating and interest expenditure are shown as 'revenue'. Those items of income and expenditure which arise from changes in the fair value of investments, finance receivables and derivative financial instruments are recognised as capital.
The Group's financial performance does not suffer materially from seasonal fluctuations.
The Directors are of the opinion that the Consolidated Group is engaged in a single segment of business, being investment in Private Finance Initiative companies and predominantly in one geographical area, the United Kingdom.
Restatement
Share capital in the 30 September 2007 financial statements was incorrectly stated at £25m instead of £25,000. Comparatives in these accounts have been restated, with the difference being taken via share premium to retained earnings. There is no impact to the net assets value at 30 September 2007 as a result of this restatement.
3. Administrative Expenses
|
|
Six months ended
30 September 2008
|
Six months ended
30 September 2007
|
|
|
£million
|
£million
|
|
|
|
|
|
Audit & Accounting
|
0.1
|
0.1
|
|
Advisory fees
|
0.1
|
0.1
|
|
Management fees (Note 12)
|
2.7
|
2.1
|
|
Investment fees (Note 12)
|
0.3
|
0.4
|
|
Directors’ fees
|
0.1
|
0.1
|
|
Professional fees
|
0.3
|
0.2
|
|
Other fees
|
0.6
|
0.4
|
|
|
4.2
|
3.4
|
Service costs
|
|
Six months ended
30 September 2008
|
Six months ended
30 September 2007
|
|
|
£million
|
£million
|
|
|
|
|
|
Service costs
|
15.0
|
7.0
|
|
Amortisation of intangible assets
|
2.0
|
1.1
|
|
|
17.0
|
8.1
|
4. Earnings per share and Diluted earnings per share
Basic and diluted earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares in issue during the period.
|
|
Six months ended 30 September 2008
|
Six months ended
30 September 2007
|
|
|
|
£million
|
£million
|
|
|
|
|
|
|
|
Profit attributable to equity holders of the Company
|
1.1
|
2.3
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue
|
311.8
|
250.0
|
|
|
|
|
|
|
|
Basic and diluted earnings per share (pence)
|
0.4
|
0.9
|
|
|
|
|
|
|
5. Interim distribution
|
|
For the six months ended 30 September 2008
|
For the six months ended 30 September 2007
|
|
|
£million
|
£million
|
|
|
|
|
|
Amounts recognised as distributions to equity holders during the period:
|
|
|
|
|
|
|
|
Second interim dividend for the year ended 31 March 2008 of 3.2p (2007: 3.225p) per share
|
8.0
|
8.1
|
|
|
|
|
The Board has proposed an interim distribution for the period ended 30 September 2008 of 3.125 pence per share (30 September 2007: 3.05 pence per share) which will result in a total distribution of £10.5 m, payable on 31 December 2008. The interim distribution is offered to shareholders as a cash payment or alternatively as a scrip dividend. The interim distribution has not been included as a liability as at 30 September 2008.
The 2008 second interim distribution of £8.0 m, representing 3.2 pence per share, was paid on 23 May 2008 and is included in the condensed consolidated statement of changes in shareholders' equity.
|
|
Year ended 31 March 2007
|
Year ended 31 March 2008
|
Year ending 31 March 2009
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend for period ending September
|
2.875p
|
3.05p
|
3.125p
|
|
|
|
|
|
|
Interim dividend for the period ending March
|
3.225p
|
3.20p
|
|
|
|
|
|
|
|
|
6.1p
|
6.25p
|
|
|
|
|
|
|
6. Net assets
The calculation of net assets per share is based on shareholders' equity of £399.6 m at 30 September 2008 and 336 million ordinary shares in issue at that date.
7. Tax
Income tax for the six month period includes a current tax charge of £2.1m, off-set by a deferred tax credit of £2.9m (2007: current tax charge of £0.1m, deferred tax credit of £2.8m and credit adjustment due to the change in UK corporate tax rate of £0.3m). The current period credit of £0.8m represents the best estimate of the average annual effective income tax rate expected for the full year, applied to the pre-tax income of the six month period.
Under the current system of taxation in Guernsey, the Company itself is exempt from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged an annual exemption fee of £600. Anticipated tax benefits of this type of income for the full year are reflected in computing the estimated annual effective income tax rate.
8. Investments at fair value through profit or loss
|
|
30 September 2008
|
|
31 March 2008
|
|
|
£million
|
|
£million
|
|
|
|
|
|
|
Opening balance
|
384.7
|
|
293.9
|
|
Investment in the period
|
26.3
|
|
82.9
|
|
Accrued interest movement
|
(4.9)
|
|
11.4
|
|
Repayments in the period
|
(1.9)
|
|
(2.4)
|
|
Subscription obligations
|
20.5
|
|
-
|
|
(Loss)/ gain on valuation
|
(1.6)
|
|
1.4
|
|
Other movements
|
(0.3)
|
|
(2.5)
|
|
Investments consolidated during the period
|
(123.0)
|
|
-
|
|
Carrying amount at period end
|
299.8
|
|
384.7
|
|
|
|
|
|
|
(Loss) / gain on valuation as above
|
(1.6)
|
|
1.4
|
|
Less : transaction costs incurred
|
-
|
|
(1.2)
|
|
(Loss) / gain on investments
|
(1.6)
|
|
0.2
|
The Investment Adviser has carried out fair market valuations of the investments as at 30 September 2008. The valuation has been prepared based on a discounted cashflow methodology and adjusted in accordance with the European Venture Capital Association's Valuation Guidelines where appropriate, given the special nature of infrastructure investments. Discount rates applied range from 7.6% to 10.8% (average of 7.9%) (2007: 7.0% to 8.8% (average 7.3%)).
In August 2008 the Group completed the acquisition of a 50% interest in The Hospital Company (Oxford John Radcliffe) Holdings Ltd from Carillion plc for a consideration price of £18.0 m.
9. Acquisition of subsidiaries
Prior to the acquisition of the remaining equity these PFI projects were held as investments at fair value and therefore there has been no gain or loss as a result of remeasuring to fair value the interests held prior to the acquisitions. Fair values were determined using the income approach which discounts the expected cash flows attributable to each asset at an appropriate rate to arrive at fair values.
Intangible assets represent the fair value of customer contracts for operating subsidiary projects recognised on acquisition, which are primarily attributable to the service portion of the project contracts, and intangible assets recognised under IFRIC 12. Intangibles are being amortised on a straight line basis over the remaining life of the concessions concerned.
West Middlesex Hospital
In July 2008 the Group acquired 5% of the equity and 2% of the loan stock in the project bringing the total equity and loan stock interests to 100%. The aggregate consideration paid for the interests in the project before the July acquisition was £12.7m.
This project is a concession to design, construct, finance, operate and maintain a 228 bed hospital in West Middlesex, UK which became operational in June 2003.
|
|
Book value at acquisition
|
Fair value adjustments
|
Fair value acquired
|
|
|
£million
|
£million
|
£million
|
|
Intangible assets
|
-
|
12.5
|
12.5
|
|
Finance receivables at fair value through profit or loss*
|
50.3
|
2.6
|
52.9
|
|
Deferred tax assets
|
1.0
|
0.8
|
1.8
|
|
Cash and cash equivalents
|
2.6
|
-
|
2.6
|
|
Other current assets
|
1.3
|
-
|
1.3
|
|
Current liabilities
|
(1.8)
|
-
|
(1.8)
|
|
Deferred tax liabilities
|
-
|
(4.2)
|
(4.2)
|
|
Other non-current liabilities
|
(54.8)
|
(2.8)
|
(57.6)
|
|
|
|
|
|
|
Net assets acquired
|
(1.4)
|
8.9
|
7.5
|
|
Goodwill
|
|
|
-
|
|
Fair value of consideration for equity
|
|
|
7.5
|
|
Fair value of consideration for loan stock
|
|
|
9.2
|
|
|
|
|
16.7
|
|
Less: Carrying amount of investment previously held as fair value through profit or loss
|
|
|
(16.0)
|
|
Consideration paid for the remaining interests
|
|
|
0.7
|
|
Cash acquired
|
|
|
(2.6)
|
|
Net cash inflow
|
|
|
(1.9)
|
* - the finance receivable in the book value at acquisition under IFRS is valued at amortised cost rather than at fair value through profit or loss, and therefore there is a fair value adjustment to reflect the fair value acquired.
Central Middlesex Hospital
In July 2008 the Group acquired 15% of the equity in the project bringing the total equity interest to 100%. The aggregate consideration paid for the interests in the project before the July acquisition was £13.2m
This project is a concession to design, construct, finance, operate and maintain hospital facilities for 214 beds and three main theatres, as well as refurbishing some existing facilities, on the Central Middlesex Hospital site in North West London, UK. Construction was completed in January 2007.
|
|
Book value at acquisition
|
Fair value adjustments
|
Fair value acquired
|
|
|
£million
|
£million
|
£million
|
|
Intangible assets
|
-
|
45.2
|
45.2
|
|
Finance receivables at fair value through profit or loss*
|
77.5
|
4.7
|
82.2
|
|
Deferred tax assets
|
9.0
|
0.5
|
9.5
|
|
Cash and cash equivalents
|
5.4
|
-
|
5.4
|
|
Other current assets
|
2.0
|
-
|
2.0
|
|
Current liabilities
|
(1.7)
|
-
|
(1.7)
|
|
Deferred tax liabilities
|
-
|
(14.0)
|
(14.0)
|
|
Other non-current liabilities
|
(115.2)
|
(1.6)
|
(116.8)
|
|
|
|
|
|
|
Net assets acquired
|
(23.0)
|
34.8
|
11.8
|
|
Goodwill
|
|
|
-
|
|
Fair value of consideration for equity
|
|
|
11.8
|
|
Fair value of consideration for loan stock
|
|
|
9.3
|
|
|
|
|
21.1
|
|
Less: Carrying amount of investment previously held as fair value through profit or loss
|
|
|
(19.7)
|
|
Consideration paid for the remaining interests
|
|
|
1.4
|
|
Cash acquired
|
|
|
(5.4)
|
|
Net cash inflow
|
|
|
(4.0)
|
* - the finance receivable in the book value at acquisition under IFRS is valued at amortised cost rather than at fair value through profit or loss, and therefore there is a fair value adjustment to reflect the fair value acquired.
Home Office
In July 2008 the Group acquired 20% of the equity in the project bringing the total equity interests to 100%. The aggregate consideration paid for the interests in the project before the July acquisition was £70.2m
This project is a concession commissioned by the UK Home Office to build, finance, operate and maintain a new headquarters building to replace their existing offices on a 4.3 acre site, followed by the construction of a building comprising three purpose-built interconnecting office blocks to accommodate up to 3,450 staff. Construction was completed in January 2005.
|
|
Book value at acquisition
|
Fair value adjustments
|
Fair value acquired
|
|
|
£million
|
£million
|
£million
|
|
Intangible assets
|
-
|
41.2
|
41.2
|
|
Finance receivables at fair value through profit or loss*
|
272.6
|
17.5
|
290.1
|
|
Deferred tax assets
|
0.4
|
0.5
|
0.9
|
|
Cash and cash equivalents
|
18.3
|
-
|
18.3
|
|
Other current assets
|
4.5
|
-
|
4.5
|
|
Current liabilities
|
(3.6)
|
-
|
(3.6)
|
|
Deferred tax liabilities
|
-
|
(16.4)
|
(16.4)
|
|
Other non-current liabilities
|
(296.6)
|
(1.8)
|
(298.4)
|
|
|
|
|
|
|
Net assets acquired
|
(4.4)
|
41.0
|
36.6
|
|
Goodwill
|
|
|
-
|
|
Fair value of consideration for equity
|
|
|
36.6
|
|
Fair value of consideration for loan stock
|
|
|
51.4
|
|
|
|
|
88.0
|
|
Less: Carrying amount of investment previously held as fair value through profit or loss
|
|
|
(81.8)
|
|
Consideration paid for the remaining interests
|
|
|
6.2
|
|
Cash acquired
|
|
|
(18.3)
|
|
Net cash inflow
|
|
|
(12.1)
|
* - the finance receivable in the book value at acquisition under IFRS is valued at amortised cost rather than at fair value through profit or loss, and therefore there is a fair value adjustment to reflect the fair value acquired.
If all the acquisitions had occurred on 1 April 2008, the estimated consolidated total income would have been £54.9 m and consolidated profit for the period would have been £2.3 m. The aggregate loss in respect of the acquired subsidiaries was £2.4m during the period.
10. Share capital and reserves
|
|
30 September 2008
|
31 March
2008
|
|
Issued and fully paid:
|
£000
|
£000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
336,361,480 (31 March 2008: 250,000,000) ordinary shares of 0.01p each
|
33.6
|
25.0
|
|
2 Management Shares of 0.01p each
|
-
|
-
|
|
|
33.6
|
25.0
|
|
|
|
|
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Management Shares carry one vote each on a poll, do not carry any right to dividends and, in winding-up, rank only for a return of the amount of the paid-up capital on such shares after return of capital on Ordinary Shares and Nominal Shares. The Management Shares are not redeemable and are accrued for and on behalf of a Guernsey Charitable Trust.
Retained reserves
Retained reserves comprise retained earnings and the balance of the share premium account, as detailed in the consolidated statement of changes in shareholders' equity.
Issued share capital
On 16 May 2008 the Company announced the results of its Placing and Offer for Subscription of C shares. The Company raised £103.6 m (before expenses) through the issue of 103,600,000 C shares at a price of £1.00 per C share, of which 7,123,913 C shares were issued pursuant to the offer for subscription and 96,476,087 C shares were issued by way of the placing. The C shares were converted to 84,361,480 ordinary shares and admitted to trading on the London Stock Exchange on 4 June 2008.
On 10 September 2008 2 million new ordinary shares were issued for cash to a single institutional investor at an issue price per share (before expenses) of 126.25p.
11. Loans and borrowings
In the six month period ending September 2008 £39.0m of debt drawings (2007: £37.1m) were made to fund equity subscriptions and acquisitions. £101.6m of the net proceeds from the C share issue were utilised in the period to repay bank debt of the Group.
Debt repayments of £8.1m were recognised in the six month period ended September 2008 in respect of the 7 consolidated subsidiaries.
12. Related party transactions
HSBC Specialist Fund Management Ltd ('HSFML') is the Company's Investment Adviser and the Operator of a limited partnership through which the Company holds its investments. The total Management and Advisory fees charged by HSFML to the Income Statement (disclosed as management fees in Note 3) was £2.5m of which the balance remained payable at the period end (2007: £2.0m). The Investment fee charged by the Operator for new portfolio investments (disclosed as investment fees in Note 3) in the period was £0.3m of which the balance remained payable at the period end (2007: £0.4m).
The following summarises the transactions between the Group and its associates and joint ventures in the period:
|
|
Transactions
|
|
Balance
|
||
|
|
Six months ended
30 September 2008
|
Six months ended
30 September 2007
|
|
30 September 2008
|
31 March
2008
|
|
|
£million
|
£million
|
|
£million
|
£million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loanstock investments
|
20.5
|
9.9
|
|
185.6
|
226.6
|
|
Loanstock repayments
|
(1.9)
--
|
(0.6)
|
|
-
|
-
|
|
Equity investments
|
-
|
-
|
|
80.5
|
91.5
|
|
Equity repayments
|
(0.6)
|
-
|
|
-
|
-
|
|
Outstanding subscription obligations
|
-
|
-
|
|
-
|
(20.5)
|
|
Loanstock interest
|
7.8
|
6.4
|
|
(7.3)
|
12.6
|
|
Dividends received
|
1.7
|
0.1
|
|
-
|
-
|
|
Fees and other income
|
2.5
|
0.1
|
|
-
|
-
|
|
|
|
|
|
|
|
The Group had total cash holdings with HSBC Bank plc at 30 September 2008 of £42.7m (2007: £53.2m). Total interest income earned from cash holdings held with HSBC Bank plc for the period was £0.5m (2007: £0.3m).
All of the above transactions were undertaken on an arm's length basis and there have been no changes in material related party transactions since the last annual report.
13. Guarantees and other commitments
14. Events after balance sheet date
There were no events after the balance sheet date which are required to be disclosed.
This information is provided by RNS
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