Half Yearly Report
HSBC Infrastructure Company Limited
12 November 2009
INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2009
The Directors of HSBC Infrastructure Company Limited announce the results for the six months ended 30 September 2009.
Highlights
|
for the six months ended 30 September 2009 (on an Investment basis unless noted otherwise1) |
1 In order to provide shareholders with further information regarding the Group's net asset value, coupled with greater transparency in the Company's capacity for investment and ability to make distributions, as in previous periods, the results have been restated in proforma tables with all investments accounted for on an Investment basis. |
Further to the Company's announcement on 2 November 2009, the Board will publish details later today of the Company's proposals to raise up to £80m by way of a C Share issue.
Graham Picken, Chairman of the Board, said:
"The Board is pleased to report a good set of results, coupled with dividend growth. The Company has performed as predicted over the last 18 months and we are now well placed to add further investments to the Group.
The Investment Adviser has secured the acquisition of three new investments in the period, and continues to actively manage the existing portfolio.
Since the period end we have signed a contract to acquire additional interests in three police projects for total consideration of £8.0m. On two of them, the Metropolitan Police Training Facilities and the Durham & Cleveland Firearms Training, the incremental acquisitions have been completed. On the third, third party consents are being obtained to allow the acquisition to finalise.
Our pipeline of new investment opportunities within our target sectors is healthy, and more acquisitions are likely in the next 6 months. The Investment Adviser is currently in exclusive negotiations to acquire further investments, with a combined investment opportunity in excess of £70m.
Strong demand for the Company's shares enabled the placing of 35.1m shares via the block listing in the period, and the Group's current debt and future equity subscription commitments now totals £55m. We will be announcing later today a further capital raising by way of C shares. We expect this to be attractive to investors since, like our equity raising in 2008, early conversion to ordinary shares will create an entitlement to the second interim for the year to 31 March 2010. Capital raising is designed to reduce net drawings under the Group's debt facilities and so position us with the flexibility to fund new investments. This is in line with our stated funding strategy."
Contacts for the Investment Adviser on behalf of the Board:
HSBC Specialist Fund Management Limited: +44 (0) 20 7991 8888
Tony Roper
Keith Pickard
Sandra Lowe
Contacts for M: Communications: +44 (0) 20 7920 2330
Edward Orlebar
James Hill
Copies of this announcement can be found on the Company's website, www.hicl.hsbc.com. The Interim Report for the six months ended 30 September 2009 will be posted to shareholders in November, and an electronic version will shortly be available from the website.
Chairman's Statement
Introduction
On behalf of the Board, I am pleased to report that the Company has maintained good progress in the six months to 30 September 2009. The existing portfolio continues to perform as planned. We have sourced three new investments in the period and raised £39.1m through the placing of shares under our block listing.
Our share price in the last six months has traded consistently at a premium to net asset value per share, we believe in part a reflection of our yield prospects and balance sheet stability.
We are announcing later today proposals to raise further equity capital by way of a C-share issue, which will position the Group well for 2010 when we anticipate further growth in our investment portfolio.
Performance of the portfolio
The Group's portfolio now consists of 31 investments, 30 PFI/PPP projects and an investment in the junior loan in Kemble Water. Apart from Bradford Schools, all the projects are fully operational. Bradford Schools is currently in construction and will become operational in 2011.
The Dutch High Speed Rail Link commenced regular train services in September and a full timetable is now expected by the year end.
As in previous periods, there are no material operational matters upon which to report. As noted in the Investment Adviser's Summary Report, the Investment Adviser has been active in adding value across the portfolio. There have been a number of successes, notably the early repayment of £52.0m on the bonds for the Colchester Garrison project.
Financial results
On a consolidated IFRS basis, the profit before tax was £26.7m (2008: £1.4m loss). The profit before tax has benefited from favourable interest rate swap, inflation swap and bond indexation movements recognised in the period and due to contributions from acquisitions made.
As in previous periods, the Company has also prepared pro-forma accounts on an Investment basis (treating all 31 holdings as investments). Profit before tax on an Investment basis was £8.5m (2008: £4.5m) and earnings per share on an Investment basis were 2.3p (2008: 1.5p). This increase in profits reflects fair value movements taken through the income statement compared to the prior year.
Cash received from the portfolio by way of distributions, capital repayments and fees was £25.0m, and after Group costs, this was a net £19.5m, which more than covers the Interim distribution. Cash generation was ahead of forecast for the first half of the year, but is expected to reverse in the second half bringing net receipts in line with plan for the full year.
Total fees accruing to HSBC Specialist Fund Management Limited (the Investment Adviser) amounted to £2.9m in the six months, relating to their 1.1% pa management fee (1.5% pa assets in construction) 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.
The total expense ratio for the Group on an Investment basis was 1.71% on an annualised basis for the six months (being the Group's operational expenses excluding acquisition costs, divided by the Group's net assets on an Investment basis). This compares with 1.74% for the year to 31 March 2009.
More details of the financial results are set out below.
Distributions
The Board has declared an Interim distribution of 3.2p per share for the year to 31 March 2010, with a scrip dividend alternative (2008: 3.125p). This is a 2.4% growth year on year and the aim remains to achieve 7.0p by March 2013.
A circular is being sent to shareholders to explain the scrip dividend alternative. Shareholders need to decide by 14 December 2009 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 20 November 2009, and will be settled at the end of December.
At the Annual General Meeting ("AGM") in August 2009, shareholders gave the Board the power to offer a scrip dividend alternative and this power runs until the next AGM in 2010. 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 2009. 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. This valuation exercise uses key assumptions which are derived from a review of recent comparable market transactions in order arrive at a fair market valuation.
The Directors have satisfied themselves with the methodology used, the economic assumptions, and the discount rates applied.
As in previous periods, the Directors have taken independent third party advice on the valuation carried out by the Investment Adviser.
The Directors have approved the valuation of the portfolio of 31 investments to be £464.5m as at 30 September 2009. On the Bradford BSF Schools Phase II project there is an outstanding equity commitment of £7.2m.
The valuation of £464.5m compares with £445.7m at 31 March 2009 and £450.5m as at 30 September 2008. 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 2009 is 113.3p (31 March 2009: 111.1p, and 98.4p at 31 March 2006).
On an Investment basis the NAV per share is 109.7p at 30 September 2009 (31 March 2009: 110.5p, and 98.4p at 31 March 2006). The Investment basis NAV per share after the second interim distribution at 31 March 2009 was 107.2p; the decrease of 0.7p (to 106.5p, being the 109.7p less the interim distribution of 3.2p) is due to an adverse movement in the Directors' valuation of the portfolio resulting from a 0.4% increase in the discount rate used, as described in more detail in the Investment Adviser's Summary Report.
Portfolio acquisitions and pipeline
The Group has made the following acquisitions in the six months to 30 September 2009:
-
In June, the Group acquired a 30% interest in Renfrewshire schools for £6.8m,
-
In July, the Group acquired a 50% interest in the Highland Schools PPP project for £16.8m, and
-
In September, the Group made a 34% investment in the Bradford BSF Schools Phase II project with a total funding requirement from the Group of £7.4m.
Since the period end, the Group has signed a conditional contract to acquire additional stakes in three existing PFI police projects for a total consideration of £8.0m. The contract is conditional on obtaining the necessary third party consents to allow the sale to take place. Consents were recently received on the MPA Training Facility and the Durham & Cleveland Firearms Training Centre, enabling the acquisition of an additional 22.92% of equity and loan notes on each to complete. The incremental stake in GMPA Police Stations will complete in due course.
The Group continues to look selectively for further acquisitions consistent with our stated policy and the approach set out in May as part of our annual results.
Our focus for further acquisitions is on the following key sectors:
-
PFI/PPP/P3 projects in the UK, Europe, North America, and Australia (both operational and in their construction phases).
-
Operational renewable energy projects such as wind farms, solar parks or hydro-electric schemes, where there are suitable contractual structures in place, enabling the Group to secure long term income streams comparable in nature to those in PFI/PPP/P3 projects.
and potentially:
-
Regulated utilities. Most investment opportunities in this sector are too large for the Group but there could be one or two potential opportunities in 2010.
-
Selectively, debt funding in infrastructure projects where it is attractively priced and appropriately structured.
Our pipeline of investment opportunities remains healthy. We are selective in choosing which opportunities to pursue and we continue to seek suitable off market transactions where possible.
The Investment Adviser is currently in exclusive negotiations to acquire further investments, with a combined investment opportunity in excess of £70m.
Accounting
At 30 September 2009, the Group had eight 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. 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 Financial Results section. 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.
Risks and uncertainties
The Board and the Investment Adviser have considered the impact of the UK Finance Bill 2009 and the new legislation affecting the tax deductibility of inter-group loan interest in UK subsidiaries of foreign companies. This takes effect for financial periods starting after 1 January 2010, and based on detailed analysis, the Investment Adviser considers the impact of this on the Group is not likely to be significant.
At this time it is not possible to accurately assess what impact the European Directive on Alternative Investment Fund Managers will have on the Group and the Company. Since there is considerable lobbying by a number of parties, it seems likely that the draft provisions will be amended. The Company has recently joined the Association of Investment Companies, ("AIC") and is supportive of the AIC's efforts to achieve an acceptable outcome on the provisions of this directive.
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. As previously reported, the portfolio has limited exposure to monoline insurers.
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 or credit issues to note. Clearly, it is possible that some partners might encounter difficulties in their wider businesses that could impact on the performance on the Group's projects. The Investment Adviser monitors their project performance, and if issues arise, action will be taken to minimise any impact on performance of the project.
Outlook
Our current portfolio of investments is expected to deliver the returns originally targeted and to maintain value, notwithstanding the harsher economic climate. In contrast to the continuing low bank deposit rates available to investors, we continue to offer our shareholders a growing yield with a resilient net asset valuation.
The return of financial stability, albeit with uncertainty around the shape and speed of recovery, enables the Board to progress the next stage of development by growing the investment portfolio to £500m and beyond. In doing so, the Company will not forsake the sound foundations established since launch in 2006 when we became the UK's first listed infrastructure Investment Company. Rather, we shall build on our successful strategy of acquiring and managing cash generative assets with strong risk mitigants embedded within the projects and across our business as a whole.
The Investment Adviser is currently assessing a strong pipeline of opportunities in our target sectors for which there are variable lead times and probabilities. That said, the supply and demand components of the market are increasingly active and we are confident of securing new assets which meet our investment criteria.
Whilst a combination of capital raising through the block listing over the summer and unused debt facilities ensure that we are able to proceed with new investments over the near term, we are mindful that such resources can be depleted quickly in a market where our positioning offers competitive advantage when bidding for high quality assets.
We are therefore announcing later today a C share issue with the aim of raising further equity in order that we have the necessary capacity to make the most of the opportunities presented to us.
In these uncertain times, the Board is very pleased with the way the Company is currently positioned, the performance of the portfolio, and the opportunities we have to continue to selectively upscale our market presence.
Graham Picken
Chairman
11 November 2009
Investment Adviser's Summary Report
Introduction
We are pleased to report that the Group is performing well and is not being significantly impacted by the current economic environment.
The recent acquisitions have increased the Group's portfolio to 31 infrastructure investments, of which 30 are PFI/PPP projects in the UK and Europe. All the PFI/PPP projects are fully operational and delivering services with the exception of Bradford Schools which was acquired in early September. Bradford Schools is under construction, with completion scheduled for 2011. All the PFI projects have long-term availability-based concessions with public sector clients, and none of them require refinancing to meet their long-term business plans.
There are no operational matters to report on any of the projects. On the Dutch High Speed Rail Link commercial train services began successfully in September.
The global economic downturn has increased the rate of suitable assets coming to market as owners of these assets either seek to realise cash or to generate profit on disposal. This has generated a good pipeline of opportunities for the Company to evaluate which we believe will result in acquisitions that meet the Investment Policy and will enhance the value of the portfolio.
Strategy
The Group's strategy continues to focus on the maximising of value from the existing portfolio and securing new investment opportunities to enhance the portfolio.
For new investments, we are continuing our strategy of concentrating on PFI/PPP concessions, both in operations and in construction and infrastructure assets with comparable risk and return profiles.
Our geographic focus is those countries with a developed PFI/PPP market. This currently includes the UK, Europe, Canada (where the programme is called P3) and Australia. In the case of renewable energy projects, we are evaluating a small number of operational projects in Europe.
Quality service delivery and maintaining good client relationships across the portfolio is an integral part of the Group's strategy. Our approach of working in partnership with our clients leads to good working relationships which in turn help to grow revenues, enables early identification of potential issues and assists in problem resolution.
Market
In the period new PFI/PPP projects have continued to be signed although at a slow pace. This does not directly affect the Group since any new investments are likely to be already operational or in their construction phase. In the secondary PFI/PPP market there has been an increased flow of assets onto the market with both individual assets and portfolios being marketed by contractors and financial institutions. This increase in supply of opportunities, combined with a small number of potential buyers, has caused the increase in discount rates used to value these investments.
The Investment Adviser has scrutinised an increased number of potential investments of which a select number have been reviewed in detail. Various opportunities have been declined to ensure that resources are targeted to value enhancing proposals. There have been a variety of reasons for not proceeding; these have included weak yields, asset size too small, revenue risks, unacceptable risk profiles, multiple competitive bidders, poor client relationships, lack of board representation and counter-party concerns.
Since 31 March 2009, the Investment Adviser has seen 38 opportunities which fit the Group's investment strategy, of which 18 have been considered in more detail. On 6 opportunities, the Group was either outbid or the process was stopped. On 4 opportunities the Group was successful (3 in the period to 30 September 2009) and on the remainder, we continue to evaluate the investment opportunity.
The assets which have been reviewed in detail have included PFI/PPP/P3 assets in construction and in operation, and operational renewable energy projects. These projects have been located in the UK, Europe, Canada and Australia.
In the current economic environment the Investment Adviser expects the flow of potentially attractive investment opportunities to continue as vendors redefine their core assets and seek disposals to de-leverage their balance sheets.
Portfolio performance
All the projects continue to perform well delivering in accordance with their service requirements. There are no material operational matters upon which to report.
On the Dutch High Speed Rail Link, the first scheduled train services commenced in September following successful retesting of the signaling. Bradford Schools, which was acquired in September is the only project in construction, with all the remaining 30 projects fully operational. Construction on Bradford Schools commenced in May 2009 through an early works agreement with the Council and is progressing on schedule with completion due in 2011.
On the Blackburn Hospital PFI Project, Ambac Assurance UK Limited ("Ambac") the monoline insurer has been further downgraded since March 2009. This has the effect of increasing the cost of the debt for the project. The value of the project has been reduced to reflect this increased cost. Any future downgrades of Ambac will have no further impact on the project. This is the only project in the Group's portfolio which is affected by a downgrade of a monoline insurer.
Our asset management team continues to work on the performance plans for each project in the portfolio. These plans cover incremental revenue opportunities, cost savings, treasury management and financial optimisation. In the current economic environment where clients are under pressure to reduce costs we are working with them to seek efficiencies and cost savings. These initiatives may include outsourcing additional services to the project or modifying the scope of the services required. An example of such an initiative is the plan to retrofit energy saving LED lights for the Home Office project to reduce the utilities costs to the client.
As a partner we seek to bring our private sector experience and knowledge from across our portfolio to assist our clients. This commitment to partnering was recognised by the Ministry of Defence ("MOD") in two recent awards for the Helicopter Training project as an industry partner to the Joint Helicopter Command and for innovation on a synthetic training link.
On Colchester Garrison, the shareholders created an innovative cost saving through the early repayment to bondholders of £52 million from surplus land sale proceeds. The shareholders negotiated with bondholders a 0.5% repayment premium to make a repayment on the bonds 2½ years earlier than scheduled. The bonds on the project have an interest coupon of 5.4% while the project was earning around 2% interest from cash on deposit. The differential between the interest cost and interest earned, less transaction costs provides a significant saving which the project is sharing 50:50 with the MOD as the project's client.
We are working on a number of variations on our projects at the clients' request. In the period these variations have included:
-
On the Oxford John Radcliffe Hospital project, the Trust is replacing and expanding its Cardiac Facility, to include 50 ensuite rooms. The project will provide additional soft FM services to this facility, which will increase the unitary charge on the project.
-
On the Helicopter Training project, at the MoD's request, the Chinook Julius upgrade to digital avionics is being undertaken. This is the start of a fleet wide modification which will extend the Chinook's life to 2040. The variation is being funded by the MoD as a capital project.
-
On the Wooldale Centre project, the Council is constructing an extension to the primary school to include 9 classrooms for an additional 250 pupils. The project will maintain and provide FM services to the new classrooms, which will be funded through an increase in the unitary charge.
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 24 years at 30 September 2009 and the weighted average debt tenor is 22 years.
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.
Acquisitions
As reported in the Chairman's Statement, the Group made three acquisitions in the six months to 30 September 2009.
In June, the Group acquired a 30% interest in the Renfrewshire Schools project for a consideration price of £6.8 million. The project comprises ten primary and secondary schools, all located in Renfrewshire. It was developed and built by Carillion and has been operational since January 2008. A subsidiary of Amey plc operates the schools under a long-term services agreement.
In early July, the Group acquired a 50% interest in the second Highland Schools PPP project for a consideration price of £16.8 million. The 30-year, all new build concession comprises five primary schools, three secondary schools, a combined primary and secondary school, and a special needs school. Construction has been completed in stages and completed this autumn.
In early September the Group acquired a 34% interest in the Bradford Schools project which had a funding commitment of £7.4m, the majority of which is a subscription obligation payable at the end of the construction period in early 2011. The scheme, which is part of the Bradford 'Building Schools for the Future' Programme, is for the provision of four Secondary Schools. The four modern campus environments also comprise four smaller schools and will provide dedicated learning for students with special educational needs. Design and construction of the schools will be provided by a joint venture between Costain and Ferrovial Agroman. Amey Communities will undertake the Facilities Management Services and provide the Information and Communications Technology.
Counterparties
The Investment Adviser maintains a regular review of the portfolio's counterparty exposure. All the PFI clients are public sector bodies. The acquisitions have provided additional diversification of the supply chain to further broaden the range of counterparties both operationally for facilities management services and financially for providers of bank deposit accounts and interest rate swaps.
The facilities management services are carried out by a range of experienced providers including Bouygues, Sodexo, Mitie and Interserve. There have been no service issues to date that might indicate financial difficulties for any of our service providers. The portfolio has a good spread of facility management suppliers providing services to our projects and there is no over-reliance on any one supplier.
Valuation
The Investment Adviser is responsible for carrying out the fair market valuation of the Group's investments which 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 report and opinion on these valuations.
For non-market traded investments, the valuation principles used are based on a discounted cash flow methodology, and adjusted in accordance with the European Venture Capital Associations' valuation guidelines where appropriate to comply with IAS 39, given the special nature of infrastructure investments. Where an investment is traded, such as the Kemble Water Junior Loan, a market quote is used.
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 2009, available from the Company's website).
The Directors' Valuation of the portfolio as at 30 September 2009 is £464.5m. This portfolio valuation compares to £445.7m as at 31 March 2009 (up 4.2%) and £250.4m at the time of launch (a reconciliation between the valuation at 30 September 2009 and that shown in the financial statements is given in Note 1 to the unaudited consolidated proforma financial statements, the principle difference being the £7.2m of loan stock commitment on Bradford Schools).
The growth in the Directors' Valuation over the last 6 months is from £445.7m to £464.5m, the components of which are tabled below.
|
Valuation movement during the six months to 30 September 2009 - £m |
|||
|
Valuation at 31 March 2009 |
|
445.7 |
|
|
Investments |
|
31.0 |
|
|
Cash receipts |
|
(25.0) |
|
|
Change in DCF rate |
|
(17.7) |
|
|
Forex movement on Dutch High Speed Rail Link |
|
(1.0) |
|
|
Return |
|
31.5 |
|
|
Valuation at 30 September 2009 |
|
464.5 |
|
Netting out acquisitions in the period of £31.0m, and investment receipts of £25.0m, the growth over the rebased value of £451.7m was 2.8%. This increase arose from a robust project performance and recognition of value uplifts from acquisitions and on the Kemble Water junior loan which more than off-set the effect of an increase of 0.4% in the discount rate applied to the operational 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.
Discount rates
The discount rates used for valuing each PFI/PPP 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 Water Junior loan |
||
|
Range |
Weighted average |
Range |
Weighted average |
|
|
30 September 2009 |
8.2% to 17.1% |
8.7% |
8.2% to 11.0% |
8.6% |
|
31 March 2009 |
7.8% to 22.4% |
8.3% |
7.8% to 8.6% |
8.1% |
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.
A number of contractors and financial institutions have sought to reduce leverage and realise profits by disposing of PFI/PPP assets providing an increased supply of assets to the secondary market that has impacted pricing levels. This movement in pricing has been reflected in an increase in the weighted average rate (excluding Kemble) for operational assets of 0.4% to 8.5%. This and an increase of 0.1% due to the 11.0% discount rate applied to the asset in construction has resulted in an increase in the weighted average rate (excluding Kemble) of 0.5%. The long term (20 and 30 year) gilt rates at September were broadly in line with where they were at March.
Inflation indexation
The PFI projects in the portfolio have contractual income streams with public sector clients, which are rebased every year for inflation. UK projects tend to use either RPI (Retail Price Index) or RPIx (RPI excluding mortgage payments), and revenues are either partially or totally indexed (depending on the contract and the nature of the project's financing). Facilities management sub-contracts have similar indexation arrangements.
The inflation assumptions used in the valuation are unchanged from March with UK inflation assumed at zero to March 2011 and 2.75% per annum thereafter. In arriving at these rates, consideration has been given to current short term economic forecasts and the long term Bank of England targets for inflation. The current forecasts for RPI in December 2010 range from 0.2% to 4.1% from 22 City institutions as compiled by HM Treasury.
Deposit rates
Each PFI project in the portfolio has cash held in bank deposits, and this is a function of their financing structure. As at 30 September 2009 the UK base rate was 0.5% and cash deposits in the portfolio were earning interest at rates in the range of 0% to 2% per annum.
The deposit rate assumptions used in the valuation are unchanged from March with deposit interest assumed at 1.0% to March 2011 and 4.5% per annum thereafter.
Each of the project's interest costs are at a fixed rate either through fixed rate bonds or bank debt which is hedged with an interest rate swap. The project's sensitivity to interest rates relates to the cash deposits which the projects are required to maintain as part of their funding. For example most projects would have a debt service reserve account in which 6 months of debt service payments are held.
Financing
In the six months to September the Company has successfully issued 35,135,000 shares, raising net proceeds of £38.8m including £5.8m received in October and a further 139,142 shares as scrip dividends in June. The net proceeds have been used to reduce the Group's debt net of the cost of the new acquisitions made. As at 30 September 2009, the Group had £145.3m of undrawn debt capacity available to fund further acquisitions in line with the Company's stated strategy.
The strategy is to use the Group's debt facilities to fund new acquisitions, to provide letters of credit for future subscription obligations, and to provide a prudent level of debt for the portfolio to improve the operational gearing.
As noted in the Chairman's Statement, the Company is announcing a C share issue, to reduce the Group's debt to provide the Group with additional capacity to make further acquisitions.
Financial Results
Accounting
At 30 September 2009, the Group had eight 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. Under International Financial Reporting Standards ("IFRS"), the results of these companies are required to be consolidated in the Group's financial statements on a line-by-line basis.
However, these investments form part of a portfolio of similar investments which are held for investment purposes and managed as a whole and there is no distinction made between those investments classified as subsidiaries and those which are not. Further, all debt owed by the Group's investments is non-recourse and the Group does not participate in their day to day management.
As in previous periods, in order to provide shareholders with further information regarding 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 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.
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.
Income and Costs
Summary income statement
|
|
Six months to 30 Sept 2009 |
|
Six months to 30 Sept 2008 |
||||
|
£m |
Investment basis |
Consolidated adjustments |
IFRS basis |
|
Investment basis |
Consolidated adjustments |
IFRS basis |
|
|
|
|
|
|
|
|
|
|
Total Revenue Income |
16.2 |
69.1 |
85.3 |
|
16.8 |
25.0 |
41.8 |
|
|
|
|
|
|
|
|
|
|
Expenses & Finance Costs |
(6.4) |
(54.8) |
(61.2) |
|
(5.9) |
(28.4) |
(34.3) |
|
|
|
|
|
|
|
|
|
|
Profit before tax & valuation movement |
9.8 |
14.3 |
24.1 |
|
10.9 |
(3.4) |
7.5 |
|
|
|
|
|
|
|
|
|
|
Fair value movements |
(1.3) |
3.9 |
2.6 |
|
(6.4) |
(2.5) |
(8.9) |
|
|
|
|
|
|
|
|
|
|
Tax and minority interests |
(0.2) |
(6.9) |
(7.1) |
|
- |
2.5 |
2.5 |
|
|
|
|
|
|
|
|
|
|
Earnings |
8.3 |
11.3 |
19.6 |
|
4.5 |
(3.4) |
1.1 |
|
|
|
|
|
|
|
|
|
|
Earnings per share |
2.3p |
|
5.5p |
|
1.5p |
|
0.4p |
On an Investment basis, Profit before tax and valuation was £9.8m down slightly on the comparative period because the comparative period benefited from significant one-off revenues from the Colchester Garrison PFI project following construction completions.
Fair value movements are a £1.3m loss which represents a decrease within the Directors' valuation of the portfolio partially offset by the favourable mark to market movements taken through the Income Statement. The decrease in the Directors' valuation has arisen from the increase in discount rate used to value the portfolio. Further detail on the valuation movement is given in the Investment Adviser's Report.
Earnings on an Investment basis were £8.3m, up £3.8m as compared to the comparative period. This represents earnings per share of a 2.3p (2008: 1.5p). The increase in earnings is a result of more favourable fair value movements in the period compared to the comparative period.
On a consolidated IFRS basis, the earnings per share were 5.5p as compared to earnings per share of 0.4p in 2008. The results on a consolidated IFRS basis are better than on an Investment basis because the value of the subsidiaries recognised under IFRS are impacted differently by the adverse changes in key economic assumptions from the market values of the subsidiaries that underlie earnings in the investment basis.
Total income on a consolidated IFRS basis of £85.3m is approximately double that of the prior year as the three additional subsidiaries recognised in July 2008 through incremental acquisitions on the Home Office, West Middlesex and Central Middlesex projects have provided 6 months of income compared to 3 months for the comparative period.
Cost analysis
|
|
Six months to 30 Sept 2009 |
|
Six months to 30 Sept 2008 |
|
£m |
Investment basis |
|
Investment basis |
|
|
|
|
|
|
Interest income |
0.1 |
|
0.2 |
|
|
|
|
|
|
Interest expense |
(2.7) |
|
(2.7) |
|
|
|
|
|
|
Investment Adviser |
(2.9) |
|
(2.8) |
|
|
|
|
|
|
Auditor - KPMG - for the Group |
(0.1) |
|
(0.1) |
|
|
|
|
|
|
Directors fees & expenses |
(0.1) |
|
(0.1) |
|
|
|
|
|
|
Other expenses |
(0.7) |
|
(0.4) |
|
|
|
|
|
|
Expenses & finance costs |
(6.4) |
|
(5.9) |
Interest was a net cost of £2.6m in the year (2008: £2.5m) increased slightly from the prior year due to a fall in interest income arising from reduced interest rates.
Total fees accruing to HSBC Specialist Fund Management Limited (the Investment Adviser) totalled £2.9m (2008: £2.8m) in the year, comprising the 1.1% pa management fee (1.5% for assets in construction), the 1.0% fee on the acquisitions made, and the £0.1m per annum advisory fee. Growth in the year is attributable to the management fee on the increase in portfolio value. 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.
Other expenses have increased £0.3m from the prior year, reflecting increased bidding activity.
Balance Sheet
Summary balance sheet
|
|
30 September 2009 |
|
31 March 2009 |
||||
|
£m |
Investment basis |
Consolidated adjustments |
IFRS basis |
|
Investment basis |
Consolidated adjustments |
IFRS basis |
|
|
|
|
|
|
|
|
|
|
Investments at fair value |
457.3 |
(164.6) |
292.7 |
|
445.7 |
(165.6) |
280.1 |
|
|
|
|
|
|
|
|
|
|
Other non-current assets |
- |
835.4 |
835.4 |
|
- |
850.8 |
850.8 |
|
|
|
|
|
|
|
|
|
|
Working capital |
1.6 |
0.8 |
2.4 |
|
(3.5) |
(4.1) |
(7.6) |
|
|
|
|
|
|
|
|
|
|
Net cash/(borrowings) |
(39.5) |
(491.7) |
(531.2) |
|
(57.7) |
(505.2) |
(562.9) |
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities |
(9.6) |
(161.6) |
(171.2) |
|
(10.8) |
(169.4) |
(180.2) |
|
|
|
|
|
|
|
|
|
|
Minority interests |
- |
(4.7) |
(4.7) |
|
- |
(4.1) |
(4.1) |
|
|
|
|
|
|
|
|
|
|
Net Assets |
409.8 |
13.6 |
423.4 |
|
373.7 |
2.4 |
376.1 |
|
|
|
|
|
|
|
|
|
|
NAV per share (before distribution) |
109.7p |
|
113.3p |
|
110.5p |
|
111.1p |
On an Investment basis, Investments at fair value were £457.3m (31 March 2009: £445.7m) net of £7.2m in future equity commitments on Bradford Schools. This is an increase of £11.6m or 2.6%. Further detail on the movement in Investments at fair value is given in the Investment Adviser's Report under Valuation.
Net borrowings on an Investment basis were £39.5m (31 March 2009: £57.7m), comprising £6.4m of cash held by the Group, and £45.9 million of debt under the Group's facilities. The breakdown of the movements in net debt is shown in the cashflow analysis below.
Other financial liabilities of £9.6m (31 March 2009: £10.8m) are the mark to market valuation of the Group's interest rate swaps and a foreign currency hedging contract.
On an Investment basis, NAV per share was 109.7p before the 3.2p distribution (110.5p at 31 March 2009).
On a consolidated IFRS basis, net assets have increased to £423.4m (31 March 2009: £376.1m) reflecting £38.8m from the issue of shares since March and £8.5m of retained profits following payment of the second interim dividend of 3.275p per share. NAV per share was 113.3p (31 March 2009: 111.1p).
Cashflow analysis
Summary cash flow
|
|
Six months to 30 Sept 2009 |
|
Six months to 30 Sept 2008 |
||
|
£m |
Investment basis |
|
Investment basis |
||
|
|
|
|
|
|
|
|
Net borrowings at start of period |
|
(57.7) |
|
|
(105.6) |
|
|
|
|
|
|
|
|
Cash from investments |
25.0 |
|
|
23.0 |
|
|
|
|
|
|
|
|
|
Operating costs outflow |
(3.2) |
|
|
(2.2) |
|
|
|
|
|
|
|
|
|
Net interest paid |
(2.3) |
|
|
(2.4) |
|
|
|
|
|
|
|
|
|
Net cash inflow before acq/financing |
|
19.5 |
|
|
18.4 |
|
|
|
|
|
|
|
|
Cost of new investments |
|
(23.9) |
|
|
(46.8) |
|
|
|
|
|
|
|
|
Forex movement on borrowings/hedging |
|
0.5 |
|
|
0.2 |
|
|
|
|
|
|
|
|
Share capital raised net of costs |
|
33.0 |
|
|
104.3 |
|
|
|
|
|
|
|
|
Dividends paid |
|
(10.9) |
|
|
(8.0) |
|
|
|
|
|
|
|
|
Net borrowings at end of period |
|
(39.5) |
|
|
(37.5) |
On an Investment basis the Group's net borrowings at 30 September were £39.5m (31 March 2009: £57.7m)
Cash from investments was £25.0m (2008: £23.0m). This has increased from the previous year reflecting contributions from acquisitions. The cash generation in the period has been strong mainly due to active management of the timing of receipts. In the second half of the year cash inflows are expected to be correspondingly lower, resulting in a full year forecast in line with plan.
Cost of investments of £23.9m (2008: £46.8m) represents the cost of Renfrewshire Schools of £6.8m, Highlands Schools of £16.8m, and Bradford Schools and associated acquisition costs of £0.3m.
The £0.5m (2008: £0.2m) forex movement arises from the effect of the weakening value of the Euro on both the revaluation of Euro borrowings and forward sales of Euros. The Euro borrowings and forward Euro sales are to hedge the Group's Euro exposure on the Dutch High Speed Rail Link asset.
Cash receipts in the period from share capital raised net of costs was £33.0m (2008: £104.3m, being the C share issue in 2008) which represents placing of shares under the block listing.
Dividends paid were £10.9m (2008: £8.0m) in the six months (being the payment of 3.275p per share in June 2009), which were cash covered by the net cash inflow before financing of £19.5m (2008: £18.4m).
Gearing
The Group has a committed £200m five year revolving facility from Bank of Scotland plc ("BoS") expiring in December 2012, which has been used to fund acquisitions. The interest rate has been partially hedged for the duration of the facility. Foreign exchange risk from Euro income from the Dutch High Speed Rail Link has been managed in the period through financial derivatives and by drawing Euros under the debt facility.
As at 30 September 2009, the Group had utilised £54.7m of this debt facility, and had net debt on an Investment basis of £39.5m (31 March 2009: £57.7m).
The BoS facilities are on a recourse basis to the Group and are 12% (excluding cash and cash equivalents) of the Directors' Valuation of £464.5m as at 30 September 2009.
There is one outstanding equity subscription obligation for the portfolio, which is on Bradford Schools. This is for £7.2m and is supported by a letter of credit drawn under the BoS facility.
On a consolidated IFRS basis, the Group had net debt of £531.2m at 30 September 2009 (31 March 2009: £562.9m). This decrease in net debt reflects the strong operational cashflows in the period and the proceeds from shares issued off-set by the cost of new investments. The effect of negative inflation on the indexed bonds consolidated under IFRS has further reduced net debt at September.
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 Adjusted Gross Asset Value of its investments and cash balances.
|
Unaudited consolidated proforma income statement |
|||||||||||
|
for the six months ended 30 September 2009 |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Six months ended 30 September 2009 |
|
Six months ended 30 September 2008 |
||||||||
|
|
|
|
|
|
|
|
|
||||
|
|
Investment basis |
Consolidation |
Consolidated |
|
Investment basis |
Consolidation |
Consolidated |
||||
|
|
Revenue |
Capital |
Total |
adjustments |
IFRS basis |
|
Revenue |
Capital |
Total |
adjustments |
IFRS basis |
|
|
£million |
£million |
£million |
£million |
£million |
|
£million |
£million |
£million |
£million |
£million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services revenue |
- |
- |
- |
55.0 |
55.0 |
|
- |
- |
- |
21.7 |
21.7 |
|
Gains on finance receivables |
- |
- |
- |
15.9 |
15.9 |
|
- |
- |
- |
7.7 |
7.7 |
|
Gains/(loss) on investments |
16.2 |
(3.3) |
12.9 |
(5.8) |
7.1 |
|
16.8 |
(7.7) |
9.1 |
1.4 |
10.5 |
|
Total income/(loss) |
16.2 |
(3.3) |
12.9 |
65.1 |
78.0 |
|
16.8 |
(7.7) |
9.1 |
30.8 |
39.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services costs |
- |
- |
- |
(46.4) |
(46.4) |
|
- |
- |
- |
(17.0) |
(17.0) |
|
Administrative expenses |
(3.8) |
- |
(3.8) |
(1.1) |
(4.9) |
|
(3.4) |
- |
(3.4) |
(0.8) |
(4.2) |
|
Profit/(loss) before net finance costs and tax |
12.4 |
(3.3) |
9.1 |
17.6 |
26.7 |
|
13.4 |
(7.7) |
5.7 |
13.0 |
18.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
(2.7) |
- |
(2.7) |
(8.0) |
(10.7) |
|
(2.7) |
1.3 |
(1.4) |
(19.3) |
(20.7) |
|
Finance income |
0.1 |
2.0 |
2.1 |
8.6 |
10.7 |
|
0.2 |
- |
0.2 |
0.4 |
0.6 |
|
Profit/(loss) before tax |
9.8 |
(1.3) |
8.5 |
18.2 |
26.7 |
|
10.9 |
(6.4) |
4.5 |
(5.9) |
(1.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense)/credit |
(0.2) |
- |
(0.2) |
(4.9) |
(5.1) |
|
- |
- |
- |
0.8 |
0.8 |
|
Profit/(loss) for the period |
9.6 |
(1.3) |
8.3 |
13.3 |
21.6 |
|
10.9 |
(6.4) |
4.5 |
(5.1) |
(0.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent |
9.6 |
(1.3) |
8.3 |
11.3 |
19.6 |
|
10.9 |
(6.4) |
4.5 |
(3.4) |
1.1 |
|
Minority interests |
- |
- |
- |
2.0 |
2.0 |
|
- |
- |
- |
(1.7) |
(1.7) |
|
|
9.6 |
(1.3) |
8.3 |
13.3 |
21.6 |
|
10.9 |
(6.4) |
4.5 |
(5.1) |
(0.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share - basic and diluted (pence) |
2.7 |
(0.4) |
2.3 |
3.2 |
5.5 |
|
3.5 |
(2.0) |
1.5 |
(1.1) |
0.4 |
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 2009 |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
30 September 2009 |
|
31 March 2009 |
||||
|
|
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 (Note 1) |
457.3 |
(164.6) |
292.7 |
|
445.7 |
(165.6) |
280.1 |
|
Finance receivables at fair value through profit or loss |
- |
639.1 |
639.1 |
|
- |
646.6 |
646.6 |
|
Intangible assets |
- |
164.8 |
164.8 |
|
- |
168.9 |
168.9 |
|
Deferred tax assets |
- |
31.5 |
31.5 |
|
- |
35.3 |
35.3 |
|
Total non-current assets |
457.3 |
670.8 |
1,128.1 |
|
445.7 |
685.2 |
1,130.9 |
|
Current assets |
|
|
|
|
|
|
|
|
Trade and other receivables |
6.0 |
15.8 |
21.8 |
|
0.1 |
7.5 |
7.6 |
|
Cash and cash equivalents |
6.4 |
43.2 |
49.6 |
|
9.1 |
45.1 |
54.2 |
|
Total current assets |
12.4 |
59.0 |
71.4 |
|
9.2 |
52.6 |
61.8 |
|
Total assets |
469.7 |
729.8 |
1,199.5 |
|
454.9 |
737.8 |
1,192.7 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Trade and other payables |
(4.2) |
(14.8) |
(19.0) |
|
(3.6) |
(11.4) |
(15.0) |
|
Current tax payable |
(0.2) |
(0.2) |
(0.4) |
|
- |
(0.2) |
(0.2) |
|
Loans and borrowings |
- |
(23.5) |
(23.5) |
|
- |
(23.4) |
(23.4) |
|
Total current liabilities |
(4.4) |
(38.5) |
(42.9) |
|
(3.6) |
(35.0) |
(38.6) |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Loans and borrowings |
(45.9) |
(511.4) |
(557.3) |
|
(66.8) |
(526.9) |
(593.7) |
|
Other financial liabilities (fair value of derivatives) |
(9.6) |
(57.2) |
(66.8) |
|
(10.8) |
(65.6) |
(76.4) |
|
Deferred tax liabilities |
- |
(104.4) |
(104.4) |
|
- |
(103.8) |
(103.8) |
|
Total non-current liabilities |
(55.5) |
(673.0) |
(728.5) |
|
(77.6) |
(696.3) |
(773.9) |
|
Total liabilities |
(59.9) |
(711.5) |
(771.4) |
|
(81.2) |
(731.3) |
(812.5) |
|
Net assets |
409.8 |
18.3 |
428.1 |
|
373.7 |
6.5 |
380.2 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Shareholders' equity |
409.8 |
13.6 |
423.4 |
|
373.7 |
2.4 |
376.1 |
|
Minority interest |
- |
4.7 |
4.7 |
|
- |
4.1 |
4.1 |
|
Total equity |
409.8 |
18.3 |
428.1 |
|
373.7 |
6.5 |
380.2 |
|
Net assets per share (pence) |
109.7 |
3.6 |
113.3 |
|
110.5 |
0.7 |
111.1 |
|
Unaudited consolidated proforma cash flow |
|||||||
|
for the six months ended 30 September 2009 |
|||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
|
Six months ended 30 September 2009 |
|
Six months ended 30 September 2008 |
||||
|
|
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 |
8.5 |
18.2 |
26.7 |
|
4.5 |
(5.9) |
(1.4) |
|
Adjustments for: |
|
|
|
|
|
|
|
|
(Gains)/loss on investments |
(12.9) |
5.8 |
(7.1) |
|
(9.1) |
(1.4) |
(10.5) |
|
Gains on finance receivables |
- |
(15.9) |
(15.9) |
|
- |
(7.7) |
(7.7) |
|
Interest payable and similar charges |
2.7 |
8.0 |
10.7 |
|
2.7 |
11.0 |
13.7 |
|
Changes in fair value of derivatives and similar income |
(2.0) |
(8.5) |
(10.5) |
|
(1.3) |
8.3 |
7.0 |
|
Interest income |
(0.1) |
(0.1) |
(0.2) |
|
(0.2) |
(0.4) |
(0.6) |
|
Amortisation of intangible assets |
- |
4.0 |
4.0 |
|
- |
2.0 |
2.0 |
|
Operating cash flow before changes in working capital |
(3.8) |
11.5 |
7.7 |
|
(3.4) |
5.9 |
2.5 |
|
|
|
|
|
|
|
|
|
|
Changes in working capital: |
|
|
|
|
|
|
|
|
(Increase)/decrease in receivables |
(0.1) |
(13.9) |
(14.0) |
|
1.1 |
(2.3) |
(1.2) |
|
Increase/(decrease) in payables |
0.7 |
4.6 |
5.3 |
|
0.2 |
(5.1) |
(4.9) |
|
Cash flow (used in)/from operations |
(3.2) |
2.2 |
(1.0) |
|
(2.1) |
(1.5) |
(3.6) |
|
|
|
|
|
|
|
|
|
|
Interest received on bank deposits and other similar income |
2.0 |
0.1 |
2.1 |
|
0.2 |
0.4 |
0.6 |
|
Cash received from finance receivables |
- |
25.5 |
25.5 |
|
- |
17.4 |
17.4 |
|
Interest paid and similar charges |
(2.4) |
(15.8) |
(18.2) |
|
(2.6) |
(11.6) |
(14.2) |
|
Corporation tax paid |
- |
(0.4) |
(0.4) |
|
(0.1) |
(0.1) |
(0.2) |
|
Net cash (used in)/from operating activities |
(3.6) |
11.6 |
8.0 |
|
(4.6) |
4.6 |
- |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchases of investments |
(23.9) |
- |
(23.9) |
|
(46.8) |
8.3 |
(38.5) |
|
Interest received on investments |
17.9 |
(2.3) |
15.6 |
|
14.3 |
(0.5) |
13.8 |
|
Dividends received |
5.5 |
(0.8) |
4.7 |
|
3.0 |
(0.5) |
2.5 |
|
Fees and other operating income |
0.8 |
(0.3) |
0.5 |
|
3.5 |
(1.0) |
2.5 |
|
Cash acquired on acquisition of subsidiaries net of acquisition costs |
- |
- |
- |
|
- |
18.0 |
18.0 |
|
Loan stock and equity repayments received |
0.8 |
- |
0.8 |
|
2.2 |
- |
2.2 |
|
Net cash from/(used in) investing activities |
1.1 |
(3.4) |
(2.3) |
|
(23.8) |
24.3 |
0.5 |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from issue of share capital |
33.0 |
- |
33.0 |
|
104.3 |
- |
104.3 |
|
Proceeds from issue of loans and borrowings |
23.5 |
- |
23.5 |
|
39.0 |
- |
39.0 |
|
Repayment of loans and borrowings |
(45.8) |
(9.0) |
(54.8) |
|
(106.9) |
(8.1) |
(115.0) |
|
Distributions paid to Company shareholders |
(10.9) |
- |
(10.9) |
|
(8.0) |
- |
(8.0) |
|
Distributions paid to minorities |
- |
(1.1) |
(1.1) |
|
- |
(0.8) |
(0.8) |
|
Net cash (used in)/from financing activities |
(0.2) |
(10.1) |
(10.3) |
|
28.4 |
(8.9) |
19.5 |
|
Net (decrease)/increase in cash and cash equivalents |
(2.7) |
(1.9) |
(4.6) |
|
- |
20.0 |
20.0 |
|
Cash and cash equivalents at beginning of period |
9.1 |
45.1 |
54.2 |
|
16.8 |
10.4 |
27.2 |
|
Cash and cash equivalents at end of period |
6.4 |
43.2 |
49.6 |
|
16.8 |
30.4 |
47.2 |
Notes to the unaudited consolidated proforma financial statements
for the six months ended 30 September 2009
The valuation of the Group's portfolio at 30 September 2009 reconciles to the condensed consolidated balance sheet as follows:
|
|
30 September 2009 |
31 March 2009 |
|
|
£million |
£million |
|
|
|
|
|
Portfolio valuation |
464.5 |
445.7 |
|
Less : undrawn loanstock commitments |
(7.2) |
- |
|
Portfolio valuation on an investment basis |
457.3 |
445.7 |
|
Less : equity and loanstock investments in operating subsidiaries eliminated on consolidation |
(164.6) |
(165.6) |
|
Investments per consolidated balance sheet on an IFRS basis |
292.7 |
280.1 |
Directors' statement of responsibilities
We confirm that to the best of our knowledge:
-
the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; and
-
the Chairman's Statement and Manager's Report meets the requirements of an interim management report, and includes a fair review of the information required by:
On behalf of the Board
G Picken
Chairman
11 November 2009
Independent review report to HSBC Infrastructure Company Limited
We have been engaged by the Company to review the condensed set of financial statements in the interim report for the six months ended 30 September 2009 which comprise the Condensed Unaudited Consolidated Income Statement, Condensed Unaudited Consolidated Balance Sheet, Condensed Unaudited Consolidated Statement of Changes in Shareholders' Equity, Condensed Unaudited Consolidated Cash Flow Statement and the related notes. We have read the other information contained in the interim report including the proforma information 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 interim report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim 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 International Financial Reporting Standards as adopted by the EU. The condensed set of financial statements included in this interim 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 interim 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 interim report for the period ended 30 September 2009 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
11 November 2009
|
Condensed unaudited consolidated income statement |
||||||||
|
for the six months ended 30 September 2009 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
Six months ended 30 September 2009 |
|
Six months ended 30 September 2008 |
||||
|
|
|
Unaudited |
|
Unaudited |
||||
|
|
Note |
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
|
|
£million |
£million |
£million |
|
£million |
£million |
£million |
|
|
|
|
|
|
|
|
|
|
|
Services revenue |
|
55.0 |
- |
55.0 |
|
21.7 |
- |
21.7 |
|
Gains/(loss) on finance receivables |
|
18.6 |
(2.7) |
15.9 |
|
8.0 |
(0.3) |
7.7 |
|
Gains/(loss) on investments |
|
11.7 |
(4.6) |
7.1 |
|
12.1 |
(1.6) |
10.5 |
|
Total income/(loss) |
|
85.3 |
(7.3) |
78.0 |
|
41.8 |
(1.9) |
39.9 |
|
|
|
|
|
|
|
|
|
|
|
Services costs |
3 |
(46.4) |
- |
(46.4) |
|
(17.0) |
- |
(17.0) |
|
Administrative expenses |
3 |
(4.9) |
- |
(4.9) |
|
(4.2) |
- |
(4.2) |
|
Profit/(loss) before net finance costs and tax |
|
34.0 |
(7.3) |
26.7 |
|
20.6 |
(1.9) |
18.7 |
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
(10.7) |
- |
(10.7) |
|
(13.7) |
(7.0) |
(20.7) |
|
Finance income |
|
0.8 |
9.9 |
10.7 |
|
0.6 |
- |
0.6 |
|
Profit/(loss) before tax |
|
24.1 |
2.6 |
26.7 |
|
7.5 |
(8.9) |
(1.4) |
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense)/credit |
|
(3.2) |
(1.9) |
(5.1) |
|
(2.0) |
2.8 |
0.8 |
|
Profit/(loss) for the period |
|
20.9 |
0.7 |
21.6 |
|
5.5 |
(6.1) |
(0.6) |
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity holders of the parent |
|
17.4 |
2.2 |
19.6 |
|
8.5 |
(7.4) |
1.1 |
|
Minority interests |
|
3.5 |
(1.5) |
2.0 |
|
(3.0) |
1.3 |
(1.7) |
|
|
|
20.9 |
0.7 |
21.6 |
|
5.5 |
(6.1) |
(0.6) |
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share - basic and diluted (pence) |
4 |
4.9 |
0.6 |
5.5 |
|
2.7 |
(2.3) |
0.4 |
All results are derived from continuing operations. See Note 2 of Notes to the condensed consolidated financial statements for the definition of revenue and capital items. There is no other comprehensive income or expense apart from those disclosed above.
The accompanying notes form an integral part of the financial statements
|
Condensed unaudited consolidated balance sheet |
|||
|
as at 30 September 2009 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
30 September 2009 |
31 March 2009 |
|
|
|
Unaudited |
Audited |
|
|
Note |
£million |
£million |
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
8 |
292.7 |
280.1 |
|
Finance receivables at fair value through profit or loss |
|
639.1 |
646.6 |
|
Intangible assets |
|
164.8 |
168.9 |
|
Deferred tax assets |
|
31.5 |
35.3 |
|
Total non-current assets |
|
1,128.1 |
1,130.9 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Trade and other receivables |
|
21.8 |
7.6 |
|
Cash and cash equivalents |
|
49.6 |
54.2 |
|
|
|
|
|
|
Total current assets |
|
71.4 |
61.8 |
|
|
|
|
|
|
Total assets |
|
1,199.5 |
1,192.7 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(19.0) |
(15.0) |
|
Current tax payable |
|
(0.4) |
(0.2) |
|
Loans and borrowings |
10 |
(23.5) |
(23.4) |
|
Total current liabilities |
|
(42.9) |
(38.6) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Loans and borrowings |
10 |
(557.3) |
(593.7) |
|
Other financial liabilities (fair value of derivatives) |
|
(66.8) |
(76.4) |
|
Deferred tax liabilities |
|
(104.4) |
(103.8) |
|
Total non-current liabilities |
|
(728.5) |
(773.9) |
|
Total liabilities |
|
(771.4) |
(812.5) |
|
Net assets |
|
428.1 |
380.2 |
|
|
|
|
|
|
Equity |
|
|
|
|
Ordinary share capital |
9 |
- |
- |
|
Share premium |
|
145.3 |
106.5 |
|
Retained reserves |
|
278.1 |
269.6 |
|
Total equity attributable to equity holders of the parent |
|
423.4 |
376.1 |
|
Minority interests |
|
4.7 |
4.1 |
|
Total equity |
|
428.1 |
380.2 |
|
Net assets per share (pence) |
6 |
113.3 |
111.1 |
The accompanying notes form an integral part of the financial statements
|
Condensed consolidated unaudited statement of changes in shareholders' equity |
|
for the six months ended 30 September 2009 |
|
Six months ended 30 September 2009 |
||||||
|
|
Attributable to equity holders of the parent |
Minority interests |
Total equity |
|||
|
|
Share capital |
Share |
Retained reserves |
Total shareholders' equity |
|
|
|
|
£million |
£million |
£million |
£million |
£million |
£million |
|
|
|
|
|
|
|
|
|
Shareholders' equity at beginning of period |
- |
106.5 |
269.6 |
376.1 |
4.1 |
380.2 |
|
|
|
|
|
|
|
|
|
Profit for the period |
- |
- |
19.6 |
19.6 |
2.0 |
21.6 |
|
|
|
|
|
|
|
|
|
Distributions paid to Company shareholders |
- |
- |
(11.1) |
(11.1) |
- |
(11.1) |
|
Distributions paid to minorities |
- |
- |
- |
- |
(1.4) |
(1.4) |
|
Ordinary shares issued |
- |
39.2 |
- |
39.2 |
- |
39.2 |
|
Costs of share issue |
- |
(0.4) |
- |
(0.4) |
- |
(0.4) |
|
|
|
|
|
|
|
|
|
Shareholders' equity at end of period |
- |
145.3 |
278.1 |
423.4 |
4.7 |
428.1 |
|
Six months ended 30 September 2008 |
||||||
|
|
Attributable to equity holders of the parent |
Minority interests |
Total equity |
|||
|
|
Share capital |
Share |
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) |
|
|
|
|
|
|
|
|
|
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 end of period |
- |
104.3 |
295.3 |
399.6 |
1.1 |
400.7 |
The accompanying notes form an integral part of the financial statements
|
Condensed unaudited consolidated cash flow statement |
|||
|
for the six months ended 30 September 2009 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 30 September 2009 |
Six months ended 30 September 2008 |
|
|
|
Unaudited |
Unaudited |
|
|
|
£million |
£million |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Profit/(loss) before tax |
|
26.7 |
(1.4) |
|
Adjustments for: |
|
|
|
|
Gains on investments |
|
(7.1) |
(10.5) |
|
Gains on finance receivables |
|
(15.9) |
(7.7) |
|
Interest payable and similar charges |
|
10.7 |
13.7 |
|
Changes in fair value of derivatives and similar income |
|
(10.5) |
7.0 |
|
Interest income |
|
(0.2) |
(0.6) |
|
Amortisation of intangible assets |
|
4.0 |
2.0 |
|
Operating cash flow before changes in working capital |
|
7.7 |
2.5 |
|
|
|
|
|
|
Changes in working capital: |
|
|
|
|
Increase in receivables |
|
(14.0) |
(1.2) |
|
Increase/(decrease) in payables |
|
5.3 |
(4.9) |
|
Cash flow used in operations |
|
(1.0) |
(3.6) |
|
|
|
|
|
|
Interest received on bank deposits and other similar income |
|
2.1 |
0.6 |
|
Cash received from finance receivables |
|
25.5 |
17.4 |
|
Interest paid and similar charges |
|
(18.2) |
(14.2) |
|
Corporation tax paid |
|
(0.4) |
(0.2) |
|
Net cash from operating activities |
|
8.0 |
- |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchases of investments |
|
(23.9) |
(38.5) |
|
Interest received on investments |
|
15.6 |
13.8 |
|
Dividends received |
|
4.7 |
2.5 |
|
Fees and other operating income |
|
0.5 |
2.5 |
|
Acquisition of subsidiaries net of cash acquired |
|
- |
18.0 |
|
Loanstock and equity repayments received |
|
0.8 |
2.2 |
|
Net cash (used in)/from investing activities |
|
(2.3) |
0.5 |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of share capital |
|
33.0 |
104.3 |
|
Proceeds from issue of loans and borrowings |
|
23.5 |
39.0 |
|
Repayment of loans and borrowings |
|
(54.8) |
(115.0) |
|
Distributions paid to Company shareholders |
|
(10.9) |
(8.0) |
|
Distributions paid to minorities |
|
(1.1) |
(0.8) |
|
Net cash (used in)/from financing activities |
|
(10.3) |
19.5 |
|
Net (decrease)/ increase in cash and cash equivalents |
|
(4.6) |
20.0 |
|
Cash and cash equivalents at beginning of period |
|
54.2 |
27.2 |
|
Cash and cash equivalents at end of period |
|
49.6 |
47.2 |
|
|
|
|
|
|
|
|||
The accompanying notes form an integral part of the financial statements
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 2009 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 2009 were approved by the Directors on 27 May 2009 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.
Basis of preparation
The interim condensed consolidated financial statements were approved by the Board of Directors on 11 November 2009.
The interim financial statements have been prepared using accounting policies in compliance 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 Group's 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 2009, except for the adoption of new standards, noted below. Adoption of these standards did not have any effect on the financial position or performance of the Group.
-
IFRS 8 'Operating Segments' - The Directors are of the opinion that the Group is engaged in a single segment of business, being investment in infrastructure which is currently predominantly in private finance initiative and public private partnership companies. The financial information used by the Directors and the Investment Adviser to allocate resources and manage the group presents the business as a single segment.
-
IAS 1 (revised 2007) 'Presentation of Financial Statements' - The Directors are of the opinion there are no other comprehensive income or expense apart from those disclosed in the condensed unaudited consolidated income statement.
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, foreign exchange movements, finance receivables and derivative financial instruments are recognised as "capital".
The Group's financial performance does not suffer materially from seasonal fluctuations.
3. Administrative expenses
|
|
Six months ended
30 September 2009
|
Six months ended
30 September 2008
|
|
|
£million
|
£million
|
|
|
|
|
|
Audit & Accounting
|
0.2
|
0.1
|
|
Advisory fees
|
-
|
0.1
|
|
Management fees (Note 11)
|
3.2
|
2.7
|
|
Investment fees (Note 11)
|
0.3
|
0.3
|
|
Directors’ fees
|
0.1
|
0.1
|
|
Professional fees
|
0.4
|
0.3
|
|
Project bid costs
|
0.4
|
0.2
|
|
Other fees
|
0.3
|
0.4
|
|
|
4.9
|
4.2
|
Service costs
|
|
Six months ended
30 September 2009
|
Six months ended
30 September 2008
|
|
|
£million
|
£million
|
|
|
|
|
|
Service costs
|
41.5
|
13.9
|
|
Amortisation of intangible assets
|
4.0
|
2.0
|
|
Other costs
|
0.9
|
1.1
|
|
|
46.4
|
17.0
|
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 2009 |
Six months ended
30 September 2008
|
||
|
|
|
|
||
|
Profit attributable to equity holders of the Company
|
£19.6 m
|
£1.1 m
|
||
|
|
|
|
||
|
Weighted average number of ordinary shares in issue
|
352.5 m
|
311.8 m
|
||
|
|
|
|
||
|
Basic and diluted earnings per share
|
5.5 pence
|
0.4 pence
|
||
|
|
|
|
||
5. Dividends
|
|
For the six months ended 30 September 2009 |
For the six months ended 30 September 2008 |
|
|
£million |
£million |
|
|
|
|
|
Amounts recognised as distributions to equity holders during the period: |
|
|
|
|
|
|
|
Second interim dividend for the year ended 31 March 2009 of 3.275p (2008: 3.2p) per share |
11.1 |
8.0 |
|
|
|
|
The 2009 second interim distribution of £11.1 m, representing 3.275 pence per share, was paid on 30 June 2009 and is included in the condensed consolidated statement of changes in shareholders' equity.
The Board has proposed an interim distribution for the period ended 30 September 2009 of 3.2 pence per share (2008: 3.125 pence per share) which will result in a total distribution of £12.0 m, payable on 31 December 2009. 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 2009.
|
|
Year ending 31 March 2010 |
Year ending 31 March 2009 |
Year ended 31 March 2008 |
Year ended 31 March 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim dividend for the period ending September |
3.2p |
3.125p |
3.05p |
2.875p |
|
|
|
|
|
|
|
Interim dividend for the period ending March |
|
3.275p |
3.20p |
3.225p |
|
|
|
|
|
|
|
|
|
6.4p |
6.25p |
6.1p |
|
|
|
|
|
|
6. Net assets
The calculation of net assets per share is based on shareholders' equity of £423.4 m at 30 September 2009 and 373.6 m ordinary shares in issue at that date.
7. Tax
Income tax for the six month period includes a current tax charge of £0.7 m and a deferred tax charge of £4.4 m (2008: current tax charge of £2.1 m, deferred tax credit of £2.9 m). The current period charge of £5.1 m 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 2009 |
|
31 March 2009 |
|
|
£million |
|
£million |
|
|
|
|
|
|
Opening balance |
280.1 |
|
384.7 |
|
Investments in the period |
23.8 |
|
30.7 |
|
Accrued interest |
(4.2) |
|
4.3 |
|
Repayments in the period |
(1.3) |
|
(4.2) |
|
Subscription obligations |
- |
|
20.5 |
|
Loss on valuation |
(4.2) |
|
(15.4) |
|
Investments consolidated during the period Other movements |
- |
|
(139.7) |
|
Other movements |
(1.5) |
|
(0.8) |
|
Carrying amount at period end |
292.7 |
|
280.1 |
|
|
|
|
|
|
Loss on valuation as above |
(4.2) |
|
(15.4) |
|
Less : transaction costs incurred |
(0.4) |
|
(0.7) |
|
Loss on investments |
(4.6) |
|
(16.1) |
The Investment Adviser has carried out fair market valuations of the investments as at 30 September 2009. The Directors have satisfied themselves as to the methodology used, the discount rates applied, and the valuation. The Directors have also obtained an independent opinion from a third party, with considerable expertise in valuing these type of investments, supporting the reasonableness of the valuation. The Kemble Water junior loan was valued on a market quote basis and the other investments, which are all investments in PFI/PPP projects, are valued using a discounted cashflow methodology. The valuation techniques and methodologies have been applied consistently with the prior period. Discount rates applied range from 8.2% to 11.0% (average of 8.6%) (31 March 2009: 7.8% to 8.6% (average 8.1%)).
The following economic assumptions were used in the discounted cashflow valuations:
|
UK inflation rates |
Zero for 18 months to March 2011 and 2.75% thereafter |
|
UK deposit interest rates |
1% for 18 months to March 2011 and 4.5% thereafter |
|
Euro/Sterling exchange rate |
0.91 for all future periods |
In June 2009 the Group completed the acquisition of a 30% interest in The Renfrewshire Schools Partnership Limited from Carillion Private Finance Limited for a consideration price of £6.8 m.
In July 2009 the Group completed the acquisition of a 50% interest in Alpha Schools Highland Limited from Galliford Try Investments for a consideration price of £16.8 m.
In September 2009 the Group reached Financial Close on a 34% interest in Integrated Bradford SPV Two Limited with a funding commitment of £7.4 m, the majority of which is a loanstock subscription obligation payable at the end of construction in 2011.
|
|
30 September 2009 |
31 March 2009 |
|
Issued and fully paid: |
£000 |
£000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
373,562,875 (31 March 2009: 338,288,733) ordinary shares of 0.01p each |
37.4 |
33.8 |
|
2 Management Shares of 0.01p each |
- |
- |
|
|
37.4 |
33.8 |
|
|
|
|
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 condensed consolidated unaudited statement of changes in shareholders' equity.
Issued share capital
In the six month period ending 30 September 2009 35.1 m new ordinary shares were issued to various institutional investors at an issue price per share (before expenses) ranging between 109.9 p and 115.75 p (2008: 2 m at 126.25 p).
On 30 June 2009 0.1 m new ordinary shares of 0.01 p each fully paid in the Company were issued as a scrip dividend alternative in lieu of cash for the second interim dividend in respect of the year ending 31 March 2009.
In the six month period ending 30 September 2009 £23.5 m of debt drawings (2008: £39.0 m) were made to fund acquisitions. £33.0 m of the net proceeds from the shares issued to institutional investors were utilised in the period to repay bank debt of the Group.
Debt repayments and bond indexation adjustments of £60.9 m were recognised in the six month period ended September 2009 (2008: £117.8 m).
11. 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 £2.6 m of which the balance remained payable at the period end (2008: £2.5 m). The Investment fee charged by the Operator for new portfolio investments (disclosed as investment fees in Note 3) in the period was £0.3 m of which the balance remained payable at the period end (2008: £0.3 m).
The following summarises the transactions between the Group and its associates and joint ventures in the period:
|
|
Transactions |
|
Balance |
||
|
|
Six months ended 30 September 2009 |
Six months ended 30 September 2008 |
|
30 September 2009 |
31 March 2009 |
|
|
£million |
£million |
|
£million |
£million |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loanstock investments |
14.9 |
20.5 |
|
192.2 |
178.3 |
|
Loanstock repayments |
(1.3) |
(1.9) |
|
- |
- |
|
Equity investments |
8.9 |
- |
|
86.2 |
77.2 |
|
Equity repayments |
- |
(0.6) |
|
- |
- |
|
Outstanding subscription obligations |
- |
- |
|
7.2 |
- |
|
Loanstock interest |
6.8 |
7.8 |
|
2.3 |
6.4 |
|
Dividends received |
4.4 |
1.7 |
|
- |
- |
|
Fees and other income |
0.5 |
2.5 |
|
- |
- |
|
|
|
|
|
|
|
The Group had total cash holdings with HSBC Bank plc at 30 September 2009 of £41.6 m (2008: £42.7 m). Total interest income earned from cash holdings held with HSBC Bank plc for the period was £0.2 m (2008: £0.5 m).
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.
12. Guarantees and other commitments
As at 30 September 2009 the Group had a £7.2 m commitment to subscribe to project investments (2008: £nil commitment). As at 30 September 2009 the Group had total capital commitments of £11.5 m (2008: £11.4 m) contracted for but not provided for.
In November 2009 the Company announced its intention to raise up to £80 m (before expenses) through the Placing and Offer for Subscription of C shares.
In November 2009 the Group agreed to acquire for £8.0m subject to 3rd party consents 22.92% of the equity and loan stock in Durham and Cleveland Firearms Training, Metropolitan Police Specialist Training Centre and Greater Manchester Police Authority ("GMPA") Police Stations to increase the total equity and loan stock interest in each project to 72.92%. The acquisitions have completed on the MPA Training Facility and the Durham & Cleveland Firearms Training Centre following receipt of consents. The stake in GMPA Police Stations is due to complete when the relevant consents have been obtained.
There were no other events after the balance sheet date which are required to be disclosed.
This information is provided by RNS
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