Preliminary Results
HSBC Infrastructure Company Limited
30 May 2007
30 May 2007
PRELIMINARY RESULTS
The Directors of HSBC Infrastructure Company Limited ('HICL') announce the
results for the period 11 January 2006 to 31 March 2007.
Highlights
•Net Asset Value per share of 124.4p up from 98.4p at the time of listing
and 107.1p at 30 September 2006, a 16.2% rise from September.
•Directors' valuation of the portfolio as at 31 March 2007 of £342.0m (of
which £22.3m is represented by future capital commitments not yet funded),
compared to £264.0m at 30 September 2006, (up 29.5%) and £250.4m at the time
of listing.
•The Group has declared a final dividend per share of 3.225p, taking the
total dividend for the period to 6.1p per share.
•A number of acquisitions were made in the period, comprising additional
interests in five of the original projects and two new investments for a
total consideration of £43.4m.
Consolidated Investment
IFRS basis basis
Profit before tax £82.4m £64.9m
Gains on investments (capital) £61.2m £53.1m
Profit before tax and gains on investments (capital)* £21.2m £11.8m
Earnings per share 28.8p 26.0p
Net Asset Value (NAV) per share 124.4p 121.5p
Final dividend per share 3.225p 3.225p
NAV per share after deducting dividend 121.2p 118.3p
Note: * The consolidated IFRS figure of £21.2m is derived from the Profit before
tax of £82.4m less the Gains on investments of £61.2m.
Graham Picken, Chairman of the Board, said: 'HICL's first year's result as a
public company have exceeded the projections set out at the time of the IPO in
March 2006. The individual investments are performing ahead of expectations and
the portfolio is being actively and efficiently managed.
The Board remains confident that for the foreseeable future there will be
opportunities to acquire infrastructure assets at attractive prices. The need
for infrastructure investment continues around the world and we believe that
private sector financing will play a major part in the overall funding mix. The
outlook for the sector remains positive and, with the Company's current
portfolio of quality assets performing well, we remain well placed to meet our
objectives and prosper further.'
Contacts for the Investment Adviser on behalf of the Board:
HSBC Specialist Fund Management Ltd
Tony Roper +44 (0)20 7991 9554
Sandra Lowe +44 (0)20 7991 3798
Contacts for M: Communications:
Edward Orlebar +44 (0)20 7153 1523
Tilly von Twickel +44 (0)20 7153 1541
Chairman's statement
Introduction
This is the first annual report of HSBC Infrastructure Company Limited (the
'Company' and with its subsidiaries, the 'Group'). I am delighted to advise you
that the period from incorporation on 11 January 2006 to 31 March 2007 has been
very successful. Operating performance achieved has been above our expectations.
The Group has made further acquisitions in the period since acquiring the
Initial Portfolio which comprised 15 assets. As at 31 March 2007, the Group
holds 17 investments.
Results
On a consolidated IFRS basis, the profit before tax for the period was £82.4m
and the consolidated earnings per share was 28.8p (£64.9m and 26.0p respectively
on an investment basis).
Valuation
The Investment Adviser has prepared fair market valuations of the Group's
investments as at 31 March 2007 on the basis of discounted cash flow analyses.
The Directors have satisfied themselves on the valuation methodology and the
discount rates used. A number of recent UK transactions involving Private
Finance Initiative ('PFI') portfolios have provided further indications of how
the market is valuing these assets.
The Directors have approved the valuation of the Company's investments of
£342.0m, of which £22.3m is represented by future capital commitments not yet
funded, as at 31 March 2007. This contributes to a net asset value ('NAV') per
share of 124.4p on a consolidated IFRS basis (121.5p on an investment basis), an
increase of 26.4% to the NAV per share basis of 98.4p at the time of listing
(23.5% on an investment basis). Comparable percentage increases to the Interim
Results at 30 September are a 16.2% increase (from107.1p to 124.4p per share) on
a consolidated basis, and a 14.1% increase (from 106.5p to 121.5p per share) on
an investment basis. This growth in NAV per share is driven by an increase in
market valuations, a lowering of the risk profile within the portfolio and
specific efficiencies identified by the Investment Adviser.
Portfolio Development
As I mentioned in the Company's Interim Report to 30 September, the Initial
Portfolio of 15 holdings in PFI projects (4 accommodation projects, 4 education
projects, 6 hospitals and the Dutch high speed rail link) was acquired in March
2006. All projects were sourced or developed by the HSBC equity infrastructure
team, and each of the projects in the Initial Portfolio has an
availability-linked revenue stream and has performed well in the period, with no
material operational or financial issues to report.
Since March 2006 the Group has acquired additional interests of equity and loan
stock in five of the original projects through a series of transactions with
contractor or operator shareholders wishing to sell all or part of their equity
investments.
The Group has also made two new investments in the period. In December 2006, the
Group completed the acquisition of a 40% stake in Pinnacle Schools, the project
company responsible for building and operating 3 new schools for Fife Council,
in Scotland. Total consideration was £5.5m and 40% equity and loan notes
interests were acquired together with 100% of the junior loan.
In March 2007, the Company acquired a £30m participation in the junior loan
facility for Kemble Water, which was part of the funding package for the
acquisition of Thames Water, the UK regulated water business.
Initial Portfolio contract settlement
As set out in the IPO prospectus, the Group entered into a sale and purchase
agreement ('SPA') under which the Initial Portfolio was acquired subject to a
series of price adjustment mechanisms (including provision for deferred
consideration) to deal with certain matters outstanding at the date of
completion, and warranties. In the period, there has been one price adjustment
in the Group's favour in relation to the Sussex Custodial Services project.
The SPA contemplated that the vendors and the Group might wish to negotiate a
settlement of the outstanding matters. After careful consideration of a proposal
made by the Vendors, which included a recommendation from the Buyside Committee
(the constitution of which was set out in the IPO prospectus), an agreement was
signed on 29th May 2007 for settlement of the outstanding matters, including
determination of outstanding price adjustments and termination of the remaining
warranty period. The Group has owned the original investments for over 12 months
and no warranty claim has been made or is envisaged. Under the terms of the
settlement, the vendors will make a financial payment of £2.1m to the Group.
Accounting
At the period end, the Company had 4 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 into the Group's financial statements on a line-by-line
basis.
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
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.
Dividends
The Directors have approved a final dividend of 3.225p per share which will be
paid on 26 June to shareholders on the register at 8 June 2007. Together with
the interim dividend of 2.875p paid in December, this brings the total dividend
for the full year to 6.1p, which is ahead of the target first year dividend of
5.75p in the IPO prospectus.
The aim of the Company remains to grow the dividend progressively and the
Directors feel able to make the current distribution due to the better than
expected results and the confidence in achieving the value enhancements.
Corporate Governance
As a Guernsey based company, the Company is not required to comply with the
recommendations of the Combined Code on Corporate Governance. However, the
Directors intend to comply with the Combined Code to the extent it is applicable
to the Company. During the period, the Directors and the Investment Adviser have
put in place the necessary procedures for this to happen. The control framework,
including service provider reviews, will be fully operative by the end of July
2007.
Shareholder Communications
As I mentioned in the Interim Report, the Company has launched its website,
www.hicl.hsbc.com, which gives further details of investments held. The Company
produces regular factsheets which are on the website, together with latest
financial information and Company presentations.
Outlook
The Directors are very satisfied with the performance of the Group in the first
reporting period, which is ahead of the projections set out in the IPO
prospectus. This is due to the individual investments performing ahead of
expectations and the active management by the Investment Adviser in identifying
and realising portfolio efficiencies.
Over the last fifteen months the infrastructure market has experienced
heightened activity with new entrants seeking to invest in assets and more
assets coming to market. Most investments are made through auction processes,
and in the last 9 months, the market has seen several agreed takeovers of UK
listed infrastructure companies.
The Board remains confident that for the foreseeable future there will be
opportunities to acquire carefully selected infrastructure assets at attractive
prices. The need for infrastructure investment continues around the world and
the Directors believe that private sector financing will play a major part in
the overall funding mix. The Investment Adviser is committed to finding suitable
opportunities which meet the Group's investment policy and are appropriately
valued.
The outlook for the sector remains positive and, with the Group's current
portfolio of quality assets performing well, the Company remains well placed to
meet its objectives and prosper further.
Graham Picken - Chairman
May 2007
Investment Adviser's Report
Introduction
We are pleased that the Group has had an excellent investment performance in its
first full reporting period.
Of the five projects in the Initial Portfolio still in construction at the time
of the stock exchange listing, four have successfully completed construction as
planned and are now earning income and delivering services. This includes the
high speed rail link which has received its certificates of availability for
both the Northern and Southern sections.
Phase 1 of the fifth project, Colchester Garrison completed ahead of programme
in August 2006, and construction of Phase 2 continues in line with forecasts,
with completion due in 2008.
Service performance on all projects is good and there are no material matters to
report.
We have completed a detailed review of each investment in the portfolio to
ensure it is delivering the contracted services to its client, it is managed
cost efficiently, and potential value opportunities have been identified and are
included in both the Directors' Valuation and future projections.
Whilst considerable investor interest in infrastructure assets continues, there
remains little publicly available data to allow an assessment of the trends in
the market. Certain assets, particularly those with significant growth
potential, are attracting considerable interest and full prices at auction. In
the current market, we still believe it will be possible to acquire suitable new
investments at reasonable prices which offer good value potential.
Strategy
The Group has focused on maximising the potential from the existing portfolio
and is seeking new investment opportunities, where they meet the Company's
investment policy and can be acquired at reasonable prices.
For new investments we continue to concentrate on assets which have all the core
infrastructure credentials, including social infrastructure (like PFI/PPP
assets), roads, railways, airports, ports, tunnels, utilities and renewable
energy. Our current geographic remit is Europe and North America, but the Far
East and Australia are being considered where suitable opportunities arise.
Delivering the required service levels for each project is an important part of
the Company's strategy. Time is taken by our asset management team to ensure
that client contact is maintained so that potential issues are identified and
resolved at an early stage.
Portfolio Development
In the period, since listing, the Group has secured additional investment
interests in five of the original projects within the portfolio, which have been
acquired from the original shareholders. We believe that there remains potential
to acquire further stakes in existing projects when current shareholders decide
to sell.
The investment companies are usually responsible for taking out insurances for
the infrastructure assets and accordingly this represents a significant cost
item. We have successfully grouped a number of projects together and arranged
their insurances on a collective basis. This has the benefit of enabling premium
savings and more favourable terms through buying a larger quantity of insurance
in the market place. Savings, which are expected to flow to the Group over time,
have been reflected in the Directors' Valuation.
Our asset management team has completed a careful review of the performance of
each project in the portfolio. This has included reviewing operational budgets,
treasury efficiencies and incremental revenue opportunities. Plans are being
made to achieve these savings wherever possible provided they do not impact on
required service levels.
We have also completed an assessment of the refinancing potential of each
project. Whilst UK PFI projects require refinancing gains to be shared with
public sector clients, the current cost of debt still makes refinancing an
attractive value-enhancing proposition. Seven projects in the portfolio are
funded by bonds or similar instruments which, due to their contractual terms,
are more costly to refinance, so there is less benefit to be gained from these
projects.
The Group is finalising its strategy and will commence a programme of
refinancing certain projects this year. In line with market practice, some of
the benefits of these refinancings are included in the Directors' Valuation.
Opportunities for future investments
Over the last year the infrastructure market has experienced increased investor
awareness of infrastructure as an attractive asset class, leading to greater
interest and investment in the period. There have been a number of high profile
transactions in the UK, including the take-overs of BAA plc and John Laing plc,
plus the acquisitions of Thames Water, the Secondary Market Infrastructure Fund
PFI portfolio, and London City Airport. In Europe the number of assets sold has
increased, many of them through auctions attracting considerable interest.
Caution is needed in the current market to ensure that acquisitions are acquired
at a price which balances the risks and enables a satisfactory return.
We have an internal screening system to assess opportunities to focus on those
which meet the Company's investment policy and which may be secured at a fair
price.
It is intended that acquisitions are funded initially from Group resources,
including debt facilities, with subsequent equity capital raisings for larger
acquisitions or when it is appropriate to reduce the Group's gearing in
anticipation of further investment activity. The aim is to expand the current
portfolio of attractive assets to deliver the progressive, long-term
distribution policy and potentially offer some capital growth.
Valuation
The Investment Adviser is responsible for carrying out a market valuation of the
Group's investments on a six monthly basis as at 31 March and 30 September each
year. The valuation is prepared in accordance with the European Venture Capital
Associations' Valuation Guidelines, using the discounted cash flows methodology,
which the Investment Adviser considers to be the most appropriate valuation
method. This is the same method used in the Interim Results to 30 September
2006, and at launch for valuing the Initial Portfolio.
The Directors' Valuation of the portfolio at 31 March 2007 was £342.0m, compared
to £264.0m at September 2006, and £250.4m at March 2006. This increase is a
function of further investments and a growth in value from identified
efficiencies and the market's changing view of PFI valuations. A reconciliation
between this valuation and that shown in the financial statements is given in
Note 1 to the unaudited proforma financial statements, the principal difference
relating to undrawn loanstock commitments.
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 judgement in assessing the expected future
cash flows from each investment. Each project company produces detailed,
concession life financial models and the Investment Adviser will, inter alia,
typically take the following into account in its review of such models and make
amendments where appropriate:
- due diligence findings where current (e.g. a recent acquisition)
- outstanding subscription obligations or other cash flows which are
contractually required or assumed in order to generate the returns
- project performance against milestones
- opportunities for financial restructuring
- changes to the economic, legal, taxation, or regulatory environment
- claims or other disputes or contractual uncertainties.
- changes to revenue and cost assumptions
Discount rates used for valuing each investment are based on the appropriate
risk free rate (derived from the relevant government bond) and risk premium. The
risk premium takes into account risks associated with the financing of a project
such as project risks (eg. liquidity, currency risks, market appetite) and any
risks to project earnings (eg. predictability and covenant of the concession
income) all of which may be differentiated by project phase, (e.g. construction,
ramp-up or operational and yielding).
The discount rates used for valuing the projects in the portfolio as at 31 March
2007 range from 6.5% to 9.0% and the weighted average is 7.0%. As stated before,
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.
Where we have identified a value enhancement but it is not possible to forecast
the appropriate cash flow adjustments of this, the potential has been estimated
and reflected instead by using a lower discount rate, in line with practice in
the market. When the cash flow consequences are sufficiently well quantified,
and have predictable timings, they will be reflected in the project model
concerned, thus enabling the corresponding discount rate reduction to be
removed. This will result in a similar valuation where our original assessment
of the value potential is proven valid.
The Directors' Valuation over the last 12 months has grown from £250.4m to
£342.0m. Whilst the growth in the period was 36.6%, the growth after allowing
for the £43.4m investments made in the period and the £18.9m cash distributions
received, is 24.4%. This growth is a function of the progress of certain
projects through their construction phase into full operation, capital growth on
investments which are not yet yielding, the value enhancements described above,
and an overall reduction in discount rates in the sector.
Financing
The Company and its wholly-owned subsidiaries currently have £135.0m of
available debt and letter of credit facilities arranged with HSBC Bank, and
£12.9m of cash on deposit. £52.5m of the facilities were drawn at 31 March 2007
and this includes the provision of a letter of credit in relation to the
Colchester Project.
The debt facilities have been renegotiated and increased since launch. The
margin on the facilities is now 1.0% over LIBOR on drawn amounts.
The strategy is to use debt facilities to fund new acquisitions, to provide
letters of credit for future subscription obligations, and to provide a prudent
level of gearing for the portfolio to improve the correlation of the earnings
from the projects to inflation.
New equity raisings will be considered either when a sufficient number of new
assets have been acquired, thus freeing up resources for further acquisitions,
or when a large/strategic acquisition is secured.
Presentation of results on investment basis
At the period end, the Company had four investments which it was deemed to
control by virtue of having the power, directly or indirectly, to govern the
financial and operating policies of those entities. Under International
Financial Reporting Standards ('IFRS'), the results of these companies are
required to be fully consolidated into the Group 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.
Accordingly, in order to provide shareholders with a better representation of
the Group's net asset value, its capacity for investment and its ability to make
distributions, the Investment Adviser has restated the Group's results in the
proforma tables below. Investments are presented on a consistent fair value
basis with movements in fair value recognised in the income statement. The table
reconciles the results under the investment basis of accounting with those under
IFRS basis by consolidating the subsidiary investments. The effect is to
disclose the subsidiaries' results on a line by line basis in the income
statement, balance sheet and cash flow.
Unaudited consolidated proforma income statements
for the period from 11 January 2006 to 31 March 2007
Consol- Consolidated
Investment basis idation IFRS
------------------------ adjustments basis
Revenue Capital Total
£million £million £million £million £million
Services revenue - - - 19.9 19.9
Gains on finance receivables - - - 28.2 28.2
Gains on investments 14.4 53.1 67.5 (6.3) 61.2
--------- ---------- ---------- --------- ----------
Total income 14.4 53.1 67.5 41.8 109.3
Services costs - - - (18.0) (18.0)
Administrative expenses (4.4) - (4.4) (0.7) (5.1)
--------- ---------- ---------- --------- ----------
Profit before net
finance costs and tax 10.0 53.1 63.1 23.1 86.2
Finance costs (0.5) - (0.5) (5.9) (6.4)
Finance income 2.3 - 2.3 0.3 2.6
--------- ---------- ---------- ---------- ----------
Profit before tax 11.8 53.1 64.9 17.5 82.4
Income tax expense
(foreign) - - - (6.9) (6.9)
--------- ----------- ---------- ---------- ----------
Profit for the period 11.8 53.1 64.9 10.6 75.5
--------- ----------- ---------- ---------- ----------
Attributable to:
Equity holders of the parent 11.8 53.1 64.9 7.1 72.0
Minority interests - - - 3.5 3.5
--------- ----------- ---------- ---------- ----------
11.8 53.1 64.9 10.6 75.5
--------- ----------- ---------- ---------- ----------
Earnings per share -
basic and diluted pence 4.7 21.3 26.0 2.8 28.8
Unaudited consolidated proforma balance sheets
as at 31 March 2007 Investment Consolidation Consolidated
basis adjustments IFRS basis
£million £million £million
Non-current assets
Investments at fair value
through profit or loss 319.7 (25.8) 293.9
Finance receivables at
fair value through profit or loss - 176.2 176.2
Intangible assets - 30.1 30.1
Deferred tax assets - 9.8 9.8
----------- ---------- -----------
Total non-current assets 319.7 190.3 510.0
----------- ---------- -----------
Current assets
Trade and other receivables 3.0 5.0 8.0
Cash and cash equivalents 49.1 10.6 59.7
----------- ---------- -----------
Total current assets 52.1 15.6 67.7
----------- ---------- -----------
Total assets 371.8 205.9 577.7
----------- ---------- -----------
Current liabilities
Bank overdraft (0.4) - (0.4)
Trade and other payables (2.4) (17.4) (19.8)
Loans and borrowings (65.2) (8.5) (73.7)
----------- ---------- -----------
Total current liabilities (68.0) (25.9) (93.9)
----------- ---------- -----------
Non-current liabilities
Loans and borrowings - (149.2) (149.2)
Other financial liabilities
(fair value of derivatives) - (5.3) (5.3)
Deferred tax liabilities - (14.7) (14.7)
----------- ---------- -----------
Total non-current liabilities - (169.2) (169.2)
----------- ---------- -----------
Total liabilities (68.0) (195.1) (263.1)
----------- ---------- -----------
Net assets 303.8 10.8 314.6
----------- ---------- -----------
Equity
Shareholders'equity 303.8 7.3 311.1
Minority interest - 3.5 3.5
----------- ---------- -----------
Total equity 303.8 10.8 314.6
----------- ---------- -----------
Net assets per share (pence) 121.5 2.9 124.4
----------- ---------- -----------
Unaudited consolidated proforma cash flow
for the period from 11 January 2006 to 31 March 2007
Investment Consolidation Consolidated
basis adjustments IFRS basis
£million £million £million
Cash flows from operating activities
Profit before tax 64.9 17.5 82.4
Adjustments for:
Gains on investments (67.5) 6.3 (61.2)
Gains on finance receivables - (28.2) (28.2)
Interest payable and similar charges 0.5 11.6 12.1
Changes in fair value of derivatives - (5.7) (5.7)
Interest income (2.3) (0.3) (2.6)
Amortisation of intangible assets - 2.1 2.1
--------- ---------- ----------
Operating cash flow before
changes in working capital (4.4) 3.3 (1.1)
Changes in working capital:
Increase in receivables (0.1) (3.2) (3.3)
Increase in payables 2.4 0.2 2.6
--------- ---------- ----------
Cash flow from operations (2.1) 0.3 (1.8)
--------- ---------- ----------
Interest received on bank deposits
and finance receivables 2.3 9.3 11.6
Cash received from finance receivables - 8.0 8.0
Interest paid (0.5) (11.4) (11.9)
Corporation tax paid - (0.3) (0.3)
--------- ---------- ----------
Net cash from operating activities (0.3) 5.9 5.6
--------- ---------- ----------
Cash flows from investing activities
Purchases of investments (271.0) 21.3 (249.7)
Interest received on investments 5.7 (0.6) 5.1
Dividends received 1.2 (0.3) 0.9
Acquisition of subsidiaries net
of cash acquired - (7.2) (7.2)
Fees and other operating income 1.1 - 1.1
Purchase of minority interests - (2.1) (2.1)
Loanstock and equity repayments received 8.0 (0.7) 7.3
--------- ---------- ----------
Net cash used in investing activities (255.0) 10.4 (244.6)
--------- ---------- ----------
Cash flows from financing activities
Proceeds from issue of share capital 246.1 - 246.1
Proceeds from issue of loans and borrowings 30.2 3.0 33.2
Repayment of loans and borrowings - (8.2) 8.2)
Dividends paid to Company shareholders (7.2) - (7.2)
Dividends paid to minorities - (0.8) (0.8)
--------- ---------- ----------
Net cash from financing activities 269.1 (6.0) 263.1
--------- ---------- ----------
Net increase in cash and cash equivalents 13.8 10.3 24.1
--------- ---------- ----------
Cash and cash equivalents at 11 January 2006 - - -
Cash and cash equivalents at 31 March 2007 13.8 10.3 24.1
--------- ---------- ----------
Notes to the unaudited proforma financial statements
for the period from 11 January 2006 to 31 March 2007
1. Investments
The valuation of the Group's portfolio at 31 March 2007 reconciles to the
audited consolidated balance sheet as follows:
£million
Portfolio valuation 342.0
Less : undrawn loanstock commitments (22.3)
---------------
Portfolio valuation on an investment basis 319.7
Less : equity and loanstock investments in operating
subsidiaries eliminated on consolidation (25.8)
---------------
Investments per audited consolidated balance sheet 293.9
---------------
HSBC Specialist Fund Management Ltd
29 May 2007
Consolidated income statement (audited)
for the period from 11 January 2006 to 31 March 2007
Note Revenue Capital Total
£million £million £million
Services revenue 19.9 - 19.9
Gains on finance receivables 9.0 19.2 28.2
Gains on investments 1 12.9 48.3 61.2
-------- --------- --------
Total income 41.8 67.5 109.3
Services costs (18.0) - (18.0)
Administrative expenses (5.1) - (5.1)
-------- --------- --------
Profit before net finance costs and tax 18.7 67.5 86.2
Finance costs (12.1) 5.7 (6.4)
Finance income 2.6 - 2.6
-------- --------- --------
Profit before tax 9.2 73.2 82.4
Income tax expense (foreign) (1.9) (5.0) (6.9)
-------- --------- --------
Profit for the period 7.3 68.2 75.5
-------- --------- --------
Attributable to:
Equity holders of the parent 9.1 62.9 72.0
Minority interests (1.8) 5.3 3.5
-------- --------- --------
7.3 68.2 75.5
-------- --------- --------
Earnings per share - basic and diluted
(pence) 3.6 25.2 28.8
Proposed dividend per share (pence) 3.225
Dividend paid per share (pence) 2.875
All results are derived from continuing operations. As this is the first period
in which the Group has operated, no comparatives are presented. The accompanying
notes are an integral part of these consolidated financial statements.
Consolidated balance sheet (audited)
as at 31 March 2007
Note £million
Non-current assets
Investments at fair value through profit or loss 2 293.9
Finance receivables at fair value through profit or
loss 176.2
Intangible assets 30.1
Deferred tax assets 9.8
----------
Total non-current assets 510.0
----------
Current assets
Trade and other receivables 8.0
Cash and cash equivalents 59.7
----------
Total current assets 67.7
----------
Total assets 577.7
----------
Current liabilities
Bank overdraft (0.4)
Trade and other payables (19.8)
Loans and borrowings (73.7)
----------
Total current liabilities (96.6)
----------
Non-current liabilities
Loans and borrowings (149.2)
Other financial liabilities (fair value of
derivatives) (5.3)
Deferred tax liabilities (14.7)
----------
Total non-current liabilities (169.2)
-----------
Total liabilities (263.1)
-----------
Net assets 314.6
-----------
Equity
Ordinary share capital 25.0
Retained reserves 286.1
-----------
Total equity attributable to equity holders of the parent 311.1
Minority interests 3.5
-----------
Total equity 314.6
-----------
Net assets per share 124.4 p
-----------
As this is the first period in which the Group has operated, no comparatives are
presented. The accompanying notes are an integral part of these consolidated
financial statements.
Consolidated statement of changes in shareholders' equity (audited)
For the period from 11 January 2006 to 31 March 2007
------------------------------
Attributable to equity holders of the parent Minority Total
interests equity
------- -------- --- --------- ----------
Total
Share Retained shareholders'
Share Capital Premium* reserves equity
£million £million £million £million £million £million
Profit for the - - 72.0 72.0 3.5 75.5
period
Surplus arising on
purchase of minority
interests - - 0.2 0.2 (0.5) (0.3)
------- -------- --- --------- ---------- ------- -------
Total
recognised income and
expense for the period - - 72.2 72.2 3.0 75.2
------- -------- --- --------- ---------- ------- -------
Minority share
of acquired - - - - 1.3 1.3
businesses
Dividends paid
to Company - - (7.2) (7.2) - (7.2)
shareholders
(2.875p per
share)
Dividends paid - - - - (0.8) (0.8)
to minorities
Ordinary
shares issued 25.0 225.0 - 250.0 - 250.0
Costs of share - (3.9) - (3.9) - (3.9)
issue
Transfer* - (221.1) 221.1 - - -
------- -------- --- --------- ---------- ------- -------
Shareholders'
equity at 31
March 2007 25.0 - 286.1 311.1 3.5 314.6
------- -------- --- --------- ---------- ------- -------
*The share premium account was cancelled by Court order on 21 July 2006 and the balance of
£221.1 million transferred to a new, distributable reserve which has been combined with
retained earnings in these accounts.
Consolidated cash flow statement (audited)
for the period from 11 January 2006 to 31 March 2007
£million
Cash flows from operating activities
Profit before tax 82.4
Adjustments for:
Gains on investments (61.2)
Gains on finance receivables (28.2)
Interest payable and similar charges 12.1
Changes in fair value of derivatives (5.7)
Interest income (2.6)
Amortisation of intangible assets 2.1
----------
Operating cash flow before changes in working capital (1.1)
Changes in working capital:
Increase in receivables (3.3)
Increase in payables 2.6
----------
Cash flow from operations (1.8)
----------
Interest received on bank deposits and finance receivables 11.6
Cash received from finance receivables 8.0
Interest paid (11.9)
Corporation tax paid (0.3)
----------
Net cash from operating activities 5.6
----------
Cash flows from investing activities
Purchases of investments (249.7)
Interest received on investments 5.1
Dividends received 0.9
Fees and other operating income 1.1
Acquisition of subsidiaries net of cash acquired (7.2)
Purchase of minority interests (2.1)
Loanstock and equity repayments received 7.3
----------
Net cash used in investing activities (244.6)
----------
Cash flows from financing activities
Proceeds from issue of share capital 246.1
Proceeds from issue of loans and borrowings 33.2
Repayment of loans and borrowings (8.2)
Dividends paid to Company shareholders (7.2)
Dividends paid to minorities (0.8)
----------
Net cash from financing activities 263.1
----------
Net increase in cash and cash equivalents 24.1
----------
Cash and cash equivalents at 11 January 2006 -
----------
Cash and cash equivalents at 31 March 2007 24.1
----------
Notes to the consolidated financial statements
for the period from 11 January 2006 to 31 March 2007
1. Gains on investments
For the period
11 January
2006 to 31
March 2007
Revenue Capital Total
£million £million £million
Interest from investments 10.9 - 10.9
Dividend income from investments 0.9 - 0.9
Fees and other operating income 1.1 - 1.1
Gains on valuation - 48.3 48.3
--------- --------- ---------
12.9 48.3 61.2
--------- --------- ---------
2. Investments at fair value through profit or loss
Investments
£million
Acquisition of Initial Portfolio 170.6
Investment in the period 78.6
Accrued interest 4.7
Repayments in the period (8.8)
Gain on valuation 49.8
Other movements (1.0)
-----------
Carrying amount at 31 March 293.9
-----------
Gain on valuation as above 49.8
Less : transaction costs incurred (1.5)
-----------
Gains on investments 48.3
-----------
The Investment Adviser has carried out fair market valuations of the investments
as at 31 March 2007. The valuation has been prepared in accordance with the
European Venture Capital Association's Valuation Guidelines, using the
Discounted Cash Flows methodology, which it considers to be the most appropriate
valuation method. Discount rates applied range from 6.5% to 7.5% (weighted
average of 7.0%).
Details of investments in which the Group held an interest at 31 March 2007 were
as follows:
Percentage holding
Investments (project name) Ordinary share Subordinated Mezzanine debt
capital loanstock
Helicopter
training
facility
(operating
company) 21.8% 21.8% -
Barnet Hospital 51.0% 99.0% 100.0%
Bishop
Auckland
Hospital 36.0% 36.0% 100.0%
West Middlesex
Hospital 95.0% 96.3% -
Sussex
Custodial
Centre 82.3% 82.3% -
Home Office
Headquarters 65.9% 81.5% -
Dutch high
speed rail
link 24.5% 50.0% -
Health &
Safety
Laboratory 80.0% 90.0% -
Defence Sixth
Form College 45.0% 45.0% -
Blackburn
Hospital 50.0% 50.0% -
Central
Middlesex
Hospital 85.0% 100.0% -
Colchester
Garrison 42.0% 42.0% -
Fife Schools 40.0% 40.0% 100.0%
Kemble Water - - 3.60%
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