30th May 2007 07:02
HSBC Infrastructure Company Limited30 May 2007 30 May 2007 PRELIMINARY RESULTS The Directors of HSBC Infrastructure Company Limited ("HICL") announce theresults 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 beforetax 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 apublic company have exceeded the projections set out at the time of the IPO inMarch 2006. The individual investments are performing ahead of expectations andthe portfolio is being actively and efficiently managed. The Board remains confident that for the foreseeable future there will beopportunities to acquire infrastructure assets at attractive prices. The needfor infrastructure investment continues around the world and we believe thatprivate sector financing will play a major part in the overall funding mix. Theoutlook for the sector remains positive and, with the Company's currentportfolio of quality assets performing well, we remain well placed to meet ourobjectives and prosper further." Contacts for the Investment Adviser on behalf of the Board: HSBC Specialist Fund Management Ltd Tony Roper +44 (0)20 7991 9554Sandra Lowe +44 (0)20 7991 3798 Contacts for M: Communications: Edward Orlebar +44 (0)20 7153 1523Tilly 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 youthat the period from incorporation on 11 January 2006 to 31 March 2007 has beenvery successful. Operating performance achieved has been above our expectations.The Group has made further acquisitions in the period since acquiring theInitial Portfolio which comprised 15 assets. As at 31 March 2007, the Groupholds 17 investments. Results On a consolidated IFRS basis, the profit before tax for the period was £82.4mand the consolidated earnings per share was 28.8p (£64.9m and 26.0p respectivelyon an investment basis). Valuation The Investment Adviser has prepared fair market valuations of the Group'sinvestments as at 31 March 2007 on the basis of discounted cash flow analyses.The Directors have satisfied themselves on the valuation methodology and thediscount rates used. A number of recent UK transactions involving PrivateFinance Initiative ("PFI") portfolios have provided further indications of howthe 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 yetfunded, as at 31 March 2007. This contributes to a net asset value ("NAV") pershare of 124.4p on a consolidated IFRS basis (121.5p on an investment basis), anincrease 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 InterimResults at 30 September are a 16.2% increase (from107.1p to 124.4p per share) ona consolidated basis, and a 14.1% increase (from 106.5p to 121.5p per share) onan investment basis. This growth in NAV per share is driven by an increase inmarket valuations, a lowering of the risk profile within the portfolio andspecific efficiencies identified by the Investment Adviser. Portfolio Development As I mentioned in the Company's Interim Report to 30 September, the InitialPortfolio of 15 holdings in PFI projects (4 accommodation projects, 4 educationprojects, 6 hospitals and the Dutch high speed rail link) was acquired in March2006. All projects were sourced or developed by the HSBC equity infrastructureteam, and each of the projects in the Initial Portfolio has anavailability-linked revenue stream and has performed well in the period, with nomaterial operational or financial issues to report. Since March 2006 the Group has acquired additional interests of equity and loanstock in five of the original projects through a series of transactions withcontractor or operator shareholders wishing to sell all or part of their equityinvestments. The Group has also made two new investments in the period. In December 2006, theGroup completed the acquisition of a 40% stake in Pinnacle Schools, the projectcompany responsible for building and operating 3 new schools for Fife Council,in Scotland. Total consideration was £5.5m and 40% equity and loan notesinterests were acquired together with 100% of the junior loan. In March 2007, the Company acquired a £30m participation in the junior loanfacility for Kemble Water, which was part of the funding package for theacquisition 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 purchaseagreement ("SPA") under which the Initial Portfolio was acquired subject to aseries of price adjustment mechanisms (including provision for deferredconsideration) to deal with certain matters outstanding at the date ofcompletion, and warranties. In the period, there has been one price adjustmentin 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 asettlement of the outstanding matters. After careful consideration of a proposalmade by the Vendors, which included a recommendation from the Buyside Committee(the constitution of which was set out in the IPO prospectus), an agreement wassigned on 29th May 2007 for settlement of the outstanding matters, includingdetermination of outstanding price adjustments and termination of the remainingwarranty period. The Group has owned the original investments for over 12 monthsand no warranty claim has been made or is envisaged. Under the terms of thesettlement, 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 controlby virtue of having the power, directly or indirectly, to govern the financialand operating policies of the project entities. Under International FinancialReporting Standards ("IFRS"), the results of these companies are required to befully consolidated into the Group's financial statements on a line-by-linebasis. In order to provide shareholders with a more meaningful representation of theGroup's net asset value, coupled with greater transparency in the Company'scapacity for investment and ability to make distributions, the results have beenrestated in proforma tables which are presented in the Investment Adviser'sreport. The proforma tables are prepared with all investments accounted for onan investment basis. By deconsolidating the subsidiary investments, theperformance of the business under consolidated IFRS basis may be compared withthe results under the investment basis. Dividends The Directors have approved a final dividend of 3.225p per share which will bepaid on 26 June to shareholders on the register at 8 June 2007. Together withthe interim dividend of 2.875p paid in December, this brings the total dividendfor the full year to 6.1p, which is ahead of the target first year dividend of5.75p in the IPO prospectus. The aim of the Company remains to grow the dividend progressively and theDirectors feel able to make the current distribution due to the better thanexpected results and the confidence in achieving the value enhancements. Corporate Governance As a Guernsey based company, the Company is not required to comply with therecommendations of the Combined Code on Corporate Governance. However, theDirectors intend to comply with the Combined Code to the extent it is applicableto the Company. During the period, the Directors and the Investment Adviser haveput in place the necessary procedures for this to happen. The control framework,including service provider reviews, will be fully operative by the end of July2007. 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 Companyproduces regular factsheets which are on the website, together with latestfinancial information and Company presentations. Outlook The Directors are very satisfied with the performance of the Group in the firstreporting period, which is ahead of the projections set out in the IPOprospectus. This is due to the individual investments performing ahead ofexpectations and the active management by the Investment Adviser in identifyingand realising portfolio efficiencies. Over the last fifteen months the infrastructure market has experiencedheightened activity with new entrants seeking to invest in assets and moreassets coming to market. Most investments are made through auction processes,and in the last 9 months, the market has seen several agreed takeovers of UKlisted infrastructure companies. The Board remains confident that for the foreseeable future there will beopportunities to acquire carefully selected infrastructure assets at attractiveprices. The need for infrastructure investment continues around the world andthe Directors believe that private sector financing will play a major part inthe overall funding mix. The Investment Adviser is committed to finding suitableopportunities which meet the Group's investment policy and are appropriatelyvalued. The outlook for the sector remains positive and, with the Group's currentportfolio of quality assets performing well, the Company remains well placed tomeet its objectives and prosper further. Graham Picken - ChairmanMay 2007 Investment Adviser's Report Introduction We are pleased that the Group has had an excellent investment performance in itsfirst full reporting period. Of the five projects in the Initial Portfolio still in construction at the timeof the stock exchange listing, four have successfully completed construction asplanned and are now earning income and delivering services. This includes thehigh speed rail link which has received its certificates of availability forboth the Northern and Southern sections. Phase 1 of the fifth project, Colchester Garrison completed ahead of programmein 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 toreport. We have completed a detailed review of each investment in the portfolio toensure it is delivering the contracted services to its client, it is managedcost efficiently, and potential value opportunities have been identified and areincluded in both the Directors' Valuation and future projections. Whilst considerable investor interest in infrastructure assets continues, thereremains little publicly available data to allow an assessment of the trends inthe market. Certain assets, particularly those with significant growthpotential, are attracting considerable interest and full prices at auction. Inthe current market, we still believe it will be possible to acquire suitable newinvestments at reasonable prices which offer good value potential. Strategy The Group has focused on maximising the potential from the existing portfolioand is seeking new investment opportunities, where they meet the Company'sinvestment policy and can be acquired at reasonable prices. For new investments we continue to concentrate on assets which have all the coreinfrastructure credentials, including social infrastructure (like PFI/PPPassets), roads, railways, airports, ports, tunnels, utilities and renewableenergy. Our current geographic remit is Europe and North America, but the FarEast and Australia are being considered where suitable opportunities arise. Delivering the required service levels for each project is an important part ofthe Company's strategy. Time is taken by our asset management team to ensurethat client contact is maintained so that potential issues are identified andresolved at an early stage. Portfolio Development In the period, since listing, the Group has secured additional investmentinterests in five of the original projects within the portfolio, which have beenacquired from the original shareholders. We believe that there remains potentialto acquire further stakes in existing projects when current shareholders decideto sell. The investment companies are usually responsible for taking out insurances forthe infrastructure assets and accordingly this represents a significant costitem. We have successfully grouped a number of projects together and arrangedtheir insurances on a collective basis. This has the benefit of enabling premiumsavings and more favourable terms through buying a larger quantity of insurancein 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 ofeach project in the portfolio. This has included reviewing operational budgets,treasury efficiencies and incremental revenue opportunities. Plans are beingmade to achieve these savings wherever possible provided they do not impact onrequired service levels. We have also completed an assessment of the refinancing potential of eachproject. Whilst UK PFI projects require refinancing gains to be shared withpublic sector clients, the current cost of debt still makes refinancing anattractive value-enhancing proposition. Seven projects in the portfolio arefunded 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 theseprojects. The Group is finalising its strategy and will commence a programme ofrefinancing certain projects this year. In line with market practice, some ofthe benefits of these refinancings are included in the Directors' Valuation. Opportunities for future investments Over the last year the infrastructure market has experienced increased investorawareness of infrastructure as an attractive asset class, leading to greaterinterest and investment in the period. There have been a number of high profiletransactions in the UK, including the take-overs of BAA plc and John Laing plc,plus the acquisitions of Thames Water, the Secondary Market Infrastructure FundPFI portfolio, and London City Airport. In Europe the number of assets sold hasincreased, many of them through auctions attracting considerable interest.Caution is needed in the current market to ensure that acquisitions are acquiredat a price which balances the risks and enables a satisfactory return. We have an internal screening system to assess opportunities to focus on thosewhich meet the Company's investment policy and which may be secured at a fairprice. It is intended that acquisitions are funded initially from Group resources,including debt facilities, with subsequent equity capital raisings for largeracquisitions or when it is appropriate to reduce the Group's gearing inanticipation of further investment activity. The aim is to expand the currentportfolio of attractive assets to deliver the progressive, long-termdistribution policy and potentially offer some capital growth. Valuation The Investment Adviser is responsible for carrying out a market valuation of theGroup's investments on a six monthly basis as at 31 March and 30 September eachyear. The valuation is prepared in accordance with the European Venture CapitalAssociations' Valuation Guidelines, using the discounted cash flows methodology,which the Investment Adviser considers to be the most appropriate valuationmethod. This is the same method used in the Interim Results to 30 September2006, and at launch for valuing the Initial Portfolio. The Directors' Valuation of the portfolio at 31 March 2007 was £342.0m, comparedto £264.0m at September 2006, and £250.4m at March 2006. This increase is afunction of further investments and a growth in value from identifiedefficiencies and the market's changing view of PFI valuations. A reconciliationbetween this valuation and that shown in the financial statements is given inNote 1 to the unaudited proforma financial statements, the principal differencerelating to undrawn loanstock commitments. Fair value for each investment is derived from the present value of theinvestment's expected future cash flows, using reasonable assumptions andforecasts, and an appropriate discount rate. The Investment Adviser exercises its judgement in assessing the expected futurecash 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 makeamendments 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 appropriaterisk free rate (derived from the relevant government bond) and risk premium. Therisk premium takes into account risks associated with the financing of a projectsuch as project risks (eg. liquidity, currency risks, market appetite) and anyrisks to project earnings (eg. predictability and covenant of the concessionincome) 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 March2007 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 appropriatediscount rate. This is based on its knowledge of the market, taking into accountintelligence gained from its bidding activities, discussions with financialadvisers in the appropriate market and publicly available information onrelevant transactions. Where we have identified a value enhancement but it is not possible to forecastthe appropriate cash flow adjustments of this, the potential has been estimatedand reflected instead by using a lower discount rate, in line with practice inthe market. When the cash flow consequences are sufficiently well quantified,and have predictable timings, they will be reflected in the project modelconcerned, thus enabling the corresponding discount rate reduction to beremoved. This will result in a similar valuation where our original assessmentof 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 allowingfor the £43.4m investments made in the period and the £18.9m cash distributionsreceived, is 24.4%. This growth is a function of the progress of certainprojects through their construction phase into full operation, capital growth oninvestments 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 ofavailable 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 2007and this includes the provision of a letter of credit in relation to theColchester Project. The debt facilities have been renegotiated and increased since launch. Themargin on the facilities is now 1.0% over LIBOR on drawn amounts. The strategy is to use debt facilities to fund new acquisitions, to provideletters of credit for future subscription obligations, and to provide a prudentlevel of gearing for the portfolio to improve the correlation of the earningsfrom the projects to inflation. New equity raisings will be considered either when a sufficient number of newassets 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 tocontrol by virtue of having the power, directly or indirectly, to govern thefinancial and operating policies of those entities. Under InternationalFinancial Reporting Standards ("IFRS"), the results of these companies arerequired to be fully consolidated into the Group financial statements on a lineby line basis. However, these investments form part of a portfolio of similar investments whichare held for investment purposes and managed as a whole and there is nodistinction made between those investments classified as subsidiaries and thosewhich are not. Further, all debt owed by the Group's investments is non-recourseand the Group does not participate in their day to day management. Accordingly, in order to provide shareholders with a better representation ofthe Group's net asset value, its capacity for investment and its ability to makedistributions, the Investment Adviser has restated the Group's results in theproforma tables below. Investments are presented on a consistent fair valuebasis with movements in fair value recognised in the income statement. The tablereconciles the results under the investment basis of accounting with those underIFRS basis by consolidating the subsidiary investments. The effect is todisclose the subsidiaries' results on a line by line basis in the incomestatement, balance sheet and cash flow. Unaudited consolidated proforma income statementsfor 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 £millionServices revenue - - - 19.9 19.9Gains on finance receivables - - - 28.2 28.2Gains 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 netfinance 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 72.0Minority 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 £millionNon-current assetsInvestments at fair valuethrough profit or loss 319.7 (25.8) 293.9Finance receivables atfair value through profit or loss - 176.2 176.2Intangible assets - 30.1 30.1Deferred tax assets - 9.8 9.8 ----------- ---------- -----------Total non-current assets 319.7 190.3 510.0 ----------- ---------- -----------Current assetsTrade and other receivables 3.0 5.0 8.0Cash 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 liabilitiesBank 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 liabilitiesLoans 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 ----------- ---------- ----------- EquityShareholders'equity 303.8 7.3 311.1Minority 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 flowfor the period from 11 January 2006 to 31 March 2007 Investment Consolidation Consolidated basis adjustments IFRS basis £million £million £millionCash flows from operating activitiesProfit before tax 64.9 17.5 82.4Adjustments 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 12.1Changes 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 beforechanges 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 depositsand finance receivables 2.3 9.3 11.6Cash received from finance receivables - 8.0 8.0Interest 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 activitiesPurchases of investments (271.0) 21.3 (249.7)Interest received on investments 5.7 (0.6) 5.1Dividends received 1.2 (0.3) 0.9Acquisition of subsidiaries net of cash acquired - (7.2) (7.2)Fees and other operating income 1.1 - 1.1Purchase 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 activitiesProceeds from issue of share capital 246.1 - 246.1Proceeds from issue of loans and borrowings 30.2 3.0 33.2Repayment 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 statementsfor 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 theaudited consolidated balance sheet as follows: £million Portfolio valuation 342.0Less : undrawn loanstock commitments (22.3) ---------------Portfolio valuation on an investment basis 319.7Less : equity and loanstock investments in operatingsubsidiaries eliminated on consolidation (25.8) ---------------Investments per audited consolidated balance sheet 293.9 --------------- HSBC Specialist Fund Management Ltd29 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 - 19.9Gains on finance receivables 9.0 19.2 28.2Gains 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 72.0Minority interests (1.8) 5.3 3.5 -------- --------- -------- 7.3 68.2 75.5 -------- --------- -------- Earnings per share - basic and diluted(pence) 3.6 25.2 28.8Proposed dividend per share (pence) 3.225Dividend paid per share (pence) 2.875 All results are derived from continuing operations. As this is the first periodin which the Group has operated, no comparatives are presented. The accompanyingnotes are an integral part of these consolidated financial statements. Consolidated balance sheet (audited)as at 31 March 2007 Note £millionNon-current assetsInvestments at fair value through profit or loss 2 293.9Finance receivables at fair value through profit orloss 176.2Intangible assets 30.1Deferred tax assets 9.8 ----------Total non-current assets 510.0 ---------- Current assetsTrade and other receivables 8.0Cash and cash equivalents 59.7 ----------Total current assets 67.7 ---------- Total assets 577.7 ---------- Current liabilitiesBank overdraft (0.4)Trade and other payables (19.8)Loans and borrowings (73.7) ----------Total current liabilities (96.6) ---------- Non-current liabilitiesLoans and borrowings (149.2)Other financial liabilities (fair value ofderivatives) (5.3)Deferred tax liabilities (14.7) ----------Total non-current liabilities (169.2) -----------Total liabilities (263.1) -----------Net assets 314.6 ----------- EquityOrdinary share capital 25.0Retained reserves 286.1 -----------Total equity attributable to equity holders of the parent 311.1Minority 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 arepresented. The accompanying notes are an integral part of these consolidatedfinancial 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 75.5periodSurplus arising onpurchase of minorityinterests - - 0.2 0.2 (0.5) (0.3) ------- -------- --- --------- ---------- ------- -------Totalrecognised income andexpense for the period - - 72.2 72.2 3.0 75.2 ------- -------- --- --------- ---------- ------- ------- Minority shareof acquired - - - - 1.3 1.3businesses Dividends paidto Company - - (7.2) (7.2) - (7.2)shareholders(2.875p pershare)Dividends paid - - - - (0.8) (0.8)to minoritiesOrdinaryshares issued 25.0 225.0 - 250.0 - 250.0Costs of share - (3.9) - (3.9) - (3.9)issueTransfer* - (221.1) 221.1 - - - ------- -------- --- --------- ---------- ------- -------Shareholders'equity at 31March 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 withretained earnings in these accounts. Consolidated cash flow statement (audited)for the period from 11 January 2006 to 31 March 2007 £millionCash flows from operating activitiesProfit before tax 82.4Adjustments for:Gains on investments (61.2)Gains on finance receivables (28.2)Interest payable and similar charges 12.1Changes 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 11.6Cash received from finance receivables 8.0Interest paid (11.9)Corporation tax paid (0.3) ----------Net cash from operating activities 5.6 ---------- Cash flows from investing activitiesPurchases of investments (249.7)Interest received on investments 5.1Dividends received 0.9Fees and other operating income 1.1Acquisition 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 activitiesProceeds from issue of share capital 246.1Proceeds from issue of loans and borrowings 33.2Repayment 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 statementsfor 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 - 10.9Dividend income from investments 0.9 - 0.9Fees and other operating income 1.1 - 1.1Gains 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 170.6Investment in the period 78.6Accrued interest 4.7Repayments in the period (8.8)Gain on valuation 49.8Other movements (1.0) -----------Carrying amount at 31 March 293.9 ----------- Gain on valuation as above 49.8Less : transaction costs incurred (1.5) -----------Gains on investments 48.3 ----------- The Investment Adviser has carried out fair market valuations of the investmentsas at 31 March 2007. The valuation has been prepared in accordance with theEuropean Venture Capital Association's Valuation Guidelines, using theDiscounted Cash Flows methodology, which it considers to be the most appropriatevaluation method. Discount rates applied range from 6.5% to 7.5% (weightedaverage of 7.0%). Details of investments in which the Group held an interest at 31 March 2007 wereas follows: Percentage holdingInvestments (project name) Ordinary share Subordinated Mezzanine debt capital loanstockHelicoptertrainingfacility(operatingcompany) 21.8% 21.8% -Barnet Hospital 51.0% 99.0% 100.0%BishopAucklandHospital 36.0% 36.0% 100.0%West MiddlesexHospital 95.0% 96.3% -SussexCustodialCentre 82.3% 82.3% -Home OfficeHeadquarters 65.9% 81.5% -Dutch highspeed raillink 24.5% 50.0% -Health &SafetyLaboratory 80.0% 90.0% -Defence SixthForm College 45.0% 45.0% -BlackburnHospital 50.0% 50.0% -CentralMiddlesexHospital 85.0% 100.0% -ColchesterGarrison 42.0% 42.0% -Fife Schools 40.0% 40.0% 100.0%Kemble Water - - 3.60% This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HICL Infrastructure