HICL Infrastructure on track to meet dividend target

(Sharecast News) - HICL Infrastructure reported a solid operational performance alongside strategic financial manoeuvres in an interim update on Thursday. The FTSE 250 company said its portfolio showed resilience in the period from 1 April to 24 July, with performance aligning with expectations and underscoring the stability of its underlying assets.

It said it was on track to meet its target dividend of 8.25p per share for the financial year ending 31 March 2025, driven by increased cash generation as anticipated.

In May, the company repaid its revolving credit facility and initiated a £50m share buyback programme.

By 24 July, HICL had repurchased 7.05 million shares, which were now held in treasury.

The total number of voting shares, excluding treasury shares, stood at 2,024,438,061.

HICL said the period also saw Ofwat's draft determination for 2025 to 2030 for Affinity Water, indicating potential positive outcomes.

The draft aligned with HICL's expectations for Affinity to resume equity distributions in the AMP 8 period.

Key points included an allowed WACC increase to 3.72% and a return on equity rise to 4.8%.

However, a proposed intervention on gearing above 70% could impact yields.

HICL said its disciplined capital allocation continued, with the company exploring strategic asset disposals and selective acquisitions to enhance portfolio metrics.

The sale proceeds from Hornsea II OFTO and the Northwest Parkway were used to repay the revolving credit facility, and fund the share buyback.

In financial terms, the company said it remained on course to deliver its dividend target, with cash generation aligning with forecasts.

Inflation for the six months ending 30 September was expected to match the assumptions from the 31 March valuation.

No recent transactions suggested a need to adjust the portfolio's weighted average discount rate of 8.0%.

Looking ahead, HICL said its board and investment manager would focus on prudent capital allocation amid a supportive market environment for private infrastructure investment.

The repayment of the revolving credit facility had strengthened the firm's position to evaluate further disposals and acquisitions selectively.

Its board said it continued to sanction capital allocation decisions, considering the strong returns from share buybacks, as the company remained committed to leveraging private capital for infrastructure development.

"HICL's diversified portfolio continues to perform well, offering shareholders access to attractive private infrastructure assets that support long-term income and capital growth," said chair Mike Bane.

"The global need for infrastructure investment remains historically elevated, creating significant opportunities for private capital.

"Following the recent UK election, we look forward to engaging further with the new government to attract and support private sector investment into critical UK infrastructure."

At 0957 BST, shares in HICL Infrastructure were down 1.04% at 123.71p.

Reporting by Josh White for Sharecast.com.