TIDMGCP
RNS Number : 1519G
GCP Infrastructure Investments Ltd
25 May 2017
GCP Infrastructure Investments Limited ("GCP Infrastructure"
and/or the "Company") (LEI 213800W64MNATSIV5Z47)
Half-yearly report and financial statements for the six month
period ended 31 March 2017
Company number: 105775
The Directors of the Company are pleased to announce the
Company's interim results for the six month period ended 31 March
2017. The Half-yearly report and financial statements can be
accessed via the Company's website at
http://gcpuk.com/gcp-infrastructure-investments-ltd and will be
posted to shareholders over the course of the next few weeks.
Contact details:
Gravis Capital Management Limited: +44 (0)20 7518 1490
Stephen Ellis
Rollo Wright
Dion Di Miceli
Stifel Nicolaus Europe Limited: +44 (0)20 7710 7600
Mark Bloomfield
Neil Winward
Tunga Chigovanyika
Buchanan: +44 (0)20 7466 5000
Charles Ryland
Robbie Ceiriog-Hughes
Victoria Hayns
Notes to editors
About GCP Infrastructure
The Company is a closed-ended London Stock Exchange-listed
investment company that seeks to generate returns from senior and
subordinated infrastructure debt and related and/or similar assets.
The Company is advised by Gravis Capital Management Limited.
ABOUT US
GCP Infrastructure Investments Limited (the "Company") is the
only UK listed fund focused primarily on investments in UK
infrastructure debt.
The Company seeks to provide shareholders with regular,
sustainable long-term dividends by investing substantially all its
capital in debt secured against UK infrastructure projects that
generate long-dated, public sector backed revenues. The Company is
currently exposed to a diversified portfolio of partially
inflation-protected loans to primarily the renewable energy, social
housing and PFI sectors.
The Company is a closed-ended investment company incorporated in
Jersey. It was admitted to the Official List and to trading on the
London Stock Exchange's Main Market in July 2010 and since then it
has grown to a market capitalisation of over GBP945 million as at
31 March 2017.
HIGHLIGHTS FOR THE SIX MONTH PERIOD
-- Dividends of 3.8 pence per share paid or declared for the six month period to 31 March 2017
-- Total shareholder return for the period of 0.8% and total return since IPO in 2010 of 95.7%
-- Profit for the period of GBP22.1 million
-- GBP90 million successfully raised through a significantly oversubscribed share issue
-- Loans advanced totalling GBP74 million secured against UK
renewable energy, social housing and PFI projects, with a further
GBP21.8 million advanced post period end
-- Post period end entry into a conditional, binding commitment
to acquire up to GBP140 million of loans as part of the UK
Government's sale of the GIB
-- A further commitment made post period end of up to GBP40
million to finance supported living housing units
-- Company NAV per ordinary share as at 31 March 2017 of 110.30
pence per share up 0.6% since 30 September 2016
-- Third-party valuation of the Company's investment portfolio
at 31 March 2017 of GBP773.4 million
INVESTMENT OBJECTIVES
Dividend income Diversification Capital preservation
---------------------------- -------------------------- --------------------------
To provide shareholders To invest in a diversified To preserve the
with regular, sustainable portfolio of debt capital value of
long--term dividends secured against its investment assets
UK infrastructure over the long term
projects
---------------------------- -------------------------- --------------------------
The Company has The Company has The valuation of
maintained or progressively increased the number the Company's investments
increased its dividend of investments in is in excess of
for every period its portfolio from the principal value
since inception 43 at 30 September outstanding. The
and has paid 2016 to 46 at 31 increase in valuation
a dividend of 7.6 March has resulted in
pence per share 2017. The investment a NAV at 31 March
for each portfolio is exposed 2017 of 110.30 pence
of the previous to a wide variety per share. The ordinary
four financial years. of sectors in terms shares have traded
of project type at a premium to
and source of underlying NAV since IPO in
cash flow. 2010.
---------------------------- -------------------------- --------------------------
Key performance Key performance Key performance
highlights highlights highlights
---------------------------- -------------------------- --------------------------
3.8p 46 110.30p
Dividends per share Number of investments NAV per share at
for the six month at 31 March 2017 31 March 2017
period to 31 March
2017
---------------------------- -------------------------- --------------------------
GBP22.1m 10.6%(1) 128.80p
Profit for the six Size of largest Share price at 31
month period ended investment March 2017
31 March 2017
---------------------------- -------------------------- --------------------------
1. The size of the largest investment is calculated by reference
to the percentage of total assets. The Cardale PFI loan is secured
on a cross-collateralised basis against 14 separate operational PFI
projects, with no exposure to any individual project being in
excess of 10% of the investment portfolio.
CHAIRMAN'S INTERIM STATEMENT
Overview
Over the six months to 31 March 2017, the period was a busy one
for the Company which raised GBP90 million through the issuance of
shares, and extended its revolving credit facility from GBP50
million to GBP75 million. The Company advanced GBP74 million of
loans secured against a variety of UK renewable energy, social
housing and PFI projects during the period, and a further GBP21.8
million post period end. The Company also published a prospectus in
respect of a new share issuance programme for 2017. The performance
of the investment portfolio enabled the Company to maintain its
dividend distribution at 3.8 pence per share for the six month
period to 31 March 2017.
On 19 April 2017, the Company entered into a conditional,
binding commitment to buy loans with a value of up to c.GBP140
million over a c.two year period as part of the acquisition of the
GIB by a Macquarie-led consortium. The delay in completing this
beneficial transaction led to the Company suffering cash-drag and a
consequent reduction in the earnings per share for the period. The
loans are secured against projects in waste to energy, onshore
wind, hydro, landfill gas and building retrofit schemes,
highlighting the rare ability of the Company to analyse and acquire
projects in a diverse range of sectors.
Market background
In terms of capital raising, this has been a very busy six
months for the entire LSE listed infrastructure investment company
sector. Ten companies across the PFI, renewable energy and social
housing sectors issued shares raising a total of GBP1.6 billion, a
strong indication that there remains very significant investor
demand for shares, such as shares in our Company, that offer
dependable yields.
It is clear, however, that rising inflation and interest rates
are looming larger in the minds of most investors. Although the low
interest rate environment persists, both ten-year sterling interest
and inflation swap rates have risen by about 0.4% over the
period.
One of the key attractions of an investment in the Company is
the inflation protection characteristics embedded in c.67% of the
investment portfolio. Furthermore, the amortising nature of loan
investments provides a continual supply of fresh capital to invest
at prevailing interest rates, offsetting the risk of rising
interest rates.
Sector overview
The considerable volume of capital entering our sector, not just
from listed investment companies but also from direct institutional
investors and private funds, means that the infrastructure market
continues to be highly competitive. Deal flow on the other hand
remains sporadic and somewhat unpredictable.
Whereas the Chancellor expounded at some length in the November
2016 Autumn Statement as to the benefits of infrastructure
spending, he was far less forthcoming in his Budget speech in March
2017. The long awaited PF2 pipeline, alluded to briefly in January
2017, is now expected to be announced sometime during the first
half of this year. The industry awaits with moderate hope.
The renewable energy market reached a milestone as the ROC
regime closed to all new generating capacity on 31 March 2017.
Subsidy levels in ongoing regimes such as the FiT or RHI have been
reduced to such an extent as to make the majority of new projects
uneconomic. The primary mechanism for governmental support for
future renewable energy projects are contracts for difference. The
results of the next auction round for contracts, expected in the
third quarter of 2017, will give much needed clarity as to which
projects will be developed in the near term.
In terms of existing projects, the Investment Adviser has
reported the emergence of a more active secondary market in
renewable energy debt, both from borrowers seeking to refinance
existing facilities and from lenders looking to sell loans. This
has been most clearly demonstrated by the Company's commitment to
acquire a portfolio as part of the sale of the GIB by the UK
Government, post period end.
In the social housing sector, there remains a healthy pipeline
of opportunities as local care commissioners continue to embrace
the benefits of the supported living model.
Investment focus
The Investment Adviser continues to find pockets of value in
small-scale education assets, almost all identified through
existing relationships. The Board remains highly supportive of
further investment in public private partnership assets.
The Company is developing an increasing presence in the
supported living sector of the social housing market and continues
to work with a number of partners. Due to increased
competitiveness, the focus has shifted to lending against
portfolios of a smaller and more location specific nature, where
the strength of the Company's existing relationships with
registered providers and local authorities gives it a competitive
advantage.
Financing new renewable energy projects has become challenging
given subsidy levels and funder competition, but the ability of the
Investment Adviser to fully understand and assess the opportunities
from individual projects in many sectors makes the Company a highly
attractive lender.
Placing programme
The Company raised GBP90 million of additional equity capital by
way of a placing programme in November 2016, at a placing price of
123.50 pence per new ordinary share. The placing was significantly
oversubscribed.
Pursuant to the Prospectus published on 28 March 2017, the new
2017 placing programme will enable the Company to issue up to 215
million new ordinary shares on a non pre-emptive basis to take
advantage of suitable investment opportunities as they arise. For
further details on movements in share capital, refer to note 10 in
the unaudited interim condensed financial statements.
NAV and share price performance
The Company's NAV per ordinary share increased over the period
from 109.67 pence to 110.30 pence. This was primarily driven by the
accretive nature of the December 2016 placing though which new
ordinary shares were issued at a premium to their prevailing NAV.
The Company's net assets increased from GBP723.8 million as at 30
September 2016 to GBP809.3 million as at 31 March 2017 as a
consequence of the net proceeds raised.
The Company's shares continued to trade at a significant premium
to NAV during the period, with an average premium rating of 15.3%.
At 31 March 2017 the ordinary shares traded at a 16.8% premium to
NAV. The share price hit an all-time high of 134.80 pence on 3
October 2016; the low for the period of 122.00 pence on 21 December
2016 coincided with the period immediately following the December
placing and the period of typically lower trading volumes in the
lead up to the holiday period.
Financing
The Company has continued to make periodic use of its revolving
credit facility in the period. On 17 January 2017, the Company
entered into an agreement with RBSI to increase the facility from
GBP50 million to GBP75 million. All amounts drawn under the
facility are to be used in or towards the making of investments in
accordance with the Company's investment policy. At 31 March 2017,
the facility was undrawn.
Dividend policy
The Directors have absolute discretion as to the payment of
dividends. An interim dividend of 1.90 pence per share for the
period 1 October 2016 to 31 December 2016 was paid on 3 March 2017.
A further interim dividend of 1.90 pence per share for the period
from 1 January 2017 to 31 March 2017 was declared on 20 April 2017
and will be paid on 2 June 2017.
Governance and compliance
The Board recognises the importance of a strong corporate
governance culture and continues to maintain principles of good
corporate governance as set out in the UK Corporate Governance Code
("UK Code"), and the Association of Investment Companies Code of
Corporate Governance and accompanying guide ("AIC Code and Guide")
which were published in April 2016 and June 2016 respectively. A
copy of the UK Code is available at www.frc.org.uk; a copy of the
AIC Code and Guide can be found at
www.theaic.co.uk.
Principal risks and uncertainties
The Directors consider that the principal risks and
uncertainties facing the Company are substantially unchanged since
the publication of the Company's 2016 annual report and financial
statements and are expected to remain relevant to the Company for
the next six months of its financial year.
Principal risks faced by the Company include (but are not
limited to) execution risk, portfolio risk, financial risk,
operational risk, cyber-crime risk, and regulatory, legal and
compliance risk. The full details can be found on pages 30 to 33 of
the annual report and financial statements for the year ended 30
September 2016.
Going concern statement
After making enquiries and considering the impact of risks and
opportunities on expected cash flows, the Directors have a
reasonable expectation that the Company has adequate financial
resources to continue in operational existence for the foreseeable
future. For this reason, in preparing the unaudited interim
condensed financial statements, they have adopted the going concern
basis.
Related parties
The Directors consider that the related parties and related
party transactions for the six month period to 31 March 2017, are
consistent with the 30 September 2016 audited financial statements
and are outlined in note 12 to the unaudited interim condensed
financial statements.
Mr Ian Reeves CBE
Chairman
24 May 2017
COMPANY PERFORMANCE
Key performance indicators
GBP22.1m
Profit for the period
HY 2016 - GBP21.9m
3.8p
Dividends per ordinary share for the period
HY 2016 - 3.8p
3.1p
Basic earnings per ordinary share for the period(1)
HY 2016 - 3.7p
110.30p
NAV per share at 31 March 2017
30 September 2016 - 109.67p
(1.) Refer to the Chairman's interim statement and Investment
Adviser's report
INVESTMENT ADVISER'S REPORT
The objective of the Company is to generate exposure to
infrastructure debt and/or similar assets.
The Investment Adviser, Gravis Capital Management Limited
(formerly Gravis Capital Partners LLP), provides investment
advisory services to the Company, including investment
recommendations, any necessary investment due diligence, management
of and reporting on the existing loan portfolio, and financial
reporting support. The Investment Adviser also provides advice
regarding the Company's equity and debt funding requirements. The
Investment Adviser is the AIFM to the Company. The basis of the
remuneration of the Investment Adviser is set out in note 12 to the
unaudited interim condensed financial statements.
The Company novated its Investment Advisory Agreement on 20
April 2017 as part of the transfer of the Investment Adviser's fund
management and advisory business. Further information in relation
to the reorganisation of Gravis Capital Management Limited is set
out in note 13 to the unaudited interim condensed financial
statements.
Investment objectives and policies
The Company's investment objective is to provide its
shareholders with regular, sustained, long-term distributions and
to preserve the capital value of its investment assets over the
long term, by generating exposure to infrastructure debt and/or
similar assets.
The Company makes investments in senior and subordinated debt
instruments issued by infrastructure Project Companies, their
owners or their lenders, and assets with a similar economic
effect.
The Company receives debt service payments in accordance with
the terms of its investments. The debt service payments, comprising
interest and principal payments are covered by expected cash flows
generated by the underlying infrastructure Project Company.
There is no, and it is not anticipated that there will be any,
outright property exposure of the Company (except potentially as
additional security).
Not more than 10% in value of the Company's total assets from
time to time consist of securities or loans relating to any one
individual infrastructure asset (having regard to the risks
relating to any cross-default or cross-collateralisation
provisions). This objective is subject to the Company having a
sufficient level of investment capital from time to time, the
ability of the Company to invest its cash in suitable investments
and is subject to the investment restrictions described in the
investment strategy (as explained in the Company's Prospectus dated
28 March 2017).
Similarly, it is the intention of the Directors that the assets
of the Company are (as far as is reasonable in the context of a UK
infrastructure portfolio) appropriately diversified by asset type
(such as PFI healthcare, PFI education, solar power, social
housing, biomass etc.) and by revenue source (such as NHS trusts,
local authorities, FiT, ROCs etc.)
Advances made during the period
The Company made eleven advances totalling GBP74 million during
the period, eight of which were made under existing facilities.
Post period end the Company advanced GBP8.9 million under existing
facilities and GBP12.9 million under new facilities.
Investment Loan Project
------------------------ ----------------------------- --------------------------
GCP Asset Finance Amount GBP0.3 million Construction of
1 Limited(1) Term 27 years a number of availability
C notes Security Subordinated based accommodation
Status Construction PPP assets in Scotland
under the NPD procurement
model.
------------------------ --------- ------------------ --------------------------
GCP Biomass 3 Limited(1) Amount GBP2.5 million Two anaerobic digestion
Term 15 years schemes in England.
Security Senior
Status Operational
------------------------ --------- ------------------ --------------------------
GCP Biomass 4 Limited(1) Amount GBP1.5 million Construction of
Term 18 years a waste to energy
Security Subordinated biomass facility
Status Construction in Widnes, England.
------------------------ --------- ------------------ --------------------------
GCP Biomass 5 Limited(1) Amount GBP0.5 million Construction of
B notes Term 15 years a food waste anaerobic
Security Senior digestion facility
Status Construction in Wales.
------------------------ --------- ------------------ --------------------------
GCP Biomass 5 Limited(1) Amount GBP0.5 million Construction of
C notes Term 15 years a food waste anaerobic
Security Senior digestion facility
Status Construction in England.
------------------------ --------- ------------------ --------------------------
GCP Healthcare 1 Amount GBP0.3 million Various operational
Limited(1) Term 27 years LIFT projects in
Security Subordinated England.
Status Operational
------------------------ --------- ------------------ --------------------------
GCP Programme Funding Amount GBP49.9 million Portfolio of housing
1 Limited Term 35 years units for occupation
Series 1 notes Security Senior by adults with
Status Operational learning or physical
difficulties in
England and Wales.
------------------------ --------- ------------------ --------------------------
GCP Programme Funding Amount GBP1.0 million Construction and
1 Limited Term 2 years renovation of housing
Series 2 notes Security Senior unit for occupation
Status Construction by adults with
learning difficulties
in England.
------------------------ --------- ------------------ --------------------------
GCP Programme Funding Amount GBP6.5 million An on-farm anaerobic
1 Limited Term 16 years digestion plant
Series 3 notes Security Senior in Scotland.
Status Construction
------------------------ --------- ------------------ --------------------------
GCP Social Housing Amount GBP4.5 million Portfolio of housing
1 Limited(1) Term 40 years units for occupation
B notes Security Senior by adults with
Status Operational learning or physical
difficulties in
England.
------------------------ --------- ------------------ --------------------------
GCP Social Housing Amount GBP6.5 million Portfolio of housing
1 Limited(1) Term 35 years units for occupation
D notes Security Senior by adults with
Status Operational learning or physical
difficulties in
England.
------------------------ --------- ------------------ --------------------------
Advances totalling
GBP74 million
------------------------ --------- ------------------ --------------------------
(1.) Further drawings under, or extensions to existing
facilities
Advances made post period end
Investment Loan Project
------------------------ ----------------------------- --------------------------
GCP Asset Finance Amount GBP2.6 million Construction of
Limited(1) Term 27 years a number of availability
C notes Security Subordinated based accommodation
Status Construction PPP assets in Scotland
under the NPD procurement
model.
------------------------ --------- ------------------ --------------------------
GCP Programme Funding Amount GBP5.7 million Portfolio of housing
1 Limited Term 55 years units for occupation
Series 4 notes Security Senior by adults with
Status Operational learning or physical
difficulties in
England.
------------------------ --------- ------------------ --------------------------
GCP Social Housing Amount GBP6.0 million Portfolio of housing
1 Limited(1) Term 40 years units for occupation
B notes Security Senior by adults with
Status Operational learning or physical
difficulties in
England.
------------------------ --------- ------------------ --------------------------
GCP Programme Funding Amount GBP7.2 million An on-farm anaerobic
1 Limited Term 16 years digestion plant
Series 3 notes Security Senior in Scotland.
Status Construction
------------------------ --------- ------------------ --------------------------
GCP Biomass 3 Limited(1) Amount GBP0.3 million Two anaerobic digestion
Term 15 years schemes in England.
Security Senior
Status Operational
------------------------ --------- ------------------ --------------------------
Advances totalling
GBP21.8 million
------------------------ --------- ------------------ --------------------------
(1.) Further drawings under, or extensions to existing
facilities
Investment portfolio
As at 31 March 2017, the Company was exposed to a diversified
portfolio of partially inflation protected investments in the UK
comprising 46 investments with an unaudited valuation of GBP773.4
million.
As at that date, the weighted average annualised yield was 8.7%
across the portfolio with a weighted average expected term of 16
years. Just over 89% of the projects the Company is exposed to are
fully operational. The remaining projects are either committed or
under construction.
Portfolio performance
The majority of the infrastructure projects that underpin the
Company's investment portfolio, whether in construction or
operation, are performing materially in line with expectations. The
current cash flow and future forecast cash flow in each case is
such that the Company expects to receive documented debt service
payments in full.
There are two exceptions. It is expected that the cash flows
receivable by the Company under two loans secured against biomass
projects will be lower than initially forecast at deal completion.
In the first case, delays in grid connection and slower than
predicted operational ramp up resulted in a valuation reduction as
reported in the previous period. During the last six months, the
Company, in consultation with the Investment Adviser, has appointed
technical advisers to run the assets with the result that
production has stabilised at satisfactory levels. No further
valuation movement has been incurred.
In the second case, the operational performance of the plants
has been materially below forecast and the Company and Investment
Adviser have been implementing a number of measures to evaluate and
carry out all necessary remedial capital works to bring the project
up to the required standard. A valuation reduction of GBP2 million
was incurred during the period to reflect the uncertainty arising
from this review.
Key exposures
Top ten investments
--------------------------- --------------- -------------- ----------
Loan Cash flow Project type % of total
type assets
--------------------------- --------------- -------------- ----------
Cardale PFI Investments Various UK
Limited(1) Unitary charge PFI 10.6%
GCP Programme Funding Supported
1 Limited Series 1 notes Rental income living 6.3%
Anaerobic
GCP Biomass 1 Limited ROCs digestion 5.5%
GCP Social Housing 1 Supported
Limited D notes Rental income living 5.3%
Commercial
GCP Green Energy 1 Limited FiT solar 4.5%
Anaerobic
GCP Biomass 5 Limited FiT digestion 4.5%
GCP Rooftop Solar 4
Limited FiT Rooftop solar 4.2%
Various UK
GCP Healthcare 1 Limited Unitary charge PFI 4.1%
GCP Rooftop Solar 5
Limited FiT Rooftop solar 3.4%
GCP Rooftop Solar 6
Limited FiT Rooftop solar 3.2%
--------------------------- --------------- -------------- ----------
1. The Cardale PFI loan is secured on a cross-collateralised
basis against 14 separate operational PFI projects, with no
exposure to any individual project being in excess of 10% of the
investment portfolio.
% of total
Top ten project counterparties assets
------------------------------- ----------
E.ON Energy Ltd (Ofgem) 22.2%
Ofgem 17.4%
Power NI (Ofgem) 8.2%
First Priority Housing
Association 6.9%
Bespoke Supported
Tenancies 6.6%
Centrica (Ofgem) 3.3%
Inclusion 3.0%
Viridian Energy Supply
Limited (Ofgem) 2.7%
Co-op Group (Ofgem) 2.7%
Various UK central
and local Government 2.5%
------------------------------- ----------
Top ten facilities % of total
managers assets
---------------------------- ----------
A Shade Greener Maintenance
Limited 21.4%
Agrivert Limited 8.2%
First Priority Housing
Association 6.9%
Fairhome 6.6%
Agrikomp (UK) Limited 5.8%
Burmeister & Wain
Scandinavian Contractor
A/S 5.7%
Senvion SE 3.8%
Grosvenor Facilities
Management 3.8%
Vestas Celtic Wind
Technology Limited 3.7%
Inclusion 3.0%
---------------------------- ----------
Investment valuation
The Valuation Agent, Mazars LLP carries out a fair market
valuation of the Company's investments on behalf of the Board on a
quarterly basis. The valuation principles used by the Valuation
Agent are based on a discounted cash flow methodology. A fair value
for each asset acquired by the Company is calculated by applying a
discount rate (determined by the Valuation Agent) to the cash flow
expected to arise from each asset.
The weighted average discount rate at 31 March 2017 was 7.91%, a
decrease of two basis points from 7.93% at 30 September 2016. The
valuation of investments is sensitive to changes in discount rates
applied. Sensitivity analysis detailing the impact of a change in
discount rates is given in note 11.
Financial performance
The Company has prepared its half-yearly report and financial
statements in accordance with IAS 34 as adopted by the European
Union, as with previous years.
In the six month period to 31 March 2017, the Company's
portfolio generated net income/gains on investments of GBP26
million. The profit for the period was GBP22.1 million, with
earnings per share of 3.1 pence.
The earnings per share is down from the prior period primarily
due to the level of cash held on the Company's balance sheet during
the period awaiting investment in the GIB assets.
The Company's ongoing charges percentage at 31 March 2017 was
1.14% on an annualised basis.
The Company has maintained an annual dividend of 7.6 pence per
share, paying or declaring a dividend of 1.90 pence for each of the
two quarters ending 31 December 2016 and 31 March 2017.
Cash position
The Company earned debt payments of GBP26.3 million during the
period, comprising GBP22.8 million of interest payments and GBP3.5
million of loan principal repayments, materially in line with
expectations. The Company paid dividends of GBP26.5 million
(including GBP1.1 million in scrip dividends) during the
period.
The Company repaid GBP36.5 million on its loan facility, raised
GBP90 million of equity capital and made investments totalling
GBP74 million. Total cash reserves at the period end were GBP37.7
million.
Project exposure
As at 31 March 2017, the Company does not have any exposure to
projects purely in the regulated utilities sector or projects with
demand based concessions. The Company's exposure to projects that
have not yet completed construction with reference to total
portfolio value at 31 March 2017 was 10.7%.
Conflicts of interest
The Company has given its consent for the Investment Adviser to
act as the investment manager to GCP Asset Backed Income Fund
Limited ("GABI"), a closed-ended investment company listed on the
London Stock Exchange's Main Market. GABI is focused predominantly
on debt investments secured against physical assets and/or
contracted cash flows.
The Company has given its consent on the basis that where the
Investment Adviser identifies an investment which, in its opinion
acting reasonably and in good faith, falls within the Company's
remit, the Company will have a right of first refusal.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Under the terms of the Disclosure Guidance and Transparency
Rules of the UK Listing Authority, the Directors are responsible
for preparing the half-yearly report and unaudited interim
condensed financial statements in accordance with applicable
regulations.
The Directors are required to:
-- select suitable accounting policies and apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements of IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Company's financial position and financial
performance;
-- make judgements and estimates that are reasonable and prudent; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
In preparing the half-yearly financial report and unaudited
interim condensed financial statements, the Directors are
responsible for ensuring that they give a true and fair view of the
state of affairs of the Company at the end of the period and the
profit or loss of the Company for that period.
Directors' responsibility statement
The Directors confirm to the best of their knowledge that:
-- the unaudited interim condensed set of financial statements
has been prepared in accordance with IAS 34 Interim Financial
Reporting as adopted by the European Union;
-- the Chairman's interim statement and the Investment Adviser's
report constitute the Company's interim management report, which
includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year); and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Mr Ian Reeves CBE
Chairman
24 May 2017
Mr David Pirouet FCA
Director
24 May 2017
INDEPENT REVIEW REPORT
To GCP Infrastructure Investments Limited
Introduction
We have been engaged by GCP Infrastructure Investments Limited
(the "Company") to review the interim condensed financial
statements in the half-yearly report for the six months ended 31
March 2017 which comprises the unaudited interim condensed
statement of comprehensive income, the unaudited interim condensed
statement of financial position, the unaudited interim condensed
statement of changes in equity, the unaudited interim condensed
statement of cash flows and the related explanatory notes. We have
read the other information contained in the half-yearly report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the unaudited
interim condensed 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 Guidance and Transparency Rules (the
"DTR") of the UK's Financial Conduct Authority (the "UK FCA").
Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report
and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company for our review work, for this report, or for the
conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the half-yearly report in accordance with the DTR of the
UK FCA.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union
("EU"). The interim condensed financial statements included in this
half-yearly report have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the interim condensed financial statements in the half-yearly
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
UK. 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 unaudited interim condensed set of
financial statements in the half-yearly report for the six months
ended 31 March 2017 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Steven D. Stormonth
For and on behalf of
KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditor
Jersey
24 May 2017
UNAUDITED INTERIM CONDENSED STATEMENT OF COMPREHENSIVE
INCOME
For the period 1 October 2016 to 31 March 2017
Period Period
ended ended
31 March 31 March
2017 2016
Notes GBP'000 GBP'000
--------------------------------- ----- --------- ---------
Income
Net income/gains on investments
at fair value through profit or
loss 3 26,008 25,484
Other income 3 1,015 1,214
--------------------------------- ----- --------- ---------
Total income 27,023 26,698
--------------------------------- ----- --------- ---------
Expense
Investment advisory fees 12 (3,321) (2,803)
Operating expenses (1,057) (1,181)
--------------------------------- ----- --------- ---------
Total expense (4,378) (3,984)
--------------------------------- ----- --------- ---------
Total operating profit before
finance costs 22,645 22,714
--------------------------------- ----- --------- ---------
Finance costs
Finance expenses (518) (813)
--------------------------------- ----- --------- ---------
Total profit and comprehensive
income for the period 22,127 21,901
--------------------------------- ----- --------- ---------
Basic and diluted earnings per
share (pence) 6 3.1220 3.7273
--------------------------------- ----- --------- ---------
All of the Company's results are derived from continuing
operations.
UNAUDITED INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION
As at 31 March 2017
As at
As at 30 September
31 March 2016
2017 (audited)
Notes GBP'000 GBP'000
-------------------------------------- ----- ----------- -------------
Assets
Cash and cash equivalents 37,712 52,057
Other receivables and prepayments 7 738 303
Financial assets at fair value
through profit or loss 11 773,373 699,682
-------------------------------------- ----- ----------- -------------
Total assets 811,823 752,042
-------------------------------------- ----- ----------- -------------
Liabilities
Other payables and accrued expenses 8 (2,539) (1,998)
Interest bearing loans and borrowings 9 - (26,208)
-------------------------------------- ----- ----------- -------------
Total liabilities (2,539) (28,206)
-------------------------------------- ----- ----------- -------------
Net assets 809,284 723,836
-------------------------------------- ----- ----------- -------------
Capital and reserves
Share capital 10 7,337 6,600
Share premium 10 783,460 694,406
Capital redemption reserve 101 101
Retained earnings 18,386 22,729
-------------------------------------- ----- ----------- -------------
Total capital and reserves 809,284 723,836
-------------------------------------- ----- ----------- -------------
Ordinary shares in issue 733,743,716 660,025,921
-------------------------------------- ----- ----------- -------------
NAV per ordinary share (pence
per share) 110.30 109.67
-------------------------------------- ----- ----------- -------------
Signed and authorised for issue on behalf of the Board of
Directors
Mr Ian Reeves CBE
Chairman
24 May 2017
Mr David Pirouet FCA
Director
24 May 2017
UNAUDITED INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY
For the period 1 October 2016 to 31 March 2017
Capital
Share Share redemption Retained Total
capital premium reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----- -------- -------- ----------- --------- --------
At 1 October
2015 5,765 599,242 101 14,436 619,544
------------------- ----- -------- -------- ----------- --------- --------
Total profit
and comprehensive
income for
the period - - - 21,901 21,901
Equity shares
issued 181 21,188 - - 21,369
Share issue
costs - (329) - - (329)
Dividends 5 - - - (22,239) (22,239)
------------------- ----- -------- -------- ----------- --------- --------
At 31 March
2016 5,946 620,101 101 14,098 640,246
------------------- ----- -------- -------- ----------- --------- --------
At 1 October
2016 6,600 694,406 101 22,729 723,836
------------------- ----- -------- -------- ----------- --------- --------
Total profit
and comprehensive
income for
the period - - - 22,127 22,127
Equity shares
issued 10 737 90,320 - - 91,057
Share issue
costs - (1,266) - - (1,266)
Dividends 5 - - - (26,470) (26,470)
------------------- ----- -------- -------- ----------- --------- --------
At 31 March
2017 7,337 783,460 101 18,386 809,284
------------------- ----- -------- -------- ----------- --------- --------
UNAUDITED INTERIM CONDENSED STATEMENT OF CASH FLOWS
For the period 1 October 2016 to 31 March 2017
Period Period
ended ended
31 March 31 March
2017 2016
Notes GBP'000 GBP'000
------------------------------------------ ----- --------- ---------
Cash flows from operating activities
Profit for the period 22,127 21,901
Finance expense 518 813
Purchase of financial assets (73,973) (43,649)
Repayment of financial assets 3,493 15,646
Unrealised income/gains on investments
at fair value through profit or
loss (3,210) (1,671)
Increase in other payables and
accrued expenses 477 135
Increase in other receivables
and prepayments (435) (18)
------------------------------------------ ----- --------- ---------
Net cash flow used in operating
activities (51,003) (6,843)
------------------------------------------ ----- --------- ---------
Cash flows from financing activities
Proceeds from issue of shares 88,735 19,664
Proceeds from interest bearing
loans and borrowings 10,000 8,400
Repayment of interest bearing
loans and borrowings (36,500) -
Dividends paid 5 (25,413) (20,863)
Finance costs paid (164) (805)
------------------------------------------ ----- --------- ---------
Net cash flow generated from financing
activities 36,658 6,396
------------------------------------------ ----- --------- ---------
Decrease in cash and cash equivalents (14,345) (447)
Cash and cash equivalents at beginning
of the period 52,057 4,906
------------------------------------------ ----- --------- ---------
Cash and cash equivalents at end
of the period 37,712 4,459
------------------------------------------ ----- --------- ---------
Net cash generated from operating
activities includes:
Investment income received 22,798 26,561
Deposit interest received 7 10
------------------------------------------ ----- --------- ---------
Non-cash items
Purchase of financial assets (capitalised
loan interest) 3 (3,030) (2,748)
------------------------------------------ ----- --------- ---------
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL
STATEMENTS
For the period 1 October 2016 to 31 March 2017
1. General information
GCP Infrastructure Investments Limited is a public company
incorporated and domiciled in Jersey on 21 May 2010 with
registration number 105775. The Company is governed by the
provisions of the Law and CIF Law.
The Company is a closed-ended investment company incorporated
under the laws of Jersey and its ordinary shares are listed on the
Main Market of the London Stock Exchange.
The Company makes infrastructure investments, typically by
acquiring interests in debt instruments issued by infrastructure
Project Companies (or by their existing lenders or holding
vehicles) that are contracted by UK public sector bodies to design,
finance, build, and operate infrastructure projects and by
investing in other assets with a similar economic effect to such
instruments.
2. Significant accounting policies
2.1 Basis of preparation
The unaudited interim condensed financial statements for the six
month period to 31 March 2017 have been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the European
Union.
The unaudited interim condensed financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Company's annual financial statements as at 30 September 2016. The
financial statements for the year ended 30 September 2016 were
audited by KPMG Channel Islands Limited who issued an unqualified
audit opinion thereon.
The audited financial statements of the Company as at and for
the year ended 30 September 2016 were prepared in accordance with
IFRS as adopted by the European Union.
The financial information contained in the unaudited interim
condensed financial statements for the period 1 October 2016 to 31
March 2017 have not been audited but have undergone a review by the
Company's Auditor in accordance with International Standards on
Review Engagements (UK & 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
UK.
The unaudited interim condensed financial statements have been
prepared under the historical cost convention, as modified by the
revaluation of financial assets held at fair value through profit
or loss.
The accounting policies adopted in the preparation of the
unaudited interim condensed financial statements are consistent
with those followed in the preparation of the Company's annual
financial statements for the year ended 30 September 2016.
Going concern
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that the Company
has the resources to continue in business for the foreseeable
future. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. Therefore, the unaudited
interim condensed financial statements have been prepared on a
going concern basis.
2.2 Significant accounting judgements and estimates
The preparation of unaudited interim condensed financial
statements in accordance with IFRS requires the Directors of the
Company to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts
recognised in the unaudited interim condensed financial statements.
However, uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the
carrying amount of the asset or liability in the future. As the
Company's financial assets are in the form of debt instruments,
judgement has been involved in determining their valuation. The
valuation process is dependent on assumptions and estimates which
are significant to the reported amounts recognised in the unaudited
interim condensed financial statements taking into account the
structure of the Company and the extent of its investment
activities.
The Directors have determined that the SPVs through which the
Company invests fall under the control of the Company in accordance
with the control criteria prescribed by IFRS 10 and therefore meet
the definition of subsidiaries. In addition the Directors continue
to hold the view that the Company meets the definition of an
investment entity and therefore can measure and present the SPVs at
fair value through profit or loss.
2.3 (a) Functional and presentation currency
Items included in the unaudited interim condensed financial
statements of the Company are measured in the primary economic
environment in which the Company operates.
The primary objective of the Company is to generate returns in
Pound Sterling, its capital-raising currency. The Company's
performance is evaluated in Pound Sterling. Therefore, the
Directors consider Pound Sterling as the currency that most
faithfully represents the economic effects of the underlying
transactions, events and conditions and have adopted it as the
Company's presentation currency. All values have been rounded to
the nearest thousand pounds (GBP'000) except where otherwise
indicated.
2.3 (b) Segmental information
For management purposes, the Company is organised into one main
operating segment. All of the Company's activities are
interrelated, and each activity is dependent on the others.
Accordingly, all significant operating decisions are based upon the
analysis of the Company as one segment. The financial results from
this segment are equivalent to the unaudited interim condensed
financial statements of the Company as a whole. The following table
analyses the Company's underlying operating income per geographical
location. The basis for attributing the operating income is the
place of incorporation of the underlying counterparty.
31 March 31 March
2017 2016
GBP'000 GBP'000
---------------- -------- --------
Channel Islands 12 10
United Kingdom 27,011 26,688
---------------- -------- --------
Total 27,023 26,698
---------------- -------- --------
3. Operating income
The table below analyses the Company's operating income for the
period per investment type:
31 March 31 March
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
Interest on cash and cash equivalents 12 10
Net movement in fair value of financial
assets through profit or loss 26,008 25,484
Other income 1,003 1,204
---------------------------------------- -------- --------
Total 27,023 26,698
---------------------------------------- -------- --------
The table below analyses the operating income derived from the
Company's financial assets at fair value through profit or
loss:
31 March 31 March
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
Loan interest - cash 19,768 23,813
Loan interest - capitalised 3,030 2,748
Unrealised gains on investments at fair
value through profit or loss 7,136 4,023
Unrealised losses on investments at
fair value through profit or loss (3,926) (5,100)
---------------------------------------- -------- --------
Total 26,008 25,484
---------------------------------------- -------- --------
4. Taxation
Profits arising in the Company for the period from 1 October
2016 to 31 March 2017 are subject to tax at the standard rate of 0%
(31 March 2016: 0%) in accordance with the Income Tax (Jersey) Law
1961, as amended.
5. Dividends
Total dividends paid or declared for the period 1 October 2016
to 31 March 2017 were 3.8 pence per share as follows:
31 March 31 March
2017 2016
Pence GBP'000 GBP'000
---------------------------------- ----- -------- --------
Current period dividends
31 March 2017 1.9 - -
31 December 2016/15 1.9 13,929 11,286
---------------------------------- ----- -------- --------
Total 3.8 13,929 11,286
---------------------------------- ----- -------- --------
Prior period dividends
30 September 2016/15 1.9 12,541 10,953
30 June 2016 1.9 - -
---------------------------------- ----- -------- --------
Total 3.8 12,541 10,953
---------------------------------- ----- -------- --------
Dividends in statement of changes
in equity 26,470 22,239
Dividends settled in shares(1) (1,057) (1,376)
---------------------------------- ----- -------- --------
Dividends in cash flow statement 25,413 20,863
---------------------------------- ----- -------- --------
1. The dividends settled in shares are where shareholders have
elected to take the scrip dividend alternative
6. Earnings per share
Basic and diluted earnings per share are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Company by the weighted average number of ordinary shares in
issue during the period.
Weighted
average
number
Total of
profit ordinary Pence
GBP'000 shares per share
------------------------------- -------- ----------- ----------
Period ended 31 March 2017
Basic and diluted earnings per
ordinary share 22,127 708,723,471 3.1220
------------------------------- -------- ----------- ----------
Period ended 31 March 2016
Basic and diluted earnings per
ordinary share 21,901 587,571,646 3.7273
------------------------------- -------- ----------- ----------
7. Other receivables and prepayments
31 March 30 September
2017 2016
GBP'000 GBP'000
------------------ -------- ------------
Other receivables 375 227
Prepayments 363 76
------------------ -------- ------------
Total 738 303
------------------ -------- ------------
8. Other payables and accrued expenses
31 March 30 September
2017 2016
GBP'000 GBP'000
------------------------- -------- ------------
Investment advisory fees 1,704 1,540
Payables 835 458
------------------------- -------- ------------
Total 2,539 1,998
------------------------- -------- ------------
9. Interest bearing loans and borrowings
31 March 30 September
2017 2016
GBP'000 GBP'000
----------------------------- -------- ------------
RBSI loan facility - 26,500
Unamortised arrangement fees - (292)
----------------------------- -------- ------------
Total - 26,208
----------------------------- -------- ------------
The table below analyses the movement for the period:
31 March 30 September
2017 2016
GBP'000 GBP'000
------------------------------------- -------- ------------
Opening balance 26,500 41,600
------------------------------------- -------- ------------
Proceeds from interest bearing loans
and borrowings 10,000 76,900
Repayment of interest bearing loans
and borrowings (36,500) (92,000)
------------------------------------- -------- ------------
Total - 26,500
------------------------------------- -------- ------------
On 23 March 2015, the Company entered into a three-year GBP50
million revolving credit facility with RBSI (the "Facility").
Interest on amounts drawn under the Facility is charged at LIBOR
plus 2.25% per annum. A commitment fee is payable on undrawn
amounts. The total costs incurred to establish the Facility of
GBP754,000 (including the arrangement fee of GBP675,000) were
offset against the amount drawn down. During the period, the
Company drew down a further GBP10 million on 22 November 2016,
resulting in a total amount of GBP36.5 million drawn down. The
Company repaid the balance of GBP36.5 million on 7 December
2016.
On 17 January 2017, the Company entered into an agreement with
RBSI in respect of a GBP25 million increase to the Facility. The
increased Facility is for an amount of GBP75 million. All amounts
drawn under the Facility are to be used in or towards the making of
investments in accordance with the Company's investment policy.
The Facility is secured against the portfolio of assets held by
the Company.
10. Authorised and issued share capital
30 September
31 March 2017 2016
-------------------- --------------------
Number Number
Share capital of shares GBP'000 of shares GBP'000
------------------------------ ----------- ------- ----------- -------
Ordinary shares issued and
fully paid
At 1 October 660,025,921 6,600 576,481,586 5,765
Equity shares issued through:
Dividends settled in shares 843,301 8 2,217,500 22
Placing programmes 72,874,494 729 81,326,835 813
------------------------------ ----------- ------- ----------- -------
Total 733,743,716 7,337 660,025,921 6,600
------------------------------ ----------- ------- ----------- -------
Share capital is the nominal amount of the Company's ordinary
shares in issue.
The 73,717,795 shares issued in the period represent 72,874,494
ordinary shares issued under the placing programme and 843,301
ordinary shares issued under the scrip dividend alternative. These
are further analysed below.
The Company is authorised to issue 1.5 billion ordinary shares,
300 million C shares and 300 million deferred shares, each having a
par value of one pence per share.
Quantitative information about the Company's share capital is
also provided in the statement of changes in equity.
31 March 30 September
2017 2016
Share premium GBP'000 GBP'000
----------------------------------------- -------- ------------
Premium on ordinary shares issued and
fully paid
Opening balance 694,406 599,242
Premium on equity shares issued through:
Dividends settled in shares 1,049 2,616
Placing programmes 89,271 94,187
Share issue costs charged to premium (1,266) (1,639)
----------------------------------------- -------- ------------
Total 783,460 694,406
----------------------------------------- -------- ------------
Share premium relates to amounts subscribed for share capital in
excess of nominal value less associated issue costs of the
subscription.
Date No of shares Description Period
issued
------------- ------------ -------------------------- --------------
Ordinary shares issued 1 July 2016
in respect of to
21 October the offer of a scrip 30 September
2016 211,066 dividend alternative 2016
------------- ------------ -------------------------- --------------
Ordinary shares issued
by way
of a fundraising
1 December of GBP90 million
2016 72,874,494 under a placing programme n/a
------------- ------------ -------------------------- --------------
Ordinary shares issued 1 October 2016
in respect of to
the offer of a scrip 31 December
3 March 2017 632,235 dividend alternative 2016
------------- ------------ -------------------------- --------------
Total 73,717,795
------------- ------------ -------------------------- --------------
As at 31 March 2017, the Company's issued share capital
comprised 733,743,716 ordinary shares, none of which were held in
treasury.
The ordinary shares carry the right to dividends out of the
profits available for distribution attributable to each share
class, if any, as determined by the Directors. Each holder of an
ordinary share is entitled to attend meetings of shareholders and,
on a poll, to one vote for each share held.
11. Financial instruments
11.1 Capital management
The Company is wholly funded from equity balances, comprising
issued ordinary share capital, as detailed in note 10 and retained
earnings, as well as a revolving credit facility, as detailed in
note 9.
The Company may seek to raise additional capital from time to
time, to the extent that the Directors and the Investment Adviser
believe the Company will be able to make suitable investments. The
Company raises capital on a highly conservative basis only when it
has a clear view of a robust pipeline of highly advanced investment
opportunities.
The Company may borrow up to 20% of its NAV as at such time any
such borrowings are drawn down. At the period end, borrowings
amounted to 0% of NAV (2016: 3.7%).
11.2 Financial risk management objectives
The Company has an investment policy and strategy as summarised
in its prospectus dated 28 March 2017 that sets out its overall
investment strategy and its general risk management philosophy and
has established processes to monitor and control these in a timely
and accurate manner. These guidelines are the subject of regular
operational reviews undertaken by the Investment Adviser to ensure
that the Company's policies are adhered to as it is the Investment
Adviser's duty to identify and assist in the control of risk. The
Investment Adviser reports regularly to the Directors who have
ultimate responsibility for the overall risk management
approach.
The Investment Adviser and the Directors ensure that all
investment activity is performed in accordance with the investment
guidelines. The Company's investment activities expose it to
various types of risk that are associated with the financial
instruments and markets in which it invests. Risk is inherent in
the Company's activities and it is managed through a process of
ongoing identification, measurement and monitoring. The financial
risks to which the Company is exposed include market risk which
includes other price risk and interest rate risk, credit risk and
liquidity risk.
11.3 Market risk
There is a risk that market movements in interest rates, credit
markets and observable yields may decrease or increase the fair
value of the Company's financial assets without regard to the
asset's underlying performance. The fair value of the Company's
financial assets is measured and monitored on a quarterly basis by
the Investment Adviser with the assistance of the Valuation
Agent.
The Valuation Agent considers the movements in comparable credit
markets and publicly available information in respect of each
project in assessing the expected future cash flows from each
investment.
The valuation principles used are based on a discounted cash
flow methodology. A fair value for each asset acquired by the
Company is calculated by applying a relevant market discount rate
to the contractual cash flows expected to arise from each
asset.
The Valuation Agent determines the discount rate that it
believes the market would reasonably apply to each investment
taking into account, inter alia, the following significant
inputs:
-- Pound Sterling interest rates;
-- movements of comparable credit markets; and
-- observable yields on other comparable instruments.
In addition, the following are also considered as part of the
overall valuation process:
-- general infrastructure market activity and investor sentiment; and
-- changes to the economic, legal, taxation or regulatory environment.
The Valuation Agent exercises its judgement in assessing the
expected future cash flows from each investment. Given that the
investments of the Company are generally fixed-income debt
instruments (in some cases with elements of inflation protection)
or other investments with a similar economic effect, the focus of
the Valuation Agent is on assessing the likelihood of any
interruptions to the debt service payments, in light of the
operational performance of the underlying asset.
The valuations are reviewed by the Investment Adviser and the
subsequent NAV is reviewed and approved by the Directors on a
quarterly basis.
The table below shows how changes in discount rate affect the
changes in the valuation of financial assets at fair value. The
range of discount rates used reflects the Investment Adviser's view
of a reasonable expectation of valuation movements across the
portfolio in a six month period.
31 March 2017
Change in discount
rate 0.50% 0.25% 0.00% (0.25%) (0.50%)
------------------------- -------- -------- ------- ------- -------
Valuation of financial
assets
at fair value (GBP'000) 745,376 759,137 773,373 788,107 803,363
Change in valuation
of financial assets
at fair value (GBP'000) (27,997) (14,236) - 14,734 29,990
------------------------- -------- -------- ------- ------- -------
As at 31 March 2017, the discount rates used in the valuation of
financial assets ranged from 6.5% to 10.4%.
11.4 Interest rate risk
Interest rate risk has the following effect:
Fair value of financial assets
Interest rates are one of the factors which the Valuation Agent
takes into account when valuing the financial assets.
Future cash flows
The Company primarily invests in senior and subordinated debt
instruments of infrastructure Project Companies. The financial
assets have fixed interest rate coupons, albeit with some inflation
protection, and as such movements in interest rates will not
directly affect the future cash flows payable to the Company.
Interest rate hedging may be carried out to seek to provide
protection against falling interest rates in relation to assets
that do not have a minimum fixed rate of return acceptable to the
Company in line with its investment policy and strategy.
Where the debt instrument is subordinated, the Company is
indirectly exposed to the gearing of the infrastructure Project
Companies. The Investment Adviser ensures as part of its due
diligence that the Project Company debt ranking senior to the
Company's investment has been hedged against movement in interest
rates where appropriate, through the use of interest rate
swaps.
Borrowings
During the period the Company made use of its Facility with
RBSI, which was used to finance investments made by the Company.
Details of the RBSI Facility are given in note 9.
Any potential financial impact of movements in interest rates on
the cost of borrowings on the Company is mitigated by the
short-term nature of such borrowings.
11.5 Credit risk
Credit risk refers to the risk that the counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company. The assets
classified at fair value through profit or loss do not have a
published credit rating, however the Investment Adviser monitors
the financial position and performance of the Project Companies on
a regular basis to ensure that credit risk is appropriately
managed.
The Company is exposed to differing levels of credit risk on all
its assets. The Company's total exposure to credit risk is GBP811
million (2016: GBP752 million) being the balance of total assets
less prepayments. Cash is held at a number of financial
institutions to spread credit risk, with cash awaiting investment
being held on behalf of the Company at banks which carry a minimum
rating of A-1, P-1 or F-1 from Standard & Poor's, Moody's or
Fitch respectively or in one or more similarly rated money market
or short-dated gilt funds.
Before an investment decision is made the Investment Adviser
performs extensive due diligence complemented by professional
third-party advisers, including technical advisers, financial and
legal advisers and valuation and insurance experts. After an
investment is made the Investment Adviser uses detailed cash flow
forecasts to assess the continued credit worthiness of Project
Companies and their ability to pay all costs as they fall due. The
forecasts are regularly updated with information provided by the
Project Companies in order to monitor ongoing financial
performance.
The Project Companies receive a significant portion of revenue
from government departments and public sector or local authority
clients.
The Project Companies are also reliant on their subcontractors,
particularly facilities managers, continuing to perform their
service delivery obligations such that revenues are not disrupted.
The credit standing of each significant subcontractor is monitored
on an ongoing basis, and period end significant exposures are
reported to the Directors quarterly.
The concentration of credit risk to any individual project did
not exceed 10% of the Company's portfolio at the period end. The
Investment Adviser also monitors the concentration of risk based
upon the nature of each underlying project.
The concentration of credit risk associated with counterparties
is deemed to be low. The counterparties are typically public sector
entities which generate pre-determined, long-term, public sector
backed revenues in the form of subsidy payments (FiT and ROCs
payments) for renewables transactions, unitary charge payments for
PFI transactions or lease payments for social housing projects. In
the view of the Investment Adviser and Board, the UK Government has
both the ability and willingness to satisfy its obligations to
these public sector entities.
The credit risk associated with each Project Company is further
mitigated because the cash flows receivable are secured over the
assets of the Project Company, which in turn has security over the
assets of the underlying projects. The debt instruments held by the
Company are held at fair value, and the credit risk associated with
these investments is one of the factors which the Valuation Agent
takes into account when valuing the financial assets.
The Investment Adviser regularly monitors the concentration of
risk based upon the nature of each underlying project to ensure
appropriate diversification and risk remains within acceptable
parameters.
Changes in credit risk affect the discount rate. The Directors
have assessed the credit quality of the portfolio at the period end
and based on the parameters set out above are satisfied that the
credit quality remains within an acceptable range for long-dated
debt.
11.6 Liquidity risk
Liquidity risk is defined as the risk that the Company will
encounter difficulty in meeting obligations associated with
financial liabilities that are settled by delivering cash or
another financial asset. Exposure to liquidity risk arises because
of the possibility that the Company could be required to pay its
liabilities earlier than expected. The Company's objective is to
maintain a balance between continuity of funding and flexibility
through the use of bank deposits and interest bearing loans and
borrowings.
The following table analyses all of the Company's financial
assets and liabilities into relevant maturity groupings based on
the remaining period from 31 March 2017 to the contractual maturity
date. The Directors have elected to present both assets and
liabilities in the liquidity disclosure below to illustrate the net
liquidity exposure of the Company.
All cash flows in the table below are on an undiscounted
basis.
Three Greater
One to to than
Less than three twelve twelve
one month months months months Total
31 March 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- -------- -------- --------- ---------
Financial assets
Cash and cash equivalents 37,712 - - - 37,712
Other receivables
and prepayments - - 738 - 738
Financial assets
at fair value through
profit or loss 17,743 8,935 65,582 1,568,633 1,660,893
---------------------------- ---------- -------- -------- --------- ---------
Total financial assets 55,455 8,935 66,320 1,568,633 1,699,343
---------------------------- ---------- -------- -------- --------- ---------
Financial liabilities
Other payables and
accrued expenses - 2,539 - - 2,539
---------------------------- ---------- -------- -------- --------- ---------
Total financial liabilities - 2,539 - - 2,539
---------------------------- ---------- -------- -------- --------- ---------
Net exposure 55,455 6,396 66,320 1,568,633 1,696,804
---------------------------- ---------- -------- -------- --------- ---------
Three Greater
One to to than
Less than three twelve twelve
one month months months months Total
30 September 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- -------- -------- --------- ---------
Financial assets
Cash and cash equivalents 52,057 - - - 52,057
Other receivables
and prepayments - - 303 - 303
Financial assets
at fair value through
profit or loss 14,998 9,074 48,164 1,373,897 1,446,133
---------------------------- ---------- -------- -------- --------- ---------
Total financial assets 67,055 9,074 48,467 1,373,897 1,498,493
---------------------------- ---------- -------- -------- --------- ---------
Financial liabilities
Other payables and
accrued expenses - 1,998 - - 1,998
Interest bearing
loans and borrowings - 26,208 - - 26,208
---------------------------- ---------- -------- -------- --------- ---------
Total financial liabilities - 28,206 - - 28,206
---------------------------- ---------- -------- -------- --------- ---------
Net exposure 67,055 (19,132) 48,467 1,373,897 1,470,287
---------------------------- ---------- -------- -------- --------- ---------
11.7 Fair values of financial assets
Basis of determining fair value
The Valuation Agent carries out quarterly fair valuations of the
financial assets of the Company. These valuations are reviewed by
the Investment Adviser and the subsequent NAV is reviewed and
approved by the Directors on a quarterly basis. The basis for the
Valuation Agent's valuations is described in note 11.3.
Fair value measurements
Investments are measured and reported at fair value and are
classified and disclosed in one of the following fair value
hierarchy levels depending on whether their fair value is based
on:
-- Level 1: quoted prices in active markets for identical assets or liabilities;
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices); and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
An investment is always categorised as Level 1, 2 or 3 in its
entirety. In certain cases the fair value measurement for an
investment may use a number of different inputs that fall into
different levels of the fair value hierarchy. In such cases, an
investment level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement. The assessment of the significance of a particular
input to the fair value measurement requires judgement and is
specific to the investment.
The table below summarises all securities held by the Company
based on the fair valuation technique adopted:
31 March 30 September
Fair value 2017 2016
hierarchy GBP'000 GBP'000
-------------------------------- ----------- -------- ------------
Financial assets at fair value
through profit or loss
Loan notes - PFI and renewables Level
excluding biomass 2 582,935 520,296
Level
Loan notes - biomass 3 190,438 179,386
-------------------------------- ----------- -------- ------------
The Directors have classified the financial instruments as Level
2 or Level 3 depending on whether or not there is a consistent data
set of comparable and observable market transactions. Due to the
limited number of comparable and observable market transactions in
the biomass sector, the Directors have classified the Company's
investments in biomass projects as Level 3. Discount rates between
7.2% and 10.3% were applied to the investments categorised as Level
3.
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and end of the period:
31 March 30 September
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- ------------
Opening balance 179,386 165,431
---------------------------------------- -------- ------------
Purchases 11,465 29,827
Repayments (1,350) (7,125)
Unrealised gains on investments at fair
value through profit or loss 3,089 1,081
Unrealised losses on investments at
fair value through profit or loss (2,152) (9,828)
---------------------------------------- -------- ------------
Closing balance 190,438 179,386
---------------------------------------- -------- ------------
For the Company's financial instruments categorised as Level 3,
changing the discount rate used to value the underlying instruments
alters the fair value. A change in the discount rate used to value
the Level 3 investments would have the following effect on profit
before tax:
31 March 2017
Level 3 0.50% 0.25% 0.00% (0.25%) (0.50%)
------------------------- ------- ------- ------- ------- -------
Valuation of financial
assets
at fair value (GBP'000) 184,719 187,543 190,438 193,406 196,449
Change in valuation
of financial assets
at fair value (GBP'000) (5,720) (2,895) - 2,968 6,011
------------------------- ------- ------- ------- ------- -------
In determining the discount rate for calculating the fair value
of financial assets at fair value through profit or loss, movements
to Pound Sterling interest rates, comparable credit markets and
observable yield on comparable instruments could give rise to
changes in the discount rate.
The Directors consider the inputs used in the valuation of
investments and the appropriateness of their classification in the
fair value hierarchy. In particular the Directors are satisfied
that significant inputs into the discount rate, other than in
respect of the biomass investments as noted above, are market
observable. Should the valuation approach change causing an
investment to meet the characteristics of a different level of the
fair value hierarchy, it will be reclassified accordingly. During
the period, there were no transfers of investments between levels
therefore no further disclosure is considered necessary by the
Directors.
12. Related party disclosures
As defined by IAS 24 Related Party Disclosures, parties are
considered to be related if one party has the ability to control
the other party or exercise significant influence over the other
party in making financial or operational decisions.
Directors
The non-executive Directors of the Company are considered to be
the key management personnel of the Company. Directors'
remuneration for the period totalled GBP160,000 (31 March 2016:
GBP165,000). At 31 March 2017, liabilities in respect of these
services amounted to GBP78,000 (30 September 2016: GBP67,000).
At 31 March 2017, Mr Paul De Gruchy, together with his family
members held 467,493 ordinary shares in the Company. At 31 March
2017, Mr Clive Spears held 25,756 ordinary shares.
Investment Adviser
The Company is party to an Investment Advisory Agreement with
the Investment Adviser, which was amended and restated in November
2015 and novated on 20 April 2017 (see note 13), pursuant to which
the Company has appointed the Investment Adviser to provide
advisory services relating to the assets on a day-to-day basis in
accordance with its investment objectives and policies, subject to
the overall supervision and direction of the Board of Directors. As
a result of the responsibilities delegated under this Agreement,
the Company considers it to be a related party by virtue of being
"key management personnel".
For its services to the Company, the Investment Adviser receives
an annual fee at the rate of 0.9% (or such lesser amount as may be
demanded by the Investment Adviser at its own absolute discretion)
multiplied by the sum of:
-- the NAV of the Company; less
-- the value of the cash holdings of the Company pro rata to the
period for which such cash holdings have been held.
The Investment Adviser is also entitled to claim for expenses
arising in relation to the performance of certain duties and, at
its discretion, 1% of the value of any transactions entered into by
the Company (where possible the Investment Adviser seeks to charge
this fee to the borrower).
The Investment Adviser has committed additional resource in
providing its client funds, including the Company, a more
comprehensive service which strengthens the level of transaction
and marketing support for the Company, in a cost-efficient manner.
The Investment Adviser receives a fee of 0.25% of the aggregate
gross proceeds from any issue of new shares in consideration for
the provision of marketing and investor introduction services. The
Investment Adviser has appointed Highland Capital Partners Limited
("Highland Capital") to assist it with the provision of such
services and pays all fees due to Highland Capital out of the fees
it receives from the Company.
With effect from 22 July 2014, the Company's Investment Adviser
was authorised as an AIFM by the FCA under the AIFMD regulations.
The Company has provided disclosures on its website,
www.gcpuk.com/gcp-infrastructure-investments-ltd, incorporating the
requirements of the AIFMD regulations.
During the period, the Company expensed GBP3,596,000 (31 March
2016: GBP2,803,000) in respect of investment advisory fees and
expenses, marketing fees and transaction management and
documentation services, GBP3,321,000 which is included within
administration expenses in the consolidated income statement and
GBP275,000 included within the share issue costs relating to share
issues during the period. As at 31 March 2017, liabilities in
respect of these services amounted to GBP1,704,000 (30 September
2016: GBP1,540,000).
The Directors of the Investment Adviser also sit on the boards
of several SPVs through which the Company invests. The Company has
delegated to the Investment Adviser through the Investment Advisory
Agreement, the day-to-day operations of these SPVs.
The voting Directors of the Investment Adviser hold directly or
indirectly, and together with their family members, 2,877,787
ordinary shares in the Company.
The non-voting Directors of the Investment Adviser hold directly
or indirectly, and together with their family members, 5,838,674
ordinary shares in the Company.
13. Subsequent events after the report date
On 19 April 2017, the Company entered into a conditional,
binding commitment to subscribe for two series of loan notes with a
value of c.GBP140 million as part of the acquisition of GIB by a
Macquarie-led consortium.
On 26 April 2017, the Company committed to subscribe for a loan
note of up to GBP40 million. The loan note, with an expected term
of c.35 years, will be used to provide funding for the acquisition
of operational supported living housing units.
Three loans totalling GBP21.8 million have been advanced to
Project Companies since the period end, GBP8.9 million under
existing facilities with a further GBP12.9 million under new
facilities.
On 20 April 2017, the Company approved the novation of its
Investment Advisory Agreement from Gravis Capital Partners LLP to
Gravis Capital Management Limited as part of the transfer of the
Investment Adviser's fund management and advisory business from a
limited liability partnership to a newly incorporated limited
company under substantially the same ownership.
14. Non-consolidated SPVs
As explained in note 2.2, the Company invests through certain
SPVs which are not consolidated as the Company meets the
consolidation exemption criteria as prescribed by IFRS 10.
For details of the non-consolidated SPVs, refer to the Company's
annual report and financial statements for the year ended 30
September 2016.
15. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
GLOSSARY OF KEY TERMS
AIFM Alternative Investment Fund Manager
AIFMD Alternative Investment Fund Manager Directive
Borrower The entity which issues loan notes to GCP
Infrastructure Investments Limited, usually
a special purpose vehicle
CIF Law Collective Investment Funds (Jersey) Law
1988
The Company GCP Infrastructure Investments Limited
C shares A share class issued by the Company from
time to time. Conversion shares are used
to raise new funds without penalising existing
shareholders. The funds raised are ring-fenced
from the rest of the Company until they
are substantially invested
Facility Revolving credit facility with RBSI
FCA Fellow of the Institute of the Chartered
Accountants in England and Wales
FiT Feed-in tariff
GIB Green Investment Bank
IFRS International Financial Reporting Standards
LIFT Local Improvement Finance Trust
LSE London Stock Exchange
The Law The Companies (Jersey) Law 1991, (as amended)
NAV Net asset value
NPD Non-profit distributing procurement model
Ordinary The ordinary share capital of GCP Infrastructure
shares Investments Limited
PFI Private Finance Initiative
PF2 Private Finance 2
PPA Power purchase agreement
PPP Public private partnership
Project Company A special purpose company which owns and
operates an asset
RBSI Royal Bank of Scotland International Limited
RHI Renewable heat incentive
ROCs Renewable obligation certificates
SPV Special purpose vehicle
CORPORATE INFORMATION
The Company
GCP Infrastructure Investments Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Administrator, secretary and
registered office of the Company
Capita Financial Administrators (Jersey) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Advisers on English law
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Advisers on Jersey law
Carey Olsen
47 Esplanade
St Helier
Jersey JE1 0BD
Depositary
Capita Trust Company (Jersey) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Directors
Ian Reeves CBE (Chairman)
Clive Spears (Deputy Chairman)
Julia Chapman
Michael Gray
Paul De Gruchy
David Pirouet
Financial adviser and broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Financial PR
Buchanan Communications
107 Cheapside
London EC2V 6DN
Independent Auditor
KPMG Channel Islands Limited
37 Esplanade
St Helier
Jersey JE4 8WQ
Investment Adviser and AIFM
Gravis Capital Management Limited
(formerly Gravis Capital Partners LLP)
53/54 Grosvenor Street
London W1K 3HU
Operational bankers
Lloyds Bank International Limited
9 Broad Street
St Helier
Jersey JE4 8NG
Royal Bank of Scotland
International Limited
71 Bath Street
St Helier
Jersey JE4 8PJ
Registrar
Capita Registrars (Jersey) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Valuation Agent
Mazars LLP
Tower Bridge House
St Katherine's Way
London E1W 1DD
This information is provided by RNS
The company news service from the London Stock Exchange
END
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