2021 Year-end Review

Over the last eleven years at Ancala we’ve built a business we’re proud of, with an experienced, collaborative and focused team, and a strong track record.  Following the challenges 2020 brought, this year we continued to adapt to the changing backdrop and our portfolio has shown real resilience, delivering strong returns and continuing to generate above-target cash yield to our investors. We attribute this to our unwavering focus on the mid-market, our rigorous investment selection combined with a contrarian view, our operational expertise and approach to ESG, all of which are part of what makes Ancala so unique. And of course, we couldn’t have achieved all we have without the hard work of the whole team.

In the last twelve months various parts of the infrastructure sector have faced challenges, but there have also been real opportunities.  A landmark for us this year was our investment in Augean, a highly regarded leader in the specialised waste management sector.  The business has exposure to attractive end markets and further growth opportunities, such as the growing need for responsible waste management. Augean also plays a crucial role in the transition towards a more sustainable and circular economy by mitigating the environmental and social impacts of waste. We look forward to working with the management team to support Augean in the next phase of its growth.

Another significant development was securing planning approval for the landmark Havant Thicket Reservoir project, which will provide vital water resources to the South East of England. We invested further capital into Portsmouth Water in support of this initiative and secured a sustainability-linked financing package. Portsmouth Water was also recognised as a sector leading water company by the industry regulator and won an award for outstanding engagement with communities and stakeholders.

Holmleigh Care Group completed the bolt-on acquisition of Ludlow Street Healthcare, a best-in-class provider of specialist care, education and treatment services for individuals with mental health needs. Set up in 2006 by healthcare specialists, Ludlow Street has developed a strong reputation for its ethical person-centered approach, community-focused settings and consistent positive outcomes and the combined group will provide first class services to its residents.

We also made an investment in a biomass facility in Croatia as the first step in building a renewables platform in that region. In addition, we continued work across the portfolio, in line with our active management approach, refinancing Hector Rail on better than planned terms; selling five assets within Ence Energia at above expected price so we can reinvest the capital into development opportunities; and various contract wins, such as SAGE’s multi-million pound contract with Lundin, signing Lufthansa as a new carrier at Liverpool John Lennon Airport and launching a new passenger route with Hector Rail.

We also made progress in ESG, with the appointment of a dedicated ESG manager, Filipa Fonte. Ancala considers ESG at each stage of our investment cycle; when sourcing opportunities and during the investment period when we work to improve and enhance operations. Filipa will ensure the ongoing identification of ESG priorities and improvements.

We have continued to expand the team at Ancala, with eight new joiners in the year across the investment, asset management, investor relations and operations teams.

As we look towards 2022, rising interest rates and the emergence of omicron create fresh hurdles. We believe there will continue to be good investment opportunities for those willing to do the work to unlock them.

We thank you for your ongoing support and look forward to continuing to work together next year. In the meantime, we hope you enjoy the festive period with your loved ones and wish you a restful break.

Spence Clunie, Managing Partner, Ancala