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RNS Number : 2499O
Utilico Investments Limited
18 September 2013
Date: 18 September 2013
Contact: Charles Jillings
Utilico Investments Limited
01372 271 486
Utilico Investments Limited
Audited Statement of Results
for the year to 30 June 2013
COMPANY Financial Highlights
-- Revenue return per ordinary share 12.09p (12.02p)
-- Capital return per ordinary share -63.53p (2.72p)
-- Total return per ordinary share -51.44p (14.74p)
-- Ordinary dividend per share 7.50p (7.00p)
-- Special dividend per share 2.50p (nil)
-- 2012 ZDP shares redeemed
-- Further 2018 ZDP shares issued
Figures in brackets are for the prior year
The Group accounts this year include BFIC and Zeta as they are
subsidiaries. The share prices of both of these companies at 30
June 2013 traded at a
discount. The consolidation of these companies eliminates the
discount and results in a gain on consolidation. We have commented
throughout this report
on the Company's results as we report the weekly NAV based on
the Company's investments, which better reflect the investment
value to shareholders.
CHAIRMAN'S STATEMENT
It is disappointing to report that Utilico Investments Limited
("Utilico" or the "Company") achieved a total negative return per
ordinary share of 24.5% in the twelve months to 30 June 2013 as a
result of net portfolio losses of GBP47.8m. This loss is
principally accounted for by the share price decline of Resolute
Mining Limited ("Resolute") from A$1.34 to A$0.60 over the twelve
months. This, together with a weak Australian Dollar to Sterling
exchange rate, resulted in losses of GBP59.4m on the Resolute
investment. The FTSE All Share Total Return Index increased by
17.9% over the same period.
During the year Utilico achieved a number of positives. The
portfolio produced record revenue income of GBP16.2m. The majority
of the portfolio was positive and there were some outstanding
results. Bermuda National Limited ("BNL") has been expanded and
Bermuda First Investment Company Limited ("BFIC") and Zeta
Resources Limited ("Zeta") were established as investment
companies. Utilico Emerging Markets Limited ("UEM") won two
industry awards for its strong performance. The 2012 ZDP shares
were redeemed for GBP67.8m in accordance with their terms on 31
October 2012 and the 2018 ZDP shares, with a market value of
GBP56.5m, now trade at a premium to NAV.
Resolute's poor share price performance during the current year
has overshadowed the rest of the portfolio, which performed well in
relatively difficult markets. Excluding Resolute, the rest of the
portfolio returned a gain of GBP11.6m.
Since August 2003 Utilico's net asset value ("NAV") per ordinary
share plus cumulative dividends of 38.20p has increased by 87.7%.
This is an average annual compound total return per ordinary share
of 7.0%, which was behind the FTSE All Share Total Return Index,
which achieved an 8.5% compound annual growth over the same
period.
Resolute's share price weakness has been driven by a combination
of a lower gold price and negative market sentiment towards gold
mining companies and the mining sector more generally. The gold
price rose in the first quarter to US$1,792 per ounce in October
2012 and fell to US$1,235 on 30 June 2013.
The Board agrees with the Investment Manager's view that both of
these factors are unduly pessimistic particularly in the case of
Resolute where operating performance remains strong with production
of 436,000 ounces at an average cost of A$811 per ounce. However,
despite good operational performance ahead of production targets,
realistically, we must anticipate continued volatility in
Resolute's share price.
The Board is anticipating this volatility as a consequence of
our views on the state of global economic recovery in circumstances
where the actions of central banks continue to mask many
substantial sovereign structural problems most notably in Europe.
Despite extensive support, Europe has generated minimal growth
overall with government debt levels continuing to rise in the
absence of meaningful welfare and other reforms. Furthermore, in
contrast to the US for example, it would appear that European banks
de-leveraging will need to continue for some considerable time to
come as many appear not to have seriously tackled the issue of
non-performing loans.
The Board will, of course, continually and actively review our
investment in Resolute with the Investment Manager and indeed, this
led to the realisation of GBP10.8m with the sale of 7.0% of our
original investment at an average price of A$1.92. However, against
the economic backdrop I have described we must anticipate further,
possibly significant, disruption in financial and economic markets.
Such market features have, historically, been positive for gold and
the Board currently regards the Resolute investment as appropriate
in a risk reflective portfolio.
During the twelve months the investment in Infratil Limited
("Infratil") was reduced by 13.7% realising GBP13.0m.
A key feature of the twelve months has been the creation and
development of BNL and the establishment of BFIC and Zeta. These
three platforms should enable better focus on the opportunities
within the financial services sector, the Bermuda investment market
and the resources sector respectively.
As Utilico holds over 50.0% of BFIC and Zeta, these two
companies were consolidated with the accounts of Utilico at the
year-end. While clearly regarded as investments, the accounting
rules currently require their consolidation, which we expect to see
reversed next year when a new International Accounting Standard
becomes effective. This has beneficially impacted on the
presentation of these results and lifted the reported Group NAV per
share from 148.50p to 157.44p. The majority of this uplift is due
to the inclusion of Zeta at NAV as opposed to its market price,
which stands at a 50.0% discount. We have commented on the
Company's results (rather than the Group's results) as these better
reflect the investment value to shareholders. Further details are
set out in the Investment Manager's Report.
The portfolio returned a record revenue total income of
GBP16.2m. The revenue income has remained strong as a result of
dividends and interest from our investments, especially from our
unlisted transport ticketing related investments. This has resulted
in record earnings per share ("EPS") of 12.09p versus 12.02p per
ordinary share in 2012.
The Board has decided to pay a final dividend of 3.75p, making a
total of 7.50p for the year, an increase of 7.1% over the previous
year's dividends of 7.00p. This dividend per share represents a
yield of 5.8% on the closing share price of 130.00p. Utilico also
paid a special dividend of 2.50p at the interim stage, taking total
dividends for the year to 10.00p, a yield of 7.7%. The revenue
reserves per ordinary share carried forward (after deduction of the
final dividend) are 10.12p. This strong position should enable the
Directors to declare a rising dividend for the current year,
although the income from the unlisted transport ticketing related
investments is expected to reduce significantly this financial
year.
The Board is aware of the increasing emphasis investors are
placing on dividend income and intends to commence paying dividends
in the current financial year on a quarterly basis. It is expected
that the first quarterly dividend will be declared in October and
paid in November 2013.
The 2012 Zero Dividend Preference shares ("ZDP shares") were
redeemed in full on 31 October 2012. Following on from the issue of
further 2014 and 2016 ZDP shares and the issue of new 2018 ZDP
shares in the year to June 2012, we issued a further 27.6m 2018 ZDP
shares during the year to 30 June 2013. The balance required for
the redemption of the 2012 ZDP shares was financed from the bank
debt. Utilico subscribed for 12.3m 2018 ZDP shares, which it has
subsequently been selling in the market when prices have been
favourable. Since October 2012, it has sold 7.6m 2018 ZDP shares,
leaving it with a resultant holding of 4.7m 2018 ZDP shares at 17
September 2013 which it intends to continue to sell over the coming
months.
On 31 October 2014 Utilico is due to redeem the 2014 ZDP shares
with a redemption value of GBP79.6m. The Board is currently
reviewing options available to the Company to facilitate the
redemption of the 2014 ZDP shares and will make a further
announcement in due course.
I would like to thank my colleague Directors for their
commitment and valued contribution to the Company in these
challenging times. I particularly want to record my own and my
predecessor Michael Collier, gratitude to Susan Hansen who is
stepping down as a Director with effect from 17 September 2013.
Susan has served on the Board with great distinction since May 2007
and we will miss her effective contribution.
Warren McLeland, who was Susan's alternate and previously a
Director of the Company, has been re-appointed with effect from 17
September 2013. We all welcome him back onto the Board.
Outlook
We expect our investee companies, including Resolute, to
continue to make good progress at the operating level which will be
positive for the Company over time. Our assessment of continued
volatility in markets and wider economic performance should create
new investment opportunities for us but will also inevitably
introduce volatility into investment valuations which we will seek
to manage.
Dr R J Urwin
17 September 2013
INVESTMENT MANAGER'S REPORT
Utilico has made progress on a number of fronts. However, this
progress has been overshadowed by the poor share price performance
of Resolute which declined by 55.6%, and as a result the total
return for the twelve months was negative 24.5%.
Over the last twelve months Utilico has made positive progress.
The portfolio produced record revenue income of GBP16.2m. The
capital performance of the majority of the portfolio was positive
and included an increase in Renewable Energy Generation Limited's
("REG") share price of 45.1%. Operationally most investee companies
made good progress. Bermuda National Limited ("BNL") was expanded
and Bermuda First Investment Company Limited ("BFIC"), a Bermuda
focused investment vehicle and Zeta Resources Limited ("Zeta"), a
resource based investment vehicle, were established. The 2012 ZDP
shares were redeemed in full for GBP67.6m and the 2018 ZDP shares
issued to part fund this redemption now trade at a premium to their
NAV and have a market value of GBP56.5m.
BFIC and Zeta have been established as subsidiaries of Utilico
and are listed on the Bermuda Stock Exchange and the Australian
Stock Exchange respectively. Utilico held 67.2% of BFIC and 70.9%
of Zeta at year end. Under current accounting convention both must
be consolidated which has a beneficial impact on Utilico's group
results as the underlying investments are included at fair values.
At the Company level we reflect the listed share price of both in
the portfolio. This results in an increase in NAV per share on
consolidation of 0.9p for BFIC and 8.2p for Zeta. Overall the
consolidated Group NAV per share is 157.44p versus the Company NAV
of 148.50p per share.
We anticipate in the current year the accounting standards will
reverse the need for consolidation. Further, it should be noted
that Utilico's weekly NAV is reported on an unconsolidated basis.
For these reasons throughout the commentary (both in the Chairman's
Statement and our Investment Manager's Report) we have referred to
the Company's position and not the Group's position.
The platforms have been set up to provide better focused
investment decisions within their sectors. Over time we hope that
BNL, BFIC and Zeta can raise external capital and develop a dynamic
profile similar to Infratil and UEM.
Given the shifting profile of Utilico to a core set of
investments, including these platforms we have included both a list
of the top 10 direct investments and a portfolio of the top 10 on a
look through basis.
Portfolio
Utilico's portfolio continues to reflect a strong bias towards
infrastructure and utilities with over 60.4% invested in these
sectors (2012: 55.0%).
During the year we invested GBP98.6m, including GBP21.4m into
Zeta mainly by way of reversing assets held by Utilico into Zeta;
GBP14.3m into BFIC by way of reversing assets held by Utilico into
BFIC; and GBP11.5m into BNL to help it fund acquisitions.
Disposals amounted to GBP102.8m including a part realisation of
Infratil raising GBP13.0m, a part realisation of Resolute raising
GBP10.8m, and a part realisation of Jersey Electricity Limited
("JEL") raising GBP4.0m.
Within the sectors, gold mining has reduced substantially from
26.0% to 13.0% of the portfolio as a result of Resolute's negative
share price performance. Increases have been seen in renewables, up
from 13.0% to 19.0%, mainly driven by a 45.1% increase in REG's
share price; and in financial services up from 5.0% to 9.0%, mainly
as a result of investments in BNL.
Geographically, gold mining has reduced substantially from 26.0%
to 13.0%, Asia and Far East is up 4.0% to 18.0% as a result of
UEM's strong performance; UK and Channel Islands are up 4.0% to
16.0% in part due to REG's performance and Bermuda is up from 9.0%
to 15.0% mainly as a result of investments in BNL.
At the year-end Utilico held unlisted and untraded investments
of GBP39.0m, equal to 10.0% of the gross assets (2012: GBP32.3m and
7.4% of gross assets).
Major Investments
Utilico now has six platform investments - UEM, Infratil, BNL,
BFIC, Zeta and the Vix Group. To this can be added the core
investment in Resolute. These together represent seven out of the
top 10 investments and account for 81.5% of the gross assets at 30
June 2013.
UEM is now Utilico's top investment accounting for 26.3% of the
portfolio. It has achieved this through a strong share price
performance. In the year to 31 March 2013, UEM achieved a total
return of 20.5%. This has been driven by good stock selection and
positive operational performance by most of its investments. UEM's
performance has been recognised by two industry awards: it won
Investment Week's Emerging Markets category Investment Company of
the Year at the 2012 awards and in June 2013 it won the Money
Observer Best Emerging Markets Trust Award.
Currently the emerging markets are facing significant challenges
and the currency and equity markets have been weak. This weakness
has negatively impacted UEM's NAV and share price.
Infratil's share price was up 8.6% over the year. In addition,
we received a dividend equivalent to 5.4% on our opening valuation.
Infratil continues to report good operational performance. During
the year Utilico reduced its exposure to Infratil by selling into
the market, reducing its holding by 13.7% at an average price of
NZ$2.40, realising GBP13.0m.
Since the year end Infratil has successfully IPO'd Z Energy
which enabled it to partially exit the investment, realising
NZ$420.0m. This is a significant step for Infratil and demonstrates
its ability to identify good investments, make a significant
difference to the investee operations and successfully exit at
higher valuations.
Resolute's share price fell by 55.6% to A$0.60. This
significantly impacted both Resolute's carrying value and Utilico's
gross assets. Over the twelve months, Resolute's share price rose
from A$1.34 to A$2.03 then fell to A$0.60 at year-end and went to a
low of A$0.53 after year-end. This peak to trough loss of 70.4% is
mirrored by the peak to trough gold price. Gold started the year at
US$1,597, reached a peak of US$1,772 then declined to a low of
US$1,235 at year end. The peak to trough loss was 30.3%. Given
Resolute's cash cost per ounce of some $800 to $900 the loss
reflected in gold price would be magnified in the case of
Resolute's profits.
We believe that gold is a repository of wealth in times of
uncertainty and going forward we expect the gold price to
improve.
In October 2012 Utilico took advantage of Resolute's firmer
share price to sell 5.4m shares at an average price of A$1.92 per
share, realising GBP10.8m for Utilico. Following the weak market
price for Resolute, Utilico bought 3.5m shares at an average price
of A$0.75, costing Utilico GBP1.7m.
Resolute's operations have been ahead of budget. Production
during the year of over 435,000 ounces comfortably exceeded
forecasts, and cash costs of A$811 per ounce were lower than
forecast. The average gold price realised was A$1,562 per ounce,
down from A$1,627 the previous year. Forecast production for the
year to 30 June 2014 is 345,000 ounces at an average cost of A$890
per ounce, with reduced production in line with expectations due to
the closure of the Golden Pride operation in Tanzania, having
reached the end of its mine life.
While the company has significantly scaled back its future
capital expenditure plans somewhat, it has continued to produce
excess cash flows, and has taken advantage of the bear market in
gold mining company shares (and subsequent lack of investment
capital) to make investments in other gold mining companies and
projects.
BNL is a financial services investment holding company which is
listed on the Bermuda Stock Exchange. BNL acquired Bermuda
Commercial Bank Limited ("BCB") in October 2012 and shareholders in
BCB became shareholders in BNL on a one-for-one basis. Utilico
invested further in BNL during the year enabling it to restructure
its investments. As at year end, Utilico held approximately 45.0%
of BNL.
BNL's larger investments now include 100% of BCB, 62.5% of JO
Hambro Investment Management Limited ("JOHIM"), 66.0% of Private
& Commercial Finance Group plc ("PCFG") on a fully diluted
basis and 46.1% of Westhouse Holdings plc ("Westhouse").
BCB reported good results for the six months ended 31 March
2013, with net profit of US$5.1m (2012: US$3.2m) on total assets of
US$631.3m (30 September 2012: US$572.0m). Total customer deposits
were US$510.3m (30 September 2012: US$457.5m). PCFG, which is
listed on AIM in London, reported strong results in the year to 31
March 2013 with profits after tax and basic earnings per share up
22.2% over the prior year and net assets up 6.3%. The business
secured further funding in the form of a convertible loan note
("CLN") and increased and extended its borrowing facilities. BCB
subscribed for GBP4.6m of the GBP5.9m CLNs issued. On a fully
diluted basis this takes BNL's interest to 66.0% of PCFG.
Westhouse, a UK small and mid cap broker, which de-listed from AIM
in early 2013, continues to find trading challenging.
Since year end, Utilico has invested a further GBP10.0m into BNL
to enable BNL to take a majority position in JOHIM. JOHIM is a UK
wealth manager with over GBP4.0bn in assets under management. This
is an exciting investment for BNL and we believe offers substantial
opportunity for growth. As at 30 August 2013 Utilico holds 49.8% of
BNL.
BFIC shares and loan notes are listed on the Bermuda Stock
Exchange. BFIC is an investment holding company with investments in
companies in Bermuda. In October 2012, Utilico, BCB and other
investors sold their holdings in certain Bermuda companies in
exchange for shares and loan notes in BFIC. Utilico holds
approximately 67.2% of BFIC. BFIC's strategy is to build up
strategic stakes in Bermuda listed local companies. Its two main
holdings are a 23% holding in KeyTech Limited and 10% holding in
Ascendant Group Limited. As at 31 March 2013 it had total assets of
BM$32.1m and had reported income for the period ended 31 March 2013
of BM$1.3m.
Zeta listed on the Australian Stock Exchange ("ASX") in June
2013 following a scheme of arrangement to merge a portfolio of some
of Utilico's holdings in resource companies with ASX-listed junior
gold explorer Kumarina Resources Limited. The investments
transferred by Utilico were valued at market prices and amounted to
GBP21.0m. Since listing, Utilico has been purchasing Zeta ordinary
shares in the market at a substantial discount. As at 30 June 2013
Utilico held 70.9% of Zeta, which has increased to 73.2% since that
date. In addition Utilico has made available a A$10.0m loan
facility to Zeta. Zeta had gross assets of A$40.5m as at 30 June
2013. Zeta is focused on the resource sectors, in particular gold
and oil and gas. Zeta will look for mis-priced asset backed
investments within the sector or positions which offer strong
optionality.
Vix Group ("Vix") has made continued progress in the twelve
months to 30 June 2013. The transport ticketing systems business
has taken steps to reduce its cost base, invest in its technology
and generally strengthen its core skill set. This has resulted in
one-off costs in the year. Notwithstanding this, the business
should be EBITDA positive. The OneLink business, which ran the
Melbourne transport ticketing systems, has seen its contract end.
Within the investment portfolio of Vix there are a number of
interesting investments in the wider payment solutions industry. A
number of these are cutting edge technologies and offer good
prospects. During the year Utilico invested a net GBP1.0m into
Vix.
Gold Mining - 13%
Our largest investment in gold mining is in Resolute. Resolute
has been reviewed above.
Renewables - 19%
Climate change remains a key factor in energy policy worldwide,
with widespread commitment to reducing greenhouse gas emissions.
This is mainly being implemented through renewable subsidy schemes
as well as "cap and trade" carbon emission trading. The economic
downturn following the financial crisis has renewed political
debate over the cost of such incentive schemes and the resulting
impact of higher energy tariffs. At the same time, meeting CO2
targets have become increasingly challenging as some major
economies are moving away from nuclear power generation following
the Fukushima disaster. Against this backdrop we continue to see
the sector as offering attractive investment opportunities,
particularly in selected regions such as the UK where long-term
sustainability of the renewable sector has been underpinned by the
draft Electricity Market Reform policies.
Utilico's main exposure to renewables is through TrustPower
Limited ("TrustPower") and Renewable Energy Generation Limited
("REG").
TrustPower is held indirectly through the investment in Infratil
Limited, which in turn holds 50.5% of TrustPower's share capital.
TrustPower continues to operate in a challenging retail environment
in New Zealand, which combined with weak hydrological conditions
and no new generation capacity, resulted in earnings falling 6.3%
in the year to March 2013. The company currently operates 730MW of
hydro and wind capacity in New Zealand and Australia, and is well
on track to commission the 270MW Snowtown II wind farm project in
Australia in 2014. This project underpins the strong growth and
optionality potential of TrustPower in the medium term.
REG has made excellent progress in the past year, with the sale
of two wind farms amply demonstrating the intrinsic value of the
assets. In January 2013 REG announced the disposal of the
newly-commissioned South Sharpley and Sancton Hill projects, with
total capacity of 16MW, for GBP32.1m. With a portfolio of 51.2MW of
operational wind farms as at end-June 2013 and over 130MW of wind
farm projects in the planning process, REG is well positioned to
capitalise on the increasing demand from financial investors for
operational wind farm assets. REG's market capitalisation increased
substantially during the period following the announcement of the
transaction.
Electricity - 10%
Jersey Electricity plc ("JEL") continues to experience tough
operating conditions which was compounded by the failure and
subsequent decommissioning of its older subsea cable supplying
electricity from France. This has resulted in JEL relying on only
one subsea connection, constraining the supply of cheaper
electricity and increasing its reliance on more expensive on-island
diesel generation facilities. While the regulator allowed JEL a
9.0% tariff increase in January 2013, this failed to compensate for
the higher operating expenses, with interim normalised net income
to end-March 2013 falling almost 80%. We continue to be concerned
about JEL's ability to procure an adequate return on investment,
particularly given the forthcoming GBP70m cost of a replacement
interconnector to France due to be commissioned in 2015. In our
view the lack of regulatory certainty on returns is a continuing
encumbrance on JEL which leaves its shares heavily undervalued
given the installed operational asset base.
We have been shareholders since 1993, but against this
background Utilico sold 29.0% of its investment for GBP4.0m during
the year.
Infratil Energy Australia Pty Ltd ("IEA") is held indirectly
through the investment in Infratil. IEA has delivered a strong
performance during the year. Customer numbers grew by 10% on last
year to 498,000 as at end-May 2013, while generation capacity has
remained flat at 285MW. The growth in the retail business combined
with lower wholesale electricity prices ensured profits rose by
over 50% to A$77m to end-March 2013, an excellent result.
Oil and Gas - 8%
New Zealand Oil & Gas Limited ("NZOG") is held indirectly
through the investment in Zeta. NZOG was relatively quiet during
the period under review. Production from its offshore Taranaki, New
Zealand oil interests (Kupe 15% and Tui 12.5%) was healthy, with
revenues ahead of forecasts, albeit down on the previous year which
is normal for oil production in the absence of new exploration. In
June 2013 the company announced promising results from its joint
venture (22.5%) drilling in Kisaran, Indonesia; further work is
needed to demonstrate whether the results can be developed
commercially. The company decided not to pursue an opportunity in
Tunisia, a decision we supported as the potential capital
expenditure costs were substantial. The coming year will be an
active one for drilling. Even accounting for that, NZOG still has
substantial cash reserves (NZ$158.0m as at 30 June 2013), and it is
our preference that excess cash should be returned to shareholders,
ideally in the form of a buy-back.
Utilico invested a further GBP3.1m in NZOG this year and has
transferred this investment to Zeta.
Z Energy Limited ("Z Energy"), which is held indirectly through
Infratil, delivered a strong performance following the completion
of the rebranding and upgrade of its service stations. A
rebalancing of sales mix away from low margin customers saw
revenues decline by 6.0% in the year to end-March 2013, while
current cost EBITDAF increased by 13.4% as margins improved. Post
the period end in August 2013 Z Energy was successfully floated on
the New Zealand and Australian stock exchanges which resulted in
Infratil reducing its stake in Z Energy from 50% to 20%. This
raised NZ$420.0m for Infratil.
Seacrest Limited ("Seacrest"), which is held direct and through
Zeta, has access to Petroleum Geo-Services' ("PGS") substantial
seismic database and licensing opportunities on a first refusal
basis for seven years. This seismic database enables exploration
companies to accelerate their progress in determining their
drilling programmes without the need to first commission 2D data
and then 3D data from seismic companies. Seacrest has used this
world-wide data set to effectively farm into a number of
prospective licences, mainly in off-shore Namibia and the North
Sea. If one of these prospective licences produces meaningful oil,
the value of Seacrest would be significant.
Airports - 5%
Wellington International Airport Ltd ("WIAL") is held indirectly
through Infratil. WIAL performed solidly over the year, with
passenger numbers increasing by 3.5%, as domestic growth benefited
from increased capacity of Jetstar and a competitive response from
Air New Zealand. International passenger growth however was
slightly subdued compared to previous years as the market has
consolidated following two years of significant growth which
included the 2011 Rugby World Cup.
Derivatives
Over the years there have been two parts to Utilico's derivative
position. First, portfolio market derivatives, mainly through
S&P500 Index options. Second, currency positions within
Utilico's portfolio.
The market derivatives have remained modest through the year.
Given the strong performance by the US markets in particular,
modest losses of GBP0.3m were incurred.
Utilico has maintained significant currency positions in part to
protect the Sterling value of certain investments. At the period
end, forward currency sale contracts were in place for nominal
NZ$126.0m, EUR11.9m and A$21.3m.
Debt
The bank debt had been reduced to nil last year, partly through
the placing of 2018 ZDP shares in the market for cash, in
anticipation of the redemption of the 2012 ZDP shares. The level of
bank debt increased from nil to GBP42.5m as at 30 June 2013 as the
debt was drawn down to redeem the 2012 ZDP shares.
As reported in last year's accounts, the amount of the facility
was increased from GBP30.0m to GBP50.0m.
ZDP Shares
The 38.2m 2012 ZDP shares outstanding as at 30 June 2012 were
redeemed on 31 October 2012. To fund this redemption, Utilico used
its bank facility with Scotiabank Europe plc together with funds
raised by placing 2014, 2016 and 2018 ZDP shares in the market over
the last two years.
At year-end Utilico held 5.8m 2018 ZDP shares and Utilico
intends to continue to sell these in the market to satisfy
demand.
Capital Returns
Capital returns were negative in the year to 30 June 2013
amounting to a loss of GBP63.2m. This comprised a loss on the
portfolio of GBP47.8m and finance costs of GBP14.3m. The resulting
EPS negative return was 63.5p, compared with a prior year gain of
2.7p.
Revenue Returns
Utilico reported record revenue returns in the twelve months to
30 June 2013. Total income was GBP16.2m, up 2.5% on the previous
year and nearly double the returns seen in the year to June 2007.
Most investee companies increased their dividends and Resolute
declared a maiden dividend in November 2012 of A$0.05.
Management and finance costs were flat year on year while other
expenses of GBP1.1m were up 27.6% as a result of an increase in
professional fees and travel expenses. Taxation rose from GBP0.02m
to GBP0.3m.
The combined effect of the above resulted in the revenue EPS
increasing marginally to a record 12.09p (2012: 12.02p).
ICM Limited
Investment Manager
17 September 2013
PRINCIPAL RISKS AND RISK MITIGATION
The Company's assets consist mainly of listed and quoted
securities and its principal risks are therefore market related or
currency related. The large number of investments held, together
with the geographic and sector diversity of the portfolio, enables
the Company to spread its risk with regard to liquidity, market
volatility, currency movements, counter party and revenue
streams.
Other key risks faced by the Company relate to investment
strategy, management and resources, regulatory issues, operational
matters, financial controls and external events.
These risks, and the way in which they are managed, are
described in more detail under the heading "Principal risks and
risk mitigation" within the Report of the Directors contained
within the Group's Report and Accounts for the year ended 30 June
2013. The Annual Report and Accounts is published on the Company's
website, www.utilico.bm.
DIRECTOR'S STATEMENT OF RESPONSIBILITIES
The Directors are responsible for preparing the Report of the
Directors and the financial statements in accordance with
applicable Bermuda law and IFRS, as adopted by the European
Union.
The Directors must not approve the Group financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of the profit and
loss of the Group and Company for that period. In preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them
consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- make judgements and estimates that are reasonable and
prudent;
-- provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
-- state that the Group and Company has complied with IFRS,
subject to any material departures disclosed and explained in the
financial statements; and
-- prepare the accounts on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping proper accounting
records which are sufficient to show and explain the Group's and
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements comply with IFRS. They
are also responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
To the best of the knowledge of the Directors: (i) the accounts
which have been prepared in accordance with IFRS, as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group, including
its protected cell within GERP included in the consolidation, and
the Company; (ii) the Chairman's Statement and Investment Manager's
Report includes a fair review of development and performance of the
business and the Report of the Directors contains a description of
the principal risks and uncertainties that the Group and Company
faces. The financial risks are also provided in note 36 to the
accounts.
Insofar as the Directors are aware:
-- there is no relevant audit information of which the Company's
auditor is unaware; and
-- the Directors have taken all reasonable steps that they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
The annual report and accounts are published on the Company's
website, www.utilico.bm, the maintenance and integrity of which is
the responsibility of the Company. The work carried out by the
auditor does not involve consideration of the maintenance and
integrity of the website and accordingly, the auditor accepts no
responsibility for any changes that have occurred in the financial
statements since they were originally presented on the website.
Visitors to the website need to be aware that the legislation
governing the preparation and dissemination of the accounts may
differ from legislation in their jurisdiction.
Approved by the Board on 17 September 2013 and signed on its
behalf by:
Dr R J Urwin
Chairman
consolidated PERFORMANCE SUMMARY
30 June 30 June Change
2013 2012 2012/13
(Company)(1) (Group)
----------------------------------------------------------- ------------------- -------------- -------------
Ordinary shares
Total return (annual) (2) (24.5%) 7.3% n/a
Annual compound total return (since inception) 7.0% 10.8% n/a
Net asset value per ordinary share 148.50p 209.67p (29.2%)
Share prices and indices
Ordinary share price 130.00p 144.00p (9.7%)
Discount 12.5% 31.3% n/a
FTSE All-Share Total Return Index 4,837 4,101 17.9%
----------------------------------------------------------- ------------------- -------------- -------------
Returns and dividends
Revenue return per ordinary share 12.09p 11.99p 0.8%
Capital return per ordinary share (63.53p) 2.73p n/a
Total return per ordinary share (51.44p) 14.72p n/a
Dividend per ordinary share 10.00p(3) 7.00p 42.9%
Zero dividend preference ("ZDP") shares(4)
2012 ZDP shares - repaid 31 October 2012
Capital entitlement per ZDP share n/a 173.52p n/a
ZDP share price n/a 175.50p n/a
2014 ZDP shares
Capital entitlement per ZDP share 152.64p 142.33p 7.2%
ZDP share price 158.50p 154.00p 2.9%
2016 ZDP shares
Capital entitlement per ZDP share 152.64p 142.33p 7.2%
ZDP share price 165.50p 148.50p 11.4%
2018 ZDP shares
Capital entitlement per ZDP share 110.50p 103.03p 7.3%
ZDP share price 113.38p 104.00p 9.0%
----------------------------------------------------------- ------------------- -------------- -------------
Capital structure (GBPm)
Gross assets(5) 389.5 434.5 (10.4%)
Bank debt 42.5 - n/a
ZDP shares 199.8 224.4 (11.0%)
Other debt - 1.2 n/a
Equity holders' funds 147.2 208.9 (29.5%)
Revenue account (GBPm)
Income 16.2 15.9 1.9%
Costs (management and other expenses) 3.2 3.0 6.7%
Finance costs 0.8 0.8 0.0%
----------------------------------------------------------- ------------------- -------------- -------------
Financial ratios of the Group
Revenue yield on average gross assets 3.8% 4.0% n/a
Ongoing charges figure(6) 2.1% 1.7% n/a
Bank loans, ZDP shares and other loans gearing on gross
assets 62.2% 51.9% n/a
----------------------------------------------------------- ------------------- -------------- -------------
(1) Company figures have been used in 2013, rather than Group,
due to the consolidation this year of BFIC and Zeta, which we
anticipate will be reversed in future years.
(2) Total return is calculated as change in NAV per ordinary
share plus dividends re-invested.
(3) Includes special dividend of 2.50p per share
(4) Issued by Utilico Finance Limited, a wholly owned subsidiary
of Utilico Investments Limited.
(5) Gross assets less current liabilities excluding loans and
ZDP shares.
(6) Expressed as a percentage of average net assets. Ongoing
charges comprise all operational, recurring costs that are payable
by the Company or suffered within underlying investee funds, in the
absence of any purchases or sales of investments.
COMPANY INCOME STATEMENT
Year to 30 June 2013 Year to 30 June 2012
Revenue Capital Total Revenue Capital Total
return return return return return return
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------------------- --------- --------- --------- --------- --------- ---------
(Losses)/gains on investments - (47,769) (47,769) - 13,338 13,338
(Losses)/gains on derivative instruments - (273) (273) - 1,002 1,002
Exchange (losses)/gains (12) (830) (842) - 1,772 1,772
Investment and other income 16,228 - 16,228 15,850 - 15,850
Total income 16,216 (48,872) (32,656) 15,850 16,112 31,962
Income not receivable - - - (126) - (126)
Management and administration fees (2,009) - (2,009) (2,022) - (2,022)
Other expenses (1,147) (8) (1,155) (899) (7) (906)
------------------------------------------------- --------- --------- --------- --------- --------- ---------
Profit/(loss) before finance costs and taxation 13,060 (48,880) (35,820) 12,803 16,105 28,908
Finance costs (754) (14,333) (15,087) (783) (13,388) (14,171)
Profit/(loss) before taxation 12,306 (63,213) (50,907) 12,020 2,717 14,737
Taxation (275) - (275) (21) - (21)
------------------------------------------------- --------- --------- --------- --------- --------- ---------
Profit/(loss) for the year 12,031 (63,213) (51,182) 11,999 2,717 14,716
------------------------------------------------- --------- --------- --------- --------- --------- ---------
Earnings per ordinary share (basic) - pence 12.09 (63.53) (51.44) 12.02 2.72 14.74
------------------------------------------------- --------- --------- --------- --------- --------- ---------
The Company does not have any income or expense that is not
included in the profit for the year, and therefore the 'profit for
the year' is also the 'total comprehensive income for the year', as
defined in International Accounting Standard 1 (revised).
All items in the above statement derive from continuing
operations.
All income is attributable to the equity holders of the
Company.
GROUP INCOME STATEMENT
Year to 30 June 2013 Year to 30 June 2012
Revenue Capital Total Revenue Capital Total
return return return return return Return
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------------- --------- --------- --------- --------- --------- ---------
(Losses)/gains on investments - (35,402) (35,402) - 13,403 13,403
(Losses)/gains on derivative instruments - (3,714) (3,714) - 942 942
Exchange (losses)/gains (12) (430) (442) - 1,792 1,792
Impairment of goodwill - (1,583) (1,583) - - -
Investment and other income 17,072 - 17,072 15,850 - 15,850
Total income 17,060 (41,129) (24,069) 15,850 16,137 31,987
Income not receivable - - - (126) - (126)
Management and administration fees (2,140) - (2,140) (2,022) - (2,022)
Other expenses (1,515) (118) (1,633) (928) (7) (935)
--------------------------------------------- --------- --------- --------- --------- --------- ---------
Profit before finance costs and taxation 13,405 (41,247) (27,842) 12,774 16,130 28,904
Finance costs (884) (13,609) (14,493) (783) (13,401) (14,184)
Profit/(loss) before taxation 12,521 (54,856) (42,335) 11,991 2,729 14,720
Taxation (275) 360 85 (21) - (21)
--------------------------------------------- --------- --------- --------- --------- --------- ---------
Profit/(loss) for the year 12,246 (54,496) (42,250) 11,970 2,729 14,699
--------------------------------------------- --------- --------- --------- --------- --------- ---------
Profit/(loss) for the year attributable to:
Equity holders of the Parent Company 12,105 (53,368) (41,263) 11,970 2,729 14,699
Non-controlling interests 141 (1,128) (987) - - -
--------------------------------------------- --------- --------- --------- --------- --------- ---------
12,246 (54,496) (42,250) 11,970 2,729 14,699
--------------------------------------------- --------- --------- --------- --------- --------- ---------
Earnings per ordinary share (basic) - pence 12.17 (53.64) (41.47) 11.99 2.73 14.72
--------------------------------------------- --------- --------- --------- --------- --------- ---------
GROUP STATEMENT of comprehensive income
Year to Year to
30 June 2013 30 June 2012
Total Total
return Return
GBP'000s GBP'000s
--------------------------------------------- -------------- --------------
(Loss)/profit before taxation (42,250) 14,699
Other comprehensive income:
Foreign exchange movements on translation
of foreign operations 533 -
--------------------------------------------- -------------- --------------
Total comprehensive (expense)/income
for the year (41,717) 14,699
--------------------------------------------- -------------- --------------
Comprehensive (expense)/income for the year
attributable to:
Equity holders of the Parent Company (40,766) 14,699
Non-controlling interests (951) -
--------------------------------------------- -------------- --------------
(41,717) 14,699
--------------------------------------------- -------------- --------------
All items in the above statement derive from continuing
operations.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year to 30 June 2013
Ordinary Share Non-
share premium Special distributable Capital Revenue
capital account reserve reserve reserves reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------- --------- --------- --------- -------------- ---------- --------- ---------
Balance at 30 June 2012 9,963 29,743 233,866 32,069 (108,172) 11,442 208,911
(Loss)/profit for the year - - - - (63,213) 12,031 (51,182)
Ordinary dividends paid - - - - - (9,714) (9,714)
Shares purchased by the Company (47) (723) - - - - (770)
Balance at 30 June 2013 9,916 29,020 233,866 32,069 (171,385) 13,759 147,245
--------------------------------- --------- --------- --------- -------------- ---------- --------- ---------
for the year to 30 June 2012
Ordinary Share Non-
share premium Special Warrant distributable Capital Revenue
capital account reserve reserve reserve reserves reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------- --------- --------- --------- ---------- -------------- ---------- --------- ---------
Balance at 30 June
2011 9,993 30,250 233,866 3,049 32,069 (113,938) 6,188 201,477
Profit for the year - - - - - 2,717 11,999 14,716
Ordinary dividends
paid - - - - - - (6,745) (6,745)
Conversion of warrants - 2 - - - - - 2
Transfer on
cancellation of
warrants - - - (3,049) - 3,049 - -
Shares purchased by
the Company (30) (509) - - - - - (539)
----------------------- --------- --------- --------- ---------- -------------- ---------- --------- ---------
Balance at 30 June
2012 9,963 29,743 233,866 - 32,069 (108,172) 11,442 208,911
----------------------- --------- --------- --------- ---------- -------------- ---------- --------- ---------
GROUP STATEMENT OF CHANGES IN EQUITY
for the year to 30 June Foreign
2013
Ordinary Share Non- currency Non-
share premium Special distributable translation Capital Revenue controlling
capital account reserve reserve reserve reserves reserve interests Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------- --------- --------- ---------- -------------- ------------ ------------ ---------- ------------ -----------
Balance at
30 June 2012 9,963 29,743 233,866 32,069 - (108,055) 11,308 - 208,894
---------------- --------- --------- ---------- -------------- ------------ ------------ ---------- ------------ -----------
(Loss)/profit
for
the year - - - - - (53,368) 12,105 (987) (42,250)
Other
comprehensive
income - - - - 497 - - 36 533
---------------- --------- --------- ---------- -------------- ------------ ------------ ---------- ------------ -----------
Total
comprehensive
income
/(expense) - - - - 497 (53,368) 12,105 (951) (41,717)
Ordinary
dividends
paid - - - - - - (9,714) - (9,714)
Shares
purchased by
the Company (47) (723) - - - - - - (770)
Loss on
partial
disposal of
subsidiary - - - - - (1,529) - - (1,529)
Increase in
non-
controlling
interests - - - - - - - 12,063 12,063
Distribution
payable to
non-
controlling
interests - - - - - - - (74) (74)
Balance at
30 June 2013 9,916 29,020 233,866 32,069 497 (162,952) 13,699 11,038 167,153
---------------- --------- --------- ---------- -------------- ------------ ------------ ---------- ------------ -----------
for the year to 30 June 2012
Ordinary Share Non-
share premium Special Warrant distributable Capital Revenue
capital account reserve reserve reserve reserves reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------- --------- --------- --------- ---------- -------------- ---------- --------- ---------
Balance at 30 June
2011 9,993 30,250 233,866 3,049 32,069 (113,833) 6,083 201,477
Profit for the year - - - - - 2,729 11,970 14,699
Ordinary dividends
paid - - - - - - (6,745) (6,745)
Conversion of warrants - 2 - - - - - 2
Transfer on
cancellation of
warrants - - - (3,049) - 3,049 - -
Shares purchased by
the Company (30) (509) - - - - - (539)
Balance at 30 June
2012 9,963 29,743 233,866 - 32,069 (108,055) 11,308 208,894
----------------------- --------- --------- --------- ---------- -------------- ---------- --------- ---------
BALANCE SHEETs
at 30 June GROUP COMPANY
2013 2012 2013 2012
GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------- --------------- --------------- --------------- ---------------
Non-current assets
Investments 393,830 423,243 380,169 432,165
Deferred exploration and evaluation 2,832 - - -
expenditure
--------------------------------------- --------------- --------------- --------------- ---------------
396,662 423,243 380,169 432,165
--------------------------------------- --------------- --------------- --------------- ---------------
Current assets
Other receivables 3,375 6,056 2,741 2,020
Derivative financial instruments 2,020 4,739 1,074 927
Cash and cash equivalents 8,456 8,246 7,581 7,908
--------------------------------------- --------------- --------------- --------------- ---------------
13,851 19,041 11,396 10,855
--------------------------------------- --------------- --------------- --------------- ---------------
Current liabilities
Loans (42,500) (1,253) (42,500) (1,253)
Other payables (3,696) (5,437) (201,757) (231,813)
Zero dividend preference shares - (66,275) - -
Derivative financial instruments (63) (2,304) (63) (1,043)
(46,259) (75,269) (244,320) (234,109)
--------------------------------------- --------------- --------------- --------------- ---------------
Net current liabilities (32,408) (56,228) (232,924) (223,254)
--------------------------------------- --------------- --------------- --------------- ---------------
Total assets less current liabilities 364,254 367,015 147,245 208,911
Non-current liabilities
Loan notes (3,705) - - -
Zero dividend preference shares (193,396) (158,121) - -
--------------------------------------- --------------- --------------- --------------- ---------------
Net assets 167,153 208,894 147,245 208,911
--------------------------------------- --------------- --------------- --------------- ---------------
Equity attributable to equity holders
Ordinary share capital 9,916 9,963 9,916 9,963
Share premium account 29,020 29,743 29,020 29,743
Special reserve 233,866 233,866 233,866 233,866
Non-distributable reserve 32,069 32,069 32,069 32,069
Foreign currency translation reserve 497 - - -
Capital reserves (162,952) (108,055) (171,385) (108,172)
Revenue reserve 13,699 11,308 13,759 11,442
--------------------------------------- --------------- --------------- --------------- ---------------
Total attributable to equity holders 156,115 208,894 147,245 208,911
Non-controlling interests 11,038 - - -
--------------------------------------- --------------- --------------- --------------- ---------------
Total equity attributable to
Group/Company 167,153 208,894 147,245 208,911
--------------------------------------- --------------- --------------- --------------- ---------------
Net asset value per ordinary share
Basic - pence 157.44 209.67 148.50 209.68
--------------------------------------- --------------- --------------- --------------- ---------------
CASH FLOW STATEMENTs
GROUP COMPANY
for the year to 30 June 2013 2012 2013 2012
GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------------------- --------------- -------------- --------------- --------------
Cash flows from operating activities 12,779 10,092 12,430 10,123
---------------------------------------- --------------- -------------- --------------- --------------
Investing activities
Purchases of investments (50,573) (46,593) (47,146) (58,842)
Sales of investments 51,363 44,860 60,889 48,567
Purchases of derivatives (6,977) (14,055) - (899)
Sales of derivatives 3,741 12,185 (1,400) 1,266
Exploration and evaluation expenditure (139) - - -
Cash from acquisition of subsidiary 3,766 - - -
Cash flows on margin accounts 4,035 (4,036) - -
---------------------------------------- --------------- -------------- --------------- --------------
Cash flows from investing activities 5,216 (7,639) 12,343 (9,908)
---------------------------------------- --------------- -------------- --------------- --------------
Cash flows before financing activities 17,995 2,453 24,773 215
---------------------------------------- --------------- -------------- --------------- --------------
Financing activities
Equity dividends paid (9,714) (6,745) (9,714) (6,745)
Movement on loans 41,247 (31,551) 41,247 (31,551)
Cash flow from issue of ZDP shares 23,209 40,240 15,955 40,240
Cash flow from redemption of ZDP
shares (67,801) (2,007) (67,609) -
Issue of share capital in subsidiary 2 - - -
Proceeds from warrants exercised - 2 - 2
Cost of shares purchased for
cancellation (770) (539) (770) (539)
Cash flows from financing activities (13,827) (600) (20,891) 1,407
---------------------------------------- --------------- -------------- --------------- --------------
Net increase in cash and cash
equivalents 4,168 1,853 3,882 1,622
Cash and cash equivalents at the
beginning of the year 4,879 1,293 4,541 1,206
Effect of movement in foreign
exchange (823) 1,733 (842) 1,713
---------------------------------------- --------------- -------------- --------------- --------------
Cash and cash equivalents at the
end of the year 8,224 4,879 7,581 4,541
---------------------------------------- --------------- -------------- --------------- --------------
Comprised of:
Cash and cash equivalents 8,456 8,246 7,581 7,908
Bank overdraft (232) (3,367) - (3,367)
--------------------------- ----------- ------------- ----------- -------------
Total 8,224 4,879 7,581 4,541
--------------------------- ----------- ------------- ----------- -------------
NOTES
The Directors have declared a final dividend of 3.75p per
ordinary share in respect of the year to 30 June 2013 payable on 18
October 2013 to all ordinary shareholders on the register at close
of business on 4 October 2013. The total cost of the dividend which
has not been accrued in the results for the year to 30 June 2013,
is GBP3,718,000 based on 99,157,214 ordinary shares in issue at the
date of this report.
The Company is an investment company incorporated in Bermuda and
listed on The London Stock Exchange.
The consolidated Accounts for the year to 30 June 2013 comprise
the results of the Company and its subsidiaries Utilico Finance
Limited, Bermuda First Investment Limited and Zeta Resources
Limited and its special purpose entity Global Equity Risk
Protection Limited.
This statement was approved by the Board on 17 September 2013.
It is not the Company's statutory accounts. The statutory accounts
for the financial year to 30 June 2013 have been approved and
audited, and received an audit report which was unqualified and did
not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying the report. The
statutory accounts for the financial year to 30 June 2012 received
an audit report which was unqualified and did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report.
The Report & Accounts will be posted to shareholders in
early October and are made available on the website www.utilico.bm.
Copies may be obtained during normal business hours from Exchange
House, Primrose Street, London, EC2A 2NY.
By order of the Board
ICM Limited, Secretary
17 September 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
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