RNS Number : 7323R
Utilico Investments Limited
16 September 2014
 



Date:                15 September 2014

 

Contact:           Charles Jillings                                              

                        Utilico Investments Limited                             

                        01372 271 486                                               

 

 

 

Utilico Investments Limited

Audited Statement of Results

for the year to 30 June 2014

 

 

 

 

 

 

 

 

 

      Financial Highlights

 

·     Total return per ordinary share 26.88p (-51.59p)

·     Annual total return 18.1% (-24.6%)

·     Ordinary dividend per share 7.50p (7.50p)

        Figures in brackets are for the prior year

 

 



 

CHAIRMAN'S STATEMENT

 

It is pleasing to report that Utilico achieved a total return per ordinary share of 18.1% in the twelve months to 30 June 2014 mainly driven by net portfolio gains of £36.7m. The FTSE All Share Total Return Index increased by 13.1% over the same period.

 

During the year Utilico achieved a number of positives. Utilico Emerging Markets Limited ("UEM") produced a positive return despite weak emerging markets and weak emerging currencies against a strong pound sterling; UEM won three industry awards for its strong performance. Somers took a significant step forward and completed the acquisition of Waverton in late July 2013, funded in part by a further £11.2m investment from Utilico. Waverton has performed strongly with assets under management up from £3.9bn on acquisition to over £5.0bn at 30 June 2014. Zeta has also performed strongly, with its NAV up by 24.3% over the year. Utilico supported Zeta by investing a further net £16.7m.

 

Over the twelve months Resolute Mining Limited ("Resolute") has invested heavily in optimising the Syama mine, proving up its reserves to 15 years and gaining control of Bibiani, an exciting prospect in Ghana. Resolute's shares have ended the twelve months to 30 June 2014 up 3.4%.

 

Significant decisions were made in terms of the longer term gearing of Utilico and the redemption of the 2014 ZDP shares. The Board, in conjunction with the Investment Manager, is determined to reduce the absolute level of debt which stood at £255.9m as at 31 December 2013. A target of £55.0m reduction in debt was set. As a result, in early January a process was started to reduce the holdings in both Infratil and UEM with a view both to better balance the portfolio and to use the proceeds to reduce Utilico's gearing. The investment in Infratil was reduced in January by £20.0m and the investment in Renewable Energy Generation ("REG") was reduced by £7.0m, representing 40.9% of Utilico's investment in REG. By 30 June 2014 bank debt had been reduced to £22.2m, down from £49.0m at 31 December 2013 as a result of realisations and the absolute level of debt stood at £234.7m as at 30 June 2014.

 

In late June Utilico announced its intention to create £25.0m 2020 ZDP shares and to seek further realisations from its portfolio. In early July Utilico announced it had successfully placed 13.8m UEM shares at 180.00p, realising £24.9m. The proceeds were used to reduce the bank debt to nil. Following a successful marketing of the 2020 ZDP shares, holders of some 9.4m 2014 ZDP shares rolled their holdings into 15.5m 2020 ZDP shares and some 9.5m 2020 ZDP shares were placed in the market. The 2020 ZDP shares started trading on 31 July 2014. Utilico is today well placed to meet the redemption of the 2014 ZDP shares in October, which will cost some £61.9m, through use of its undrawn bank facility of £50.0m and on-going realisation of portfolio holdings. The Board has therefore decided to close the Placing Programme as described in the Prospectus dated 2 July 2014 with immediate effect.

 

As anticipated in the interim report, revenue returns reduced in the twelve months to 30 June 2014. Total income was £10.4m, down 35.8% on the prior year. This has resulted in earnings per share ("EPS") of 7.03p versus 12.06p per ordinary share in 2013.

 

Utilico has moved to paying quarterly dividends. For the year to 30 June 2014 Utilico has paid four quarterly dividends of 1.875p amounting to 7.50p for the year. This is in line with the prior year. Looking forward the Directors expect to maintain the current dividend profile. Undistributed revenue reserve per share is around 9.66p.

 

In March 2014 ICM, Utilico's Investment Manager, offered to reduce its management fee to 0.25% with effect from 1 January 2014 until the high watermark of 284.81p is regained. The Board was pleased to accept this very welcome offer.

 

The ongoing charges figures excluding and including performance fees of 2.2% and 3.1% respectively, include operational, recurring costs payable by the Group and a proportion of costs incurred in other investment companies held within the portfolio. The direct operating costs of the Group as a ratio of average net assets is 1.4%.

 

Since the year end Michael Collier has retired from the Board of Utilico and we have appointed Graham Cole as a Director, both with effect from 11 September 2014. Graham is Chairman of Vix Technology, in which Utilico has a significant interest.

 

On behalf of the Board, I would like to thank Michael for his support, enthusiasm and guidance both as the first Chairman of the Company from its launch in 2007 until September 2011 and subsequently as a Director. We will miss his wise counsel at the Board meetings.

 

Outlook

We expect our investee companies and platform investments to continue to make good progress at the operating level. This should produce positive results for Utilico over the medium to long term. Short term there is much to be concerned with particularly in Europe and the Middle East. Political tensions will be a significant feature for investors over the next twelve months. We expect continued challenging investment conditions, but this should create new investment opportunities.

 

 

 

Dr Roger Urwin
15 September 2014

 

 

 



INVESTMENT MANAGER'S REPORT

 

The Company achieved an 18.1% total return for the twelve months to 30 June 2014. The breadth of the gains was pleasing, with eight out of the top ten investments posting good positive returns.

 

Utilico has continued its move towards core platform investments, which offer the following benefits:

 

·      Focused strategy. Each platform has a narrow mandate and as such is driven by the need to find and make investments within its mandate.

·      Dedicated research analysts. The research analysts for each platform are focused on both understanding their portfolio businesses and identifying compelling investments.

·      The platforms can draw on Utilico's support and financial backing.

·      The platforms can utilise ICM's wide knowledge across many jurisdictions to optimise investment structures and undertake corporate finance led transactions.

 

In short, the platforms have been set up to provide sharper focus leading to better investment opportunities and decisions within their sectors.

 

This move to core platforms is ongoing. During the year Utilico invested £11.2m in Somers (enabling it to complete the Waverton acquisition in July 2013); and £16.7m in Zeta (enabling it to take up investment opportunities in Panoramic Resources Limited ("Panoramic") and New Zealand Oil & Gas Limited ("NZOG")). Utilico reduced its holding in Infratil during the year, thus reducing its concentration within the Utilico portfolio from 21.5% in June 2013 to 15.3% in June 2014.

 

We first articulated the platform approach in early 2012. Over the three years from 2011 to 2014 our platform investments have grown from £217.7m to £275.4m. As at 30 June 2014 they represent 68.4% of the portfolio. Since the year end Utilico has placed out some 23.8% of its holding in UEM to bring that holding down to 20.8% of the portfolio.

 

It must be noted that Utilico has suffered a discount drag on the platform investments. The initial investments made were based on NAV. Following this, the shares in the platform companies have traded at a discount. As Utilico marks to market these investments there is an immediate negative effect from investments made and this has dragged Utilico's performance down.

 

As at 30 June 2014 there were discounts to published NAV's of 8.3% for UEM (some £9.6m); 12.8% for Somers (some £6.9m); and 30.9% for Zeta (some £16.1m). In addition, Infratil's shares were trading at NZ$2.44, well below the valuations of the sum of all its parts of over NZ$3.00, a discount of 18.8% (some £14.3m). Together this amounts to a discount on these investments of some £46.6m. Adding this back would see Utilico's shareholders' funds increase to £211.0m. We hope that as these platforms start to demonstrate consistent long-term returns, the demand for the platform listed shares will increase, resulting in a narrowing of the discounts.

 

In terms of gearing Utilico took steps in the second half of the year to reduce the outright level of debt and therefore gearing in the portfolio. The proceeds from the Infratil disposal and the 40.9% reduction in REG investment were used to reduce bank debt to £22.2m at year end from £49.0m at the half year.

 

As a result of portfolio gains shareholders' funds rose from £147.1m to £164.4m and gearing reduced from 160.4% to 142.8%. Adjusting for the UEM disposal in July 2014, gearing has fallen to 136.6% as at 31 July 2014. Longer term the aim is to see this closer to 100.0%. As noted above, if the discount on the platforms above was added back, shareholders' funds would increase to some £211.0m and gearing based on this and post the UEM disposal would be 111.2%.

 

As anticipated this time last year, the investment entities amendments to IFRS10 were adopted by the EU and there is no longer a need to consolidate Zeta and Bermuda First Investment Company Limited ("BFIC"). Utilico has chosen to adopt IFRS10 early and to restate the prior year figures to reflect this. All comparisons are between the current year and prior year restated figures.

 

Portfolio

The portfolio continues to evolve. However, there remains a strong bias towards infrastructure and utilities, with 49.0% invested in these sectors (2013: 60.4%).

 

During the year we invested £76.2m, including £16.7m net into Zeta; £11.2m into Somers; £6.9m into Vix Technology; £1.5m into BFIC (to fund investments); and £2.0m into Vix Limited.

 

Disposals amounted to £83.0m, including part realisations of Infratil raising £27.8m and of REG raising £8.6m. Utilico exited Jersey Electricity Limited ("JEL") raising £10.0m.

 

Whilst we disclose the top ten direct investments we continue to present the portfolio on a look through basis both as to sector and geographic split. Geographically, New Zealand is down due to the reduced investment in Infratil and Australia is up mainly due to Zeta's investment into Panoramic and its subsequent excellent performance. UK and Channel Islands is substantially down as a result of selling out of JEL and reducing the holding in REG. Within the sectors, there has been an increase in financial services mainly as a result of the investment by Somers in Waverton and in oil & gas mainly as a result of investment in NZOG.

 

At the year-end Utilico held unlisted and untraded investments of £64.6m, equal to 16.2% of the gross assets (2013: £39.0m and 10.2% of gross assets).

 

Major Platform Investments

Utilico has six platform investments - UEM, Infratil, Somers, Zeta, BFIC and Vix Limited. These together represent six out of the top 10 investments and account for 68.4% of the gross assets as at 30 June 2014.

 

UEM remains Utilico's largest investment accounting for 26.5% of the portfolio at the year end. In the year to 30 June 2014, UEM achieved a total return of 6.4%, ahead of the MSCI Emerging Markets Total Return Index (GBP adjusted) which grew by 1.4%. ICM's research analysts continue to find attractive investments for UEM; their stock selection has been good and the performance recognised by a number of awards that UEM has won recently. UEM won the Investment Company of the Year award 2013 for the Investment Week's Emerging Markets category for the second year running and the Moneywise Investment Trust Awards 2014 for the Global Emerging Markets category.

 

The strong underlying stock selection was significantly impacted by the strength of Sterling, which posed a major headwind to performance. UEM has a March year end and in the year to March 2014 it reported exchange rates negatively impacted its NAV by 14.2%.

 

Subsequent to the year-end, Utilico has disposed of 13.8m shares in UEM at 180.00p, reducing Utilico's shareholding in UEM by almost a quarter. This reflects a re-balancing of the portfolio following a period of outperformance by UEM relative to other constituents of Utilico's portfolio, and takes Utilico's emerging market exposure back to around 20%, a level which we believe is appropriate for Utilico for the long term.

 

Emerging market economies continue to achieve positive GDP growth and their outlook remains positive.

 

Infratil's share price was up 10.7% in the period under review, reflecting a combination of strong operational performance as well as asset realisations at valuations well in excess of market expectations.

 

The successful IPO of Z Energy in August 2013 was a particularly notable transaction for Infratil, enabling it to realise a 30% stake for net proceeds of NZ$398m. Infratil had partnered with NZ Superannuation Fund in August 2010 to acquire Shell's New Zealand fuels distribution business and a 17.1% stake in the New Zealand refining company. Infratil set about a complete restructuring of the business, including a rebranding to Z Energy and the insourcing of IT, finance and call centre services. This resulted in a c.60% increase in EBITDA over the subsequent four years. Having originally invested NZ$210m for a 50% stake, the IPO combined with dividend receipts has seen Infratil realise a fourfold return on its investment.

 

The success of the Z Energy IPO has led to a comprehensive reappraisal of the market value of Infratil's assets, and a modest re-rating of its assets by the market. In May 2014 Infratil announced a strategic review of its Australian energy assets, with a number of parties expressing interest in a range of options including outright purchase and merger combinations. Preferred partners have been selected and a final decision is expected to be reached in early September. This could see further value realisation with a commensurate positive effect on Infratil's shares.

 

In the year to June 2014 Utilico reduced its holding in Infratil by 32.4% with the sale of 23.7m shares at an average price of NZ$2.30, realising £27.7m.

 

Somers' share price has risen from US$12.00 to US$14.25 in the twelve months to 30 June 2014, an increase of 18.8%, but still a discount to book NAV of some 12.8%. This reflects the strong performance of the Somers' portfolio. For the six months ended 31 March 2014, Somers reported net income of US$10.8m on equity attributable to Somers' shareholders of US$183.8m. Somers book NAV per share was US$16.25 as at 31 March 2014.

 

A key step for Somers was the acquisition of a 62.5% interest in Waverton in August 2013. Utilico exercised warrants of £10.5m held in Somers to assist Somers to fund the investment.

 

Somers two biggest investments are Bermuda Commercial Bank Limited ("BCB") and Waverton, both of which reported strong results for the six months ended 31 March 2014. BCB reported net income for the six months of US$7.9m (2013: US$5.1m) on total assets of US$582.9m. Total customer deposits were US$449.2m.

 

Waverton reported revenue for the six months of US$25.3m and profit after tax of $4.3m. Importantly its significant increase in assets under management over the six months has been due to net new assets and this should improve profitability going forward. As at 30 June 2014 Waverton had AUM of £5.1bn.

 

The Waverton investment by Somers comprised £10.75m in equity and £14.0m by way of loans to the acquisition vehicle in which Somers holds 62.5% and Waverton's management and an employee trust hold 37.5%. Waverton has repaid approximately £4.4m of the loans outstanding and externally refinanced all of Somers' original loan.

 

Post the year end, Somers announced an investment of €3.3m in Merrion Capital Holdings ("Merrion"), an Irish financial services group. Merrion has AUM of some €0.8bn.

 

In the year ended 30 June 2014, Zeta's net tangible assets ("NTA") per share rose from A$0.77 per share (adjusted for a subsequent rights issue) at the start of the year to A$0.96 at the close, a rise of 24.3%. Over this same period Zeta's share price rose 65.0%, from A$0.40 to A$0.66. The share price discount to NTA at the end of June 2014 was 30.9%.

 

Zeta's investment performance was buoyed in particular by a significant shareholding in Panoramic, an Australian nickel producer. Subsequent to the initial purchase of shares by Zeta, Panoramic announced a potential major discovery of nickel, and furthermore the nickel price rose strongly in the wake of a decision by the Indonesian government to ban exports of raw nickel ore in order to foster the development of nickel refineries in Indonesia.

 

Having identified Panoramic as an attractive investment Utilico lent Zeta the funding to take advantage of an investment opportunity in Panoramic. This demonstrates the benefit of Utilico's platform approach, with the focused emphasis resulting in the in-house analysts' identifying the opportunity and using Utilico's balance sheet to support Zeta.

 

During the year Zeta announced a rights issue enabling existing shareholders to purchase one new share at A$0.50 for every existing one share held. Utilico took up its full entitlement and subscribed A$19.0m. Zeta used the proceeds to repay in full a loan from Utilico which had principally been used to fund the investment in Panoramic.

 

BFIC's share price was unchanged over the year to 30 June 2014. BFIC's investee companies have faced significant challenges over the year as the Bermudian economy continues to be weak. BFIC's two major investments, KeyTech Limited ("KeyTech") and Ascendant Group Limited ("Ascendant"), both reported tough trading conditions and sharply lower profits. As at 30 June 2014, BFIC had total assets of BM$32.0m and reported operating profit for the twelve months of BM$1.6m. BFIC's NAV per share was BM$4.52 as at 30 June 2014.

 

Post the year end, KeyTech announced a transformative transaction involving the disposal of its fixed line business, Bermuda Telephone Company ("BTC") and the acquisition of British Overseas Territory Cable & Telecommunications Limited ("BOTCAT"). BOTCAT owns WestStar TV Limited in Cayman and a significant interest in CableVision Holding Limited in Bermuda. Following completion of the acquisition, KeyTech will have a more resilient, flexible and hopefully profitable business to compete in an ever increasing competitive market place in both the Cayman Islands and Bermuda.

 

Vix Limited is an unlisted Bermuda holding company and its main investment is in Vix Investments Limited ("Vix Investments"). Vix Investments is an unlisted investment holding company with a technology investment portfolio of US$32.2m. The two key investments are PSP International Limited ("PSP") and Touchcorp Limited ("Touchcorp"), accounting for 61.0% and 23.0% of Vix Investments portfolio respectively.

 

PSP process B2B payments globally with a strong focus on supporting virtual cards to the travel industry through a 20% holding in eNett International ("eNett"). PSP revenues were up nearly 4.5x in the year to 31 December 2013 at A$9.2m and EBITDA turned positive at A$2.9m. For the year to 31 December 2014 revenues are expected to rise by over 4 times and EBITDA by over 3 times. During June 2014 PSP reduced its holding in eNett from 36.5% to 20.0%, realising proceeds of US$65.4m. Vix Investments holds 14.1% in PSP on a fully diluted basis.

 

Touchcorp operates real time systems enabling POS processing for its customers and clients. The business is profitable and growing. Revenues and EBITDA in the year to 30 December 2013 were A$17.1m and A$2.1m. The management team are looking to increase revenues and nearly double EBITDA in the current year. Vix Investments holds 23.7% of Touchcorp.

 

Major direct investments

Utilico has four direct investments in the top ten: Resolute, Vix Technology, REG and Augean plc ("Augean").

 

Following the halving of Resolute's share price in the year ended June 2013, both the price of gold and Resolute's shares stabilised in the year to June 2014, rising by 3.4% to A$0.62.

 

Overall production was down on the previous year. This was expected, as the company's operations at the Golden Pride project in Tanzania came to the end of its mine life. Production from the Syama mine in southern Mali reached record levels and the company made significant progress in optimising the mine's operations. This has supported additional investment into Syama this year.

 

Elsewhere the company moved to 90% ownership and operatorship of the Bibiani gold project in Ghana. Resolute has announced plans for a 20,000 metres drill programme to better delineate the underground resource.

 

Resolute produced over 342,000 ounces of gold in the year ended June 2014 at a cash cost of $922 per ounce; the company has forecast production for the year to June 2015 of 315,000 ounces at a cash cost of $890 per ounce.

 

Resolute has significantly increased its reserves at Syama following a successful drilling programme and extended the mine's life from 10 years to 15 years.

 

Vix Technology is an unlisted company offering integrated payment solutions for the public and private sector across the world. During the year to 30 June 2014 the company has made significant steps towards reducing its cost base and increasing its EBITDA margin, while ensuring that it continues to develop its product base. The company is involved in a number of projects in different development stages, ensuring that the pipeline of projects remains strong and the outlook for Vix Technology remains positive.

 

During the year ended June 2014 Vix Technology's unaudited revenue increased 2.4% to A$144.7m with EBITDA including R&D investment programs increasing to A$9.7m from A$1.1m. Vix Technology continues to hold a 11.2% interest in China City Rail Transportation Technology ("CCRTT"), the Hong Kong listed transportation solutions provider.

 

REG has continued to make solid operational progress over the year, with the sale of its 12MW wind farm at Goonhilly Downs in Cornwall to BlackRock further demonstrating the intrinsic value of the assets. Total consideration received for this transaction was £25.1m, resulting in a £9.4m profit on disposal. With an operational wind farm portfolio as at end-December 2013 of 39.2MW, as well as 18.5MW under construction, 31.2MW of projects consented, 140MW in the planning system awaiting determination and a further development pipeline of up to 1,000MW, REG is well positioned to capitalise on the increasing demand from financial investors for operational wind farm assets.

 

In the period under review REG received planning permission for an extension to its 12MW French Farm wind project in Peterborough. However, a few months later the Secretary of State for Communities and Local Government exercised his power to call-in the extension, which means that it will now be determined at public inquiry. It is clear that renewable subsidies and planning consent for onshore wind farms are becoming an increasingly political issue with escalating intervention from central and local government. This interference negatively affects investment into the renewables sector and heightens uncertainty over long-term returns on future project developments.

 

As of June 2013 REG Bio-Power operated 8MW of generation plant primarily servicing National Grid Short Term Operating Reserve contracts. It has recently initiated the construction of an 18MW bio-power plant at Whitemoor Business Park in Yorkshire, with financing secured from Caterpillar Financial Services (UK) Ltd and procurement contracts signed with Finning UK. The project is expected to cost £6.3m and is expected to be operational in the second half of 2014.

 

In the twelve months to June 2014 Utilico sold 11.4m shares in REG at an average price of 76.74p, reducing its holding by 40.9% and realising £8.6m. Over the period REG's share price fell 3.0%.

 

Augean has had a positive and eventful year, with the new CEO Dr. Stewart Davies joining in August 2013 and immediately initiating a strategic review of the loss-making Waste Networks division. This resulted in the decision to dispose of the associated transfer site assets, which realised net proceeds of £1.1m and resulted in a £4.0m goodwill impairment. Augean has subsequently invested heavily into its North Sea Services subsidiary in Aberdeen, and the Integrated Services division leased a High Temperature Incineration (HTI) facility in East Kent. In May 2014 it acquired the HTI plant and freehold title to the surrounding land for £1.9m.

 

The restructuring of the business away from lower-margin activities including the disposal of the loss-making Waste Networks business, has materially improved financials, with Augean reporting EBITDA growth of 19.8% in the year to December 2013 and a 40% increase in dividends per share. This positive momentum looks to have continued into 2014, with revenues in the first six months of 2014 growing by 6.4%, driven by 3.4% growth in landfill waste volumes and a quadrupling of radioactive waste volumes. While the scale of the Low Level Waste (LLW) and Naturally Occurring Radioactive Material (NORM) streams is currently small, these are of much higher value for Augean. The UK faces a major challenge in decommissioning its nuclear estate, with the Nuclear Decommissioning Authority estimating the future costs of the estate over the next century costing £65bn on a discounted basis. Augean is well placed to benefit from this long-term trend.

 

There has been no change in Utilico's shareholding of Augean during the year.

 

Sector Reviews

Utilico has five key sectors which account for 59% of the portfolio, which are reviewed below.

 

·      Financial Services - 14%

Our largest investment in financial services is in Somers which is reviewed above. We fully expect Somers to make further investments into the financial services sector as banks and operating companies globally seek to redress balance sheets which remain challenging, especially in Europe. After the year end and as mentioned previously, Somers invested €3.3m, mainly through a convertible loan note, in Merrion.

 

·      Oil & Gas - 13%

NZOG is held direct and indirectly through Zeta. In contrast to the prior year, NZOG had an active year in terms of exploration drilling. In Kisaran, Indonesia, testing of flow rates proved positive, such that the joint venture is now working on a development plan. In New Zealand, the semi-submersible drill rig, the Kan Tan IV, has undertaken a succession of drilling activities across various fields, including Matuku, Pateke, and Oi. Matuku and Oi were unsuccessful. Pateke was successful from the perspective of finding more in the Tui fields. However, a succession of problems increased the costs of that drilling. Corporately, NZOG moved to increase its share in the producing Tui oil field by acquiring an additional 15% stake from existing joint venture partner Mitsui for what we believe was a good price for the purchaser. NZOG's share in Tui is now 27.5%. It retains its 15% stake in producing gas field Kupe. NZOG's cash reserves have been somewhat depleted by the active drilling season, and as at 30 June 2014 cash balances were NZ$135.1m, down from NZ$158.0m a year before.

 

Seacrest LP ("Seacrest") is held direct and indirectly through Zeta. During the year the company completed the establishment of additional regional subsidiaries, through which Seacrest has amassed a large collection of interests in joint venture exploration permits, covering different geological basins in the North Sea, offshore Ireland, and offshore Namibia. Drilling has only occurred at one permit to date (at Handcross in offshore Nambia), but the company is now at the beginning of its drilling programme, and more results are expected in the coming year. During the year, the value of Seacrest was restated following an independent valuation, with the value increased from US$1.33 to US$1.71 per share.

 

·      Renewables - 13%

Utilico's main exposure to renewables is through TrustPower Limited ("TrustPower") and REG. In recent years the implementation of government policies on low-emission technologies has been highly supportive of investment in the renewable energy sector. However in several Western countries these policies are being re-examined in light of subdued post-crisis energy demand, concerns over the levels of renewable subsidies, the impact of variable generation on the grid and base load generators, as well as local issues such as opposition to onshore wind turbines. While this makes for a challenging backdrop, it is notable that there looks to be a material discount between the value of wind farm assets implied by the market capitalisation of many companies operating in this space, and the realisable value of those assets to financial investors such as pension funds. Companies which are able to exploit this valuation gap through the realisation of such assets offer attractive investment opportunities.

 

TrustPower is held indirectly through our investment in Infratil, which has a 50.5% stake in TrustPower's share capital. In its financial year to March 2014 TrustPower entered the gas trading and retailing business and undertook a major rebranding, with positive results. The number of electricity customers increased by 8.7% and during the year 14,000 new gas customers were started. However this was offset by an ongoing challenging retail environment, with customer electricity demand falling 4.6% and evidence of margin pressure. Generation activities in New Zealand were impacted by weak hydro production, with output falling 9.2%, partly compensated by wind generation improving by 5.5%. More positively the phased commissioning of Snowtown Stage 2 Wind Farm resulted in a 38.9% increase in output in Australia. At a group level, in the year to March 2014 TrustPower's EBITDAF declined 5.9% and underlying earnings fell by 14.8%. The full commissioning of Snowtown Stage 2 Wind Farm is due to complete by September 2014, which combined with the acquisition of 106MW of generation assets of Green State Power for A$72.2m, is set to improve earnings momentum.

 

REG has been reviewed above.

 

·      Gold Mining - 11%

Our largest investment in gold mining is through Resolute, which is held directly by UIL 10.1% and indirectly mainly through Zeta. Resolute has been reviewed above.

 

·      Infrastructure IT - 8%

Our two largest investments in infrastructure IT are Vix Technology and Vix Limited. Both are reviewed above.

 

Derivatives

Over the years there have been two parts to Utilico's derivative position. First, portfolio market derivatives, mainly through S&P500 Index options, which remained at a modest level during the year. However, the strong performance by the US markets and the S&P Index has resulted in losses of £1.7m in maintaining the current position.

 

Second, currency positions within Utilico's portfolio, a loss of £0.5m, which has continued to maintain 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$136.0m, €11.9m and A$20.0m.

 

Debt

Bank debt increased in the year from £42.5m to £50.0m in January 2014. Since then it has reduced to £22.2m as at 30 June 2014; the £22.2m loan has been repaid since the year end.

 

The facility was extended in July 2014 to 22 March 2016 and it is intended that it will be redrawn in October to part fund the 2014 ZDP shares redemption.

 

ZDP Shares

Utilico started the year with 5.8m 2018 ZDP shares held as an investment on its balance sheet. These were placed out at a premium to NAV. During the year Utilico has purchased 1.0m 2014 ZDP shares and holds these on its balance sheet at the year end.

 

In late June proposals were put to Utilico Finance shareholders to create 25m 2020 ZDP shares. These proposals were passed in July 2014. Proposals were also made to the 2014 ZDP shareholders to roll up to £25.0m of their 2014 ZDP shares into 2020 ZDP shares.

 

On 25 July 2014 holders of 9.38m ZDP shares elected to roll their holdings into 2020 ZDP shares at the rate of 1.6525 2020 ZDP shares for each 2014 ZDP share. A further 9.5m 2020 ZDP shares were placed in the market at £1.00 per share. Together this resulted in 25m 2020 ZDP shares being issued on 31 July 2014.

 

Utilico is in a strong position to redeem the balance of 2014 ZDP shares, requiring some £61.9m, using its undrawn £50.0m bank facility and other cash and realisable assets. No further issues of ZDP shares are currently anticipated this year.

 

Capital Returns

Capital returns were positive in the year to 30 June 2014, amounting to a gain of £19.7m. This comprised a gain on investments of £36.7m offset by derivative and foreign exchange contracts losses of £2.8m and finance costs of £14.2m. The resulting EPS was 19.85p, compared with a prior year loss of 63.65p.

 

Revenue Returns

As flagged in the interim report, Utilico anticipated reduced revenue returns in the twelve months to 30 June 2014. Total income was £10.4m, down 35.8% on the prior year.

 

Management fees and costs were £1.2m, some 40% lower than the prior year. This is due to ICM reducing its management fee to 0.25% from 1 January 2014 until the performance high watermark of 284.81p is regained, and a reduction of the assets on which ICM can charge a fee, as platform assets from which ICM earns a fee directly are excluded for fee purposes at a Utilico level.

 

The combined effect of the above resulted in the revenue EPS decreasing to 7.03p (2013: 12.06p).

 

 

ICM Limited
Investment Manager
15 September 2014



 

PRINCIPAL RISKS AND RISK MITIGATION

 

The Board carefully considers the Company's principal risks and seeks to mitigate these risks through continual and regular review, policy setting, compliance with and enforcement of contractual obligations and active communication with the Investment Manager and the Company's Administrator (F&C Management Limited ("F&C" or "the Administrator")).

 

The Board applies the principles and recommendations of the UK Code on Corporate Governance and the AIC's Code on Corporate Governance. Through these procedures, and in accordance with Internal Control: Revised Guidance for Directors on the Combined Code (the "FRC guidance"), the Board has established an on-going process for identifying, evaluating and managing the significant risks faced by the Company and has regularly reviewed the effectiveness of the internal control systems for the year. This process has been in place throughout the year under review and to the date hereof and will continue to be regularly reviewed by the Board going forward

 

The Company's assets consist mainly of listed and quoted securities and its principal risks are therefore market related or currency related. A more detailed explanation of these risks and the way they are managed is contained in note 28 to the Accounts. Other risks faced by the Group include the following:

 

Investment objective and strategy - the risk that the investment strategy does not achieve long-term total returns for the Company's shareholders

There is no guarantee that the Company's strategy and business model will be successful in achieving its investment objective.

The Board monitors the performance of the Company and has established guidelines to ensure that the investment policy is pursued by the Investment Manager.

The Board regularly reviews strategy in relation to a range of issues including the balance between quoted and unquoted stocks, the allocation of assets between geographic regions and sectors and gearing. Periodically the Board holds a separate meeting devoted to strategy, the most recent one being held in November 2013.

 

Investment risk

The investment process employed by the Investment Manager combines assessment of economic and market conditions in the relevant countries with stock selection. Fundamental analysis forms the basis of the Company's stock selection process, with an emphasis on sound balance sheets, good cash flows, the ability to pay and sustain dividends, good asset bases and market conditions. Overall, the investment process is aiming to achieve absolute returns through an active fund management approach.

Risk management is an integral part of the investment management process. The Investment Manager effectively controls risk by ensuring that the Company's portfolio is always appropriately diversified.

Past performance of the Company is not necessarily indicative of future performance.

A fuller review of economic and market conditions is included in the Investment Manager's Report section of this Strategic Report.

 

Currency risk

The Company's results are reported in Sterling, whilst the majority of its assets are priced in foreign currencies. The impact of adverse movements in exchange rates can significantly affect the returns in Sterling of both capital and income. It is difficult and expensive to hedge currencies.

Such factors are out of the control of the Board and the Investment Manager and may give rise to distortions in the reported returns to shareholders.

 

Gearing

The ordinary shares rank behind the bank debt and ZDP shares, making them a geared instrument.

The gearing level is high due to the capital structure of the balance sheet. Whilst the gearing should enhance total return where the return on the Company's underlying securities is rising and exceeds the cost of borrowing, it will have the opposite effect where the underlying return is falling. As at 30 June 2014, net gearing from borrowings stood at 13.5%.

 



 

Banking: a breach of the Company's loan covenants might lead to funding being summarily withdrawn

The Investment Manager monitors compliance with the banking covenants when each drawdown is made and at the end of each month.

The Board reviews compliance with the banking covenants at each Board meeting.

 

Shares trading at a discount to Net Asset Value

Shareholders are exposed to certain risks in addition to risks applying to the Company itself. The ordinary shares of the Company may trade at a discount to their NAV. The Board monitors the price of the Company's shares in relation to their NAV and the premium/discount at which they trade.

The value of an investment in the Company and the income derived from that investment may go down as well as up and an investor may not get back the amount invested.

 

Key staff: loss by the Investment Manager of key staff could affect investment returns

The quality of the management team is a crucial factor in delivering good performance. There are training and development programs in place for employees and the recruitment and remuneration package has been developed in order to retain key staff.

The position is monitored by the Board at each meeting; the Board discusses succession planning with the Investment Manager.

 

Regulatory: breach of regulatory rules could lead to suspension of trading in the Company's shares, financial penalties or a qualified audit report

The Company Secretary, working closely with the Administrator, monitors the Company's compliance with the Listing Rules of the Financial Conduct Authority and compliance with the principal rules is reviewed by the Directors at each Board Meeting; any concerns are discussed with the Company's advisers.

 

Reliance on the Investment Manager and other service providers: the Company has no full-time employees and the Directors have all been appointed on a non-executive basis; the Company is reliant upon the performance of third party service providers. In particular, the Investment Manager performs services which are integral to the operation of the Company

Failure by any service provider to carry out its obligations to the Company in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Company and could affect the ability of the Company to successfully pursue its investment policy. The Audit Committee monitors the performance of the service providers at each meeting.

The Board reviews operational issues at each Board Meeting and the Audit Committee receives reports on the operation of internal controls.

 

Financial: inadequate controls by the Investment Manager or Administrator or third party service providers could lead to misappropriation of assets

The Audit Committee reviews the Administrator's annual internal control report which details the controls around the reconciliation of the Administrator's records to those of the Custodians. The Administrator reviews the control reports published by JP Morgan Chase and draws any issues to the attention of the Board.

Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations. The Board reviews financial reports in detail at each Board Meeting.

 



 

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 and Company 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 or 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 Group and 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 prevention and detection of fraud and other irregularities.

 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Corporate Governance Statement, a Directors' Remuneration Report and a Report of the Directors' that comply with that law and those regulations.

 

The Directors of the Company, each confirm to the best of their knowledge that:

 

• the financial statements, which have been prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and net return of the Company;

• the annual financial report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces; and

• they consider that the annual financial report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and Company's performance, business model and strategy.

 

Approved by the Board on 15 September 2014 and signed on its behalf by:

 

 

Roger Urwin

Chairman



 

consolidated PERFORMANCE SUMMARY

 

 

30 June

2014

30 June

2013*

Change

2013/14

Ordinary shares

 

 

 

Total return (annual) (1) (%)

18.1

(24.6)

n/a

Annual compound total return (since inception) (%)

7.9

7.0

n/a

Ordinary shares

 

 

 

Net asset value per ordinary share (p)

165.84

148.33

11.8%

Ordinary share price (p)

128.00

130.00

(1.5%)

Discount (%)

22.8

12.4

n/a

FTSE All-Share Total Return Index

5,471

4,837

13.1%

Returns and dividends

 

 

 

Revenue return per ordinary share (p)

7.03

12.06

(41.7%)

Capital return per ordinary share (p)

19.85

(63.65)

n/a

Total return per ordinary share (p)

26.88

(51.59)

n/a

Dividend per ordinary share (p)

7.50

10.00(2)

(25.0%)

Zero dividend preference ("ZDP") shares(3)

 

 

 

2014 ZDP shares

 

 

 

Capital entitlement per ZDP share (p)

163.70

152.64

7.2%

ZDP share price (p)

166.25

158.50

4.9%

2016 ZDP shares

 

 

 

Capital entitlement per ZDP share (p)

163.70

152.64

7.2%

ZDP share price (p)

177.13

165.50

7.0%

2018 ZDP shares

 

 

 

Capital entitlement per ZDP share (p)

118.50

110.50

7.2%

ZDP share price (p)

128.25

113.38

13.1%

Equity holders' funds

 

 

 

Gross assets(4) (£m)

399.1

383.0

4.2%

Bank debt (£m)

22.2

42.5

(47.8%)

ZDP shares (£m)

212.5

193.4

9.9%

Equity holders' funds (£m)

164.4

147.1

11.8%

Revenue account

 

 

 

Income (£m)

10.4

16.2

(35.8%)

Costs (management and other expenses)
(m)

2.1

3.2

(34.4%)

Finance costs (£m)

0.9

0.8

12.5%

Financial ratios of the Group

 

 

 

Revenue yield on average gross assets (%)

2.6

4.2

n/a

Ongoing charges figure excluding performance fees(5) (%)

2.2

1.8

n/a

Ongoing charges figure including performance fees(5) (%)

3.1

3.0

n/a

Bank loans, net bank overdraft and ZDP shares

gearing on net assets (%)

 

144.4

 

160.4

 

n/a

* 2013 figures have been restated, see note 1

 

(1) Total return is calculated as change in NAV per ordinary share plus dividends re-invested

(2) Includes special dividend of 2.50p per share

(3) Issued by Utilico Finance Limited, a wholly owned subsidiary of Utilico Investments Limited

(4) Gross assets less current liabilities excluding loans and ZDP shares

(5) 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.



 

 

GROUP INCOME STATEMENT

 

 

 

Restated*

 

Year to 30 June 2014

Year to 30 June 2013

 

Revenue

Capital

Total

Revenue

Capital

Total

 

return

return

return

return

return

Return

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

 

 

 

 

 

 

 

Gains/(losses) on investments

-

36,709

36,709

-

(45,005)

(45,005)

Losses on derivative financial instruments

-

(2,247)

(2,247)

-

(3,714)

(3,714)

Exchange gains/(losses)

36

(519)

(483)

(12)

(991)

(1,003)

Investment and other income

10,374

-

10,374

16,228

-

16,228

Total income

10,410

33,943

44,353

16,216

(49,710)

(33,494)

Management and administration fees

(1,200)

-

(1,200)

(2,030)

-

(2,030)

Other expenses

(944)

(4)

(948)

(1,160)

(8)

(1,168)

Profit/(loss) before finance costs and taxation

8,266

33,939

42,205

13,026

(49,718)

(36,692)

Finance costs

(933)

(14,234)

(15,167)

(754)

(13,609)

(14,363)

Profit/(loss) before taxation

7,333

19,705

27,038

12,272

(63,327)

(51,055)

Taxation

(360)

(22)

(382)

(275)

-

(275)

Profit/(loss) for the year

6,973

19,683

26,656

11,997

(63,327)

(51,330)

 

 

 

 

 

 

 

Earnings per ordinary share (basic) - pence

7.03

19.85

26.88

12.06

(63.65)

(51.59)

 

* See notes 1 and 3

 

The Group does not have any income or expense that is not included in the profit/(loss) for the year, and therefore the "profit/(loss) for the year" is also the "total comprehensive income/(expense) 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. There are no minority interests.



 

COMPANY INCOME STATEMENT

 

 

Year to 30 June 2014

Year to 30 June 2013

 

Revenue

Capital

Total

Revenue

Capital

Total

 

return

return

return

return

return

return

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

 

 

 

 

 

 

 

Gains/(losses) on investments

-

34,925

34,925

-

(47,769)

(47,769)

Losses on derivative instruments

-

(477)

(477)

-

(273)

(273)

Exchange gains/(losses)

36

(515)

(479)

(12)

(830)

(842)

Investment and other income

10,374

-

10,374

16,228

-

16,228

Total income

10,410

33,933

44,343

16,216

(48,872)

(32,656)

Management and administration fees

(1,196)

-

(1,196)

(2,009)

-

(2,009)

Other expenses

(942)

(4)

(946)

(1,147)

(8)

(1,155)

Profit/(loss) before finance costs and taxation

8,272

33,929

42,201

13,060

(48,880)

(35,820)

Finance costs

(933)

(14,380)

(15,313)

(754)

(14,333)

(15,087)

Profit/(loss) before taxation

7,339

19,549

26,888

12,306

(63,213)

(50,907)

Taxation

(360)

(22)

(382)

(275)

-

(275)

Profit/(loss) for the year

6,979

19,527

26,506

12,031

(63,213)

(51,182)

 

 

 

 

 

 

 

Earnings per ordinary share (basic) - pence

7.04

19.69

26.73

12.09

(63.53)

(51.44)

 

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 STATEMENT OF CHANGES IN EQUITY

 

 

 

For the year to 30 June 2014

 

 

 

 

 

 

Ordinary

Share

 

Non-

 

 

 

 

share

premium

Special

distributable

Capital

Revenue

 

 

capital

account

reserve

reserve

reserves

reserve

Total

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

Balance at 30 June 2013

9,916

29,020

233,866

32,069

(171,382)

13,591

147,080

Profit for the year

-

-

-

-

19,683

6,973

26,656

Ordinary dividends paid

-

-

-

-

-

(9,296)

(9,296)

Balance at 30 June 2014

9,916

29,020

233,866

32,069

(151,699)

11,268

164,440

 

 

 

Restated for the year to 30 June 2013 (restated)*

 

 

 

 

 

Ordinary

Share

 

Non-

 

 

 

share

premium

Special

distributable

Capital

Revenue

 

capital

account

reserve

reserve

reserves

reserve

Total

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

Balance at 30 June 2012

9,963

29,743

233,866

32,069

(108,055)

11,308

208,894

-

-

-

-

(63,327)

11,997

(51,330)

-

-

-

-

-

(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

(171,382)

13,591

147,080

 

* See notes 1 and 3

 

 

 



 

COMPANY STATEMENT OF CHANGES IN EQUITY

 

 

 

 

Ordinary

Share

 

Non-

 

 

 

 

share

premium

Special

distributable

Capital

Revenue

 

 

capital

account

reserve

reserve

reserves

reserve

Total

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

Balance at 30 June 2013

9,916

29,020

233,866

32,069

(171,385)

13,759

147,245

Profit for the year

-

-

-

-

19,527

6,979

26,506

Ordinary dividends paid

-

-

-

-

-

(9,296)

(9,296)

Balance at 30 June 2014

9,916

29,020

233,866

32,069

(151,858)

11,442

164,455

 

 

 

Ordinary

Share

 

Non-

 

 

 

share

premium

Special

distributable

Capital

Revenue

 

capital

account

reserve

reserve

reserves

reserve

Total

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

Balance at 30 June 2012

9,963

29,743

233,866

32,069

(108,172)

11,442

208,911

-

-

-

-

(63,213)

12,031

(51,182)

-

-

-

-

-

(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

 



 

BALANCE SHEETs

 

at 30 June

 

GROUP

 

 

COMPANY

 

 

As previously

Restated

 

 

 

 

reported

(see note 1) 

 

 

 

2013

2013

2013

2013

2012

 

£'000s

£'000s

£'000s

£'000s

£'000s

Non-current assets

 

 

 

 

 

Investments

402,538

393,830

372,630

404,342

380,169

Deferred exploration and evaluation

expenditure

 

-

 

2,832

 

-

 

-

 

-

 

402,538

396,662

372,630

404,342

380,169

Current assets

 

 

 

 

 

Other receivables

783

3,375

2,742

782

2,741

Derivative financial instruments

164

2,020

2,020

41

1,074

Cash and cash equivalents

721

8,456

7,644

716

7,581

 

1,668

13,851

12,406

1,539

11,396

Current liabilities

 

 

 

 

 

Loans

(22,239)

(42,500)

(42,500)

(22,239)

(42,500)

Other payables

(4,045)

(3,696)

(1,997)

(218,198)

(201,757)

Derivative financial instruments

(989)

(63)

-

(989)

(63)

Zero dividend preference shares

(76,138)

-

(63)

-

-

 

(103,411)

(46,259)

(44,560)

(241,426)

(244,320)

Net current liabilities

(101,743)

(32,408)

(32,154)

(239,887)

(232,924)

Total assets less current liabilities

300,795

364,254

340,476

164,455

147,245

Non-current liabilities

 

 

 

 

 

Loan notes

-

(3,705)

-

-

-

Zero dividend preference shares

(136,355)

(193,396)

(193,396)

-

-

Net assets

164,440

167,153

147,080

164,455

147,245

 

 

 

 

 

 

Equity attributable to equity holders

 

 

 

 

 

Ordinary share capital

9,916

9,916

9,916

9,916

9,916

Share premium account

29,020

29,020

29,020

29,020

29,020

Special reserve

233,866

233,866

233,866

233,866

233,866

Non-distributable reserve

32,069

32,069

32,069

32,069

32,069

Foreign currency translation reserve

-

497

-

-

-

Capital reserves

(151,699)

(162,952)

(171,382)

(151,858)

(171,385)

Revenue reserve

11,268

13,699

13,591

11,442

13,759

Total attributable to equity holders

164,440

156,115

147,080

164,455

147,245

Non-controlling interests

-

11,038

-

-

-

Total equity attributable to

Group/Company

 

164,440

 

167,153

147,080

 

164,455

 

147,245

 

 

 

 

 

 

Net asset value per ordinary share

 

 

 

 

 

Basic - pence

165.84

157.44

148.33

165.85

148.50

 



STATEMENTs OF CASH FLOW

 

 

 

GROUP

 

COMPANY

 

 

Restated*

 

 

for the year to 30 June

2014

2013

2013

2012

 

£'000s

£'000s

£'000s

£'000s

Cash flows from operating activities

5,709

12,405

5,729

12,430

Investing activities

 

 

 

 

Purchases of investments

(75,521)

(46,954)

(78,115)

(47,146)

Sales of investments

84,190

51,363

90,735

60,889

Purchases of derivatives

(2,243)

(6,977)

-

-

Sales of derivatives

2,778

3,741

1,482

(1,400)

Cash flows on margin accounts

-

4,035

-

-

Cash flows from investing activities

9,204

5,208

14,102

12,343

 

 

 

 

 

Cash flows before financing activities

14,913

17,613

19,831

24,773

 

 

 

 

 

Financing activities

 

 

 

 

Equity dividends paid

(9,296)

(9,714)

(9,296)

(9,714)

Movement on loans

(19,251)

41,247

(19,251)

41,247

Cash flow from issue of ZDP shares

6,477

23,209

(69)

15,955

Cash flow from redemption of ZDP

shares

 

(1,683)

 

(67,801)

 

-

 

(67,609)

Cost of shares purchased for

cancellation

 

-

 

(770)

 

-

 

(770)

Cash flows from financing activities

(23,753)

(13,829)

(28,616)

(20,891)

 

 

 

 

 

Net increase in cash and cash

equivalents

 

(8,840)

 

3,784

 

(8,785)

 

3,882

Cash and cash equivalents at the

beginning of the year

 

7,644

 

4,879

 

7,581

 

4,541

Effect of movement in foreign

exchange

 

(1,493)

 

(1,019)

 

(1,490)

 

(842)

Cash and cash equivalents at the

end of the year

 

(2,689)

 

7,644

 

(2,694)

 

7,581

 

 

 

Comprised of:

 

 

 

 

Cash and cash equivalents

721

7,644

716

7,581

Bank overdraft

(3,410)

-

(3,410)

-

Total

(2,689)

7,644

(2,694)

7,581

 

* See notes 1 and 3



 

 

NOTES

 

1. SIGNIFICANT ACCOUNTING POLICIES

 

The Company is an investment company incorporated in Bermuda and quoted on the London Stock Exchange.

 

The unaudited Group Accounts have been prepared in accordance with International Financial Reporting

Standards as adopted by the EU ('IFRS').

 

The Group, from 1 July 2013, has early adopted IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures. The effective date of these standards is 1 January 2014. The EU has permitted early adoption. IFRS 10, IAS 27 and IAS 28 require retrospective application while IFRS 12 is applied prospectively. The Company falls to be defined under IFRS 10 as an Investment Entity.

 

IFRS 10 replaces guidance on consolidation in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Special Purpose Entities. Under IFRS 10, an investor controls an investee when it has exposure to the investee's variable returns and has the ability to influence those returns. Such control is the basis for determining which entities are consolidated, except in the case of Investment Entities. IFRS 10 exempts an investment entity from consolidating its subsidiaries unless those subsidiaries provide services directly related to the parent company's investment activities, Nonconsolidated subsidiaries shall be measured at fair value through profit and loss in accordance with IFRS9 Financial Instruments: Recognition and Measurement.

 

Utilico Finance Limited ("UFL") and Global Equity Risk Protection Limited ("GERP") continue to be consolidated under IFRS 10. Bermuda First Investment Company Limited ("BFIC") and Zeta Resources Limited, which were previously consolidated and remain subsidiaries of the Company, are now accounted for as investments at fair value through profit and loss. The Group accounts for the year ended 30 June 2013 have been restated to reflect this change in accounting policy (see the Balance Sheet on page 19 and note 3).

 

The Group has also adopted IFRS 13 Fair Value Measurement. IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements when such measurements are required or permitted by other IFRSs. It unifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It replaces

and expands the disclosure requirements about fair value measurement in other IFRSs, including IFRS 7.

 

2. DIVIDENDS

 

The Directors declared a fourth quarterly dividend in respect of the year ended 30 June 2014 of 1.875p per ordinary share which was paid on 8 September 2014 to all ordinary shareholders on the register at close of business on 22 August 2014. The total cost of this dividend, which has not been accrued in the results for the year to 30 June 2014, is £1,859,000 based on 99,157,214 ordinary shares in issue.

 



 

3. RESTATEMENT OF PRIOR YEAR FIGURES

 

The effects of these changes are shown on the Balance Sheet. The impact on the Group Income Statement, Group Statement of Comprehensive Income and Group Cash Flow Statement are as follows:

 

GROUP INCOME STATEMENT

 


Previously reported

Effect of restatement


Restated


Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total


return

return

return

return

return

return

return

return

return

Year to 30 June 2013

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s











Gains on investments

-

(35,402)

(35,402)

-

(9,603)

(9,603)

-

(45,005)

(45,005)

Losses on derivative instruments

-

(3,714)

(3,714)

-

-

-

-

(3,714)

(3,714)

Exchange gains/(losses)

(12)

(430)

(442)

-

(561)

(561)

(12)

(991)

(1,003)

Impairment of goodwill

-

(1,583)

(1,583)

-

1,583

1,583

-

-

-

Investment and other income

17,072

-

17,072

(844)

-

(844)

16,228

-

16,228

Total income

17,060

(41,129)

(24,069)

(844)

(8,581)

(9,425)

16,216

(49,710)

(33,494)

Management and

administration fees

(2,140)

-

(2,140)

110

-

110

(2,030)

-

(2,030)

Other expenses

(1,515)

(118)

(1,633)

355

110

465

(1,160)

(8)

(1,168)

Profit before finance costs and

taxation

13,405

(41,247)

(27,842)

(379)

(8,471)

(8,850)

13,026

(49,718)

(36,692)

Finance costs

(884)

(13,609)

(14,493)

130

-

130

(754)

(13,609)

(14,363)

Profit before taxation

12,521

(54,856)

(42,335)

(249)

(8,471)

(8,720)

12,272

(63,327)

(51,055)

Taxation

(275)

360

85

-

(360)

(360)

(275)

-

(275)

Profit for the period

12,246

(54,496)

(42,250)

(249)

(8,831)

(9,080)

11,997

(63,327)

(51,330)











Profit/(loss) for the period

attributable to:










Equity holders of the Parent

Company

12,105

(53,368)

(41,263)

(108)

(9,959)

(10,067)

11,997

(63,327)

(51,330)

Non-controlling interests

141

(1,128)

(987)

(141)

1,128

987

-

-

-


12,246

(54,496)

(42,250)

(249)

(8,831)

(9,080)

11,997

(63,327)

(51,330)











Earnings per ordinary share

(basic) - pence

12.17

(53.64)

(41.47)

(0.11)

(10.01)

(10.12)

12.06

(63.65)

(51.59)

 

 

GROUP STATEMENT OF COMPREHENSIVE INCOME

 


 

Year to 30 June 2013


Previously reported

Effect of restatement

Restated


Total return

Total return

Total return


£'000s

£'000s

£'000s

Loss for the year

(42,250)

(9,080)

(51,330)

Other comprehensive income:




Foreign exchange movements on translation

of foreign operations

 

533

 

(533)

-

Total comprehensive expense for the year

(41,717)

(9,613)

(51,330)





Comprehensive expense for the year attributable to:




Equity holders of the Parent Company

(40,766)

(10,564)

(51,330)

Non-controlling interests

(951)

951

-


(41,717)

(9,613)

(51,330)



 

3. RESTATEMENT OF PRIOR YEAR FIGURES (CONTINUED)

 

GROUP CASH FLOW STATEMENT

 

 

 

Year to 30 June 2013

 

 

 

 

Previously

Effect of

 

 

 

 

 

reported

restatement

Restated

 

 

 

 

£'000s

£'000s

£'000s

Cash flows from operating

activities

 

 

 

 

12,779

 

(374)

 

12,405

Investing activities

 

 

 

 

 

 

Purchases of investments

 

 

 

(50,573)

3,619

(46,954)

Sales of investments

 

 

 

51,363

-

51,363

Purchases of derivatives

 

 

 

(6,977)

-

(6,977)

Sales of derivatives

 

 

 

3,741

-

3,741

Exploration and evaluation

expenditure

 

 

 

(139)

139

-

Cash from acquisition of

subsidiary

 

 

 

3,766

(3,766)

-

Cash flows on margin accounts

 

 

 

4,035

-

4,035

Cash flows from investing

activities

 

 

 

5,216

(8)

5,208

Cash flows before financing

activities

 

 

 

17,995

(382)

17,613

Financing activities:

 

 

 

 

 

 

Equity dividends paid

 

 

 

(9,714)

-

(9,714)

Movement on loans

 

 

 

41,247

-

41,247

Cash flows from issue of

ZDP shares

 

 

 

23,209

-

23,209

Cash flows from redemption of

ZDP shares

 

 

 

(67,801)

-

(67,801)

Issue of share capital in

subsidiary

 

 

 

2

(2)

-

Cost of ordinary share buyback

 

 

 

(770)

-

(770)

Cash flows from financing

activities

 

 

 

(13,827)

(2)

(13,829)

Net (decrease)/increase in cash

and cash equivalents

 

 

 

4,168

(384)

3,784

Cash and cash equivalents at the

beginning of the period

 

 

 

4,879

-

4,879

Effect of movement in foreign

exchange

 

 

 

(823)

(196)

(1,019)

Cash and cash equivalents at

the end of the period

 

 

 

(8,224)

(580)

7,644

 

 

 

 

 

 

 

Comprised of:

 

 

 

 

 

 

Cash

 

 

 

8,456

(812)

7,644

Bank overdraft

 

 

 

(232)

232

-

Total

 

 

 

8,224

(580)

7,644

 

 

 

 

 

 

 

 



 

FAIR VALUE OF BFIC AND ZETA

The Group has re-presented certain balances in the consolidated balance sheet to reflect the effect of adopting IFRS10 (see note 1). This change has required BFIC and Zeta to be valued at fair value through profit and loss (prior year consolidated disclosure included BFIC and Zeta at net asset value).

 

 

 



30 June

2014

30 June

2013

Fair value of holdings



£'000s

£'000s

BFIC



14,935

15,196

Zeta



36,084

11,680

 

 

 

 

 

This statement was approved by the Board on 15 September 2014. It is not the Group's or Company's statutory accounts. The statutory accounts for the financial year to 30 June 2014 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 2013 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

15 September 2014

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR QKPDQPBKDCCD