RNS Number : 1814G
UIL Finance Limited
13 March 2020
 

                                     

UIL Finance Limited

 

 

                                  

HALF-YEARLY REPORT

 

FOR THE SIX MONTHS TO 31 DECEMBER 2019

 



 

UIL Finance Limited

 

REPORT AND ACCOUNTS

for the six months to 31 December 2019

 

 

Contents            

Page

                                                                                                                                                                     


                                                                                                                                                                     


Company Directory

 2

                                                                                                                                                                     


                                                                                                                                                                     


Strategic Review

3





Directors' Report

4

              


              


Statement of Directors' Responsibilities

6

              




Unaudited Condensed Income Statement

7

              


              


Unaudited Condensed Statement of Financial Position

8

              


              


Unaudited Condensed Notes to the Accounts

9



 

 



 

UIL Finance Limited                                                                                               



COMPANY DIRECTORY








Registered Office

Clarendon House


2 Church Street


Hamilton HM11


Bermuda





Directors

Peter Burrows, AO (Chairman)


Stuart Bridges


Alison Hill


Christopher Samuel


David Shillson







Company Number

39479



Legal Entity Identifier

213800JPJWZ5P3QJX538



Auditor

KPMG LLP


15 Canada Square

Canary Wharf

London E14 5GL

United Kingdom



Date of Formation

17 January 2007





Nature of Business

Closed end investment company





Ordinary Shareholder and Parent Company

UIL Limited





 



UIL Finance Limited

 

STRATEGIC REVIEW

The Strategic Review is designed to provide shareholders with an insight into the operations of the Company during the period. In particular, it gives information on:

 

• the Company's objective and investment policy;

• the regulatory and competitive environment within which the Company operates;

• the Board's strategy for achieving its stated objectives;

• principal risks and risk management; and

• key performance indicators.

 

Objective

The Company's investment objective is to finance and fund the final capital entitlements of the zero dividend preference ("ZDP") shares.

 

Investment policy

The Company seeks to fund the final capital entitlements of the ZDP shares by lending current asset funds to its parent company, UIL Limited.

 

Regulatory and competitive environment

The Company is obliged to comply with Bermuda law, the Listing Rules of the Financial Conduct Authority and International Financial Reporting Standards as adopted by the European Union ("IFRSs as adopted by the EU"). The Company is exempt from taxation, except insofar as it is withheld from income received. Under Bermuda law, the Company may not distribute income by way of a dividend unless, after distribution of the dividend, the realisable value of the Company's assets would be greater than the aggregate of its liabilities.

 

ICM Investment Management Limited ("ICMIM") is the Alternative Investment Fund Manager of UIL Limited and joint investment manager with ICM Limited ("ICM"). ICM was appointed as company secretary with effect from 1 July 2017.

 

Strategy for achieving objectives

The Company's performance in pursuing its objective is based on the ability of its parent company to repay the intra-group loan to the Company. UIL Limited has provided an undertaking to provide sufficient funds to the Company to meet each redemption as it falls due.

 

Principal risks

The principal underlying risk of the Company continues to relate to its ability to repay the ZDP shares when they fall due. This is dependent on the asset performance of the parent company. At 31 December 2019, the parent company had net assets of £301,631,000 (31 December 2018: £264,763,000 and 30 June 2019: £326,268,000) after providing for amounts due to ZDP shareholders. Details of the ZDP shares are set out in note 7 to the accounts.

 

A further risk faced by the Company is that of a regulatory nature. A regulatory or legal breach could lead to financial penalties.  The Company uses all reasonable efforts to ensure that the Company adheres to the relevant statutory and regulatory requirements.

 

Key Performance Indicators

The Board assesses the Company's success in pursuing its objectives in the ability to provide for the amounts due to the ZDP shareholders.

 

This Strategic Review was approved by the Board of Directors 13 March 2020.

 

ICM Limited

Company Secretary

13 March 2020

UIL Finance Limited

 

DIRECTORS' REPORT

The Directors present their report and accounts of the Company for the six months ended 31 December 2019.

 

Principal activity and status

UIL Finance Limited (the "Company") is a Bermuda exempted, closed ended investment company with company registration number 39479. The Company's issued ZDP shares are listed on the standard segment of the main market of the London Stock Exchange.

 

Results and Dividends

The results for the period are set out in the attached accounts which are prepared on a going concern basis and as set out  in note 13, the Directors believe that it is appropriate to adopt the going concern basis in preparing the accounts as the Company can continue to operate due to the contractual obligation of the parent company to ensure that UIL Finance is able to redeem the ZDP shares on each repayment date and the Directors are comfortable that the parent company has the financial resources to do so.

 

The Company has not declared a dividend in respect of the period ended 31 December 2019 (for the periods ended 31 December 2018 and 30 June 2019: nil).

 

Directors

The following Directors held office throughout the period, unless otherwise stated:

Peter Burrows (Chairman)

Alison Hill

Christopher Samuel

David Shillson

 

Warren McLeland and Eric Stobart stepped down from the Board on 30 September 2019 and Stuart Bridges was appointed on 2 October 2019.

 

Directors' Disclosures

At 31 December 2019, no Director had any interest in the Company's shares (31 December 2018 and 30 June 2019: none).  No Director acquired or disposed of any interest in the shares in the Company during the period or since the period end.

 

Board Meetings

The Board meets at least twice a year to consider strategic affairs and to approve the half yearly report and the annual report and accounts. In view of the nature of the Company's business the Board does not consider it necessary to appoint a separate audit committee or nominations committee.

 

Directors' Remuneration

No Director received or is entitled to receive any remuneration from the Company.

 

Statement of Changes in Equity

There were no movements in equity attributable to equity holders and a statement of changes in equity has therefore not been prepared.

 

Cash Flow

There were no cash flows in the period and therefore a cash flow statement has not been prepared.

 

Zero dividend preference shares

Full details of the changes to the Company's authorised and issued zero dividend preference shares during the period can be found in note 7 to the accounts.

 

Ordinary Share Capital

Full details of the changes to the Company's authorised and issued ordinary share capital during the period can be found in note 8 to the accounts.

 

Ordinary shares of UIL Limited

Ordinary shares of UIL Limited rank behind the ZDP shares on a winding up of the Company and UIL Limited, together referred to as the Group (save for any undistributed revenue reserves of UIL Limited on a winding up).

 

Auditor

KPMG LLP ("KPMG") was the Company's auditor for the year ended 30 June 2019 and was re-appointed as auditor to the Company at the AGM of the Company on 7 November 2019.

 

 

 

By order of the Board

 

ICM Limited,

Secretary

13 March 2020

 



 

UIL Finance Limited

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the Half Yearly Financial Report 

We confirm to the best of our knowledge:

 

• the condensed set of financial statements contained within the report for the six months to 31 December 2019 has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and gives a true and fair view of the assets, liabilities, financial position and return of the Company; and

 

• The half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements as required by DTR 4.2.7R;

 

• The Directors' statement of principal risks and uncertainties above is a fair review of the principal risks and uncertainties for the remainder of the year as required by DTR 4.2.7R;

 

• The half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year as required by DTR 4.2.8R.

 

 

 

Peter Burrows

Chairman

13 March 2020

UIL Finance Limited

 

UNAUDITED CONDENSED INCOME STATEMENT




Six months to

Six months to

Year to




31 December

31 December

30 June




2019

2018

2019



Note

£'000s

£'000s

£'000s







Interest income


2

5,309

7,107

12,082

Total income



5,309

7,107

12,082

Other expenses



-

-

-

Profit before finance costs and taxation



5,309

7,107

12,082

Finance costs


3

(5,309)

(7,107)

(12,082)

Profit before taxation



-

-

-

Taxation



-

-

-

Profit for the period



-

-

-













Earnings per share - pence


4

-

-

-







The Company does not have any income or expense that is not included in the profit for the period, and therefore the 'profit for the period' is also the 'total comprehensive income for the period', as defined in International Accounting Standard 1 (revised).

 

All items in the above statement are derived from continuing operations.


The unaudited condensed notes on pages 9 to 17 form part of these condensed financial statements.

 

 

 

 



 

 

UIL Finance Limited

 

UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION







As at


31 December

31 December

30 June



2019

2018

2019


Note

£'000s

£'000s

£'000s

Non-current assets





Other receivables

6

120,635

167,590

172,565

Current assets





Other receivables

6

57,239

-

-

Current liabilities





Zero dividend preference shares

7

(57,239)

-

-

Total assets less current liabilities


120,635

167,590

172,565

Non-current liabilities





Zero dividend preference shares

7

(120,635)

(167,590)

(172,565)

Net assets


-

-  

-  






Equity attributable to equity holders





Ordinary share capital

8

-

-  

-  






The unaudited condensed notes on pages 9 to 17 form part of these condensed financial statements.

 

 

 

 

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS

for the period to 31 December 2019

 

1.      Accounting policies

The Company is an investment company incorporated in Bermuda on 17 January 2007. The accounting policies below are unchanged from the previous year.

                               

(a)              Basis of accounting

The financial statements of the Company have been prepared on a going concern basis (see note 13) in accordance with International Financial Reporting Standards as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards Committee that remain in effect.

 

A Statement of Changes in Equity has not been presented as there is no movement in the current or prior period.

 

(b)              Zero dividend preference shares

The ZDP shares, due to be redeemed on 31 October 2020, 2022, 2024 and 2026, at a redemption value of 154.90 pence per share, 146.99 pence per share, 138.35 pence per share and 151.50 pence per share respectively, have been classified as liabilities, as they represent an obligation on behalf of the Company to deliver to their holders a fixed and determinable amount at the redemption date. They are accordingly accounted for at amortised cost, using the effective interest method as per the requirements of IFRS 9 "Financial Instruments", even though under Bermuda company law ZDP shares are required to be recognised as share capital in the Company.

 

(c)              Cash flow statement

There were no cash flows in the period or in the prior year and therefore a cash flow statement has not been prepared. All transaction movements were through the intra-group loan account.

 

(d)              Foreign currency

The functional and reporting currency is pounds sterling because the Company's ZDP share capital was raised, and will be repaid, in pounds sterling, and has been lent to, and will be repaid, by the parent company, in that currency.

  

(e)              Interest income

Interest on debt is accrued on a time basis using the effective interest method, calculated by accreting the initial recognition of the inter-company loan at present value (loan and contribution by the parent) to the final amount receivable at maturity.

 

(f)               Expenses

The Company incurs no expenses other than finance costs. The Directors are not entitled to receive any remuneration and all other expenses relating to the Company are paid in full by the parent company.

 

(g)              Finance costs

Finance costs are accounted for on an effective interest method.

 

(h)              Inter-company loans

UIL Limited has agreed to place the Company in sufficient funds to enable the Company to pay the capital entitlement of each class of ZDP share on their respective redemption dates. The amount owed in the accounts is based on the entitlements of the ZDP shareholders at the relevant date. The inter-company loans are accordingly accounted for at amortised cost, using the effective interest method and were assessed for credit risk under the IFRS 9 methodology and evaluated as having no significant credit risk. Therefore, no amounts were recognised as an impairment provision.

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

1.      Accounting policies (continued)

 

 (i)              Use of judgements, estimates and assumptions

The presentation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on perceived risks, historical experience, expectations of plausible future events and other factors. Actual results may differ from these estimates. The area requiring the most significant judgement and estimation in the preparation of the financial statements is the accounting through the Income Statement of the parent contribution to UIL Finance to enable UIL Finance to repay the ZDP shareholders on each repayment date. The parent's contribution towards the issue cost of the ZDP shares and redemption proceeds has been treated through the Income Statement and recognised over the life of the loan as UIL Finance provides financing services to UIL and in return is due to receive reimbursement of any costs and expense as and when they fall due. The policy for interest income, including the allocation and recognition of the parent contributions, is set out in note 1(e) to the accounts.

 

2.               Interest income


Six months to

Six months to

Year to


31 December

31 December

30 June


2019

2018

2019


£'000s

£'000s

£'000s

Interest income

5,309

7,107

12,082

 

3.               Finance costs


Six months to

Six months to

Year to


31 December

31 December

30 June


2019

2018

2019


£'000s

£'000s

£'000s

ZDP shares

5,309

7,107

12,082

 

4.               Earnings per share

The calculation of earnings per share is based on a profit after tax for the period of £nil (for the periods to 31 December 2018 and 30 June 2019: £nil) and a weighted average number of 10 ordinary shares in issue during the period (for the periods 31 December 2018 and 30 June 2019: 10 ordinary shares in issue).

 

5.               Dividends

There were no dividends paid or declared in respect of the period (for the periods to 31 December 2018 and 30 June 2019: £nil).

 

6.               Other receivables


31 December

31 December

30 June


2019

2018

2019


£'000s

£'000s

£'000s

Loan to parent company - UIL Limited   




  - Receivable within one year

57,239

-

-

- Receivable after more than one year

120,635

167,590

172,565


177,874

167,590

172,565

The loan is repayable on the date the underlying ZDP shares are redeemed.

 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

7.               Zero dividend preference shares

 


31 December

31 December

30 June


2019

2018

2019


£'000s

£'000s

£'000s

ZDP shares - current liabilities




2020 ZDP shares

57,239

-

-

ZDP shares - non-current liabilities




2020 ZDP shares

-

53,655

55,387

2022 ZDP shares

61,442

57,681

59,499

2024 ZDP shares

32,414

30,799

31,582

2026 ZDP shares

26,779

25,455

26,097


120,635

167,590

172,565

Total ZDP shares liabilities

177,874

167,590

172,565

 

 

Authorised ZDP shares of the Company as at 31 December 2019, 31 December 2018 and 30 June 2019 were as follows:

 



Number

£'000s

2018 ZDP shares of 5.9319p each


53,072,561

3,148

2020 ZDP shares of 6.0514p each


50,000,000

3,026

2022 ZDP shares of 5.3180p each


78,117,685

4,154

2024 ZDP shares of 3.8025p each


76,717,291

2,917

2026 ZDP shares of 10p each


25,000,000

2,500

 

 

ZDP shares issued by the Company are as follows:

 

Six months to 31 December 2019






 

 

Balance as at

30 June 2019

 

 

Finance costs

 

Balance as at

31 December 2019

2020

Number




39,000,000

-

39,000,000

£'000s




55,387

1,852

57,239

2022

Number




50,000,000

-

50,000,000

£'000s




59,499

1,943

61,442

2024

Number




30,000,000

-

30,000,000

£'000s




31,582

832

32,414

2026

Number




25,000,000

-

25,000,000

£'000s




26,097

682

26,779

Total

£'000s




172,565

5,309

177,874

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

7.               Zero dividend preference shares (continued)

 

Six months to 31 December 2018




 

Balance as at

30 June 2018

 

Redemption of ZDP shares

 

Cancellation of ZDP shares

 

Finance costs

Balance as at

31 December 2018

2018

Number


32,716,029

(31,892,465)

(823,564)

-

-

£'000s


51,266

(51,194)

(1,322)

1,250

-

2020

Number


39,000,000

-

-

-

39,000,000

£'000s


51,940

-

-

1,715

53,655

2022

Number


50,000,000

-

-

-

50,000,000

£'000s


55,873

-

-

1,808

57,681

2024

Number


50,000,000

-

(20,000,000)

-

30,000,000

£'000s


50,027

-

(20,920)

1,692

30,799

2026

Number


25,000,000

-

-

-

25,000,000

£'000s


24,813

-

-

642

25,455

Total

£'000s


233,919

(51,194)

(22,242)

7,107

167,590

 

Year to 30 June 2019




Balance as at

30 June 2018

Redemption of ZDP shares

Cancellation of ZDP shares

Finance costs

Balance as at

30 June 2019

2018

Number


32,716,029

(31,892,465)

(823,564)

-

-

£'000s


51,266

(51,194)

(1,322)

1,250

-

2020

Number


39,000,000

-

-

-

39,000,000

£'000s


51,940

-

-

3,447

55,387

2022

Number


50,000,000

-

-

-

50,000,000

£'000s


55,873

-

-

3,626

59,499

2024

Number


50,000,000

-

(20,000,000)

-

30,000,000

£'000s


50,027

-

(20,920)

2,475

31,582

2026

Number


25,000,000

-

-

-

25,000,000

£'000s


24,813

-

-

1,284

26,097

Total

£'000s


233,919

(51,194)

(22,242)

12,082

172,565

 

 

UIL Limited held 11,920,535 2026 ZDP shares as at 30 June 2019. In the period UIL Limited sold 8,829,682 2026 ZDP shares in the open market, receiving £9.5m. UIL Limited held 3,090,853 2026 ZDP shares as at 31 December 2019.

 

2020 ZDP shares

Based on the initial entitlement of a 2020 ZDP share of 100p on 31 July 2014, a 2020 ZDP share will have a final capital entitlement at the end of its life on 31 October 2020 of 154.90p equating to a 7.25% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2020 ZDP share as at 31 December 2019 was 146.12p (31 December 2018: 136.25p and 30 June 2019: 141.01p).

 

2022 ZDP shares

Based on the initial entitlement of a 2022 ZDP share of 100p on 23 June 2016, a 2022 ZDP share will have a final capital entitlement at the end of its life on 31 October 2022 of 146.99p equating to a 6.25% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2022 ZDP share as at 31 December 2019 was 123.79p (31 December 2018: 116.52p and 30 June 2019: 120.03p).

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

7.               Zero dividend preference shares (continued)

 

2024 ZDP shares

Based on the initial entitlement of a 2024 ZDP share of 100p on 2 November 2018, a 2024 ZDP share will have a final capital entitlement at the end of its life on 31 October 2024 of 138.35p equating to a 4.75% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2024 ZDP share as at 31 December 2019 was 110.54p (31 December 2018: 105.54p and 30 June 2019: 107.97p).

 

2026 ZDP shares

Based on the initial entitlement of a 2026 ZDP share of 100p on 26 April 2018, a 2026 ZDP share will have a final capital entitlement at the end of its life on 31 October 2026 of 151.50p equating to a 5.00% per annum gross redemption yield. The capital entitlement (excluding issue costs) per 2026 ZDP share as at 31 December 2019 was 108.55p (31 December 2018: 103.38p and 30 June 2019: 105.89p).

 

The ZDP shares are admitted to the standard segment of the Official List and to trading on the London Stock Exchange and are stated at amortised cost using the effective interest method. The ZDP shares carry no entitlement to income however they have a pre-determined final capital entitlement which ranks behind all other liabilities and creditors of the Company and UIL Limited but in priority to the ordinary shares of the Company and UIL Limited save in respect of certain winding up revenue profits of UIL Limited.

 

The growth of each ZDP share accrues daily and is reflected in the return and net asset value per ZDP share on an effective interest method. The ZDP shares do not carry any voting rights at general meetings of the Company. However the Company will not be able to carry out certain corporate actions unless it obtains the separate approval of the ZDP shareholders (treated as a single class) at a separate meeting. Separate approval of each class of ZDP shareholders must be obtained in respect of any proposals which would affect their respective rights, including any resolution to wind up the Company. In addition the approval of ZDP shareholders by the passing of a special resolution at separate class meetings of the ZDP shareholders is required in relation to any proposal to modify, alter or abrogate the rights attaching

to any class of the ZDP shares and in relation to any proposal by the Company or its parent company which would reduce the Group's cover of the existing ZDP shares below 1.35 times.

 

On a liquidation of UIL Limited and/or the Company, to the extent that the relevant classes of ZDP shares have not already been redeemed, the shares shall rank in the following order of priority in relation to the repayment of their accrued capital entitlement as at the date of liquidation:

 

(i) the 2020 ZDP shares shall rank in priority to the 2022 ZDP shares, the 2024 ZDP shares and the 2026 ZDP shares;

(ii) the 2022 ZDP shares shall rank in priority to the 2024 ZDP shares and the 2026 ZDP shares; and

(iii) the 2024 ZDP shares shall rank in priority to the 2026 ZDP shares;

 

The entitlement of ZDP Shareholders of a particular class shall be determined in proportion to their holdings of ZDP shares of that class.

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

8.               Ordinary share capital 

 


Number

£

Authorised



Ordinary shares of 10p each

10

1

Issued and nil paid



Balance at 31 December 2019, 31 December 2018

and 30 June 2019

 

10

 

-  

 

In addition to receiving any income distributed by way of dividend, the ordinary shareholders will be entitled to all surplus assets after payment of all debts, including ZDP shares.

 

Net asset value per ordinary share is £nil (31 December 2018: £nil and 30 June 2019: £nil) based on 10 shares in issue.

 

9.               Parent company

 

UIL Limited, incorporated in Bermuda, is the parent company of the Company, holding 100% of the nil paid ordinary shares.

 

In the opinion of the Directors, the Company's ultimate parent undertaking is Somers Isles Private Trust Company Limited ("SIPTCL"), a company incorporated in Bermuda and owned by Mr Duncan Saville.

 

10.             Related party transactions

 

UIL Limited, SIPTCL, General Provincial Life Pension Fund Limited which holds 63.7% of UIL Limited shares and ultimately controlled by SIPTCL and the Board of the Company are considered related parties. Amounts owing from related parties are disclosed in the financial statements in note 6, ZDP shares issued to UIL Limited are disclosed in note 7 and interest income from related parties is disclosed in note 2.

 

11.             Operating Segments

 

The Directors are of the opinion that the Company's activities comprise a single business segment of financing the Company's ZDP shares debt by lending current asset funds to its parent company and therefore no segmental reporting is provided.

 

12.             Financial Risk Management

 

The Board of Directors is responsible for the Company's risk management. The Directors' policies and processes for managing the financial risks are set out in the interest rate exposure and credit risk management sections below.

 

The accounting policies which govern the reported Statement of Financial Position carrying values of the underlying financial assets and liabilities, as well as the related income and expenditure, are set out in note 1 to the accounts. The policies are in compliance with IFRSs as adopted by the EU and best practice, and include the valuation of financial assets at fair value and liabilities at amortised cost.

 



 

UIL Finance Limited

                                                                                 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

12.             Financial Risk Management (continued)

 

Interest Rate exposure

The exposure of the financial assets and liabilities to interest risks is shown below:

 



Within

More than


Total

one year

one year

31 December 2019

£'000s

£'000s

£'000s

Exposure to fixed rates




ZDP shares

(177,874)

(57,239)

(120,635)

Intra-group loan

177,874

57,239

 120,635

Net exposures




At period end

 -

-

-

Maximum in period

 -

-

-

Minimum in period

 -

-

-

 



Within

More than


Total

one year

one year

31 December 2018

£'000s

£'000s

£'000s

Exposure to fixed rates




ZDP shares

(167,590)

-

(167,590)

Intra-group loan

167,590

167,950

 -

Net exposures




At period end

 -

167,950

(167,590)

Maximum in period

 -

185,308

(185,308)

Minimum in period

 -

165,953

(165,953)

 



Within

More than


Total

one year

one year

30 June 2019

£'000s

£'000s

£'000s

Exposure to fixed rates




Zero dividend preference shares

(172,565)

-

(172,565)

Intra-group loan

172,565

-

(172,565)

Net exposures




At year end

 -

-

-

Maximum in year

-

-

-

Minimum in year

 -

-

-

 

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

12.             Financial Risk Management (continued)

 

Credit Risk exposure

The Company is exposed to potential failure by its parent company to settle the ZDP share liability on behalf of the Company on the respective repayment dates. The Board assesses this risk at each Board meeting.

 

2020 ZDP shares

Based on their final entitlement of 154.90p per share, the final entitlement of the 2020 ZDP shares was covered 4.73 times by UIL Limited's gross assets as at 31 December 2019. Should gross assets fall by 78.9% over the remaining life of the 2020 ZDP shares, then the 2020 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 90.3%, equivalent to an annual fall of 93.9%, the 2020 ZDP shares would receive no payment at the end of their life.

 

2022 ZDP shares

Based on their final entitlement of 146.99p per share, the final entitlement of the 2022 ZDP shares was covered 2.85 times by UIL Limited's gross assets as at 31 December 2019. Should gross assets fall by 65.0% over the remaining life of the 2022 ZDP shares, then the 2022 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 78.9%, equivalent to an annual fall of 42.2%, the 2022 ZDP shares would receive no payment at the end of their life. 

 

2024 ZDP shares

Based on their final entitlement of 138.35p per share, the final entitlement of the 2024 ZDP shares was covered 2.33 times by UIL Limited's gross assets as at 31 December 2019. Should gross assets fall by 57.1% over the remaining life of the 2024 ZDP shares, then the 2024 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 65.0%, equivalent to an annual fall of 19.5%, the 2024 ZDP shares would receive no payment at the end of their life. 

 

2026 ZDP shares

Based on their final entitlement of 151.50p per share, the final entitlement of the 2026 ZDP shares was covered 2.00 times by UIL Limited's gross assets as at 31 December 2019. Should gross assets fall by 49.9% over the remaining life of the 2026 ZDP shares, then the 2026 ZDP shares would not receive their final entitlements in full. Should gross assets fall by 57.1%, equivalent to an annual fall of 11.6%, the 2026 ZDP shares would receive no payment at the end of their life.

 

None of the Company's financial liabilities is past due or impaired.

 

Fair Values of financial assets and liabilities

The assets and liabilities of the Company are, in the opinion of the Directors, reflected in the Statement of Financial Position at fair value except for the ZDP shares and the inter-company loan which are carried at amortised cost using effective interest method in accordance with IFRS 9, or at a reasonable approximation thereof.

 

The fair values of the ZDP shares based on their quoted market value were:

 


31 December

31 December

30 June


2019

2018

2019


£'000s

£'000s

£'000s

2020 ZDP shares

59,085

57,330

58,305

2022 ZDP shares

66,000

64,250

66,000

2024 ZDP shares

34,050

32,550

34,200

2026 ZDP shares

27,125

26,000

26,875

 



 

UIL Finance Limited

 

UNAUDITED CONDENSED NOTES TO THE ACCOUNTS (CONTINUED)

 

12.             Financial Risk Management (continued)

 

Capital risk management

The objective of the Company is to finance and fund the redemption value of the ZDP shares. The Board has a responsibility for ensuring the Company's ability to continue as a going concern and to meet the redemption of the ZDP shares. This is dependent on the asset performance of the parent company. As at 31 December 2019, the parent company had net assets of £301,631,000 (31 December 2018: £264,763,000 and 30 June 2019: £326,268,000) after providing for amounts due to ZDP shareholders.

 

13.             Going Concern

The Directors believe that it is appropriate to adopt the going concern basis in preparing the accounts as the Company can continue to operate due to the contractual obligation of the parent company to ensure that UIL Finance is able to redeem the ZDP shares on each repayment date and the Directors are comfortable that the parent company has the financial resources to do so.

 

 


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