RNS Number : 3362K
Utilico Limited
16 April 2010
 



 

Utilico Limited

Interim Management Statement

31 March 2010

 

Quarterly Management Review

Utilico Limited ("Utilico") published its interim report and accounts for the six months to 31 December 2009 on 24 February 2010. Further, Utilico has also published monthly fact sheets on its website, www.utilico.bm.

 

Set out below is the interim management statement ("IMS") for the period from 1 January 2010 to 31 March 2010, and contains information that covers this period, and up to the date of publication of this IMS. Utilico is publishing this IMS in accordance with DTR 4.3 of the FSA Handbook.

 

This IMS has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party or for any other purpose.

 

Performance

The equity markets continued to rise during the three months under review, the FTSE All-Share Index rose by 5.4%, the S&P Index (GBP adjusted) rose by 11.5% and the MSCI EMF (GBP adjusted) Index rose by 8.5%.  Utilico's NAV (including undistributed income) underperformed against the market, increasing in value by 0.8%, largely as a result of a decline in the value of specific positions. Over the past nine months since the financial year end in June 2009, Utilico's NAV has increased 29.8% versus the FTSE All-Share Index which increased by 34.0%. 

 

 

Portfolio

Utilico's gross assets less current liabilities (excluding current debt) began the quarter at £339.5m and ended the quarter at £343.1m an increase of 1.1%. Ordinary Shareholders' funds increased by £1.4m from £163.3m at 31 December 2009 to £164.7m at 31 March 2010.

 

The ten largest holdings have remained the same over the quarter although there have been some strong movements in share price. Infratil gained 7.5% over the three months whilst Renewable Energy Generation lost 17.5% of its share price value.

 

Infratil continues to be Utilico's largest investment and rose as a percentage of gross assets due to the performance of the ordinary share price combined with the strength of the New Zealand Dollar against Sterling.

 

Utilico Emerging Markets (UEM) outperformed Utilico during the period as a result of recovery in the Emerging Markets, and the weakness of Sterling. UEM's NAV rose by 8.1% over the three months. During the period Utilico sold 550,000 ordinary shares in UEM realising £0.7m and purchased 550,000 warrants in UEM at a cost of £0.1m.

 

Resolute Mining's convertible note price fell by 5.3% and its ordinary share price fell 5.6% during the period, on an absence of major news flow.  Renewable Energy Generation (REG) saw its share price fall by 17.5% as the market prefers to see tangible evidence of value creation from their cash position, rather than attributing value up-front to REG's future development pipeline.  Billing Services' share price fell by 17.0% to 18.25p despite releasing solid underlying results for the full year 2009, which were enhanced by some one-off items. The company's operational cash flow was used primarily to reduce its balance sheet liabilities rather than to provide a distribution to equity holders, and this seems to have disappointed investors. Jersey Electricity and Vix Technology fell in value by 0.7% and 2.5% respectively. Ascendant group's share price was also down by 3.6% to $14.50.

 

Debt and Cash

During the period Utilico maintained its debt position at £20.0m.  All Utilico's debt is drawn in New Zealand Dollars, providing a partial hedge against Utilico's NZD denominated assets. Utilico's cash balance increased over the period, from £10.6m at 31 December 2009 to £15.8m at 31 March 2010.

 

Hedging

Options. Utilico has maintained its option positions over the three month period. At 31 December 2009, Utilico held index put options which provided market protection of approximately £33.8m with a market value of £2.8m. By the end of March 2010, the level of protection had increased to £35.5m and the market value of the position was £1.9m

 

Currency Hedging. At the end of March 2010, Utilico held currency hedges in New Zealand Dollars, US Dollars, Euros, Sterling and Australian Dollars.

 

The NZ$ contracts of NZ$78.0m and NZ$12.5m covered approximately £36.5m of Sterling assets and $8.9m of US Dollar assets. The US Dollar contracts cover approximately £14.8m of Sterling assets. The Euro currency forward contracts of €10.5m cover £4.9m of Sterling assets, AS$3.7m of Australian Dollar assets and US$3.4m of Dollar assets. The remaining two hedges were Australian dollars against Sterling and US Dollars, providing coverage of £23.1m and US$16.8m. In total £100.0m of assets are covered by these currency forwards.

 

ZDP Shares

Over the quarter, the traded price of Utilico's 2012 ZDP shares increased to 157.25p up 1.0% since the year end. The 2014 and 2016 maturity ZDP shares also rose by 2.2% and 6.8% to 130.50p and 117.00p respectively.

 

As at 31 March 2010, the three ZDP tranches offered yields to maturity of 4.8%, 5.6% and 7.9% for the 2012, 2014, and 2016 maturities respectively. Likewise the asset covers at final redemption value stood at 3.40x, 2.10x and 1.45x for the 2012, 2014, and 2016 maturities respectively.

 

Share price and NAV

Utilico's share price fell from 142.25p at 31 December 2009 to 135.00p at 31 March 2010. Utilico's undiluted NAV rose slightly to 190.65p from 189.05p and the discount to NAV increased from 24.8% at 31 December 2009 to 29.2% at 31 March 2010. A combination of all Utilico's traded instruments ended March with a 13.0% discount to underlying asset value.

 

Bonus issue

As previously announced to the market, despite having positive revenue earnings, under Bermuda law Utilico has been unable to pay a dividend to Shareholders as a result of having negative capital reserves since March 2008. In light of the significant increases in the NAV during the last year, ZDP Cover had increased above 1.4x allowing the Company to repurchase its ordinary shares. It is the intention of the Company to make cash distributions by way of a bonus issue of new ordinary shares to existing Shareholders which would immediately be bought back by the Company at their market price and subsequently cancelled. The amount received by the Shareholders would be equivalent to a dividend that they would have received in respect of their existing ordinary shares. A full and detailed Circular outlining the proposed bonus issue is available on the Company's website.

 

Outlook

We remain cautiously optimistic. We firmly believe the economic performance of the emerging markets, in particular China, and the strengthening recovery in the USA will result in stronger corporate earnings. Market valuations, particularly where utilities and infrastructure investments are concerned, do not look particularly stretched.  However, the substantial imbalances within the global economy, coupled with the levels of indebtedness of developed economies, cause us to remain vigilant. Sovereign debt and its reduction could unsettle the economic recovery underway.  We believe that Utilico's sectors will outperform the more cyclical sectors over coming years.

 

Capital Structure



31 March

2010

£m


31 December 2009

Gross assets less current liabilities



343.1


339.5







Bank debt



20.0


20.5

ZDP shares



158.4


155.7

Shareholders' funds (ordinary shares)



164.7


163.3




343.1


339.5

Effective gearing on ordinary shares












Ordinary Shares

 



31 March

2010


31 December 2009

NAV (undiluted, cum income)



190.65p


189.05p

NAV (diluted, cum income)



190.65p


189.05p

Share price



135.00p


142.25p

Discount to diluted NAV



29.2%


24.8%

Annual average compound return (including dividends)



11.0%


11.3%

Shares in issue



86,373,835


86,373,835







Warrants at 31 March 2010

 





2012

Expiry date





April 2012

Price





1.50p

Warrants in issue





3,588,643

Exercise terms





1 ordinary

Share






per warrant at subscription

price






of 315p







ZDP Shares at 31 March 2010

 

2012


2014


2016

Accrued capital entitlement

149.02p


121.59p


121.59p

Share price

157.25p


130.50p


117.00p

(Discount)/premium to NAV

5.5%


7.3%


(3.8%)

ZDP cover*

3.40x


2.10x


1.45x

Yield to redemption*

4.8%


5.6%


7.9%

ZDP redemption value

177.52p


167.60p


192.78p

Shares in issue

45,486,200


37,500,000


37,500,000

*based on final redemption values






 

 

Performance

 


31 March

2010

31 December 2009


% change

Utilico NAV (undiluted, cum income)


190.65p

189.05p


0.8%

FTSE All-Share Index


2910

2761


5.4%

 

Sectoral Split of Investments *

 



31 March

2010


31 December 2009

Renewable Energy



19%


20%

Electricity



15%


15%

Gold



14%


14%

Road & Rail



12%


5%

Airports



9%


10%

Telecoms



8%


8%

Other



8%


1%

Water and waste



6%


7%

Ports



4%


4%

Other Infrastructure



2%


2%

Gas



1%


2%

Satellites



1%


1%

Infrastructure IT



1%


11%

Postal



0%


-







Geographical Split of Investments *

 



31 March

2010


31 December 2009

New Zealand



22%


19%

UK



17%


18%

Other - Gold



14%


-

Asia & Far East



14%


11%

North America



10%


10%

Australia



10%


24%

Latin America



7%


9%

Europe (excluding UK and Switzerland)



6%


7%

Other



-


-

Switzerland



-


2%







* on a look through basis












 

 

Top 10 Holdings as % of Gross Assets

 


31 March

2010


31 December 2009

1 (1)

Infratil Limited


25.5%


23.1%

2 (2 )

Utilico Emerging Markets Limited


21.0%


20.5%

3 (3)

Resolute Mining Ltd


13.6%


13.6%

4 (4)

Jersey Electricity Company Limited


5.6%


5.7%

5 (5)

Vix Technology


4.7%


4.8%

6 (7)

Renewable Energy Generation Limited


3.3%


4.1%

7 (6)

KeyTech Limited


3.2%


3.2%

8 (-)

Ascendant Group


2.2%


2.2%

9 (8)

Billing Services


2.2%


2.6%

10 (10)

Renewable Energy Holdings


1.7%


2.1%


Total Top 10


83.0%


81.9%

 

 

 

Enquiries

Charles Jillings

Utilico Limited

+44 1372 271 486

 

Alastair Moreton

Hannah Pearce

Arbuthnot Securities

+44 207 012 2000


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