RNS Number : 5471F
UIL Limited
21 February 2018
 

Date:                      21 February 2018

 

Contact:                 Charles Jillings                                                               

                                ICM Investment Management Limited                        

                                01372 271 486                                                               

 

 

 

UIL LIMITED

UNAUDITED STATEMENT OF RESULTS

FOR THE SIX MONTHS TO 31 DECEMBER 2017

 

 

 

 

 

 

 

 

 

FINANCIAL HIGHLIGHTS

 

 

 

 

·      Revenue return  per ordinary share 3.22p (2.76p)

·      Capital return per ordinary share 13.76p (20.69p)

·      Total return per ordinary share 16.98p (23.45p)

·      Dividends per ordinary share 3.75p (3.75p)

 

 

Figures in brackets are 31 December 2016

 

             

UNAUDITED GROUP PERFORMANCE SUMMARY 


Half-year

31 Dec

2017

Half-year

31 Dec

2016

Annual

30 Jun

2017

% change

Jun-Dec

2017

NAV total return(1) (%)

6.7

9.7

7.7

n/a

Annual compound NAV total return

(since inception)(2) (%)

 

12.0

 

12.6

 

11.9

 

n/a

NAV per ordinary share (pence)

266.08

261.14

252.86

5.2

Ordinary share price (pence)

163.50

143.50

164.00

(0.3)

Discount (%)

38.6

45.0

35.1

n/a

FTSE All-Share Total Return Index

7,266

6,424

6,777

7.2

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





2018 ZDP shares





Capital entitlement per ZDP share

151.44

141.18

146.19

3.6

ZDP share price

157.38

154.38

154.75

1.7

2020 ZDP shares





Capital entitlement per ZDP share

127.04

118.43

122.64

3.6

ZDP share price

143.75

133.50

140.38

2.4

2022 ZDP shares





Capital entitlement per ZDP share

109.67

103.20

106.37

3.1

ZDP share price

124.50

109.75

119.50

4.2

2024 ZDP shares





Capital entitlement per ZDP share

100.75

n/a

n/a

n/a

ZDP share price

105.25

n/a

n/a

n/a

Equity holders' funds (£m)





Gross assets(4)

459.7

471.6

449.7

2.2

Bank loans

37.1

75.0

47.8

(22.4)

ZDP shares

182.6

160.8

173.8

5.1

Equity holders' funds

240.0

235.8

228.1

5.2

Revenue account (£m)





Income

5.2

4.8

10.7

8.3(5)

Costs (management and other expenses)

1.4

1.5

2.9

(6.7)(5)

Finance costs

0.8

0.7

1.8

14.3 5)

Financial ratios of the Group (%)





Revenue yield on average gross assets

2.3(6)

2.2(6)

2.4

n/a

Ongoing charges figure excluding performance fees(7)

2.1(6)

2.0(6)

2.1

n/a

Ongoing charges figure including performance fees(7)

2.5(6)

2.8(6)

2.6

n/a

Bank loans, net bank overdraft and

ZDP shares gearing on net assets

 

92.1

 

103.5

 

97.2

 

n/a

Returns and dividends (pence)





 

Revenue return per ordinary share

3.22

2.76

6.38

16.7 (5)

 

Capital return per ordinary share

13.76

20.69

12.46

(33.5) (5)

 

Total return per ordinary share

16.98

23.45

18.84

(27.6) (5)

 

Dividends per ordinary share

3.75

3.75

7.50

0.0  (5)

 

(1)  Total return is calculated as change in NAV per ordinary share, plus dividends reinvested

(2)  Since inception includes data relating to Utilico Investment Trust plc, UIL's predecessor, which started trading in August 2003

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

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

(5)  Percentage change based on comparative six month period to 31 December 2016

(6)  For comparative purposes the figures have been annualised

(7)  Expressed as a percentage of average net assets. Ongoing charges comprise all operational, recurring costs that are payable by the Group or

incurred within underlying investee funds, in the absence of any purchases or sales of investments

CHAIRMAN'S STATEMENT

 

UIL achieved a positive NAV total return of 6.7% in the six months to 31 December 2017 while the share price fell by 0.3%. The FTSE All Share Total Return Index was also positive at 7.2%. Since inception UIL has delivered a 411.4% NAV growth versus the FTSE's 237.6%, resulting in a compound annual growth rate for UIL of 12.0%. Arising from this strong NAV performance, a performance fee payable by UIL of £0.8m (2016: nil) has been accrued.

The share price total return for the six months was 2.0%. Despite the good NAV gains, the reduction in absolute debt and gearing, and attractive dividend payments, the ordinary share discount has widened to 38.6% as at 31 December 2017 from 35.1% as at 30 June 2017.

During the six months to 31 December 2017 UIL did not buy back any shares. However, since the period end and up to 20 February 2018, UIL bought back 0.7m shares, 0.8% of the issued shares, at an average price of 172.67p, a discount to the NAV as at 31 December 2017 of 35.1%.

In my statement for the year to 30 June 2017, I noted that the world's gross domestic product ("GDP") looked to be in a positive synchronised growth across most global markets, inflation remains weak and as such, we are experiencing a "Goldilocks" type environment for investors. This continued in the second half of 2017 with GDP rising and the Goldilocks environment remaining intact. Nearly all asset classes strengthened and performance even accelerated over the six months to 31 December 2017, and this has continued with a strong start to 2018.

Against this rising strength in GDP and low interest rates, volatility has reduced and is currently at decade lows. Populism and regional tensions remain elevated and are expected to continue over the coming year. Whether they will disrupt the synchronised GDP expectations remains a concern. The challenge posed by the emergence of disruptive technology businesses, which increasingly dominate local and global markets, has continued. Much of the asset class growth has been driven by higher earnings and valuations, but also higher debt levels across the world's economies.

This remains a difficult environment for long term strategic investors. UIL's portfolio has benefitted from its technology investments and in particular, Afterpay Touch Group Limited ("Afterpay"), an Australian fintech business.

Over the six months to 31 December 2017 Sterling has recovered some of the ground it lost over the six months to 30 June 2017. Sterling rose against the New Zealand Dollar by 7.2%, by 4.1% against the US Dollar and 2.1% against the Australian Dollar, while falling 1.1% against the Euro. Oil continued its strong recovery rising by 39.5% ending the year at USD 66.87 per barrel. Gold rose by 5.0% over the six months to 31 December 2017 ending the year at USD 1,303/oz.

UIL has delivered strong gains over the period with gains on investments on the capital return of £14.3m, as Afterpay increased its value by £31.3m. UIL's NAV rose by 13.22p to 266.08p over the six months to 31 December 2017. 

In October 2017 UIL successfully rolled 17.1m of its existing 2018 ZDP shares into a new issue of 2024 ZDP shares and placed 3.3m of the new 2024 ZDP shares for cash. The 2024 ZDP shares have a lower compounding rate of 4.75% and will reduce UIL's funding costs going forward. It is pleasing to note the new 2024 ZDP shares trading at a premium to the issue price.

The Board is considering proposals to extend its ZDP maturity profile through the issue of a new class of 2026 ZDP shares and a corresponding reduction in the Company's bank facility. Further details will be announced in due course. 

UIL has placed 3.3m new 2024 ZDP shares for cash, realised investments, received back investee loans and seen its currency hedges rolled over, all generating cash in the six month period enabling UIL to reduce its bank loans from £47.8m to £37.1m.

The combination of the above has seen UIL's gearing reduce to 92.1% from 97.2% as at 30 June 2017 and its average funding costs as at 31 December 2017 reduce to 3.4%. 

The profit on the revenue account in the half year was up by 16.4% at £2.9m (31 December 2016: £2.5m). The Board has maintained the quarterly dividends of 1.875p per ordinary share, with the second quarterly dividend to be paid on 23 March 2018 to shareholders on the register as at 9 March 2018.

MiFID II came into effect in January 2018 and UIL was required to publish a Key Information Document ("KID"). UIL has fully complied with the new KID requirements for its ordinary shares and each of its ZDP shares at a financial cost to the shareholders. The Board would suggest some caution to shareholders using the KID. In particular, while the performance scenarios have been calculated using the methodology prescribed by EU rules, these should not be taken as a guide to the future and actual performance which may turn out to be materially different.

In response to the new MiFID II environment, ICM and ICM Investment Management have agreed to absorb the research cost and not recharge them to UIL.

OUTLOOK

Markets remain outside the normal historic parameters. From a monetary policy perspective, unconventional tools are continuing to be deployed, such as negative interest rates and Quantitative Easing ("QE") still being implemented in Europe and Japan.  However, the US economy has strengthened to the point where Quantitative Tightening ("QT") is now in place and inflation look set to rise, including wage inflation. This in turn has seen increased market expectations that interest rates will need to rise faster.

The rising dislocation between QE and QT is likely to result in increased volatility and in the last month volatility has been seen to spike and markets correct.  Corporates remain in a goldilocks scenario (global growth, low interest rates and low inflation) which should be beneficial when reflected in rising revenues, increasing margins and consequently good earnings growth. This should have positive implications for UIL's portfolio.

A caution should be made about geopolitical events and populism. There continues to be a strong populist influence and this could lead to changing outcomes which may not always be foreseen. Further increased geopolitical tensions, especially in the Middle East could also have implications for the markets.

While macro, political and geopolitical events will influence markets, UIL's investment approach and performance will continue to be driven by individual stock selection.

 

Peter Burrows

Chairman

21 February 2018

 



 

INVESTMENT MANAGERS' REPORT

UIL's NAV total return was 6.7% in the six months to 31 December 2017 and builds again on the significant gains made by UIL in recent years. Since inception UIL's NAV total return has been 411.4% and the share price total return was 318.9%.

As noted in the Chairman's statement, the six months to 31 December 2017 has seen a further acceleration in global GDP and a continuation of the goldilocks scenario, growth in GDP with low inflation and low interest rates. Equity markets led by the USA S&P have moved higher in rising earnings and valuations. Commodity prices have been much stronger, led by oil which, as at 31 December 2017 was 39.5% higher at USD 66.87 per barrel, and gold which was up by 5.0% at USD 1,303/oz.

We remain optimistic about short-term markets but are concerned about elevated political and geographical tensions which could derail global GDP growth. We remain concerned about the rising level of global debt and liabilities. 

Over the six months, Sterling has reversed some of the losses it made in recent years. Sterling was up against the NZD by 7.2%; USD by 4.1% and AUD by 2.1%. The Euro gained 1.1% versus Sterling.

For UIL, the net effect of all of the above has been further asset gains. UIL's foreign exchange positions have released cash on maturity as Sterling has firmed. UIL has taken the opportunity to reduce bank debt by placing 3.3m new 2024 ZDP shares for cash and realising investments.

PORTFOLIO

The technology investments in UIL have been strong with Afterpay rising 122.8%. Offsetting this, Zeta Resources Limited ("Zeta") and Resolute Mining Limited ("Resolute") have both been relatively weak and disappointingly, so too has the unlisted company Vix Technology Limited ("Vix Technology"). These are all reviewed below.

Overall, the investment portfolio gained £14.3m and the gains on derivatives and foreign exchange amounted to £5.0m.

MAJOR PLATFORM INVESTMENTS

Somers Limited ("Somers") is a financial services sector investment holding company listed on the Bermuda Stock Exchange. Somers' share price was USD 14.25 as at 31 December 2017, up from USD 13.00 as at 30 June 2017. 

During the period PCF Group plc, Somers' majority owned bank, received a UK deposit banking licence and commenced taking retail deposits, while Homeloans Limited ("Homeloans") became Somers' largest investment following the growth in its reported Assets under Management to AUD 10.2bn. Somers' shareholders' equity increased significantly to USD 361.2m (June 2017: USD 268.6m) mainly as a result of the conversion of the loan notes issued as part of Somers' acquisition of the majority stake in Homeloans in September 2016. Somers' other two significant investments are Bermuda Commercial Bank Limited (one of Bermuda's four licensed banks), which is a wholly owned investment and a 62.5% interest in Waverton Investment Management Limited ("Waverton"), a UK private wealth manager with £5.5bn of assets under management.

For the year ended 30 September 2017 Somers reported a net profit of USD 19.4m on total equity of USD 361.2m. Somers' diluted NAV per share was USD 18.55 as at 30 September 2017 (September 2016: USD 18.66). The profit was driven principally by valuation increases at Homeloans and Waverton due to strong financial performances at both companies. Despite the annual profit, NAV per share remained at similar levels to last year mainly due to the issue of shares from the pro rata bonus warrant issue to all shareholders at a discount to net asset value. Following the exercise of convertible loan notes by other shareholders during the period, UIL's holding in Somers reduced to 44.2% as at 31 December 2017. Somers is now UIL's largest investment accounting for 19.6% of the total portfolio.

Utilico Emerging Markets Limited ("UEM") invests predominantly in infrastructure and utility assets in emerging markets and is listed in the UK and traded on the London Stock Exchange. During the period, emerging markets have generally been strong, with the MSCI Emerging Markets Total Return Index (GBP adjusted) up by 11.3%. This reflects robust underlying economies, with all regions across the world showing positive synchronised growth while inflation in most countries remains subdued.

After enduring its longest recession in history in 2015-16, Brazil's economy finally returned to growth in early 2017 and sustained this through the year. This helped deliver strong market performance, with a 21.5% rise in the Bovespa index over the six months to 31 December 2017. Meanwhile China continued to deliver surprisingly resilient growth, with GDP up 6.9% in 2017, beating the official target. While the Chinese A-share market posted modest growth, up by 3.6% over the six months, the Hong Kong Hang Seng was also particularly strong, up by 16.1%. It is notable that in Argentina President Macri continues to effect major market-friendly reforms, which was reflected in the Merval index appreciating by 37.2% during the period. However, stubbornly high inflation partly eroded returns here, with the Argentinian Peso depreciating against Sterling by 13.9%. 

In the six months to 31 December 2017, UEM's NAV increased by 7.2% on a total return basis, reflecting a solid underlying performance from the portfolio constituents, partly offset by currency headwinds due to strengthening of Sterling. During the period UEM's share price total return increased by 4.1%, reflecting the increase in dividends to 3.40p per share. UIL sold 0.75m shares in UEM over the period, reducing its holding by 2.3% and realising £1.7m.

Zeta is a resource-focused investment company which is listed on the Australian Stock Exchange. Over the six months to 31 December 2017, Zeta's net assets increased by a pleasing 33.0%, while its share price declined by 12.2% to AUD 0.33, representing a discount to net tangible assets of 29.5%.

During the six month period, commodity prices were up overall. Oil prices rose, with the Brent crude oil price up by 39.5% to USD 66.87 per barrel. The gold price was up by 5.0% to USD 1,303/oz, while the nickel price was up by 30.2% to USD 5.48/lb. In line with the rise in commodity prices, the net assets of Zeta rose by 33.0% from USD 68.7m to USD 91.4m. However, the net assets per share rose by 24.9% due to dilution from the exercise of options by UIL during the period. In the six months to 31 December 2017, New Zealand Oil & Gas ("NZOG") was subject to a partial takeover bid by OG Oil & Gas, benefiting Zeta's investment in NZOG. 

The loan balance as at 31 December 2017 is AUD 24.5m, UIL loaned Zeta an additional AUD 12.7m and Zeta repaid to UIL AUD 18.4m.

Infratil Limited ("Infratil") is a New Zealand listed company managed by H.R.L. Morrison & Co, with its main business lines focused in the renewable energy, airport and public transportations sectors. Infratil's share price increased by 11.8% in the six months to 31 December 2017 reflecting solid financial performance in its investments, which has led to an upgrade in its EBITDAF guidance for its financial year to 31 March 2018.

In its interim report to 30 September 2017, Infratil's six-month continuing EBITDAF was up by 18.4%, with a strong performance at Trustpower more than offsetting a weaker financial contribution from NZ Bus and Tilt Renewables. Trustpower has benefitted from a combination of strong hydrology and firm electricity prices in New Zealand, with total generation up by 20.4% and EBITDAF growth of 33.8%. However, wind resources have been comparatively weak, with Tilt Renewables output falling by 16.0% and EBITDAF declining 19.9%. NZ Bus passenger figures fell by 8.6% due to the loss of its South Auckland services, with resulting EBITDAF declining 28.4%. Wellington Airport provided steady growth, reporting passenger numbers up by 3.1% and EBITDAF up 8.2%, whilst Perth Energy losses narrowed. Overall, Infratil's net parent surplus increased 15.6% year-on-year. 

In the six months to 31 December 2017 Infratil increased its dividends per share by 4.3%. There was no change to UIL's shareholding in Infratil during the period. 

Bermuda First Investment Company Limited ("BFIC") is an investment company focused on Bermuda. Its largest investments are Ascendant Group Limited ("Ascendant") (valued at BMD 25.9m as at 31 December 2017) and One Communications Limited ("One") (valued at BMD 24.1m as at 31 December 2017). BFIC's policy is to build strategic investments in local Bermudan companies whilst working closely, where appropriate, with the board and senior management of those companies to increase the long-term value of the investments and to encourage the introduction of shareholder friendly initiatives. Both companies are benefiting from an improvement in the Bermuda economy and a strong 2017 where Bermuda had a positive uplift from hosting the America's Cup. Both Ascendant and One are making significant investments to maintain and improve their respective networks in order to drive future growth.

MAJOR DIRECT HOLDINGS

Gold production by Resolute in the six months to 31 December 2017 was 142,749 ounces, down 16.3% on the same period in the prior year. This was due to lower head grades, planned production shutdowns for maintenance at Syama and the wind-down of reserves from underground mining at Ravenswood before transitioning to large-scale open pit operations. Production cash costs during the period averaged AUD 1,231 per ounce. For the year to June 2018 Resolute has forecast production of 300,000 ounces at an all-in sustaining cost of AUD 1,280 per ounce. The Syama underground mine is currently under development and is due to commence full underground mining in December 2018.

In the six months to 31 December 2017, Resolute sold 121,480 ounces of gold at an average price of AUD 1,687 per ounce, generating gross operating cash flow of AUD 86.8m. Cash and bullion on hand and liquid investments were AUD 196.4m as at 31 December 2017 (2016: AUD 282.5m); total borrowings were AUD 35.0m (2016: AUD 22.0m). During the period Resolute paid a dividend of 2.0c per share. 

The share price of Resolute during the six months to 31 December 2017 was down by 4.2% from AUD 1.19 as at 30 June 2017 to AUD 1.14 as at the end of December 2017. There was no change in UIL's shareholding during the six months under review.

Afterpay had a rewarding six months following the merger between Afterpay Holdings Limited and Touchcorp Limited on 30 June 2017.

The company's "Afterpay" branded payment service, which allows consumers in Australia and New Zealand to pay for goods in instalments with no interest charges funded by supplier discounts, continued to grow extremely strongly, in terms of total transaction values, customer numbers and merchant outlets. AUD 918.0m of sales were processed through the platform in the six months to 31 December 2017, more than six times the AUD 145.0m of sales processed for the same period in 2016. 

Afterpay now has over 11,500 merchants offering its payment option and 1.5m consumers have now used the service. Whilst over 90% of processed payments are made online, the service is increasingly being used instore, with Afterpay available as a payment method in over 5,000 branches of multiple retailers. During the period, Afterpay has partnered with Qantas' low cost airline, Jetstar, to offer Afterpay as a payment option for domestic flights.

Since the period end, Afterpay has announced that it is evaluating an entry into the US market and to support this, the company has entered into a strategic relationship with a US based venture capital firm, Matrix Partners. 

Afterpay's share price more than doubled over the six month period, advancing 122.8%. UIL sold 3.0m shares (16.8% of UIL's shareholding) realising £8.2m over the six months to 31 December 2017.

Optal Limited ("Optal") is a developer of global payment solutions, with its key application providing payment services to eNett, a virtual payment card solution for the travel industry. eNett is majority owned by NASDAQ listed Travelport Worldwide Limited, with Optal owning a 23.5% stake. 

eNett's revenues continue to grow strongly, albeit at a lower rate than in prior years. For the three months to 30 September 2017, eNett's revenues increased by 30.0% to USD 54.0m when compared to the same period in 2016. Optal is an unlisted company and its revenues for the period have not been publicly disclosed. However, revenues generated from its relationship with eNett grow at a rate broadly proportional to eNett's volumes. Optal is profitable and cash generative.

Vix Technology is an unlisted company in which UIL has a 39.8% holding. It is a global leader in smart booking, ticketing, payments, real-time information and data management solutions for large-scale transport networks, working with over 200 customers worldwide. Vix Technology leverages more than 25 years of industry experience designing, operating and maintaining proven next-generation ticketing, payment and loyalty platforms to help governments and businesses manage more than five billion transactions a year and create new ways to connect with their customers.

2017 marked the formal launch of a new strategy for Vix Technology, promoting greater integration, the outsourcing of non-core functions and a commitment to the common technology platform, "Pulse". The move to a universal platform is expected to improve scalability, reduce business risk and promote sustainable growth. However, deferred project revenues and material fixed costs have impacted performance in the short term. 2017 EBITDA was disappointing and with a commitment to deliver a core Pulse product for selected geographies, 2018-2020 will continue to reflect a relatively high cost base. Nevertheless, the transition from a project-focused to a product-focused business model will leave the company better placed to compete effectively in a rapidly changing global marketplace. 

In the six months to 31 December 2017, UIL wrote down its equity holding in Vix Technology by £6.5m to reflect the headwinds being experienced by the business.

Vix Verify Global Ltd ("VVG") is an unlisted global technology business based in Australia. The company provides identity verification services to customers such as banks, telecommunications providers, online gaming companies and government agencies. Vix Verify's systems are used to check identities and verify the validity of identification documents for various purposes including fraud reduction, the prevention of money laundering and terrorism financing and checking immigration statuses.

VVG's Australian operations exceeded budget while VVG continues to invest in its operations internationally. 

UIL holds its 39.8% interest in VVG through a CFD, which confers the same benefit as if the shares had been held directly by UIL.

PORTFOLIO ACTIVITY

During the six months to 31 December 2017, UIL invested £19.3m, including £3.4m lent to Vix Technology and £8.3m to Zeta, and realised £21.2m, including £10.7m from the repayment of Zeta loans, £8.2m from the sale of shares in Afterpay and £1.7m in UEM.

The geographical split, on a look-through basis, had Australia increasing to 30.9% of total investments (30 June 2017: 27.3%) and Bermuda decreasing from 16.1% as at 30 June 2017 to 12.6% as at the end of December 2017. In the sector split, technology rose to 26.5% (30 June 2017: 22.3%) and oil and gas reduced from 9.1% as at 30 June 2017 to 6.0% as at 31 December 2017.

LEVEL 3 INVESTMENTS

UIL's investments in level 3 companies decreased by £1.5m. Platform loans remained relatively flat at £21.8m, a decrease of 2.2%. 

GEARING

It is pleasing to note UIL's initial goal set four years ago of reducing gearing to 100.0% or below has been delivered. 

Gearing (including the ZDP shares) has steadily reduced from 160.4% as at 30 June 2013, 124.1%, two years ago, 103.5% a year ago and 97.2% as at 30 June 2017 to 92.1% as at 31 December 2017.

ZDP SHARES

During the six months to 31 December 2017, UIL Finance issued £50.0m of new 2024 ZDP shares of which £20.0m were issued to UIL and are held by UIL on its balance sheet. The 2024 ZDP shares held by UIL are eliminated on consolidation of UIL Finance. Of the £30.0m issued to the market, £26.7m was issued to existing 2018 ZDP shareholders under the rollover offer and £3.3m was placed in the market for cash.

The 2018 ZDP shares which are due for redemption on 31 October 2018 this year were reduced by the rollover to stand at £49.5m as at 31 December 2017. These are expected to be redeemed for cash and on time in full. 

Funding is expected to come from the undrawn Scotia facility and from further realisations and distributions from investee companies.

DEBT

Bank loans decreased from £47.8m as at 30 June 2017 to £37.1m as at 31 December 2017 funded by investee loan repayments, portfolio realisations, cash being released from UIL's FX positions as Sterling has strengthened and the placing of 3.3m new 2024 ZDP shares for cash.

The £50.0m loan facility with Scotiabank is due for repayment on 22 March 2018. UIL has agreed indicative terms for a new two year £50.0m secured multicurrency revolving bank facility with Scotiabank on similar terms and covenants, which is expected to be entered into, prior to 22 March 2018.

DERIVATIVES

During the six months to 31 December 2017 there continued to be significant currency hedges. As at 31 December 2017 these were AUD 140.9m, USD 74.8m, NZD 14.4m and EUR 6.0m. These generated a gain on the capital account of £4.1m (31 December 2016: loss of £9.0m). 

REVENUE RETURN

Revenue total income rose by 9.9% from £4.8m to £5.3m. Management and administration fees and other expenses decreased by 5.7% to £1.4m (31 December 2016: £1.5m). Finance costs increased by 26.5% to £0.8m (31 December 2016: £0.7m). 

As a result of the above, revenue profit increased by 16.4% from £2.5m to £2.9m and earnings per ordinary share ("EPS") rose by 16.7% to 3.22p from 2.76p as at 31 December 2016.

CAPITAL RETURN

Capital total income was £19.3m (31 December 2016: £25.2m). This represented gains on investments and also gains on foreign exchange positions.

Management fees of £0.8m represent accrued performance fees due to ICM Limited and ICM Investment Management Limited under the management agreements. 

Finance costs were 7.0% lower at £6.0m (31 December 2016: £6.5m) reflecting lower costs associated with the ZDP shares in issue.

The resultant profit for the six months to 31 December 2017 on the capital return was £12.4m (31 December 2016: £18.7m) and the EPS was 13.76p (31 December 2016: 20.69p).

EXPENSE RATIO

The ongoing charges figure, excluding performance fees, increased from 2.0% as at 31 December 2016 to 2.1% as at 31 December 2017. Including performance fees (accrued by UIL and underlying investee funds) the ongoing charges figure decreased from 2.8% to 2.5%.

 

ICM Investment Management Limited and ICM Limited

21 February 2018

 

HALF-YEARLY FINANCIAL REPORT AND RESPONSIBILITY STATEMENT

 

The Chairman's Statement and the Investment Managers' Report give details of the important events which have occurred during the period and their impact on the financial statements.

 

PRINCIPAL RISKS AND UNCERTAINTIES

Most of UIL's principal risks and uncertainties are market related and are similar to those of other investment companies investing mainly in listed equities in developed countries.

 

The principal risks and uncertainties were described in more detail under the heading "Principal Risks and Risk Mitigation" within the Business Review section of the Annual Report and Accounts for the year ended 30 June 2017 and have not changed materially since the date of that report.

 

The principal risks faced by UIL include not achieving long-term total returns for its shareholders, the adverse impact gearing could have, the sudden withdrawal of its bank facility, loss of key management and losses due to inadequate controls of third party service providers.

 

The Annual Report and Accounts is available on the Company's website, www.uil.limited

 

RELATED PARTY TRANSACTIONS

Details of related party transactions in the six months to 31 December 2017 are set out in note 12 to the Half-Yearly Report and details of the fees paid to the Investment Managers are set out in note 2 to the Half-Yearly Report.

 

Directors' fees were increased by approximately 2.3% with effect from 1 July 2017 to:

Chairman £44,000 per annum

Chairman of the Audit Committee £42,000 per annum

Directors £32,500 per annum

 

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with Chapter 4 of the Disclosure Guidance and Transparency Rules, the Directors confirm that to the best of their knowledge:

 

• The condensed set of financial statements contained within the report for the six months to 31 December 2017 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 Group;

• The half-yearly financial report, together with the Chairman's Statement and Investment Managers' 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; and

• 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.

 

On behalf of the Board

Peter Burrows

Chairman

21 February 2018

 



 

UNAUDITED CONDENSED GROUP INCOME STATEMENT

 







for the six months to 31 December



2017



2016


Revenue

Capital

Total

Revenue

Capital

Total


return

return

return

return

return

return


£'000s

£'000s

£'000s

£'000s

£'000s

£'000s








Gains on investments

-

14,250

14,250

-

35,006

35,006

Gains/(losses) on derivative financial instruments

-

4,102

4,102

-

(8,999)

(8,999)

Foreign exchange (losses)/gains

(20)

908

888

(66)

(789)

(855)

Investment and other income

5,257

-

5,257

4,830

-

4,830

Total income

5,237

19,260

24,497

4,764

25,218

29,982

Management and administration fees

(740)

(804)

(1,544)

(852)

-

(852)

Other expenses

(644)

-

(644)

(616)

(2)

(618)

Profit before finance costs and taxation

3,853

18,456

22,309

3,296

25,216

28,512

Finance costs

(846)

(6,049)

(6,895)

(669)

(6,507)

(7,176)

Profit before taxation

3,007

12,407

15,414

2,627

18,709

21,336

Taxation

(100)

-

(100)

(129)

-

(129)

Profit for the period

2,907

12,407

15,314

2,498

18,709

21,207








Earnings per ordinary share  - pence

3.22

13.76

16.98

2.76

20.69

23.45

 

The Group 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 derive from continuing operations.

All income is attributable to the equity holders of the Company. There are no minority interests.

 



UNAUDITED CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY

 

for the six months to 31 December 2017







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 2017

9,020

19,313

233,866

32,069

(75,667)

9,468

228,069

Profit for the period

-

-

-

-

12,407

2,907

15,314

Ordinary dividends paid

-

-

-

-

-

(3,382)

(3,382)

Balance at 31 December 2017

9,020

19,313

233,866

32,069

(63,260)

8,993

240,001

 

 

 

for the six months to 31 December 2016







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 2016

9,065

20,031

233,866

32,069

(86,928)

10,482

218,585

Profit for the period

-

-

-

-

18,709

2,498

21,207

Ordinary dividends paid

-

-

-

-

-

(3,388)

(3,388)

Shares purchased by the

Company

 

(35)

 

(563)

 

-

 

-

 

-

 

-

 

(598)

Balance at 31 December 2016

9,030

19,468

233,866

32,069

(68,219)

9,592

235,806

 

 

 

 

for the year to 30 June 2017







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 2016

9,065

20,031

233,866

32,069

(86,928)

10,482

218,585

Profit for the year

-

-

-

-

11,261

5,760

17,021

Ordinary dividends paid

-

-

-

-

-

(6,774)

(6,774)

Shares purchased by the

Company

 

(45)

 

(718)

 

-

 

-

 

-

 

-

 

(763)

Balance at 30 June 2017

9,020

19,313

233,866

32,069

(75,667)

9,468

228,069

 



UNAUDITED CONDENSED GROUP BALANCE SHEET

 


31 Dec 2017

31 Dec 2016

30 Jun 2017


£'000s

£'000s

£'000s

Non-current assets




Investments

461,451

473,943

449,116

Current assets




Other receivables

1,273

646

25,190

Derivative financial instruments

1,287

6,094

818

Cash and cash equivalents

620

253

3,573


3,180

6,993

29,581

Current liabilities




Loans

(37,128)

(25,000)

(47,846)

Other payables

(3,022)

(9,247)

(26,472)

Derivative financial instruments

(1,911)

(56)

(2,532)

Zero dividend preference shares

(49,482)

-

-


(91,543)

(34,303)

(76,850)

Net current liabilities

(88,363)

(27,310)

(47,269)

Total assets less current liabilities

373,088

446,633

401,847

Non-current liabilities




Loans

-

(50,000)

-

Zero dividend preference shares

(133,087)

(160,827)

(173,778)

Net assets

240,001

235,806

228,069





Equity attributable to equity holders




Ordinary share capital

9,020

9,030

9,020

Share premium account

19,313

19,468

19,313

Special reserve

233,866

233,866

233,866

Non-distributable reserve

32,069

32,069

32,069

Capital reserves

(63,260)

(68,219)

(75,667)

Revenue reserve

8,993

9,592

9,468

Total attributable to equity holders

240,001

235,806

228,069





Net asset value per ordinary share




Basic - pence

266.08

261.14

252.86





 



 

UNAUDITED CONDENSED GROUP STATEMENT OF CASH FLOWS

 


Six months to

Six months to

Year to


31 Dec 2017

31 Dec 2016

30 Jun 2017


£'000s

£'000s

£'000s

Cash flows from operating activities

580

1,933

1,314

Investing activities:




Purchases of investments

(18,452)

(43,874)

(67,267)

Sales of investments

21,193

60,490

109,560

Purchases of derivatives

-

(28,607)

(23,202)

Sales of derivatives

3,012

-

-

Cash flows from investing activities

5,753

(11,991)

19,091

Cash flows before financing activities

6,333

(10,058)

20,405

Financing activities:




Equity dividends paid

(3,382)

(3,388)

(6,774)

Movement on loans

(9,595)

46,800

25,148

Cash flows from issue of ZDP shares

2,840

19,538

27,258

Cash flows from redemption of ZDP shares

-

(62,741)

(62,741)

Cost of shares purchased for cancellation

(164)

(598)

(599)

Cash flows from financing activities

(10,301)

(389)

(17,708)

Net (decrease)/increase in cash and cash equivalents

(3,968)

(10,447)

2,697

Cash and cash equivalents at the beginning

of the period

 

3,573

 

(114)

 

(114)

Effect of movement in foreign exchange

(237)

2,646

990

Cash and cash equivalents at the end of the period

(632)

(7,915)

3,573





Comprised of:




Cash

620

253

3,573

Bank overdraft

(1,252)

(8,168)

-

Total

(632)

(7,915)

3,573

 



 

NOTES

 

The Directors have declared a second quarterly dividend in respect of the year ending 30 June 2018 of 1.875p per ordinary share payable on 23 March 2018 to shareholders on the register at close of business on 9 March 2018. The total cost of this dividend, which has not been accrued in the results for the six months to 31 December 2017, is £1,678,000 based on 89,493,389 ordinary shares in issue at the date of this report.

 

The half-yearly report is available on the website www.uil.limited and will be posted to shareholders at the beginning of March 2018. Copies may be obtained during normal business hours from Exchange House, Primrose Street, London, EC2A 2NY.


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