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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 GBP36.7m. 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 GBP11.2m investment from Utilico. Waverton has performed
strongly with assets under management up from GBP3.9bn on
acquisition to over GBP5.0bn 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 GBP16.7m.
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 GBP255.9m as at 31
December 2013. A target of GBP55.0m 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
GBP20.0m and the investment in Renewable Energy Generation ("REG")
was reduced by GBP7.0m, representing 40.9% of Utilico's investment
in REG. By 30 June 2014 bank debt had been reduced to GBP22.2m,
down from GBP49.0m at 31 December 2013 as a result of realisations
and the absolute level of debt stood at GBP234.7m as at 30 June
2014.
In late June Utilico announced its intention to create GBP25.0m
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 GBP24.9m. 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 GBP61.9m, through use of its undrawn bank
facility of GBP50.0m 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 GBP10.4m, 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 GBP11.2m in Somers (enabling it to complete the Waverton
acquisition in July 2013); and GBP16.7m 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 GBP217.7m to GBP275.4m. 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 GBP9.6m); 12.8% for Somers (some GBP6.9m); and
30.9% for Zeta (some GBP16.1m). 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 GBP14.3m).
Together this amounts to a discount on these investments of some
GBP46.6m. Adding this back would see Utilico's shareholders' funds
increase to GBP211.0m. 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
GBP22.2m at year end from GBP49.0m at the half year.
As a result of portfolio gains shareholders' funds rose from
GBP147.1m to GBP164.4m 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
GBP211.0m 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 GBP76.2m, including GBP16.7m net
into Zeta; GBP11.2m into Somers; GBP6.9m into Vix Technology;
GBP1.5m into BFIC (to fund investments); and GBP2.0m into Vix
Limited.
Disposals amounted to GBP83.0m, including part realisations of
Infratil raising GBP27.8m and of REG raising GBP8.6m. Utilico
exited Jersey Electricity Limited ("JEL") raising GBP10.0m.
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 GBP64.6m, equal to 16.2% of the gross assets (2013: GBP39.0m 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 GBP27.7m.
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 GBP10.5m
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 GBP5.1bn.
The Waverton investment by Somers comprised GBP10.75m in equity
and GBP14.0m 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 GBP4.4m of the loans
outstanding and externally refinanced all of Somers' original
loan.
Post the year end, Somers announced an investment of EUR3.3m in
Merrion Capital Holdings ("Merrion"), an Irish financial services
group. Merrion has AUM of some EUR0.8bn.
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
GBP25.1m, resulting in a GBP9.4m 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 GBP6.3m 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 GBP8.6m. 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
GBP1.1m and resulted in a GBP4.0m 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 GBP1.9m.
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 GBP65bn 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 EUR3.3m, 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 GBP1.7m in maintaining the
current position.
Second, currency positions within Utilico's portfolio, a loss of
GBP0.5m, 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, EUR11.9m and A$20.0m.
Debt
Bank debt increased in the year from GBP42.5m to GBP50.0m in
January 2014. Since then it has reduced to GBP22.2m as at 30 June
2014; the GBP22.2m 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 GBP25.0m 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 GBP1.00 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 GBP61.9m, using its undrawn GBP50.0m
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 GBP19.7m. This comprised a gain on
investments of GBP36.7m offset by derivative and foreign exchange
contracts losses of GBP2.8m and finance costs of GBP14.2m. 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 GBP10.4m, down 35.8% on the prior year.
Management fees and costs were GBP1.2m, 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 30 June Change
2014 2013* 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) (GBPm) 399.1 383.0 4.2%
Bank debt (GBPm) 22.2 42.5 (47.8%)
ZDP shares (GBPm) 212.5 193.4 9.9%
Equity holders' funds (GBPm) 164.4 147.1 11.8%
Revenue account
Income (GBPm) 10.4 16.2 (35.8%)
Costs (management and other expenses) 2.1 3.2 (34.4%)
(m)
Finance costs (GBPm) 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
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'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
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'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
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'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
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------- ---------- ---------- --------- -------------- ---------- --------- ---------
Balance at 30 June 2012 9,963 29,743 233,866 32,069 (108,055) 11,308 208,894
(Loss)/profit for the year - - - - (63,327) 11,997 (51,330)
Ordinary dividends paid - - - - - (9,714) (9,714)
Shares purchased by the
Company (47) (723) - - - - (770)
------------------------------- ---------- ---------- --------- -------------- ---------- --------- ---------
Balance at 30 June 2013 9,916 29,020 233,866 32,069 (171,382) 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
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'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
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------- --------- --------- --------- -------------- ---------- --------- ---------
Balance at 30 June 2012 9,963 29,743 233,866 32,069 (108,172) 11,442 208,911
(Loss)/profit for the year - - - - (63,213) 12,031 (51,182)
Ordinary dividends paid - - - - - (9,714) (9,714)
Shares purchased by the
Company (47) (723) - - - - (770)
---------------------------- --------- --------- --------- -------------- ---------- --------- ---------
Balance at 30 June 2013 9,916 29,020 233,866 32,069 (171,385) 13,759 147,245
---------------------------- --------- --------- --------- -------------- ---------- --------- ---------
BALANCE SHEETs
at 30 June GROUP COMPANY
As previously Restated
reported (see note 1)
2013 2013 2013 2013 2012
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
------------------------------------- -------------- --------------- -------------- -------------- --------------
Non-current assets
Investments 402,538 393,830 372,630 404,342 380,169
Deferred exploration and evaluation - 2,832 - - -
expenditure
------------------------------------- -------------- --------------- -------------- -------------- --------------
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
GBP'000s GBP'000s GBP'000s GBP'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 GBP1,859,000 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 GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
2013
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
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
GBP'000s GBP'000s GBP'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
GBP'000s GBP'000s GBP'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 30 June
2014 2013
Fair value of holdings GBP'000s GBP'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
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