Interim Management Statement

RNS Number : 8682A

Utilico Limited

16 October 2009

Utilico Limited

16 October 2009

Quarterly Management Review

Utilico Limited ("Utilico") published its full year results to 30 June 2009 on 16 September 2009. Further, Utilico has published monthly fact sheets on its website, www.utilico.bm.

Set out below is the interim management statement ("IMS") for the period from 1 July 2009 to 30 September 2009, and contains information that covers this period, and up to the date of publication of this IMS. Utilico is publishing this IMS in accordance with DTR 4.3 of the FSA Handbook.

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

Performance

Global economies continued to recover led by China. The investment by China in infrastructure assets has led to a recovery in the mining and manufacturing industries around the world. In the developed economies quantitative easing has resulted in stability. These factors have underpinned the markets confidence and a strong performance has been seen across the world.

The equity markets continued to rise during the three months under review, the FTSE All-Share Index rose by 21.3% and Utilico's NAV (including undistributed income) performed broadly in line and increased in value by 18.8%. Over the past six months Utilico's NAV has increased by 36.1% versus the FTSE All-Share Index which increased by 32.8%.

Portfolio

Utilico's gross assets less current liabilities (excluding current debt) began the quarter at £288.9m and ended the quarter at £320.6m showing a sizeable increase. Shareholders' funds increased by £23.9m from £126.8m at 30 June 2009 to £150.7m at 30 September 2009.

Within the ten largest holdings, there has been limited movement, although there have been some strong performers. Ascendant Limited (formerly Belco) has seen its value decline and as a result it fell just outside the top ten. It has been replaced by Billing Services which joined the top ten as a result of strong share price performance.

Infratil continues to be Utilico's top investment and rose as a percentage of gross assets following Utilico's exercise of its partly paid warrants combined with the strength of the New Zealand Dollar against Sterling.

UEM has risen in line with Utilico as a result of good recovery in the Emerging Markets. UEM's NAV rose by 13.6% over the three months. UEM's share price discount widened from 6.4% to 6.9% resulting in Utilico's investment in UEM recording a gain of 11.2%.

Resolute Mining held its position largely as a result of the strengthening Australian Dollar against Sterling. Resolute continues to make steady progress towards being fully operational.

Renewable Energy Generation (REG) saw its share price rise strongly, up 39.0% to 57.00p, following the disposal of its Canadian wind business, AIM Powergen, for £69.0m (CAD$119.0m). Following completion of this disposal in October and repayment of its debt, REG will have a net cash position of circa £50.0m. In addition, REG has 30MW of existing wind capacity and a pipeline of 300MW together with a growing bio-power business. Given its market capitalisation of £58.9m at 30 September 2009 Utilico's investment manager considers that this investment still looks fundamentally undervalued.

Billing Services continues to do well and its share price rose 72.0% to 24.50p during the three months. At 30 September 2009 Billing Services' market capitalisation was £68.3m with an historic EV/EBITDA of 4.4x which, again, Utilico's investment manager believes to be undervalued despite its rise in share price.

Newtel sold its Guernsey business to Jersey Telecom during the period under review. This should result in a substantial capital return to Utilico of its investment in Newtel. This transaction is expected to be completed by the end of October 2009.

Jersey Electricity and Vix Technology stood still in value terms. Keytech's share price firmed by 5.2% and Renewable Energy Holdings softened by 9.5%.

Debt and Cash

During the period Utilico maintained its debt position at £17.0m. All Utilico's debt was drawn in Sterling. Utilico's cash balance decreased over the period, from £4.5m at 30 June 2009 to £1.0m at 30 September 2009.

Hedging

Options. Utilico has maintained its option positions over the three month period. At the year end 30 June 2009, Utilico held index put options which provided market protection of approximately £49.0m with a market value of £2.4m. By the end of September 2009, the level of protection had reduced to £43.8m and the market value of the position was £1.2m.

Currency Hedging. At the end of September 2009, Utilico held currency hedges in New Zealand Dollars, Euros, Sterling and Australian Dollars.

The NZ$ contracts of NZ$60.0m and NZ$32.5m covered approximately £27.1m of Sterling assets and $23.5m of US Dollar assets. The Euro currency forward contract of EUR3.0m covers £2.7m of Sterling assets. The remaining two hedges were between Sterling and Australian Dollars providing coverage of AUD$4.7m and £5.6m.

Interest rates. Utilico has maintained its interest rate swap contracts which provide protection in the event that interest rates increase. These swap contracts were taken out in previous years when interest rates were substantially above levels seen today, and as such are all now in an "in the money" position. The swaps are recognised in Utilico's NAV at their liability value of US$0.9m at 30 September 2009 and expire in November 2009 and November 2010.

ZDP Shares

Over the quarter, the traded price of Utilico's 2012 ZDP shares increased to 154.50p up 2.5% since the year end. The 2014 and 2016 maturity ZDP shares also rose by 9.8% and 7.0% to 128.00p and 109.75p respectively.

At the 30 September 2009, the three ZDP tranches offered yields to maturity of 4.6%, 5.4% and 8.3% for the 2012, 2014, and 2016 maturities respectively. Likewise the asset covers at final redemption value stood at 3.28x, 2.00x and 1.38x for the 2012, 2014, and 2016 maturities respectively.

During September 2009 Utilico sold back into the market the 2016 ZDP's it had acquired at a profit of £1.4m.

Share price and NAV

Utilico's share price fell from 117.00p at 30 June 2009 to 111.50p at 30 September 2009.Utilico's undiluted NAV rose to 174.43p from 146.87p and the discount to NAV increased from 20.3% at 30 June 2009 to 36.1% at 30 September 2009. A combination of all Utilico's traded instruments ended September with a 15.8% discount to underlying asset value. Since the period end Utilico's share price has recovered and as at 15 October 2009 stands at 133.50p

Outlook

We are cautiously optimistic. The world's economies are recovering. The low interest rate environment should lead to continued underpinning of assets and in particular, equity markets. The caution must be around the easing of fiscal stimulus by governments and its impact on the real economy and the bond markets. Exchange rates remain one of the biggest challenges for investors.

Capital Structure		30 September 2009 £m	30 June 2009 £m
Gross assets less current liabilities		320.6	288.9

Bank debt		17.0	17.0
ZDP shares		152.9	145.1
Shareholders' funds (ordinary shares)		150.7	126.8
		320.6	288.9
Effective gearing on ordinary shares		2.1	2.3

Ordinary Shares		30 September 2009	30 June 2009
NAV (undiluted, cum income)		174.43p	146.87p
NAV (diluted, cum income)		174.43p	146.87p
Share price		111.50p	117.00p
Discount to diluted NAV		36.1%	20.3%
Annual average compound return (including dividends)		10.3%	7.6%
Shares in issue		86,372,957	86,372,957

Warrants at 30 September 2009			2012
Expiry date			April 2012
Price			1.50p
Warrants in issue			3,589,521
Exercise terms			1 ordinary Share
			per warrant at subscription price
			of 315p

ZDP Shares at 30 September 2009	2012	2014	2016
Accrued capital entitlement	144.08p	117.42p	117.42p
Share price	154.50p	128.00p	109.75p
(Discount)/premium to NAV	7.2%	9.0%	(6.5%)
ZDP cover*	3.28x	2.00x	1.38x
Yield to redemption*	4.6%	5.4%	8.3%
ZDP redemption value	177.52p	167.60p	192.78p
Shares in issue	45,486,200	37,500,000	37,500,000
*based on final redemption values

Performance

30 September

2009

June

2009

% change

Utilico NAV (undiluted, cum income)

174.43p

146.87p

18.8%

FTSE All-Share Index

2,635

2,172

21.3%

Sectoral Split of Investments *	30 September 2009	30 June 2009
Renewable Energy	21%	20%
Electricity	15%	15%
Airports	11%	11%
Telecoms	11%	10%
Road & Rail	10%	12%
Gold	9%	10%
Water	4%	5%
Ports	4%	4%
Investment Funds	4%	2%
Gas	2%	2%
Postal	1%	1%
Other	8%	8%


Geographical Split of Investments *	30 September 2009	30 June 2009
Australasia	41%	42%
Europe (excluding UK)	18%	18%
UK	12%	12%
Asia & Far East	11%	11%
North America	9%	8%
Latin America	9%	9%
* on a look through basis

Top 10 Holdings as % of Gross Assets		30 September 2009	30 June 2009
1 (1)	Infratil Limited	25.6%	23.7%
2 (2)	Utilico Emerging Markets Limited	20.9%	20.6%
3 (3)	Resolute Mining Ltd	8.9%	9.0%
4 (4)	Jersey Electricity Company Limited	5.8%	6.3%
5 (5)	Vix Technology	5.0%	6.3%
6 (6)	KeyTech Limited	3.6%	3.3%
7 (8)	Renewable Energy Generation Limited	3.2%	2.5%
8 (-)	Billing Services	3.0%	-
9 (7)	Newtel Holdings Limited	2.9%	3.1%
10 (10)	Renewable Energy Holdings	2.5%	2.0%



	Total Top 10	81.5%	76.8%
	Figures in brackets 30 June 2009