Interim Management Statement

RNS Number : 8554F

Utilico Investments Limited

04 May 2011

 



Utilico Investments Limited

Interim Management Statement

31 March 2011

Quarterly Management Review

Utilico Investments Limited ("Utilico") published its interim report and accounts for the period to 31 December 2010 on 24 February 2011.  Utilico has also published monthly fact sheets on its website, www.utilico.co.uk.

Set out below is the interim management statement ("IMS") for the period from 1 January 2011 to 31 March 2011 containing information that covers this period, and up to the date of publication of this IMS.

Performance

The equity markets moved marginally during the three months under review, the FTSE All-Share Index rose by 0.2%, the S&P Index (GBP adjusted) rose by 2.3% and the MSCI EMF (GBP adjusted) Index fell by 1.3%.  Utilico's NAV underperformed the markets, falling in value by 12.6%.

Dividends

An interim dividend of 3.25p and a special cash dividend of 1.75p announced in February, were paid on 26 April 2011.

Special General Meeting Resolutions

At an SGM on 7 January 2011 the resolutions to change Utilico's investment mandate, acquire the assets of Eclectic Investment Company, acquire further Resolute Mining Ordinary Shares and change the name of the fund to Utilico Investments Limited were passed. As a result, on 17 January 2011, the Resolute Mining and Eclectic assets were transferred into Utilico's portfolio and 13.5m Utilico ordinary shares were issued. Utilico's amended investment policy is to maximise shareholder returns by identifying and investing in investments where the underlying value is not reflected in the market price.

Portfolio

Utilico's gross assets less current liabilities (excluding debt) began the quarter at £402.5m and ended the quarter at £407.5m an increase of 1.2%. Ordinary Shareholders' funds increased by £1.9m from £204.5m at 31 December 2010 to £206.7m at 31 March 2011.

The ten largest holdings have remained the same over the quarter although there have been changes in the weighting. The three largest share price movements during the period were Renewable Energy Generation shares up by 27.3%, Bermuda Commercial Bank up by 9.1% and Resolute Mining ordinary shares down 12.9%.

Infratil continues to be Utilico's largest investment. It fell as a percentage of gross assets due to the performance of the ordinary share price combined with the appreciation of the New Zealand Dollar against Sterling and as a result of the new investments acquired in January.

Resolute Mining's share price fell by 12.9% over the three months, however, the acquisition of the additional Resolute assets resulted in the position increasing in absolute terms to 22.8% of the gross assets.

UEM's NAV and share price fell by 2.8% and 4.2% respectively during the quarter.

The three months under review have been a difficult period with political unrest and violence in the Middle East and North Africa ("MENA") and the tsunami in Japan. The  unrest in MENA has resulted in the price of oil rising, up 16.8% over the three months, and general uncertainty leading to falling prices in the equity markets. In addition, the crisis at the Fukushima Nuclear Plant and the possibility that Japan will have to rely more heavily on fossil fuel electricity generation going forwards have affected the rising oil prices. However, a knock on effect from this appears to be a stronger commitment to the renewable energy sector, with a 27.3% rise in the share price of Renewable Energy Generation.

Other movements in the top ten include Jersey Electricity down 3.4%, Keytech down 5.7%, and Ascendant Group down 6.4%.

Debt and Cash

During the period under review, Utilico entered into a new multicurrency revolving banking facility of up to £30m with ScotiaBank Europe PLC. Utilico's debt was drawn in full entirely in New Zealand Dollars at the end of March 2011. Utilico's cash balance reduced over the period, from £3.8m at 31 December 2010 to £1.8m at 31 March 2011.

Hedging

Options. Utilico has reduced its equity market option positions to nil over the three month period.

Currency Hedging. At the end of March 2011 Utilico held currency hedges in New Zealand Dollars, Australian Dollars, Euros and US Dollars.

The New Zealand Dollar contracts of NZ$53.8m and NZ$12.5m covered approximately £25.6m of Sterling assets and $9.5m of US Dollar assets. The US Dollar contracts cover £25.0m of Sterling assets, the Euro contracts cover £7.5m of Sterling assets and the Australian Dollar contracts cover £26.7m of Sterling assets. In total £101.4m of assets are covered by these currency hedges. The NZ$65.0m of bank borrowings increase this further to £131.4m of assets.

ZDP Shares

Over the quarter, the traded price of Utilico's 2012 ZDP shares increased to 166.0p up 1.1%, the 2014 ZDP shares rose 3.7% to 140.5p and the 2016 ZDP shares fell by 4.1% to 127.75p.

As at 31 March 2011 the three ZDP tranches offered yields to maturity of 4.3%, 5.0% and 7.6% for the 2012, 2014, and 2016 maturities respectively. The asset covers at final redemption value stood at 3.65x, 2.33x and 1.65x for the 2012, 2014, and 2016 maturities respectively.

Share price and NAV

Utilico's share price rose from 149.75p at 31 December 2010 to 160.00p at 31 March 2011, an increase of 6.8%. Utilico's discount to NAV decreased from 36.7% at 31 December 2010 to 22.7% at 31 March 2011. A combination of all Utilico's traded instruments ended March with a 10.8% discount to underlying asset value.

Outlook

We are cautious given the current set of challenges facing the markets. There remain substantial imbalances within the global economy, in particular high levels of sovereign debt in developed economies, inflation in emerging economies, and political change in the Middle East. All these issues are likely to challenge the equity markets over the short term.

Capital Structure			31 March 2011 £m		31 December 2010 £m
Gross assets less current liabilities			£407.5m		£402.5m
Bank debt			£30.9m		£31.1m
ZDP shares			£169.9m		£166.9m
Shareholders' funds (ordinary shares)			£206.7m		£204.5m
			£407.5m		£402.5m
Effective gearing on ordinary shares			1.9x		1.9x
Ordinary Shares			31 March 2011		31 December 2010
NAV (undiluted, cum income)			206.89p		236.75p
Share price			160.0p		149.75p
Discount to undiluted NAV			22.7%		36.7%
Annual average compound return (including dividends)			11.9%		13.9%
Shares in issue			99,925,394*		86,373,863
Warrants at 31 March 2011					2012
Expiry date					April 2012
Price					2.00p
Warrants in issue					3,588,617*
Exercise terms					1.090909 ordinary Share
					per warrant at subscription price
					of 288.75p
ZDP Shares at 31 March 2011	2012		2014		2016
Accrued capital entitlement	159.44p		130.39p		130.39p
Share price	166.00p		140.50p		127.75p
(Discount)/premium to NAV	4.1%		7.8%		(2.0%)
ZDP cover*	3.65x		2.33x		1.65x
Yield to redemption*	4.3%		5.0%		7.6%
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

*On 7 April 2011, 712 Utilico ordinary shares were listed on the Official List and admitted to trading on the London Stock Exchange following the exercise of 653 warrants. As at the date of this IMS there are 99,926,106 ordinary shares and 3,587,964 warrants in issue.

Performance		31 March 2011	31 December 2010		% change
Utilico NAV (undiluted, cum income)		206.89p	236.75p		(12.6%)
FTSE All-Share Index		3068	3063		0.2%%

Sectoral Split of Investments *			31 March 2011		31 December 2010
Gold Renewable Energy Electricity Other Airports Infrastructure IT Toll roads Water and waste Ports Telecoms Banks Infrastructure Investment Funds Other Infrastructure Gas Satellites			23% 17% 12% 7% 7% 6% 5% 5% 5% 4% 4% 2% 1% 1% 1%		22% 17% 13% 6% 7% 7% 6% 6% 6% 5% 2% -% 1% 1% 1%
Geographical Split of Investments *			31 March 2011		31 December 2010
Gold New Zealand UK and Channel Islands Asia & Far East Latin America Bermuda Australia Europe (excluding UK and Switzerland) North America			23% 20% 16% 14% 8% 7% 6% 4% 2%		22% 21% 14% 15% 9% 6% 7% 4% 2%
* on a look through basis

Top 10 Holdings as % of Gross Assets			31 March 2011		31 December 2010
1(1) 2(3) 3(2) 4(4) 5(7) 6(6) 7(5) 8(8) 9(9) 10(-)	Infratil Limited Resolute Mining Ltd Utilico Emerging Markets Limited Jersey Electricity Company Limited Bermuda Commercial Bank Renewable Energy Generation Limited Vix Technology KeyTech Limited Ascendant Group Renewable Energy Holdings Total Top 10		24.7% 22.8% 22.5% 4.2% 3.9% 3.0% 2.1% 1.8% 1.6% 1.3% 87.9%		26.6% 21.6% 23.8% 4.6% 2.2% 2.3% 2.6% 2.1% 1.7% 1.4% 88.9%

Enquiries

Charles Jillings

Utilico Investments Limited

[phone]

 

END

 

 

IMSKMGGKKFNGMZM