Annual Financial Report

RNS Number : 8780A

UIL Limited

17 September 2018

 

Date:                      14 September 2018

Contact:                 Charles Jillings

                                ICM Investment Management Limited

                                01372 271 486

UIL LIMITED

AUDITED STATEMENT OF RESULTS

for the year to 30 June 2018

FINANCIAL HIGHLIGHTS

·   Net asset value ("NAV") total return of 18.7%

·   Dividend per ordinary share maintained at 7.50p

GROUP PERFORMANCE SUMMARY

	30 June 2018	30 June 2017	Change % 2018/17
NAV total return(1) (for the year) (%)	18.7	7.7	n/a
Share price total return(1) (for the year) (%)	11.3	31.3	n/a
Annual compound NAV total return (since inception) (%)	12.4	11.9	n/a
NAV per ordinary share (pence)	291.79	252.86	15.4
Ordinary share price (pence)	174.50	164.00	6.4
Discount(1) (%)	40.2	35.1	n/a
Returns and dividends (pence)
Revenue return per ordinary share	6.67	6.38	4.5
Capital return per ordinary share	38.96	12.46	212.7
Total return per ordinary share	45.63	18.84	142.2
FTSE All-Share Index total return	7,389	6,777	9.0
Dividend per ordinary share	7.50	7.50	0.0
Zero dividend preference ("ZDP") shares(2) (pence)
2018 ZDP shares
Capital entitlement per ZDP share	156.78	146.19	7.2
ZDP share price	159.50	154.75	3.1
2020 ZDP shares
Capital entitlement per ZDP share	131.52	122.64	7.2
ZDP share price	142.50	140.38	1.5
2022 ZDP shares
Capital entitlement per ZDP share	113.01	106.37	6.2
ZDP share price	124.50	119.50	4.2
2024 ZDP shares
Capital entitlement per ZDP share	103.10	n/a	n/a
ZDP share price	107.50	n/a	n/a
2026 ZDP shares
Capital entitlement per ZDP share	100.87	n/a	n/a
ZDP share price	102.25	n/a	n/a
Equity holders' funds (£m)
Gross assets(3)	488.3	449.7	8.6
Bank debt	27.8	47.8	(41.8)
ZDP shares	199.4	173.8	14.7
Equity holders' funds	261.1	228.1	14.5
Revenue account (£m)
Income	10.6	10.7	(0.9)
Costs (management and other expenses)	2.8	2.9	(3.4)
Finance costs	1.6	1.8	(11.1)
Financial ratios of the Group (%)
Ongoing charges figure excluding performance fees(1)	2.2	2.1	n/a
Ongoing charges figure including performance fees(1)	4.4	2.6	n/a
Bank loans, overdraft and ZDP shares gearing on net assets(1)	87.3	97.2	n/a

(1) See Alternate Performance Measures on pages 107 and 108 of the Report and Accounts

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

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

CHAIRMAN'S STATEMENT

It is pleasing to report that UIL achieved a NAV total return per ordinary share of 18.7% for the year to 30 June 2018. This outperformed the FTSE All Share Total Return Index over the same period, which was up by 9.0%. Over the three years to 30 June 2018, UIL's NAV total return was 90.3%, representing a gain of over £110.0m, well ahead of most relevant indices.

Since inception in August 2003, UIL has distributed £61.0m in dividends, invested £23.9m in ordinary share buybacks and added net gains to our NAV of some £215.0m for a total return of 468.5% (adjusted for the exercise of warrants and convertibles). This represents an average annual compound total return since inception of 12.4%. The FTSE All Share Total Return Index average annual compound total return for the same period was 8.6%.

I noted in the half-yearly report that the goldilocks scenario for equities (positive gross domestic product ("GDP") growth, low inflation, low interest rates) had continued from the end of 2017 into the start of 2018. We had, however, expressed concern that the rising dislocation between Quantitative Easing ("QE") and Quantitative Tightening ("QT") in a number of countries would likely result in increased volatility. This volatility is now evident and markets are starting to be tested. In January and February 2018, the S&P 500 lost over 10% from peak to trough and failed to regain that January peak of 2,823.81 and closed on 30 June 2018 at 2,718.37. Since then the S&P 500 has exceeded that peak and was 2901.52 as at 31 August 2018. Emerging markets ("EM") have experienced an even greater level of volatility than developed markets.

While most markets have gained over the past twelve months, corporate earnings have been rising at a faster rate. This has resulted in a number of compelling investment opportunities.

The gain in UIL's portfolio is as a result of the Investment Managers' individual stock selection, strong conviction in the Company's existing investments and by remaining fully invested throughout the reporting period. UIL's investments are guided by three core views. First, that the world's financial markets are over indebted; second, disruptive technological change offers strong investment upside; and third, EM provide higher GDP growth opportunities than developed markets. The Investment Managers are focused on finding compelling investment opportunities at valuations that do not reflect their true long-term value. ICM is a relentless bottom up investor.

While I don't usually comment on individual investment positions it would be remiss of me not to note the stellar performance of Afterpay Touch Group Limited ("APT"). Having started the year trading at AUD 2.68 and ending the year at AUD 9.35, APT's performance has been outstanding. It is even more pleasing to see APT trading at over AUD 16.00 today. The Investment Managers sold down half the holding into this rising strength, however, APT remains UIL's fifth largest holding. APT's disruptive business model is a truly global business opportunity and one that we have significant expectations for further upside.

UIL continues to invest in and develop a number of platforms: Utilico Emerging Markets Trust plc ("UEM") (EM); Somers Limited ("Somers") (financial services); Zeta Resources Limited ("Zeta") (resource and commodities); and Infratil Limited ("Infratil") (utility infrastructure in Australasia). In addition, UIL has established a strong track record of investing in the FinTech and PayTech sectors and is looking to establish a "platform" to capitalise on this position. Allectus Capital Limited ("Allectus") will focus on this key area for UIL. Pleasingly, the majority of our existing platforms have continued to make significant progress over the last 12 months.

A negative aspect of the platform investments continues to be the 'discount on discount'. UEM's share price on 30 June 2018 was 197.00p, which represented a discount of 13.6% to the diluted NAV of 228.11p. A look-through valuation of UEM, Somers and Zeta would increase UIL's NAV by 24.6% to 363.69p per share.

The discount factor encouraged the Investment Managers, supported by the Board, to continue to buy back shares. This year UIL bought back 0.7m ordinary shares (0.8%) at an average price of 172.67p, which represented a discount of 40.8% to the closing NAV. These buybacks were accretive to UIL's NAV per share and earnings per share ("EPS"). Further buybacks need to be balanced with the need for the Company to maintain adequate cover for the ZDP shareholders and to maintain liquidity for the redemption of the ZDP shares when due for repayment.

In November 2017 UIL successfully rolled 17.1m of its existing 2018 ZDP shares into 26.7m new 2024 ZDP shares and placed 3.3m of the new 2024 ZDP shares for cash. The new 2024 ZDP shares have a lower compounding rate of 4.75% and will reduce UIL's funding costs going forward. In April 2018 UIL launched a new £25.0m issue of 2026 ZDP shares with the objective of reducing the bank facility from the proceeds raised. This extends the ZDP cycle for UIL and results in lower bank debt and a lower redemption value every two years as the ZDP shares will be spread over four issues. UIL initially placed 10.6m 2026 ZDP shares at the 100.00p placing price and has subsequently placed 1.0m at an average price of 101.53p. UIL held 13.4m shares on its balance sheet at the year end and intends to place these out in response to market demand.

It is pleasing to see our four issues of ZDP shares trading at much tighter gross redemption yields than last year and that the ZDP market remains relatively buoyant. As a result of UIL's investment performance the cover for the ZDP shares has improved considerably.

Revenue return for the year to 30 June 2018 was £6.0m, ahead of the prior year of £5.8m, (an increase of 4.1%). This resulted in revenue return EPS of 6.67p versus the prior year's 6.38p, an increase of 4.5%. The better outcome at an EPS level is due in part to the share buybacks outlined above.

The Board maintained total dividends for the year to 30 June 2018 at 7.50p per share which represents a yield on the closing share price of 174.50p of 4.3%. Looking forward, the Board expects to maintain the current dividend profile. Undistributed revenue reserves carried forward reduced from £9.5m to £9.0m equal to some 10.02p per share.

The capital return for the year ended 30 June 2018 was £35.0m. This reflects portfolio gains of £48.4m and gains on derivatives and foreign exchange of £4.1m. Ongoing charges are 2.2% excluding performance fees and 4.4% including performance fees payable by UIL and the other companies managed by ICM (2017: 2.1% excluding performance fees and 2.6% including performance fees). These charges include operational, recurring costs payable not only by the Group but also a proportion of costs incurred at other investment companies held within the portfolio.

With effect from 1 July 2018 the provision of administration services to UIL was moved from F&C Management Limited to JPMorgan Chase Bank N.A. (in relation to fund accounting, fund valuation and reporting administration services) and through ICMIM, to Waverton Investment Management (in relation to middle office and market dealing services). JPMorgan remains UIL's custodian and depositary.

I would like to thank F&C Management Limited for their support and contribution to UIL and its predecessors going back to 1993. I would also like to thank the management team at ICM and Waverton for achieving this move. It is never easy with a highly regulated framework with which UIL is required to comply.

OUTLOOK

The world's markets have seen a sharp increase in volatility. The main driving factor is the shift from QE to QT by the USA. This in turn is leading to US Dollar strengthening and a 'risk off' approach by investors to many markets. We expect this to continue and the consequence to likely be a slowing of EM economies and possibly a global recession and this will in turn feed back to the developed economies over the next 24 months.

Against the above backdrop, stock selection is of increasing importance. ICM's relentless bottom up approach to investment should benefit UIL's portfolio.

Peter Burrows AO
Chairman
14 September 2018

INVESTMENT MANAGERS' REPORT

UIL's NAV total return of 18.7% for the twelve months to 30 June 2018 was a rewarding result given the market volatility in 2018.

The stand out performances have been the technology investments, especially APT and Optal Limited ("Optal") up by 248.9% and 66.7% respectively. Share price performance at both companies was driven by strong operational performances.

UIL continues to develop its core platform investments, which offer the following benefits:

•  Focused strategy. Each platform has a narrow mandate and as such is driven by the objective of finding and making investments within its mandate.

•  Dedicated research analysts. The research analysts for each platform are focused on both understanding existing portfolio businesses and identifying compelling new investments.

•  Financial support. Ability to draw on UIL's support and financial backing.

•  Deep knowledge. Utilising the Investment Managers' knowledge across many jurisdictions to optimise investment opportunities and undertake corporate finance led transactions.

The platforms have been set up to provide a sharper focus, leading to better investment opportunities and decision making by analysts within their defined sectors.

Platform investments represent 56.1% of the total portfolio as at 30 June 2018, amounting to a total investment of £276.8m. During the year to 30 June 2018, UIL made net withdrawals of £15.5m, (prior year £23.5m) from its platform investments. Key realisations included £18.1m from Zeta and £10.5m from Infratil.

Offsetting the benefits outlined above is the discount drag that UIL suffers on its platform investments. As at 30 June 2018 there were discounts to published NAVs of 13.6% for UEM (some £12.0m); 18.4% for Somers (some £25.1m) and 30.9% for Zeta (some £27.3m). Together this amounts to a discount on these investments of some £64.4m. Adding these discounts back would see UIL's shareholders' funds increase by 24.6% to 363.69p.

A key driver in shaping the current portfolio is the Investment Managers' three medium-term core views. First, that the world's financial markets are over indebted; second, that technological change offers strong investment upside and third, that EM offers higher GDP growth opportunities than developed markets. UIL's Investment Managers' emphasis is on individual stock selection, remaining fully invested and focusing on finding investments at valuations that do not reflect their true long-term value, while at the same time being a supportive shareholder of investee companies. ICM is a relentless bottom up investor.

PORTFOLIO

The portfolio's exposure to infrastructure and utilities was in line with last year, with 27.4% invested in these sectors. The prior year's exposure was 25.8%. The big increases in sector exposures are in technology, up to 25.9% (prior year 22.3%) of the portfolio and financial services, up to 22.7% (prior year 20.0%), mainly as a result of investment outperformance.

As at 30 June 2018 the top ten investments accounted for 89.2% of the portfolio versus the prior year's 86.5%. Concentration risk, however, is significantly reduced owing to platforms holding a number of underlying investments. It should be noted that for both sector and geographic analysis, we continue to present the portfolio on a look-through basis.

PLATFORM INVESTMENTS

UIL currently has six individual platform investments - Somers, UEM, Zeta, Infratil, Bermuda First Investment Company Limited ("BFIC") and Allectus. These investments represent five of the top ten portfolio investments and excluding Allectus, these five investments account for 56.1% of the total portfolio as at 30 June 2018 (prior year 56.5%). These are reviewed under the ten largest holdings starting on page 16 of the Report and Accounts.

In addition, Allectus is an unlisted investment company, holding unlisted investments in technology companies, primarily related to Fintech. ICM's Allectus team are actively seeking and making early stage investments in potentially disruptive technology businesses. 

DIRECT INVESTMENTS

UIL has five direct investments in its top ten holdings. These include: Resolute Mining Limited ("Resolute"), APT, Optal, Vix Technology Limited ("VixTech") and Vix Verify Global Pty Ltd ("Vix Verify"). The top ten investments are reviewed individually under the ten largest holdings starting on page 16 of the Report and Accounts.

UNLISTED INVESTMENTS

Unlisted investments at UIL were valued at £103.6m (21.0% of the total portfolio) as at 30 June 2018, up from £92.2m (20.5% of the portfolio) as at 30 June 2017. Included in the unlisted investments in the top ten are Optal, VixTech and Vix Verify, each of which are reviewed under the ten largest holdings starting on page 16 of the Report and Accounts.

Together the unlisted investments and the loans to the listed platforms are reported as level 3 investments amounting to £126.1m, as compared to the prior year of £109.0m.

SECTOR REVIEWS

Technology - 25.9% (prior year 22.3%)

UIL holds a number of investments in the technology sector, both directly and through Allectus (eleventh largest investment). APT is UIL's fifth largest holding in the portfolio as at 30 June 2018 while Optal is the sixth largest holding and VixTech is the eighth largest holding.

Financial Services - 22.7% (prior year 20.0%)

UIL's largest investment in financial services is Somers, UIL's largest investment holding which accounts for 22.6% of UIL's total portfolio as at 30 June 2018 (prior year 19.1%)

Gold Mining - 15.6% (prior year 18.1%)

UIL's largest investment in gold mining is in Resolute, which is held both directly by UIL (13.1% of the total portfolio) and indirectly through Zeta.

Resources (including gold mining) - 25.0% (prior year 21.7%)

UIL's largest investment in resources is Zeta, which accounts for 12.3% of the total portfolio as at 30 June 2018 (prior year 12.1%).

DERIVATIVES

UIL was for the most part inactive in stock market derivatives during the year as the Investment Managers expected the markets to perform well in 2018 driven by strong corporate earnings, notwithstanding increased volatility.

UIL operates a Sterling liability neutral policy and therefore hedged its predominantly Sterling ZDP liabilities with an appropriate mix of currency hedges.

Currency hedging resulted in profits of £3.3m due to Sterling's relative weakness. UIL has hedged a mixture of Australian Dollar, US Dollar, New Zealand Dollar and Euro to ensure ZDP liabilities were matched with certain assets. At the period end UIL's forward currency sale contracts in place were for nominal AUD 183.0m, USD 87.3m, NZD 14.7m and EUR 6.0m.

GEARING

We are pleased to highlight that UIL's initial goal set in 2013 of reducing gearing to 100.0% or below has been delivered again this year. Gearing (including the ZDP shares) has steadily reduced from 160.4% in 2013 to 87.3% as at 30 June 2018.

It is also worth noting UIL's average cost of borrowing (ZDP shares and bank debt) has now fallen to 5.9% in 2018.

ZDP SHARES

UIL's wholly owned subsidiary, UIL Finance, commenced the year with £173.8m of ZDP shares in issue. With the new 2024 and 2026 ZDP shares issued in the financial year under review, the ZDP shares were at £233.9m as at 30 June 2018. UIL holds 0.3m 2018 ZDP shares, 20.0m 2024 ZDP shares and 13.4m 2026 ZDP shares on its balance sheet. As at 30 June 2018, the net issued ZDP shares on a consolidated basis to outside investors are some £199.4m.

Further details on the ZDP shares are included in note 15 to the accounts.

DEBT

Bank debt decreased from £47.8m as at 30 June 2017 to £27.8m as at 30 June 2018 and was drawn in both Australian and Canadian Dollars.

Scotiabank's £50.0m committed senior secured multicurrency revolving facility has been extended to March 2020.

REVENUE RETURNS

Revenue returns were £6.0m, up by 4.1% on the previous year's £5.8m. Management fees decreased by 10.0% reflecting the increased investments in platforms and resultant reduction of fees at a UIL level in order to avoid double charging. The revenue return EPS of 6.67p was up from the prior year's 6.38p, an increase of 4.5% driven by revenue return increases and a lower number of shares in issue following the buybacks during the financial year.

CAPITAL RETURNS

Capital returns were £35.0m, up by 211.0% on the prior year's £11.3m. The gains on investments were £48.4m reflected in the main by very strong technology investee gains together with gains on derivatives and foreign exchange of £4.1m. These were offset by the investment management performance fee of £5.3m.

Ongoing charges, excluding performance fees, were 2.2% on average net assets.

ICM Investment Management Limited and ICM Limited
Investment Managers
14 September 2018

PRINCIPAL RISKS AND RISK MITIGATION

ICMIM was appointed as the Company's AIFM with effect from 13 April 2015 and has sole responsibility for risk management subject to the overall policies, supervision, review and control of the Board.

The Board considers carefully 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 Managers and the Company's Administrator.

The Board applies the principles and recommendations of the UK Code on Corporate Governance and the AIC's Code on Corporate Governance (the "AIC Code") as described on page 50 of the Report and Accounts. The Company's internal controls are described in more detail on page 44 of the Report and Accounts. 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 ongoing 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.

Most of the Company's principal risks are market-related and similar to those of other investment companies which invest globally in various currencies around the world. The principal ongoing risks and uncertainties currently faced by the Company, and the controls and actions to mitigate those risks are described below. Further details of risks and risk management policies as they relate to the financial assets and liabilities of the Company are detailed in note 30 to the accounts.

Investment risk: the risk that the investment strategy does not achieve long-term total returns for the Company's shareholders

The Board monitors the performance of the Company and has established guidelines to ensure that the investment policy that has been approved is pursued by the Investment Managers.

The investment process employed by the Investment Managers 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. The political risks associated with investing in these countries are also assessed. Overall, the investment process aims to achieve absolute returns through an active fund management approach.

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. Such factors are out of the control of the Board and the Investment Managers and may give rise to distortions in the reported returns to shareholders. It can be difficult and expensive to hedge some currencies.

In addition, 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 Board may buy back shares if there is a significant overhang of stock in the market, having regard to the percentage of shares in public hands.

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 2017.

A fuller review of economic and market conditions is included in the Investment Managers' Report section of the Report and Accounts.

There is no guarantee that the Company's strategy and business model will be successful in achieving its investment objective. 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. Past performance of the Company is not necessarily indicative of future performance.

No material change in overall risk in the year.

Gearing: the risk that the use of gearing may adversely impact on the Company's performance

The ordinary shares rank behind 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 2018, gearing on net assets, including bank loans, any overdrafts and ZDP shares, was 87.3%. The Board reviews the level of gearing at each Board meeting.

No material change in overall risk in the year.

Banking: a breach of the Company's loan covenants might lead to funding being summarily withdrawn

ICMIM 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.

No material change in overall risk in the year.

Key staff: loss by the Investment Managers 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 of the Investment Managers and the recruitment and remuneration packages have been developed in order to retain key staff.

Any material changes to the management team are considered by the Board at its next meeting; the Board discusses succession planning with the Investment Managers at regular intervals.

No material change in overall risk in the year.

Reliance on the Investment Managers and other service providers: inadequate controls by the Investment Managers or Administrator or other third party service providers could lead to misappropriation of assets

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 Company's main service providers are listed on page 106 of the Report and Accounts. The Audit & Risk Committee monitors the performance of the service providers.

All listed investments are held in custody for the Company by JPMorgan Chase Bank N.A., Jersey ("JPMorgan"); the unlisted investments are held in custody by BCB (together "the Custodians"). Following the appointment of J.P. Morgan Europe Limited ("JPMEL") as the Company's Depositary services provider, JPMEL also monitors the movement of cash and assets across the Company's accounts. The Audit & Risk Committee reviews the Administrator's annual internal controls report.

The Board reviews operational issues at each Board meeting and the Audit & Risk Committee receives reports on the operation of internal controls and the risk of cybercrime, as explained in more detail within "Internal Controls" on page 44 of the Report and Accounts. The risk of cybercrime is high, as it is with most organisations, but the Board regularly seeks assurances from the Investment Managers and other service providers on the preventative steps that they are taking to reduce this risk.

Although there has been no change in overall risk in the year, the possibility of cybercrime continues to be a concern. The Company's assets are considered to be relatively secure, so the risk is the inability to transact investment decisions for a period of time and reputational risk.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the Annual Report and Financial Statements

The Directors are responsible for preparing the Report and Accounts and the Group and parent Company financial statements in accordance with applicable law and regulations. 

The Directors are required under Bermudan law to prepare Group and parent Company financial statements for each financial year.  The Group financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and applicable law and the Directors have elected to prepare the parent Company financial statements on the same basis. 

Under Bermudan company law the financial statements are required to give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period.  In preparing each of the Group and parent Company financial statements, the Directors are required to: 

·      select suitable accounting policies and then apply them consistently; 

·      make judgements and estimates that are reasonable, relevant and reliable; 

·      state whether they have been prepared in accordance with IFRS as adopted by the EU; 

·      assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

·      use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. 

They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report and a Corporate Governance Statement that complies with that law and those regulations. The Directors have decided to prepare voluntarily a Directors' Remuneration Report as if the Company was required to comply with the requirements of Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008 No. 410) made under the UK Companies Act 2006.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Bermuda Companies Act (1981). They have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL REPORT 

We confirm that to the best of our knowledge: 

·      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and 

·      the annual report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. 

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy. 

Approved by the Board on 14 September 2018 and signed on its behalf by:

Peter Burrows

Chairman

GROUP INCOME STATEMENT

for the year to 30 June			2018				2017
	Revenue	Capital	Total	Revenue	Capital		Total
	return	return	return	return	return		return
	£'000s	£'000s	£'000s	£'000s	£'000s		£'000s
Gains on investments	-	48,366	48,366	-	31,238		31,238
Gains/(losses) on derivative financial instruments	-	3,298	3,298	-	(11,346)		(11,346)
Foreign exchange (losses)/gains	(97)	777	680	(67)	3,058		2,991
Investment and other income	10,671	-	10,671	10,775	-		10,775
Total income	10,574	52,441	63,015	10,708	22,950		33,658
Management and administration fees	(1,491)	(5,337)	(6,828)	(1,656)	-		(1,656)
Other expenses	(1,316)	(1)	(1,317)	(1,205)	(3)		(1,208)
Profit before finance costs and taxation	7,767	47,103	54,870	7,847	22,947		30,794
Gains on transactions of ZDP shares held intra group	-	4	4	-	617		617
Finance costs	(1,592)	(12,083)	(13,675)	(1,837)	(12,273)		(14,110)
Profit before taxation	6,175	35,024	41,199	6,010	11,291		17,301
Taxation	(179)	-	(179)	(250)	(30)		(280)
Profit for the year	5,996	35,024	41,020	5,760	11,261		17,021
Earnings per ordinary share - pence	6.67	38.96	45.63	6.38	12.46		18.84

The Group 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. There are no minority interests.

COMPANY INCOME STATEMENT

for the year to 30 June			2018			2017
	Revenue	Capital	Total	Revenue	Capital	Total
	return	return	return	return	return	return
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Gains on investments	-	49,712	49,712	-	31,001	31,001
Gains/(losses) on derivative financial instruments	-	3,298	3,298	-	(10,346)	(10,346)
Foreign exchange (losses)/gains	(97)	777	680	(67)	3,053	2,986
Investment and other income	10,671	-	10,671	10,775	-	10,775
Total income	10,574	53,787	64,361	10,708	23,708	34,416
Management and administration fees	(1,491)	(5,337)	(6,828)	(1,641)	-	(1,641)
Other expenses	(1,316)	(1)	(1,317)	(1,196)	(3)	(1,199)
Profit before finance costs and taxation	7,767	48,449	56,216	7,871	23,705	31,576
Finance costs	(1,592)	(12,821)	(14,413)	(1,837)	(12,697)	(14,534)
Profit before taxation	6,175	35,628	41,803	6,034	11,008	17,042
Taxation	(179)	-	(179)	(250)	(30)	(280)
Profit for the year	5,996	35,628	41,624	5,784	10,978	16,762
Earnings per ordinary share - pence	6.67	39.63	46.30	6.40	12.15	18.55

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 2018
	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 year	-	-	-	-	35,024	5,996	41,020
Transfer for change in treatment of subsidiary	-	-	-	-	(243)	243	-
Ordinary dividends paid	-	-	-	-	-	(6,738)	(6,738)
Shares purchased by the Company	(71)	(1,146)	-	-	-	-	(1,217)
Balance at 30 June 2018	8,949	18,167	233,866	32,069	(40,886)	8,969	261,134

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

COMPANY STATEMENT OF CHANGES IN EQUITY

for the year to 30 June 2018
	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	(75,910)	9,711	228,069
Profit for the year	-	-	-	-	35,628	5,996	41,624
Ordinary dividends paid	-	-	-	-	-	(6,738)	(6,738)
Shares purchased by the Company	(71)	(1,146)	-	-	-	-	(1,217)
Balance at 30 June 2018	8,949	18,167	233,866	32,069	(40,282)	8,969	261,738

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	(86,888)	10,701	218,844
Profit for the year	-	-	-	-	10,978	5,784	16,762
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	(75,910)	9,711	228,069

BALANCE SHEETS

	GROUP		COMPANY
at 30 June	2018	2017	2018	2017
	£'000s	£'000s	£'000s	£'000s
Non-current assets
Investments	493,375	449,116	528,544	449,261
Current assets
Other receivables	1,699	25,190	1,699	25,190
Derivative financial instruments	503	818	503	818
Cash and cash equivalents	647	3,573	647	3,423
	2,849	29,581	2,849	29,431
Current liabilities
Bank loans	-	(47,846)	-	(47,846)
Other payables	(6,852)	(26,472)	(240,771)	(200,245)
Derivative financial instruments	(1,089)	(2,532)	(1,089)	(2,532)
Zero dividend preference shares	(50,858)	-	-	-
	(58,799)	(76,850)	(241,860)	(250,623)
Net current liabilities	(55,950)	(47,269)	(239,011)	(221,192)
Total assets less current liabilities	437,425	401,847	289,533	228,069
Non-current liabilities
Bank loans	(27,795)	-	(27,795)	-
Zero dividend preference shares	(148,496)	(173,778)	-	-
Net assets	261,134	228,069	261,738	228,069
Equity attributable to equity holders
Ordinary share capital	8,949	9,020	8,949	9,020
Share premium account	18,167	19,313	18,167	19,313
Special reserve	233,866	233,866	233,866	233,866
Non-distributable reserve	32,069	32,069	32,069	32,069
Capital reserves	(40,886)	(75,667)	(40,282)	(75,910)
Revenue reserve	8,969	9,468	8,969	9,711
Total attributable to equity holders	261,134	228,069	261,738	228,069
Net asset value per ordinary share - pence	291.79	252.86	292.47	252.86

STATEMENTS OF CASH FLOWS

	GROUP		COMPANY
for the year to 30 June	2018	2017	2018	2017
	£'000s	£'000s	£'000s	£'000s
Cash flows from operating activities	2,116	1,314	2,122	1,340
Investing activities:
Purchases of investments	(64,046)	(67,267)	(64,313)	(72,371)
Sales of investments	70,115	109,560	71,092	124,709
Purchases of derivatives	-	(23,202)	-	(23,202)
Sales of derivatives	2,170	-	2,170	-
Cash flows from investing activities	8,239	19,091	8,949	29,136
Cash flows before financing activities	10,355	20,405	11,071	30,476
Financing activities:
Equity dividends paid	(6,738)	(6,774)	(6,738)	(6,774)
Movements on loans	(18,962)	25,148	(18,962)	25,148
Cash flows from issue of ZDP shares	13,921	27,258	12,943	17,208
Cash flows from redemption of ZDP shares	(417)	(62,741)	-	(62,744)
Cost of ordinary shares purchased for cancellation	(1,381)	(599)	(1,381)	(599)
Cash flows from financing activities	(13,577)	(17,708)	(14,138)	(27,761)
Net increase in cash and cash equivalents	(3,222)	2,697	(3,067)	2,715
Cash and cash equivalents at the beginning of the year	3,573	(114)	3,423	(277)
Effect of movement in foreign exchange	(404)	990	(409)	985
Cash and cash equivalents at the end of the year	(53)	3,573	(53)	3,423

Comprised of:
Cash	647	3,573	647	3,423
Bank overdraft	(700)	-	(700)	-
Total	(53)	3,573	(53)	3,423

NOTES

The Directors declared a fourth quarterly dividend in respect of the year ended 30 June 2018 of 1.875p per share which will be paid on 21 September 2018 to all ordinary shareholders on the register at close of business on 7 September 2018. The total cost of the dividend, which has not been accrued in the results for the year to 30 June 2018, is £1,678,000 based on 89,493,389 ordinary shares in issue.

This Statement of Results was approved by the Board on 14 September 2018. It is not the Group's or Company's statutory accounts. The statutory accounts for the financial year ended 30 June 2018 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 ended 30 June 2017 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 for the year ended 30 June 2018 will be posted to shareholders in early October 2018. A copy is available to view and download from the Company's website at www.uil.limited 

Legal Entity Identifier: 213800CTZ7TEIE7YM468

By order of the Board

ICM Limited, Secretary

14 September 2018

 

END

 

 

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