TIDMUEM
RNS Number : 1537U
Utilico Emerging Markets Trust PLC
21 November 2023
Date: 21 November 2023
UTILICO EMERGING MARKETS TRUST PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS TO 30 SEPTEMBER 2023
Utilico Emerging Markets Trust plc ("UEM" or the "Company")
today announced its unaudited financial results for
the six months to 30 September 2023.
Highlights of results for the six months to 30 September
2023:
-- Net asset value ("NAV") total return per share of 6.0%*
-- NAV per share of 261.58p per share, up 4.3%
-- Gross assets of GBP529.2m, a decrease of 2.5%
-- Annual compound NAV total return since inception of 9.4%*
-- Dividends per share totalled 4.30p for the period, an
increase of 3.6%. Dividends were fully covered by earnings
-- Revenue earnings per share ("EPS") decreased 12.9% to 5.95p
-- Total revenue income of GBP14.8m, an 12.4% decrease
*See Alternate Performance Measures on pages 43 to 45 of the
Half-Yearly Financial Report for the six months to 30 September
2023
The Half-Yearly Financial Report for the six months to 30
September 2023 will be posted to shareholders in early December
2023. A copy will shortly be available to view and download from
the Company's website at www.uemtrust.co.uk and the National
Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . Please
click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/1537U_1-2023-11-21.pdf
John Rennocks, Chairman of UEM said: "It is pleasing to report
that UEM exhibited a strong performance in the half year to 30
September 2023 and delivered a positive NAV total return of 6.0%.
This was once again significantly ahead of the MSCI EM total return
Index which was down 0.9% over the same period. The long-term
annual compound NAV total return since inception to 30 September
2023 was 9.4% exceeding the MSCI EM total return Index of 7.2%.
"UEM has declared two quarterly dividends of 2.15p each,
totalling 4.30p per share, a 3.6% increase over the previous half
year. Dividends remain fully covered by income. The retained
earnings revenue reserves increased by GBP3.3m to GBP12.9m as at 30
September 2023, equal to 6.53p per share.
"UEM's share price discount widened further over the half year
from 13.5% as at 31 March 2023 to 15.1% as at 30 September 2023.
This remains well above the level that the Board expects to see
over the medium term. The Company has continued buying back shares
for cancellation, with 4.4m shares bought back in the half year to
30 September 2023, at an average price of 222.14p. The Board would
like to re-emphasise that UEM's portfolio is predominantly invested
in relatively liquid, cash-generative companies which have
long-duration operational, infrastructure and utility assets that
the Company's Investment Managers believe are structurally
undervalued and offer the potential for excellent total
returns".
Charles Jillings, Investment Manager of UEM added: "UEM's one
year, three years, five years and since inception performance is
strongly ahead of the MSCI Index. UEM has delivered this together
with a rising dividend; a low beta (as at 30 September 2023, UEM's
five year Sterling adjusted beta versus the MSCI EM Index was
0.83); and with a portfolio which is very different from the MSCI
EM Index (UEM's active share is over 98.0%). This should be
compelling to investors who want exposure to infrastructure
megatrends in emerging markets, top performance and comparatively
low levels of volatility.
"We have identified four megatrends that should underpin the
investment opportunities for UEM - Energy Transition, Digital
Infra, Social Infra and Global Trade. There are significant
structural shifts underway which will continue irrespective of
macro or political pressures. While it is true that urbanisation
and the growth of the middle class continues to drive much of the
momentum in emerging economies, the megatrends are seeing a
determined accelerated shift in economic activity."
Contacts: Joint Portfolio Manager and Company Secretary
ICM Investment Management Limited +44(0)1372 271486
Charles Jillings / Alastair Moreton
Public Relations
Montfort Communications +44(0)20 3770 7913
Gay Collins / Pippa Bailey
utilico@montfort.london
Joint Brokers
Shore Capital +44(0)20 7408 4090
Rose Ramsden / Angus Murphy
Barclays Bank +44(0)20 7623 2323
Dion Di Miceli / Stuart Muress / Louis Reed
BarclaysInvestmentCompanies@barclays.com
PERFORMANCE SUMMARY
% Change
Half-year Half-year Annual Mar -
30 Sep 2023 30 Sep 2022 31 Mar 2023 Sep 2023
----------------------------------------------- -------------- -------------- -------------- -------------
NAV total return per share (1) (%) 6.0 (2.8) 2.1 n/a
Share price total return per share (%) 4.3 (4.0) 0.8 n/a
Annual compound NAV total return (1) (since
inception) (%) 9.4 9.3 9.3 n/a
----------------------------------------------- -------------- -------------- -------------- -------------
NAV per share (1) (pence) 261.58 243.29 250.91 4.3
Share price (pence) 222.00 211.00 217.00 2.3
Discount (1) (%) (15.1) (13.3) (13.5) n/a
Earnings per share
- Capital (pence) 8.24 (14.99) (6.61) 155.0 (4)
- Revenue (pence) 5.95 6.83 9.40 (12.9)( 4)
Total (pence) 14.19 (8.16) 2.79 273.9 (4)
----------------------------------------------- -------------- -------------- -------------- -------------
Dividends per share (pence) 4.30 (2) 4.15 8.45 3.6 (4)
--------------
Gross assets (3) (GBPm) 529.2 521.8 542.5 (2.5)
Equity holders' funds (GBPm) 517.3 501.6 507.4 2.0
Shares bought back (GBPm) 9.9 18.7 27.2 (47.1) (4)
--------------
Net overdraft (GBPm) (2.2) (3.5) (1.0) 120.0
Bank loans (GBPm) (11.8) (20.2) (35.1) (66.4)
----------------------------------------------- -------------- -------------- -------------- -------------
Net debt (GBPm) (14.0) (23.7) (36.1) (61.2)
Gearing (1) (%) (2.7) (4.7) (7.1) n/a
----------------------------------------------- -------------- -------------- -------------- -------------
Management and administration fees and
other expenses (GBPm) 3.7 3.7 7.4 0.0 (4)
----------------------------------------------- -------------- -------------- -------------- -------------
Ongoing charges figure (1) (%) 1.4 (5) 1.4 (5) 1.4 n/a
----------------------------------------------- -------------- -------------- -------------- -------------
(1) See Alternative Performance Measures on pages 43 to 45 of
the Half-Yearly Financial Report for the six months to 30 September
2023
(2) The second quarterly dividend declared has not been included
as a liability in the accounts
(3) Gross assets less liabilities excluding loans
(4) Percentage change based on comparable six month period to 30 September 2022
(5) For comparative purposes the figures have been annualised
CHAIRMAN'S STATEMENT
The half year to 30 September 2023 has continued to be truly
challenging for all, including investors. Multiple wars through to
inflation and sharply higher central bank interest rates; to rising
geopolitical friction; and to the challenges on climate change and
significant natural disasters remain headwinds for investors. To
this we can add the tragic events in Israel and the Middle East
descending back into conflict. The anticipated recovery in the
Chinese economy post Covid-19 has not met expectations and
continues to be a drag on global GDP. Understandably, volatility in
most markets has been elevated.
Despite all these challenges, it is pleasing to report that UEM
exhibited a strong performance in the half year to 30 September
2023 and delivered a positive NAV total return of 6.0%. This was
once again significantly ahead of the MSCI EM total return Index
which was down 0.9% over the same period.
UEM measures its performance on a total return basis over the
long term and the Investment Managers are seeking long term
performance to meet or exceed 10.0% per annum including a rising
dividend. Over one, three and five years and since inception, UEM
has outperformed the MSCI EM total return Index. The long term
annual compound NAV total return since inception to 30 September
2023 was 9.4%, exceeding the MSCI EM total return Index of
7.2%.
GLOBAL ECONOMY
As referred to above, there are numerous headwinds currently
faced by the markets, each of which is challenging in its own
right. We have historically discussed a number of these and they
largely remain unresolved. We continue to witness a significant
rise in nationalism, wealth inequality and global migration. All of
these issues and challenges no doubt continue to tear at the fabric
of our societies and institutions.
While Covid-19 is behind us, the legacy of Covid-19 and the
West's response to it has undoubtedly led to higher debt and higher
inflation in the developed western economies. Furthermore, the war
in Ukraine has seen sharply higher commodity prices and
accelerating inflation especially in Latin America. The response by
the central banks to higher inflation has been to rapidly raise
interest rates to bring inflation under control.
The markets are rightly concentrating on the US and the Federal
Reserve in particular, given the size of the US market and global
dominance of the US Dollar. The Federal Reserve is laser-focused on
reducing inflationary pressures by raising interest rates and has
encouraged the market to adopt a "higher for longer" outlook. The
resilience of the US markets has been unexpected. With GDP growth
in the last quarter of over 4.0% and unemployment remaining low, it
is unsurprising the Federal Reserve has raised rates to 5.25%. The
higher for longer expectation is starting to be seen in longer
duration treasuries. They started the half year at 3.5% and stood
at 4.6% as at 30 September 2023. This has had two outcomes: first,
many central banks reference the Federal Reserve and cannot risk
currency weakness by cutting rates in their local currency; and
second, investors have been reducing investments in equities and
moving into bonds.
Again, as we have noted before, the need to have resilient and
diversified supply chains, energy security, green energy and
increased defence capabilities will see resources diverted and
reinvested with an urgency and scale not previously witnessed in
our lifetime. This shift will give rise to new opportunities for
investors, including UEM. There are a number of megatrends that
should provide many of UEM's investment strong tailwinds.
EMERGING MARKETS
EM were mixed over the half year reflecting local headwinds,
higher interest rates and lower valuations. Bucharest's BET Index
was up 18.4%, Brazil's Bovespa Index was up 14.4%, the Indian
Sensex was up 11.6%, Chile's IPSA Index was up 9.6% and Vietnam's
Ho Chi Minh Index was up 8.4%. Meanwhile the Hong Kong Hang Seng
Index was down 12.7%, the Mexican Bolsa was down 5.6% and the
Philippine PSEI Index was down 2.7%. A common theme has been rising
inflation in Latin America and Eastern Europe and weakening
consumer confidence in Asia.
Most currencies continued to be weak against UK Sterling,
although the exceptions included the Mexican Peso, up 5.3%, the
Brazilian Real, up 2.6%, and the Hong Kong Dollar, up 1.5%. Oil
rose 19.5% over the six months to 30 September 2023, in response to
rising uncertainties and supply constraints.
UNLISTED INVESTMENTS (LEVEL 3 INVESTMENTS)
Over the half year to 30 September 2023, the value of the level
3 investments reduced to GBP43.8m from GBP58.7m as at 31 March
2023. This was driven mainly by reduced valuations on two
investments Petalite Limited ("Petalite") and Conversant Solutions
Pte Ltd ("Conversant"). As at 30 September 2023 the level 3
investments represented 8.2% of the total portfolio.
Petalite is a disruptive technology start up business and gives
UEM exposure to the electric vehicle revolution through charging
infrastructure. Conversant is a Singapore based provider of
internet network and edge computing services.
More details on these investments can be found in the Investment
Managers' Report.
REVENUE EARNINGS AND DIVID
It was disappointing to see UEM's revenue earnings per share
("EPS") decrease by 12.9% to 5.95p, in part due to having lower
average gearing and selling higher paying dividend investments.
UEM has declared two quarterly dividends of 2.15p each,
totalling 4.30p per share, a 3.6% increase over the previous half
year. Dividends remain fully covered by income. The retained
earnings revenue reserves increased by GBP3.3m to GBP12.9m as at 30
September 2023, equal to 6.53p per share.
The Board would like to re-emphasise that UEM's portfolio is
predominantly invested in relatively liquid, cash-generative
companies which have long-duration operational, infrastructure and
utility assets that the Company's Investment Managers believe are
structurally undervalued and offer the potential for excellent
total returns.
SHARE BUYBACKS
Disappointingly UEM's share price discount widened further over
the half year from 13.5% as at 31 March 2023 to 15.1% as at 30
September 2023. This remains well above the level that the Board
expects to see over the medium term. The Company has continued
buying back shares for cancellation, with 4.4m shares bought back
in the half year to 30 September 2023, at an average price of
222.14p.
While the Board is keen to see the discount narrow, any share
buyback remains an independent investment decision. Historically
the Company has bought back shares if the discount widens in normal
market conditions to over 10.0%. Since inception, UEM has bought
back 79.3m ordinary shares totalling GBP148.7m. The share buybacks
have contributed 0.3% to UEM's total returns during the six months
ended 30 September 2023.
ONGOING CHARGES
Ongoing charges were again unchanged at 1.4% for the year to 30
September 2023, a good result especially given the wider
inflationary environment.
BOARD
Your Board has consciously reduced to four Directors. This has
seen our gender diversity reduce to 25.0% which we note is below
targets set by the wider corporate governance framework. The Board
will continue to have regard to boardroom diversity during its
consideration of succession planning and future Board
appointments.
ADVISER AND INVESTOR COMMUNICATION
UEM is continuing to rejuvenate its marketing presentation and
draw attention to a number of megatrend tailwinds benefitting UEM.
The drive is to improve investor knowledge and broaden UEM's
investor base, especially the retail sector. The breadth of
coverage now being achieved by UEM is excellent and we hope that
once sentiment turns, there will be a rising trend of retail and
high net worth investors who will be inclined to buy into UEM.
OUTLOOK
The megatrends driving most emerging economies are expected to
continue and even accelerate over the coming year. The strong
results being reported by our investee companies combined with low
valuations leads us to remain optimistic that UEM offers
significant value to its shareholders.
John Rennocks
Chairman
21 November 2023
INVESTMENT MANAGERS' REPORT
It is good to see UEM deliver another positive NAV gain, with a
NAV total return for the half year to 30 September 2023 of 6.0%,
building on the 2.1% uplift for the year ended 31 March 2023. This
performance was again substantially ahead of the MSCI EM total
return Index which was down by 0.9% during the half year to 30
September 2023.
UEM's one year, three years, five years and since inception
performance is strongly ahead of the MSCI Index. UEM has delivered
this together with a rising dividend; a low beta (as at 30
September 2023, UEM's five year Sterling adjusted beta versus the
MSCI EM Index was 0.83); and with a portfolio which is very
different from the MSCI EM Index (UEM's active share is over
98.0%). This should be compelling to investors who want exposure to
infrastructure megatrends in EM, top performance and comparatively
low levels of volatility.
We were surprised and disappointed by the slow response of
China's economy to the lifting of Covid-19 restrictions, having
expected a surge in demand as China reopened, in line with other
economies. We increased our investments in China, including a
GBP7.5m position in Shanghai International Airport Co., Ltd
("SHIA") as at 31 March 2023 and in the half year to 30 September
2023, we added GBP1.0m to this position. However, the "revenge
travel" bounce seen in other economies has been slow to
materialise. Reflecting this the shares in SHIA have declined by
32.0% over the six months.
China's continued recovery will be a key factor, not only for
investments in China but also for the wider EM given the country's
high import/export led economy. It is an undoubted global growth
driver, and whilst the Chinese government continues to support the
economy, to date the stimulus policies have had limited impact.
The world is still faced with a number of unresolved deep-seated
challenges. As noted in the Chairman's Statement these range from
inflation to climate change. We have addressed these before, but it
is worth emphasising the inflation and interest rate outlook.
INFLATION AND INTEREST RATES
A year ago, we noted most central banks were grappling with
strongly rising inflation and the need to raise interest rates
higher. Most economies had negative real interest rates (inflation
running ahead of interest rates). Today many global economies are
faced with inflation subsiding and positive real interest rates.
This should mean central banks have room to reduce rates going
forward with a number of economies having record positive real
rates.
We believe that the US Federal Reserve is key to understanding
the outlook for most central banks, who do not want to reduce their
local rates, risking currency weakness and thereby imported
inflation. While it is true that a number of countries have
marginally reduced rates, they will naturally temper further cuts
by reference to the Federal Reserve. The US Dollar remains the
global reserve currency and will do so for some considerable time.
Given the nature of many emerging economies they are sensitive to
the US and therefore US Dollar interest rates.
The Federal Reserve in turn is being driven by the resilience in
the US economy. GDP increased last quarter at an annual rate of
4.9%; unemployment is under long term trends; and employment is
rising. Given the speed of the Federal Reserve interest rate rises
and the fact that the rate today of 5.25% is at a 22 year high, it
is remarkable that the world's biggest economy is so strong. It is
unsurprising the Federal Reserve has encouraged a "higher for
longer" stance as it sees the need to weaken the economy. We
believe the Federal Reserve could adopt this stance well into next
year. As such we see global interest rates remaining elevated.
This is important as it will be a drag on economies, but markets
are able to look to the future and we expect many EM to price in
these further opportunities to reduce rates. EM are well placed for
this gain in markets.
Inflation has not been as much of a challenge in Asia and we
suspect this results from higher unemployment levels at the start
of Covid-19. Consequently, wage pressures are lower, as is
inflation. It is worth noting that China's inflation is running at
under 2.0%.
MEGATRS
We have identified four megatrends that should underpin the
investment opportunities for UEM. These are Energy Transition,
Digital Infra, Social Infra and Global Trade. There are significant
structural shifts underway which will continue irrespective of
world macro or political pressures. While it is true that
urbanisation and the growth of the middle class continues to drive
much of the momentum in emerging economies, the megatrends are
seeing a determined accelerated shift in economic activity.
Energy transition is seeing an enormous investment in renewable
energy and the infrastructure which is needed to support it. To
grow their economies EM need to invest in energy supply. As an
observation energy demand often outstrips GDP growth as economies
expand and many EM are choosing to invest in renewables to support
that growth. While the developed world is typically shifting from
fossil fuels to renewables, emerging economies have an advantage
that they can look to renewables rather than fossil fuels to
develop. It is no accident that many EM already have a higher
renewables mix as a result, with many looking to phase out existing
fossil fuel capacity as well. This shift is providing many
investment opportunities for UEM including the renewable asset
owners, such as Omega Energia; the transmission grid operators
connecting up wind and solar farms, such as Power Grid Corporation
of India Limited; and legacy power generation companies which are
transitioning from coal to renewables, such as Engie Energia Chile
S.A.
Digital infra is an enabler of structural change and
technological innovation globally and especially in EM. Fast,
universal and affordable access to the internet is increasingly
considered a necessary utility, even in the least developed
markets. There are attractive opportunities to invest in companies
offering and improving 4G and 5G mobile connectivity and fibre
broadband direct to consumers and in passive infrastructure
companies offering mobile towers, fibre connections and data centre
services to telecoms operators and other corporate clients. EM
companies can deliver IT services and software development to
global clients in a cost-effective way, such as FPT Corporation and
Telelink Business Services. The continuing rapid growth in data
consumption is driving demand for new data centres, such as Korean
Internet Neutral Exchange, which is building a new data centre in
Seoul, due to complete in 2024.
Social infra development is a critical requirement for EM.
Urbanisation is driving significant demand for the essential
services which support improved quality of life, such as water and
sewerage connections, waste facilities, electricity connections and
healthcare. In many EM the social infrastructure outside of the
major cities is often under-developed, and governments are
committing significant resources towards improving this directly or
through incentivised schemes, such as public-private partnerships.
Water, waste and electricity distribution businesses are natural
monopolies and are typically highly regulated with opportunities
such as Aguas Andinas and Cia de Saneamento Basico do Estado de Sao
Paulo ("Sabesp") offering predictable, long-term returns. Solid
waste operators, such as Orizon Valorizacao de Residuos S.A.
("Orizon"), tend to be more commercial, with opportunities to move
up the value chain (e.g. biogas, carbon credits) as well as to
consolidate fragmented, nascent markets.
Global trade is continually evolving and historically has been
dominated by more developed countries. However, by 2040 EM as a
percentage of global GDP is expected to exceed that of developed
markets, being driven by increases in EM's GDP per capita, growth
in consumption and improvements in productivity. This long term
shift towards EM is therefore providing investment opportunities,
such as International Container Terminal Services, Inc. ("ICT").
However, over the last two to five years there have been additional
forces changing the way in which global trade is conducted.
Covid-19 caused manufacturers to reassess their global supply
chains, resulting in many now having more than one manufacturing
location, to ensure supply chains are more diversified, resilient
and stable so they can trade through supply shock disruptions.
Countries such as Mexico, India and Vietnam are benefiting from
this. Furthermore, there has been a reshaping of the competitive
environment; the geopolitical tensions and competition between the
US and China has impacted the multilateral trading systems; and the
war in Ukraine has also added another dynamic. The desire to bring
production of goods closer to the final consumer is driving near
shoring and friend shoring. Mexico is one country that is
benefiting here.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
ESG remains a continued focus for UEM. ICM has implemented a
sound and robust framework enabling it to engage with portfolio
companies. ICM sees this as a journey on which it expects to see
changes in behaviour and outcomes over time. While the key driver
for investments by UEM is equity total returns, to UEM the clear
expectation is the need for all portfolio businesses to engage in
processes which meet global expectations. There can be no doubt
that companies will face increased scrutiny from all investors and
the public over ESG issues and UEM's portfolio needs to be on that
journey.
CLIMATE CHANGE
Climate change remains at the forefront of global debate,
heightened by the increased impact of climate disasters worldwide.
The past year has provided a stark reminder of the devastation that
can arise from climate change-related disasters. We have been aware
of the impacts of climate and the El Nino and La Nina phases and
have tracked for some time hydrology and the impact on rivers, dams
and agricultures in Brazil. Rainfall can and does impact energy
pricing and agriculture output.
It is obvious that climate-driven events are becoming more
frequent and severe. This can range from days lost at a port due to
disruptive weather through to flooding and the evident social
impacts on clean water. Climate change risk is monitored across the
portfolio, however predicting the likelihood and impact of events
remains a difficult task. Currently, we see geographical
diversification as the best way to mitigate the risk posed by
climate-related disasters.
PORTFOLIO
UEM's gross assets (less liabilities excluding loans) decreased
to GBP529.2m as at 30 September 2023 from GBP542.5m as at 31 March
2023. This reflects the repayment of bank loans of GBP22.7m, the
share buybacks of GBP9.9m and net capital returns of GBP16.5m in
the half year.
As at 30 September 2023 the top thirty holdings accounted for
71.5% of the total portfolio (31 March 2023: 67.7%). There have
been new entrants into the top thirty holdings over the half year.
UEM increased its investment in Sabesp by GBP2.0m and Omega Energia
S.A. by GBP1.2m. This together with some strong share price
performances from PT Pertamina Geothermal Energy Tbk. up by 108.7%
and TTS (Transport Trade Services) S.A. up by 73.6%, moved them all
into the top thirty holdings. Ocean Wilsons Holdings Limited's
share price firmed by 7.9% and this moved it into thirtieth
position as we reduced other holdings.
UEM halved its holdings in the Mexican Airports and they
continue to perform exceptionally well at an operating level.
However, given the strong performance and some uncertainties around
the regulation of the concessions as they come up for renewal, this
resulted in a reduction of our positions by GBP12.3m. Fortuitously,
an element of the regulatory framework was changed by the
government, surprising the market and the shares sold off
significantly in October 2023. As noted, SHIA failed to see a
strong bounce in international passengers and muted customer
spending and its share price declined by 32.0%. Grupo Traxion
S.A.B. de C.V.'s share price fell by 20.4% following a clumsy
secondary placement. These holdings all fell out of the top thirty
as a result.
Purchases in the portfolio decreased to GBP24.5m in the half
year ended 30 September 2023 (30 September 2022: GBP52.6m) and
realisations decreased to GBP56.4m (30 September 2022: GBP67.3m).
This reflects in part, a reluctance to invest when uncertainties
are rising over China's economic recovery, together with the
uncertainties over US interest rates. An active decision was
therefore taken to slowly decrease UEM's debt. UEM ended the half
year with its bank loans at GBP11.8m, 23.7 % of the available
GBP50.0m facility
(31 March 2023: GBP35.1m).
LEVEL 3 INVESTMENTS
UEM ended the half year to 30 September 2023 with level 3
investments totalling GBP43.8m (31 March 2023: GBP58.7m),
representing 8.2% of total investments (31 March 2023: 10.8%). The
decrease in the half year resulted mainly from reduced valuations
for Petalite and Conversant. There were also realisations of
GBP4.3m mainly from the sale of an unlisted renewables company in
India which saw GBP3.7m returned to UEM. The sale resulted in UEM
realising an annual rate of return of 24.8% in Sterling terms after
tax on the investment.
In 2020 UEM initially invested a modest amount in Petalite and
provided additional investment in June 2022 following significant
progress as part of the introduction of a strategic partner and
investor. Based on the valuation of the June 2022 fundraise, the
holding in Petalite was valued upwards to GBP28.6m as at 31 March
2023. While progress continues to be made, in the wider market
comparable valuations for listed peers have softened. In line with
this, UEM reduced the Petalite carrying value by 12.9% as at 30
September 2023. Petalite signed a co-development agreement with a
major UK charge point operator and in October 2023 UEM provided a
temporary GBP2.5m loan facility to Petalite to support the business
whilst it completes a Series A fundraise.
Conversant reported strong operating results and raised new
equity at SGD 6.00 per share in 2022. However, UEM has now been
more cautious on its near-term prospects following the unexpected
death of the founder in late 2022. Based on Conversant's profit
expectations for 2023, as well as peer group multiples, UEM has
conservatively marked the valuation down by 57.2% to SGD 2.57 per
share.
SHARE BUYBACKS
UEM continues to actively buy back its shares. In the half year
to 30 September 2023 UEM bought back 4.4m shares at GBP9.9m. The
average price paid over the six months to 30 September 2023 was
222.14p per share. This was enhancing to NAV per share which was
261.58p as at 30 September 2023.
Since inception UEM has bought back 79.3m shares at a cost of
GBP148.7m and an average price of 187.06p.
BANK DEBT
UEM's net debt, being bank loans and overdrafts less cash,
decreased significantly over the half year from GBP36.1m as at 31
March 2023 to GBP14.0m as at 30 September 2023. UEM's GBP50.0m
committed multicurrency loan facility matures in March 2024.
REVENUE RETURN
Revenue income decreased 12.4% to GBP14.8m for the six months to
30 September 2023, from GBP16.9m for the six months to 30 September
2022. This arose from a marginal shift in the portfolio to
companies investing for the longer term in companies such as Orizon
and selling higher paying dividend investments.
Management fees and other expenses were largely unchanged at
GBP1.6m for the half year. While finance costs doubled, they
remained modest at GBP0.2m. Taxation rose by 10.0% to GBP1.1m for
the period to 30 September 2023, prior half year was GBP1.0m.
Arising from the above, profit for the half year decreased by
17.4% to GBP11.9m from GBP14.4m at the prior half year. EPS
decreased by 12.9% to 5.95p compared to the prior half year of
6.83p with the decrease in profit being offset by a reduced average
number of shares in issue following buybacks. Dividends per share
of 4.30p were fully covered by earnings.
Retained revenue reserves rose to GBP12.9m as at 30 September
2023, equating to 6.53p per share.
CAPITAL RETURN
The portfolio gained GBP19.3m during the half year to 30
September 2023 (30 September 2022: loss of GBP28.6m). There were
gains on foreign exchange of GBP0.4m (30 September 2022: loss of
GBP0.6m). The resultant total income gain on the capital return was
GBP19.7m against prior half year loss of GBP29.3m.
Management and administration fees were largely unchanged at
GBP2.2m for the half year. Finance costs remain modest at GBP0.7m
but rose by 250.0% in the half year as a result of higher interest
rate costs from GBP0.2m in the prior half year. Taxation was a cost
of GBP0.3m in the half year versus a gain of GBP0.1m in the prior
half year, which arose mainly from increased Indian deferred
capital gains tax on unrealised gains in the period. The net effect
of the above was a gain on capital return of GBP16.5m (30 September
2022: a loss of GBP31.6m).
INVESTOR COMMUNICATION
We have been increasing the marketing of UEM to the wider
investment community, including retail investors, through a number
of initiatives. These include regular publications of research
notes from UEM's broker, Shore Capital and Corporate Limited and
Edison Investment Research Limited; utilising the Investor Meet
Company platform which provides an excellent recorded video
platform for communicating to individual investors; and increasing
the content on UEM's website via our 'insights' page.
Charles Jillings
ICM Investment Management Limited and ICM Limited
21 November 2023
HALF-YEARLY FINANCIAL REPORT AND RESPONSIBILITY STATEMENT
The Chairman's Statement and the Investment Managers' Report
give details of the important events which have occurred during the
period and their impact on the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
Most of UEM's principal risks and uncertainties are market
related and are similar to those of other investment companies
investing mainly in listed equities in emerging markets.
The principal risks and uncertainties were described in more
detail under the heading "Principal Risks and Risk Mitigation"
within the Strategic Report section of the Annual Report and
Accounts for the year ended 31 March 2023 and have not changed
materially since the date of that document.
The principal risks faced by UEM include not achieving long term
total returns for its shareholders, adverse market conditions
leading to a fall in NAV, loss of key management, its shares
trading at a discount to NAV, losses due to inadequate controls of
third party service providers, gearing risk and regulatory risk. In
addition, the Board continues to monitor a number of emerging risks
that could potentially impact the Company, the principal ones being
geopolitical risk and climate change risk.
The Annual Report and Accounts is available on the Company's
website, www.uemtrust.co.uk
RELATED PARTY TRANSACTIONS
Details of related party transactions in the six months to 30
September 2023 are set out in note 9 to the accounts and details of
the fees paid to the Investment Managers are set out in note 2 to
the accounts. Directors' fees were increased by approximately 5.0%
with effect from 1 April 2023 to: Chairman GBP52,500 per annum;
Chair of Audit & Risk Committee GBP49,100 per annum; and other
Directors GBP38,900 per annum.
The net fee entitlement of each Director is satisfied in shares
of the Company, purchased in the market by each Director at around
each quarter end.
DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with Chapter 4 of the Disclosure Guidance and
Transparency Rules, the Directors confirm that to the best of their
knowledge:
-- the condensed set of financial statements contained within
the report for the six months to 30 September 2023 has been
prepared in accordance with International Accounting Standard 34
"Interim Financial Reporting" on a going concern basis and gives a
true and fair view of the assets, liabilities, financial position
and return of the Company;
-- the half-yearly report, together with the Chairman's
Statement and Investment Managers' Report, includes a fair review
of the important events that have occurred during the first six
months of the financial year and their impact on the financial
statements as required by DTR 4.2.7R;
-- the Directors' statement of principal risks and uncertainties
above is a fair review of the principal risks and uncertainties for
the remainder of the year as required by DTR 4.2.7R; and
-- the half-yearly report includes a fair review of the related
party transactions that have taken place in the first six months of
the financial year as required by DTR 4.2.8R.
On behalf of the Board
John Rennocks
Chairman
21 November 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Six months to Six months to
30 September 2023 30 September 2022
Notes 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 - 19,284 19,284 - (28,628) (28,628)
Foreign exchange gains/(losses) - 403 403 - (623) (623)
Investment and other income 14,758 - 14,758 16,887 - 16,887
----------------------------------------------- -------- -------- -------- -------- -------- --------
Total income/(loss) 14,758 19,687 34,445 16,887 (29,251) (12,364)
2 Management and administration fees (699) (2,169) (2,868) (712) (2,216) (2,928)
Other expenses (877) - (877) (789) - (789)
----------------------------------------------- -------- -------- -------- -------- -------- --------
Profit/(loss) before finance costs and taxation 13,182 17,518 30,700 15,386 (31,467) (16,081)
Finance costs (166) (663) (829) (50) (199) (249)
----------------------------------------------- -------- -------- -------- -------- -------- --------
Profit/(loss) before taxation 13,016 16,855 29,871 15,336 (31,666) (16,330)
3 Taxation (1,076) (315) (1,391) (954) 85 (869)
----------------------------------------------- -------- -------- -------- -------- -------- --------
Profit/(loss) for the period 11,940 16,540 28,480 14,382 (31,581) (17,199)
----------------------------------------------- -------- -------- -------- -------- -------- --------
4 Earnings per share (basic) - pence 5.95 8.24 14.19 6.83 (14.99) (8.16)
----------------------------------------------- -------- -------- -------- -------- -------- --------
All items in the above statement derive from continuing
operations.
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies.
The net return on ordinary activities after taxation represents
the profit for the period and also the total comprehensive
Income.
CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the six months to 30 September 2023
Ordinary Capital Retained earnings
Notes share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------- -------- -------- ---------- -------- --------- -------- --------
Balance as at 31 March 2023 2,023 76,706 322 432,577 (13,841) 9,587 507,374
Shares purchased by the
7 Company and cancelled (45) - 45 (9,918) - - (9,918)
Profit for the period - - - - 16,540 11,940 28,480
5 Dividends paid in the period - - - - - (8,614) (8,614)
Balance as at 30 September 2023 1,978 76,706 367 422,659 2,699 12,913 517,322
--------------------------------- -------- -------- ---------- -------- --------- -------- --------
for the six months to 30 September 2022
Ordinary Capital Retained earnings
Notes share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------- -------- -------- ---------- -------- --------- -------- --------
Balance as at 31 March 2022 2,148 76,706 197 459,736 (139) 7,268 545,916
Shares purchased by the
7 Company and cancelled (86) - 86 (18,674) - - (18,674)
(Loss)/profit for the period - - - - (31,581) 14,382 (17,199)
5 Dividends paid in the period - - - - - (8,414) (8,414)
Balance as at 30 September 2022 2,062 76,706 283 441,062 (31,720) 13,236 501,629
--------------------------------- -------- -------- ---------- -------- --------- -------- --------
for the year ended 31 March 2023
Ordinary Capital Retained earnings
Notes share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------- -------- -------- ---------- -------- --------- -------- --------
Balance as at 31 March 2022 2,148 76,706 197 459,736 (139) 7,268 545,916
Shares purchased by the
7 Company and cancelled (125) - 125 (27,159) - - (27,159)
(Loss)/profit for the year - - - - (13,702) 19,474 5,772
5 Dividends paid in the year - - - - - (17,155) (17,155)
--------------------------- -------- -------- ---------- -------- --------- -------- --------
Balance as at 31 March 2023 2,023 76,706 322 432,577 (13,841) 9,587 507,374
--------------------------- -------- -------- ---------- -------- --------- -------- --------
CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
Notes as at 30 Sep 2023 30 Sep 2022 31 Mar 2023
GBP'000s GBP'000s GBP'000s
------------------------------------- ----------- ----------- -----------
Non-current assets
11 Investments 533,066 528,400 545,657
------------------------------------- ----------- ----------- -----------
Current assets
Other receivables 2,460 2,351 1,444
Cash and cash equivalents 774 907 456
------------------------------------- ----------- ----------- -----------
3,234 3,258 1,900
------------------------------------- ----------- ----------- -----------
Current liabilities
Other payables (5,206) (8,002) (3,461)
Bank loans (11,837) - (35,102)
------------------------------------- ----------- ----------- -----------
(17,043) (8,002) (38,563)
------------------------------------- ----------- ----------- -----------
Net current liabilities (13,809) (4,744) (36,663)
------------------------------------- ----------- ----------- -----------
Total assets less current liabilities 519,257 523,656 508,994
Non-current liabilities
6 Bank loans - (20,185) -
Deferred tax (1,935) (1,842) (1,620)
------------------------------------- ----------- -----------
Net assets 517,322 501,629 507,374
------------------------------------- ----------- ----------- -----------
Equity attributable to equity holders
7 Ordinary share capital 1,978 2,062 2,023
Merger reserve 76,706 76,706 76,706
Capital redemption reserve 367 283 322
Special reserve 422,659 441,062 432,577
Capital reserves 2,699 (31,720) (13,841)
Revenue reserve 12,913 13,236 9,587
------------------------------------- ----------- ----------- -----------
Total attributable to equity holders 517,322 501,629 507,374
------------------------------------- ----------- ----------- -----------
8 Net asset value per share
Basic - pence 261.58 243.29 250.91
------------------------------------- ----------- ----------- -----------
CONDENSED STATEMENT OF CASH FLOWS ( UNAUDITED)
Six months to Six months to Year to
30 Sep 2023 30 Sep 2022 31 Mar 2023
GBP'000s GBP'000s GBP'000s
------------------------------------------------------ -------------- -------------- -------------
Operating activities
Profit/(loss) before taxation 29,871 (16,330) 7,198
Deduct investment income - dividends (13,890) (16,184) (22,671)
Deduct investment income - interest (828) (702) (1,627)
Deduct bank interest received (40) (1) (28)
Add back interest charged 829 249 843
Add back (gains)/losses on investments (19,284) 28,628 8,389
Add back foreign currency (gains)/losses (403) 623 515
Increase in other receivables (31) (33) (31)
Decrease in other payables (20) (50) (88)
------------------------------------------------------ -------------- -------------- -------------
Net cash outflow from operating activities
before dividends and interest (3,796) (3,800) (7,500)
Interest paid (1,044) (241) (646)
Dividends received 13,444 15,069 22,417
Investment income - interest received 321 236 475
Bank interest received 40 1 28
Taxation paid (1,086) (912) (1,691)
------------------------------------------------------ -------------- -------------- -------------
Net cash inflow from operating activities 7,879 10,353 13,083
------------------------------------------------------ -------------- -------------- -------------
Investing activities
Purchases of investments (23,368) (50,888) (106,821)
Sales of investments 55,550 67,208 125,649
Net cash inflow from investing activities 32,182 16,320 18,828
------------------------------------------------------ -------------- -------------- -------------
Financing activities
Repurchase of shares for cancellation (9,751) (18,144) (27,159)
Dividends paid (8,614) (8,414) (17,155)
Drawdown of bank loans 1,599 4,280 35,385
Repayment of bank loans (24,283) (8,536) (24,440)
Net cash outflow from financing activities (41,049) (30,814) (33,369)
------------------------------------------------------ -------------- -------------- -------------
Decrease in cash and cash equivalents (988) (4,141) (1,458)
Cash and cash equivalents at the start of the period (1,026) 452 452
Effect of movement in foreign exchange (178) 157 (20)
------------------------------------------------------ -------------- -------------- -------------
Cash and cash equivalents at the end of the period (2,192) (3,532) (1,026)
------------------------------------------------------ -------------- -------------- -------------
Comprised of:
Cash 774 907 456
Bank overdraft (2,966) (4,439) (1,482)
---------------- -------- -------- --------
Total (2,192) (3,532) (1,026)
---------------- -------- -------- --------
NOTES TO THE ACCOUNTS (UNAUDITED)
1. ACCOUNTING POLICIES
The Company is an investment company incorporated in the United
Kingdom with a premium listing on the London Stock Exchange.
The unaudited condensed accounts have been prepared in
accordance with UK adopted International Accounting Standards,
which comprise standards and interpretations approved by the IASB
and International Accounting Standards and Standing Interpretations
Committee interpretations approved by the IASC that remain in
effect and to the extent that they are in conformity with the
requirement of the Companies Act 2006 ("IFRS"), IAS 34 "Interim
Financial Reporting" and the accounting policies set out in the
audited statutory accounts for the year ended 31 March 2023.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. The significant judgements
made by the Directors in applying the accounting policies and key
sources of uncertainty were the same as those applied to the
financial statements as at and for the year ended 31 March
2023.
The condensed Accounts do not include all of the information
required for full annual accounts and should be read in conjunction
with the accounts of the Company for the year ended 31 March 2023,
which were prepared under full IFRS requirements.
2. MANAGEMENT AND ADMINISTRATION FEES
The Company has appointed ICMIM as its Alternative Investment
Fund Manager and joint portfolio manager with ICM, for which they
are entitled to a management fee. The aggregate fees payable by the
Company are apportioned between the Investment Managers as agreed
by them.
The relationship between ICMIM and ICM is compliant with the
requirements of the UK version of the EU Alternative Investment
Fund Managers Directive as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018, as amended, and
also such other requirements applicable to ICMIM by virtue of its
regulation by the Financial Conduct Authority.
The annual management fee is a tiered structure as follows: 1.0%
of NAV up to and including GBP500m; 0.9% of NAV exceeding GBP500m
up to and including GBP750m; 0.85% of NAV exceeding GBP750m up to
and including GBP1,000m; and 0.75% of NAV exceeding GBP1,000m,
payable quarterly in arrears. The management fee is allocated 80%
to capital return and 20% to revenue return. The investment
management agreement may be terminated upon six months' notice.
ICMIM also provides company secretarial services to the Company,
with the Company paying GBP35,000 (30 September 2022: GBP35,000 and
31 March 2023: GBP70,000) equivalent to 45% of the costs associated
with this office and recharges research fees to the Company based
on a budget of GBP0.3m per annum, paid quarterly in arrears. These
charges are allocated 80% to capital return and 20% to revenue
return.
JPMorgan Chase Bank N.A. - London Branch has been appointed
Administrator and ICMIM has appointed Waverton to provide certain
support services (including middle office, market dealing and
information technology support services).
3. TAXATION
The revenue return taxation charge of GBP1,076,000 (30 September
2022: GBP954,000 and 31 March 2023: GBP1,638,000) relates to
irrecoverable overseas taxation suffered on dividend and interest
income.
The capital return taxation expense of GBP315,000 (30 September
2022: income of GBP85,000 and 31 March 2023: income of GBP212,000)
relates to capital gains on realised gains on sale of overseas
investments and deferred tax in respect of capital gains tax on
overseas unrealised investment gains that may be subject to
taxation in future years.
4. EARNINGS PER SHARE
Earnings per share is the profit attributable to shareholders
and based on the following data:
Six months to Six months to Year to
30 Sep 2023 30 Sep 2022 31 Mar 2023
GBP'000s GBP'000s GBP'000s
-------------------------------------------------------------- -------------- -------------- -------------
Revenue return 11,940 14,382 19,474
Capital return 16,540 (31,581) (13,702)
-------------------------------------------------------------- -------------- -------------- -------------
Total return 28,480 (17,199) 5,772
-------------------------------------------------------------- -------------- -------------- -------------
Number Number Number
-------------------------------------------------------------- -------------- -------------- -------------
Weighted average number of ordinary shares in issue
during the period for basic earnings per share calculations 200,672,201 210,727,891 207,220,648
-------------------------------------------------------------- -------------- -------------- -------------
Pence Pence Pence
-------------------------------------------------------------- -------------- -------------- -------------
Revenue return per share 5.95 6.83 9.40
Capital return per share 8.24 (14.99) (6.61)
-------------------------------------------------------------- -------------- -------------- -------------
Total return per share 14.19 (8.16) 2.79
-------------------------------------------------------------- -------------- -------------- -------------
5. DIVIDS
30 Sep
2023
Record date Payment date GBP'000s 30 Sep 2022 GBP'000s 31 Mar 2023 GBP'000s
----------------------------- ------------- -------------- ---------- --------------------- ---------------------
2022 Fourth quarterly
dividend of 2.00p per share 06-Jun-22 24-Jun-22 - 4,250 4,250
2023 First quarterly
dividend of 2.00p per share 02-Sep-22 23-Sep-22 - 4,164 4,164
2023 Second quarterly
dividend of 2.15p per share 02-Dec-22 16-Dec-22 - - 4,384
2023 Third quarterly
dividend of 2.15p per share 03-Mar-23 24-Mar-23 - - 4,357
2023 Fourth quarterly -
dividend of 2.15p per share 02-Jun-23 23-Jun-23 4,334 -
2024 First quarterly -
dividend of 2.15p per share 01-Sep-23 22-Sep-23 4,280 -
----------------------------- ------------- -------------- ---------- --------------------- ---------------------
8,614 8,414 17,155
---------------------------------------------------------- ---------- --------------------- ---------------------
The Directors have declared a second quarterly dividend in
respect of the year ending 31 March 2024 of 2.15p per share payable
on 15 December 2023 to shareholders on the register at close of
business on 1 December 2023. The total cost of the dividend, which
has not been accrued in the results for the six months to 30
September 2023, is GBP4,217,000 based on 196,121,375 shares in
issue as at 20 November 2023.
6. BANK LOANS
The Company has an unsecured committed senior multicurrency
revolving facility of GBP50,000,000 with the Bank of Nova Scotia,
London Branch expiring on 15 March 2024. Commitment fees are
charged on any undrawn amounts at commercial rates. The terms of
the loan facility, including those related to accelerated repayment
and costs of repayment, are typical of those normally found in
facilities of this nature. The existing loan rolls over on a
periodic basis subject to usual conditions including a covenant
with which the Company is comfortable it can ensure compliance
As at 30 September 2023 GBP11,837,000 (30 September 2022:
GBP20,185,000 and 31 March 2023: GBP35,102,000) was drawn down.
7. ORDINARY SHARE CAPITAL
Issued, called up and fully paid
Ordinary shares of 1p each Number GBP'000s
------------------------------------------- ------------ ---------
Balance as at 31 March 2023 202,212,256 2,023
Purchased for cancellation by the Company (4,441,578) (45)
-------------------------------------------- ------------ ---------
Balance as at 30 September 2023 197,770,678 1,978
-------------------------------------------- ------------ ---------
During the period the Company bought back for cancellation
4,441,578 (30 September 2022: 8,560,692 and 31 March 2023:
12,531,811) ordinary shares at a total cost of GBP9,918,000 (30
September 2022: GBP18,674,000 and 31 March 2023: GBP27,159,000). A
further 1,649,303 ordinary shares have been purchased for
cancellation at a total cost of GBP3,543,000 since the period
end.
8. NET ASSET VALUE PER SHARE
The NAV per share is based on the net assets attributable to the
equity shareholders of GBP517,322,000 (30 September 2022:
GBP501,629,000 and 31 March 2023: GBP507,374,000) and on
197,770,678 ordinary shares, being the number of ordinary shares in
issue at the period end (30 September 2022: 206,183,375 and 31
March 2023: 202,212,256).
9. RELATED PARTY TRANSACTIONS
The following are considered related parties of the Company: the
subsidiary undertakings (UEM (HK) Limited and UEM Mauritius
Holdings Limited), the associates of the Company (East Balkan
Properties plc, Petalite Limited ("Petalite") and Pitch Hero
Holdings Limited), the Board of UEM, ICM and ICMIM (the Company's
joint portfolio managers), Mr Saville, Mr Jillings (a key
management person of ICMIM) and UIL Limited.
As at 30 September 2023 the fair value of the loan held with UEM
(HK) Limited was GBP9,706,000 and loan interest accrued was
GBP71,000 (30 September 2022: GBP11,871,000 and GBP77,000
respectively and 31 March 2023: GBP10,118,000 and GBP71,000
respectively). In the period GBP406,000 loan interest was
capitalised. As at 30 September 2023, the fair value of the equity
holdings held in UEM(HK) Limited was GBPnil (30 September 2023:
GBP1,128,000 and 31 March 2023 GBP1,498,000). During the period the
Company did not receive any amounts from or make payments to UEM
Mauritius Holdings Limited.
There were no transactions with East Balkan Properties plc or
Petalite Limited.
Pursuant to an extension and amendment (dated 24 August 2023) of
a loan agreement dated 1 March 2021 under which UEM has agreed to
loan monies to Pitch Hero, UEM advanced to Pitch Hero GBP50,000 on
25 August 2023. As at 30 September 2023, the balance of the loan
and interest outstanding was GBP535,000 (30 September 2022:
GBP162,000 and 31 March 2023: GBP470,000). The loan bears interest
at an annual rate of 10% (prior to 24 August 2023 the rate was 5%).
The first repayment date is 25 August 2024, with a final repayment
date of 25 August 2027.
The Board received aggregate remuneration of GBP108,000 (30
September 2022: GBP121,000 and 31 March 2023: GBP225,000) included
within "Other expenses" for services as Directors. As at the period
end, GBPnil (30 September 2022: GBPnil and 31 March 2023: GBPnil)
remained outstanding to the Directors. In addition to their fees,
the Directors received dividends totalling GBP21,000 (30 September
2022: GBP26,000 and 31 March 2023: GBP45,000) during the period
under review in respect of their shareholdings in the Company.
There were no further transactions with the Board during the
period.
There were no transactions with ICM, ICMIM, ICM Investment
Research Limited or ICM Corporate Services (Pty) Ltd, subsidiaries
of ICM, other than investment management, secretarial costs,
research fees as set out in note 2 of GBP2,701,000 (30 September
2022: GBP2,770,000 and 31 March 2023: GBP5,420,000) and reimbursed
expenses included within Other Expenses of GBP30,000 (30 September
2022: GBP2,000 and 31 March 2023: GBP134,000). As at the period end
GBP1,345,000 (30 September 2022: GBP1,382,000 and 31 March 2023:
GBP1,330,000) remained outstanding in respect of management,
company secretarial and research fees.
Mr Jillings received dividends totalling GBP20,000 (30 September
2022: GBP18,000 and 31 March 2023: GBP38,000) and UIL Limited
received dividends totalling GBP784,000 (30 September 2022:
GBP1,178,000 and 31 March 2023: GBP2,051,000).
10. GOING CONCERN
Notwithstanding that the Company has reported net current
liabilities of GBP13,809,000 as at 30 September 2023 (30 September
2022: GBP4,744,000 and 31 March 2023: GBP36,663,000), the financial
statements have been prepared on a going concern basis which the
Directors consider to be appropriate for the following reasons. The
Board's going concern assessment has focused on the forecast
liquidity of the Company for at least twelve months from the date
of approval of the financial statements. This analysis assumes that
the Company would, if necessary, be able to meet some of its short
term obligations through the sale of listed securities, which
represented 91.8% of the Company's total portfolio as at 30
September 2023. As part of this assessment the Board has considered
a severe but plausible downside that reflects the impact of the
Company's key risks and an assessment of the Company's ability to
meet its liabilities as they fall due assuming a significant
reduction in asset values and accompanying currency volatility.
The Board also considered reverse stress testing to identify the
reduction in the valuation of liquid investments that would cause
the Company to be unable to meet its net liabilities, being
primarily the bank loan. The Board is confident that the reduction
in asset values implied by the reverse stress test is not plausible
even in the current volatile environment. Consequently, the
Directors believe that the Company will have sufficient funds to
continue to meet its liabilities as they fall due for at least
twelve months from the date of approval of the financial
statements.
As at the period end, the Company had a GBP50m unsecured
multicurrency loan facility with Bank of Nova Scotia, London
Branch, expiring on 15 March 2024. The Company will either extend
or replace the facility or repay the outstanding debt when due from
portfolio realisations
Accordingly, the Board considers it appropriate to continue to
adopt the going concern basis in preparing the accounts.
11. FAIR VALUE HIERARCHY
IFRS 13 'Financial Instruments: Disclosures' require an entity
to classify fair value measurements using a fair value hierarchy
that reflects the significance of the inputs used in making the
measurements. The fair value hierarchy shall have the following
levels:
Level 1 reflects financial instruments quoted in an active
market.
Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation
technique whose variables include only data from observable
markets.
Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on
assumptions that are not supported by prices from observable market
transactions in the same instrument and not based on available
observable market data.
The financial assets and liabilities measured at fair value in
the statement of financial position are grouped into the fair value
hierarchy as follows:
30 Sep 2023
Level 1 Level 2 Level 3 Total
GBP'000s GBP'000s GBP'000s GBP'000s
------------- ---------- ---------- ---------- ------------
Investments 481,123 8,160 43,783 533,066
------------- ---------- ---------- ---------- ------------
30 Sep 2022
Total
Level 1 GBP'000s Level 2 GBP'000s Level 3 GBP'000s GBP'000s
------------- ----------------- ----------------- ----------------- ------------
Investments 469,777 9,125 49,498 528,400
------------- ----------------- ----------------- ----------------- ------------
31 Mar 2023
Total
Level 1 GBP'000s Level 2 GBP'000s Level 3 GBP'000s GBP'000s
------------- ----------------- ----------------- ----------------- ------------
Investments 483,146 3,818 58,693 545,657
------------- ----------------- ----------------- ----------------- ------------
During the period two stocks with a value of GBP4.6m were
transferred from level 1 to level 2 due to the investee company
shares trading irregularly. The book cost and fair value was
transferred using the 31 March 2023 balances, and all subsequent
trades are therefore disclosed in the level 2 column (30 September
2023: one stock with a value of GBP5.5m was transferred from level
1 to level 2 due to the investee company shares trading irregularly
and 31 March 2023: one stock with value of GBP1.7m was transferred
from level 1 to level 2 due to the investee company shares trading
irregularly, three stocks with value of GBP8.0m were transferred
from level 2 to level 1 due to the investee companies shares
resuming regular trading in the year, one stock with value of
GBP0.8m was transferred from level 3 to level 1 due to the investee
company shares becoming listed and one stock transferred from level
1 to level 3 at GBPnil value due to the investee company shares
being suspended from trading. The book cost and fair value was
transferred using the 31 March 2022 balances except for the stock
that was suspended, the book cost and fair value transferred at the
time of suspension).
A reconciliation of fair value measurements in level 3 is set
out in the following table:
Six months to Six months to Year to
30 Sep 2023 30 Sep 2022 31 Mar 2023
GBP'000s GBP'000s GBP'000s
----------------------------------------------------- -------------- -------------- -------------
Valuation brought forward 58,693 48,110 48,110
Purchases 466 2,731 3,691
Sales (4,279) (3,782) (4,423)
Gains on sale of investments 139 991 1,760
(Losses)/gains on investments held at end of period (11,236) 1,448 9,555
----------------------------------------------------- -------------- -------------- -------------
Valuation carried forward 43,783 49,498 58,693
----------------------------------------------------- -------------- -------------- -------------
Analysed
Cost of investments 25,810 28,396 29,484
Gains on investments 17,973 21,102 29,209
----------------------------------------------------- -------------- -------------- -------------
Valuation carried forward 43,783 49,498 58,693
----------------------------------------------------- -------------- -------------- -------------
12. FINANCIAL RISK MANAGEMENT - LEVEL 3 FINANCIAL
INSTRUMENTS
Valuation methodology
The objective of using valuation techniques is to arrive at a
fair value measurement that reflects the price that would be
received to sell the asset or paid to transfer the liability in an
orderly transaction between market participants at the measurement
date. The Company uses proprietary valuation models, which are
compliant with IPEV guidelines and IFRS 13 and which are usually
developed from recognised valuation techniques.
The Directors have satisfied themselves as to the methodology
used, the discount rates and key assumptions applied, and the
valuations. The methodologies used to determine fair value are
described in the 2023 Report and Accounts. The level 3 assets
comprise of a number of unlisted investments at various stages of
development and each has been assessed based on its industry,
location and business cycle. The valuation methodologies include
net assets, discounted cash flows, cost of recent investment or
last funding round, listed peer comparison or peer group multiple,
as appropriate. Where applicable, the Directors have considered
observable data and events to underpin the valuations. A discount
has been applied, where appropriate, to reflect both the unlisted
nature of the investments and business risks.
Sensitivity of level 3 financial investments measured at fair
value to changes in key assumptions
Level 3 inputs are sensitive to assumptions made when
ascertaining fair value. While the Directors believe that the
estimates of fair value are appropriate, the use of different
methodologies or assumptions could lead to different measurements
of fair value. The sensitivities shown in the table below give an
indication of the effect of applying reasonable and possible
alternative assumptions.
In assessing the level of reasonably possible outcomes
consideration was also given to the impact on valuations of the
increased level of volatility in equity markets since early 2022,
principally reflecting concerns about increasing rates of
inflation, tightening energy supplies, rising interest rates and
the Ukraine war. The impact on the valuations has been varied and
largely linked to their relevant sectors and this has been
reflected in the level of sensitivities applied.
The following table shows the sensitivity of the fair value of
level 3 financial investments to changes in key assumptions.
As at 30 September 2023
Carrying
Investment Valuation Risk Sensitivity amount Sensitivity
Investment type methodology weighting +/- GBP'000s GBP'000s
----------------------- ------------ -------------- ------------ ------------ ---------- ------------
Last funding
round
Petalite Equity * High 50% 24,916 12,458
UEM (HK) Limited
-
CGN Capital Partners
Infra Fund 3 Loan NAV Low 10% 9,706 971
Conversant Solutions Peer
Pte Ltd Equity multiples Medium 20% 3,324 665
Other investments Equity Various Medium 20% 5,307 1,061
Discounted
Other investments Loans cash flows Medium 20% 530 106
----------------------- ------------ -------------- ------------ ------------ ---------- ------------
Total 43,783 15,261
------------------------------------------------------------------- ------------ ---------- ------------
As at 30 September 2022
Carrying
Investment Valuation Risk Sensitivity amount Sensitivity
Investment type methodology weighting +/- GBP'000s GBP'000s
----------------------- ------------ -------------- ------------ ------------ ---------- ------------
Milestone
Petalite Equity analysis High 40% 18,693 7,477
UEM (HK) Limited
-
CGN Capital Partners
Infra Fund 3 Loan NAV Low 10% 11,871 1,187
Conversant Solutions Last funding
Pte Ltd Equity round Medium 20% 8,085 1,617
Other investments Equity Various Medium 20% 5,626 1,125
Other investments Equity Various Low 10% 4,723 472
Last funding
Other investments Equity round High 30% 350 105
Discounted
Other investments Loans cash flows Medium 20% 150 30
----------------------- ------------ -------------- ------------ ------------ ---------- ------------
Total 49,498 12,013
------------------------------------------------------------------- ------------ ---------- ------------
As at 31 March 2023
Carrying
Investment Valuation Risk Sensitivity amount Sensitivity
Investment type methodology weighting +/- GBP'000s GBP'000s
----------------------- ------------- -------------- ------------ ------------ ---------- ------------
Last funding
Petalite Equity round High 50% 28,607 14,304
UEM (HK) Limited
-
CGN Capital Partners
Infra Fund 3 Equity/Loan NAV Low 10% 11,615 1,162
Conversant Solutions Last funding
Pte Ltd Equity round Medium 20% 7,877 1,575
Other investments Equity Various Medium 20% 5,956 1,191
Other investments Equity Various Low 10% 4,187 419
Discounted
Other investments Loans cash flows High 20% 450 90
----------------------- ------------- -------------- ------------ ------------ ---------- ------------
Total 58,692 18,741
-------------------------------------------------------------------- ------------ ---------- ------------
* Valuation of investment in Petalite
Petalite is an unlisted electric vehicle ("EV") charging
infrastructure company based in the UK that has been developing a
new technology which enables more reliable and cost effective EV
chargers. UEM holds 28.6% of the ordinary shares in Petalite and as
at 31 March 2023, carried this investment at GBP28.6m. Since March
2023, the EV charging sector, as measured by listed stock prices,
has weakened and private capital activity has decreased. The
Directors consider these events would also apply to Petalite and
have accordingly reduced the carrying value of Petalite by an
amount equivalent to the average reduction of Petalite's peer group
comparable companies, giving a carrying value of GBP24.9m as at 30
September 2023.
13. RESULTS
The financial information contained in this Half-Yearly
Financial Report does not constitute statutory accounts as defined
in Sections 434 - 436 of the Companies Act 2006. The financial
information for the six months ended 30 September 2023 and 30
September 2022 have neither been audited nor reviewed by the
Company's auditors.
The information for the year ended 31 March 2023 has been
extracted from the latest published audited financial statements
which have been filed with the Registrar of Companies. The report
of the auditor on those accounts contained no qualification or
statement under Section 498(2) or (3) of the Companies Act
2006.
Legal Entity Identifier: 2138005TJMCWR2394O39
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END
IR BGBDBRXDDGXB
(END) Dow Jones Newswires
November 21, 2023 06:00 ET (11:00 GMT)
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