REG - UIL Finance Ltd UIL Limited Utilico Limited 2014 UIL Finance - UTLG - Half-year Report
21/02/2024 16:30
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RNS Number : 9883D UIL Finance Limited 21 February 2024
UIL Finance Limited
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS TO 31 DECEMBER 2023
UIL Finance Limited
HALF-YEARLY FINANCIAL REPORT
for the six months to 31 December 2023
Contents Page
Company Directory 2
Strategic Review 3
Directors' Report 4
Statement of Directors' Responsibilities 6
Condensed Income Statement (Unaudited) 7
Condensed Statement of Changes in Equity (Unaudited) 7
Condensed Statement of Cash Flows (Unaudited) 7
Condensed Statement of Financial Position (Unaudited) 8
Condensed Notes to the Accounts (Unaudited) 9
UIL Finance
Limited
COMPANY DIRECTORY
Registered Office Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Directors Peter Burrows, AO (Chairman)
Stuart Bridges
Alison Hill
David Shillson
Company Number 39479
Legal Entity Identifier 213800JPJWZ5P3QJX538
Auditor KPMG LLP
15 Canada Square
Canary Wharf
London E14 5GL
United Kingdom
Date of Formation 17 January 2007
Nature of Business Closed end investment company
Ordinary Shareholder and Parent Company UIL Limited
UIL Finance Limited
STRATEGIC REVIEW
The Strategic Review is designed to provide shareholders with an insight into
the operations of the Company during the period. In particular, it gives
information on:
• the Company's objective and investment policy;
• the regulatory and competitive environment within which the Company
operates;
• the Board's strategy for achieving its stated objectives;
• principal risks and risk management; and
• key performance indicators.
Objective
The Company's investment objective is to finance and fund the final capital
entitlements of the zero dividend preference ("ZDP") shares.
Investment policy
The Company seeks to fund the final capital entitlements of the ZDP shares by
lending current asset funds to its parent company, UIL Limited.
Regulatory and competitive environment
The Company is obliged to comply with Bermuda law, the Listing Rules of the
Financial Conduct Authority and United Kingdom adopted International Financial
Reporting Standards ("UK adopted IFRSs"). The Company is exempt from taxation,
except insofar as it is withheld from income received. Under Bermuda law, the
Company may not distribute income by way of a dividend unless, after
distribution of the dividend, the realisable value of the Company's assets
would be greater than the aggregate of its liabilities. ICM Investment
Management Limited ("ICMIM") is the Alternative Investment Fund Manager of UIL
Limited and joint investment manager with ICM Limited ("ICM"). ICM is the
company secretary.
Strategy for achieving objectives
The Company's performance in pursuing its objective is based on the ability of
its parent company to repay the intra-group loan to the Company. UIL Limited
has provided an undertaking to provide sufficient funds to the Company to meet
each redemption as it falls due.
Principal risks and uncertainties
The principal underlying risk of the Company continues to relate to its
ability to repay the ZDP shares when they fall due. This is dependent on the
asset performance of the parent company. At 31 December 2023, the parent
company had net assets of £170,283,000 (31 December 2022: £200,838,000 and
30 June 2023: £167,078,000) after providing for amounts due to ZDP
shareholders. Details of the ZDP shares are set out in note 7 to the accounts.
A further risk faced by the Company is that of a regulatory nature. A
regulatory or legal breach could lead to financial penalties or a qualified
audit report. The Company uses all reasonable efforts to ensure that the
Company adheres to the relevant statutory and regulatory requirements.
Key Performance Indicators
The Board assesses the Company's success in pursuing its objectives in the
ability to provide for the amounts due to the ZDP shareholders which is based
on the ability of its parent company to repay the intra-group loan to the
Company. The KPIs for the parent company can be found in UIL Limited's Annual
Report.
This Strategic Review was approved by the Board of Directors on 21 February
2024.
ICM Limited
Company Secretary
21 February 2024
UIL Finance Limited
DIRECTORS' REPORT
The Directors present their half-yearly financial report of the Company for
the six months ended 31 December 2023.
Principal activity and status
UIL Finance Limited (the "Company" or "UIL Finance") is a Bermuda exempted,
closed ended investment company with company registration number 39479. The
Company's issued ZDP shares are listed on the standard segment of the main
market of the London Stock Exchange.
Corporate Governance
Bermuda does not have its own corporate governance code and, since the Company
has a Standard Listing on the Official List of the Financial Conduct
Authority, the Company is not required to comply or provide an explanation for
any non-compliance with the UK Corporate Governance Code issued by the
Financial Reporting Council.
The Board meets at least twice a year to consider strategic affairs and to
approve the half yearly report and the annual report and accounts.
In the Directors' opinion, the interests of the Company and its shareholders
are adequately covered by the governance procedures applicable to its parent
company, UIL Limited. For example, UIL Limited's Audit & Risk Committee
considers the financial reporting procedures and oversees the internal control
and risk management systems for the Group as a whole and the Directors see no
benefit in convening a separate Audit Committee or any other committee for the
Company. An overview of the Group's internal control and risk management
systems are set out in UIL Limited's report and accounts.
Results and Dividends
The results for the period are set out in the attached accounts which are
prepared on a going concern basis and as set out in note 13, the Directors
believe that it is appropriate to adopt the going concern basis in preparing
the accounts as the Company can continue to operate due to the contractual
obligation of the parent company to ensure that UIL Finance is able to redeem
the ZDP shares on each repayment date and the Directors are comfortable that
the parent company has the financial resources to do so.
The Company has not declared a dividend in respect of the period ended 31
December 2023 (for the periods ended 31 December 2022 and 30 June 2023: nil).
Directors
The following Directors held office throughout the period, unless otherwise
stated:
Peter Burrows (Chairman)
Stuart Bridges
Alison Hill
David Shillson
Directors' Disclosures
At 31 December 2023, no Director had any interest in the Company's shares (31
December 2022 and 30 June 2023: none). No Director acquired or disposed of
any interest in the shares in the Company during the period or since the
period end.
Directors' Remuneration
No Director received or is entitled to receive any remuneration from the
Company.
Zero dividend preference shares
Full details of the changes to the Company's authorised and issued zero
dividend preference shares during the period can be found in note 7 to the
accounts.
Ordinary Share Capital
Full details of the changes to the Company's authorised and issued ordinary
share capital during the period can be found in note 8 to the accounts.
Ordinary shares of UIL Limited
Ordinary shares of UIL Limited rank behind the ZDP shares on a winding up of
the Company and UIL Limited, together referred to as the Group (save for any
undistributed revenue reserves of UIL Limited on a winding up).
Auditor
KPMG LLP ("KPMG") was the Company's auditor for the year ended 30 June 2023
and was re-appointed as auditor to the Company at the AGM of the Company on 9
November 2023.
By order of the Board
ICM Limited
Secretary
21 February 2024
UIL Finance Limited
STATEMENT OF DIRECTORS' RESPONSIBILITIES
in respect of the Half-Yearly Financial Report
We confirm to the best of our knowledge:
• The condensed set of financial statements contained within the report
for the six months to 31 December 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 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 within
the Strategic Review above is a fair review of the principal risks and
uncertainties for the remainder of the year as required by DTR 4.2.7R;
• 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
Peter Burrows
Chairman
21 February 2024
UIL Finance Limited
CONDENSED INCOME STATEMENT (UNAUDITED)
Six months to Six months to Year to
31 December 31 December 30 June
2023 2022 2023
Note £'000s £'000s £'000s
Income 2 2,666 3,662 6,260
Total income 2,666 3,662 6,260
Other expenses - - -
Profit before finance costs and taxation 2,666 3,662 6,260
Finance costs 3 (2,666) (3,662) (6,260)
Profit before taxation - - -
Taxation - - -
Profit for the period - - -
Earnings per share - pence 4 - - -
The Company does not have any income or expense that is not included in the
profit for the period, and therefore the 'profit for the period' is also the
'total comprehensive income for the period', as defined in International
Accounting Standard 1 (revised).
All items in the above statement are derived from continuing operations.
The condensed notes (unaudited) on pages 9 to 17 form part of these condensed
financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
There are no movements in equity.
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
There were no cash flows in the period and therefore a cash flow statement has
not been prepared.
UIL Finance Limited
CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at 31 December 31 December 30 June
2023 2022 2023
Note £'000s £'000s £'000s
Non-current assets
Other receivables 6 61,124 95,624 98,222
Current assets
Other receivables 6 39,764 - -
Current liabilities
Zero dividend preference shares 7 (39,724) - -
Total assets less current liabilities 61,124 95,624 98,222
Non-current liabilities
Zero dividend preference shares 7 (61,124) (95,624) (98,222)
Net assets - - -
Equity attributable to equity holders
Ordinary share capital 8 - - -
The condensed notes (unaudited) on pages 9 to 17 form part of these condensed
financial statements.
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED)
for the period to 31 December 2023
1. Accounting policies
The Company is an investment company incorporated in Bermuda on 17 January
2007. The accounting policies below are unchanged from the previous year.
(a) Basis of accounting
This condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK.
The annual financial statements of the Company for the year ending 30 June
2024 will be prepared in accordance with UK-adopted international accounting
standards, which comprise standards and interpretations approved by the
International Accounting Standards Board and International Accounting
Standards Committee that remain in effect.
The financial statements of the Company have been prepared on a going concern
basis (see note 13).
(b) Zero dividend preference shares
The ZDP shares, due to be redeemed on 31 October 2024, 2026 and 2028, at a
redemption value, including accrued capitalised returns of 138.35 pence per
share, 151.50 pence per share and 152.29 pence per share respectively, have
been classified as liabilities, as they represent an obligation on behalf of
the Company to deliver to their holders a fixed and determinable amount at the
redemption date. They are accordingly accounted for at amortised cost, using
the effective interest method as per the requirements of IFRS 9 "Financial
Instruments", even though under Bermuda company law ZDP shares are required to
be recognised as share capital in the Company.
(c) Cash flow statement
There were no cash flows in the period or in the prior year and therefore a
cash flow statement has not been prepared. All transaction movements were
through the intra-group loan account.
(d) Foreign currency
The functional and reporting currency is pounds sterling because the Company's
ZDP share capital was raised, and will be repaid, in pounds sterling, and has
been lent to, and will be repaid, by the parent company, in that currency.
(e) Income
(i) Interest income
Interest on debt is accrued on a time basis using the effective interest
method, calculated by accreting the initial recognition of the inter-company
loan at present value (loan and contribution by the parent) to the final
amount receivable at maturity.
(ii) Other income
The parent's contribution towards the issue costs of the ZDP shares and
redemption proceeds is accrued on a time basis, calculated by amortising the
issue costs over the life of the loan.
(f) Expenses
The Company incurs no expenses other than finance costs. The Directors are not
entitled to receive any remuneration and all other expenses relating to the
Company are paid in full by the parent company.
(g) Finance costs
Finance costs are accounted for on an effective interest method.
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
1. Accounting policies (continued)
(h) Inter-company loans
UIL Limited has undertaken (i) to repay any interest free loan, and (ii) to
reimburse the Company (by way of payment in advance, if required) any and all
costs, expenses, fees or interest the Company incurs or is otherwise liable to
pay to the holder of the ZDP shares so as to enable the Company to pay the
final capital entitlement of each class of ZDP share on their respective
redemption date. The amount owed in the accounts is based on the entitlements
of the ZDP shareholders at the relevant date. The inter company loans are
accordingly accounted for at amortised cost, using the effective interest
method and were assessed for credit risk under the new IFRS 9 methodology and
evaluated as having no significant credit risk. Therefore, no amounts were
recognised as an impairment provision.
(i) Use of judgements, estimates and assumptions
The presentation of the financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets,
liabilities, income and expenses. Estimates and judgements are continually
evaluated and are based on perceived risks, historical experience,
expectations of plausible future events and other factors. Actual results may
differ from these estimates. The area requiring the most significant judgement
and estimation in the preparation of the financial statements is the
accounting through the Income Statement of the parent contribution to UIL
Finance to enable UIL Finance to repay the ZDP shareholders on each repayment
date. The parent's contribution towards the issue cost of the ZDP shares and
redemption proceeds has been treated through the Income Statement and
recognised over the life of the loan as UIL Finance provides financing
services to UIL Limited and in return is due to receive reimbursement of any
costs and expense as and when they fall due. The policy for interest income,
including the allocation and recognition of the parent contributions, is set
out in note 1(e) to the accounts.
2. Income
Six months to Six months to Year to
31 December 31 December 30 June
2023 2022 2023
£'000s £'000s £'000s
Interest income 2,500 3,468 5,910
Other income 166 194 350
2,666 3,662 6,260
3. Finance costs
Six months to Six months to Year to
31 December 31 December 30 June
2023 2022 2023
£'000s £'000s £'000s
ZDP shares 2,666 3,662 6,260
4. Earnings per share
The calculation of earnings per share is based on a profit after tax for the
period of £nil (for the periods to 31 December 2022 and 30 June 2023:
£nil) and a weighted average number of 10 ordinary shares in issue during the
period (for the periods 31 December 2022 and 30 June 2023: 10 ordinary
shares in issue).
5. Dividends
There were no dividends paid or declared in respect of the period (for the
periods to 31 December 2022 and 30 June 2023: £nil).
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
6. Other receivables
31 December 31 December 30 June
2023 2022 2023
£'000s £'000s £'000s
Loan to parent company - UIL Limited
- Receivable within one year 39,764 - -
- Receivable after more than one year 61,124 95,624 98,222
100,888 95,624 98,222
The loan is repayable on the date the underlying ZDP shares are redeemed.
7. Zero dividend preference shares
31 December 31 December 30 June
2023 2022 2023
£'000s £'000s £'000s
ZDP shares - current liabilities
2024 ZDP shares 39,764 - -
ZDP shares - non-current liabilities
2024 ZDP shares - 37,790 38,765
2026 ZDP shares 32,796 31,181 31,979
2028 ZDP shares 28,328 26,653 27,478
61,124 95,624 98,222
Total ZDP shares liabilities 100,888 95,624 98,222
Authorised ZDP shares of the Company as at 31 December 2023, 31 December 2022
and 30 June 2023 were as follows:
Number £'000s
2022 ZDP shares of 5.3180p each 63,686,754 3,387
2024 ZDP shares of 3.8025p each 76,717,291 2,917
2026 ZDP shares of 10p each 25,000,000 2,500
2028 ZDP shares of 3.8676p each 44,842,717 1,734
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
7. Zero dividend preference shares (continued)
ZDP shares issued by the Company are as follows:
Six months to 31 December 2023
Balance as at
Balance as at Finance costs 31 December 2023
30 June 2023
2024 Number 30,000,000 - 30,000,000
£'000s 38,765 999 39,764
2026 Number 25,000,000 - 25,000,000
£'000s 31,979 817 32,796
2028 Number 25,000,000 - 25,000,000
£'000s 27,478 850 28,328
Total £'000s 98,222 2,666 100,888
Six months to 31 December 2022
Balance as at
Balance as at Redemption of ZDP shares Finance costs 31 December 2022
30 June 2022
2022 Number 35,569,069 (35,569,069) - -
£'000s 51,166 (52,283) 1,117 -
2024 Number 30,000,000 - - 30,000,000
£'000s 36,833 - 957 37,790
2026 Number 25,000,000 - - 25,000,000
£'000s 30,397 - 784 31,181
2028 Number 25,000,000 - - 25,000,000
£'000s 25,849 - 804 26,653
Total £'000s 144,245 (52,283) 3,662 95,624
Year to 30 June 2023
Balance as at 30 June 2022 Redemption of ZDP shares Finance costs Balance as at
30 June 2023
2022 Number 35,569,069 (35,569,069) - -
£'000s 51,166 (52,283) 1,117 -
2024 Number 30,000,000 - - 30,000,000
£'000s 36,833 - 1,932 38,765
2026 Number 25,000,000 - - 25,000,000
£'000s 30,397 - 1,582 31,979
2028 Number 25,000,000 - - 25,000,000
£'000s 25,849 - 1,629 27,478
Total £'000s 144,245 (52,283) 6,260 98,222
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
7. Zero dividend preference shares (continued)
UIL Limited held 2,309,620 2026 ZDP shares as at 31 December 2023, 31 December
2022 and 30 June 2023.
UIL Limited held 583,735 2028 ZDP shares as at 31 December 2023, 31 December
2022 and 30 June 2023.
2024 ZDP shares
Based on the initial entitlement of a 2024 ZDP share of 100p on 2 November
2017, a 2024 ZDP share will have a final capital entitlement at the end of its
life on 31 October 2024 of 138.35p equating to a 4.75% per annum gross
redemption yield. The capital entitlement (excluding issue costs) per 2024 ZDP
share as at 31 December 2023 was 133.07p (31 December 2022: 127.06p and 30
June 2023: 130.04p).
2026 ZDP shares
Based on the initial entitlement of a 2026 ZDP share of 100p on 26 April 2018,
a 2026 ZDP share will have a final capital entitlement at the end of its life
on 31 October 2026 of 151.50p equating to a 5.00% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2026 ZDP share as
at 31 December 2023 was 131.90p (31 December 2022: 125.65p and 30 June 2023:
128.75p).
2028 ZDP shares
Based on the initial entitlement of a 2028 ZDP share of 100p on 23 April 2021,
a 2028 ZDP share will have a final capital entitlement at the end of its life
on 31 October 2028 of 152.29p equating to a 5.75% per annum gross redemption
yield. The capital entitlement (excluding issue costs) per 2028 ZDP share as
at 31 December 2023 was 116.21p (31 December 2022: 109.91p and 30 June 2023:
113.02p).
The ZDP shares are admitted to the standard segment of the Official List and
to trading on the London Stock Exchange and are stated at amortised cost using
the effective interest method. The ZDP shares carry no entitlement to income
however they have a pre-determined final capital entitlement which ranks
behind all other liabilities and creditors of the Company and UIL Limited but
in priority to the ordinary shares of the Company and UIL Limited save in
respect of certain winding up revenue profits of UIL Limited.
The growth of each ZDP share accrues daily and is reflected in the return and
net asset value per ZDP share on an effective interest method. The ZDP shares
do not carry any voting rights at general meetings of the Company. However the
Company will not be able to carry out certain corporate actions unless it
obtains the separate approval of the ZDP shareholders (treated as a single
class) at a separate meeting. Separate approval of each class of ZDP
shareholders must be obtained in respect of any proposals which would affect
their respective rights, including any resolution to wind up the Company. In
addition the approval of ZDP shareholders by the passing of a special
resolution at separate class meetings of the ZDP shareholders is required in
relation to any proposal to modify, alter or abrogate the rights attaching to
any class of the ZDP shares and in relation to any proposal by the Company or
its parent company which would reduce the Group's cover of the existing ZDP
shares below 1.35 times.
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
7. Zero dividend preference shares (continued)
On a liquidation of UIL Limited and/or the Company, to the extent that the
relevant classes of ZDP shares have not already been redeemed, the shares
shall rank in the following order of priority in relation to the repayment of
their accrued capital entitlement as at the date of liquidation:
(i) the 2024 ZDP shares shall rank in priority to the 2026 ZDP shares and the
2028 ZDP shares; and
(ii) the 2026 ZDP shares shall rank in priority to the 2028 ZDP shares.
The entitlement of ZDP Shareholders of a particular class shall be determined
in proportion to their holdings of ZDP shares of that class.
8. Ordinary share capital
Number £
Authorised
Ordinary shares of 10p each 10 1
Issued and nil paid
Balance at 31 December 2023, 31 December 2022
and 30 June 2023 10 -
In addition to receiving any income distributed by way of dividend, the
ordinary shareholders will be entitled to all surplus assets after payment of
all debts, including ZDP shares.
Net asset value per ordinary share is £nil (31 December 2022: £nil and 30
June 2023: £nil) based on 10 shares in issue.
9. Parent company
UIL Limited, incorporated in Bermuda, is the parent company of the Company,
holding 100% of the nil paid ordinary shares.
In the opinion of the Directors, the Company's ultimate parent undertaking is
Somers Isles Private Trust Company Limited ("SIPTCL"), a company incorporated
in Bermuda and owned by Mr Duncan Saville.
10. Related party transactions
UIL Limited, SIPTCL, General Provincial Life Pension Fund Limited ("GPLPF")
which holds 65.4% of UIL Limited shares and Union Mutual Pension Fund Limited
("UMPLF") which holds 10.2% of UIL Limited shares and the Board of the Company
are considered related parties. GPLPF and UMPF are ultimately controlled by
SIPTCL. Amounts owing from related parties are disclosed in the financial
statements in note 6, ZDP shares issued to UIL Limited are disclosed in note 7
and interest receivable from related parties is disclosed in note 2.
11. Operating Segments
The Directors are of the opinion that the Company's activities comprise a
single business segment of financing the Company's ZDP shares debt by lending
current asset funds to its parent company and therefore no segmental reporting
is provided.
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
12. Financial Risk Management
The Board of Directors is responsible for the Company's risk management. The
Directors' policies and processes for managing the financial risks are set out
in the interest rate exposure and credit risk management sections below.
The accounting policies which govern the reported Statement of Financial
Position carrying values of the underlying financial assets and liabilities,
as well as the related income and expenditure, are set out in note 1 to the
accounts. The policies are in compliance with IFRSs as adopted by the UK and
best practice, and include the valuation of financial assets at fair value and
liabilities at amortised cost.
Interest Rate exposure
The exposure of the financial assets and liabilities to interest risks is
shown below:
Within More than
Total one year one year
31 December 2023 £'000s £'000s £'000s
Exposure to fixed rates
ZDP shares (100,888) (39,764) (61,124)
Intra-group loan 100,888 39,764 61,124
Net exposures
At period end - - -
Maximum in period - - -
Minimum in period - - -
Within More than
Total one year one year
31 December 2022 £'000s £'000s £'000s
Exposure to fixed rates
ZDP shares (95,624) - (95,624)
Intra-group loan 95,624 - 95,624
Net exposures
At period end - - -
Maximum in period - - -
Minimum in period - - -
Within More than
Total one year one year
30 June 2023 £'000s £'000s £'000s
Exposure to fixed rates
Zero dividend preference shares (98,222) - (98,222)
Intra-group loan 98,222 - 98,222
Net exposures
At year end - - -
Maximum in year - - -
Minimum in year - - -
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
12. Financial Risk Management (continued)
Credit Risk exposure
The Company is exposed to potential failure by its parent company to settle
the ZDP share liability on behalf of the Company on the respective repayment
dates. The Board assesses this risk at each Board meeting.
2024 ZDP shares
Based on their final entitlement of 138.35p per share, the final entitlement
of the 2024 ZDP shares was covered 4.47 times by UIL Limited's gross assets as
at 31 December 2023. Should gross assets fall by 77.6% over the remaining life
of the 2024 ZDP shares, then the 2024 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 91.6%, equivalent to an
annual fall of 94.9%, the 2024 ZDP shares would receive no payment at the end
of their life.
2026 ZDP shares
Based on their final entitlement of 151.50p per share, the final entitlement
of the 2026 ZDP shares was covered 2.84 times by UIL Limited's gross assets as
at 31 December 2023. Should gross assets fall by 64.8% over the remaining life
of the 2026 ZDP shares, then the 2026 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 77.6%, equivalent to an
annual fall of 41.0%, the 2026 ZDP shares would receive no payment at the end
of their life.
2028 ZDP shares
Based on their final entitlement of 152.29p per share, the final entitlement
of the 2028 ZDP shares was covered 2.08 times by UIL Limited's gross assets as
at 31 December 2023. Should gross assets fall by 51.9% over the remaining life
of the 2028 ZDP shares, then the 2028 ZDP shares would not receive their final
entitlements in full. Should gross assets fall by 64.8%, equivalent to an
annual fall of 19.4%, the 2028 ZDP shares would receive no payment at the end
of their life.
None of the Company's financial liabilities is past due or impaired.
Fair Values of financial assets and liabilities
The assets and liabilities of the Company are, in the opinion of the
Directors, reflected in the Statement of Financial Position at fair value
except for the ZDP shares and the inter-company loan which are carried at
amortised cost using effective interest method in accordance with IFRS 9, or
at a reasonable approximation thereof.
The fair values of the ZDP shares based on their quoted market value were:
31 December 31 December 30 June
2023 2022 2023
£'000s £'000s £'000s
2024 ZDP shares 38,100 37,500 37,050
2026 ZDP shares 27,125 28,625 28,625
2028 ZDP shares 22,375 23,875 24,125
UIL Finance Limited
CONDENSED NOTES TO THE ACCOUNTS (UNAUDITED) (CONTINUED)
12. Financial Risk Management (continued)
Capital risk management
The objective of the Company is to finance and fund the redemption value of
the ZDP shares. The Board has a responsibility for ensuring the Company's
ability to continue as a going concern and to meet the redemption of the ZDP
shares. This is dependent on the asset performance of the parent company. As
at 31 December 2023, the parent company had net assets of £170,283,000 (31
December 2022: £200,838,000 and 30 June 2023: £167,078,000) after providing
for amounts due to ZDP shareholders.
13. Going Concern
The Directors believe that it is appropriate to adopt the going concern basis
in preparing the accounts as the Company can continue to operate due to the
contractual obligation of the parent company to ensure that UIL Finance is
able to redeem the ZDP shares on each repayment date and the Directors are
comfortable that the parent company has the financial resources to do so.
The Board considered the parent company's going concern assessment which
focused on the forecast liquidity of the Group for 12 months from the date of
approval of the financial statements. This analysis assumes that the parent
company will meet some of its short term obligations through the sale of level
1 listed securities, which represented 20.0% of the parent company's total
portfolio as at 31 December 2023. As part of this assessment the board of the
parent company has considered a severe but plausible downside that reflects
the impact of the key risks set out in the Strategic Report of the Annual
Report and an assessment of the parent company's ability to meet its
liabilities as they fall due (including the loan liabilities), assuming a
significant reduction in asset values and accompanying currency volatility.
The severe but plausible downside assumes a breach of bank loan covenants
leading to the repayment of bank loan liabilities and a significant reduction
in asset values in line with that experienced during the emergence of the
COVID 19 pandemic in the first quarter of 2020. The parent company board also
considered reverse stress testing to identify the reduction in the valuation
of liquid investments that would cause the Group to be unable to meet its net
current liabilities, being primarily the bank loan of £15,000,000, the bank
overdraft of £9,767,000 and the repayment to the 2024 ZDP shareholders of
£41,505,000. The parent company 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 are confident that the Company will have
sufficient funds to continue to meet its liabilities as they fall due for at
least 12 months from the date of approval of the financial statements.
Accordingly, the Board considers it appropriate to continue to adopt the going
concern basis in preparing the accounts.
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