REG - Utilico Emerging Mkt - Annual Financial Report
13/06/2025 12:15
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RNS Number : 8165M Utilico Emerging Markets Trust PLC 13 June 2025
Date: 13 June 2025
UTILICO EMERGING MARKETS TRUST PLC
ANNUAL FINANCIAL REPORT
FOR THE YEAR TO 31 MARCH 2025
Utilico Emerging Markets Trust plc ("UEM" or the "Company") today announces
its audited financial results for the year to 31 March 2025.
UEM is a UK listed fund unique in focusing on infrastructure and utilities in
emerging markets, where structural growth drivers are accelerated by global
infrastructure megatrends.
Despite significant macroeconomic volatility over the past 12 months, UEM's
investment strategy has delivered significant outperformance for shareholders
over the medium term. UEM's net asset value total return for the three and
five year periods to 31 March 2025 increased by 11.8% and 67.2% respectively,
significantly outperforming the MSCI EM Index which was up by 6.3% and 40.8%
respectively
Highlights of results
· Net asset value ("NAV") total return per share of -2.9%* (2024:
12.8%*)
· NAV per share of 257.28p, down 6.1%
· Gross assets of £497.4m*, a decrease of 4.9%
· Annual compound NAV total return since inception of 8.8%* (MSCI
EM Index 7.2%)
· Dividends per share totalled 9.125p for the year, an increase of
6.1%. Dividends were fully covered by earnings
· The 10(th) year in a row that UEM has increased its dividend,
thereby joining the next generation of "Dividend Heros" published by the
Association of Investment Companies, the only Global Emerging Markets fund to
do so
· Dividend yield of 4.2%* (2024: 3.9%*)
· Revenue earnings per share ("EPS") increased 12.7% to 9.95p
· Total revenue income of £23.8m, an 3.3% increase
*See Alternate Performance Measures on pages 92 to 94 of the Report and
Accounts
The Report & Accounts for the year ended 31 March 2025 will be posted to
shareholders in early July 2025. A copy will shortly be available to view and
download from the Company's website at www.uemtrust.co.uk
(http://www.uemtrust.co.uk) and the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Please click on the following link to view the
document: http://www.rns-pdf.londonstockexchange.com/rns/8165M_1-2025-6-13.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/8165M_1-2025-6-13.pdf)
Mark Bridgeman, Chairman of UEM said: "For the year ending 31 March 2025, NAV
total return for the year was down by 2.9%, underperforming the MSCI EM total
return Index which increased by 5.7% in Sterling terms over the same period.
However, given the long term nature of UEM's investment portfolio, it is
important to look beyond a single year's performance. Over the three and five
year periods to 31 March 2025, UEM's NAV total return increased by 11.8% and
67.2%, significantly outperforming the MSCI EM Index which was up by 6.3% and
by 40.8% respectively.
"UEM's revenue earnings per share ("EPS") increased by 12.7% to 9.95p as at 31
March 2025 and the Board has consequently increased the dividend to 9.125p for
the year, a rise of 6.1%. Once again the dividend is fully covered by
earnings. Every year for the last 10 years, UEM has been able to increase the
annual dividend per share for shareholders, thereby joining the ranks of the
AIC's next generation of "Dividend Heroes". Given the volatility of emerging
market currencies and our reporting currency in Sterling, this is a
significant accomplishment.
"I am pleased to present my first annual report as Chairman in this, the
Company's 20(th) year since inception. While short term volatility may
persist, the Board shares the confidence of the Investment Managers in the
proven ability of the portfolio to outperform the MSCI EM Index over the long
term, based on disciplined stock selection, focused on infrastructure
megatrends in emerging markets".
Charles Jillings & Jacqueline Broers, Investment Managers of UEM added:
"During the year UEM continued to focus on well researched, carefully
targeted, bottom up investing in emerging market infrastructure and utilities
companies which are well placed to benefit from the global infrastructure
megatrends. Whilst the year to 31 March 2025 has seen high levels of
economic and political uncertainty we have remained resolutely focused on our
investment strategy, which we believe will continue to deliver significant
value for shareholders.
"This approach has remained consistent since the Company's IPO in 2005 and has
delivered recognisable long term performance. As we celebrate our
20(th) Anniversary this year, we are proud that over 20 years our NAV total
return was 427.6% compared to the MSCI EM Index which was 303.5%.
"There remain a number of uncertainties in the current market, both economic
as well as geopolitical. Emerging markets are widely expected to benefit from
a rotation in investor sentiment away from the US market that is gaining
momentum. Whilst there is macro volatility, this volatility often provides
investment opportunities to secure attractive long term holdings at compelling
valuations. We therefore continue to remain highly confident that the
investment strategy is well placed to continue its 20 year track record of
long term outperformance".
Contacts: Joint Portfolio Manager and Company Secretary
ICM Investment Management
Limited
+44(0)1372 271486
Charles Jillings / Jacqueline
Broers / Alastair Moreton
Public Relations
Montfort Communications
+44(0)20
3770 7913
Gay Collins / Nita Shah
utilico@montfort.london (mailto:utilico@montfort.london)
Joint Brokers
Shore
Capital
+44(0)20 7408 4090
Gillian Martin / Daphne Zhang
Barclays
Bank
+44(0)20 7623 2323
Dion Di Miceli / Stuart Muress / James Atkinson
BarclaysInvestmentCompanies@barclays.com
(mailto:BarclaysInvestmentCompanies@barclays.com)
Performance Summary
31 March 31 March % change
2025 2024 2025/24
NAV total return per share1 (annual) (%) (2.9) 12.8 n/a
Share price total return per share1 (annual) (%) 1.8 5.8 n/a
Annual compound NAV total return1
(since inception - 20 July 20052) (%) 8.8 9.5 n/a
NAV per share (pence) 257.28 274.01 (6.1)
Share price (pence) 216.00 221.00 (2.3)
Discount1 (%) (16.0) (19.3) n/a
Earnings per share (basic)
- Capital (pence) (18.81) 20.48 (191.8)
- Revenue (pence) 9.95 8.83 12.7
Total (pence) (8.86) 29.31 (130.2)
Dividends per share
- 1st quarter (pence) 2.150 2.150 0.0
- 2nd quarter (pence) 2.325 2.150 8.1
- 3rd quarter (pence) 2.325 2.150 8.1
- 4th quarter (pence) 2.3253 2.150 8.1
Total (pence) 9.125 8.600 6.1
Gross assets1 (£m) 497.4 522.9 (4.9)
Equity holders' funds (£m) 479.8 522.9 (8.2)
Shares bought back (£m) 9.6 25.4 (62.2)
Cash (£m) 3.9 5.8 (32.8)
Bank loans (£m) (17.5) - n/a
Net (debt)/cash (£m) (13.6) 5.8 (334.5)
Net (gearing)/cash1 (%) (2.8) 1.1 n/a
Management and administration fees
and other expenses (£m) 7.4 7.7 (3.9)
Ongoing charges figure1 (%) 1.5 1.5 n/a
(1) See Alternative Performance Measures on pages 92 to 94 of the Report and
Accounts
(2) All performance data relating to periods prior to 3 April 2018 are in
respect of Utilico Emerging Markets Limited ("UEM Limited"), UEM's predecessor
(3) The fourth quarterly dividend has not been included as a liability in
the accounts
Chairman's Statement
I am pleased to present my first annual report as Chairman for the year ended
31 March 2025, UEM's 20th year since its inception in July 2005.
UEM is unique in focusing on infrastructure and utilities in EM, where
structural growth drivers are accelerated by global infrastructure megatrends.
This strategy is highly differentiated from the MSCI EM Index and is expertly
managed by a disciplined, bottom-up approach from the Investment Managers.
Given the long term nature of UEM's investment portfolio, comprising companies
delivering essential services and long term growth to EM economies, it is
important to look beyond a single year's performance. While UEM's NAV total
return for the year was down by 2.9%, underperforming the MSCI EM total return
Index which increased by 5.7% in Sterling terms over the same period, over the
three and five year periods to 31 March 2025, UEM's NAV total return increased
by 11.8% and 67.2%, significantly outperforming the MSCI EM Index which was up
by 6.3% and by 40.8% respectively.
The chart at the bottom of the page illustrates UEM's performance over the
last five years compared to the wide range of categories which make up the
MSCI EM Index. UEM's portfolio composition will therefore be very different to
that of the MSCI EM Index. Whilst in the short term this may lead to periods
of underperformance or outperformance, over the longer term the Investment
Managers' approach is expected to lead to outperformance against the MSCI EM
Index.
The investment backdrop this year has been one of economic uncertainty and
volatility due to the continually changing investment landscape. Expectations
at the start of the year were that the US Federal Reserve would cut interest
rates for the first time in over four years. However, the persistently strong
US labour market and inflationary data resulted in interest rate reductions
being pushed into the latter part of the year. With the election of President
Trump in November 2024, the global economic outlook once again changed, as
speculation turned to the magnitude of the proposed trade tariffs and an
expansionary fiscal policy. All of which led to higher interest rate and
inflation expectations.
In contrast, the largest emerging market, China, witnessed the opposite during
the year, suffering from deflationary pressures on the back of weak consumer
confidence and a struggling property market. The fiscal and monetary stimulus
measures announced in September 2024 fuelled a short-lived market rally as
clarity around a stimulus package failed to materialise fully. Whilst the
start of Chinese New Year sparked renewed enthusiasm for technology stocks and
all things AI related, market concerns around how China will achieve its 5%
GDP growth target remain, especially as relations between China and the US
continue to worsen and trade tariffs escalate.
Geopolitical conflicts have continued in Ukraine and the Middle East, and
these have added additional headwinds. However, despite these challenges at a
macro level, most of UEM's portfolio companies continue to perform well
operationally.
Two events that have hampered UEM's performance have been the reduction in the
valuation of Petalite Limited ("Petalite") and currency. Petalite, an unlisted
investment, impacted UEM's NAV total return by -1.5%. In addition, since UEM
has 21.8% of its portfolio invested in Brazil, the 14.5% Brazilian Real
depreciation against Sterling this year has overshadowed very strong
operational performance being reported from a number of the Brazilian investee
companies.
Revenue and Dividends
UEM's revenue earnings per share ("EPS") increased by 12.7% to 9.95p in the
year to 31 March 2025 and the Board has consequently increased the dividend to
9.125p for the year, a rise of 6.1%. Once again the dividend is fully covered
by earnings.
The increase in the aggregate level of dividends for the year comprised a
dividend of 2.15p in the first quarter which was then increased to 2.325p for
the next three quarters. Every year for the last ten years, UEM has been able
to increase the annual dividend per share for shareholders thereby joining the
AIC's next generation of "dividend heroes", the only Global Emerging Markets
fund to do so. Given the volatility of emerging market currencies and our
reporting currency in Sterling, this is a significant accomplishment.
The Board also understands the importance that shareholders place on dividends
as an important part of total shareholder return. Accordingly, in the absence
of unforeseen circumstances, the Board will continue its aim to declare a
rising dividend each year, utilising reserves if required.
Retained earnings revenue reserves increased by £1.9m in the year to £12.0m,
equating to 6.44p per share as at 31 March 2025.
Ongoing Charges
Ongoing charges were unchanged for the year to 31 March 2025 at 1.5%, despite
the persistent inflationary pressures being witnessed in the wider market. The
Board regularly assesses the Company's service providers and their fees.
Bank Debt
In August 2024 UEM signed a new £50.0m multi-currency loan facility agreement
with Barclays Bank, following the maturity of the UEM loan facility with The
Bank of Nova Scotia in March 2024.
As at 31 March 2025, £17.6m was drawn under the loan facility, compared to
nil as at 31 March 2024 and net gearing stood at 2.8% (31 March 2024: net cash
1.1%).
Portfolio Disclosure
In recent years UEM has disclosed the top thirty holdings representing
approximately 70% of the portfolio. Going forward, to further enhance our
transparency and reporting, we have decided to move to providing disclosure of
all the portfolio holdings.
Unlisted Investments (Level 3 Investments)
Over the years UEM has invested in unlisted businesses with investment size
always being modest. As at 31 March 2025, the value of level 3 investments was
£13.4m, representing 2.7% of the total portfolio, down from £23.1m as at 31
March 2024. The reduction is primarily due to the decrease in valuation of
Petalite of £6.5m, as the electric vehicle sector continues to face valuation
weakness. Further details are provided in the Investment Managers' report.
The primary focus for UEM has historically been, and continues to be, on
listed investments. In response to investor feedback and in consideration of
the fact that investment funds with substantial unlisted holdings often trade
at higher discounts to NAV, the Board and the Investment Managers have agreed
that no new unlisted investments will be made, except in exceptional
circumstances.
Share Buybacks
Over the year to 31 March 2025, UEM's discount has continued, albeit narrowing
from 19.3% as at 31 March 2024 to 16.0% as at 31 March 2025. This is above
where the Board would like to see the discount. The Company therefore has
taken a number of proactive measures including increased marketing and buying
back shares for cancellation, benefitting shareholders as it increases the NAV
per share of the remaining outstanding shares.
This year, the Company bought back 4.3m shares, equivalent to 2.3% of the
share capital as at 31 March 2024 at an average price of 221.36p per share and
a total cost of £9.6m. The share buyback has contributed to 0.4% of UEM's
total return as at 31 March 2025. Since inception, the Company has bought back
90.5m shares, equating to £173.8m, over 30% of the current fund size.
2026 Continuation Vote
UEM's Articles of Association provide that a continuation vote is put to
shareholders every five years. The continuation vote was passed at the AGM
held in 2021 and since that time, UEM's performance has been strong, with NAV
total returns in the four years ended 31 March 2025 amounting to 6.5% per
annum, compared to a reduction in the MSCI EM Index of -0.3% per annum over
that period. Shareholders will therefore have further opportunities to vote on
the continuation of the Company at the AGM in 2026 and every fifth AGM
thereafter.
Having recently taken over as Chairman, I have met with a number of the
largest shareholders during the last six months and I intend to continue
engagement. If there are any shareholders who would like to meet with me,
please contact the Company's brokers. The Board greatly values the views of
all shareholders and will take them into account. Shareholders can contact me
through the contact page on UEM's website www.uemtrust.co.uk.
The Company has the authority to operate a potential tender facility available
at the Directors' discretion for up to 12.5% of the issued share capital. The
Company is reviewing the effectiveness of this facility against other
potential options with its advisers, to the extent required as a further tool
for proactive discount management. Any changes to this will be announced in
due course.
Audit Tender
In February 2025, it was announced that, following a formal tender process,
BDO LLP ("BDO") has been appointed as the Company's auditor for the financial
year ended 31 March 2025, replacing KPMG LLP.
BDO's appointment as auditors for the following financial year will be subject
to shareholder approval at the forthcoming AGM.
Board Composition
As previously announced, I took on the role of Chairman following the
retirement of John Rennocks on 31 December 2024, with Isabel Liu assuming the
role of Senior Independent Director. I would like to thank John for all his
hard work and dedication to the Company over his nine years as a Director and
Chairman.
In September 2024, Nadya Wells was appointed as a non-executive Director
bringing a wealth of experience in investment management, EM and investment
companies. Nadya has taken on the role of Chair of UEM's Management Engagement
Committee.
As usual, all the Directors will stand for reappointment at the forthcoming
AGM on 16 September 2025.
All the Directors continue to invest their net fees each quarter in the shares
of the Company.
Joint Portfolio Managers
We were pleased to announce in January 2025 that ICM had appointed Jacqueline
Broers as joint portfolio manager alongside Charles Jillings. Jacqueline,
previously deputy portfolio manager, joined ICM in 2010 and has been involved
in the management of UEM since that time. Charles has been portfolio manager
since UEM's IPO in 2005.
20th Anniversary
UEM was first listed on 20 July 2005 making this year its 20th anniversary as
a public company. Since inception to 31 March 2025, UEM has achieved a NAV
total return of 8.8% per annum or 427.6% in aggregate, significantly
outperforming the MSCI EM Index which was up by 303.5% over that period. This
is testament to the skill and experience of the Portfolio Managers, and the
breadth and quality of the support from the ICM research team. Furthermore,
the Portfolio Managers are as enthusiastic about the potential for the
portfolio as they were in 2005, if not more, given the opportunities they are
seeing.
Outlook
Navigating through all the political noise is likely to be the biggest
headwind, with market risk premiums remaining high until there is more
certainty on the direction of US growth and US interest rates. President
Trump's obsession with tariffs will potentially weaken the US Dollar further.
While this should be positive for EM, the President's actions will likely be
limited by the US bond market acting as a brake, in light of the potentially
higher cost of borrowing and US debt to GDP now over 120%.
Geopolitical pressures will also remain high in both the Russia-Ukraine
conflict and the Middle East. Relations between China and the US appear to be
marginally thawing post the President's U-turn on tariffs; although they have
a long way to go, with the relationship likely to remain highly volatile with
neither nation willing to concede.
Emerging markets are expected to be well placed as they should be able to
capitalise on this dislocation in the markets. It is already clear that
foreign investors are beginning to look for alternatives to the US to invest,
which can only be positive for the rest of the world. With EM valuations
remaining relatively cheap, these markets are likely to benefit from
increasing investor demand playing very well to our core investment thesis.
The defensive nature of UEM's infrastructure and utilities portfolio
benefitting from global infrastructure megatrends, coupled with the
disciplined stock selection of the manager, should ensure UEM continues to
deliver long term returns to shareholders with an attractive dividend income.
Mark Bridgeman
Chairman
13 June 2025
Investment Managers' Report
For the year ended 31 March 2025, UEM's NAV total return was down by 2.9%
underperforming the MSCI EM total return Index which increased by 5.7%.
However, as reported in the Chairman's Statement, over the three and five
years UEM's NAV total return increased by 11.8% and 67.2%, significantly
outperforming the MSCI EM Index which was up by 6.3% and by 40.8%
respectively. Since inception, UEM's NAV total return was 427.6% compared to
the MSCI EM Index which was 303.5%.
Investment Environment
In the year to 31 March 2025, the increase in economic and political
uncertainty has heightened and dominated the investment landscape. We have
seen a year where over half the world's population went to the electoral
ballot and inflation in most countries has eased although geopolitical
pressures have increased. During the year, UEM has continued to stay focused
on its bottom-up investment approach and not become distracted by the top down
"noise".
Over the last twelve months, there were several significant global elections
for UEM, such as those in Mexico, India, Indonesia and the US. The
inauguration in January 2025 of President Trump into the US White House has
further fuelled market uncertainty resulting in gyrating volatile trade
policies, raised equity risk premia and elevated geopolitical tensions, making
it a challenging investment backdrop.
The election of President Trump with his commitment to tariffs and potential
expansionary federal policy has also called into question the direction of US
interest rate cuts. The year started with a sense of optimism that US interest
rates would be reduced based on expectations that inflationary pressure would
weaken (therefore benefitting EM), only to be short lived as stronger than
expected US economic data continued to be reported as the year went on.
Nevertheless, during the 2024 calendar year, three interest rate cuts were
eventually delivered. Now with Trump 2.0 being rolled out, any further rate
cuts into 2025 are being called into question given elevated tariff
uncertainty and its potential impact on inflation and global GDP.
How relations between the two nations of the US and China will be normalised
is also difficult to see. China, with its export led economy, has been
battling a host of internal challenges since the Covid-19 pandemic. GDP growth
is slowing, consumer confidence is at all-time lows, deflationary concerns
linger and the real estate market, once the engine room of China's growth
story, continues to struggle. The People's Bank of China and the National
People's Congress announced half hearted stimulus policies during the year,
which led to short term uplifts in the market, but until relations with the US
stabilise, the outlook for the Chinese economy will remain uncertain.
One moment during the year that was 'game changing' for China and perhaps puts
us into a new era of weakened 'US exceptionalism' was the launch of DeepSeek's
reasoning model in January 2025. The Chinese AI startup has been able to
demonstrate capabilities that can rival US technology companies at a fraction
of the cost and therefore questions the US leadership in this area.
One region that has been able to sit under the radar of President Trump's
pronouncements has been Latin America (except Mexico) and in particular
Brazil, given it maintains a more balanced trade relationship with the US.
However, Brazil this year has faced a number of domestic challenges despite
strong GDP growth (approximately 3.0% for the third year in a row) and low
unemployment levels. Fiscal concerns continue to weigh heavily on investors'
minds with President Lula unable to provide confidence to the market that he
will respect fiscal spending limits, resulting in the Brazilian Real
depreciating 14.5% this year and Brazilian interest rates surging to nearly
15%. The Bovespa was subsequently down 13.0%. Despite the strong operational
performance of a number of the Brazilian companies in UEM's portfolio, this FX
exposure has unfortunately impacted overall performance during the year since
Brazil constitutes 21.8% of the total portfolio as at 31 March 2025.
There remain a number of uncertainties in the current market, both
economically as well as geopolitical, although such conditions are providing
UEM with many interesting investment opportunities. At an investee company
level, it is encouraging to see that many of the companies continue to
navigate the choppy waters well and we believe they will continue to deliver
over the long term.
Portfolio Focus
During the year UEM remained focused on bottom-up investing in emerging market
infrastructure and utilities companies which are well placed to benefit from
the global infrastructure megatrends. Regardless of the macro volatility and
geopolitical noise, such megatrends remain fundamental in light of the
infrastructure investment required for both today's needs and tomorrow's
innovation.
Social Infrastructure - has increased in UEM's portfolio this year
contributing 32.2% (31 March 2024: 24.9%), as it is very apparent that many EM
still lack adequate essential basic social infrastructure such as water
sanitation and waste treatment that are a necessity for everyday life. Many of
the investment opportunities in this area address these fundamental issues.
In the year to 31 March 2025, UEM increased its position in two water
sanitation companies, Sabesp (Brazil) and Manila Water (The Philippines),
whose share prices were up over the year by 20.4% and 40.8% respectively. Both
companies are benefitting from improved regulatory environments, providing an
attractive level of return. This encourages continued investment and efficient
operations, which translates to stable and predictable cash flows for UEM as
investors. In addition, both companies still have significant capital
investment plans as they strive to meet their targets for universal access to
water and sanitation, as well as ambitions to consolidate the fragmented
domestic markets in which they operate, providing a sustainable growth
opportunity. Since these types of investments are fundamental to the
foundations of an emerging market economy and typically are domestically
focused, they are operationally sheltered from the macro and geopolitical
turbulence that is currently being witnessed globally.
Further, we see continued development of many EM countries, both in terms of
GDP per capita growth and positive demographics, resulting in increasing
levels of urbanisation and the growth of the middle class. Both of these
factors require support from social infrastructure as populations demand
better quality services and infrastructure. TAV Havalimanları Holding, the
Turkish listed airport operator, benefitted from this trend during the year,
with passenger growth up 11.5% and leading to its local share price increasing
by 36.0%.
Energy Growth and Transition - continues to be an important segment within the
portfolio at 25.6% (31 March 2024: 31.8%) as investment into energy
infrastructure remains fundamental for EM countries to support and sustain
stronger GDP growth over the long term. It also enables EM countries to work
towards achieving net zero and a decarbonisation of their energy matrix. Sadly
in today's world another dimension is now also coming into play, namely energy
security and independence. Energy security has become even more important with
the heightened geopolitical tensions in the Middle East and the ongoing
Russia/Ukraine War. This has resulted in countries looking to enhance their
own energy security and energy independence to safeguard supply as well as
mitigate pricing volatility from fossil fuels.
UEM therefore continues to favour those assets that support energy transition,
security and independence. Investment into electricity transmission companies
such as Alupar Investimento, a transmission and generation company in Brazil;
IndiGrid, a transmission investment trust in India; and Interconexión
Eléctrica, a Colombian energy transmission company, support this approach.
All these companies have certainty over future cash generation given the
structure of their transmission concessions, as well as offering growth
opportunities since they continue to look for new transmission projects which
are critical to support the rapid growth of renewable energy.
UEM's exposure to this segment has reduced during the year by 6.2% primarily
due to the exit of Power Grid Corporation of India. This position was exited
as the valuation became elevated. Powergrid Infrastructure Investment Trust
was also reduced during the year and Petalite's valuation was written down
(see further details in the level 3 investments section below).
Digital Infrastructure - investors' attention over the past year has been
increasingly focused towards AI and its potential to disrupt and reshape the
practises of many businesses. The announcement by DeepSeek in January 2025 of
its latest model, DeepSeek R1, to rival existing AI Large Language model
providers at a fraction of the cost has been a catalyst in changing the AI
balance of power away from the US which has historically dominated this space,
as well causing the market to reevaluate the hardware requirements for these
tasks. China's technology companies and political leadership have swiftly
embraced new AI ambitions. Digital infrastructure supports such rapid growth,
providing infrastructure to help deliver this transformation.
One such investment within the portfolio is SUNeVision. It is a Hong Kong
leading data centre operator, with eight data centres and two cable landing
stations, well located as the major regional hub for data hosting and being
the leading interconnection point in Asia. The stock continues to be well
placed as Hong Kong has data centre capacity constraints and its share price
has increased by 169.7% during the year.
Within UEM, digital infrastructure has increased to 25.0% of the total
portfolio (31 March 2024: 21.8%). Part of this increase has come from the
ongoing strong performance of FPT Corporation, the Vietnamese technology and
telecommunications company, whose share price increased by 18.8% over the
year, and Sonatel, a West African telecoms operator, up by 39.9%.
Global Trade - despite all the recent tariff turmoil we believe that global
trade will continue to have relative winners and losers. The increasingly
multipolar, deglobalised world that we are currently witnessing and the
reshaping of the competitive trading environment are presenting opportunities
as well as challenges.
Global trade represents 17.2% of UEM's portfolio as at 31 March 2025, a
reduction of 4.3% on the prior year. One of the drivers of this reduction was
the exit from Santos Brasil, the Brazilian listed container port operator near
Sao Paulo. In August 2024, the port operator's controlling shareholder
received an offer from CMA CGM to sell its interest which UEM took the
opportunity to sell into.
International Container Terminal Services, the Philippines listed container
port operator and UEM's largest holding, is one company that has been able to
capitalise on the changing global trade landscape and continues to be able to
navigate through the headwinds. With its 32 container port terminals in 19
countries, predominately located in EM, it has been able to deliver both
operationally and financially, primarily as it has a diversified portfolio of
origin and destination port assets that are benefitting from being located in
burgeoning markets. Over the year, its share price increased by 11.6%.
Portfolio Stock Positioning and Contribution
As at 31 March 2025, UEM gross assets decreased to £497.4m (31 March 2024:
£522.9m). This reflects the portfolio losses of £29.0m, share buy backs
during the year of £9.6m and offset in part by an increase in loans of
£17.5m.
At the year end, the top ten investments accounted for 37.7% (31 March 2024:
35.4%) with the top thirty holdings accounting for 73.7% of the total
portfolio (31 March 2024: 70.9%).
During the year, UEM invested £11.6m in Sabesp, the Brazilian water
sanitation company, more than doubling its position. Sabesp is now a
turnaround story after the Sao Paulo state government reduced its holding and
a well-known respected operator Equatorial became a significant shareholder.
Within the social infrastructure sector, a further £4.4m was invested in
Manila Water with the position growing further as a result of its share price
increasing by 40.5% over the year. An additional investment of £4.3m was also
made into Athens International Airport based on attractive valuation and a
positive outlook, whilst TAV Havalimanlari Holding also saw net investment of
£2.4m. Within the energy growth and transition sector, IndiGrid
Infrastructure Trust saw a further £3.7m investment and an additional
investment of £3.4m was made in Serena Energia, a renewable energy company
listed in Brazil.
Outside the top thirty, capitalising on the digital infrastructure megatrend,
£4.9m was invested in MyEG Services, the Malaysian e-government services
provider, alongside UEM increasing its position by £4.6m in Helios Towers,
the African and Middle East towers operator. UEM also invested £4.9m into
Medikaloka Hermina, an Indonesian hospital operator, a social infrastructure
megatrend investment.
As noted previously, UEM exited Santos Brasil and Power Grid Corporation of
India during the year realising £21.3m and £8.5m respectively. UEM also
exited its position in China Datang receiving £7.8m whilst reducing its
position in another Chinese company, Citic Telecom by £7.2m. UEM exited its
position in Engie Energia Chile, in light of its relatively high valuation,
realising £6.9m.
On a total contribution to NAV basis, the top five contributors were
SUNeVision (1.7%), Manila Water (1.1%), Aguas Andinas (0.6%), Sonatel (0.6%)
and International Container Terminal Services (0.6%) amounting to 4.6% of
UEM's performance for the year.
SUNeVision benefitted from its exposure to the digital infrastructure
megatrend and AI exposure with its share price up 169.7%, whilst Manila
Water's share price increased by 40.5% over the period and continues to be
well placed to capitalise on the additional infrastructure spend required to
improve the Philippines water sector. Aguas Andinas, the Chilean listed water
company, gained from a long overdue tariff increase and an improvement in
Chilean market sentiment in the run up to the election due to be held in
November 2025. Sonatel's share price appreciated by 39.9% due to strong growth
in 4G mobile data, fibre broadband and mobile money customers. Finally,
International Container Terminal Services, while being the top contributor to
UEM's performance in March 2024, was once again in the top five as it
continues to deliver strong operational performance and remains relatively
attractively valued.
The bottom five contributors which reduced UEM's NAV performance by 5.4% were
Petalite (1.5%), JSL (1.3%), KINX (0.9%), Grupo Traxion (0.9%) and Serena
Energia (0.8%). Petalite was the biggest detractor as UEM reduced down the
carrying value based on the latest external fund raising price. JSL and Serena
Energia, both Brazilian listed companies, saw their share prices fall during
the period by 59.4% and 18.2% respectively. Their weak share price performance
was exacerbated further by the depreciation of the Brazilian Real to Sterling,
as noted earlier, of 14.5%. Both these companies, despite reasonable
operational performance over the period, were affected by low levels of
investor demand for Brazilian small cap companies. Grupo Traxion's share price
was down by 48.9% over the period affected by concerns around nearshoring. The
Mexican Peso also depreciated against Sterling 20.5%. KINX's share price
decline of 24.5% for the year was disappointing, reflecting the delay in
completion of its new data centre capacity.
Unlisted Investments (Level 3 Investments)
As at 31 March 2025, UEM ended the year with level 3 investments totalling
£13.4m (31 March 2024: £23.1m), representing 2.7% of total investments (31
March 2024: 4.5%). UEM's level 3 investments reduced mainly as a result of the
reduction in valuation of Petalite by £6.5m and a further realisation of
£1.0m from CGN Capital Partners Infra Fund 3, held through UEM (HK) Limited.
Petalite continues to make steady progress, with the company raising £10.0m
in a Series A fund raise at the end of the year. However, the market remains
tough, with comparable listed entities in the electric vehicle sector
continuing to see falling valuations (around 50% over the year) which was
reflected in the Series A fund raising price. UEM did not invest any new money
and it has therefore reduced its investment valuation in line with this price,
leading to an equity value of £3.6m as at 31 March 2025.
As noted in the Chairman's Statement, UEM's focus is primarily on listed
investments and new unlisted investments will only be made in exceptional
circumstances.
Revenue Return
Revenue income increased marginally to £23.8m in the year to 31 March 2025,
from £23.1m in the prior year, with the revenue yield on the closing
portfolio increasing to 4.8% from 4.5% as at 31 March 2024.
Management fees and other expenses decreased 7.9% to £3.1m in the year to 31
March 2025 (31 March 2024: £3.4m). This reflects decreases in audit fees, and
management and administration fees. Loans were drawn from September 2024 under
the new Barclays loan facility and therefore finance costs decreased to £0.2m
(31 March 2024: £0.3m). Taxation reduced 6.3% to £1.8m during the year ended
31 March 2025 (31 March 2024: £2.0m) reflecting dividends received from
countries with lower withholding tax rates.
As a result of the above, profit for the year increased by 7.3% to £18.7m
from £17.4m for 31 March 2024. Revenue earnings per share increased by 12.7%
to 9.95p compared to the prior year of 8.83p, reflecting the improvement in
profit and the reduced average number of shares in issue following share
buybacks. Dividends per share ("DPS") of 9.125p were fully covered by
earnings.
Retained revenue reserves rose to £12.0m as at 31 March 2025, equal to 6.44p
per share.
Capital Return
The portfolio losses were £29.0m during the year to 31 March 2025 (31 March
2024: gains of £46.8m). Losses on foreign exchange were £0.6m and the
resultant total loss was £29.6m against prior year gains of £47.4m.
Management and administration fees were almost flat at £4.3m (31 March 2024:
£4.4m).
Finance costs decreased to £0.8m from £1.3m as a result of the lower loans
drawn in the year. There was a taxation charge of £0.8m (31 March 2024:
£1.4m) which arose from Indian capital gains tax. The net effect of the above
was a loss on capital return of £35.4m compared to a gain of £40.4m for 31
March 2024.
Investment Outlook
Global uncertainties and volatility are likely to continue but within this we
see significant opportunities for value creation with our careful bottom-up
approach to investments in EM that benefit from infrastructure and utilities
megatrends. We therefore continue to remain highly confident that the
investment strategy is well placed to continue its 20 year track record of
long term outperformance.
Charles Jillings & Jacqueline Broers
ICM Investment Management Limited and ICM Limited
13 June 2025
Principal and Emerging Risks
During the year ended 31 March 2025, ICMIM was the Company's AIFM and had sole
responsibility for risk management, subject to the overall policies,
supervision, review and control of the Board.
As required by the Association of Investment Companies ("AIC") Code of
Corporate Governance, the Board has undertaken a robust assessment of the
principal and emerging risks facing the Company. It seeks to mitigate these
risks through regular review by the Audit & Risk Committee of the
Company's risk register which identifies the risks facing the Company and the
likelihood and potential impact of each risk, together with the controls
established for mitigation.
During the year the Audit & Risk Committee discussed and monitored a
number of emerging risks that could potentially impact the Company, the
principal ones being geopolitical risk and climate change risk and these are
considered within investment risk and market risk below.
The principal risks and uncertainties currently faced by the Company and the
controls and actions to mitigate those risks, are described below. There have
been no significant changes to the principal risks during the year, although
geopolitical risk remains elevated.
Investment Risk: The risk that the investment strategy does not achieve
long-term positive total returns for the Company's shareholders. Insufficient
consideration of ESG factors could lead to poor performance and/or a reduction
in demand for the Company's shares.
The Board monitors the performance of the Company and has established
guidelines to ensure that the approved investment policy is pursued by the
Investment Managers. These guidelines include sector and market exposure
limits.
The investment process employed by the Investment Managers combines assessment
of economic and market conditions in the relevant countries with stock
selection. Fundamental analysis forms the basis of the Company's stock
selection process, with an emphasis on sound balance sheets, good cash flows,
the ability to pay and sustain dividends, good asset bases and market
conditions. In addition, ESG factors are also considered when selecting and
retaining investments, and political risks associated with investing in EM are
also assessed. The Investment Managers try to reduce risk by ensuring that the
Company's portfolio is always appropriately diversified. Overall, the
investment process aims to achieve absolute returns through an active fund
management approach and the Board monitors the implementation and results of
the investment process with the Investment Managers.
Market Risk: The Company's assets consist mainly of listed securities and its
principal risks are therefore market related and adverse market conditions
could lead to a fall in NAV.
The Company's portfolio is exposed to equity market risk and foreign currency
risk. Adverse market conditions may result from factors such as economic
conditions, political change, geopolitical confrontations, climate change,
natural disasters and health epidemics. At each Board meeting the Board
reviews the diversification of the portfolio, asset allocation, stock
selection, unquoted investments and levels of gearing and has set investment
restrictions and guidelines which are monitored and reported on by the
Investment Managers.
The Company's results are reported in Sterling, although the majority of its
assets are priced in foreign currencies and therefore any rise or fall in
Sterling will lead, respectively, to a fall or rise in the Company's reported
NAV. Such factors are out of the control of the Board and the Investment
Managers and may give rise to distortions in the reported returns to
shareholders. It is difficult and expensive to hedge EM currencies.
Key Staff Risk: Loss by the Investment Managers of key staff could affect
investment returns.
The quality of the investment management team is a crucial factor in
delivering good performance. There are training and development programmes in
place for employees and the remuneration packages have been developed in order
to retain key staff. ICM also has a large team with strength and depth. Any
material changes to the management team are considered by the Board at its
next meeting; the Board discusses succession planning with the Investment
Managers at regular intervals.
Discount Risk: The Company's shares may trade at a discount to their NAV and a
widening discount may undermine investor confidence in the Company.
The Board monitors the price of the Company's shares in relation to their NAV
and is focussed on reducing the discount at which they trade. The Board
generally buys back shares for cancellation in normal market conditions if
they are trading at a discount in excess of 10% and the Investment Managers
agree that it is a good investment decision.
Operational Risk: Failure by any service provider to carry out its obligations
to the Company in accordance with the terms of its appointment could have a
materially detrimental impact on the operation of the Company and could affect
the ability of the Company to successfully pursue its investment policy.
The Company's main service providers are listed on page 91. The Audit &
Risk Committee monitors the performance and controls (including business
continuity procedures) of the service providers at regular intervals.
All listed and a number of unlisted investments are held in custody for the
Company by JPMorgan Chase Bank N.A. - London Branch. JPMEL, the Company's
depositary services provider, also monitors the movement of cash and assets
across the Company's accounts. The Audit & Risk Committee reviews the JP
Morgan system and organisation controls reports, which are reported on by
Independent Service Auditors, in relation to its administration, custodial and
information technology services.
The Board reviews the overall performance of the Investment Managers and all
the other service providers on a regular basis. The risk of cybercrime is
high, as it is with most organisations, but the Board regularly seeks
assurances from the Investment Managers and other key service providers on the
preventative steps that they are taking to reduce this risk.
Gearing Risk: Whilst the use of borrowings should enhance total return where
the return on the Company's underlying securities is rising and exceeds the
cost of borrowing, it will have the opposite effect where the underlying
return is falling.
Gearing levels may change from time to time in accordance with the Board and
Investment Managers' assessment of risk and reward. As at 31 March 2025, UEM
had net gearing on net assets of 2.8%. ICMIM monitors compliance with the
banking covenants on a daily basis. The Board reviews compliance with the
banking covenants at each Board meeting.
Regulatory Risk: Failure to comply with applicable legal and regulatory
requirements such as the tax rules for investment companies, the FCA's Listing
Rules and the Companies Act 2006 could lead to suspension of the Company's
Stock Exchange listing, financial penalties, a qualified audit report or the
Company being subject to tax on capital gains.
The Investment Managers and the Company's professional advisers monitor
developments in relevant laws and regulations and provide regular reports to
the Board in respect of the Company's compliance.
Directors' Statement Of Responsibilities
in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the annual report and the
financial statements in accordance with UK adopted International Accounting
Standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, they are required to prepare the financial
statements in accordance with UK adopted International Accounting Standards.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that period. In preparing
these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable and
reliable;
· state whether they have been prepared in accordance
with UK adopted International Accounting Standards subject to any material
departures disclosed and explained in the financial statements;
· prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Company will continue in
business; and
· prepare a Directors' Report, a Strategic Report and
Directors' Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring that the
annual report and accounts, taken as a whole, is fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the Company's performance, business model and strategy.
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein..
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL
REPORT
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
· the Chairman's Statement, Strategic Report and
Directors' Report include a fair review of the development and performance of
the business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
We consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Approved by the Board on 13 June 2025 and signed on its behalf by:
Mark Bridgeman
Chairman
Statement Of Comprehensive Income
for the year to for the year to
31 March 2025 31 March 2024
Revenue Capital Total Revenue Capital Total
return return return return return return
£'000s £'000s £'000s £'000s £'000s £'000s
(Losses)/gains on investments - (29,007) (29,007) - 46,836 46,836
Foreign exchange (losses)/gains - (590) (590) - 610 610
Investment and other income 23,840 - 23,840 23,079 - 23,079
Total income/(loss) 23,840 (29,597) (5,757) 23,079 47,446 70,525
Management and administration fees (1,381) (4,284) (5,665) (1,445) (4,368) (5,813)
Other expenses (1,710) - (1,710) (1,911) - (1,911)
Profit/(loss) before finance costs and taxation 20,749 (33,881) (13,132) 19,723 43,078 62,081
Finance costs (192) (768) (960) (318) (1,274) (1,592)
Profit/(loss) before taxation 20,557 (34,649) (14,092) 19,405 41,804 61,209
Taxation (1,834) (750) (2,584) (1,958) (1,360) (3,318)
Profit/(loss) for the year 18,723 (35,399) (16,676) 17,447 40,444 57,891
Earnings per share (basic) - pence 9.95 (18.81) (8.86) 8.83 20.48 29.31
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 Company does not have any income or expense that is not included in the
profit for the year and therefore the profit for the year is also the total
comprehensive income for the year, as defined in International Accounting
Standard 1 (revised).
All income is attributable to the equity holders of the Company.
STATEMENT OF CHANGES IN EQUITY
for the year to 31 March 2025
Ordinary Capital Retained earnings
share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance as at 31 March 2024 1,909 76,706 436 407,180 26,603 10,099 522,933
Shares purchased by the Company and (44) - 44 (9,624) - - (9,624)
cancelled
(Loss)/profit for the year - - - - (35,399) 18,723 (16,676)
Dividends paid in the year - - - - - (16,811) (16,811)
Balance as at 31 March 2025 1,865 76,706 480 397,556 (8,796) 12,011 479,822
for the year to 31 March 2024
Ordinary Capital Retained earnings
share Merger redemption Special Capital Revenue
capital reserve reserve reserve reserves reserve Total
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance as at 31 March 2023 2,023 76,706 322 432,577 (13,841) 9,587 507,374
Shares purchased by the Company and (114) - 114 (25,397) - - (25,397)
cancelled
Profit for the year - - - - 40,444 17,447 57,891
Dividends paid in the year - - - - - (16,935) (16,935)
Balance as at 31 March 2024 1,909 76,706 436 407,180 26,603 10,099 522,933
STATEMENT OF FINANCIAL POSITION
2025 2024
as at 31 March £'000s £'000s
Non-current assets
Investments 495,154 517,195
Current assets
Other receivables 1,008 6,078
Cash and cash equivalents 3,933 5,751
4,941 11,829
Current liabilities
Other payables (2,055) (4,573)
Bank loans (17,553) -
(19,608) (4,573)
Net current (liabilities)/assets (14,667) 7,256
Total assets less current liabilities 480,487 524,451
Non-current liabilities
Provision for capital gains tax (665) (1,518)
Net assets 479,822 522,933
Equity attributable to equity holders
Ordinary share capital 1,865 1,909
Merger reserve 76,706 76,706
Capital redemption reserve 480 436
Special reserve 397,556 407,180
Capital reserves (8,796) 26,603
Revenue reserve 12,011 10,099
Total attributable to equity holders 479,822 522,933
Net asset value per share
Basic - pence 257.28 274.01
STATEMENT OF CASH FLOWS
2025 2024
Year to 31 March £'000s £'000s
Operating activities
(Loss)/profit before taxation (14,092) 61,209
Deduct investment income - dividends (22,293) (21,100)
Deduct investment income - interest (1,463) (1,932)
Deduct bank Interest received (84) (47)
Add back interest charged 960 1,592
Add back losses/(gains) on investments 29,007 (46,836)
Add back foreign exchange losses/(gains) 590 (610)
Decrease/(increase) in other receivables 30 (30)
Increase/(decrease) in other payables 881 (683)
Net cash outflow from operating activities before dividends and interest (6,464) (8,437)
Interest paid - (1,813)
Dividends received 22,874 20,212
Investment income - interest 824 1,125
Bank interest received 84 47
Taxation paid (3,426) (3,431)
Net cash inflow from operating activities 13,892 7,703
Investing activities
Purchases of investments (128,323) (75,544)
Sales of investments 123,128 151,442
Net cash (outflow)/inflow from investing activities (5,195) 75,898
Financing activities
Repurchase of shares for cancellation (9,624) (25,397)
Dividends paid (16,811) (16,935)
Drawdown of bank loans 28,524 19,821
Repayment of bank loans (11,913) (53,943)
Interest paid (806) -
Net cash outflow from financing activities (10,630) (76,454)
(Decrease)/increase in cash and cash equivalents (1,933) 7,147
Cash and cash equivalents at the start of the year 5,751 (1,026)
Effect of movement in foreign exchange 115 (370)
Cash and cash equivalents as at the end of the year 3,933 5,751
NOTES
The Directors have declared a fourth quarterly dividend in respect of the year
ended 31 March 2025 of 2.325p per share payable on 27 June 2025 to
shareholders on the register at close of business on 6 June 2025. The total
cost of the dividend, which has not been accrued in the results for the year
to 31 March 2025, is £4,309,000 based on 185,319,391 shares in issue at the
record date.
This statement was approved by the Board on 13 June 2025. The financial
information set out above does not constitute the Company's statutory accounts
for the years ended 31 March 2025 or 2024 but is derived from those accounts.
Statutory accounts for 2024 have been delivered to the Registrar of Companies
and those for 2025 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
Annual General Meeting Arrangements
The Annual General Meeting of the Company will be held at The Royal Society of
Chemistry, Burlington House, Piccadilly, London W1J 0BA on Tuesday, 16
September 2025 at 10.30 a.m. and notice is set out at the end of the Report
& Accounts.
Legal Entity Identifier: 2138005TJMCWR2394O39
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