London, UK, 4 März 2024

Edison issues update on UIL (UTL): Long-term focus, avoiding short-term noise

UIL Limited (UIL) is managed by Charles Jillings and his highly experienced team at value-based specialist investor ICM. It is a unique portfolio of undervalued assets, which is illustrated by the fund’s differentiated exposures. In terms of geography, the largest weightings are Australia (c 42%) and the UK (c 21%), while the largest sector allocations are financial services (c 51%) and technology (c 21%). The majority of the portfolio, around 75%, is held in platforms (collective investment companies), with the balance in direct investments. UIL’s dividends have remained steady for the last three financial years and the board anticipates that the annual distribution will at least be maintained, using revenue reserves when required. The company offers a very attractive above-market 7.1% dividend yield.

Despite a choppy market environment, Jillings has remained focused on reducing UIL’s leverage, which is a mixture of zero dividend preference shares (ZDPs) and bank debt. The company’s remaining loan with Bank of Nova Scotia will be repaid on 19 March 2024, and one of UIL’s three tranches of ZDPs will be redeemed at the end of October 2024. Despite investment company discounts being wider than average in an uncertain macroeconomic environment, UIL’s board is hopeful that lower leverage could contribute to the company being afforded a higher valuation. It is also important to note that an investor in UIL effectively receives a ‘double discount’; for example, at end-January 2024, Zeta Resources (14.7% of the fund), was trading at a 16.7% discount to net tangible assets, and Utilico Emerging Markets Trust (10.6%) was trading at a 14.5% discount to NAV.

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