TIDMCLIG
RNS Number : 9644V
City of London Investment Group PLC
23 January 2012
23(rd) January 2012
CITY OF LONDON INVESTMENT GROUP PLC
("City of London" or "the Group")
HALF YEAR RESULTS TO 30(th) NOVEMBER 2011
City of London (LSE: CLIG) announces half year results for the
six months to 30(th) November 2011.
HIGHLIGHTS
-- Revenues stable at GBP17.2 million (2010: GBP17.2 million)
-- Funds under Management ("FuM") of US$4.8 billion (GBP3.0
billion) at 30(th) November 2011. This compares to US$5.8 billion
(GBP3.5 billion) at the beginning of this financial year on 1(st)
June 2011 and US$5.5 billion (GBP3.6 billion) at 30th November
2010. The MSCI Emerging Markets Index (MXEF) declined by 19.3% over
the period compared to the 17.2% fall in FuM in US dollar
terms.
-- Profit before tax of GBP6.1 million, including a GBP0.4
million gain on the sale of an investment (2010: GBP5.7 million,
including GBP0.4 million of main market Listing costs)
-- Maintained interim dividend of 8p per share payable on 27(th)
February 2012 to shareholders on the register on 10(th) February
2012
-- Cash and cash equivalents at the period end of GBP5.9 million (2010: GBP3.1 million)
Andrew Davison, Chairman, said, "We have carefully and
deliberately built our business to be resilient in the face of the
sometimes extreme volatility inherent in investing in emerging and
frontier markets around the world. Our aversion to risk has enabled
us to build a loyal client base by being able to offer long-term
benchmark outperformance in a risky asset class. It is our ability
to retain and grow the client base which allows us to pay
consistent dividends to reward our shareholders."
Barry Olliff, CEO, added, "Bearing in mind that our FuM have
been significantly impacted by the adverse market conditions, we
consider that we have done a relatively good job of controlling our
costs. Very early in 2011 we battened down the hatches. Our main
focus was on expenses that we considered could be cut that would
not damage our long term business plans.
"While this has been a difficult year for our Equities products,
our Market Neutral, Frontier and Developed CEF funds have done very
well and are a potential source of additional FuM. We are as a
result bringing forward our marketing plans in this regard."
For further information, please visit www.citlon.co.uk or
contact:
Doug Allison (Finance Director) Simon Hudson / Andrew Dunn
City of London Investment Group Tavistock Communications
PLC
Tel: +44 (0)20 7860 8347 Tel: +44 (0)20 7920 3150
Claes Spang Simon Bridges / Martin Green
Singer Capital Markets Limited Canaccord Genuity Limited
Financial Adviser & Joint Broker Joint Broker
Tel: +44 (0)20 3205 7500 Tel: +44 (0)20 7050 6500
Chairman's statement
Despite the sometimes extreme volatility of emerging markets in
the first half of our financial year, the Group has performed
creditably in financial terms. Our ability to deal with declining
and volatile markets whilst still generating profits and dividends
for shareholders illustrates well the Group's risk averse approach
and our relentless focus on keeping fixed costs to a minimum.
Total funds under management (FuM) at 30(th) November 2011, our
half-year end, were US$4.8 billion (GBP3.0 billion). This compares
to US$5.8 billion (GBP3.5 billion) at the beginning of this
financial year on 1(st) June 2011 and US$5.5 billion (GBP3.6
billion) at 30(th) November 2010. The MSCI Emerging Markets Index
(MXEF) declined by 19.3% over our first half-year as against the
17.2% fall in FuM in US dollar terms. As we announced during the
period under review, although markets have been very volatile,
clients remained loyal with net new inflows of US$41.4 million,
made up of US$281.8 million of redemptions and US$323.2 million of
new allocations. At the most recent month end, 31(st) December, FuM
stood at US$4.7 billion.
Results - unaudited
Revenues for the six months to 30th November 2011 were unchanged
at GBP17.2 million (2010: GBP17.2 million). The average net fee,
after allowing for commissions payable, weighted across the
portfolio, is currently 86 basis points. Given our fixed cost base,
which has remained stable at some GBP0.9 million per month, this
makes operating profitability (before profit sharing of 30%)
remarkably predictable with a high level of visibility. We
announced in an Interim Management Statement on 5th December 2011
that we expected profit before taxation for the six months ended
30th November 2011 to be approximately GBP6.1 million. The outturn
was exactly in line with profit before tax of GBP6.1 million (2010:
GBP6.1 million before Listing costs of GBP0.4 million incurred in
that period).
This year's profit before tax includes a gain of US$0.7 million
(GBP0.4 million) on the sale of an investment in options on
unquoted equity, which could potentially increase during the second
half year to a total gain of US$1.2 million (GBP0.7 million), in
accordance with a contingency clause in the sale agreement. The
Group has not previously highlighted this investment as its cost
and prior value were deemed immaterial.
Administrative expenses increased by just 5% to GBP11.6 million
(2010: GBP11.0 million before the exceptional costs of the upgrade
to the main market of GBP0.4 million). Administrative expenses
include both variable costs as well as fixed overheads, with
variable costs representing some 53% of the total (2010: 56%)
including profit-share distribution. Variable costs also include
commission payable to our ex-third party marketing consultant,
North Bridge Capital, of GBP2.6 million (2010: GBP2.7 million).
The commissions payable to North Bridge Capital will begin to
fall significantly from 2014 as a result of our decision to bring
marketing in-house. We have recruited two additional experienced
marketing executives during the period - one to broaden our reach
in the US and the other to focus on European markets. They are
already making a real contribution to our profile generally and to
FuM via new mandates for our Natural Resources product.
Basic earnings per share, after a 33% tax charge of GBP2.0
million (2010: GBP1.8 million representing 31% of profit before
tax), were 16.2p (2010: 16.0p). Diluted earnings per share were
15.7p (2010: 15.4p).
Dividends
In a statement released on the day of our Annual General Meeting
on 3(rd) October 2011, we said that the Board expected to maintain
or increase the dividend during the current year unless there was a
further very significant deterioration in markets over the
remainder of the year. We also said that this may require a
relaxation of the Group's 1.5x dividend cover policy, which, we
said, the Group was well placed to accommodate in terms of both
capital adequacy and liquidity.
The Board has decided to pay a maintained interim dividend of 8p
per share. The dividend will be paid on 27(th) February 2012 to
shareholders on the register on 10(th) February 2012. Our dividend
payment policy is based on a split of one third/two thirds between
the interim and the final. In the absence of a marked deterioration
in emerging markets, this means that shareholders can expect to
receive a minimum payment of 16p as a final dividend with upside
available depending on the performance of, and outlook for,
emerging markets.
Board
At the beginning of the financial year we appointed a new US
based Non-executive Director, Rian Dartnell. Rian is Chief
Investment Officer for Granite Associates, having spent his career
managing global multi-asset class funds. Effective today, George
Robb has retired from the Board as a Non-executive Director, and is
replaced by Lynn Ruddick. Lynn is Non-executive Chairman or
Director of a number of investment trusts, as well as serving as an
investment committee member or trustee of two pension plans. She is
also a former Chairman of the Investment Committee of the National
Association of Pension Funds.
George Robb has been a Non-executive Director of City of London
since 1997, with a brief gap in 2004-5. As a long term Board
member, and shareholder, George's contribution to the development
of the Group has been important and we will miss his participation
in our discussions. On behalf of the Directors, I wish George a
long and happy retirement.
Outlook
The management team and Board of City of London have carefully
and deliberately built our business to be resilient in the face of
the sometimes extreme volatility inherent in investing in emerging
and frontier markets around the world. Our aversion to risk has
enabled us to build a loyal client base by being able to offer
long-term benchmark outperformance in a risky asset class. It is
our ability to retain and grow the client base which allows us to
pay consistent dividends to reward our shareholders.
As we begin the second half of the year, the outlook for
emerging markets remains opaque but the Board is confident that the
Group has done all that it can to structure the business to deliver
continuing value to clients, staff and shareholders.
Andrew Davison
Chairman
19(th) January 2012
Chief Executive Officer's review
This has been a tough half year in terms of both investment
performance and also the firm's results. I thought that the best
way to confront this was by going into some of the details
associated with what we have been doing in our attempt to mitigate
these issues.
Investment Performance.
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