Funds under management at City of London Investment Group (CLIG) fell 18 per cent to £2.9bn in the year to May, as ongoing volatility in global equity markets encouraged investors to reduce their exposure to risk assets. Consequently, net management fees earned by the company fell by £2m to £27.5m. Still, a much lower tax charge meant that net profits were only marginally lower and, with the support of an attractive yield, the shares are well supported.
It's worth noting that a bulk of the £5.2m commission paid out by CLIG went to North Bridge Capital, but since 2010 the 10-year contract, whereby it receives 20 per cent of fee income on clients introduced to CLIG, has been in run-off, which means that commission payment to North Bridge will cease by 2020. CLIG estimates these commission payments will drop to £4.4m in the current financial year.
Sensibly, management drew back from spending on marketing initiatives, given clients' aversion to risk, and concentrated on retaining existing clients. However, ongoing volatility meant that discounts to net asset values have widened, and with asset prices lower CLIG's emerging market closed-end fund strategy showed a 16.3 per cent negative return against a 14.5 per cent fall in the MSCI emerging markets index.
Singer Capital Markets is forecasting current year adjusted pre-tax profits of £10.4m and EPS of 27.3p (from £11.5m and 32.8p in 2012).
| CITY OF LONDON (CLIG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 329p | MARKET VALUE: | £89m | |
| TOUCH: | 325-330p | 12-MONTH HIGH: | 390p | LOW: 300p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 57p | NET CASH: | £5.4m | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 24.9 | 10.7 | 29.3 | 19.5 |
| 2009 | 20.2 | 5.4 | 16.1 | 15.0 |
| 2010 | 30.0 | 10.4 | 28.5 | 22.0 |
| 2011 | 36.5 | 13.1 | 35.1 | 24.0 |
| 2012 | 34.1 | 11.5 | 33.8 | 24.0 |
| % change | -7 | -12 | -4 | - |
Ex-div: 3 Oct Payment: 19 Oct | ||||
