TIDMCLIG
RNS Number : 0556C
City of London Investment Group PLC
18 February 2022
18th February 2022
CITY OF LONDON INVESTMENT GROUP PLC
("City of London", "the Group" or "the Company")
HALF YEAR RESULTS TO 31ST DECEMBER 2021
City of London (LSE: CLIG) announces that it has today made
available on its website, https://www.clig.com/ , the Half Year
Report and Financial Statements for the six months ended 31st
December 2021.
The above document has been uploaded to the National Storage
Mechanism, in accordance with Listing Rule 9.6.1 R, and will
shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
HALF YEAR SUMMARY
- Funds under Management (FuM) of US$11.1 billion (GBP8.2
billion) at 31st December 2021. This compares with US$11.4
billion (GBP8.3 billion) at the beginning of this financial
year on 1st July 2021 and US$10.9 billion (GBP8.0 billion)
at 31st December 2020.
- FuM at 31st January 2022 of US$10.8 billion (GBP8.0 billion)
- Net fee income representing the Group's management fees
on FuM was GBP29.8 million (31st December 2020: GBP22.6
million)
- Underlying profit before tax* was GBP15.5 million (31st
December 2020: GBP11.2 million). Profit before tax was
GBP13.6 million (31st December 2020: GBP8.8 million)
- Maintained interim dividend of 11p per share (31st December
2020: 11p) payable on 25th March 2022 to shareholders
on the register on 25th February 2022
- Special dividend of 13.5p per share (31st December 2020:
nil) payable on 25th March 2022 to shareholders on the
register on 25th February 2022
*This is an Alternative Performance Measure (APM). Please
refer to the CEO review for more details on APMs.
For access to the full interim report, please follow the link
below:
http://www.rns-pdf.londonstockexchange.com/rns/0556C_1-2022-2-17.pdf
This release includes forward-looking statements, which may
differ from actual results. Any forward-looking statements are
based on certain factors and assumptions, which may prove
incorrect, and are subject to risks, uncertainties and assumptions
relating to future events, the Group's operations, results of
operations, growth strategy and liquidity.
For further information, please visit www.clig.co.uk or
contact:
Tom Griffith, CEO
City of London Investment Group PLC
Tel: 001-610-380-0435
Martin Green
Zeus Capital Limited
Financial Adviser & Broker
Tel: +44 (0)20 3829 5000
CHAIR'S STATEMENT
The familiar refrain that "it ain't over, till it's over" has
often been used in connection with sporting contests but the events
of recent months show that it has at least equal validity to global
pandemics. Just as the world was recovering some level of normality
in the autumn of 2021, courtesy of a global vaccination campaign
that now totals 10.4 billion doses, the Omicron variant brought
that progress to an abrupt but temporary halt in the closing weeks
of the year. The good news for investors is that markets have
become less "COVID-sensitive" with each wave recognising perhaps
that, over time, vaccine-led herd immunity will outweigh any risk
of a return to the extreme social disruption of the last two
years.
While the ripple effects of the pandemic will continue to
reverberate for some time, particularly in relation to supply chain
bottlenecks, equity markets are increasingly directing their focus
back to the more traditional issues of growth, inflation, monetary
policy and geopolitics, each of which present potential challenges
in 2022. Meanwhile, as CEO Tom Griffith explains in his report,
both CLIG operating subsidiaries have continued to navigate the
challenges posed by on/off remote working requirements with full
functionality and, on behalf of your Board, I would like to extend
our sincere thanks once again to our hard-working employees across
all the offices.
Assets and performance
Funds under Management (FuM) fell by 2.6% in the six months
ended 31st December 2021 to US$11.1 billion due to mixed conditions
across the Group's products but were still 2% ahead of the
comparable figure at the end of 2020. Although the more defensive,
value-driven characteristics of closed-end funds (CEFs) provided
positive attribution for the Emerging Markets (EM) strategy in the
half year, the 23% fall in Chinese equities, which accounts for
around one-third of the index, proved a major drag on both the
benchmark and FuM, with an 11% fall over the period to US$4.8
billion. Despite lacklustre markets in the International strategy,
this product has continued to attract impressive inflows. The
strategy FuM stands at US$2.1 billion, a 14.2% increase in FuM as
compared to 30th June 2021 and a 26.3% increase in FuM as compared
to 31st December 2020. While the aggregate FuM numbers at CLIM were
little changed over the half-year period at US$7.2 billion, each of
the major strategies recorded robust outperformance against their
respective benchmarks. Looking forward, the combination of this
strong relative performance and an ability to re-commence
face-to-face meetings with clients and consultants are anticipated
to translate into further inflows in the coming months.
KIM's FuM grew by c.1% to US$3.9 billion as compared to 30th
June 2021 despite the normal seasonal withdrawals that arise in the
final weeks of the calendar year. In comparison with 31st December
2020, however, FuM was 7% higher, thanks mainly to very strong
relative performance, particularly in the dominant fixed income
space. The issuance of approximately 250 Special Purpose
Acquisition Companies (SPACs), represents an addition of US$54
billion to KIM's investable universe. SPACs can offer a fixed
income return profile with lower risk, and potential for upside.
Pre-merger SPAC investments were an important contributor to
returns for KIM in the first half of the financial year. With c.60%
of KIM's assets invested in fixed income securities, it is very
encouraging to note that they have been able to show strong
performance through a period of rising inflation and interest rate
expectations and this bodes well for both client retention and new
business potential in the coming year.
Results
For CLIG, the six months ended December 2021 showed solid
progress and it was pleasing to see the positive impact of the
merger with KIM in terms of both profits and earnings per share
(EPS). Profit before tax for the six months to 31st December 2021
was GBP13.6 million (31st December 2020: GBP8.8 million). Following
previous practice, I will comment on our results by reference to an
Alternative Performance Measure (APM) of "Underlying" profits and
EPS, which exclude exceptional or non-recurring items, as we
believe that these provide shareholders with a more accurate
measure of the Group's financial performance.
Underlying profit before tax of GBP15.5 million was 38.4% up on
the equivalent period of 2020, but this figure translates to a 7.8%
gain when adjusted for the limited three-month contribution from
KIM in the previous period. KIM's underlying profit before tax of
GBP6.9 million was marginally ahead of the previous period on a
comparable basis, having absorbed increased costs associated with
upgrades to KIM's operating infrastructure. The 11% increase in
CLIM's contribution to GBP8.6 million owes much to the buoyancy of
global equity markets in the early months of 2021, which partially
reversed in the EM space in the second half of calendar year 2021.
The combination of a 10% fall in the MXEF EM index coupled with a
3% rise in the average rate for sterling (vs. US$) in the six
months to 31st December 2021 pared growth somewhat but, pleasingly,
the blended net fee margin across both operating subsidiaries
remained steady at an average rate of 74 bps. Diluted EPS for the
first half of the financial year was 21.2p per share on a statutory
basis, while underlying EPS rose 3% to 24.1p (2020: 23.4p) on a
fully diluted basis.
Dividends
Inflationary pressures and a near-term tapering of quantitative
easing signal a clear tightening bias from Central Banks and,
mindful that economic activity remains "COVID-constrained" in many
countries, the outlook for global equities is far from assured in
2022. Against this uncertain background, your Board has declared an
unchanged interim dividend of 11p per share, a level which leaves a
small degree of "headroom" within the stated dividend cover policy
of 1.2/1 over a rolling five-year period. At the same time, the
Board is conscious that any accumulation of capital over and above
that which is needed for capital investment, regulatory
requirements and a prudential cash buffer should be returned to
shareholders. Accordingly, the Board has also declared a special
dividend of 13.5p per share, making this the second such special
distribution in the last three years. Both dividends will be paid
on 25th March 2022 to those shareholders registered at the close of
business on 25th February 2022.
The Board
There were no changes to the Board's membership during the
half-year period. However, as acknowledged in our 2021 Annual
Report & Accounts, compliance with the UK Corporate Governance
Code in respect of independence, together with upcoming rules
concerning diversity and inclusion, will necessitate significant
changes to the Board's composition going forward. Following a
thorough review of these issues, later this year we will present
shareholders with a road map towards compliance, recognising the
need to reconcile an appropriate level of continuity with adherence
to our governance obligations as a UK-listed entity.
ESG
The proposed changes to the Board composition, referred to
above, form only part of CLIG's commitment to address ESG
challenges both within the business and in the wider communities in
which we operate. While many of the criteria being codified to
measure ESG performance have been a natural part of our culture
over many years, it is important for us to record our "ESG modus
operandi" in a more formal way in order to apprise shareholders of
our ongoing commitment to good governance. To that end, our website
has been updated with an Anti-Slavery statement and regular
engagement meetings between employees and independent Directors
have been established on a rotational basis. Increased emphasis on
employee training and initiatives to prioritise diversity and
inclusion through each layer of the business also form part of this
process. CLIG is firmly committed to the goal of high attainment in
the ESG sphere.
Outlook
As mentioned earlier, global markets will be confronted this
year with progressive reductions in monetary stimulus as pandemic
support measures are gradually withdrawn and this is likely to
create headwinds for both equity and debt markets. Indeed,
benchmarks such as the tech-heavy NASDAQ, which rose by c.130% in
the 20 months to November 2021, have appeared more vulnerable to a
correction recently with a 9% fall over the last two months. While
international equity markets may be less vulnerable to these tech
valuation bubbles, the tapering of monetary support, ongoing supply
disruptions and geopolitical tensions each have the capacity to
destabilise markets in the months ahead and point to the need for a
cautious stance. Within the EM space, China will continue to exert
a strong influence and the recent tightening of the regulatory
environment, coupled with large-scale mobility restrictions arising
from China's zero-tolerance COVID policy will constrain both the
pace and timing of an economic recovery.
It is now 15 months since the merger with KIM and we believe
that the results during this period demonstrate the benefits of a
more diversified revenue base in terms of both clients and market
segments. Thus, despite the clear challenges ahead, we remain
optimistic that the value-driven characteristics of CEFs, supported
by a macro-economic research focus, will continue to offer enhanced
relative performance for our clients and shareholders over the
longer term.
Barry Aling
Chair
17th February 2022
CHIEF EXECUTIVE OFFICER'S REVIEW
Diversification
Diversification has been a long-standing theme in our reports
over many years in recognition of the need to expand our product
offerings, opportunities for employees and our revenue stream.
Whilst our unique focus on closed-end funds (CEFs) has enabled us
to deliver relative outperformance against a relevant benchmark to
our clients over multiple investment cycles, capacity limitations
in the CEF universe of available securities have constrained
growth.
Our approach to this constraint for CLIM has been to apply our
team's expertise in CEFs to additional market segments. Sustained
CLIM diversification has reached a major milestone over the period
with CLIM's International Equity strategy (INTL) surpassing US$2
billion in Funds under Management (FuM) representing 30% of CLIM
FuM as of 31st December 2021. As many of our shareholders will
recognise, this "overnight success" has taken over a decade to
achieve and was only possible as a result of the relentless efforts
of the INTL team. Reaching this milestone is a reflection of the
hard work by many of our colleagues along with the patience of
shareholders.
Further, and as a result of top quartile relative performance of
the INTL strategy, clients and consultants have shown interest in a
Global product, to offer exposure to US and non-US equities. In
December 2021, a new product managed by the INTL team was seeded
with US$2.5 million, which we expect will attract client assets
over the next two years.
We refer to the second part of our diversification efforts as
CLIG diversification. As indicated in our most recent annual
report, the evolution of your company featured the merger with
Karpus Investment Management (KIM) in the prior financial year
which progressed our diversification efforts.
We have expanded our reporting in the below table from previous
reporting periods to include both the percentage of FuM for CLIM
& KIM strategies along with the percentage of FuM for CLIG.
This further breakdown of reporting provides shareholders with an
additional data point to follow our diversification efforts,
inclusive of the relative growth of the CLIM INTL strategy
mentioned previously, over the past five years.
FuM flows
Although CLIM's net client flows remain negative for the
financial year to date to 31st December 2021 at (US$58.7 million)
we have seen this recent trend over the past several quarters begin
to reverse. Quarterly inflows increased to US$311 million in the
second quarter of the financial year relative to US$123.8 million
in the first quarter of the financial year, while outflows reduced
to (US$198.5 million) from (US$295 million) respectively.
CLIG - FUM by line of business (US$m)
CLIM 30 Jun 30 Jun 30 Jun 30 Jun 2021 31 Dec 2021
2018 2019 2020
--------------- ---------------- ---------------- ------------------------- -------------------------
US$m % US$m % US$m % US$m % % US$m % %
of of of of of of of
CLIM CLIM CLIM CLIM CLIG CLIM CLIG
total* total* total* total total total total
------ ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
Emerging
Markets 4,207 83% 4,221 78% 3,828 69% 5,393 72% 47% 4,800 67% 43%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
International 480 9% 729 14% 1,244 23% 1,880 25% 17% 2,147 30% 19%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
Opportunistic
Value 174 3% 233 4% 256 5% 231 3% 2% 232 3% 2%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
Frontier 245 5% 206 4% 175 3% 13 0% 0% 10 0% 0%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
Other/REIT 1 0% 7 0% 9 0% 13 0% 0% 12 0% 0%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
CLIM total 5,107 100% 5,396 100% 5,512 100% 7,530 100% 66% 7,201 100% 64%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
KIM 30 Jun 30 Jun 30 Jun 30 Jun 2021 31 Dec 2021
2018 2019 2020
--------------- ---------------- ---------------- ------------------------- -------------------------
US$m % US$m % US$m % US$m % % US$m % %
of of of of of of of
KIM KIM KIM KIM CLIG KIM CLIG
total* total* total* total total total total
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
Retail 2,098 67% 2,291 67% 2,401 69% 2,804 72% 24% 2,830 72% 26%
Institutional 1,019 33% 1,105 33% 1,087 31% 1,115 28% 10% 1,119 28% 10%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
KIM total 3,117 100% 3,396 100% 3,488 100% 3,919 100% 34% 3,949 100% 36%
------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
CLIG total 11,449 100% 11,150 100%
---------------- ------ ------- ------ -------- ------ -------- ------- ------- ------- ------- ------- -------
*Pre-merger
Net investment flows (US$000's)
CLIM FYE Jun FYE Jun FYE Jun FYE Jun FY 2022,
2018 2019 2020 2021 as of Dec
2021
---------------------- ----------- ---------- ---------- ---------- -----------
Emerging Markets (215,083) (183,521) (279,459) (275,493) (279,104)
International 279,394 252,883 551,102 (14,145) 231,705
Opportunistic
Value 54,251 48,236 45,914 (102,663) (6,700)
Frontier 67,000 (21,336) 16,178 (168,843) (4,575)
REIT - 6,000 4,600 - -
---------------------- ----------- ---------- ---------- ---------- -----------
CLIM total 185,562 102,262 338,335 (561,144) (58,674)
---------------------- ----------- ---------- ---------- ---------- -----------
KIM FYE Jun FYE Jun FYE Jun FYE Jun FY 2022,
2018 2019 2020 2021* as of Dec
2021
---------------------- ----------- ---------- ---------- ---------- -----------
Retail 46,550 33,701 26,323 (104,222) (34,452)
Institutional (107,410) 9,050 (67,087) (130,911) (19,033)
---------------------- ----------- ---------- ---------- ---------- -----------
KIM total (60,860) 42,751 (40,764) (235,133) (53,485)
---------------------- ----------- ---------- ---------- ---------- -----------
*Includes net investment flows for Retail - (24,407) and Institutional
- (20,264) pertaining to period before 1st October 2020 (pre-merger).
The above shift resulted from increased CLIM marketing efforts
in calendar year 2021 that began to turn the tide of flows positive
in the second quarter of this financial year with US$112.5 million
of net inflows. Re-opening our INTL strategy to new investors
contributed significantly to net inflows after being closed to new
investors for the year to December 2020 following a period of
strong growth. Currently, we are projecting this positive trend of
net inflows to continue through the remainder of the financial
year.
A handful of CLIM clients in the past six months transferred
their account balance from the Emerging Market (EM) strategy to the
INTL strategy, illustrating another positive effect of CLIM
diversification. Whilst the EM equity asset class may be out of
favour, client assets remained at CLIM. Year-end tax planning led
to outflows from the KIM strategies.
Both CLIM and KIM remain constrained by clients and prospects
limiting their access via in-person marketing; we believe in-person
marketing and client discussions are a strength of both operating
subsidiaries, as investment management remains a
relationship-driven business. With this said, we are prepared
moving forward with the ability to provide in-person or virtual
meetings with clients, consultants and prospective clients
depending on their preference.
Relative investment performance at both CLIM and KIM was strong
during the six months ending 31st December 2021 and for calendar
year 2021. All strategies with impactful FuM at both CLIM and KIM
outperformed their respective benchmarks in calendar year 2021.
These strong returns should buoy marketing efforts in 2022. On the
downside, the underperformance of EM equities over the past six
months compared to other asset classes did weigh on the ability for
CLIM's FuM to grow during what otherwise was a strong equity rally,
in particular in US equities.
Business integration
While the investment personnel at each subsidiary remain
separate and distinct, there is ongoing integration of
non-investment management resources to allow for both subsidiaries
to benefit from the experience and expertise of colleagues. Both
CLIM and KIM have strong brands and reputations in the United
States, and operational teams who support the investment personnel
are being leveraged to work together.
Information Technology (IT) infrastructure integration is
ongoing, linking the two networks together and allowing for
failover and other synergies to exist. We expect this
infrastructure integration to be complete by financial year end at
the latest. Additionally, when acting on behalf of the larger,
combined entity, there are economies of scale available with IT
vendors and contracts for services required by both operating
subsidiaries.
CLIM Dubai office
CLIM's Dubai office opened in 2007 to allow CLIM to research
investment opportunities in the region as well as to increase the
Group's visibility in the area. As a number of frontier
(pre-emerging) markets were in the region, the office was staffed
by two employees to conduct research on the underlying portfolio
investments and was critical to the initial development and
marketing of the CLIM Frontier strategy. At that time, the weight
of the Middle Eastern markets was approximately 12% and 70% of the
EM and Frontier equity indices respectively, but are now in the
single digits. As a result of the shift in markets that make up the
frontier indices from the Middle East and Africa to Asia, we are
letting the Dubai office lease expire in March 2022. One employee
from the Dubai office has already transferred to CLIM's office in
Pennsylvania, while the remaining employee will end his tenure with
CLIM in March after taking the necessary steps with regulators,
local authorities and vendors to close the office.
Financial results
Group FuM as at 31st December 2021 was US$11.1 billion (GBP8.2
billion). Net fee income currently accrues at a weighted average
rate of approximately 74 basis points of FuM. The Group's net fee
income for the six months ended 31st December 2021 was GBP29.8
million, with GBP10.9 million coming from KIM (31st December 2020:
GBP22.6 million, with GBP5.1 million coming from KIM for the three
months ended 31st December 2020).
Profit before tax for the six months ended 31st December 2021
increased to GBP13.6 million (31st December 2020: GBP8.8 million).
EPS increased by 21% to 21.5p per share for the six months ended
31st December 2021 from 17.7p per share for the six months ended
31st December 2020.
Currency exposure
The Group's revenue is almost entirely US dollar based whilst
its costs are incurred in US dollars, sterling, and to a lesser
degree Singapore dollars and UAE dirhams (which will no longer be
applicable after 31st March 2022). The following table aims to
illustrate the effect of a change in the US dollar/sterling
exchange rate on the Group's post-tax profits at various FuM
levels, based on the assumptions given, which are a close
approximation of the Group's current operating parameters. It is
evident that a stronger US dollar increases sterling post-tax
profits, whilst a weaker US dollar causes the opposite. During the
six months ended 31st December 2021, the average FX rate was
1.3612, with a closing FX rate of 1.3532 as compared to the average
FX rate of 1.3219 for the six months ended 31st December 2020 and a
closing FX rate of 1.367 as 31st December 2020.
FX/Post-tax profit
matrix
Illustration of US$/GBP
rate effect:
-------------------------------------- -------------- ----------- -------- ---------
FuM US$bn: 9.3 10.2 11.1 11.7 12.2
----------- -------------- ----------- -------- ---------
US$/GBP Post-tax, GBPm
-------------------------------------------------------------
1.26 16.6 19.5 22.5 24.4 26.2
1.31 15.7 18.5 21.4 23.2 24.9
1.36 14.9 17.6 20.3 22.1 23.8
1.41 14.1 16.7 19.4 21.0 22.7
1.46 13.4 15.9 18.5 20.1 21.7
----------- -------------- ----------- -------- ---------
Assumptions: CLIM KIM
-------------------------------------- ------------------------------------- ---------
1. Average net fee 72bps 76bps
2. Annual operating GBP6.7m plus US$8.5m plus S$0.6m US$8.3m
costs (GBP1 = S$1.82)
3. Average tax 21% 24%
4. Amortisation of intangible GBP3m per annum
Note: The above table is intended to illustrate the approximate
impact of movement in US$/GBP, given an assumed set of trading
conditions. It is not intended to be interpreted or used as
a profit forecast.
Cash and dividends
The CLIG Board reviews its cash position and overall
distribution policy on a regular basis and believes that our policy
of a rolling five year dividend cover of 1.2x remains appropriate.
Our cash position has grown to GBP24.5 million at calendar year end
in addition to the seed investments of GBP6.1 million (including
GBP4.0 million in REITs and GBP1.9 million in the Global product
funded in December 2021). After considering the alternatives for
returning a portion of this cash to shareholders, the Board has
announced an interim dividend of 11p per share in line with last
year amounting to c.GBP5.4 million and a 13.5p special dividend
amounting to c.GBP6.6 million.
The first special dividend was paid to shareholders in March
2019, which was 13 years from our original listing date. This
second special dividend comes a relatively short three years later
due to strong cash generation and was made possible by the support
and patience of our shareholders through the recent merger and
other diversification efforts. After both the interim and special
dividend, and inclusive of seed investments, the Group meets
regulatory and statutory requirements with significant operating
capital. The option of increasing the final dividend at year end,
dependent upon market conditions, remains open.
Dividend cover chart
We have provided an illustrative framework which we update twice
a year to enable shareholders and other interested parties to
calculate our post-tax profits based upon some key assumptions.
This dividend cover chart can be found on our website at
https://www.clig.com/dividend-cover.php, and is also shown on page
10 of our interim accounts, and shows the quarterly estimated cost
of a maintained dividend against actual post-tax profits for last
year, the current six months ended 31st December 2021 and the
assumed post-tax profit for the six months ended 30th June 2022 and
the next financial year based upon assumptions included in the
chart.
Alternative Performance Measures
The Directors use the following Alternative Performance Measures
(APMs) to evaluate the performance of the Group as a whole:
Underlying profit before tax - Profit before tax, adjusted for
gain/loss on investments, acquisition-related costs and
amortisation of acquired intangibles. This provides a measure of
the profitability of the Group for management's
decision-making.
Underlying earnings per share - Underlying profit before tax,
adjusted for tax as per income statement, tax effect of adjustments
and non-controlling interest, divided by the weighted average
number of shares in issue as at the period end. Refer to note 4 in
the interim financial statements for reconciliation.
Alternative Performance Measures
Underlying profit and profit before Six months Six months Year ended
tax ended Dec ended Dec Jun 21
21 20
-------------------------------------
GBP GBP GBP
------------------------------------- ------------ ------------ ------------
Net fee income 29,839,500 22,599,770 52,450,936
Administrative expenses (14,282,692) (11,355,646) (25,631,432)
Net interest paid (72,107) (54,479) (117,063)
------------------------------------- ------------ ------------ ------------
Underlying profit before tax 15,484,701 11,189,645 26,702,441
------------------------------------- ------------ ------------ ------------
(Deduct)/add back:
(Loss)/gain on investments (33,142) 454,278 540,172
Acquisition-related costs - (1,743,424) (1,743,424)
Amortisation on acquired intangibles (1,876,979) (1,083,395) (3,250,185)
------------------------------------- ------------ ------------ ------------
Profit before tax 13,574,580 8,817,104 22,249,004
------------------------------------- ------------ ------------ ------------
Cybersecurity update
In order to counter evolving cybersecurity threats, the Group
has recently engaged an external vendor to assess our overall
program's operating effectiveness, identify gaps and recommend
enhancements.
All employees will continue to receive training on a variety of
cybersecurity topics throughout the year. We are also expanding the
Diversity/Equality/Inclusion training provided in 2021 to include
additional related topics.
CLIG KPI
As noted in the 2021 Annual Report and Accounts, due to the
continued diversification of CLIG's business away from CLIM's core
EM strategy, the comparison to MXEF (MSCI EM Index) as a Key
Performance Indicator (KPI) is no longer relevant. We retain the
share price KPI to show the total return of CLIG over a market
cycle. The goal of this KPI is for the total return (share price
plus dividends) to compound annually in a range of 7.5% to 12.5%
over a five-year period. This KPI is meant to stretch the
management team, without incentivising managers to take undue
levels of risk.
For the five years ended 31st December 2021, CLIG's cumulative
total return was 108.7%, or 15.8% annualised, which exceeded the
KPI by 3.3 percentage points on an annualised basis. Since listing
in April 2006, the annualised return of a CLIG share is 14.4%. All
values are sourced from Bloomberg.
CLIG outlook
Efforts to diversify from CLIM's EM-centric strategy via
development of the INTL strategy proved timely with the
underperformance of EM equities over the past five years relative
to other equity asset classes. We believe that ongoing growth via
diversification, including the merger with KIM, will continue to
benefit all stakeholders by reducing the volatility of earnings and
broadening our client base. The support of our stakeholders is
appreciated as we continue to grow the combined business.
We remain guided in our decision-making by considering the best
interests of our three major stakeholders - Clients, Employees, and
Shareholders. We operate in a global market environment which
remains volatile. Investors are concerned by a variety of factors
including inflationary pressures, the response of central banks,
geopolitical risks and the ongoing nature of the pandemic.
Nevertheless, our continued strong cash position, while allowing
for the payment of a special dividend, maintains a margin of safety
for the Group in the face of any sustained downturn in markets and
FuM.
Additionally, the efforts of our colleagues at both CLIM and KIM
during another challenging six-month period is a key
differentiator. They remain committed to the business and their
responsibilities in the face of ongoing volatility and uncertainty
caused by the ongoing pandemic. The Group has largely been spared
from the impact of "The Great Resignation", and we hope that our
colleagues continue to feel supported and valued, while also
recognising the impact and contribution of their hard work being
reflected in the strong position of the larger Group. Their
attitude, perseverance, and determination are the engine room that
continue to drive this Group forward.
Tom Griffith
Chief Executive Officer
17th February 2022
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 31ST DECEMBER 2021
Six months Six months
ended ended Year ended
31st Dec 31st Dec 30th June
2021 2020 2021
(unaudited) (unaudited) (audited)
Note GBP GBP GBP
================================== ==== ============ ============ ============
Revenue
Gross fee income 2 31,444,729 23,733,759 55,123,274
Commissions payable (782,728) (358,662) (1,100,708)
Custody fees payable (822,501) (775,327) (1,571,630)
================================== ==== ============ ============ ============
Net fee income 29,839,500 22,599,770 52,450,936
================================== ==== ============ ============ ============
Administrative expenses
Employee costs 11,162,624 8,853,182 20,045,406
Other administrative
expenses 2,767,044 2,139,428 4,866,625
Depreciation and amortisation 2,230,003 1,446,431 3,969,586
================================== ==== ============ ============ ============
(16,159,671) (12,439,041) (28,881,617)
Operating profit before
exceptional item 13,679,829 10,160,729 23,569,319
Exceptional item
Acquisition-related costs - (1,743,424) (1,743,424)
================================== ==== ============ ============ ============
Operating profit 13,679,829 8,417,305 21,825,895
================================== ==== ============ ============ ============
Net interest (payable)/receivable
and similar (losses)/gains 3 (105,249) 399,799 423,109
================================== ==== ============ ============ ============
Profit before taxation 13,574,580 8,817,104 22,249,004
Income tax expense (3,021,473) (2,241,835) (5,258,486)
================================== ==== ============ ============ ============
Profit for the period 10,553,107 6,575,269 16,990,518
================================== ==== ============ ============ ============
Profit attributable to:
Non-controlling interests (4,093) 12,330 19,285
Equity shareholders of
the parent 10,557,200 6,562,939 16,971,233
================================== ==== ============ ============ ============
Basic earnings per share 4 21.5p 17.7p 39.4p
================================== ==== ============ ============ ============
Diluted earnings per
share 4 21.2p 17.4p 38.8p
================================== ==== ============ ============ ============
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 31ST DECEMBER 2021
Six months Six months
ended ended Year ended
==================================
31st Dec 31st Dec 30th June
2021 2020 2021
==================================
(unaudited) (unaudited) (audited)
GBP GBP GBP
================================== ============ =========== ============
Profit for the period 10,553,107 6,575,269 16,990,518
Other comprehensive income:
Items that may be subsequently
reclassified to income statement
Foreign currency translation
difference 2,064,275 (175,923) (6,675,136)
---------------------------------- ------------ ----------- ------------
Total comprehensive income
for the period 12,617,382 6,399,346 10,315,382
================================== ============ =========== ============
Attributable to:
Equity shareholders of the
parent 12,621,475 6,387,016 10,296,097
Non-controlling interests (4,093) 12,330 19,285
---------------------------------- ------------ ----------- ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31ST DECEMBER 2021
31st Dec 31st Dec 30th June
2021 2020 2021
(unaudited) (unaudited) (audited)
=============================
Note GBP GBP GBP
============================= ==== ============= ============= ==============
Non--current assets
Property and equipment 2 541,920 512,846 455,983
Right-of-use assets 2 2,483,666 1,863,368 2,757,179
Intangible assets 2,5 101,119,637 110,260,241 100,961,992
Other financial assets 6,210,092 4,326,183 4,373,485
Deferred tax asset 370,265 317,371 366,405
============================= ==== ============= ============= ==============
110,725,580 117,280,009 108,915,044
============================= ==== ============= ============= ==============
Current assets
Trade and other receivables 6,484,325 7,011,563 6,953,470
Cash and cash equivalents 24,506,056 17,545,110 25,514,619
============================= ==== ============= ============= ==============
30,990,381 24,556,673 32,468,089
============================= ==== ============= ============= ==============
Current liabilities
Trade and other payables (7,031,598) (5,910,861) (8,260,597)
Lease liabilities (402,151) (584,404) (392,954)
Current tax payable (1,374,356) (2,061,263) (1,367,564)
============================= ==== ============= ============= ==============
Creditors, amounts
falling due within
one year (8,808,105) (8,556,528) (10,021,115)
============================= ==== ============= ============= ==============
Net current assets 22,182,276 16,000,145 22,446,974
============================= ==== ============= ============= ==============
Total assets less
current liabilities 132,907,856 133,280,154 131,362,018
----------------------------- ---- ------------- ------------- --------------
Non--current liabilities
Lease liabilities (2,126,921) (1,301,128) (2,348,101)
Deferred tax liability (8,389,334) (9,809,808) (8,696,813)
Net assets 122,391,601 122,169,218 120,317,104
============================= ==== ============= ============= ==============
Capital and reserves
Share capital 506,791 506,791 506,791
Share premium account 2,256,104 2,256,104 2,256,104
Merger relief reserve 101,538,413 101,538,413 101,538,413
Investment in own
shares 6 (6,926,039) (4,575,581) (6,068,431)
Share option reserve 168,935 186,470 195,436
EIP share reserve 1,071,618 900,795 1,282.884
Foreign currency differences
reserve (4,564,976) (130,038) (6,629,251)
Capital redemption
reserve 26,107 26,107 26,107
Retained earnings 28,129,274 21,277,645 27,019,584
============================= ==== ============= ============= ==============
Attributable to:
Equity shareholders
of the parent 122,206,227 121,986,706 120,127,637
Non-controlling interests 185,374 182,512 189,467
----------------------------- ---- ------------- ------------- --------------
Total equity 122,391,601 122,169,218 120,317,104
============================= ==== ============= ============= ==============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 31ST DECEMBER 2021
Total
Foreign Capital attributable
Share Merger Investment Share EIP currency redemption to
Share premium relief in own option share diff reserve Retained share-
capital account reserve shares reserve reserve reserve GBP earnings holders NCI Total
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
------------------- --------- ----------- ------------- ------------- ---------- ----------- ------------- ----------- ------------- -------------- --------- --------------
At 1st July
2021 506,791 2,256,104 101,538,413 (6,068,431) 195,436 1,282,884 (6,629,251) 26,107 27,019,584 120,127,637 189,467 120,317,104
Profit for
the period - - - - - - - - 10,557,200 10,557,200 (4,093) 10,553,107
Other comprehensive
income - - - - - - 2,064,275 - - 2,064,275 - 2,064,275
Total comprehensive
income - - - - - 2,064,275 - 10,557,200 12,621,475 (4,093) 12,617,382
Transactions
with owners
Share option
exercise - - - 124,250 (12,787) - - - 12,787 124,250 - 124,250
Purchase
of own shares - - - (2,349,321) - - - - - (2,349,321) - (2,349,321)
Share-based
payment - - - - 17,285 465,900 - - - 483,185 - 483,185
EIP
vesting/forfeiture - - - 1,367,463 - (677,166) - - - 690,297 - 690,297
Deferred
tax on share
options - - - - (30,999) - - - (2,992) (33,991) - (33,991)
Current
tax on share
options - - - - - - - - 12,890 12,890 - 12,890
Dividends
paid - - - - - - - - (9,470,195) (9,470,195) - (9,470,195)
------------------- --------- ----------- ------------- ------------- ---------- ----------- ------------- ----------- ------------- -------------- --------- --------------
Total transactions
with owners - - - (857,608) (26,501) (211,266) - - (9,447,510) (10,542,885) - (10,542,885)
------------------- --------- ----------- ------------- ------------- ---------- ----------- ------------- ----------- ------------- -------------- --------- --------------
As at
31st December
2021 506,791 2,256,104 101,538,413 (6,926,039) 168,935 1,071,618 (4,564,976) 26,107 28,129,274 122,206,227 185,374 122,391,601
------------------- --------- ----------- ------------- ------------- ---------- ----------- ------------- ----------- ------------- -------------- --------- --------------
Total
Foreign attributable
Share Share Merger Investment Share EIP currency Capital to
capital premium relief in own option share diff redemption Retained share-
GBP account reserve shares reserve reserve reserve reserve earnings holders NCI Total
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
------------------- --------- ----------- ------------- ------------- ---------- ----------- ----------- ----------- ------------- ------------- --------- -------------
At 1st July
2020 265,607 2,256,104 - (5,765,993) 241,467 1,232,064 45,885 26,107 20,626,405 18,927,646 170,182 19,097,828
Profit for
the period - - - - - - - - 6,562,939 6,562,939 12,330 6,575,269
Other comprehensive
income - - - - - - (175,923) - - (175,923) - (175,923)
------------------- --------- ----------- ------------- ------------- ---------- ----------- ----------- ----------- ------------- ------------- --------- -------------
Total comprehensive
income - - - - - (175,923) - 6,562,939 6,387,016 12,330 6,399,346
Transactions
with owners
Issue of
ordinary
shares on
merger 241,184 - 101,538,413 - - - - - - 101,779,597 - 101,779,597
Share issue
costs - - - - - - - - (967,880) (967,880) - (967,880)
Share option
exercise - - - 221,712 (34,709) - - - 34,709 221,712 - 221,712
Purchase
of own shares - - - (401,288) - - - - - (401,288) - (401,288)
Share-based
payment - - - - (20,288) 371,035 - - - 350,747 - 350,747
EIP
vesting/forfeiture - - - 1,369,988 - (702,304) - - - 667,684 - 667,684
Deferred
tax on share
options - - - - - - - - 1,777 1,777 - 1,777
Dividends
paid - - - - - - - - (4,980,305) (4,980,305) - (4,980,305)
------------------- --------- ----------- ------------- ------------- ---------- ----------- ----------- ----------- ------------- ------------- --------- -------------
Total transactions
with owners 241,184 - 101,538,413 1,190,412 (54,997) (331,269) - - (5,911,699) 96,672,044 - 96,672,044
------------------- --------- ----------- ------------- ------------- ---------- ----------- ----------- ----------- ------------- ------------- --------- -------------
As at
31st December
2020 506,791 2,256,104 101,538,413 (4,575,581) 186,470 900,795 (130,038) 26,107 21,277,645 121,986,706 182,512 122,169,218
------------------- --------- ----------- ------------- ------------- ---------- ----------- ----------- ----------- ------------- ------------- --------- -------------
Total
attributable
Share Investment Share EIP Foreign Capital to
Share premium in own option share exchange redemption Retained share-
capital account Merger shares reserve reserve reserve reserve earnings holders NCI Total
GBP GBP reserve GBP GBP GBP GBP GBP GBP GBP GBP GBP
GBP
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ----------- ------------ ------------ -------- ------------
As at 1st
July 2020 265,607 2,256,104 - (5,765,993) 241,467 1,232,064 45,885 26,107 20,626,405 18,927,646 170,182 19,097,828
Profit for
the period - - - - - - - - 16,971,233 16,971,233 19,285 16,990,518
Other comprehensive
income - - - - - - (6,675,136) - - (6,675,136) - (6,675,136)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ----------- ------------ ------------ -------- ------------
Total comprehensive
income - - - - - - (6,675,136) - 16,971,233 10,296,097 19,285 10,315,382
Transactions
with owners
Issue of
ordinary
shares on
merger 241,184 - 101,538,413 - - - - - - 101,779,597 - 101,779,597
Share issue
costs - - - - - - - - (967,881) (967,881) - (967,881)
Share option
exercise - - - 830,819 (119,787) - - - 119,787 830,819 - 830,819
Purchase
of own shares - - - (2,503,244) - - - - - (2,503,244) - (2,503,244)
Share-based
payment - - - - (12,023) 760,645 - - - 748,622 - 748,622
EIP
vesting/forfeiture - - - 1,369,987 - (709,825) - - - 660,162 - 660,162
Deferred
tax on share
options - - - - 85,779 - - - (20,574) 65,205 - 65,205
Current tax
on share
options - - - - - - - - 33,738 33,738 - 33,738
Dividends
paid - - - - - - - (9,743,124) (9,743,124) - (9,743,124)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ----------- ------------ ------------ -------- ------------
Total transactions
with owners 241,184 - 101,538,413 (302,438) (46,031) 50,820 - - (10,578,054) 90,903,894 - 90,903,894
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ----------- ------------ ------------ -------- ------------
As at 30th
June 2021 506,791 2,256,104 101,538,413 (6,068,431) 195,436 1,282,884 (6,629,251) 26,107 27,019,584 120,127,637 189,467 120,317,104
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ----------- ------------ ------------ -------- ------------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 31ST DECEMBER 2021
Six months Six months
ended ended Year ended
====================================
31st Dec 31st Dec 30th June
2021 2020 2021
====================================
(unaudited) (unaudited)** (audited)
Note GBP GBP GBP
==================================== ==== ============= ============= =============
Cash flow from operating
activities
Profit before taxation 13,574,580 8,817,104 22,249,004
Adjustments for:
Depreciation of property
and equipment 89,650 95,595 187,714
Depreciation of right-of-use
assets 259,144 242,037 492,730
Amortisation of intangible
assets 5 1,881,209 1,108,799 3,289,142
Share-based payment charge/(credit) 17,285 (20,288) (12,023)
EIP-related charge 466,945 548,098 802,314
Loss/(gain) on investments 3 33,142 (454,278) (540,172)
Interest receivable 3 (4,926) (12,823) (17,689)
Interest payable 3 77,033 67,302 134,752
Translation adjustments 185,970 (35,628) 33,529
------------------------------------ ---- ------------- ------------- -------------
Cash generated from operations
before changes in working
capital 16,580,032 10,355,918 26,619,301
Decrease/(increase) in
trade and other receivables 469,138 (235,649) (439,607)
(Decrease)/(increase)
in trade and other payables (540,999) 140,932 2,800,465
------------------------------------ ---- ------------- ------------- -------------
Cash generated from operations 16,508,171 12,261,201 28,980,159
Interest received 3 4,926 12,823 17,689
Interest paid on leased
assets 3 (77,033) (67,302) (133,827)
Interest paid - - (925)
Taxation paid (3,496,583) (1,646,534) (5,841,493)
==================================== ==== ============= ============= =============
Net cash generated from
operating activities 12,939,481 8,560,188 23,021,603
==================================== ==== ============= ============= =============
Cash flow from investing
activities
Purchase of property and
equipment and intangibles (173,807) (55,314) (93,342)
Purchase of non-current
financial assets (1,889,216) - (715)
Proceeds from sale of
non-current financial
assets 7,080 - -
Cash consideration paid
on merger net of cash
acquired - 946,773 946,773
Net cash (used in)/generated
from investing activities (2,055,943) 891,459 852,716
==================================== ==== ============= ============= =============
Cash flow from financing
activities
Ordinary dividends paid 8 (9,470,195) (4,980,305) (9,743,124)
Purchase of own shares
by employee benefit trust (2,349,321) (401,288) (2,503,244)
Proceeds from sale of
own shares by employee
benefit trust 124,250 221,712 830,819
Payment of lease liabilities (243,459) (247,139) (486,680)
Share issue costs - (967,881) (967,881)
Net cash used in financing
activities (11,938,725) (6,374,901) (12,870,110)
==================================== ==== ============= ============= =============
Net (decrease)/increase
in cash and cash equivalents (1,055,187) 3,076,746 11,004,209
Cash and cash equivalents
at start of period 25,514,619 14,594,333 14,594,333
Cash held in funds* 41,574 12,588 20,357
Effect of exchange rate
changes 5,050 (138,557) (104,280)
==================================== ==== ============= ============= =============
Cash and cash equivalents
at end of period 24,506,056 17,545,110 25,514,619
==================================== ==== ============= ============= =============
*Cash held in funds was consolidated using accounts drawn up as
at end of period.
**Following an FRC corporate reporting review of the Group's
2020 Annual Report and Accounts, in accordance with IAS 7 paragraph
16, acquisition-related costs and share issue costs disclosed as
cash flows from investing activities in the 2020/2021 half year
report have been restated as cash flows from operating and
financing activities within the 2020 comparative above. This
restatement does not impact closing cash; it solely relates to the
classification of these 2020 exceptional cash outflows as operating
activities and net cash used in financing activities respectively
as opposed to investing activities as previously reported. Refer
note 11 'Restatement of comparative cash flow information'.
NOTES
1 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
The financial information contained herein is unaudited and does
not comprise statutory financial information within the meaning of
section 434 of the Companies Act 2006. The information for the year
ended 30th June 2021 has been extracted from the latest published
audited accounts and delivered to the Registrar of Companies. The
report of the independent auditor on those financial statements
contained no qualification or statement under s498(2) or (3) of the
Companies Act 2006.
These interim financial statements have been prepared in
accordance with the UK-adopted International Accounting Standard 34
'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. The accounting policies adopted and the
estimates and judgements used in the preparation of the unaudited
consolidated financial statements are consistent with those set out
and applied in the statutory accounts of the Group for the year
ended 30th June 2021, which were prepared in accordance with
International Financial Reporting Standards (IFRSs) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006.
The consolidated financial information contained within this
report incorporates the results, cash flows and financial position
of the Company and its subsidiaries for the period to 31st December
2021.
Group companies are regulated and perform annual capital
adequacy and liquidity assessments, which incorporates a series of
stress tests on the Group's financial position over a three-year
period from 30th November 2021. These forecasts have been prepared
taking into account the potential impact of COVID-19 on the Group's
operations.
The Group's financial projections and the capital adequacy and
liquidity assessments provide comfort that the Group has adequate
financial and regulatory resources to continue in operational
existence for the foreseeable future. Accordingly, the Directors
continue to adopt the going concern basis of accounting in
preparing the interim financial statements.
New or amended accounting standards and interpretations
adopted
The Group has adopted all relevant new or amended International
Accounting Standards and interpretations as adopted by the UK that
are mandatory for the current reporting period. Any new or amended
accounting standards that are not mandatory have not been early
adopted. None of the standards not yet effective are expected to
have a material impact on the Group's financial statements.
2 SEGMENTAL ANALYSIS
The Directors consider that the Group has only one reportable
segment, namely asset management, and hence only analysis by
geographical location is given.
Europe
USA Canada UK (ex UK) Other Total
GBP GBP GBP GBP GBP GBP
======================= ============ =========== ========= =========== ======= ============
Six months to 31st
Dec 2021
Gross fee income 29,950,594 739,166 160,150 594,819 - 31,444,729
Non-current assets:
Property and equipment 262,246 - 255,745 - 23,929 541,920
Right-of-use assets 1,278,965 - 1,174,344 - 30,357 2,483,666
Intangible assets 101,116,490 - 3,147 - - 101,119,637
Six months to 31st
Dec 2020
Gross fee income 22,387,190 699,921 163,838 482,810 - 23,733,759
Non-current assets:
Property and equipment 184,989 - 296,693 - 31,164 512,846
Right-of-use assets 394,820 - 1,352,725 - 115,823 1,863,368
Intangible assets 110,248,634 - 11,607 - - 110,260,241
======================= ============ =========== ========= =========== ======= ============
Year to 30th June
2021
Gross fee income 52,215,280 1,458,957 356,462 1,092,575 - 55,123,274
Non-current assets:
Property and equipment 175,387 - 254,197 - 26,399 455,983
Right-of-use assets 1,421,279 - 1,263,534 - 72,366 2,757,179
Intangible assets 100,954,615 - 7,377 - - 100,961,992
----------------------- ------------ ----------- --------- ----------- ------- ------------
The Group has classified gross fee income based on the domicile
of its clients and non-current assets based on where the assets are
held.
Included in gross fee income are fees of GBP2,966,412 (year to
30th June 2021 - GBP5,470,051; six months to 31st December 2020 -
GBP2,488,298) which arose from fee income from the Group's largest
customer. No other single customer contributed 10 per cent or more
to the Group's revenue in any of the reporting periods.
3 NET INTEREST (PAYABLE)/RECEIVABLE AND SIMILAR (LOSSES)/GAINS
Six months Six months Year ended
ended ended
=============================
31st Dec 31st Dec 30th June
2021 2020 2021
=============================
(unaudited) (unaudited) (audited)
GBP GBP GBP
============================= ================ ================ ============
Interest on bank deposit 4,926 12,823 17,689
Unrealised (loss)/gain
on investments (36,511) 454,278 540,172
Realised gain on investments 3,369 - -
Interest payable on lease
liabilities (77,033) (67,302) (133,827)
Interest payable on restated
US tax returns - - (925)
(105,249) 399,799 423,109
============================= ================ ================ ============
4 EARNINGS PER SHARE
The calculation of earnings per share is based on the profit for
the period attributable to the equity shareholders of the parent
divided by the weighted average number of ordinary shares in issue
for the six months ended 31st December 2021.
As set out in note 6 the Employee Benefit Trust held 1,689,428
ordinary shares in the Company as at 31st December 2021. The
Trustees of the Trust have waived all rights to dividends
associated with these shares. In accordance with IAS 33 "Earnings
per share", the ordinary shares held by the Employee Benefit Trust
have been excluded from the calculation of the weighted average
number of ordinary shares in issue.
The calculation of diluted earnings per share is based on the
profit for the period attributable to the equity shareholders of
the parent divided by the diluted weighted average number of
ordinary shares in issue for the six months ended 31st December
2021.
Reported earnings per share
Six months Six months Year ended
ended ended
==============================
31st Dec 2021 31st Dec 2020 30th June
2021
==============================
(unaudited) (unaudited) (audited)
GBP GBP GBP
============================== ========================== ========================== ============
Profit attributable to
the equity shareholders
of the parent for basic
earnings 10,557,200 6,562,939 16,971,233
------------------------------ -------------------------- -------------------------- ------------
Number of shares Number of Number of
shares shares
------------------------------ -------------------------- -------------------------- ------------
Issued ordinary shares
as at 1st July 50,679,095 26,560,707 26,560,707
Effect of own shares held
by EBT (1,558,012) (1,537,864) (1,502,266)
Effect of shares issued
in the period - 12,059,194 18,039,233
------------------------------ -------------------------- -------------------------- ------------
Weighted average shares
in issue 49,121,083 37,082,037 43,097,674
Effect of movements in
share options and EIP awards 636,718 615,017 677,739
------------------------------ -------------------------- -------------------------- ------------
Diluted weighted average
shares in issue 49,757,801 37,697,054 43,775,413
------------------------------ -------------------------- -------------------------- ------------
Basic earnings per share
(pence) 21.5 17.7 39.4
Diluted earnings per share
(pence) 21.2 17.4 38.8
------------------------------ -------------------------- -------------------------- ------------
Underlying earnings per share*
Underlying earnings per share is based on the underlying profit
after tax*, where profit after tax is adjusted for gain/loss on
investments, acquisition-related costs, amortisation of acquired
intangibles, their related tax impact and non-controlling
interest.
Underlying profit for calculating underlying earnings per
share
Six months Six months Year ended
ended ended
----------------------------------
31st Dec 2021 31st Dec 2020 30th June
2021
----------------------------------
(unaudited) (unaudited) (audited)
GBP GBP GBP
---------------------------------- ------------------------ ------------------------ ------------
Profit before tax 13,574,580 8,817,104 22,249,004
Add back/(deduct):
- Loss/(gain) on investments 33,142 (454,278) (540,172)
- Acquisition-related costs - 1,743,424 1,743,424
- Amortisation on acquired
intangibles 1,876,979 1,083,395 3,250,185
---------------------------------- ------------------------ ------------------------ ------------
Underlying profit before
tax 15,484,701 11,189,645 26,702,441
Tax expense as per the
consolidated income statement (3,021,473) (2,241,835) (5,258,486)
Tax effect of acquisition-related
costs and amortisation
of acquired intangibles (456,805) (117,190) (677,412)
Adjustment for NCI 4,093 (12,330) (19,285)
---------------------------------- ------------------------ ------------------------ ------------
Underlying profit after
tax for the calculation
of underlying earnings
per share 12,010,516 8,818,290 20,747,258
---------------------------------- ------------------------ ------------------------ ------------
Underlying earnings per
share (pence) 24.5 23.8 48.1
Underlying diluted earnings
per share (pence) 24.1 23.4 47.4
---------------------------------- ------------------------ ------------------------ ------------
* This is an Alternative Performance Measure (APM). Please refer
to the CEO review for more details on APMs.
5 INTANGIBLE ASSETS
31st 30th
31st December 2021 Dec 2020 Jun 2021
------------------------------------------------------------------------------- ------------ ------------
Direct Long
customer Distribution Trade term
Goodwill relationships channels name software Total Total Total
GBP GBP GBP GBP GBP GBP GBP GBP
-------------- ----------- -------------- ------------- ---------- --------- ------------ ------------ ------------
Cost
At start
of period 65,123,297 33,472,334 4,590,186 1,018,983 689,100 104,893,900 761,971 761,971
Acquired
on
acquisition - - - - - - 111,323,195 111,323,195
Currency
translation 1,438,949 559,626 66,246 18,856 (4,865) 2,078,812 (65,428) (7,191,266)
At close
of period 66,562,246 34,031,960 4,656,432 1,037,839 684,235 106,972,712 112,019,738 104,893,900
-------------- ----------- -------------- ------------- ---------- --------- ------------ ------------ ------------
Amortisation
charge
At start
of period - 2,673,300 522,535 54,350 681,723 3,931,908 714,662 714,662
Charge
for the
period - 1,543,828 301,764 31,387 4,230 2,061,955 1,108,799 3,289,142
Currency
translation - 36,867 7,207 749 (4,865) (140,788) (63,964) (71,896)
At close
of period - 4,253,995 831,506 86,486 681,088 5,853,075 1,759,497 3,931,908
-------------- ----------- -------------- ------------- ---------- --------- ------------ ------------ ------------
Net book
value 66,562,246 29,777,965 3,824,926 951,353 3,147 101,119,637 110,260,241 100,961,992
-------------- ----------- -------------- ------------- ---------- --------- ------------ ------------ ------------
Goodwill, direct client relationships, distribution channels and
trade name acquired through business combination relates to the
merger with KIM on 1st October 2020 (see note 7).
The fair values of KIM's direct customer relationships and the
distribution channels have been measured using a multi-period
excess earnings method. The model uses estimates of annual
attrition driving revenue from existing customers to derive a
forecast series of cash flows, which are discounted to a present
value to determine the fair values of KIM's direct customer
relationships and the distribution channels.
The fair value of KIM's trade name has been measured using a
relief from royalty method. The model uses estimates of royalty
rate and percentage of revenue attributable to trade name to derive
a forecast series of cash flows, which are discounted to a present
value to determine the fair value of KIM's trade name.
The total amortisation charged to the income statement for the
six months ended 31st December 2021 in relation to direct client
relationships, distribution channels and trade name, was
GBP1,876,979 (nine-month period from the date of the merger to 30th
June 2021 - GBP3,250,185, three-month period from the date of the
merger to 31st December 2020 - GBP1,083,395).
Impairment
Goodwill acquired through business combination is in relation to
the merger with KIM and relates to the acquired workforce and
future expected growth of the Cash Generating Unit (CGU).
The Group's policy is to test goodwill arising on acquisition
for impairment annually, or more frequently if changes in
circumstances indicate a possible impairment. The Group has
considered whether there have been any indicators of impairment
during the six months ended 31st December 2021, which would require
an impairment review to be performed. The Group has considered
indicators of impairment with regard to a number of factors,
including those outlined in IAS 36 'Impairment of assets'. Based
upon this review, the Group has concluded that there are no such
indicators of impairment as at 31st December 2021.
6 INVESTMENT IN OWN SHARES
Investment in own shares relates to City of London Investment
Group PLC shares held by an Employee Benefit Trust on behalf of
City of London Investment Group PLC.
At 31st December 2021 the Trust held 1,001,315 ordinary 1p
shares (30th June 2021 - 913,038; 31st December 2020 - 679,038), of
which 366,750 ordinary 1p shares (30th June 2021 - 405,750; 31st
December 2020 - 420,750) were subject to options in issue.
The Trust also held in custody 688,113 ordinary 1p shares (30th
June 2021 - 678,120; 31st December 2020 - 678,120) for employees in
relation to restricted share awards granted under the Group's
Employee Incentive Plan (EIP).
The Trust has waived its entitlement to receive dividends in
respect of the total shares held (31st December 2021 - 1,689,428;
30th June 2021 - 1,591,158; 31st December 2020 - 1,357,138).
7 BUSINESS COMBINATIONS
On 1st October 2020 City of London Investment Group PLC
completed the merger of Snowball Merger Sub, Inc. with and into
Karpus Management Inc. dba Karpus Investment Management (KIM), a
US-based investment management business, on a debt free basis, by
way of a scheme of arrangement in accordance with the New York
Business Corporation Law, with KIM being the surviving entity in
the Merger. CLIG acquired 100% of voting equity interest in KIM and
the merger was satisfied by issue of new ordinary shares and cash
for a total consideration of GBP101,887,540. KIM uses closed-end
funds (CEFs) amongst other securities as a means to gain exposure
for its client base comprising of US high net worth clients and
corporate accounts. It qualifies as a business as defined in IFRS 3
"Business Combinations". The merger is considered to be of
substantial strategic and financial benefit to the Group and its
shareholders.
Details of the net assets acquired, goodwill and purchase
consideration are detailed in note 6 on pages 107 to 108 of the
Annual Report and Accounts for the year ended 30th June 2021.
8 DIVIDS
A final dividend of 22p per share (gross amount payable
GBP11,149,401; net amount paid GBP9,470,195*) in respect of the
year ended 30th June 2021 was paid on 29th October 2021.
An interim dividend of 11p per share (2021 - 11p) (gross amount
payable GBP5,574,700; net amount payable GBP5,388,863*) in respect
of the year ending 30th June 2022 will be paid on 25th March 2022
to members registered at the close of business on 25th February
2022.
In addition, a special dividend of 13.5p per share (2021 - nil)
(gross amount payable GBP6,841,678; net amount payable
GBP6,613,605*) in respect of the year ending 30th June 2022 will be
paid on 25th March 2022 to members registered at the close of
business on 25th February 2022.
* Difference between gross and net amounts is on account of
shares held at EBT that do not receive dividend and 25% waived
dividend on new shares issued upon merger in accordance with the
lockup deed (applicable for dividends for the year ended 30th June
2021 only).
9 PRINCIPAL RISKS AND UNCERTAINTIES
In the course of conducting its business operations, the Group
is exposed to a variety of risks including market, liquidity,
operational and other risks that may be material and require
appropriate controls and on-going oversight.
The principal risks to which the Group will be exposed in the
second half of the financial year are substantially the same as
those described in the last annual report (see page 28 and 29 of
the Annual Report and Accounts for the year ended 30th June 2021),
being the impact of the COVID-19 pandemic, the potential for loss
of FuM as a result of poor investment performance, client
redemptions, breach of mandate guidelines or material error, loss
of key personnel, Technology/IT, cybersecurity and business
continuity, legal and regulatory risks.
Changes in market prices, such as foreign exchange rates and
equity prices will affect the Group's income and the value of its
investments.
Most of the Group's revenues, and a significant part of its
expenses, are denominated in currencies other than sterling,
principally US dollars. These revenues are derived from fee income
which is based upon the net asset value of accounts managed, and
have the benefit of a natural hedge by reference to the underlying
currencies in which investments are held. Inevitably, debtor and
creditor balances arise which in turn give rise to currency
exposures.
10 FINANCIAL INSTRUMENTS
The Group's financial assets include cash and cash equivalents,
investments and other receivables.
Its financial liabilities include accruals and other payables.
The fair value of the Group's financial assets and liabilities is
materially the same as the book value.
Fair value measurements recognised in the statement of financial
position
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into levels 1 to 3 based on the degree to which
the fair value is observable.
- Level 1: fair value derived from quoted prices (unadjusted)
in active markets for identical assets and liabilities.
- Level 2: fair value derived from inputs other than quoted
prices included within level 1 that are observable for
the assets or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
- Level 3: fair value derived from valuation techniques
that include inputs for the asset or liability that are
not based on observable market data.
The fair values of the financial instruments are determined as
follows:
- Investments for hedging purposes are valued using the
quoted bid price and shown under level 1.
- Investments in own funds are determined with reference
to the net asset value (NAV) of the fund. Where the NAV
is a quoted price the fair value is shown under level
1, where the NAV is not a quoted price the fair value
is shown under level 2.
- Forward currency trades are valued using the forward exchange
bid rates and are shown under level 2.
- Unlisted equity securities are valued using the net assets
of the underlying companies and are shown under Level
3.
The level within which the financial asset or liability is
classified is determined based on the lowest level of significant
input to the fair value measurement.
31st December 2021 Level 1 Level 2 Level Total
GBP GBP 3 GBP
GBP
-------------------------------- --------- --------- ----- ---------
Financial assets at fair value
through profit or loss
Investment in other non-current
financial assets 4,366,296 1,843,796 - 6,210,092
Forward currency trades - 37,650 - 37,650
-------------------------------- --------- --------- ----- ---------
Total 4,366,296 1,881,446 - 6,247,742
-------------------------------- --------- --------- ----- ---------
There are no financial liabilities at fair value at 31st
December 2021.
31st December 2020 Level 1 Level 2 Level Total
GBP GBP 3 GBP
GBP
================================ ========= ========= ===== =========
Financial assets at fair value
through profit or loss
Investment in other non-current
financial assets 2,424,277 1,901,906 - 4,326,183
Forward currency trades - 261,379 - 261,379
================================ ========= ========= ===== =========
Total 2,424,277 2,163,285 - 4,587,562
================================ ========= ========= ===== =========
There are no financial liabilities at fair value at 31st
December 2020.
30th June 2021 Level 1 Level 2 Level Total
GBP GBP 3 GBP
GBP
-------------------------------- --------- --------- ----- ---------
Financial assets at fair value
through profit or loss
Investment in other non-current
financial assets 2,498,719 1,874,766 - 4,373,485
-------------------------------- --------- --------- ----- ---------
Total 2,498,719 1,874,766 - 4,373,485
-------------------------------- --------- --------- ----- ---------
Financial liabilities at fair
value through profit or loss
Forward currency trades - 69,558 - 69,558
-------------------------------- --------- --------- ----- ---------
Total - 69,558 - 69,558
-------------------------------- --------- --------- ----- ---------
There were no transfers between any of the levels in the
reporting period.
All fair value gains and losses included in other comprehensive
income relate to the investment in own funds.
Where there is an impairment in the investment in own funds, the
loss is reported in the income statement. No impairment was
recognised during the period or the preceding year.
The fair value gain on the forward currency trades is offset in
the income statement by the foreign exchange losses on other
currency assets and liabilities held during the period and at the
period end. The net loss reported for the period is GBP19,116 (30th
June 2021: net loss GBP60,607; 31st December 2020: net loss
GBP3,416).
11 RESTATEMENT OF COMPARATIVE CASH FLOW INFORMATION
The FRC's corporate reporting review of the Group's Annual
Report and Accounts to 30th June 2020 highlighted that IAS 7
Statement of cash flows paragraph 16 prevents items being
classified as investing activities unless a corresponding asset is
also capitalised. Acquisition-related costs were incurred over both
the year ended 30th June 2020 and in the six months ended 31st
December 2020. The FRC's review was completed after the publication
of the interim financial statements for the six months ended 31st
December 2020 and thus the same restatement made to the full year
2020 financial statements has been made to correct the comparative
cash flow statement for the six months ended 31st December
2020.
Cash outflows related to acquisition-related costs of
GBP1,743,424 and share issue costs of GBP967,881 have now been
presented within cash flows from operating activities and financing
activities respectively as opposed to cash flows from investing
activities in the Consolidated cash flow statement.
Net cash generated from operating activities for the six months
ended 31st December 2020 has decreased by GBP1,743,424 from
GBP10,303,612 to GBP8,560,188, net cash used in investing
activities has decreased by GBP2,711,304 from cash used in
investing activities of GBP1,819,845 to cash generated of
GBP891,459, and net cash used in financing activities has increased
by GBP967,881 from GBP5,407,020 to GBP6,374,901.
Previously Restatement Restated
reported
-----------------------------
GBP GBP GBP
----------------------------- ----------- ----------- -----------
Cash flow statement line
item
Net cash generated from
operating activities 10,303,612 (1,743,424) 8,560,188
Acquisition-related costs (1,743,424) - (1,743,424)
Share issue costs (967,881) - (967,881)
Net cash (used in)/generated
by investing activities (1,819,845) 2,711,304 891,459
Net cash used in financing
activities (5,407,020) (967,881) (6,374,901)
----------------------------- ----------- ----------- -----------
The FRC's enquiries regarding this matter are now complete. It
must be noted that the FRC's review is limited to the published
2020 Annual Report and Accounts; it does not benefit from a
detailed understanding of underlying transactions and provides no
assurance that the Annual Report and Accounts are correct in all
material respects. Further details are provided within the Audit
and Risk Committee report included in Annual Report and Accounts
for the year ended 30th June 2021.
12 GENERAL
The interim financial statements for the six months ended 31st
December 2021 were approved by the Board on 17th February 2022.
These financial statements are unaudited, but they have been
reviewed by the auditors, having regard to International Standard
on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board.
Copies of this statement are available on our website
www.clig.co.uk.
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
The Directors confirm that to the best of our knowledge:
- The condensed set of financial statements has been prepared
in accordance with IAS34 Interim Financial Reporting as
adopted by the UK; and
- The Half Year Report includes a fair review of the information
required by:
- DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have
occurred during the first six months of the financial
year and their impact on the condensed set of financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the year;
and
- DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken
place in the first six months of the current financial
year and that have materially affected the financial position
or performance of the Group during that period; and any
changes in the related party transactions described in
the last annual report that could do so.
The Directors of City of London Investment Group PLC are as
listed in the Annual Report and Accounts 2020-2021. A list of
current Directors is maintained at www.clig.co.uk.
By order of the Board
Tom Griffith
Chief Executive Officer
INDEPENT REVIEW REPORT TO CITY OF LONDON INVESTMENT GROUP
PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31st December 2021 which comprises the
Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Financial Position,
Consolidated Statement of Changes in Equity, Consolidated Cash Flow
Statement and the related explanatory notes. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing and presenting the half-yearly financial report in
accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group will be prepared in accordance with UK-adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting" as contained in UK-adopted International
Accounting Standards.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31st
December 2021 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, "Interim
Financial Reporting" as contained in UK-adopted International
Accounting Standards, and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board and for the purpose of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority. Our review work has been undertaken so that we might
state to the Company those matters we are required to state to them
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
17th February 2022
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