REG - City of Lon Inv Grp - HALF YEAR RESULTS AND BOARD CHANGES
23/02/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240223:nRSW1765Ea&default-theme=true
RNS Number : 1765E City of London Investment Group PLC 23 February 2024
23rd February 2024
CITY OF LONDON INVESTMENT GROUP PLC
("City of London", "CLIG", "the Group" or "the Company")
HALF YEAR RESULTS TO 31ST DECEMBER 2023 AND BOARD CHANGES
City of London (LSE: CLIG) announces that it has today made available on its
website, https://www.clig.com/ (https://www.clig.com/) , the Half Year Report
and Financial Statements for the six months ended 31st December 2023.
The above document will 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
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
HALF YEAR SUMMARY
- Funds under Management (FuM) of $9.6 billion at 31st December 2023. This
compares with $9.4 billion at the beginning of this financial year on 1st July
2023 and $9.2 billion at 31st December 2022
- FuM at 31st January 2024 of $9.5 billion
- Net fee income representing the Group's management fees on FuM was $32.6
million (31st December 2022: $31.9 million)
- Underlying profit before tax* was $13.3 million (31st December 2022: $13.6
million). Profit before tax was $11.1 million (31st December 2022: $11.0
million)
- Maintained interim dividend of 11p per share (31st December 2022: 11p) payable
on 28th March 2024 to shareholders on the register on 1st March 2024
*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/1765E_1-2024-2-22.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1765E_1-2024-2-22.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.
BOARD CHANGES
CLIG is pleased to announce that Sarah Ing will be joining the Board as a
Non-Executive Director (NED) on 1st March 2024. Sarah is a qualified
chartered accountant with over 30 years of experience in the financial
services sector including audit, corporate finance, investment banking and
asset management. She is an experienced NED in quoted financial services
companies. Previously, Sarah founded and ran an investment management business
and was also a top-rated equity research analyst covering the financial
sector. Sarah is also an independent NED at CMC Markets plc, XPS Pensions
Group plc and Marex Group plc. She is the Chair of the Remuneration Committee
at CMC Markets plc, Chair of the Audit and Risk Committee and of the
Sustainability (ESG) Committee at XPS Pensions Group plc and at Marex Group
plc she is senior independent Director and Chair of the Audit and Compliance
Committee.
Upon joining Sarah will become a member of the Audit, Nomination and
Remuneration Committees.
There is no further information required to be disclosed pursuant to paragraph
9.6.13R of the Listing Rules.
The Group also announces that Jane Stabile, a Non-Executive Director and Chair
of the Nomination Committee, will be resigning from the Board on 29th February
2024, following a request from her to resign due to increasing commitments in
her own business. Rian Dartnell will take over as Chair of the Nomination
Committee.
Rian Dartnell, Chair of CLIG, said: "On behalf of the Board I would like to
welcome Sarah Ing. Sarah's extensive experience in asset management and her
record of delivering significant results across a range of businesses will add
an important dimension to the Board. We look forward to her contribution. We
would also like to thank Jane Stabile for her important contributions to CLIG
over the last five and a half years. We wish her well in her endeavours".
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 / James Hornigold
Zeus Capital Limited
Financial Adviser & Broker
Tel: +44 (0)20 3829 5000
CHAIR'S STATEMENT
Introduction
This is my first report to shareholders since becoming Chair in October 2023.
My goal is to work with our Board and management to ensure the conditions for
CLIG to grow and maintain its strong track record and client focus. We will do
this while maintaining the exacting fiduciary standards for which CLIG is
known and respected. We continue to engage with shareholders and investors
sharing how the strong teams and investment processes at CLIG drive
performance. In its fourth decade, the Group continues to be financially
strong and well-managed. As always, the team will pursue excellence in its
investing and maintain a focus on long-term success.
Over my investment management career, I have been an avid observer of
different investment cultures and have learned the importance of a contrarian
and supportive attitude when managing investment teams. Many asset managers
are pro-cyclical, meaning they invest and spend more when times are good.
Conversely, in downturns pressures build and budgets are slashed. It is
precisely to avoid this behaviour that CLIG maintains a conservative balance
sheet (with net cash) and has never had debt. Discounts in closed-end funds
(CEFs) tend to be widest during hard times. It is essential that we support
our teams and lend a hand, but particularly so when markets are down. This
calm and methodical orientation is key to our investment teams having the
equanimity to invest with conviction when opportunities present themselves.
I joined the CLIG Board the day the merger with KIM was completed on 1st
October 2020 and have observed your Group's management team making continuous
organisational and systems improvements in the integration process. This past
September, the Board and the teams from CLIM and KIM had their first Group
Strategy Meeting since the merger. The meetings were very important in
building camaraderie and gave everyone the opportunity to discuss CLIG's
strategic priorities. Both CLIM and KIM are team-oriented firms and benefit
from highly experienced employees, many of whom have worked together for
decades. It is exciting to see the teams bonding and working so well together.
Assets and performance
Group Funds under Management (FuM) went up by $152 million, an increase of 2%,
in the six months ended 31st December 2023 to $9.6 billion as compared to $9.4
billion as of 30th June 2023. CLIM's FuM increased by $54 million to $6.0
billion and KIM saw an increase of $98 million to $3.6 billion.
Over the six-month period, there were net outflows of $294 million across the
Group's strategies, led by Emerging Markets (EM) redemptions at CLIM and
outflows to meet individual expenses, taxes and required minimum distributions
from retirement accounts at KIM.
Relative investment performance at CLIM was positive for the Opportunistic
Value strategy, neutral for the International strategy and slightly negative
for the EM strategy, whereas relative investment performance at KIM was
positive for the Taxable Fixed Income strategy and Tax-sensitive Fixed Income
strategy, while negative for US Equity and Conservative Balanced mandates over
the six months ended December 2023.
Marketing and sales activity picked up significantly in January 2024 as
clients and prospects review their investment allocations. The Group is
focused on new mandates in a number of CLIG's asset classes with very good
long-term performance as CEF discounts are at compelling levels. Our business
development team is actively reaching out to clients and prospects to discuss
the current opportunity-rich environment.
Reporting currency
As mentioned in the Annual Report for the year ended 30th June 2023, the Board
decided to change the Group's financial reporting currency to US dollars with
effect from 1st July 2023. This allows us to present a more transparent
statement of comparative financial performance that neutralises currency
fluctuations. This is the first time the Group's results are being reported in
US dollars.
ESG
Historically, we have secured renewable energy for our London and Rochester NY
offices. During the period, we worked with service providers to convert the
energy that powers CLIM's West Chester, Pennsylvania office to a renewable
source. This improvement will come into effect during February 2024.
Business travel increased during the period with growth in our marketing
efforts as the team met clients and prospects. As mentioned above, we also
held our first Group Strategy Meeting for all Group employees and our Board in
September 2023 after a gap of four years. To offset the impact of increased
business travel, the Group has implemented a carbon offset programme.
All employees have attended our ongoing training programme directed towards
diversity, equity and inclusion. To reinforce awareness of their role in
protecting our network infrastructure, all employees receive monthly training
on the critical issue of cybersecurity.
Alongside adherence to CLIG's governance obligations at Board level, the Group
is strongly committed to regular workforce engagement sessions to develop a
closer relationship between employees and the Non-Executive Directors (NEDs)
who are not involved in the business on a day-to-day basis. Importantly, these
sessions are structured to encourage a rapport between the NEDs and employees.
NEDs spent over two days on-site with employees in a mix of formal
presentations, social and team building events during the Group Strategy
Meeting.
Your Board
On behalf of the Board and CLIG's employees, I would like to thank Barry
Aling, our excellent Chair of five years and a member of our Board since 2013,
for his outstanding service. Barry's high standards and astute judgment have
had a strong positive impact on CLIG. We look forward to maintaining close
touch with Barry and wish him a joyful retirement. I am pleased to announce
that Sarah Ing will be joining CLIG's Board as a Non-Executive Director as of
1st March 2024. Sarah is a highly effective and seasoned professional in the
financial services industry and brings significant Board experience. Sarah's
appointment follows a request by Jane Stabile to resign from the Board with
effect from 29th February 2024 due to increasing commitments in her own
business. On behalf of our Board, I would like to thank Jane for her important
contributions to CLIG over the last five and a half years. We wish her well in
her endeavours and look forward to maintaining close touch.
Dividends
Your Board is declaring an unchanged interim dividend of 11p per share, taking
into account
profits for the period. The Board continues to believe that the use of a
dividend cover policy based on rolling five-year periods provides a prudent
template that serves to protect shareholders from the market volatility that
can affect profits of asset management companies. The Board applies this
policy using Underlying Profits†. The interim dividend will be paid on 28th
March 2024 to those shareholders registered at the close of business on 1st
March 2024.
Shareholder engagement
Since our Annual General Meeting on 23rd October 2023, we have pursued a
strategy of engagement with our largest shareholder and have had a series of
constructive meetings. Discussions on strategy for CLIG's businesses have been
ongoing. We are making progress on a series of shared priorities, including an
enhanced focus on the management of our cash balances as well as maintaining
our commitment to expense management. We have also been engaging with our
other shareholders and, as always, plan to maintain transparency in our
ongoing dialogue.
Outlook
The current very wide discounts in CEFs remind me of my early investing days.
I first invested in an EM CEF in 1993, a very strong year for EM. During the
year, that fund surged in value and moved to a 10% premium to net asset value
at which point I sold it. When Alan Greenspan and the Fed began raising
interest rates in early 1994, I was then able to invest in well-managed CEFs
at 15-20% discounts at a time when emerging markets were in a severe
correction. I called it buying a double-discount. Two years earlier, Barry
Olliff founded CLIG to pursue a similar strategy. Little did I know then that
savvy George Karpus had begun investing in discounted CEFs in the US starting
in 1992. Our Founders Barry and George developed their investment processes
and teams to buy low and sell high. Now in our fourth decade, this spirit of
buying quality at discounts resonates strongly within the Group.
A talented investment manager we know describes his approach as investing
under a cloud. He uses clouds (bad news and uncertainty) as markers for
uncovering value below. Indeed, inflation, the ensuing interest tightening
cycle and geopolitical headwinds are presenting opportunities. It is notable
that emerging and international markets have substantially lagged the US
market since the merger. Indeed, the S&P index has delivered a cumulative
return of 49% in the 39-month period versus just 2% for EM and 23% for
international markets. At the same time, rising interest rates have created
opportunities for KIM's fixed income and municipals strategies. Relative
valuations are much lower in the markets where the Group has the majority of
its assets under management and discounts in our CEF portfolios are at
compelling levels. Our teams are energised and we remain constructive on the
outlook for performance at CLIG.
Thank you for your interest in City of London Investment Group.
Sincerely yours,
Rian Dartnell
Chair
22nd February 2024
†This is an Alternative Performance Measure (APM). Please refer to CEO
review for more details on APMs.
CHIEF EXECUTIVE OFFICER'S REVIEW
Investor headwinds
Investors have been wrestling with a series of shocks over the past four years
including the Covid-19 outbreak, the ensuing pandemic, post-Covid inflation,
the Russia-Ukraine war and now a new conflict in the Middle East. In
combination with the ongoing Russia-Ukraine conflict, the Israel-Hamas war has
put further pressures on energy prices and exacerbated global supply chain
difficulties.
Following eleven rate hikes since March 2022, the US Fed indicated no further
rate hikes were expected at its September 2023 meeting. Just a few short weeks
later, in early October, the Israel-Hamas war ignited, leading to instability
in the Middle East that rattled global financial markets and sent investors
scrambling to protect their portfolios from increased geopolitical risks.
In early November, market expectations were for the Fed to cut rates in 2024
supported further by the Fed's stance at their November meeting, reversing the
market downturn seen in October. Clients that had remained invested during the
recent market turbulence were rewarded with significant gains through
year-end.
FuM & flows
As shareholders will have seen from our interim trading update (announced on
22nd January 2024) and the monthly release of data on our website,
www.clig.co.uk, FuM have increased due to market rises over the six months to
the end of the calendar year as shown in Figure 1.
Figure 1. CLIG - FuM by line of business ($m)
CLIM 30 Jun 2020 30 Jun 2021 30 Jun 2022 30 Jun 2023 31 Dec 2023
$m % of CLIM total* $m % of CLIM total % of CLIG total $m % of CLIM total % of CLIG total $m % of CLIM total % of CLIG total $m % of CLIM total % of CLIG total
Emerging Markets 3,828 69% 5,393 72% 47% 3,703 64% 40% 3,580 61% 38% 3,578 60% 37%
International 1,244 23% 1,880 25% 17% 1,812 32% 20% 1,983 34% 21% 2,004 34% 21%
Opportunistic Value 256 5% 231 3% 2% 193 3% 2% 244 4% 3% 278 5% 3%
Frontier 175 3% 13 0% 0% 9 0% 0% 9 0% 0% 10 0% 0%
Other/REIT 9 0% 13 0% 0% 74 1% 1% 88 1% 1% 88 1% 1%
CLIM total 5,512 100% 7,530 100% 66% 5,791 100% 63% 5,904 100% 63% 5,958 100% 62%
KIM 30 Jun 2020 30 Jun 2021 30 Jun 2022 30 Jun 2023 31 Dec 2023
$m % of KIM total* $m % of KIM total % of CLIG total $m % of KIM total % of CLIG total $m % of KIM total % of CLIG total $m % of KIM total % of CLIG total
Retail 2,401 69% 2,804 72% 24% 2,419 70% 26% 2,441 69% 26% 2,472 68% 26%
Institutional 1,087 31% 1,115 28% 10% 1,014 30% 11% 1,079 31% 11% 1,146 32% 12%
KIM total 3,488 100% 3,919 100% 34% 3,433 100% 37% 3,520 100% 37% 3,618 100% 38%
CLIG total 11,449 100% 9,224 100% 9,424 100% 9,576 100%
*Denotes pre-merger percentages
Some individual clients, particularly those concerned about their retirement
assets, reduced their portfolio's market exposure locking in losses during
recent market downturns; instead choosing the safety of bank deposits and
money market vehicles paying high rates of interest. Marketing for new
mandates or additional investments becomes challenging, as the focus must
shift to maintaining existing client relationships.
Broadly speaking, the psychology of US individual investors has been
negatively impacted by rising interest rates and broad market losses in fixed
income assets in 2022 and continuing into part of 2023. This is compounded by
the aforementioned safety provided in bank deposits and money market funds, at
a higher interest rate than at any time over the last twenty years. Finally,
the ongoing drumbeat of geopolitical issues and risks add to the negative
mindset of investors.
The table in Figure 2 shows flows into and out of our various business
areas/strategies over the past four and a half years.
Figure 2. Net investment flows ($'000)
CLIM FYE Jun 2020 FYE Jun 2021 FYE Jun 2022 FYE Jun 2023 HYE Dec 2023
Emerging Markets (279,459) (275,493) (315,770) (205,924) (171,151)
International 551,102 (14,145) 452,554 (50,824) (89,815)
Opportunistic Value 45,914 (102,663) 617 34942 15,015
Frontier 16,178 (168,843) (4,748) - -
Other/REIT 4,600 - 79,133 (5,709) (2,631)
CLIM total 338,335 (561,144) 211,786 (227,515) (248,582)
KIM FYE Jun 2020 FYE Jun 2021* FYE Jun 2022 FYE Jun 2023 HYE Dec 2023
Retail 26,323 (104,222) (106,444) (141,952) (40,031)
Institutional (67,087) (130,911) (3,302) 12,530 (5,688)
KIM total (40,764) (235,133) (109,746) (129,422) (45,719)
*Includes net investment flows for Retail - (24,407) and Institutional -
(20,264) pertaining to period before 1st October 2020 (pre-merger)
Client asset retention was good throughout the turbulence of the past six
months relative to competitors and what industry statistics suggest.
The ongoing trend of outflows from active managers into passive managers
continued in 2023, but with an additional twist, as flows into money market
vehicles reached an all-time high for net inflows during calendar year 2023,
as reflected in the chart in Figure 3 on page 8 of the full interim report.
Finally, per Morningstar, after ten years of passive flows outpacing active
flows, there are more assets in passive managed investment vehicles than
active managed investment vehicles for the first time ever as illustrated in
Figure 3.
Investors in the Group's CEF strategies have outperformed their relevant
indices over the long term aided by the additional alpha contribution of
buying securities at a discount to Net Asset Value (NAV). Marketing activity
has picked up in January and we remain focused on our CEF strategies which
have good long-term performance and ample capacity.
Size-Weighted Average Discount (SWAD)
Markets have been volatile for an extended period of time since the outset of
the pandemic in early 2020 continuing into the latest quarter. Discounts are
historically wide across the strategies indicating considerable value as
illustrated in Figures 4 and 5 on pages 8 and 9 of the full interim report.
Currency exposure
Following the change in the Group's presentational currency with effect from
1st July 2023, the Group's interim results for the six-month period ended 31st
December 2023, and all subsequent financial information, will be prepared
using US dollars.
While fee income and the bulk of expenses will now be aligned in USD, c.33% of
Group's overheads are incurred in GBP that are subject to USD/GBP currency
rate fluctuations. Opposite to last year's six months interim report, on an
average, USD weakened by c.7% against GBP to 1.256 for the six months ended
31st December 2023 from 1.1759 for the six months ended 31st December 2022.
Expenses
With reduced FuM we have made some reductions in expenses which will benefit
the P&L, largely in FY2025 rather than FY2024. We will continue to reduce
our costs by taking more aggressive action in the event that FuM falls as we
move closer to the current financial year end.
Over the six-month period, further investment was made in IT infrastructure
based on technology advancements allowing for significant monthly cost
reductions going forward. Additional increases over the same six-month period
in the prior financial year relate to salary and benefit costs along with
Group costs denominated in GBP as a result of sterling strengthening c.7% over
the period.
Total compensation for Group employees is comprised of salaries plus related
benefits and profit sharing. Salary levels are moderate relative to our
competitors as a result of the volatility of markets causing variability in
our results. The modest increase in salary and benefit costs over the FY2024
interim period is a product of a tight labour market and continued
inflationary pressures. The group has responded to these pressures focusing
salary increases on key personnel and areas where the shortage of talent is
most acute.
With this said, total compensation overall for Group employees has declined
over the past two years reflecting declining FuM and the strong link between
remuneration and profit.
As stated in the Remuneration report contained within our FY2023 Annual
Report, rather than making large numbers of employees redundant during market
downturns and negatively impacting the business, the variable component of
compensation can take the brunt of reduced revenues. Maintaining a high ratio
of variable pay for all employees underscores the message that we are a team
and rewards should be reduced when the Group underperforms. Variable pay can
be adjusted in line with profitability, and aligns employees with
shareholders.
The chart in Figure 6 on page 10 of the full interim report illustrates this
approach in action by showing a decrease in total compensation post FY2022
when accounting for a 22% drop in the profit share component of compensation.
Financial results
Net fee income in the first six months of FY2024 of $32.6 million is slightly
higher over the same period in FY2023 of $31.9 million (based on conversion of
actual net fee income of £27.3 million at the average USD/GBP exchange rate).
CLIM's diversification provides the ability to acquire and retain additional
sources of FuM based revenues that otherwise would not have been possible -
this includes new clients, but as importantly provides clients looking to
diversify from EM with alternative options. Over the past ten years, we have
seen a marked shift in "EM fatigue", which has been driven by geopolitical
events, underperformance of EM equity relative to other regions, and an
overall lack of growth.
The Group's profit before tax increased slightly for the six months ended 31st
December 2023 to $11.1 million as compared to $11.0 million for the six months
ended 31st December 2022*. However, underlying profit before tax for the six
months ended 31st December 2023 fell by c.2% to $13.3 million from $13.6
million for the six months ended 31st December 2022 due to the adjustment of
higher gains on investments of $0.6 million in the six months ended 31st
December 2023 as compared to $0.2 million of gains in the six months ended
31st December 2022. EPS for the six months ended 31st December 2023 decreased
by c.2% to 16.9¢ (13.4p) per share from 17.2¢ (15.0p) per share for the six
months ended 31st December 2022. Underlying EPS for the six months ended 31st
December 2023 decreased by c.4% to 20.4¢ (16.2p) per share from 21.3¢
(18.4p) per share for the six months ended 31st December 2022.
Dividend cover chart
We have provided an illustrative framework in Figure 7 on page 11 of the full
interim report to enable shareholders and other interested parties to
calculate our post-tax profits based upon some key assumptions. The dividend
cover chart shows the quarterly estimated cost of a maintained dividend
against actual post-tax profits for last year, the current six months ended
31st December 2023, and the assumed post-tax profit for the six months ended
30th June 2024 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:
Earnings per share in pence - Earnings per share in US dollars as per the
income statement is converted to sterling using the average exchange rate for
the period. Refer to note 4 in the interim financial statements.
Underlying profit before tax - Profit before tax, adjusted for gain/loss on
investments 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 the income statement and the tax effect of adjustments, divided by the
weighted average number of shares in issue as at the period end. Underlying
earnings per share is converted to sterling using the average exchange rate
for the period. Refer to note 4 in the interim financial statements for the
reconciliation.
Six months ended
Six months ended 31st Dec 2022* Year ended
31st Dec 2023 30th Jun 2023*
$'000 $'000 $'000
Profit before tax 11,069 10,965 22,127
Add back/(deduct):
Gain on investments (560) (195) (689)
Amortisation on acquired intangibles 2,799 2,800 5,599
Underlying profit before tax 13,308 13,570 27,037
CLIG KPI
CLIG's management team has a share price Key Performance Indicator (KPI) which
is for the total return (share price plus dividends) of a CLIG share to
compound annually in a range of 7.5% to 12.5% over a rolling 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
2023, CLIG's cumulative total return in GBP was 25.7%, or 4.7% annualised,
this had recovered to 6.9% by 31st January 2024. CLIG's management team is
monitoring this development, as the broad market declines in October
precipitated this underperformance and will update shareholders in our June
2024 Annual Report and Accounts. Since listing in April 2006, the annualised
return is 11.0%.
Corporate Governance and Stakeholders
The preceding six months saw a passing of the Chair baton from Barry Aling to
Rian Dartnell, as Barry retired after a ten-year tenure on the CLIG Board,
including the last five as Chair. On behalf of my fellow Group Executive
Committee (GEC), and CLIG employees overall, I want to say thank you to Barry
for his support and leadership.
In Barry's final statement as Chair, he stated that CLIG is committed to
meeting the standards of our UK listing although it has created a meaningful
burden in terms of human and financial resources. To put this statement into
historical perspective, CLIG moved from AIM to the main market listing of the
LSE in October 2010, in order to meet the requirements of increased
transparency on corporate governance initiatives from UK institutional
investors. This successful transition to the main market was critical in
broadening the pool of potential investors and increasing demand for Group
shares. The stringent demands on the Group from the UK Corporate Governance
Code help us in our role of acting as a steward of our shareholders' trust and
remaining on the main market is important to the future of the Group in
retaining a larger existing and prospective shareholder base. Recent
announcements from the FCA that it will be reducing the regulatory burden on
UK listed companies are a welcome development, and begin to address some of
the concerns raised in Barry Aling's final statement as Chair.
Environmental reporting update
Employees and management of the Group are committed to protecting the
environment in which we operate. We provide investment management services to
our clients which have a relatively modest direct environmental impact. As
noted within our FY2023 Annual Report and Accounts, we plan to reduce
emissions where we can, and offset emissions where we cannot reduce. Below are
descriptions of actions taken at the Group level to 1) reduce carbon emissions
and 2) offset carbon emissions.
In terms of reducing carbon emissions, the electricity supplied to the London
office is via contracts backed by renewable energy sources, while the
Rochester office is primarily powered by wind power generated in New York
State. From February 2024 onwards, our West Chester, Pennsylvania office will
also be powered by renewable energy sources.
In terms of offsetting carbon emissions, in December 2023, we completed our
first offset of carbon emissions. The Group purchased carbon credits for the
carbon emitted from flights undertaken by Group employees during the current
financial year. These credits were purchased via Gold Standard
(www.goldstandard.org), in order to allay concerns about greenwashing or
paying away money for minimal or unreportable short-term impact. Gold
Standard's allocation methodology will fund projects that will save 173 tonnes
of CO2 emissions from being released into the atmosphere.
Cybersecurity update
In cybersecurity, employee education must be the priority for a company that
takes cybersecurity seriously, as employees are the gatekeepers to the Group's
network, files and data. We highlighted in our FY2023 Annual Report &
Accounts that all CLIG employees were given a Security Awareness Proficiency
Assessment, and that CLIG employees outperformed the industry average in all
seven categories, as well as overall scoring. We used the metrics provided by
the assessment to fine tune the focus of our cybersecurity training for the
rest of calendar year 2023.
We provide employees with monthly cybersecurity training via a third-party
portal, and participation is tracked to ensure that all Group employees
complete the training. All new hires are provided cybersecurity training upon
their start date.
Outside of the training provided to all employees, employees within the
Group's information technology department continue to strengthen and protect
our network infrastructure and remain vigilant in their analysis of potential
threat vectors.
CLIG outlook
In my CLIG outlook from the FY2023 Annual Reports and Accounts, I used the
phrase "with a following wind" to reference that the foundations for growth
have been laid, and the Group was poised for growth pending an improvement in
the overall market sentiment. The wind has not yet shifted, as CEF discounts
remain wide across multiple strategies. Despite a headwind versus a tailwind,
the Group is positioned to go further together, with thanks and appreciation
to our colleagues for navigating the rough seas.
Tom Griffith
Chief Executive Officer
22nd February 2024
* Comparative period results have been restated in US dollars.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023
Six months ended Six months ended Year ended
31st Dec 2023 31st Dec 2022 30th June 2023
(restated) (restated)
(unaudited) (unaudited) (audited)
Note $'000 $'000 $'000
Revenue
Gross fee income 2 34,210 33,514 68,725
Commissions payable (876) (926) (1,823)
Custody fees payable (725) (695) (1,422)
Net fee income 32,609 31,893 65,480
Administrative expenses
Employee costs 14,991 14,093 29,762
Other administrative expenses 4,320 3,984 8,382
Depreciation and amortisation 3,284 3,174 6,434
(22,595) (21,251) (44,578)
Operating profit 10,014 10,642 20,902
Finance income 3 1,257 408 1,389
Finance expense 3 (202) (85) (164)
Profit before taxation 11,069 10,965 22,127
Income tax expense (2,854) (2,541) (4,630)
Profit for the period 8,215 8,424 17,497
Profit attributable to:
Equity shareholders of the parent 8,215 8,424 17,497
Basic earnings per share (cents) 4 16.9 17.2 38.4
Diluted earnings per share (cents) 4 16.5 17.0 37.6
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023
Six months ended Six months ended Year ended
31st Dec 2023 31st Dec 2022 30th June 2023
(restated) (restated)
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Profit for the period 8,215 8,424 17,497
Other comprehensive income:
Items that may be subsequently reclassified to income statement
Foreign currency translation difference 1 - -
Total comprehensive income for the period 8,216 8,424 17,497
Attributable to:
Equity shareholders of the parent 8,216 8,424 17,497
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31ST DECEMBER 2023
31st Dec 2023 31st Dec 2022 30th June 2023
(restated) (restated)
(unaudited) (unaudited) (audited)
Note $'000 $'000 $'000
Non‐current assets
Property and equipment 2 1,241 725 921
Right-of-use assets 2 5,196 2,763 2,524
Intangible assets 2,5 125,657 131,265 128,462
Other financial assets 5,396 9,199 10,020
Deferred tax asset 427 449 493
137,917 144,401 142,420
Current assets
Trade and other receivables 10,356 7,056 8,090
Current tax receivable 396 - -
Cash and cash equivalents 25,912 23,053 28,569
36,664 30,109 36,659
Current liabilities
Trade and other payables (9,014) (8,569) (10,733)
Lease liabilities (421) (327) (251)
Current tax payable - (974) (1,009)
Creditors, amounts falling due within one year (9,435) (9,870) (11,993)
Net current assets 27,229 20,239 24,666
Total assets less current liabilities 165,146 164,640 167,086
Non‐current liabilities
Lease liabilities (5,263) (2,585) (2,498)
Deferred tax liability (8,596) (9,853) (9,175)
Net assets 151,287 152,202 155,413
Capital and reserves
Share capital 644 828 828
Share premium account 2,866 4,080 4,080
Merger relief reserve 128,984 131,188 131,188
Investment in own shares 6 (9,073) (11,987) (13,162)
Share option reserve 165 751 802
EIP share reserve 1,664 1,712 2,485
Foreign currency translation reserve (1,199) (8,272) (7,179)
Capital redemption reserve 33 52 52
Retained earnings 27,203 33,850 36,319
Attributable to:
Equity shareholders of the parent 151,287 152,202 155,413
Total equity 151,287 152,202 155,413
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023
Total
Foreign currency translation Capital redemption attributable
Share premium account Investment Share option reserve EIP reserve reserve to
Share capital $'000 Merger relief reserve in own $'000 share $'000 $'000 Retained share-
$'000 $'000 shares reserve earnings holders
$'000 $'000 $'000 $'000
At 30th June 2023 (restated) 828 4,080 131,188 (13,162) 802 2,485 (7,179) 52 36,319 155,413
Effect of change in functional currency (184) (1,214) (2,204) 2,861 (632) (285) 5,980 (19) (4,303) -
At 1st July 2023 644 2,866 128,984 (10,301) 170 2,200 (1,199) 33 32,016 155,413
Profit for the period - - - - - - - - 8,215 8,215
Other comprehensive income - - - - - - 1 - - 1
Total comprehensive income
- - - - - 1 - 8,215 8,216
Transactions with owners
Share option exercise - - - 154 (18) - - - 18 154
Purchase of own shares - - - (1,112) - - - - - (1,112)
Share-based payment - - - - 22 567 - - - 589
EIP vesting/forfeiture - - - 2,186 - (1,103) - - - 1,083
Deferred tax on share options - - - - (9) - - - (24) (33)
Current tax on share options - - - - - - - - 27 27
Foreign exchange translation - - - - - - (1) - - (1)
Dividends paid - - - - - - - - (13,049) (13,049)
Total transactions with owners
- - - 1,228 (5) (536) (1) - (13,028) (12,342)
As at
31st December 2023 644 2,866 128,984 (9,073) 165 1,664 (1,199) 33 27,203 151,287
Total
Foreign currency translation attributable
Share premium account Investment Share option reserve EIP reserve Capital redemption to
Share capital $'000 Merger relief reserve in own $'000 share $'000 reserve Retained share-
$'000 $'000 shares reserve $'000 earnings holders
$'000 $'000 $'000 $'000
At 1st July 2022 (restated) 828 4,080 131,188 (11,883) 739 1,943 (8,129) 52 37,997 156,815
Profit for the period - - - - - - - - 8,424 8,424
Other comprehensive income - - - - - - - - - -
Total comprehensive income
- - - - - - - - 8,424 8,424
Transactions with owners
Purchase of own shares - - - (1,777) - - - - - (1,777)
Share-based payment - - - - 17 613 - - - 630
EIP vesting/forfeiture - - - 1,673 - (844) - - - 829
Deferred tax on share options - - - - (5) - - - - (5)
Foreign exchange translation - - - - - - (143) - (41) (184)
Dividends paid - - - - - - - - (12,530) (12,530)
Total transactions with owners
- - - (104) 12 (231) (143) - (12,571) (13,037)
As at 828 4,080 131,188 (11,987) 751 1,712 (8,272) 52 33,850 152,202
31st December 2022 (restated)
Total
Foreign currency translation Capital redemption attributable
Share premium account Investment Share option reserve EIP reserve reserve to
Share capital $'000 Merger relief reserve in own $'000 share $'000 $'000 Retained share-
$'000 $'000 shares reserve earnings holders
$'000 $'000 $'000 $'000
At 1st July 2022 (restated) 828 4,080 131,188 (11,883) 739 1,943 (8,129) 52 37,997 156,815
Profit for the period - - - - - - - - 17,497 17,497
Other comprehensive income - - - - - - - - - -
Total comprehensive income - - - - - - - - 17,497 17,497
Transactions with owners
Share option exercise - - - 88 (10) - - - 10 88
Purchase of own shares - - - (3,078) - - - - - (3,078)
Share-based payment - - - - 36 1,174 - - - 1,210
EIP vesting/forfeiture - - - 1,711 - (871) - - - 840
Deferred tax on share options - - - - (17) - - - (1) (18)
Current tax on share options - - - - - - - - 5 5
Foreign exchange translation - - - - 54 239 950 - 203 1,446
Dividends paid - - - - - - - (19,392) (19,392)
Total transactions with owners - - - (1,279) 63 542 950 - (19,175) (18,899)
As at 30th June 2023 (restated) 828 4,080 131,188 (13,162) 802 2,485 (7,179) 52 36,319 155,413
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023
Six months ended Six months ended
Year ended
31st Dec 2023 31st Dec 2022 30th June 2023
(restated) (restated)
(unaudited) (unaudited) (audited)
Note $'000 $'000 $'000
Cash flow from operating activities
Profit before taxation 11,069 10,965 22,127
Adjustments for:
Depreciation of property and equipment 140 99 274
Depreciation of right-of-use assets 340 272 553
Amortisation of intangible assets 5 2,804 2,803 5,607
Loss on disposal of property and equipment - - 1
Share-based payment charge 22 18 36
EIP-related charge 1,044 662 1,267
Gain on investments 3 (560) (195) (689)
Interest receivable 3 (697) (213) (700)
Interest payable 3 17 - -
Interest payable on lease liabilities 3 185 85 164
Translation adjustments (142) (71) (314)
Cash generated from operations before changes in working capital
14,222 14,425 28,326
Decrease in trade and other receivables 498 751 154
Decrease in trade and other payables (1,131) (1,941) (296)
Cash generated from operations 13,589 13,235 28,184
Interest received 3 697 213 700
Interest paid 3 (17) - -
Interest paid on leased assets 3 (185) (85) (164)
Taxation paid (4,773) (2,867) (5,772)
Net cash generated from operating activities 9,311 10,496 22,948
Cash flow from investing activities
Purchase of property and equipment and intangibles (460) (218) (577)
Purchase of non-current financial assets - - (1,356)
Proceeds from sale of non-current financial assets 2,536 - 1,356
Net cash generated from/(used in) investing activities 2,076 (218) (577)
Cash flow from financing activities
Ordinary dividends paid 7 (13,049) (12,530) (19,392)
Purchase of own shares by employee benefit trust (1,112) (1,777) (3,078)
Proceeds from sale of own shares by employee benefit trust 154 - 88
Payment of lease liabilities (80) (249) (476)
Net cash used in financing activities (14,087) (14,556) (22,858)
Net decrease in cash and cash equivalents (2,700) (4,278) (487)
Cash and cash equivalents at start of period 28,569 27,617 27,617
Cash held in funds* - 50 77
Effect of exchange rate changes 43 (336) 1,362
Cash and cash equivalents at end of period 25,912 23,053 28,569
*Cash held in funds was consolidated using accounts drawn up as at end of
period.
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 2023 has been
extracted from the latest published audited accounts (refer details of changes
in presentational and functional currency below) which have been 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
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. 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 2023, which were prepared in accordance
with UK-adopted International Accounting Standards.
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 2023.
Group companies are regulated and perform annual capital adequacy and
liquidity assessments, which incorporates stress testing based on loss of
revenue on the Group's financial position over a three-year period. The Group
has performed additional stress tests using several different scenario levels,
over a three-year period on the Group's financial position from 31st December
2023.
The Group's financial projections, 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.
Changes in presentational and functional currency
With effect from 1st July 2023, the Group has changed its presentational
currency from sterling to US dollars, to mirror the primary economic
environment that it operates in. This change will provide investors and other
stakeholders greater transparency of the Group's performance and reduced
foreign exchange volatility on its income and costs.
The change in the Group's presentational currency to US dollars has resulted
in a change in the parent company's primary economic environment. Dividend
streams from its subsidiaries are now received and retained by the parent
company in US dollars. Hence, all the parent company's income is now in US
dollars and a large portion of its costs are also in US dollars. As a result,
the parent company's functional currency has changed to US dollars with effect
from 1st July 2023.
In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates
and Errors, the change in presentational currency has been applied
retrospectively, whereas the change in functional currency has been applied
prospectively with effect from 1st July 2023.
Certain elements of historical financial information have been restated in US
dollars and form the basis of the comparative financial information included
in these interim financial statements for the six months ended 31st December
2023.
In accordance with the provisions of IAS 21, the Effects of Changes in Foreign
Exchange Rates, due to the change in presentational currency, financial
information has been restated from sterling to US dollars as follows:
· assets and liabilities in non-US denominated currencies were
translated into US dollars at the rate of exchange at the relevant balance
sheet date;
· non-US dollar income statements and cash flows were translated into
US dollars at average rates of exchange for the relevant period;
· share capital, share premium and all other equity items were
translated at the historical rates prevailing on 1st June 2007, the date of
transition to IFRS or the subsequent rates prevailing on the date of each
relevant transaction or average rates as relevant; and
· the cumulative foreign exchange translation reserve was set to zero
on 1st June 2007, the date of transition to IFRS, and this reserve has been
restated on the basis that the Group has reported in US dollars since that
date.
New or amended accounting standards and interpretations adopted
The Group has adopted all the new or amended accounting standards and
interpretations issued by the International Accounting Standards Board (IASB)
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 (ex UK)
USA Canada UK $'000 Other Total
$'000 $'000 $'000 $'000 $'000
Six months to 31st Dec 2023
Gross fee income 32,895 722 - 549 44 34,210
Non-current assets:
Property and equipment 975 - 247 - 19 1,241
Right-of-use assets* 4,131 - 1,040 - 25 5,196
Intangible assets 125,633 - 24 - - 125,657
Six months to 31st Dec 2022 (restated)
Gross fee income 32,240 695 - 540 39 33,514
Non-current assets:
Property and equipment 446 - 262 - 17 725
Right-of-use assets 1,481 - 1,203 - 79 2,763
Intangible assets 131,232 - 33 - - 131,265
Year to 30th June 2023 (restated)
Gross fee income 66,102 1,419 - 1,122 82 68,725
Non-current assets:
Property and equipment 641 - 264 - 16 921
Right-of-use assets 1,319 - 1,152 - 53 2,524
Intangible assets 128,432 - 30 - - 128,462
* During the period, the Group entered into a long-term lease for its new West
Chester office which commenced on 1st July 2023.
3 FINANCE INCOME AND FINANCE EXPENSE
Six months ended Six months ended
31st Dec 2023 31st Dec 2022 Year ended
(restated) 30th June 2023
(restated)
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Finance income:
Interest on cash and cash equivalents 697 213 700
Unrealised gain on investments 44 195 305
Realised gain on investments 516 - 384
Total finance income 1,257 408 1,389
Finance expense:
Interest payable on lease liabilities (185) (85) (164)
Interest payable other (17) - -
Total finance expense (202) (85) (164)
Net finance income 1,055 323 1,225
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 2023.
As set out in note 6 the Employee Benefit Trust held 1,789,369 ordinary shares
in the Company as at 31st December 2023. 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 2023.
Reported earnings per share
Six months ended
Six months ended 31st Dec 2022 Year ended
31st Dec 2023 (restated) 30th June 2023
(restated)
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Profit attributable to the equity shareholders of the parent for basic 8,215 8,424 17,497
earnings
Number of shares Number of shares Number of shares
Issued ordinary shares as at 1st July 50,679,095 50,679,095 50,679,095
Effect of own shares held by EBT (1,939,759) (1,839,546) (1,842,182)
Weighted average shares in issue 48,739,336 48,839,549 48,836,913
Effect of movements in share options and EIP awards 953,028 823,114 892,422
Diluted weighted average shares in issue 49,692,364 49,662,663 49,729,335
Basic earnings per share (cents) 16.9 17.2 38.4
Diluted earnings per share (cents) 16.5 17.0 37.6
Basic earnings per share (pence)^ 13.4 15.0 30.2
Diluted earnings per share (pence)^ 13.2 14.7 29.6
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, amortisation
of acquired intangibles and their related tax impact.
Underlying profit for calculating underlying earnings per share
Six months ended Six months ended
31st Dec 2023 31st Dec 2022 Year ended
(restated) 30th June 2023
(restated)
(unaudited) (unaudited) (audited)
$'000 $'000 $'000
Profit before tax 11,069 10,965 22,127
Add back/(deduct):
- Gain on investments (560) (195) (689)
- Amortisation on acquired intangibles 2,799 2,800 5,599
Underlying profit before tax 13,308 13,570 27,037
Tax expense as per the consolidated income statement (2,854) (2,541) (4,630)
Tax effect on fair value adjustment 141 41 145
Unwinding of deferred tax liability (672) (672) (1,344)
Underlying profit after tax for the calculation of underlying earnings per 9,923 10,398 21,208
share
Underlying earnings per share (cents) 20.4 21.3 43.4
Underlying diluted earnings per share (cents) 20.0 20.9 42.6
Underlying earnings per share (pence)^ 16.2 18.4 36.5
Underlying diluted earnings per share (pence)^ 15.9 18.1 35.8
^ Converted to sterling using the average exchange rate for the relevant
period.
* This is an Alternative Performance Measure (APM). Please refer to the CEO
review for more details on APMs.
5 INTANGIBLE ASSETS
31st December 2023 31st Dec 2022 30th Jun 2023
Goodwill Direct customer relationships Distribution channels Trade name Long term software Total Total Total
(restated) (restated)
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At start of period 90,072 46,052 6,301 1,404 915 144,744 144,692 144,692
Additions - - - - - - 14 15
Currency translation - - - - - - (7) 37
At close of period 90,072 46,052 6,301 1,404 915 144,744 144,699 144,744
Amortisation charge
At start of period - 12,664 2,476 258 885 16,283 10,639 10,639
Charge for the period - 2,303 450 46 5 2,804 2,803 5,607
Currency translation - - - - - - (8) 36
At close of period - 14,967 2,926 304 890 19,087 13,434 16,282
Net book value 90,072 31,085 3,375 1,100 25 125,657 131,265 128,462
Goodwill, direct customer relationships, distribution channels and trade name
acquired through a business combination relate to the merger with KIM on 1st
October 2020.
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 the 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 2023 in relation to direct customer relationships,
distribution channels and trade name, was $2,799k (year ended 30th June 2023 -
$5,598k; six months ended 31st December 2022 - $2,800k).
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 2023 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'. No indications of impairment of individual
intangible assets have been identified.
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 2023 the Trust held 593,236 ordinary 1p shares (30th June
2023 - 985,411; 31st December 2022 - 763,636), of which 241,000 ordinary 1p
shares (30th June 2023 - 290,900; 31st December 2022 - 321,250) were subject
to options in issue.
The Trust also held in custody 1,196,133 ordinary 1p shares (30th June 2023 -
1,003,944; 31st December 2022 - 1,009,622) 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 2023 - 1,789,369; 30th June 2023 - 1,989,355;
31st December 2022 - 1,773,258).
7 DIVIDENDS
A final dividend of 22p per share (2022 - 22p) (gross amount payable
£11,149k; net amount paid £10,712k ($13,049k)*) in respect of the year ended
30th June 2023 was paid on 27th October 2023.
An interim dividend of 11p per share (2023 - 11p) (gross amount payable
£5,575k; net amount payable £5,356k*) in respect of the year ending 30th
June 2024 will be paid on 28th March 2024 to members registered at the close
of business on 1st March 2024.
* Difference between gross and net amounts is due to shares held at EBT that
do not receive dividend.
8 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 30 and 31 of the Annual Report and Accounts for the
year ended 30th June 2023), being 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 and 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 US dollars. However, exchange rate movements will impact the
portion of Group expenses that are incurred in non-US dollars.
9 RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company and its subsidiary
undertakings carry out transactions with related parties as defined under IAS
24 Related Party Disclosures. Material transactions are set out below:
(i) Transactions with key management personnel
Key management personnel are defined as Directors (both Executive and
Non-Executive) of City of London Investment Group PLC.
(a) The compensation paid to the Directors as well as their shareholdings in
the Group and dividends paid, did not affect the financial position or the
performance of the Group for the current reporting period. There were no
changes to the type and nature of the related party transactions from those
that were reported in the FY2023 Annual Report and Accounts.
(b) One of the Group's subsidiaries manages funds for one of its key
management personnel, for which it receives a fee. All transactions between
key management and their close family members and the Group's subsidiary are
on terms that are available to all employees of that Company. The amount
received in fees during the period was $211. There were no fees outstanding as
at the period end.
(ii) Person with significant influence
One of the Group's subsidiaries manages funds for a person with significant
influence based on his shareholding in the Group. The amount received in fees
during the period was $39k.
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.
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 2023 Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 5,348 48 - 5,396
Total 5,348 48 - 5,396
31st December 2022 (restated) Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 6,891 2,308 - 9,199
Total 6,891 2,308 - 9,199
Financial liabilities at fair value through profit or loss
Forward currency trades - 441 - 441
Total - 441 - 441
30th June 2023 (restated) Level 1 Level 2 Level 3 Total
$'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 7,589 2,431 - 10,020
Forward currency trades - 99 - 99
Total 7,589 2,530 - 10,119
There were no financial liabilities at fair value at 31st December 2023 or
30th June 2023.
There were no transfers between any of the levels in any of the reporting
periods.
All fair value gains and losses included in the income statement 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 profit
reported for the period is $422k (30th June 2023: net profit $55k; 31st
December 2022: net loss $214k).
10 GENERAL
The interim financial statements for the six months ended 31st December 2023
were approved by the Board on 22nd February 2024. These financial statements
are unaudited, but they have been reviewed by the auditors, having regard to
International Standard on Review Engagements (UK) 2410 (ISRE (UK) 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 2022-2023. A list of current Directors is
maintained at www.clig.co.uk.
By order of the Board
Tom Griffith
Chief Executive Officer
22nd February 2024
INDEPENDENT REVIEW REPORT TO CITY OF LONDON INVESTMENT GROUP PLC
Conclusion
We have been engaged by City of London Investment Group PLC ('the Company') to
review the condensed set of financial statements of the Company and its
subsidiaries (the 'Group') in the half-yearly financial report for the six
months ended 31 December 2023 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 material misstatements of fact or
material inconsistencies with the information in the condensed set of
financial statements.
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 31 December 2023 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.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued 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.
As disclosed in note 1, the annual financial statements of the Group are
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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management has
inappropriately adopted the going concern basis of accounting or that
management has identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group and
the Company to cease to continue as a going concern.
Responsibilities of Directors
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report 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.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Group's and the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the Company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim Financial
Information performed by the Independent Auditor of the Entity". 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
22nd February 2024
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FLFFDFAIFFISRecent news on City of London Investment
See all newsREG - City of Lon Inv Grp - Trading Update
AnnouncementREG - City of Lon Inv Grp - Holding(s) in Company
AnnouncementREG - City of Lon Inv Grp - Holding(s) in Company
AnnouncementREG - City of Lon Inv Grp - Holding(s) in Company
AnnouncementREG - City of Lon Inv Grp - INTERIM DIVIDEND – US DOLLAR CONVERSION RATE
Announcement