City of London Investment

18 September 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

• Funds under management (FuM) endured a rollercoaster second half, but finished the year up 2% to lift profit by 10% and the dividend by 11%.

• FuM ‘capacity’ has become an issue, and explains CLIG’s limited past progress and probably prompted the upcoming merger. 

• The Karpus deal appears logical, but similar to CLIG the merger partner has struggled to attract new clients.

• The accounts continue to sport high margins, decent cash flow, high equity returns and net cash.

• A potential P/E of 11 and yield of 7.5% seem attractive, although the shares have been rated modestly for years. I continue to hold.

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23 March 2020
By Maynard Paton

Results summary for City of London Investment (CLIG):

• Funds under management rallied to a record level in GBP terms, lifting revenue by 11%, profit by 22% and the dividend by 11%.

• However, the market crash that followed these results has superseded a lot of the statement’s commentary and accounting.

• Profit may now be running almost 40% lower than at the start of the year and may just about cover the 28p per share full-year dividend.

• The accounts continue to sport high margins, decent cash flow and net cash — all of which ought to see the business through the present downturn.

• Although the shares have been rated modestly on a P/E basis for years, the possible yield now tops 9%. I continue to hold.

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26 July 2019
By Maynard Paton

Results summary for City of London Investment (CLIG):

• These 2019 summary figures contained no surprises, as lower funds under management (FUM) throughout the year left revenue down 6% and profit down 16%.

• FUM ironically ended the year at its highest-ever level in GBP terms (£4.2b), as client money once again trickled out of the main emerging-market funds and in to other strategies.

• The overall fee rate paid by clients slid from 80 basis points to 76 basis points.

• The accounts continue to sport high margins, a robust return on equity, decent cash flow and net cash.

• The P/E is approximately 10 and the yield tops 6%, although the shares have traded on a similar rating for years. I continue to hold.

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18 January 2019
By Maynard Paton

Results verdict on City of London Investment (CLIG):

• Monthly updates had already braced shareholders for lower funds under management — which in turn reduced first-half profit by 21%.

• Tough markets have again prompted the fund manager to cut its projections, as fee rates are trimmed and costs creep higher.

• As before, significant new clients are required to bolster earnings and support a decisive share-price re-rating.

• I am hopeful the replacement chief executive might one day re-energise the group’s marketing.

• The accounts remain cash-rich and high-margin, and the shares yield 7.5%. I continue to hold.

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01 August 2018
By Maynard Paton

Update on City of London Investment (CLIG).

Event: Trading update and shareholder presentation/summary results for the year ending 30 June 2018 published 17 July 2018.

Summary: Bumper first-half figures and subsequent monthly updates had already ensured the fund manager’s summary annual results would be positive. However, the second half did witness funds under management decline and the group’s own projections for the coming year have now been reduced. In addition, client fees have been cut once again while the main emerging-market strategy continues to underperform. I still hope that, one day, this cash-rich, high-margin business can attract meaningful new mandates to spark a share-price re-rating.  Until then, a 6.8% income remains available. I continue to hold.

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19 January 2018
By Maynard Paton

Update on City of London Investment (CLIG).

Event: Trading update and shareholder presentation/summary results for the six months ending 31 December 2017 published 17 January 2018.

Summary: Favourable market movements helped CLIG report its best-ever first-half figures, with revenue, profit, net cash and the dividend all moving higher. However, the finer details showed the emerging-market fund manager struggling to capture new clients as its main strategy under-performed. Meanwhile, fee rates are still being chipped away and staff costs keep on climbing. The shares may look under-appreciated on a P/E of 10 and yield of 6%, but sadly a re-rating does not appear imminent. I continue to hold. 

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03 August 2017
By Maynard Paton

Quick update on City of London Investment (CLIG).

Event: Trading statement and shareholder presentation for the year ending 30 June 2017 published 19 July 2017

Summary: Earlier updates had already signalled these summary annual results would be positive. However, the fund manager’s progress was supported entirely by favourable markets and currency movements — the year actually witnessed a net outflow of client money. Still, the icing on the cake was the first dividend lift for six years and, despite the share price climbing since this time last year, the payout still supports a 6% income. The presentation also outlined the potential cost of the new staff bonus scheme, and I am hopeful the cited 2% of revenue will not eventually rise towards the scheme’s 5% limit. I continue to hold.   

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19 January 2017
By Maynard Paton

Quick update on City of London Investment (CLIG).

Event: Trading update and shareholder presentation for the six months ending 31 December 2016 published 17 January 2017.

Summary: CLIG had already acknowledged it would be a Brexit beneficiary, and this week’s update was the first to give shareholders some actual figures based on the weakened GBP. Even with client money barely moving, this emerging-market fund manager delivered a very welcome 61% profit surge to ensure the near-7% dividend yield remains safe for now. However, the usual downsides remain — not least stagnant funds under management and rising staff costs. I continue to hold.   

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13 September 2016
By Maynard Paton

Quick update on City of London Investment (CLIG).

Event: Final results for the year ending 30 June 2016 published 12 September 2016

Summary: I’m starting to go off City businesses. First it was Record and now it is CLIG that wants to pay its employees a lot more… despite profits at both having gone nowhere for years. Sadly, CLIG’s revised bonus plan has offset some promising news of greater funds under management and the real prospect (finally!) of a dividend lift. I can only hope the fund manager can soon deliver the much-needed performance to justify the extra bonus cost. I continue to hold.

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27 July 2016
By Maynard Paton

Quick update on City of London Investment (CLIG).

Event: Trading update for the year ending 30 June 2016 published 18 July 2016

Summary: Regular monthly updates had already ensured this statement would not be too surprising. However, CLIG trimmed back its projections for 2017 and despite stagnant funds under management, extra costs are filtering into the business. Fortunately the group should benefit significantly from the weaker pound, and its dollar-based income may currently support a P/E of 10 and 7%-plus yield. I continue to hold.   

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12 January 2016
By Maynard Paton

Quick update on City of London Investment (CLIG).

Event: First-half trading statement published 12 January

Summary: Not a bad statement, given CLIG is an emerging-market fund manager and its markets have slumped since the summer. A particular bright spot was the group’s forward guidance, which for 2016/17 is factoring in an acceleration of new client money. However, I continue to value the shares on today’s funds under management — which suggest the 24p per share dividend and 7% yield remain safe for now. I continue to hold.   

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