Results summary for City of London Investment (CLIG):
Rough market conditions causing funds under management (FuM) to fall 17% to $9.2b led to H2 net fee income dropping 5% and H2 profit diving 20%.
A post-year update showed FuM sliding a further 8% to $8.5b, but also the fourth consecutive quarter of net FuM inflows that may signal clients re-appraising CLIG’s ‘value’ approach.
Buying SPACs at discounts to cash helped merger partner KIM outperform the original CLIM division with 6% five-year annualised returns versus 3-4%.
Revenue “100%” denominated in the stronger USD, handy cash conversion plus net funds and investments of £30m counterbalanced an H2 margin squeezed to ‘only’ 42%.
Near-term earnings could now be running at 36p per share, which should still support the 33p per share dividend and 8%-plus yield at 400p. I continue to hold.
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20 October 2022 By Maynard Paton
Difficult market conditions have led to depressed ratings for many asset-flush shares.
Hence a new screen to pinpoint companies offering cash-rich balance sheets and market caps below their book value. I have attempted to avoid ‘value traps’ by demanding the shares pay a dividend and offer a history of trading above book value.
The exact filter criteria I employed for this search were:
A price to net tangible assets of no more than 1;
A dividend being paid during the most recent year;
A 10-year average price to net tangible assets of at least 1;
Net borrowings less total leases of no more than 0 (i.e. a net cash position excluding IFRS 16 lease obligations), and;
A share price denominated in pounds sterling.
I applied the screen the other day and SharePad returned 22 matches:
I selected Redrow from the five house builders at the top of the list because the group’s recent results included very clear guidance:
Redrow’s own projections put its 400p shares on a P/E of approximately 4 and a yield of at least 8%
Combined with a net asset value of 554p per share that gives a price to book of 0.72, the FTSE 250 constituent is very much trading at the ‘deep value’ end of the market spectrum.
Happy Sunday! I trust your shares continue to perform better than mine during 2022.
A summary of my portfolio’s progress:
Q3 return: -9.2%*.
Q3 trades: None.
YTD return: -23.4%* (FTSE 100: -3.9%).
YTD winners/losers: 2 winners vs 9 losers.
(*Performance calculated using quoted bid prices and includes all dealing costs, withholding taxes, custody fees, paid dividends and cash interest)
I am heading for my worst annual performance for at least two decades after my portfolio fell 9.2% during Q3 to leave my shares down 23.4% for the year so far.
Yet despite another miserable quarter of negative returns, the Q3 newsflow did not seem particularly awful.
Special dividends were in fact declared by Andrews Sykes and Tristel, which takes one-off payments for me this year to six and cements 2022 as my best-ever year for extra income. The quarter also witnessed higher payouts from M Winkworth and S & U.
I have recorded another episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Greggs and the investment potential of sausage rolls:
A disappointing FY 2022 performance, with a Q4 sales warning alongside greater costs leading to a small H2 loss.
SYS1’s ‘Reasons to Believe’ have been diluted, and hint at reduced long-term expectations following the disappearance of a £100m revenue ambition.
The transition to new data and consultancy services continues, with such income representing 51% of total revenue for FY 2022 and possibly 70% for Q1 2023.
A fresh non-exec reveals the agitated shareholder who has initiated a strategic review, which in turn led to the sensible cancellation of a tender offer.
Net cash represents 31% of the market cap, with long-term multi-bagger potential presently obscured by weak legacy services and costs running ahead of new-product revenue. I continue to hold.
A trio of upbeat trading statements caught the market’s attention this summer.
The first occurred during June and referred to “strong margin improvements“:
“29 June: Shoe Zone is pleased to announce that since the publication of its interim results in May, the business has been trading well andhas also seen strong margin improvements and cost savings, in particular as a result of rent reductions and good supply chain management, which are expected to continue into Q4 of the Company’s financial year for the 52 weeks to 2 October 2022″.
The second update followed in July, and revealed “stronger than expected” trading:
“26 July: Shoe Zone is pleased to announce that since the publication of its trading update on 29 June 2022, trading has been stronger than expected due to higher than expected demand for summer products, particularly in the last two weeks. The Company has also continued to experience margin improvements as a result of good supply chain and cost management.”
And the third update occurred last month, and confirmed trading had “continued to exceed expectations“:
“31 August: Shoe Zone is pleased to announce that since the publication of its trading update on 26 July 2022, trading has continued to exceed expectations due to continued strong demand for summer and back-to-school products throughout August. The Company also continues to benefit from the margin improvements as outlined in recent trading updates.”
The remarkable run of RNSs also revealed the group lifting its current-year profit expectations from “not less than £8.5 million” to “not less than £10.5 million“.
The profit upgrades and share-price surge will of course be welcomed by shareholders, although the company’s longer-term performance could mean the positive summer may not be a persistent phenomenon.
The shares joined AIM at 160p during 2014 and, eight years later, the price stands at… 160p:
A steady FY 2022 performance, buoyed by an H2 that saw property sales achieve a record £379k average and realise a 66% premium to their 2014 Allsop valuation.
The final dividend was lifted 11% while expenditure on new properties fell to a 13-year low after management expressed a desire to “not chase purchases at any price“.
Net debt remains very modest at just 5% of the property estate and reflects management’s concerns of forthcoming “difficult economic circumstances“.
Friction between major shareholders continues, with revised director-pay arrangements perhaps encouraging significant protest votes at the latest AGM.
Net asset value remains at £101 per share, although the balance sheet could be worth £210 per share assuming all owned properties enjoy immediate ‘reversionary’ gains and are then sold at fair-market value. I continue to hold.
I have recorded another pilot episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Somero Enterprises and the investment potential of the company’s concrete levelling machines:
An unspectacular H1 performance, albeit accompanied by a 21% dividend lift, after further pandemic disruption left revenue down 8% and adjusted profit down 9%.
Muted progress from vitamin D and other established antibodies continues to leave near-term growth dependent on the fast-selling troponin product.
The “exciting” potential of a Tau biomarker alongside the BVXP website selling pyrene test kits suggest positive developments within the research pipeline.
Net cash at £5m is the lowest for six years, and combined with standstill earnings seems likely to reduce the size of any FY 2022 special payout.
Troponin’s finite income and a resultant sum-of-the-parts valuation do not indicate an obviously compelling £33 share price. I continue to hold.
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25 August 2022 By Maynard Paton
Another month and another round of ‘back to basics’ filtering.
Introduced earlier this year to identify James Halstead, this screen shortlists companies that offer cash-flush balance sheets, robust margins and dependable dividends. SharePad returned 19 matches:
I selected Cerillion because the shares were among the few on the shortlist to have moved higher this year. I passed on EMIS and Cardiff Property because the former was subject to a bid and the latter was too small.
Cerillion’s shares have actually five-bagged since the pandemic lows of March 2020 and remain very close to their £11 all-time high:
An encouraging performance, with profit recovering 35% following the pandemic to almost match the record set during FY 2018.
Additional reporting disclosures revealed ASY’s main UK Hire division enjoyed sales rebounding 17% and a wonderful 34% margin.
European operations expanded to 27% of group revenue following very strong progress, although Middle Eastern woes included an extra £1m provision.
The books remain in good shape, with useful cash generation lifting net funds to £29m and perhaps increasing the possibility of another special dividend.
An estimated 13-14x P/E and near-5% yield hardly seem expensive given the appealing financials, potential for an FY 2022 heatwave bonanza and scope for further European expansion. I continue to hold.
The absence of pandemic restrictions ensured a bumper H2 performance that TAST acknowledged may not be repeatable during the current year.
Higher wages, rising utility costs, “prevailing economic uncertainties” plus a June update that did not refer to H1 trading could be other signs of FY 2022 not being that profitable.
Rent reductions of 27% now appear to be temporary, and explain why total lease obligations remain in excess of £50m.
Repaying an emergency loan, appointing a new executive alongside plans to open 5-6 new restaurants confirm management’s mindset has moved from ‘survival’ to ‘recovery’.
Although the £8m market cap could be remarkably cheap if TAST ever sustains a modest margin on decent sales, other shares could offer more dependable returns. I continue to hold.
A record H1 performance bolstered by the acquisition of Spanish firm Zemper and complemented by another special dividend.
Progress at Thorlux continues to be modest, but a new MD, an order book up 25% alongside growing demand for energy-efficient lighting support future optimism.
Dutch profit was assisted by the absence of earn-out provisions, with new manufacturing facilities at Famostar underpinning “continued rapid sales growth“.
Net cash remained significant at £37m after extra stock investment suggested component shortages were no longer as severe as they once were.
A P/E of 27 seems generous, but could reflect significant ‘ESG’ attractions as TFW showcases its environmental credentials to quoted companies scrambling for LED lighting. I continue to hold.
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Difficult market conditions have prompted yet another bout of ‘back to basics’ filtering.
Introduced the other month to identify James Halstead, this screen short-lists companies that offer cash-flush balance sheets, robust margins and dependable dividends. SharePad returned 19 matches:
I selected Liontrust Asset Management because the shares were highlighted by ace fund manager Keith Ashworth-Lord within his latest Buffettology fund factsheet. Mr Ashworth-Lord wrote:
“Liontrust Asset Management (-15.5%) announced final results which showed substantial growth in average AUM (+43%), revenue (+41%), dividends per share (+53%) and free cash flow (+122%).
The reaction of Liontrust’s share price — which will be seen by the teenage scribblers in the City as high beta — is symptomatic of current market sentiment. As a result, the shares trade on a trailing free cash flow yield of 15% and a trailing dividend yield of 8%. Talk about ‘value’.”
I have recorded another pilot episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about Tristel and the company’s hospital disinfectants and shareholder open day:
Maynard Paton: “Hi Winter, Yes, this tax angle seems correct. I have only really considered a liquidation valuation as the likelihood of…” 24 Jun 2025
Maynard Paton: “Hi Winter Thanks for the message. “According to your calculations, a property could be valued higher immediately after purchase. That’s…” 24 Jun 2025
Winter: “You deduct tax in your NAV calculation. That’s not wrong for the liquidation value. But if a buyer takes over…” 23 Jun 2025
Winter: “I had the same thought than Javed. According to your calculations, a property could be valued higher immediately after purchase.…” 23 Jun 2025
Maynard Paton: “City of London Investment (CLIG) AGM attendance 28 October 2024 I attended CLIG’s AGM at the group’s head office in…” 20 Jun 2025
Maynard Paton: “City of London Investment (CLIG) Publication of 2024 annual report continued Here are some further points of interest to accompany…” 20 Jun 2025
Maynard Paton: “Hi Javed, Thanks for the message. You could apply a discount. But my calculations are based on today’s values or…” 20 Jun 2025
Javed Abrahams: “Don’t we need to apply an appropriate discount rate to the vacant possession NAV to calculate the true NAV? A…” 20 Jun 2025
