Final Results
City of London Investment Group PLC
17 September 2007
For release at 0700h, 17 September 2007
CITY OF LONDON INVESTMENT GROUP PLC
('City of London', 'the Group', or 'the Company')
PRELIMINARY RESULTS FOR THE YEAR TO 31 MAY 2007
SUMMARY
City of London Investment Group PLC (AIM: CLIG), a leading emerging market asset
management group, announces preliminary results for the year to 31 May 2007.
• First full year as a publicly listed company following Admission to AIM
in April 2006
• Funds under management increased by 38% to US$3.79 billion
• Profit before tax up 55% to £7.3 million
• Basic earnings per share up 47% to 19.9p, fully diluted earnings per
share up 50% to 17.5p
• Recommended final dividend of 7p per share payable on 15 November 2007
to shareholders on the register on 2 November, making a total for the year
of 10p
• Funds under management up by a further 8% to US$4.09 billion at the end
of the first quarter (31 August 2007)
Andrew Davison, Chairman, said, 'These record results demonstrate the strength
and cash generation characteristics of the Group. Together with the strong
ungeared balance sheet, they provide us with a secure platform from which to
grow our traditional business lines and to diversify carefully and cautiously
into new ones.'
Barry Olliff, Chief Executive, added, 'Since its inception, we have run our
business in a manner that is both conservative and relatively unfashionable. We
don't manage hedge funds. We don't manage any money from an absolute return
perspective, preferring to manage money relative to a benchmark. We manage money
using a team approach. We do not encourage the cult of the individual.
We have developed our diversification plans significantly over the past year and
would expect them to continue to develop and bear fruit during the next year.
Both FUM and pre-tax profit for the first quarter of the new financial year are
significantly ahead of budget.'
Enquiries to:
Doug Allison, Finance Director John West / Andrew Dunn
City of London Investment Group PLC Tavistock Communications
Tel: 020 7711 0771 Tel: 020 7920 3150
Jeff Keating / Fred Walsh / Simon Brown
Landsbanki Securities (UK) Limited
Nominated Adviser & Broker
Tel: 020 7426 9000
For further information about City of London, please visit www.citlon.co.uk
The pages that follow are extracted from the Company's Annual Report, which is
currently in print and will be distributed within the next two weeks
Chairman's Statement
I am pleased once again to report a year of good progress for City of London
Investment Group, the first full year for which the Group's shares have been
quoted on the AIM market of the London Stock Exchange. Since the financial year
end in May, the volatility in all markets in which we invest for our clients has
increased significantly as a result of the problems first encountered in US
credit markets. Although this additional volatility has affected our investment
activities in the first quarter of the current financial year, Funds under
Management at the end of August totalled some US$4.093 billion compared to the
31st May figure of US$3.793 billion.
Our markets have always been volatile and our performance to date in the new
financial year provides, I believe, endorsement that our business model is
sufficiently robust to continue to generate outperformance against benchmarks
even in recent market conditions. In order to provide some financial protection
to the Group from the worst of the volatility, we have this year instituted a
limited hedging programme which is described more fully, along with our view of
the Group's target investment markets, in the Chief Executive's Review and the
Accounts that follow my statement.
Results
Funds under management during the period under review increased by 38% to US$3.8
billion (2006: US$2.8 billion) reflecting both our outperformance in growing
emerging markets and additional funds from existing and new clients. As a result
of the growth in funds under management, turnover increased by almost 30% to
£18.3 million (2006: £14.1 million). The higher turnover figure translated, due
to the operational gearing inherent in our business, into a 55% increase in
profit before tax to £7.3 million (2006: £4.7 million after AIM listing costs of
£483,000). Net profit for the period after a 34% tax charge (2006: 38%) was £4.9
million (2006: £2.9 million), producing basic earnings per share up 47% to 19.9p
(2006: 13.5p) and fully diluted earnings per share of 17.5p (2006: 11.7p).
Retained profit for the year, after the paid and proposed dividend payments set
out below was £4.1 million (2006: £0.7 million). As a result of the
substantially higher level of retained profits for the year, shareholders' funds
almost doubled to £8.6 million (2006: £4.3 million), including cash balances at
the year end of £6.6 million (2006: £2.7 million). The Group has no borrowings.
A more detailed explanation of the accounts for the year is contained in the
Financial Review.
Dividends
The Board is recommending a final dividend in respect of the financial year to
31st May 2007 of 7p per share. Subject to approval by shareholders at the Annual
General Meeting, the dividend will be paid on 15th November 2007 to shareholders
on the register on 2nd November 2007. Together with the interim dividend of 3p
per share paid in March, this makes a total for the year of 10p. No dividend was
paid as a publicly listed company in 2006 reflecting the fact that City of
London listed on AIM less than two months before the financial year end.
The Group's dividend policy is based on paying dividends to shareholders that
are twice covered by earnings and to pay one third of the annual total as an
interim dividend and two thirds as a final dividend. This year's interim
dividend of 3p per share therefore implied a final dividend of 6p. In the event,
the Board decided to recommend a final dividend of 7p per share taking into
account the year end cash balances and the continuing satisfactory financial
performance of the Group. Going forward, we intend to maintain our current
dividend policy and to declare or recommend dividends with the interim and full
year results announced in January and September respectively followed by
payments in February and November.
Review
City of London's investment management services, provided predominantly to
institutional clients, are focused on closed-end funds investing in the world's
emerging markets. In addition, the Group manages investments in direct equities
in both emerging and natural resource markets. We provide our services currently
from three offices in the United States, London and Singapore.
The emerging market universe in which we principally invest began the financial
year at relatively depressed levels but recovered strongly during the first half
and this momentum was maintained during the second half as investment
fundamentals in many of the territories remained strong. The positive emerging
market performance ended abruptly after the year end as international investors
shied away from perceived higher risk investments and markets, following the
problems disclosed by lenders in the US mortgage markets. Shareholders should
take comfort from the fact that the higher volatility of markets now is an
environment we are used to and have successfully dealt with over our history as
an investment manager specialising in emerging markets.
Good progress has been made towards our strategic objective to diversify our
business. A number of new mandates were won during the period and it is pleasing
to report that such success is continuing not only in our traditional core
market of North America but also in Europe where we have invested in increased
marketing of the Group's services. At the same time, we have been planning the
addition - when market conditions are appropriate - of two new funds for
European distribution, a natural resources fund and an emerging markets high
yield fund. These will provide further diversification from our original
investment management activities.
The Group's geographical presence will be expanded with the planned opening of
an office in the increasingly important emerging markets of the Middle East.
Subject to the necessary regulatory approvals, we expect to open an office in
Dubai by the end of the fourth quarter of calendar 2007. Initially this office
will have a staff of two.
Investor Relations and Corporate Governance
As a Company we set great store by being as open as possible with our
shareholders and one of the principal means of communication is, of course, the
web site (www.citlon.co.uk). This has recently been upgraded so that the
Investor Relations section now complies fully with AIM Rule 26, which came into
force in August.
Outlook
We expect to continue to grow City of London Investment Group for the benefit of
its clients and shareholders, managers and staff around the world. These record
results demonstrate the strength and cash generation characteristics of the
Group. Together with the strong ungeared balance sheet, they provide us with a
secure platform from which to grow our traditional business lines and to
diversify carefully and cautiously into new ones. The current year has started
positively with the Group in good shape to deliver further progress, subject
only, and always, to the performance of our investment markets. I am confident
that the excellence of our staff combined with the strength of our process will
enable us to continue to capitalise to the maximum extent on the opportunities
that lie ahead.
Andrew Davison
Chairman
14th September 2007
Chief Executive Officer's Review
The listing
This is our first full year as a listed company and it's been a surprise to me
the extent that, as far as our company is concerned, it's been business as
usual. We have not found being listed a distraction. Possibly this was as a
result of us having most of the required internal controls in place for many
years prior to listing. Neither have there been changes in our Governance. The
Board appointed a further Independent Director, David Cardale at the point of
listing, but apart from this there has been no noticeable difference in the way
we are running the Group.
One item of City of London Investment Management Company's publications that
might be of interest to Group shareholders is our Statement on Corporate
Governance and Voting Policy for Closed-End Funds, 2007. This is the sixth
edition of this document that was first issued in 1999. Where relevant we follow
the principles within this document in the running of the Group.
The past financial year
The past year has been eventful. Funds under management ('FUM') have increased
from $2.750bn to $3.793bn. Or measured in sterling from £1.471bn to £1.916bn.
Due to the ongoing out performance of the emerging market asset class we have
experienced significant rebalancing. These rebalancings totalled approximately
$269mn. Fortunately as a result of ongoing good investment performance these
lost assets were replaced. In my opinion this puts us in a good position for a
bear market because this will mean that clients are, to a significant extent,
presently adjusting their exposure to emerging markets, reducing the need for
this to occur when markets are falling. Please refer to the Financial review
below for more information regarding our currency hedging strategy, together
with a table showing the sensitivity of our income to moves in the $/£ exchange
rate.
In April we started to hedge (you could say) our P&L, but in reality we were
hedging our FUM against a fall in world stock markets. Rather than believing
that our asset class was expensive we were attempting to take into account that
world stock markets seemed expensive (the emerging markets are to some extent
priced off world markets), that the move upwards had been very sharp and that
our profits were significantly ahead of budget. Our concern was to get a
significant percentage of these profits into shareholders hands in the form of
dividends. Whilst believing that we remain in an emerging markets secular bull
market, we decided to place $100,000 at the end of April and May (and we
continued with this program with similar amounts in June and July) into the
purchasing of out of the money puts. As at the end of August the profit on this
investment was $171,325. We review this exposure and value it daily, reflecting
its valuation on a monthly basis through our management accounts.
At the point of listing we did not make a forecast regarding dividends for y/e
2007. At the interim stage we declared a dividend of 3p and stated that based
upon present conditions we intended to pay a twice covered dividend. At that
time that could have been projected as a potential final dividend of 6p. In the
event as a result of increased FUM and profits, and subject to ratification by
shareholders it is intended to pay a final dividend of 7p.
Diversification
We have developed our diversification plans significantly over the past year and
would expect them to continue to develop and bear fruit during the next year.
The basis of our diversification plans relate to risk. At the beginning of the
decade (31st December 1999), 89% of our assets were US based. If we were to go
back even two years, close to 81% of our business was US based and nearly all of
the growth was coming from the US too. A further risk was that we had all of our
eggs, you might say, in the Emerging Markets basket. However, I would point out
that when we say we are going to diversify we are not setting targets, we are
not going to spend a lot of shareholders' money attempting to achieve an
objective in a given time frame, or in a difficult (stock) marketplace. Rather
we are going to be opportunistic and, most important, we are not going to market
products that are not either first or second quartile, for to do so would mean
that we would be undermining the reputation of the company we work for.
As a result of the above our present diversification, which we plan to be
organic, falls into three categories:
1) To diversify our core emerging markets business geographically. Since January
2006, the percentage of assets that are sourced outside of the US has increased
from 17% to 23%.
2) To use our investment trust discipline in other areas separate from the
emerging markets. We have recently (in our new financial year) been awarded our
first ACWI (ex US) mandate.
3) To develop our emerging markets equities (as compared with closed end funds)
business.
A possible new office
In my previous review I mentioned that we were considering the opening of an
office in Dubai. This was principally to add value to our investment process
but, I stated, we would hope that over a period of time it could assist in the
selling of City of London products. These plans have developed over the past
year to the extent that this office will, other things being equal, open during
October this year. It will be staffed initially by two existing City of London
employees. This office will round out for the foreseeable future our coverage
geographically, effectively allowing us to trade in all of the various emerging
markets efficiently.
Business continuity plans
Another year of testing was successfully completed at our off-site disaster
recovery centre in London. We extensively tested recovery of mission critical
servers from backup tape onto different hardware platforms following our
previously tried and tested procedures. We are also in the process of signing up
with a leading disaster recovery centre based in Philadelphia, which would
provide us with instant desk space for our US office in the event of a disaster
type scenario, replicating the London arrangements.
Cost income ratio
As our FUM grows, so we expect our cost income ratio to fall, and so it has this
year, from 56% in fiscal 2006 to 52% in the current year (treating third party
marketing commission and custody as a deduction from fees rather than as an
expense). We take some pride in the fact that this level is significantly lower
than the average for our sector, and it is a fundamental element of our strategy
to maintain the focus on costs that enables us to consistently differentiate
City of London in this respect. I make no apology for repetition on this point;
our ethos would simply not allow us to relax our stance on cost control.
Operational leverage
As I reported last year we are focused on developing our business in such a way
that enables a significant percentage of any increase in income to flow through
to shareholders. We do not spend large amounts of shareholders' money on fancy
offices, or on travel, or accommodation when on the road. As I mentioned
earlier, neither do we intend to throw shareholders' money at diversification.
Over many years I've watched financial service companies do this often with very
little added value being achieved in terms of measurable success.
The other point about operational leverage that I would like to make is that if
you don't spend frivolously you don't have to change habits in the event of a
bear market. In other words, keeping expenses low results in higher dividends
for shareholders.
Authorisation and regulation
It seems to me that we, by which I mean our wholly owned subsidiary City of
London Investment Management Company Limited ('CoLIM'), are one of the most
regulated firms of our size. CoLIM is authorised and regulated by the Financial
Services Authority in the UK, is registered as an adviser with the US Securities
and Exchange Commission, and is also registered as required by the regulatory
authorities in Singapore and Canada. Additionally, CoLIM is currently seeking
authorisation from the Dubai Financial Services Authority against the background
of the Dubai office intentions as outlined above.
End of first quarter FUM
At the end of August total FUM were $4.093bn. This compares with $2.815bn at the
same point last year. Both FUM and pre-tax profit for the quarter are
significantly ahead of our budget.
CoL core values
By now you will be aware of the fact that since our company's inception, we have
run our business in a manner that is both conservative and might seem relatively
unfashionable. We don't manage Hedge Funds. We don't manage any money from an
Absolute return perspective (neither do we participate in out performance),
preferring to manage money Relative to a benchmark. We manage money using a team
approach. We do not encourage the cult of the individual. The reason that we
maintain these core values is that we believe that by doing so we provide better
returns for our clients which leads to employment continuity for employees and
better returns for our shareholders.
Thanks to CoL employees
Finally I would like to thank all of my colleagues for their hard work over the
past year in what remains a challenging environment.
Barry Olliff
Chief Executive Officer
14th September 2007
Financial Review
Profit and Loss Account
Group turnover, management fees charged as a percentage of funds under
management (FUM), increased by almost 30%, reflecting the 38% uplift in FUM to a
period end figure of US$3.793 billion. As last year, by far the largest
proportion of turnover - £16.8 million (2006: £13.2 million) representing 92%
(2006: 93%) of the total - was generated in North America. However, progress was
made in growing the level of business derived from Europe and turnover generated
here doubled to £1.1 million, representing 6% (2006: 4%) of the total for the
year.
Administrative Expenses increased by 18% to £11.2 million (2006: £9.5 million).
The increase is principally accounted for by higher wage costs resulting from
six additional members of staff and the higher levels of bonuses paid during the
year, reflecting the Group's increased profitability. Over 50% of Administrative
Expenses for the period (2006: 46%) are represented by costs that vary with
turnover levels, principally commissions payable to marketing agents at £2.72
million (2006: £2.18 million) and staff profit sharing at £3.15 million (2006:
£2.20 million), representing 53% (2006: 47%) of total staff costs.
The dividend for 2007 is the £735,864 cost of the interim dividend of 3p per
share paid in March 2007, while the 2006 figure comprises the final dividend for
2005 and the interim and final dividends for 2006, paid before the Company was
listed on AIM, which together total £2,282,675.
The Group's tax charge is normally higher than the 30% prevailing rate of UK
corporation tax because net income attributable to the US operations attracts
the higher US corporate tax rate of marginally in excess of 40%. The overall
charge rate this year was 34% (2006: 38% restated), reflecting that most of our
managed funds and segregated accounts had a higher weighting towards non-US
investments during the period.
Recognised gains and losses
The revaluation reserve increased by £511,323 to a year end balance sheet figure
of £645,829 (2006: £134,506), reflecting the increase in the value of
investments made by the Group in order to seed new funds, plus the investment in
the options hedging programme referred to in the Chairman's Statement and the
Chief Executive's Review. These investments had a market value of £2.30 million
(2006: £1.36 million) at the year end, with the increase of £940,000 being
attributable approximately 50:50 to net new investments and to the increase in
market value.
Balance sheet
The major change in the consolidated balance sheet compared to last year is the
higher level of retained profit, and consequently cash, arising from the Group's
increased profitability during the year. As is historically the case for the
Group, net current assets of £8.3 million (2006: £4.0 million) represent, at 97%
(2006: 93%), by far the largest proportion of total net assets of £8.6 million
(2006: £4.3 million).
Debtors and creditors both increased roughly in proportion with the growth in
turnover. Cash at bank and in hand at £6.6 million (2006: £2.7 million)
represented 77% (2006: 63%) of total net assets.
Investment in own shares increased by £0.55 million to a year end figure of
£1.57 million (2006: £1.03 million), representing loans made by the Company to
the employee benefit trust to acquire shares for the share option schemes. These
loans are repaid on the exercise of options issued by the trust.
Currency exposure
In line with previous years, some 90% of the Group's income is sourced in US$,
but its expenses are roughly evenly divided between sterling and US dollars
(with a small Singapore dollar element). As a result, reported sterling net
income is significantly exposed to movements in the sterling/US dollar exchange
rate, which during the year moved within an approximate range of US$1.80 - 2.00
to £1 (2006: US$1.70 - 1.90 to £1).
The following table illustrates the approximate effect across a range of funds
under management assumptions, given the current geographical distribution of the
expense base:
Average FUM - US$billion
--------------------------------------
3.0 3.5 4.0 4.5
---------------------------------------------
US$/£ Pre-tax, £million
---------------------------------------------
1.90 6.4 8.0 9.7 11.3
1.95 6.2 7.8 9.4 11.0
2.00 6.0 7.5 9.1 10.7
2.05 5.8 7.3 8.8 10.4
2.10 5.6 7.1 8.6 10.1
---------------------------------------------
Assumes:
1. Average net fee 0.90%.
2. Annual operating costs of £2.5 million plus US$4.2 million plus Singapore
$1.2 million.
3. Profit share equivalent to 30% of operating profits.
For example, if funds under management were constant at US$4.0 billion
throughout the year, then the impact on sterling pre-tax profit of a move in the
exchange rate from US$2.00 to US$2.05 to £1 would be approximately £0.3 million
on an annualised basis, if one assumes that none of the exposure is hedged. That
said, it is worth repeating that there is a significant degree of natural hedge
inherent in our investment process, given that a weaker US dollar gives uplift
to our funds under management.
As in previous years, we continue to hedge our balance sheet currency exposure
by forward sales, with a total of US$4.5million sold forward at the balance
sheet date.
Share options
The Group regards share options as a vital tool in recruiting, motivating and
retaining staff and management. At the period end there were 4,797,675 options
on ordinary shares outstanding (2006: 4,747,050), representing 17.9% of the
current issued share capital. 2,297,675 of the outstanding options (48% of the
total) are over shares held by the Employee Share Option Trust and their
eventual exercise will therefore result in no dilution to existing shareholders'
interests.
Change in accounting policy
The Group has adopted accounting standard FRS 20, Share-based Payments. The
effect of this was to increase Administrative Expenses in the year to 31st May
2007 by £124,520 and by £64,026 for 2006, which has meant that the 2006
comparative figures have been restated to reflect the adoption. Corresponding
amounts have been credited to a Share Option Reserve on the Consolidated Balance
Sheet. The charges arise because under FRS 20, the fair value of the employee
services received in exchange for share options is recognised as an expense.
More detail on the adoption of FRS 20 is contained in Note 1 to the Accounts.
International Financial Reporting Standards
City of London Investment Group is required to adopt International Financial
Reporting Standards (IFRS) for the year ended 31st May 2008. These accounts have
been produced in line with UK GAAP. The interim results for the six months to
30th November 2007 will be the first results prepared under IFRS.
D F Allison
Finance Director
14th September 2007
Consolidated profit & loss account
For the year ended 31st May 2007
2006
2007 (as
restated)
---------------------------------------------------------------------------
Note £ £
---------------------------------------------------------------------------
Turnover 2 18,304,881 14,118,639
Administrative expenses
Staff costs 5,954,730 4,568,763
Other administrative expenses 5,139,946 4,350,907
AIM listing costs - 482,708
Depreciation 120,494 108,112
---------------------------------------------------------------------------
(11,215,170) (9,510,490)
Other operating income - 9,520
---------------------------------------------------------------------------
Operating profit 7,089,711 4,617,669
Interest receivable and similar income 242,103 109,562
---------------------------------------------------------------------------
Profit on ordinary activities before taxation 7,331,814 4,727,231
Tax charge on profit on ordinary activities 3 (2,457,856) (1,784,138)
---------------------------------------------------------------------------
Profit on ordinary activities after taxation 4,873,958 2,943,093
Dividends 4 (735,864) (2,282,675)
---------------------------------------------------------------------------
Retained profit for the financial year 6 4,138,094 660,418
---------------------------------------------------------------------------
Basic profit per share 5 19.9p 13.5p
---------------------------------------------------------------------------
Diluted profit per share 5 17.5p 11.7p
---------------------------------------------------------------------------
Consolidated statement of total recognised gains and losses
For the year ended 31st May 2007
2006
2007 (as
restated)
Note £ £
---------------------------------------------------------------------------
Retained profit for the period 4,138,094 660,418
Increase in revaluation reserve 511,323 134,506
---------------------------------------------------------------------------
Total recognised gains and losses for the 4,649,417 794,924
period ---------
Prior year adjustment 6 (106,325)
---------------------------------------------------------------------------
Total gains and losses recognised since the
last annual report 4,543,092
---------------------------------------------------------------------------
Consolidated balance sheet
31st May 2007
2006
2007 (as restated)
Note £ £
-----------------------------------------------------------------------------
Fixed assets
Tangible assets 193,362 225,939
Investments 46,859 61,253
-----------------------------------------------------------------------------
240,221 287,192
-----------------------------------------------------------------------------
Current assets
Debtors 2,613,212 2,136,312
Investments 2,299,325 1,359,563
Cash at bank and in hand 6,616,824 2,708,915
-----------------------------------------------------------------------------
11,529,361 6,204,790
Creditors, amounts falling due within one (3,210,074) (2,160,169)
year
-----------------------------------------------------------------------------
Net current assets 8,319,287 4,044,621
-----------------------------------------------------------------------------
Total assets less current liabilities 8,559,508 4,331,813
-----------------------------------------------------------------------------
Capital and reserves
Called up share capital 267,777 267,777
Share premium account 6 1,357,283 1,357,283
Investment in own shares 6 (1,573,525) (1,027,283)
Revaluation reserve 6 645,829 134,506
Share option reserve 6 230,845 106,325
Profit and loss account 6 7,631,299 3,493,205
-----------------------------------------------------------------------------
Shareholders' funds 6 8,559,508 4,331,813
-----------------------------------------------------------------------------
The Board of directors approved these financial statements on 14th September
2007.
Cash flow statement
For the year ended 31st May 2007
2007 2006
Note £ £
-----------------------------------------------------------------------------
Consolidated cash flow statement
Net cash inflow from operating activities 7 7,708,693 4,145,424
Returns on investments and servicing of finance 196,487 109,562
Taxation (2,190,642) (1,643,687)
Capital expenditure and financial investment (58,545) (164,267)
Equity dividends paid (735,864) (2,282,675)
Financing (546,242) 907,685
Management of liquid resources (465,978) (761,167)
-----------------------------------------------------------------------------
Increase in cash 9 3,907,909 310,875
-----------------------------------------------------------------------------
Notes to the financial statements
For the year ended 31st May 2007
1. Basis of preparation and financial information
The financial information set out in this preliminary announcement has been
prepared on the same basis as the accounting policies used in the Company's 2006
statutory accounts. This is with the exception of the adoption of FRS20
'Share-based payments'.
The information shown for the years ended 31st May 2007 and 31st May 2006 does
not constitute statutory accounts within the meaning of S240 of the Companies
Act 1985 and has been extracted from the full accounts for the years ended 31st
May 2007 and 31st May 2006.
The reports of the auditors on those accounts were unqualified and did not
contain a statement under either S237(2) or S237(3) of the Companies Act 1985.
The accounts for the year ended 31st May 2006 have been filed with the Registrar
of Companies. The accounts for the year ended 31st May 2007 will be delivered to
the Registrar of Companies in due course.
Change in accounting policies
In preparing the financial information for the current period, the Group has
adopted FRS20 'share-based payments'. The effect of this change in policy on the
results is to increase the administrative costs as detailed below. A
corresponding amount is credited to a share option reserve in accordance with
FRS20.
Share-based Total share
End of accounting period payment option reserve
--------------------------------------------------------------------------
31st May 2005 42,299 42,299
30th November 2005 27,301 69,600
31st May 2006 36,725 106,325
30th November 2006 56,657 162,982
31st May 2007 67,863 230,845
--------------------------------------------------------------------------
Share-based payments
The Company operates an Employee Share Option Plan. In accordance with FRS20,
the fair value of the employee services received in exchange for share options
is recognised as an expense. The fair value has been calculated using the
Binomial pricing model, and has been expensed on a straight line basis over the
vesting period of three years, based on the Company's estimate of the number of
shares that will actually vest.
2. Analysis of turnover, operating profit and net assets
The directors consider that the group only undertakes one class of business, and
hence only analysis by geographical location is given.
Turnover Operating Net
profit assets
2006 2006
2007 2006 2007 (as 2007 (as
restated) restated)
£ £ £ £ £ £
----------------------------------------------------------------------------------------
Europe 1,130,223 585,206 601,146 855,197 6,606,459 2,367,636
North America 16,780,057 13,185,903 6,301,978 3,538,613 1,923,885 1,921,165
South America - 298,173 - 205,660 1,643 2,973
Other 394,601 49,357 186,587 18,199 27,520 40,039
----------------------------------------------------------------------------------------
18,304,881 14,118,639 7,089,711 4,617,669 8,559,508 4,331,813
----------------------------------------------------------------------------------------
3. Tax charge on profit on ordinary activities
(a) Analysis of tax charge on ordinary activities:
2007 2006
£ £
-----------------------------------------------------------------------
Tax at 30% (2006 - 30%) based on the profit 2,260,228 1,538,223
for the year
Double taxation relief (542,228) (415,360)
Adjustments in respect of prior years (11,518) (3,148)
-----------------------------------------------------------------------
1,706,482 1,119,715
Foreign tax for the current period 778,144 652,983
Adjustments in respect of prior years (26,770) 11,440
-----------------------------------------------------------------------
751,374 664,423
-----------------------------------------------------------------------
2,457,856 1,784,138
-----------------------------------------------------------------------
(b) Factors affecting tax charge for the current period:
The tax assessed for the period is different to that resulting from applying the
standard rate of corporation tax in the UK: 30% (prior year: 30%). The
differences are explained below:
2007 2006
(as
restated)
£ £
------------------------------------------------------------------
Profit on ordinary activities before tax 7,331,814 4,727,231
------------------------------------------------------------------
Tax at 30% thereon (2,199,544) (1,418,169)
Effects of:
Expenses not deductible for tax purposes (41,353) (119,208)
Capital allowances less than depreciation (16,733) -
Unrelieved overseas tax (235,916) (237,623)
Prior period adjustments 38,288 (8,292)
Other (2,598) (846)
------------------------------------------------------------------
(2,457,856) (1,784,138)
------------------------------------------------------------------
The Company has revalued its current asset investments to market value. Deferred
tax has not been recognised on this revaluation, but the estimated tax payable
if the investments were sold at the values shown is £193,749 (2006 - £40,352).
4. Dividend
2007 2006
£ £
------------------------------------------------------------------
Dividends paid:
Interim dividend of £0.03 per share (2006 - 735,864 1,982,662
£0.09)
Final dividend in respect of year ended:
31st May 2005 of £0.36 per share - 300,013
------------------------------------------------------------------
735,864 2,282,675
------------------------------------------------------------------
5. Earnings per share
The calculation of basic earnings per share is based on the profit for the year
of £4,873,958 (2006 restated - £2,943,093) divided by the weighted average
number of ordinary shares in issue for the year ended 31st May 2007 of
24,432,528 (2006 - 21,855,212).
As set out in Note 6 the Employee Benefit Trust held 2,303,125 ordinary shares
in the Company as at 31st May 2007. The Trustees of the Trust have waived all
rights to dividends associated with these shares. In accordance with FRS22 the
ordinary shares held by the Employee Benefit Trust have been excluded from the
calculation of the weighted average of ordinary shares in issue.
The calculation of diluted earnings per share is based on the profit for the
year of £4,873,958 (2006 restated - £2,943,093) divided by the diluted weighted
average of ordinary shares for the year ended 31st May 2007 of 27,823,144 (2006
- 25,272,459).
6. Combined statement of movement in reserves and reconciliation of
shareholders' funds
GROUP Year
ended
31st May
Share Investment Share Profit 2006
Share premium in own Revaluation option and loss Total
capital account shares reserve reserve account Total (as
restated)
£ £ £ £ £ £ £ £
----------------------------------------------------------------------------------------------------------
At 1st June
2006 -
as 267,777 1,357,283 (1,027,283) 134,506 - 3,599,530 4,331,813 2,565,178
previously
stated
Prior year
adjustment
FRS 20 - - - - 106,325 (106,325) - -
----------------------------------------------------------------------------------------------------------
At 1st June
2006 -
as restated 267,777 1,357,283 (1,027,283) 134,506 106,325 3,493,205 4,331,813 2,565,178
Purchase of
own shares - - (670,948) - - - (670,948) -
Share
allotment - - 124,706 - - - 124,706 907,685
Revaluation
reserve - - - 511,323 - - 511,323 134,506
Share
option
reserve - - - - 124,520 - 124,520 64,026
Profit
retained
for the
period - - - - - 4,138,094 4,138,094 660,418
----------------------------------------------------------------------------------------------------------
At 31st May
2007
267,777 1,357,283 (1,573,525) 645,829 230,845 7,631,299 8,559,508 4,331,813
----------------------------------------------------------------------------------------------------------
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 May 2007 the Trust held 2,303,125 ordinary 1p shares (2006 - 2,262,750),
of which 2,297,675 ordinary 1p shares (2006 - 2,247,050) were subject to options
in issue.
In total, the Company has granted options over 4,797,675 ordinary shares at
exercise prices from £0.26 to £2.73. These options have a range of exercise
dates from September 2000 to March 2017.
7. Reconciliation of operating profit to net cash inflow from operating
activities
2006
2007 (as restated)
£ £
------------------------------------------------------------------------
Operating profit 7,089,711 4,617,669
Profit on sale of fixed assets - (9,519)
Depreciation charges 120,494 108,112
Increase in debtors (476,900) (1,043,783)
Increase in creditors 782,691 408,417
Translation adjustments on investments 68,177 502
Share-based payment charge 124,520 64,026
------------------------------------------------------------------------
Net cash inflow from operating activities 7,708,693 4,145,424
------------------------------------------------------------------------
8. Reconciliation of net cash flow to movement in net funds
2007 2006
£ £
------------------------------------------------------------------------
Increase in cash in the year 3,907,909 310,875
Increase in liquid assets 465,978 761,167
Other non cash changes 30,816 -
Changes in market value
and exchange rate movement 442,968 134,506
------------------------------------------------------------------------
Change in net funds 4,847,671 1,206,548
Net funds at 1st June 4,068,478 2,861,930
------------------------------------------------------------------------
Net funds at 31st May 8,916,149 4,068,478
------------------------------------------------------------------------
9. Analysis of changes in net funds
Changes
At in market Other At
1st June Cash value and non-cash 31st May
2006 flows exchange changes 2007
rates
£ £ £ £ £
---------------------------------------------------------------------------
Cash at bank and
in hand 2,708,915 3,907,909 - - 6,616,824
Current asset
investments 1,359,563 465,978 442,968 30,816 2,299,325
---------------------------------------------------------------------------
4,068,478 4,373,887 442,968 30,816 8,916,149
---------------------------------------------------------------------------
10. Copies of the Annual Report for the year ended 31st May 2007 are available
from the Company's Registered office at 10 Eastcheap, London EC3M 1LX, and
will be sent to shareholders shortly.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 17th May 2024
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