Final Results
City Natural Res High Yield Tst PLC
27 September 2007
To: RNS
From: City Natural Resources High Yield Trust plc
Date: 27 September 2007
Unaudited results for the year ended 30 June 2007
• Net asset value total return of 67.0 per cent since 1 July 2006 compared
to a total return of 25.1 per cent from the benchmark index.
• Ordinary share price total return since 1 July 2006 of 61.6 per cent.
• Net asset value total return of 311.0 per cent since 1 August 2003
compared to a total return of 98.7 per cent from the benchmark index.
• Ordinary share price total return since 1 August 2003 of 265.7 per cent.
• Dividend of 2.35 pence per share for the year, an increase of 9.3 per
cent.
The chairman, Geoff Burns noted,
'I said in my Statement last year that I was pleased the year had been one of '
success for shareholders, with net asset value and share price total returns of
more than 45 per cent.' I am delighted to report even stronger performance this
year, with net asset value and share price total returns of more than 60 per
cent during the year to 30 June 2007.
This delight is, of course, tempered by the turbulence seen in markets since the
year end, a subject to which I return below.
Investment Performance
Your Company's net asset value per share rose by 64.3 per cent to 193.4 pence
during the year ended 30 June 2007. To this must be added three quarterly
dividends of 0.5 pence per share and a fourth interim dividend of 0.85 pence per
share, the total of 2.35 pence representing a 9.3 per cent increase on last
year's 2.15 pence.
The net asset value total return for the year was 67.0 per cent, taking the net
asset value total return to 311.0 per cent since 1 August 2003 when the
reconstruction of the investment portfolio was completed following the change to
the Company's investment objective.
The share price rose from 110.8 pence to 176.0 pence during the year, an
increase of 58.8 per cent, the discount at which the shares trade widening a
little to 9.0 per cent.
The warrant price more than doubled from 39.0 pence to 89.3 pence over the same
period.
Investment Strategy
While the Investment Manager has remained focussed on taking full advantage of
the capital growth opportunities offered by the continuing bull market in the
natural resource sector, a note of caution entered his deliberations during the
last quarter. This saw gearing trimmed and the tops taken off a number of the
larger holdings.
Such moves reinforced an emphasis on increasing the income component of returns
for shareholders, a tactic aided by the maturing of exploration companies such
as Jubilee Mines which, as anticipated, have started to pay dividends. Our
natural resource convertible holdings proved to be useful sources of both income
and, on conversion, capital growth.
A 0.5 pence per share addition to revenue reserves accompanied the 9.3 per cent
increase in this year's dividends and we will not lose sight of the importance
of income to shareholders.
Board
Richard Prickett joined the Board in November, and I would like to repeat the
welcome that I extended to him in my Interim Statement. The value of Richard's
substantial corporate experience in the mineral sector is already manifest.
Investment Manager
Our investment manager, New City Investment Managers Ltd ('NCIM') is joining
with another fund management group, CQS Cayman Limited Partnership ('CQS').
Richard Lockwood and Andrew Ferguson continue to look after us, and CQS's
complementary approach to clients and operational strengths will free more of
their time to do what they do best - pick stocks. We wish NCIM well in this
next stage of its development.
Outlook
Having peaked at 198.0 pence on 27 July 2007 our net asset value fell by 20.1
per cent to 158.3 pence during a traumatic August. It has recovered to 188.7
pence as I write.
This fall was very much market led rather than a reflection of weaker commodity
prices. The oil price, in fact, showed renewed strength, while gold has moved
ahead strongly, pushing through US $700. US dollar weakness has played a part
in this, but the gold price also reflects gold's safe haven status in what
remain troubled times. Investors are fearful of further contagion by the US
sub-prime market and volatility, particularly amongst the second-line stocks
where we are strongly represented, will remain high.
The fundamental strength of the world economy, and in particular of the Far
East, has not, however, diminished. This will continue to underpin commodity
prices and we are confident that the bull market in natural resources has
further to run. Your Company is well positioned to take advantage of this.
Enquiries:
Richard Lockwood, New City Investment Managers: 0207 557 4370
Martin Cassels, F&C Investment Business Ltd: 0207 628 8000
Audited Income Statement
for the year ended 30 June 2007
Notes 2007 2007 2007
Revenue Capital Total
£'000 £'000 £'000
Realised gains on investments - 15,616 15,616
Increase in fair value of investments - 35,968 35,968
Exchange losses - (91) (91)
Income 3,567 - 3,567
Investment management fee (304) (912) (1,216)
Other expenses (333) - (333)
Net return before finance costs and taxation 2,930 50,581 53,511
Interest payable and similar charges (322) (967) (1,289)
Net return on ordinary activities before taxation 2,608 49,614 52,222
Tax on ordinary activities (818) 581 (237)
Net return attributable to equity shareholders 1,790 50,195 51,985
Return per share 1
Basic 2.85p 79.84p 82.69p
Fully diluted 2.78p 77.97p 80.75p
Audited Income Statement
for the year ended 30 June 2006
Notes 2006 2006 2006
Revenue Capital Total
£'000 £'000 £'000
Realised gains on investments - 12,161 12,161
Increase in fair value of investments - 12,986 12,986
Exchange losses - (128) (128)
Income 2,877 - 2,877
Investment management fee (217) (654) (871)
Other expenses (270) - (270)
Net return before finance costs and taxation 2,390 24,365 26,755
Interest payable and similar charges (236) (603) (839)
Net return on ordinary activities before taxation 2,154 23,762 25,916
Taxation on ordinary activities (599) 390 (209)
Net return attributable to equity shareholders 1,555 24,152 25,707
Return per share 1
Basic 2.48p 38.42p 40.90p
Fully diluted 2.45p 38.15p 40.60p
Balance Sheet as at 30 June
2007 2006
Audited Audited
£'000 £'000
Fixed assets
Investments 148,455 92,556
Current assets
Debtors 3,514 1,076
Cash at bank and on deposit 427 508
3,941 1,584
Creditors: amounts falling due within one year (26,468) (18,862)
Net current liabilities (22,527) (17,278)
Net assets 125,928 75,278
Capital and reserves
Called-up share capital 15,719 15,714
Special distributable reserve 30,386 30,386
Share premium 22 -
Warrant reserve 2,342 2,353
Other reserves:
Capital reserve - realised 20,709 6,482
Capital reserve - unrealised 55,339 19,371
Revenue reserve 1,411 972
Equity shareholders' funds 125,928 75,278
Net asset value per share
2
Basic 200.28p 119.76p
Fully diluted 193.42p 117.68p
Reconciliation of Movements in Shareholders' Funds
Year ended 30 Year ended 30
June 2007 June 2006
Audited Audited
£'000 £'000
Opening equity shareholders' funds 75,278 50,827
Gains on investments 51,584 25,147
Return on ordinary activities after taxation 1,790 1,555
Costs charged to capital (1,298) (867)
Exchange losses (91) (128)
Exercise of warrants 16 -
Dividends paid (1,351) (1,256)
Closing equity shareholders' funds 125,928 75,278
Cash Flow Statement for the year to 30 June
2007 2006
Audited Audited
£'000 £'000
Operating activities
Investment income received 2,747 2,708
Capital dividend received 1,200 -
Deposit interest received 35 -
Other income received - 17
Investment management fees paid (1,254) (760)
Other cash payments (476) (356)
Net cash inflow from operating activities 2,252 1,609
Servicing of finance
Interest on loan (1,278) (681)
Bank overdraft interest - (35)
Net cash outflow from servicing of finance (1,278) (716)
Taxation
Tax paid (107) (154)
Capital expenditure and financial investment
Purchases of investments (56,656) (49,504)
Disposals of investments 49,634 44,714
Net cash outflow from capital expenditure and financial investment (7,022) (4,790)
Dividends
Equity dividends paid (1,351) (1,256)
Net cash outflow before financing (7,506) (5,307)
Financing
Bank loan drawn down 7,500 5,500
Issue of ordinary shares 16 -
Net cash inflow from financing 7,516 5,500
Increase in cash 10 193
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year 10 193
Cash inflow from drawdown of loans (7,500) (5,500)
Exchange losses (91) (128)
Movement in net debt in the year (7,581) (5,435)
Opening net debt at 1 July (16,992) (11,557)
Closing net debt at 30 June (24,573) (16,992)
Notes
1. The basic revenue return per ordinary share is based on the net return
after taxation of £1,790,000 (2006: £1,555,000) and on 62,866,469 (2006:
62,857,143) ordinary shares being the weighted average number of ordinary
shares in issue during the year.
The basic capital return per ordinary share is based on a net capital gain
of £50,195,000 (2006: £24,152,000) and on 62,866,469 (2006: 62,857,143)
ordinary shares, being the weighted average number of ordinary shares in
issue during the year.
2. On 27 December 2006 the Company issued 18,500 ordinary shares of 25p each
following the exercise of 18,500 warrants.
The basic net asset value per ordinary share of 200.28p (2006: 119.76p) is
based on 62,875,643 shares (2006: 62,857,143), being the total number of
ordinary shares in issue at the end of the year.
The fully diluted net asset value per ordinary share is 193.42p (2006:
117.68p).
As at 30 June 2007 there were 3,981,500 (2006 - 4,000,000) warrants in
issue. Each warrant confers the right to subscribe for one new ordinary
shares at 85 pence on 31 October (or, if later, the date being 30 days after
the date in which copies of the Company accounts are dispatched to
shareholders) in any of the years 2006 to 2009. The warrant price as at
30 June 2007 89.3 pence (2006: 39.0 pence).
3. The Board declared a fourth interim dividend of 0.85p per share which was
paid on 24 August 2007 to shareholders on the register on 27 July 2007,
having an ex-dividend date of 25 July 2007.
4. The financial information set out above does not constitute the Company's
statutory accounts for the year ended 30 June 2007. The financial
information for 2006 is derived from the statutory accounts for 2006 which
have been delivered to the Registrar of Companies. The Auditors have
reported on the 2006 accounts, their report was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
The statutory accounts for 2007 are audited and the Auditors have issued an
unqualified opinion. The statutory accounts for 2007 will be finalised on
the basis of the financial information presented in this preliminary
announcement and will be delivered to the Registrar of Companies following
the Company's Annual General Meeting.
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