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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cqs New City High Yield Fund Limited | LSE:NCYF | London | Ordinary Share | JE00B1LZS514 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.10 | -0.19% | 52.60 | 52.60 | 52.80 | 53.00 | 52.40 | 52.60 | 403,161 | 10:57:48 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Unit Inv Tr, Closed-end Mgmt | 8.37M | 3.2M | 0.0060 | 87.67 | 282.38M |
From Apr 2019 to Apr 2024
TIDMNCYF
RNS Number : 4202Q
CQS New City High Yield Fund Ltd
26 February 2021
A copy of the Company's Half Year Report will shortly be available on the Company's website ( https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd ), on the National Storage Mechanism ( https://data.fca.org.uk/#/nsm/nationalstoragemechanism ) and will also be provided to those shareholders who have requested a printed or electronic copy.
CQS NEW CITY HIGH YIELD FUND LIMITED
Interim Results Announcement
for the six months ended 31 December 2020
Statement from the Chair
Key points
-- Net asset value total return of 8.83%
-- Ordinary share price total return of 15.39%
-- Dividend yield of 8.57%, based on dividends at an annualised rate of 4.46 pence and a share price of 52.00 pence at 31 December 2020
-- Ordinary share price at a premium of 6.38% at 31 December 2020
-- GBP1.70m of equity raised during the six months to 31 December 2020
Investment Performance
The six months to 31 December 2020 covered by this interim report have seen a welcome recovery from last March and April's Covid-19 market dislocation. Your Company had a net asset value total return of 8.83% for the period and, thanks to an increase in the share price premium, a share price total return of 15.39%. The Company's shares traded at a premium to their net asset value for most of the review period and as 31 December 2020 this stood at 6.38%, recovering from a slight discount of 0.25% at the start of the financial year. The average premium over the six months to 31 December 2020 was 1.64% and over three years 4.57%.
The market backdrop to your Company's results has been eventful with the Brexit endgame being played out, political turbulence in the United States and overriding everything the ongoing Covid-19 pandemic. Helped by massive amounts of government stimulus, the equity and bond markets have held up well, particularly towards the end of 2020. Ian Francis, your investment manager, discusses the six months in more detail in his review below.
Earnings and Dividends
The Company's earnings per share were 2.12 pence for the six months, lower than the 2.24 pence earned in the same period last year, covering the dividends paid. The Company has declared two dividends of 1.00 pence so far in this financial period, maintaining the level of those declared in the same period in the past two years. In the absence of unforeseen circumstances, the Board expects to follow the same pattern of dividend payments as declared last year and maintain or slightly increase the total level of dividends for the year. Based on an annual rate of 4.46 pence and a share price of 50.92 pence at the time of writing, this represents a dividend yield of 8.76%.
Dividend payments are a critical aspect of the Company for shareholders and the Board continually assesses the Company's dividend policy, both in the immediate future and looking further out. In the current financial year, a dividend of at least the same as the previous year (4.46 pence) is likely to be covered by earnings. Should this not be the case, the Board is prepared to use a modest amount of reserves to make up a marginal shortfall and anticipates that this will be the most likely scenario for the next few years as well.
Gearing
The Company renewed its existing Scotiabank GBP35m loan facility in December 2020 with a one year GBP35m facility with the same bank at a current all-in rate of 1.39%. The facility is comparable to the one that it replaced. GBP33m was drawn down at 31 December 2020 which gave the Company an effective gearing rate of 14.02%. This is broadly similar to this time last year and the Board does not expect much fluctuation in this level.
Share Issuance
Taking advantage of the premium rating that the market continues to attach to your Company's shares, GBP1.7m was raised from new and existing shareholders during the six-month period, with 3.45m ordinary shares issued from the block listing facility. A further GBP1.5m has been raised since 31 December 2020. As well as a modest uplift in net asset value from any issue of shares, over time existing shareholders should benefit from lower ongoing charges and greater liquidity in the Company's shares.
Outlook
The Covid-19 pandemic continues to impact every part of the world to a greater or lesser extent. The roll out of vaccines is probably a 'game changer' but not an instant one given the administration logistics and new variants emerging. The impact of the virus, not least on government finances, will be felt for many years to come. From your Company's perspective, continued rigorous credit analysis on the issuers of the bonds held remains paramount as is seizing opportunities as they arise in the secondary markets. Your investment manager, Ian Francis, is an experienced professional with a strong team supporting him and he is adept at this. He shares his outlook below.
Caroline Hitch
Chair
25 February 2021
Investment Manager's Review
Market and economic review
During the six-month period under review there was a marked divergence between the economic realities of the ongoing Covid-19 crisis and the performance of equity and bond markets. The Summer months saw a muted economic recovery as industrial and service sectors in the UK, Europe and the US reopened after their initial lockdowns. This recovery was abruptly stalled in the Autumn months as a second lockdown reared its ugly head and whole sectors in the hospitality and travel industries were forced to close again. The stock markets on the other hand have tried to look through the gloom and taking their cue from the vast amounts of fiscal stimulus unleashed by the major central banks, equities have powered ahead. The positive vaccine news towards the end of the year was another major fillip for the markets. The political landscape had a turbulent period as well - in the UK we saw all the drama of the Brexit negotiations coming to a head on Christmas Eve with an agreement reached. Both sides claimed victory but the realities will be the innumerable small changes that will take place over the months and years ahead. Europe saw a range of responses to the Covid-19 crisis and a consensus recovery package was eventually agreed. The US was dominated by the tumultuous Presidential election and the subsequent Senate run-off elections which saw a Democratic majority across the political landscape. The US economy and markets are now concentrating on what the size and types of stimulus packages will be. I wrote last Summer that "all that the vast amounts of funds being injected by the seemingly unlimited amounts of QE are doing is to move the level of markets away from the real economy, trying to keep companies and markets afloat until the economy can recover. This is a high risk strategy but definitely in line with the 'whatever it takes' world of Central Banks." Six months on this statement still holds true - the major change being the prospect of a range of vaccines that will hopefully allow lockdowns to end. Portfolio Review We have continued to maintain a diversified portfolio across a range of sectors and have a good proportion of the portfolio in non-sterling currencies. The non-sterling exposure was 28.4% of the portfolio as at 31 December 2020. Turnover within the portfolio has remained low and we have seen a number of investments redeem their bonds either at their scheduled repayment date or earlier if the opportunity arose. Examples are the Balfour Beatty Convertible Preference Shares which repaid GBP4.12 million on 1 July and the Garfunkelex 11.5% and 8.5% bonds which were called. We have increased our position in Bracken Midco 8.875% 2023 (a specialist mortgage and finance provider). We have not seen any further problems in the portfolio where bond issuers or equity companies have been unable to pay their coupons or dividends. We continue to monitor closely how companies recover as we come out of Covid-19 restrictions and, as we did in the global financial crisis, look for any opportunities as they arise. For the six months to 31 December 2020 the revenue account earnings were 2.12p compared to 2.24p for the same period last year. In my regular discussions with shareholders the revenue and dividends are topics of crucial importance and the ability of any portfolio company to pay its coupon or expected dividend is one of the major indicators we follow. With the inclusion of dividends paid the total net asset return for the six months to 31 December 2020 was a positive 8.83%. Outlook Markets have already rallied globally as they look through the pandemic. Where they go from here will be based on the speed and strength of each country's economy recovery rates. In the UK we see a positive recovery from the very efficient vaccine roll out which is considerably ahead of our former EU partners. This means that our domestic economy is likely to recover well before most of Europe. How fast and in which areas will be decided by the government, along with our ability to travel abroad over the coming months. Brexit has so far been kept out of the news headlines, but evidence of many businesses' both large and small having to relocate part of their manufacturing in the EU in order to access markets, meaning the loss of jobs in the UK. Another big question mark is as yet there is no framework or agreement over financial services which is potentially troubling for the UK economy. I will be working as usual over the forthcoming months to look after your portfolio and ensure that it is in the best possible position for whatever lies ahead. Ian "Franco" Francis 25 February 2021
Condensed Statement of Comprehensive Income
For the six months ended 31 December 2020 (Unaudited)
Hot Features
Premium
Notes Revenue Capital Total
------------------------------------------------------- ------ ------------- ------------- -------------
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------ ------------- ------------- -------------
Net capital gain
Net gain on financial assets designated at fair value 8 - 7,665 7,665
Foreign exchange loss - (20) (20)
Revenue
Income 3 10,659 - 10,659
------------------------------------------------------- ------ ------------- ------------- -------------
Total income 10,659 7,645 18,304
------------------------------------------------------- ------ ------------- ------------- -------------
Expenses
Investment management fee 4 (704) (235) (939)
Other expenses 5 (435) (5) (440)
------------------------------------------------------- ------ ------------- ------------- -------------
Total expenses (1,139) (240) (1,379)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit before finance costs and taxation 9,520 7,405 16,925
Finance costs
Interest payable and similar charges 6 (145) (48) (193)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit before taxation 9,375 7,357 16,732
Irrecoverable withholding tax (168) - (168)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit after taxation 9,207 7,357 16,564
Earnings per ordinary share (pence) 7 2.12 1.69 3.81
------------------------------------------------------- ------ ------------- ------------- -------------
For the six months ended 31 December 2019 (Unaudited)
Notes Revenue Capital Total
------------------------------------------------------- ------ ------------- ------------- -------------
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------ ------------- ------------- -------------
Net capital gain
Net gain on financial assets designated at fair value 8 - 1,420 1,420
Foreign exchange loss - (149) (149)
Revenue
Income 3 10,936 - 10,936
------------------------------------------------------- ------ ------------- ------------- -------------
Total income 10,936 1,271 12,207
------------------------------------------------------- ------ ------------- ------------- -------------
Expenses
Investment management fee 4 (771) (257) (1,028)
Other expenses 5 (366) (38) (404)
------------------------------------------------------- ------ ------------- ------------- -------------
Total expenses (1,137) (295) (1,432)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit before finance costs and taxation 9,799 976 10,775
Finance costs
Interest income 10 - 10
Interest payable and similar charges 6 (210) (70) (280)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit before taxation 9,599 906 10,505
Irrecoverable withholding tax (108) - (108)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit after taxation 9,491 906 10,397
Earnings per ordinary share (pence) 7 2.24 0.21 2.45
------------------------------------------------------- ------ ------------- ------------- -------------
For the year ended 30 June 2020 (Audited)
Notes Revenue Capital Total
------------------------------------------------------- ------ ------------- ------------- -------------
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------ ------------- ------------- -------------
Net capital loss
Net loss on financial assets designated at fair value 8 - (33,398) (33,398)
Foreign exchange loss - (97) (97)
Revenue
Income 3 22,625 - 22,625
------------------------------------------------------- ------ ------------- ------------- -------------
Total income/(loss) 22,625 (33,495) (10,870)
------------------------------------------------------- ------ ------------- ------------- -------------
Expenses
Investment management fee 4 (1,477) (492) (1,969)
Other expenses 5 (745) (40) (785)
------------------------------------------------------- ------ ------------- ------------- -------------
Total expenses (2,222) (532) (2,754)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit/(loss) before finance costs and taxation 20,403 (34,027) (13,624)
Finance costs
Interest income 12 - 12
Interest payable and similar charges 6 (418) (139) (557)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit/(loss) before taxation 19,997 (34,166) (14,169)
Irrecoverable withholding tax (331) - (331)
------------------------------------------------------- ------ ------------- ------------- -------------
Profit/(loss) after taxation 19,666 (34,166) (14,500)
Earnings per ordinary share (pence) 7 4.59 (7.98) (3.39)
------------------------------------------------------- ------ ------------- ------------- -------------
The total column of this statement represents the Company's Condensed Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement are derived from continuing operations.
No operations were acquired or discontinued during the period.
There is no other comprehensive income as all income is recorded in the Condensed Statement of Comprehensive Income above.
The accompanying notes below are an integral part of these condensed financial statements.
Condensed Statement of Financial Position
As at 31 December 2020
As at 31 December 2019 As at 30 June
As at 31 December 2020 GBP'000 2020
Notes GBP'000 GBP'000
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Non-current assets
Financial assets 8 240,309 255,451 230,741
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Current assets
Debtors and other receivables 3,405 4,250 9,882
Cash and cash equivalents 3,090 7,382 2,853
-------------------------------------------- ------ ----------------------- ----------------------- --------------
6,495 11,632 12,735
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Total assets 246,804 267,083 243,476
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Current liabilities
Bank loan 6 (33,000) (31,000) (31,000)
Creditors and other payables (531) (495) (6,797)
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Total liabilities (33,531) (31,495) (37,797)
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Net asset value 213,273 235,588 205,679
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Stated capital and reserves
Stated capital account 9 198,745 193,452 197,037
Special distributable reserve 50,385 50,385 50,385
Capital reserve (52,268) (24,653) (59,725)
Revenue reserve 16,511 16,404 17,982
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Equity shareholders' funds 213,273 235,588 205,679
-------------------------------------------- ------ ----------------------- ----------------------- --------------
Net asset value per ordinary share (pence) 10 48.88p 55.22p 47.52p
-------------------------------------------- ------ ----------------------- ----------------------- --------------
The condensed financial statements were approved by the Board of Directors and authorised for issue on 25 February 2021 and were signed on its behalf by:
Caroline Hitch
Chair
The accompanying notes below are an integral part of these condensed financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 December 2020 (Unaudited)
Notes Stated Special distributable Capital Revenue reserve Total
capital reserve reserve
account
GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
------------------------- ------ --------- ---------------------- --------- ---------------- ---------
At 1 July 2020 197,037 50,385 (59,725) 17,982 205,679
Total comprehensive
income for the period:
Profit for the period - - 7,357 9,207 16,564
Transactions with
owners recognised
directly in equity:
Dividends paid 11 - - - (10,678) (10,678)
Net proceeds from
issue of shares 9 1,708 - - - 1,708
At 30 December 2020 198,745 50,385 (52,368) 16,511 213,273
------------------------- ------ --------- ---------------------- --------- ---------------- ---------
For the six months ended 31 December 2019 (Unaudited)
Notes Stated Special distributable Capital Revenue reserve Total
capital reserve reserve
account
GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
------------------------- ------ --------- ---------------------- --------- ---------------- ---------
At 1 July 2019 191,007 50,385 (25,559) 17,294 233,127
Total comprehensive
income for the period:
Profit for the year - - 906 9,491 10,397
Transactions with
owners recognised
directly in equity:
Dividends paid 11 - - - (10,381) (10,381)
Net proceeds from
issue of shares 2,445 - - - 2,445
------------------------- ------ --------- ---------------------- --------- ---------------- ---------
At 31 December 2019 193,452 50,385 (24,653) 16,404 235,588
------------------------- ------ --------- ---------------------- --------- ---------------- ---------
For the year ended 30 June 2020 (Audited)
Notes Stated Special distributable Capital Revenue reserve Total
capital reserve reserve
account
GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
---------------------- ------ --------- ---------------------- --------- ---------------- ---------
At 1 July 2019 191,007 50,385 (25,559) 17,294 233,127
Total comprehensive
(loss)/ income for
the year:
(Loss)/profit for
the year - - (34,166) 19,666 (14,500)
Transactions with
owners recognised
directly in equity:
Dividends paid 11 - - - (18,978) (18,978)
Net proceeds from
issue of shares 6,030 - - - 6,030
---------------------- ------ --------- ---------------------- --------- ----------------
At 30 June 2020 197,037 50,385 (59,725) 17,982 205,679
---------------------- ------ --------- ---------------------- --------- ---------------- ---------
The accompanying notes below are an integral part of these condensed financial statements.
Condensed Cash Flow Statement
Six months ended Six months ended Year ended
31 December 2020 31 December 2019 30 June 2020
Notes GBP'000 GBP'000 GBP'000
Operating activities
Profit/(loss) before finance cost and taxation 16,925 10,775 (13,624)
Adjustments to reconcile (loss)/profit before tax to
net cash flows:
Realised loss on financial assets
designated at fair value through profit
or loss. 8 6,753 2,719 2,766
Unrealised (gain)/loss on financial assets
designated at fair value through profit
or loss 8 (14,418) (4,139) 30,632
Effective interest adjustment 8 (174) (72) (162)
Foreign exchange loss 20 149 97
Purchase of financial assets designated at fair value
through profit or loss (1) (32,606) (63,259) (86,268)
Proceeds from sale of financial assets designated at
fair value through profit or loss (2) 31,582 60,667 73,197
Changes in working capital
(Increase)/decrease in other receivables (43) (64) 824 Increase in other payables (451) 227 478 Irrecoverable withholding tax paid (168) (108) (331) ------------------------------------------------------ ------ ------------------ ------------------ -------------- Net cash inflow from operating activities 7,420 6,895 7,609 ------------------------------------------------------ ------ ------------------ ------------------ -------------- Financing activities Dividends paid 11 (10,678) (10,381) (18,978) Drawdown of bank loan 6 2,000 3,000 3,000 Finance costs (193) (265) (548) Net proceeds from issuance of ordinary shares 9 1,708 2,445 6,030 ------------------------------------------------------ ------ ------------------ ------------------ -------------- Net cash outflow from financing (7,163) (5,201) (10,496) ------------------------------------------------------ ------ ------------------ ------------------ -------------- Increase/(decrease) in cash and cash equivalents 257 1,694 (2,887) ------------------------------------------------------ ------ ------------------ ------------------ -------------- Cash and cash equivalents at the start of the period 2,853 5,837 5,837 Exchange loss (20) (149) (97) ------------------------------------------------------ ------ ------------------ ------------------ -------------- Cash and cash equivalents at the end of the period 3,090 7,382 2,853 ------------------------------------------------------ ------ ------------------ ------------------ --------------
(1) - Amounts due to brokers as at 31 December 2020 relating to purchases of financial assets designated at fair value through profit amounted to GBP244,000 (31 December 2019: GBPnil; 30 June 2020: GBP6,059,000).
(2) - Amounts due from brokers as at 31 December 2020 relating to sales of financial assets designated at fair value through profit amounted to GBPnil (31 December 2019: GBPnil; 30 June 2020: GBP6,520,000).
The accompanying notes below are an integral part of these condensed financial statements.
Notes to the Financial Statements 1. General Information
The Company was incorporated as a closed-end investment company with limited liability in Jersey under the Companies (Jersey) Law 1991 on 17 January 2007, with registered number 95691. The Company's ordinary shares were admitted to the Official List as maintained by the Financial Conduct Authority and admitted to trading on the Main Market of the London Stock Exchange on 7 March 2007.
The Company's registered address is IFC1, The Esplanade, St Helier, Jersey, JE1 4BP.
2. Accounting policies 2.1 Basis of accounting
The Annual Report and Financial Statements is prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with International Financial Reporting Standards ("IFRS") as adopted by the European Union which comprise standards and interpretations approved by the International Accounting Standards Board, and interpretations issued by the International Financial Reporting Standards and Standing Interpretations Committee as approved by the International Accounting Standards Committee which remain in effect. The Annual Report and Financial Statements are also prepared in accordance with the guidance set out in the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (the "AIC SORP") in November 2014 and updated in January 2017, March 2018 and October 2019 with consequential amendments where this does not conflict with IFRS. The Interim Report has been prepared in accordance with International Accounting Standards (IAS) 34 - Interim Financial Reporting ("IAS 34") as adopted by the European Union. They have also been prepared using the same accounting policies applied for the year ended 30 June 2020 Annual Report and Financial Statements, which was prepared in accordance with IFRS, except for new standards and interpretations adopted by the Company as set out below. The Company has also prepared the condensed interim financial statements in line with the updated AIC SORP where this does not conflict with IFRS. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Standards and amendments to existing standards effective for annual periods beginning on or after 1 January 2020
The Company applies for the first time IFRS 3 Business Combinations (amendment) and Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) which all became effective on 1 January 2020. The Directors do not expect that the adoption of standards listed above will have a material impact on the financial statements of the Company in future periods.
Definition of Material (Amendments to IAS 1 and IAS 8)
The International Accounting Standards Board has redefined its definition of material, issued practical guidance on applying the concept of materiality and issued proposals focused on the application of materiality to disclosure of other accounting policies. The amendments do not have a material impact on the Company's financial statements
Several other amendments and interpretations apply for the first time in 2020, but these do not have an impact on the condensed financial statements.
2.2 Going Concern
The condensed financial statements have been prepared on the going concern basis. In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
2.3 Segmental reporting
No segmented reporting is provided as the Board, as the Chief Operator Decision Maker (with advice from the Investment Manager), are of the opinion that the Company is engaged in a single segment of business of investing in debt and, to a significantly lesser extent, equity securities.
2.4 Seasonality
The Company's business is not subject to seasonal fluctuations.
3. Income
Six months ended Six months ended 31 December 2019 Year ended
31 December 2020 (Unaudited) 30 June 2020
(Unaudited) GBP'000 (Audited)
GBP'000
GBP'000
Income from investments
------------------ ---------------------------------- --------------
Dividend income 1,634 1,842 2,668
------------------ ---------------------------------- --------------
Interest on fixed interest securities 9,025 9,094 19,957
------------------ ---------------------------------- --------------
Total income 10,659 10,936 22,625
------------------ ---------------------------------- --------------
4. Investment Management Fee
The Company's investment manager is CQS (UK) LLP ("CQS") which has delegated this function to New City Investment Managers.
As per the Investment Management Agreement dated 18 September 2019, the management fee is charged at a rate of 0.8% per annum on the Company's total assets (being total assets less current liabilities (other than bank borrowings and ignoring any taxation which is or may be payable by the Company)) up to GBP200 million, 0.7% per annum of Assets in excess of GBP200 million and up to and including GBP300 million and 0.6% per annum thereafter. The management fee is paid monthly in arrears .
The contract between the Company and CQS (UK) LLP may be terminated by either party giving not less than 12 months' notice of termination.
During the six months period ended 31 December 2020, investment management fees of GBP939,000 were incurred (six months ended 31 December 2019: GBP1,028,000; year ended 30 June 2020: GBP1,969,000), of which GBP162,000 was payable at the period end (six months ended 31 December 2019: GBP344,000; year ended 30 June 2020: GBP602,000). Investment management fees have been allocated 75% to revenue and 25% to capital.
5. Other expenses
During the six months ended 31 December 2020 the Company's other expenses were GBP440,000 (six months ended 31 December 2019: GBP404,000; year ended 30 June 2020: GBP785,000).
Secretarial and administration fees
Secretarial and administration fees incurred during the six months ended 31 December 2020 were GBP103,000 (six months ended 31 December 2019: GBP106,000; year ended 30 June 2020: GBP202,000).
Directors' fees
On 22 May 2019, the Board approved an increased level of remuneration for the Directors from GBP146,750 (Chair: GBP37,500; Audit Chair: GBP31,250 and other directors: GBP26,000) to GBP157,000 with annual effect from 1 July 2019 as follows:
Chair GBP40,000
Audit Chair GBP34,000
Other GBP27,500
The Board has not approved any change in remuneration during the period ended 31 December 2020.
Directors fees for the six months ended 31 December 2020 were GBP78,000 (six months ended 31 December 2019: GBP78,000; year ended 30 June 2020: GBP157,000).
Audit fees and non-audit fees paid to the auditor
Audit fees for the six months ended 31 December 2020 were GBP22,000 (six months ended 31 December 2019: GBP19,000; year ended 30 June 2020: GBP45,000).
There were no non-audit fees paid to the auditor during the period ended 31 December 2020 (six months period ended 31 December 2019: GBPnil; year ended 30 June 2020: GBPnil).
6. Bank Loan and finance costs
Six months ended Six months ended Year ended
31 December 2020 31 December 2019 30 June 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000
GBP'000
Bank Loan facility - opening balance 31,000 28,000 28,000
------------------ ------------------ --------------
Drawdowns 2,000 3,000 3,000
------------------ ------------------ --------------
Bank Loan facility - closing balance 33,000 31,000 31,000
------------------ ------------------ --------------
The Company has a short term unsecured loan facility with Scotiabank Europe Plc ("Scotiabank"). The facility is due to expire on 18 December 2021 after which it is anticipated the Company will take out a new facility on comparable terms.
On 18 December 2020, the Company drew down a further GBP2,000,000. As at 31 December 2020, the unsecured loan facility had a limit of GBP35,000,000 of which GBP33,000,000 was drawn down at an interest rate of 1.38700%, which is made up of LIBOR plus a margin rate.
The current loan facility was renewed on 18 December 2020 on the same terms as applied to the previous facility that expired on the 18 December 2020. During the six months ended 31 December 2020 the covenants of the loan facility have been met. The following are the covenants for the facility held as at 31 December 2020:
-- the borrower shall not permit the adjusted asset coverage to be less than 4 to 1
-- the borrower shall not permit the net asset value to be less than GBP95,000,000 at any time
-- the borrower shall maintain an additional adjusted asset coverage of at least 1.5 to 1 at all times
The loan facility is rolled over every three months and can be cancelled at any time
During the six months ended 31 December 2020, the Company incurred interest expense of GBP193,000 (six months ended 31 December 2019; GBP280,000; year ended 30 June 2020: GBP557,000) and received interest of GBPnil (six months ended 31 December 2019: GBP10,000; 30 June 2020: GBP12,000).
7. Earnings per ordinary share
Revenue Capital Total
for the six months ended 31 December 2020 2.12p 1.69p 3.81p
-------- -------- --------
for the six months ended 31 December 2019 2.24p 0.21p 2.45p
-------- -------- --------
for the year ended 30 June 2020 4.59p (7.98)p (3.39)p
-------- -------- --------
The revenue earnings per ordinary share for the six months ended 31 December 2020 is based on the net profit after taxation of GBP9,207,000 (six months ended 31 December 2019: GBP9,491,000; year ended 30 June 2020: GBP19,666,000) and on a weighted average of 434,967,075 (six months ended 31 December 2019: 424,861,641; year ended 30 June 2020: 428,002,951) ordinary shares in issue throughout the period .
The capital return per ordinary share for the six months ended 31 December 2020 is based on a net capital gain of GBP7,357,000 (six months ended 31 December 2019: a net capital gain of GBP906,000; year ended 30 June 2020: a net capital loss of GBP34,166,000) and on a weighted average of 434,967,075 (six months ended 31 December 2019: 424,861,641; year ended 30 June 2020: 428,002,951) ordinary shares in issue throughout the period .
Refer to note 13 for details of ordinary shares issued subsequent to the end of the reporting period. These shares were issued at a premium to the 31 December 2020 NAV per ordinary share.
8. Financial assets designated at fair value through profit or loss
All financial assets are valued at fair value through profit or loss. Gains or losses arising from changes in the fair value of investments are included in the Statement of Comprehensive Income.
As at As at As at
31 December 2020 31 December 2019 30
(Unaudited) (Unaudited) June
GBP'000 GBP'000 2020
(Audited)
GBP'000
Opening valuation 230,741 253,034 253,034
------------------ ------------------ -----------
Purchases at cost 26,791 59,628 88,696
------------------ ------------------ -----------
Sales proceeds (25,062) (58,703) (77,753)
------------------ ------------------ -----------
Realised losses on sales(1) (6,753) (2,719) (2,766)
------------------ ------------------ -----------
Effective interest adjustment 174 72 162
------------------ ------------------ -----------
Unrealised gains/(losses) (2) 14,418 4,139 (30,632)
------------------ ------------------ -----------
Closing valuation 240,309 255,451 230,741
------------------ ------------------ -----------
Total net gain/(loss) on financial assets designated at
fair value through profit or loss for the period/year 7,665 1,420 (33,398)
(1) Realised losses on financial assets designated at fair value through profit or loss is made up of gains of GBP522,000 and losses of GBP7,277,000.
(2) Unrealised gains on financial assets designated at fair value through profit or loss is made up of gains of GBP28,364,000 and losses of GBP13,946,000.
Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is significant to the fair value measurement for the individual investments in its entirety as follows:
Level 1 - investments quoted in an active market.
Level 2 - investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices.
Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or based on observable market data.
Investments valued using stock market active prices are disclosed as Level 1 and this is the case for the quoted equity investments that the Company holds. Securities in Level 2 are priced using evaluated prices from a third party vendor, together with a price comparison made to evaluated secondary and tertiary third party sources, including broker quotes and benchmarks. As a result, these investments are disclosed as Level 2 - recognising that the fair values of these investments are not as visible as quoted investments and their higher inherent pricing risk.
Investments included as Level 3 are priced using a valuation technique reviewed by the Board taking into account, where appropriate, latest dealing prices, broker statements, valuation information and other relevant factors.
Level 1 Level 2 Level 3 Total
Financial assets at fair value GBP'000 GBP'000 GBP'000 GBP'000
Fixed income securities 6,193 184,390 10,711 201,294
--------- --------- --------- ---------
Equity shares 35,939 - 332 36,271
--------- --------- --------- ---------
Convertible bonds - 2,744 - 2,744
--------- --------- --------- ---------
As at 31 December 2020 42,132 187,134 11,043 240,309
--------- --------- --------- ---------
Level 1 Level 2 Level 3 Total
Financial assets at fair value GBP'000 GBP'000 GBP'000 GBP'000
Fixed income securities 5,804 185,163 11,131 202,098
--------- --------- --------- ---------
Equity shares 39,149 334 421 39,904
--------- --------- --------- ---------
Convertible bonds 4,202 9,247 - 13,449
--------- --------- --------- ---------
As at 31 December 2019 49,155 194,744 11,552 255,451
--------- --------- --------- ---------
Level 1 Level 2 Level 3 Total
Financial assets at fair value GBP'000 GBP'000 GBP'000 GBP'000
Fixed income securities 4,512 175,853 8,484 188,849
--------- --------- --------- ---------
Equity shares 31,029 - 380 31,409
--------- --------- --------- ---------
Convertible bonds 4,038 6,445 - 10,483
--------- --------- --------- ---------
As at 30 June 2020 39,579 182,298 8,864 230,741
--------- --------- --------- ---------
During the period ended 31 December 2020 there were no transfers between level 1 and level 2.
Financial assets designated at fair value through profit or loss reconciliation - Level 3
IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen in reference to the specific underlying circumstances and position of the investee company. On that basis, the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly. The following shows a reconciliation from the beginning to the end of the year for fair value measurements in Level 3 of the fair value hierarchy.
Six months ended
31 December 2020
(Unaudited)
Level 3 Financial Assets GBP'000
Opening valuation 8,864
------------------
Purchases 40
------------------
Sales (232)
------------------
Unrealised gains 4,107
------------------
Realised losses (4,971)
------------------
Transfers into Level 3 3,235
------------------
11,043
------------------
OakNorth Bank 01/06/2028 FRN, NT Rig Holdco 7.5% 20/12/2021 and Oro Negro Dril 7.5% 24/01/2019 were transferred to Level 3 due to a decrease in observable data.
If the market value of the Level 3 investments fell by 5%, the impact on the profit or loss and the net asset value would have been a reduction to profit of GBP552,000. If the value of the Level 3 investments rose by the same amount, the effect would have been equal and opposite.
31 December 2020
(Unaudited)
GBP'000
Aggregated Micro 8% 17/10/2036 7,154 (1)
----------------- ----
OakNorth Bank Variable 01/06/2028 1,860 (1)
----------------- ----
NT Rig Holdco 12% 20/12/2021 667 (1)
----------------- ----
JPI Media Group Senior Notes (Facility B) 592 (1)
----------------- ----
NT Rig Holdco 7.5% 20/12/2021 438 (3)
----------------- ----
R.E.A Holdings Plc CW 15/07/2025 170 (2)
----------------- ----
Fara Holdco Limited NPV 148 (1)
----------------- ----
JPI Media Group Equity 14 (1)
----------------- ----
Others -
----------------- ----
11,043
----------------- ----
(1) Single broker quote, low liquidity
(2) Marked to model
(3) Asset priced
The Company also holds a number of other Level 3 assets with a value of GBPnil.
9. Stated Capital
Authorised
The authorised share capital of the Company is represented by an unlimited number of ordinary shares of no par value.
Allotted, called up and fully-paid
Share Issue Costs
Amount GBP'000
Number of received Share capital
ordinary shares GBP'000 GBP'000
Total as at 1 July 2020 432,851,858 197,037
------------------------------- ----------- ------------------ --------------
600,000 ordinary shares of no par
value allotted on 28 July 2020 at
50.00p 600,000 300 (2) 298
------------------------------- ----------- ------------------ --------------
1,700,000 ordinary shares of no par
value allotted on 07 September
2020 at 49.75p 1,700,000 846 (6) 840
------------------------------- ----------- ------------------ --------------
750,000 ordinary shares of no par
value allotted on 15 September
2020 at 50.00p 750,000 375 (3) 372
------------------------------- ----------- ------------------ --------------
400,000 ordinary shares of no par
value allotted on 20 November 2020
at 50.00p 400,000 200 (2) 198
------------------------------- ----------- ------------------ --------------
Total issued share capital at 31
December 2020 436,301,858 1,721 (13) 198,745
------------------------------- ----------- ------------------ --------------
The balance of shares held in treasury by the Company at 31 December 2020 was nil (31 December 2019: nil; 30 June 2020: nil).
On 01 October 2020, a block listing facility for 43,000,000 new shares was approved by the UK Listing Authority. This facility is used for the purposes of satisfying market demand.
Refer to note 13 for further information subsequent to the reporting period.
10. Net Asset Value per Ordinary share
31 December 2020 31 December 2019 30 June 2020
(Unaudited) (Unaudited) (Audited)
Net Asset Value (GBP'000) 213,273 235,588 205,679
----------------- ----------------- -------------
Net Asset per share (pence) 48.88p 55.22p 47.52p
----------------- ----------------- -------------
The NAV per share is the value of all Company's total assets, less total liabilities, divided by the total number of ordinary shares at each period end. As at 31 December 2020 436,301,858 ordinary shares were held (31 December 2019: 426,601,858; 30 June 2020: 432,851,858).
11. Dividends
Six months ended Six months ended Year ended
31 December 2020 31 December 2019 30 June 2020
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000
GBP'000
Amounts recognised as distributions to equity holders in the
period:
------------------ ------------------ --------------
Dividends in respect of the previous period
------------------ ------------------ --------------
- Fourth interim dividend 6,319 6,125 6,125
------------------ ------------------ --------------
Dividends in respect of the period under review
------------------ ------------------ --------------
- First interim dividend 4,359 4,256 4,256
------------------ ------------------ --------------
- Second interim dividend - - 4,276
------------------ ------------------ --------------
- Third interim dividend - - 4,321
------------------ ------------------ --------------
10,678 10,381 18,978
------------------ ------------------ --------------
Refer to note 13 for further information subsequent to the reporting period.
12. Related Parties
The Board
During the period, there were no transactions with the Board other than directors' fees as disclosed in note 5. There were no changes to the shares held by the Directors during the period and therefore, as at 31 December 2020, the Directors each beneficially held the following shares in the Company:
Caroline Hitch: 130,000 ordinary shares Wendy Dorman: 112,000 ordinary shares Duncan A H Baxter: 195,127 ordinary shares Ian Cadby: 25,000 ordinary shares John E Newlands: 10,000 ordinary shares
Investment Manager
During the period, there were no transactions with the Investment Manager other than investment manager fees. With effect from 06 November 2020 the Investment Management Agreement with the Investment Manager was amended, the changes in this amendment agreement do not have any impact on the management fee.
Refer to note 4 for further information.
All transactions with related parties are carried out on an arm's length basis.
13. Subsequent Events
The Board have evaluated subsequent events for the Company through to 25 February 2021, the date the financial statements were available to be issued, and has concluded that the material events listed below do not require adjustment of the financial statements.
Share Issues
On 13 January 2021, the Company issued 800,000 ordinary shares at a price of 52.5p per share.
On 18 January 2021, the Company issued 600,000 ordinary shares at a price of 52.4p per share.
On 25 January 2021, the Company issued 650,000 ordinary shares at a price of 52.6p per share.
On 03 February 2021, the Company issued 850,000 ordinary shares at a price of 51.6p per share.
Dividend Declaration
On 20 January 2021, the Company announced its second interim dividend of 1.00 pence per share, payable on 26 February 2021 to shareholders on the register on 29 January 2021, having an ex-dividend date of 28 January 2021.
Directors' Statements
Directors' Statement of Principal Risks and Uncertainties
When considering the total return of the Company, the Directors take account of the risk which has been taken in order to achieve that return. The Directors have carried out a robust assessment of the principal risks and mitigating factors facing the Company including those which would threaten its business model, future performance, solvency or liquidity. The following risk factors have been identified and are listed below:
-- Dividend and earnings risk
-- Market risk leading to a loss of share value
-- Key person risk
-- Gearing risk
-- Operational risk
-- Regulatory risk
-- Political risk
-- Financial risk
Information on these risks and how they are managed is given in the Annual Report and Financial Statements for the year ended 30 June 2020. In the view of the Board these principal risks and uncertainties are as applicable to the remaining six months of the current financial year as they were in the six months under review.
The Company may be exposed to certain risks that are not disclosed within the Annual Report and Financial Statements.
The Company is not necessarily free from any such risks.
Directors' Responsibility Statement in Respect of the Interim Report
We confirm that to the best of our knowledge:
-- the unaudited condensed financial statements within the Interim Report have been prepared in accordance with IAS 34 - Interim Financial Reporting, as adopted by the European Union ("EU") and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at 31 December 2020, as required by the Financial Conduct Authority's ("FCA") Disclosure Guidance and Transparency Rule ("DTR") 4.2.4R.
-- the Statement from the Chair, Investment Manager's Review and the condensed financial statements include a fair review of the information required by the Disclosure Guidance and Transparency Rules ("DTR") 4.2.7R, being an indication of important events that have occurred during the first six months ended 31 December 2020 and their impact on the unaudited condensed financial statements;
-- the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and
-- the condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place during the six months ended 31 December 2020 and that have materially affected the financial position or performance of the Company during that period .
Signed on behalf of the Board
Caroline Hitch
Chair
25 February 2021
Glossary of Terms and Definitions
Dividend per The total amount of dividends declared for every issued ordinary
ordinary share share over a period of time.
Company CQS New City High Yield Fund Limited
--------------------------------------------------------------------
Dividend yield The annual dividend per share expressed as a percentage of the
share price (bid price).
--------------------------------------------------------------------
FRN Floating Rate Note.
--------------------------------------------------------------------
Gearing The level of borrowing that the Company has undertaken. Represented
by total assets (being total assets less current liabilities
(excluding borrowings)) less all cash, expressed as a percentage
of shareholders' funds (being the Net Asset Value of the Company)
minus 100.
--------------------------------------------------------------------
Net Asset Value The value of total assets less total liabilities. Liabilities
or NAV and for this purpose include current and long-term liabilities.
NAV per ordinary To calculate the net asset value per ordinary share, the net
share asset value divided by the number of shares in issue produces
the net asset value per share.
--------------------------------------------------------------------
Premium or The amount by which the market price per share of an investment
discount company is higher or lower than the net asset value per share.
The discount or premium is expressed as a percentage of the
net asset value per share.
--------------------------------------------------------------------
Revenue earnings Revenue earnings (which includes dividends paid out during the
per ordinary year) divided by the weighted average number of ordinary shares
share in issue during the financial year, expressed as a percentage.
--------------------------------------------------------------------
SME Small and medium-sized enterprises.
--------------------------------------------------------------------
Total Return The return to shareholders calculated on a per share basis by
adding dividends paid and declared in the period to the increase
or decrease in the share price (bid) or net asset value. The
dividends are assumed to have been reinvested in the form of
ordinary shares or net assets.
--------------------------------------------------------------------
A copy of the Company's Interim Report will be available shortly from the Company Secretary, (BNP Paribas Securities Services S.C.A., Jersey Branch, IFC 1, The Esplanade, St Helier, Jersey, JE1 4BP), or will be circulated on the Company's website (https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd).
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END
IR EAEASAFNFEAA
(END) Dow Jones Newswires
February 26, 2021 02:00 ET (07:00 GMT)
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