Chairman's Statement
Highlights
· Net asset value total return of 5.82%.
· Ordinary share price total return of 5.50%.
· Dividend yield of 7.16%, based on dividends at an annualised rate of 4.42 pence
and a share price of 61.75 pence at 30 June 2018.
· Ordinary share price at a premium of 7.15% at 30 June 2018.
· £18.8m of equity raised during the year to 30 June 2018.
Investment and Share Price Performance
The Company's net asset value total return was 5.82% for the year ended 30 June 2018. The share price total return for the same period was 5.50%, and the premium to net asset value at which the Company's shares trade stood at 7.1% at 30 June 2018. The average premium over the year to 30 June 2018 was 5.6%, and over three years 4.0%.
Last year's strong investment returns were built on markets which were sanguine as to Eurozone and Brexit concerns and buoyed by President Trump's election. This year's more subdued returns reflect a reawakening of those Brexit concerns as the end game approaches, and worry as to how President Trump's approach to international trade may play out.
Earnings and Dividends
The Company's earnings per share were 4.54 pence for the year; although marginally below the level of last year, earnings continued to cover the dividend paid. It is worth noting that the Company has substantial revenue reserves which could be used to partly pay the dividend if it became uncovered in future years, but this isn't planned or forecast.
The Company declared three interim dividends of 0.99 pence in respect of the period, and one of 1.45 pence. The aggregate payment of 4.42 pence per share represents a 0.7% increase on the 4.39 pence paid last year. Based on an annualised rate of 4.42 pence and a share price of 60.40 pence at the time of writing, this represents a yield of 7.3%. Since its launch in 2007, the level of dividends paid by the Company has increased every year.
Gearing
The Company renewed its existing £30m loan facility with Scotiabank in December 2017 at a current all-in rate of 1.47%. The facility is on comparable terms to the one that it replaced. £28m was drawn down at 30 June 2018 and the Company had an effective gearing rate of 10.45%.
Rating and Fund Raising
The market attached a premium rating to the shares of your Company throughout the period. Taking advantage of this, the Company raised £18.8m from new and existing shareholders during the year, selling 27.6m shares out of treasury and issuing 3.0m ordinary shares from its blocklisting facility. A further £2.1m has been raised since the year end. In order to ensure maximum flexibility, a resolution will be proposed at the Annual General Meeting to renew the Directors' authority to issue shares equivalent to 10% of the Company's share capital. As well as a modest increase in net asset value from any issue of shares, existing shareholders can look to benefit from a lower ongoing charges ratio and greater liquidity in the Company's shares.
Outlook
Twelve months on, geo-political uncertainty remains the defining characteristic as we look ahead, with Brexit locally and protectionist measures globally making for an uncomfortable backdrop. The slow normalisation of the world economy ten years after the collapse of Lehman Brothers, marked by rising interest rates, especially in the United States, is more encouraging, however. In this context, portfolio diversity remains your Company's greatest strength, and we are ready to take advantages of opportunities as they occur.
James G West
8 October 2018