Specialist fund SQN Asset Finance Income reports annuals – SQN Asset Finance Income (SQN) has released results for the year to 30 June 2019. The fund looks to provide shareholders with regular, sustainable dividends and to generate capital appreciation through investment in business-essential, revenue producing (or cost saving) equipment and other physical assets.
The company provides asset financing primarily by way of equipment leases, loans, hire-purchase
agreements, construction finance, and residual participations. It is intended that each investment made by
the company will generate returns either through cash flow over the investment term or through the
residual value of the equipment or other assets at the end of the investment term.
Over the year, total return NAV was up 4% for ordinary shares and 7.1% for the 2016 C shares.
View from chairman Peter Niven
“Five years ago the group was created to provide a high level of monthly income to investors through
investments in a diversified portfolio of asset finance and equipment lease transactions. During the
intervening years, the group has paid an annual dividend of 7.25 pence per share on a monthly basis, has
maintained an overall target return on the ordinary shares of between 8% and 10% over the longer term
and has delivered a 33.3% net asset value total return. Since being fully invested, our total return has been
on target.
Each investment that the Group makes is secured by collateral that is intended to provide downside
protection in the event of a default. This strategy has been proven effective for the asset finance and
equipment leasing industry and for the managers in particular.
The board believes there is a positive outlook for our progress to continue and improve over the long-term.
Our shorter term performance, over the financial year to 30th June 2019, at 4.0% for the ordinary shares
and 7.1% for the 2016 C Shares was lower than both our historic performance and our target. It is, of course,
disappointing to fall short of our target and I address this and the current income shortfall on the ordinary
shares below (QuotedData note: please refer to the full announcement extract for this).
Underlying investment performance remains strong. We invest in long term assets and the temptation is, of
course, to review the performance of these over short term time frames. I believe that this is a mistake. The
evidence for the robustness of the portfolio comes from our concluded transactions. Approximately 20% of
the original portfolio has now matured or been repaid and this component has achieved a weighted average
yield of over 11.5%. This compares to our target yield of approximately 9.5% which is necessary to cover
the 7.25 pence per share monthly dividend and generate some modest capital growth. Much of that yield
premium is realised on the eventual conclusion of deals and I would suggest that this must be remembered
when analysing the current income shortfall dealt with below.”
SQN: Specialist fund SQN Asset Finance Income reports annuals