CQS New City High Yield (NCYF) has released its annual results for its finical year ending 30 June 2023.
- NCYF reported a NAV total return of 2.04% and a negative share price total return of (0.68%). The positive NAV total return can be attributed to NCYF’s dividend pay-outs over the year, with the chairman highlighting that “this outcome was despite a difficult background as rising inflation and interest rates worried investors in the high yield debt markets in which the Company mainly invests”.
- There were two disappointments within NCYF’s portfolio, its Matalan Finance bond was written down to zero as a result of its issuer undoing refinancing, and NCYF’s Credit Suisse bond was also written down to zero as pert of its takeover by UBS. However several bods were repaid over the year, such as its Barclays and Shawbrook Group bonds.
- Revenues totalled 4.51p per share for the recent fincial year, a 8.41% increase on the year prior. This allowed the board to pay a total dividend of 4.49p per share, marginally up on the 4.48p of the prior financial year. This equates to a dividend yield of 9.6%, based on its current share price.
- NCYF traded on a premium over its financial year, allowing the board to issues 48m shares, raising £24.2m in new assets. NCYF currently trades on a 2.4% premium.
Ian Francis, NCYF’s investment manager, commented:
“The economic outlook for the UK will be affected by several factors in the months ahead. These include any continued rise in interest rates, how fast inflation continues to fall towards Government targets and whether the UK falls back into recession. Another factor we look at is the UK housing market, how resilient prices are over the next 12 months and whether the recent weakness is set to continue. Finally, as we approach the end of 2024, the prospect of the general election with a possible (at this time according to polls) change of Government makes us look at how policies could change.
“Globally, a lot will depend on the world’s two biggest economies, the USA and China. The USA economy is moving along nicely but there will be a lot of political factors to consider in the run up to the 2024 Presidential elections. The Chinese macro-economic picture looks horrible with major weakness in the property sector which is 30% of their GDP.
“As regards markets affecting the Company, we believe that we are nearing the top of the interest rate cycle and that we will see a recovery in capital values of higher yielding bonds in the next year or so which would positively impact the ability of companies to refinance debt. But a word of caution: all of this can be affected by external influences.”