TwentyFour Income Fund Ltd on Tuesday said net asset value fell across its recent financial year, as it said concerns about inflation and recessionary were likely to persist into financial 2024.

The Guernsey-headquartered closed-ended company, which invests for income in UK and European asset-backed securities, still increased its payout to shareholders.

TwentyFour Income reported NAV per share on March 31 of 100.97 pence, down 10% from 112.45p a year earlier. Total net assets increased slightly to £725.0 million from £718.5 million, but the company issued 79.1 million new shares during the recent year.

The stock was up 0.6% to 95.83p each in London on Tuesday morning.

In the financial year that ended March 31, TwentyFour Income swung to a comprehensive loss of £22.6 million from a profit of £36.3 million.

Interest income rose to £64.5 million from £36.7 million, but the fund booked a net currency loss of £8.8 million from a profit of £5.4 million and net losses on financial assets at fair value widened dramatically to £70.2 million from £297,452 a year earlier.

Despite this, the company increased its dividends declared by 40% for a total of 9.46p in financial 2023 from 6.77p in financial 2022.

‘The strategy of investing in higher yielding floating rate asset backed securities in a rising interest rate environment has enabled the company to deliver these attractive dividends, as all excess investment income is paid out each year,’ said Chair Bronwyn Curtis.

‘The market volatility seen in all fixed income products did impact the company’s NAV and share price...The Russian invasion of Ukraine just prior to the start of the company’s financial year caused credit spreads to widen as risk sentiment in all markets deteriorated quickly. The company did not have any direct or indirect exposure to Russia or Ukraine and, to date, has not had any direct impact from the various sanctions imposed on Russia.’

Curtis also noted the impact of rising prices causing inflation to ‘surge to the highest level for 40 years’, alongside high interest rates and inflation putting pressures on the cost of living.

Looking ahead, TwentyFour said inflation and recessionary fears were likely to persist into its financial 2024, in addition to ‘ongoing problems in commercial real estate and banks’.

But TwentyFour said that the company is in a good position to benefit from current conditions, expecting income to continue to benefit while interest rates in the UK and Europe remain elevated.

‘Market volatility is likely to remain elevated. Current valuations reflect modest recessionary yields, so the company is, in our view, in a good position to benefit from potential market dislocations,’ Curtis continued.

‘While a deterioration of fundamental performance of the investment asset class of the company is expected (mostly co-related to unemployment, house prices, corporate earnings and defaults) the board remains confident in the portfolio manager’s underwriting and stress testing which the board believes to be instrumental to avoiding bond defaults and significant price drops, especially as an economic recession is becoming more likely.’

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