To: RNS
From: CT UK High Income Trust PLC
Date: 5 December 2022
LEI: 213800B7D5D7RVZZPV45
Unaudited Interim Results
The Board of CT UK High Income Trust PLC announces the unaudited interim results of the Company for the six month period to 30 September 2022.
Highlights
· Net asset value total return(1) per share for the six months was -11.8%, compared to the Benchmark(2) total return of -8.3%.
· Ordinary share price total return for the six months was -9.1% compared to the Benchmark total return of -8.3%.
· B share price total return for the six months was -5.0% compared to the Benchmark total return of -8.3%.
· Distribution yield(1) of 7.1% on Ordinary shares and 6.7% on B shares at 30 September 2022, compared to the yield on the FTSE All-Share Index of 3.8%.
Notes:
1. Total return and yield - see Alternative Performance Measures.
2. Benchmark - From launch on 1 March 2007, the Company's benchmark index was the FTSE All-Share Capped 5% Index. Following shareholder approval at the Company's AGM on 5 July 2018, the benchmark was changed to the FTSE All-Share Index.
Chairman's Statement
Investment performance
For the six months to 30 September 2022 the net asset value ("NAV") total return for both the Ordinary shares and B shares was -11.8%, while the equivalent total return for the FTSE All-Share Index (the benchmark) was -8.3%.
The market backdrop has been very challenging given the war in Ukraine and the knock-on impact of rising energy prices driving higher inflation. The Bank of England had been slow to react to the much-heralded rise in inflation earlier in the year but is now responding with unprecedented rate rises as it seeks to slow inflation and begin the downward trend towards the guided 2% range. Markets seemed to have calmed since Rishi Sunak took office and the effect of the Autumn Statement has been to restore stability and confidence in the UK market.
Philip Webster, our Portfolio Manager (the "Manager"), is using this opportunity, one he believes is the first since he assumed management of the investment portfolio in 2017, to buy into quality business models at significantly more attractive valuations. He feels we have entered a new phase for markets, especially in the UK mid-cap space, where there is quality on offer at depressed multiples. While the NAV total return for the Company's shares has underperformed the benchmark in the six months to 30 September 2022, we are encouraged by our discussions with the Manager and his conviction that the investment portfolio is in a better position today than at any time under his tenure.
The Manager has compelling sector-specific views which, in this current environment, have created a headwind to performance. The strong performance of some of the market behemoths, such as BP, Shell and AstraZeneca (to which the investment portfolio has no exposure) have been a sustained challenge to relative performance over most of the last twelve months. While there are many commentators that believe the oil price will remain high and that these are quality business models, he begs to differ. In the Manager's view, when the market rotates towards a "risk-on" mindset, these defensive assets will underperform. Approximately a third of the Company's investment portfolio is in UK mid-cap companies, where the Manager feels better able to find higher quality names at depressed valuations. The higher domestic concentration of earnings has seen the FTSE 250 index fall 17% on a total return basis over the interim period, nearly twice the fall of the wider FTSE All-Share Index. This performance differential has provided the opportunity to initiate new positions in Hargreaves Lansdown, Rotork and following the period end, One Savings Bank. These are the sort of businesses that the Manager has been patiently following until valuations better reflected their earnings.
The Manager has also been active with some of the Company's smaller investment holdings. Positions in Prudential, Jupiter, Haleon and Just Eat Takeaway.com have been exited - moves triggered by a pragmatic approach to capital allocation that balances growth potential with our aim of returning to a covered dividend. Aside from Jupiter, these investments all had a sub-market yield. He has also reduced some of the top performers; Compass Group, Beazley and Deutsche Boerse, where yields have contracted. Positions in the higher yielding Intermediate Capital, Rio Tinto, Phoenix Group and Berkeley Group have been increased on weakness. There is a balancing act to be struck here and given the Manager's comfort in valuations and the quality available, he has begun the process of adding gearing back into the portfolio.
Share price performance
Over the period there was a welcome narrowing of the discount to NAV at which the Company's shares traded. For the Ordinary shares, the discount closed from -9.3% at 31 March 2022 to -6.9% at 30 September 2022. Consequently, the share price total return for the Ordinary shares for the period was -9.1%. The B shares were trading at a discount to NAV of -8.3% at 31 March 2022 but this closed to a discount to NAV of -1.4% at the period end, thus generating a share price total return for the B shares of -5.0% for the period under review.
Over several years your Board and Investment Manager have been working hard to increase the awareness of the Company, particularly among self-directed investors and we are pleased to see the ownership of the Company's shares by these groups continuing to increase on a consistent basis, be that through the Columbia Threadneedle Savings plans or direct purchases by investors via the well-known trading platforms.
During the period, 100,000 Ordinary shares were bought back for treasury at an average discount of -10.3% to the prevailing NAV. No B shares were bought back in the period under review.
Earnings, dividends and capital repayments
In the period under review your Company's revenue earnings per share has fallen by 10.9% from 2.21p per share to 1.97p per share in comparison to the six months to 30 September 2021.
The decline in the revenue earnings has been driven by two factors. The first, and most significant, is a reduction in the level of the Company's gearing. The second impact was the one-off benefit we received from two large special dividends from Rio Tinto and Berkeley Group in September 2021, which we are not forecasting for this year.
At the interim results stage in 2021 we had drawn down most of our available borrowing facilities as we sought to benefit from the post-pandemic recovery in equities. While this was the correct strategy at that time, the backdrop shifted dramatically towards the end of 2021 as we entered the beginning of an interest rate tightening cycle, exacerbated by surging inflation. The Board and Manager, therefore, felt it was prudent to unwind the gearing, reducing it to around 1-2%. Strategically, we believe we made the right decision to be more cautious as markets sold off but were aware that we had to reduce revenue to protect capital.
We still have work to do in making up the shortfall in revenue but feel more confident allocating capital post the pullback. Valuations in the UK domestic mid-cap space look very compelling, even if the outlook is somewhat uncertain as we enter 2023. We will continue to add gearing, seeking to be opportunistic around stock-specific weakness. The Manager has also sought to mitigate the worst of the earnings risk through buying quality business models with high levels of dividend cover and robust balance sheets.
Your Board was again pleased to increase dividends and capital repayments to shareholders in the year to 31 March 2022, made possible by the use of revenue reserves that your Company has consistently built up over the years. One of the benefits of the Investment Trust structure is the ability to create and use revenue reserves to help smooth the level of dividend payments to shareholders over the longer term. The past three years have shown how effectively this structure can work. However, I wish to emphasise to shareholders that it is a key objective of the Board and Manager to rebuild revenue reserves and return to a covered dividend as soon as practicable.
In the absence of unforeseen circumstances, it is the Board's current intention that the aggregate dividend and capital repayment for the current financial year to 31 March 2023 will be at least 5.45p per Ordinary share and B share respectively. Three quarterly interim dividends and capital repayments have so far been declared, each of 1.32p per share.
At 30 September 2022 the distribution yields on the Ordinary shares (7.1%) and B shares (6.7%) were both significantly greater than the benchmark index yield (3.8%).
Borrowing
At the end of September, the Company refinanced its borrowings and entered into a three-year unsecured revolving credit facility ("RCF") with The Royal Bank of Scotland International Limited for £15 million. This replaced the Company's £7.5 million RCF with Scotiabank (Ireland) Designated Activity Company and its £7.5 million unsecured term loan with Scotiabank Europe plc, both of which matured on 28 September 2022.
It is believed that the RCF will provide suitable flexibility for the Board and Manager to utilise borrowing when investment opportunities arise or, conversely, reduce borrowing dependent on market conditions and outlook. At the time of writing, borrowings total 3.7% of total assets.
Board changes
Following the Annual General Meeting on 20 July 2022, the Chairman, John Evans, retired from the Board. John was a non-executive director of your Company for nine years, of which three were as Chairman, during which time he acted in the best interests of shareholders and with the utmost integrity at all times. I would like to offer John my personal thanks for his exceptional contribution and commitment to the Company throughout this time. From the same date, I became Chairman of the Company.
Following the period end, we were delighted to welcome a new non-executive Director to the Board. Angus Pottinger was appointed with effect from 24 November 2022. Angus has worked in financial services for over 35 years, including most recently 22 years in Invesco's investment trust team, where he was Head of Investment Company Services, specifically in charge of accounting, company secretarial and administration functions. He has a wealth of relevant experience that will complement the Board's current skill set.
Investment Manager and Name Change
As previously reported, on 8 November 2021, Columbia Threadneedle Investments, part of Ameriprise Financial acquired BMO's EMEA asset management business ('BMO GAM (EMEA)'), which included your Company's Investment Manager ('BMO Investment Business Limited').
As explained in our Annual Report, preparation was underway for the BMO GAM (EMEA) business to be rebranded as Columbia Threadneedle Investments and this was completed towards the start of July 2022. As part of this process, the Company's Investment Manager was renamed Columbia Threadneedle Investment Business Limited.
As many of the Company's shareholders invest through the Investment Manager's savings plans and as its brand was changing to Columbia Threadneedle Investments, the Board resolved that continuing to align with the brand of the Investment Manager and the savings plans would avoid unnecessary confusion and ensure the Company maximised the benefits of the broader Columbia Threadneedle Investments brand and marketing.
On 29 June 2022 the Company therefore announced that it had changed its name to CT UK High Income Trust PLC with immediate effect. The Company's website address was also amended to ctukhighincome.co.uk and its trading instrument display mnemonics ("TIDM") changed to CHI, CHIB and CHIU for the Company's Ordinary shares, B shares and Units respectively.
There has been no change to the personnel running the activities of your Company in terms of both portfolio management and administration.
Outlook
There is no doubt that we are facing a combination of economic and political challenges which makes any forward-looking statements precarious. It is probably fair to say that, at the very least, the medium-term outlook is wholly dependent on an early resolution to the war in Ukraine.
The consumer is being squeezed from all angles due to global inflation, supply line shortages and rising prices and there is no simple answer. The Government support packages will help on energy prices, but with the Bank of England anxious to make up lost ground in the fight against inflation, interest rates are likely to continue to rise into 2023. This picture makes it very hard to gauge whether we get a soft or hard landing, and whether company earnings' expectations for 2023 have bottomed, or whether we have more downgrades to come.
Being a Manager responsible for investors' money is not for the faint hearted. The last three years have been difficult to navigate but your Board and Manager remain confident that the investment portfolio is in a very strong position once the outlook improves, given the quality companies it holds. As already mentioned, the Manager believes this isn't the right time to be seeking out defensive mega-caps and the Board wholly supports his desire to manage a diversified portfolio which offers differentiation from the benchmark index.
As ever, thank you for being a shareholder in CT UK High Income Trust PLC. Phillip Webster remains dedicated to the task of delivering positive returns of capital and income for all shareholders and, with the yield on the Ordinary shares and B shares currently at 6.6% and 6.5% respectively, the Company offers the prospects of an attractive total return over the medium term.
Andrew Watkins
Chairman
2 December 2022
Condensed Unaudited Statement of Comprehensive Income
For the six month period to 30 September 2022
| | Six months to 30 September 2022 | ||
| | | | |
| Notes | Revenue | Capital | Total |
| | £'000 | £'000 | £'000 |
| |
|
|
|
| Losses on investments held at fair value | - | (14,679) | (14,679) |
| Exchange gains/(losses) | 2 | (2) | - |
| Income 2 | 2,680 | - | 2,680 |
| Investment management fee 3 | (91) | (211) | (302) |
| Other expenses | (238) | - | (238) |
| Profit/(loss) before finance costs and taxation | 2,353 | (14,892) | (12,539) |
| | | | |
| Net finance costs | | | |
| Interest on bank loans | (33) | (76) | (109) |
| Total finance costs | (33) | (76) | (109) |
| | | | |
| Profit/(loss) before tax | 2,320 | (14,968) | (12,648) |
| Tax on ordinary activities 4 | (34) | - | (34) |
| Profit/(loss) for the period | 2,286 | (14,968) | (12,682) |
|
| | | |
|
| | | |
| Total comprehensive income for the period | 2,286 | (14,968) | (12,682) |
|
| | | |
| | | | |
| Earnings per share 5 | 1.97p | (12.91)p | (10.94)p |
The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards. 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 derive from continuing operations.
All of the profit and comprehensive income for the period is attributable to the owners of the Company.
Condensed Unaudited Statement of Comprehensive Income
| | Six months to 30 September 2021 | Year to March 2022* | ||||
| | | | | | | |
| Notes | Revenue | Capital | Total | Revenue | Capital | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
| Gains/(losses) on investments held at fair value | - | 2,850 | 2,850 | - | (1,087) | (1,087) |
| Exchange gains | - | 1 | 1 | - | 5 | 5 |
| Income 2 | 2,993 | - | 2,993 | 5,013 | - | 5,013 |
| Investment management fee 3 | (117) | (272) | (389) | (227) | (529) | (756) |
| Other expenses | (247) | - | (247) | (506) | - | (506) |
| Profit/ (loss) before finance costs and taxation | 2,629 | 2,579 | 5,208 | 4,280 | (1,611) | 2,669 |
| | | | | | | |
| Net finance costs | | | | | | |
| Interest on bank loans | (41) | (95) | (136) | (78) | (183) | (261) |
| Total finance costs | (41) | (95) | (136) | (78) | (183) | (261) |
| | | | | | | |
| Profit/ (loss) before tax | 2,588 | 2,484 | 5,072 | 4,202 | (1,794) | 2,408 |
| Tax on ordinary activities 4 | (23) | - | (23) | (24) | - | (24) |
| Profit/ (loss) for the period | 2,565 | 2,484 | 5,049 | 4,178 | (1,794) | 2,384 |
|
| | | | | | |
|
| | | | | | |
| Total comprehensive income for the period | 2,565 | 2,484 | 5,049 | 4,178 | (1,794) | 2,384 |
|
| | | | | | |
| | | | | | | |
| Earnings per share 5 | 2.21p | 2.15p | 4.36p | 3.61p | (1.55)p | 2.06p |
The total column of this statement represents the Company's Income Statement and Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards. 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 derive from continuing operations.
All of the profit and comprehensive income for the period is attributable to the owners of the Company.
*these figures are audited.
Condensed Unaudited Statement of Financial Position
| | | | |
| Notes | 30 Sept | 30 Sept | 31 March |
| | 2022 | 2021 | 2022* |
| | £'000 | £'000 | £'000 |
| |
|
|
|
| Non-current assets | | | |
| Investments held at fair value through profit or loss 9 | 94,620 | 127,861 | 111,362 |
| | 94,620 | 127,861 | 111,362 |
| | | | |
| Current assets | | | |
| Receivables | 3,425 | 562 | 3,210 |
| Cash and cash equivalents | 5,090 | 1,999 | 4,686 |
|
| 8,515 | 2,561 | 7,896 |
| | | | |
| Total assets | 103,135 | 130,422 | 119,258 |
| Current liabilities | | | |
| Payables | (506) | (518) | (543) |
| Bank loans 10 | (7,500) | (13,000) | (7,500) |
| Total liabilities | (8,006) | (13,518) | (8,043) |
| Net assets | 95,129 | 116,904 | 111,215 |
| | | | |
| Capital and Reserves |
|
|
|
| Share capital 11 | 134 | 134 | 134 |
| Share premium | 153 | 153 | 153 |
| Capital redemption reserve | 5 | 5 | 5 |
| Buy back reserve | 80,315 | 80,394 | 80,394 |
| Special capital reserve | 10,823 | 12,505 | 11,704 |
| Capital reserves | (370) | 18,876 | 14,598 |
| Revenue reserve | 4,069 | 4,837 | 4,227 |
| Equity shareholders' funds | 95,129 | 116,904 | 111,215 |
| Net asset value per Ordinary share 12 | 82.16p | 100.88p | 95.97p |
| Net asset value per B share 12 | 82.16p | 100.88p | 95.97p |
Approved by the Board, and authorised for issue, on 2 December 2022 and signed on its behalf by:
Andrew Watkins, Chairman
*these figures are audited.
Condensed Unaudited Statement of Changes in Equity
for the six months to 30 September 2022
| |
Share Capital |
Share Premium | Capital Redemption Reserve | Buy Back Reserve | Special Capital Reserve |
Capital Reserves |
Revenue Reserve |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
|
|
| Balance as at 1 April 2022 | 134 | 153 | 5 | 80,394 | 11,704 | 14,598 | 4,227 | 111,215 |
| (Loss)/profit for the period | - | - | - | - | - | (14,968) | 2,286 | (12,682) |
| Shares bought back for treasury | - | - | - | (79) | - | - | - | (79) |
| Dividends paid on Ordinary shares | - | - | - | - | - | - | (2,444) | (2,444) |
| Capital returns paid on B shares | - | - | - | - | (881) | - | - | (881) |
| Balance as at 30 September 2022 | 134 | 153 | 5 | 80,315 | 10,823 | (370) | 4,069 | 95,129 |
for the six months to 30 September 2021
| |
Share Capital |
Share Premium | Capital Redemption Reserve | Buy Back Reserve | Special Capital Reserve |
Capital Reserves |
Revenue Reserve |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
|
|
| Balance as at 1 April 2021 | 134 | 153 | 5 | 80,394 | 13,340 | 16,392 | 4,589 | 115,007 |
| Profit for the period | - | - | - | - | - | 2,484 | 2,565 | 5,049 |
| Dividends paid on Ordinary shares | - | - | - | - | - | - | (2,317) | (2,317) |
| Capital returns paid on B shares | - | - | - | - | (835) | - | - | (835) |
| Balance as at 30 September 2021 | 134 | 153 | 5 | 80,394 | 12,505 | 18,876 | 4,837 | 116,904 |
for the year to 31 March 2022 *
| |
Share Capital |
Share Premium | Capital Redemption Reserve | Buy Back Reserve | Special Capital Reserve |
Capital Reserves |
Revenue Reserve |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
|
|
| Balance as at 1 April 2021 | 134 | 153 | 5 | 80,394 | 13,340 | 16,392 | 4,589 | 115,007 |
| (Loss)/profit for the year | - | - | - | - | - | (1,794) | 4,178 | 2,384 |
| Dividends paid on Ordinary shares | - | - | - | - | - | - | (4,540) | (4,540) |
| Capital returns paid on B shares | - | - | - | - | (1,636) | - | - | (1,636) |
| Balance as at 31 March 2022 | 134 | 153 | 5 | 80,394 | 11,704 | 14,598 | 4,227 | 111,215 |
*These figures are audited
Condensed Unaudited Cash Flow Statement
| | Six months to 30 Sept 2022 | Six months to 30 Sept 2021 | Year to 31 March 2022* |
| | £'000 | £'000 | £'000 |
| Cash flows from operating activities |
|
|
|
| (Loss)/profit before tax | (12,648) | 5,072 | 2,408 |
| Adjustments for: | | | |
| Losses/ (gains) on investments held at fair value through profit or loss | 14,679 | (2,850) |
1,087 |
| Exchange gains | - | (1) | (5) |
| Interest income | (29) | - | (5) |
| Interest received | 29 | - | 5 |
| Dividend income | (2,651) | (2,993) | (5,008) |
| Dividend income received | 3,122 | 3,444 | 4,935 |
| Decrease/(increase) in receivables | 8 | 2 | (5) |
| (Decrease)/ increase in payables | (38) | (23) | 2 |
| Finance costs | 109 | 136 | 261 |
| Overseas tax suffered | (43) | (52) | (49) |
| Cash flows from operating activities | 2,538 | 2,735 | 3,626 |
| Cash flows from investing activities | | |
|
| Purchases of investments | (22,001) | (5,675) | (10,594) |
| Sales of investments | 23,406 | 3,913 | 19,264 |
| Cash flows from investing activities | 1,405 | (1,762) | 8,670 |
|
| | | |
| Cash flows from financing activities | | | |
| Dividends paid on Ordinary shares | (2,444) | (2,317) | (4,540) |
| Capital returns paid on B shares | (881) | (835) | (1,636) |
| Interest on bank loans | (135) | (133) | - |
| Shares purchased for treasury | (79) | - | (249) |
| (Repayment)/drawdown of Scotiabank loan | (7,500) | 2,000 | (3,500) |
| Drawdown of RBS loan | 7,500 | - | - |
| Cash flows from financing activities | (3,539) | (1,285) | (9,925) |
|
| | | |
| Net increase/(decrease) in cash and cash equivalents | 404 | (312) | 2,371 |
| Effect of movement in foreign exchange | - | 1 | 5 |
| Opening net cash and cash equivalents | 4,686 | 2,310 | 2,310 |
| Closing cash and cash equivalents | 5,090 | 1,999 | 4,686 |
*These figures are audited
Notes to the Condensed Financial Statements (unaudited)
1. Accounting Policies
The condensed unaudited financial statements have been prepared on a going concern basis and in accordance with UK-adopted International Accounting Standard 34 "Interim Financial Reporting" and the accounting policies set out in the statutory financial statements of the Company for the year ended 31 March 2022. The condensed financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company for the year ended 31 March 2022, which were prepared under UK-adopted International Accounting Standards.
2. Income
| | 30 Sept 2022 | 30 Sept 2021 | 31 March 2022 |
| | £'000 | £'000 | £'000 |
| |
|
|
|
| UK dividend income | 1,830 | 2,147 | 3,920 |
| UK dividend income - special dividends | - | 601 | 656 |
| Overseas dividend income | 776 | 179 | 305 |
| Property income distributions | 45 | 66 | 127 |
| | 2,651 | 2,993 | 5,008 |
| Other income | | | |
| Interest on cash and cash equivalents | 29 | - | 5 |
| | 2,680 | 2,993 | 5,013 |
3. With effect from 1 April 2022, the Company's investment manager Columbia Threadneedle Investment Business Limited (formerly BMO Investment Business Limited) receives an investment management fee of 0.60 per cent per annum of the net asset value of the Company payable quarterly in arrears. Prior to 1 April 2022, the investment management fee was 0.65 per cent per annum of the Company's net asset value.
4. The taxation charge for the period represents withholding tax suffered on overseas dividend income.
5. The earnings per share are based on the net profit/(loss) for the period and on 115,873,753 shares (period to 30 September 2021 - 115,881,403; year to 31 March 2022 - 115,881,403), being the weighted average number of shares in issue during the period.
6. Earnings for the six months to 30 September 2022 should not be taken as a guide to the results of the full year.
7. The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Company is engaged in a single segment of business, of investing in equity securities, and that therefore the Company has only a single operating segment. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance is the total return on the Company's net asset value as calculated under UK-adopted International Accounting Standards and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the condensed financial statements.
8. Dividends and capital repayments
| |
Payment Date | Six months to 30 Sept 2022 | Six months to 30 Sept 2021 | Year to 31 March 2022 |
| |
| £'000 | £'000 | £'000 |
| In respect of the previous period: |
|
|
|
|
| Fourth interim dividend at 1.55p (2021: 1.43p) per Ordinary share |
6 May 22 |
1,320 |
1,218 |
1,218 |
| Fourth capital repayment at 1.55p (2021: 1.43p) per B share |
6 May 22 |
476 |
439 |
439 |
| | | | | |
| In respect of the period under review: |
|
|
|
|
| First interim dividend at 1.32p (2022: 1.29p) per Ordinary share |
5 Aug 22 |
1,124 |
1,099 |
1,099 |
| First capital repayment at 1.32p (2022: 1.29p) per B share |
5 Aug 22 |
405 |
396 |
396 |
| Second interim dividend (2022: 1.29p) per Ordinary share | |
- |
- |
1,099 |
| Second capital repayment (2022: 1.29p) per B share | |
- |
- |
396 |
| Third interim dividend (2022: 1.32p) per Ordinary share | |
- |
- |
1,124 |
| Third capital repayment (2022: 1.32p) per B share | |
- |
- |
405 |
|
|
| 3,325 | 3,152 | 6,176 |
A second interim dividend for the year to 31 March 2023, of 1.32p per Ordinary share, was paid on 4 November 2022 to Ordinary shareholders on the register on 7 October 2022.
A second quarter capital repayment of 1.32p per B share was paid on 4 November 2022 to B shareholders on the register on 7 October 2022.
Although these payments relate to the period ended 30 September 2022, under UK-adopted International Accounting Standards they will be accounted for in the six months to 31 March 2023, being the period during which they are paid.
9. Investments held at fair value through profit or loss
|
|
Listed/ Quoted (Level 1) £'000 |
Subsidiary/ Unlisted (Level 3) £'000 |
Total £'000 |
| Cost brought forward | 104,515 | 250 | 104,765 |
| Gains brought forward | 6,597 | - | 6,597 |
| Fair value of investments at 31 March 2022 | 111,112 | 250 | 111,362 |
| Movement in the period: | | | |
| Purchases at cost | 22,001 | - | 22,001 |
| Sales proceeds | (24,064) | - | (24,064) |
| Gains on investments sold in the period | 1,375 | - | 1,375 |
| Losses on investments held at 30 September 2022 | (16,054) | - | (16,054) |
| Fair value of investments at 30 September 2022 | 94,370 | 250 | 94,620 |
| Cost at 30 September 2022 | 103,827 | 250 | 104,077 |
| Losses at 30 September 2022 | (9,457) | - | (9,457) |
| Fair value of investments at 30 September 2022 | 94,370 | 250 | 94,620 |
Accounting standards recognise a hierarchy of fair value measurements for financial instruments which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The classification of financial instruments depends on the lowest significant applicable input, as follows:
· Level 1 - quoted (unadjusted) prices in active markets for identical assets or liabilities.
· Level 2 - other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly. The Company held no such instruments during the period under review.
· Level 3 - techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data. The Company's investment in its subsidiary undertaking, Investors Securities Company Limited, is included in Level 3 and is valued at its net asset value.
There were no transfers between levels of the fair value hierarchy during the six months ended 30 September 2022.
10. Bank loans
Until 28 September 2022, the Company had a £7.5 million unsecured term loan from Scotiabank Europe plc at a fixed interest rate of 2.58 per cent per annum (30 September 2021 - £7.5 million; 31 March 2022 - £7.5 million). It also had a £7.5 million unsecured multicurrency revolving credit facility ("RCF") with Scotiabank (Ireland) Designated Activity Company. On 28 September 2022 both loan facilities matured and the £7.5 million unsecured term loan was repaid to Scotiabank Europe plc. At that time, £nil was drawn down under the RCF (30 September 2021 - £5.5 million; 31 March 2022 - £nil).
On 28 September 2022, the Company entered into a three-year unsecured revolving credit facility ("RCF") with The Royal Bank of Scotland International Limited for £15 million of which £7.5 million was immediately drawn down and remained drawn down at 30 September 2022.
11. Share capital
Allotted, issued and fully paid
|
| Listed | Held in Treasury | In Issue | |||
|
| Number | £ | Number | £ | Number | £ |
| Ordinary Shares of 0.1p each | | | | | | |
| Balance at 1 April 2022 | 102,067,144 | 102,067 | (16,894,491) | (16,894) | 85,172,653 | 85,173 |
| Repurchased to be held in treasury | - | - | (100,000) | (100) | (100,000) | (100) |
| Balance at 30 September 2022 | 102,067,144 | 102,067 | (16,994,491) | (16,994) | 85,072,653 | 85,073 |
|
B Shares of 0.1p each | | | | | | |
| Balance at 1 April 2022 | 32,076,703 | 32,077 | (1,367,953) | (1,368) | 30,708,750 | 30,709 |
| Balance at 30 September 2022 | 32,076,703 | 32,077 | (1,367,953) | (1,368) | 30,708,750 | 30,709 |
| Total at 30 September 2022 | 134,143,847 | 134,144 | (18,362,444) | (18,362) | 115,781,403 | 115,782 |
During the period, the Company bought back 100,000 Ordinary shares at a cost of £79,000 and bought back nil B shares to hold in treasury (period to 30 September 2021 - nil Ordinary shares and nil B shares; year to 31 March 2022 - nil Ordinary shares and nil B shares).
At 30 September 2022 the Company held 16,994,491 Ordinary shares and 1,367,953 B shares in treasury (30 September 2021 - 16,894,491 Ordinary shares and 1,367,953 B shares; 31 March 2022 - 16,894,491 Ordinary shares and 1,367,953 B shares).
12. The net asset value per share is based on shareholders' funds at the period end and on 85,072,653 Ordinary shares and 30,708,750 B shares, being the number of shares in issue at the period end (30 September 2021 - 85,172,653 Ordinary shares and 30,808,750 B shares; 31 March 2022 - 85,172,653 Ordinary shares and 30,708,750 B shares).
13. The fair values of the Company's financial assets and liabilities are not materially different from their carrying values in the financial statements.
The Company's financial risk management objectives and policies are consistent with those disclosed in the Company's financial statements for the year ended 31 March 2022.
14. Changes in liabilities arising from financing activities
| | Six months to 30 September 2022 | Six months to 30 September 2021 | Year to 31 March 2022 |
| | £'000 | £'000 | £'000 |
| Opening net debt at beginning of period/year | 7,500 | 11,000 | 11,000 |
| Cash flows: |
| | |
| Drawdown of RBS/Scotiabank revolving credit facility | 7,500 | 2,000 | 2,000 |
| Repayment of Scotiabank revolving credit facility | - | - | (5,500) |
| Repayment of Scotiabank term loan | (7,500) | - | - |
| Closing net debt at end of period/year | 7,500 | 13,000 | 7,500 |
15. Going concern
In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council and have undertaken a rigorous review of the Company's ability to continue as a going concern and specifically in the context of the COVID-19 pandemic. The Board has, in particular, considered the impact of increased market volatility and the present uncertainties in economic recovery from the COVID-19 pandemic and geopolitical unrest.
The Company's investment objective and policy, which is subject to regular Board monitoring processes, is designed to ensure that the Company is invested mainly in liquid, listed securities. The value of these investments exceeds the Company's liabilities by a significant margin. The Company retains title to all assets held by its custodian and has agreements relating to its borrowing facilities with which it has complied. Cash is held only with banks approved and regularly reviewed by the Manager.
As part of the going concern review, the Directors noted that a borrowing facility of a £15 million revolving credit facility is committed to the Company until 28 September 2025 and loan covenants are reviewed by the Board on a regular basis.
The Directors believe, having assessed the principal risks and other matters, including the COVID-19 pandemic and in light of the controls and review processes noted and bearing in mind the nature of the Company's business and assets and revenue and expenditure projections, that the Company has adequate resources to continue in operational existence for a period of at least twelve months from the date of approval of the financial statements. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
The Company does not have a fixed life. However, in the event that the net asset value total return performance of the Company is less than that of the FTSE All-Share Index over the relevant three year period, in accordance with the Company's articles of association, shareholders will be given the opportunity to vote on whether the Company should continue in existence, by ordinary resolution at the Company's Annual General Meeting ('AGM'). The current three year period for this purpose will run from 1 April 2022 to 31 March 2025. At the AGM held on 20 July 2022, an ordinary resolution that the Company should continue in existence was passed. Also, a special resolution that new articles of association be approved and adopted was passed, which included reducing the performance measurement period from five years to three years, as referenced above.
16. Related party transactions
The Directors of the Company are considered a related party. The Directors receive aggregated remuneration for services as Directors and for which there were no outstanding balances at the period end. There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or performance of the Company during the period and there have been no changes in the related party transactions described in the last Annual Report that could do so.
17. The Company's auditor, Deloitte LLP, has not audited or reviewed the Interim Report to 30 September 2022 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory financial statements in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory financial statements for the year ended 31 March 2022, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. The condensed financial statements shown for the year ended 31 March 2022 are an extract from those financial statements. No full statutory financial statements in respect of any period after 31 March 2022 have been reported on by the Company's auditor or delivered to the Registrar of Companies.
The Interim Report to 30 September 2022 is available on the website maintained on behalf of the Company at ctukhighincome.co.uk.
Statement of Principal Risks and Uncertainties
Most of the Company's principal risks and uncertainties that could threaten its objective, strategy, future performance, liquidity and solvency are market related and comparable to those of other investment trusts investing primarily in listed securities.
These risks, and the way in which they are managed, are described under the heading 'Principal Risks and Uncertainties and Viability Statement' within the Strategic Report in the Company's Annual Report for the year ended 31 March 2022.
The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.
The principal risks identified in the Annual Report were:
• Financial Risk. The Company's assets consist mainly of listed equity securities and its principal financial risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk
• Investment and strategic risk
• Regulatory risk
• Operational risk
• Custody risk
These include risks in relation to failures at service providers or loss or sabotage of data through cyber threats or business continuity failure.
The Board has also considered the impact of increased market volatility and the present uncertainties in economic recovery from the COVID-19 pandemic and geopolitical unrest which has impacted the value of investments. In addition, the operational resilience of the Manager and the Company's other third party service providers has been considered. This is included within financial risk and operational risk.
Statement of Directors' Responsibilities in Respect of the Interim Report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in accordance with UK-adopted International Accounting Standard 34 "Interim Financial Reporting" and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
· the Chairman's Statement and the Statement of Principal Risks and Uncertainties (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure Guidance and Transparency Rule ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
· the Statement of Principal Risks and Uncertainties is a fair review of the principal risks and uncertainties for the remainder of the financial year; and
· the Chairman's Statement together with 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 in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
On behalf of the Board
Andrew Watkins
Chairman
2 December 2022
Alternative Performance Measures ("APMs")
The Company uses the following APMs:
Discount/premium - the share price of an investment company is derived from buyers and sellers trading their shares on the stock market. This price is not identical to the net asset value (NAV) per share of the underlying assets less liabilities of the Company. If the share price is lower than the NAV per share, the shares are trading at a discount. This usually indicates that there are more sellers of shares than buyers. Shares trading at a price above NAV per share are deemed to be at a premium usually indicating there are more buyers of shares than sellers.
|
|
| 30 September 2022 | 31 March 2022 | ||||
|
|
| Ordinary Shares | B Shares | Units | Ordinary Shares | B Shares | Units |
| Net asset value per share | (a) | 82.16p | 82.16p | 328.64p | 95.97p | 95.97p | 383.88p |
| Share price | (b) | 76.50p | 81.00p | 308.00p | 87.00p | 88.00p | 336.00p |
| Discount (c=(b-a)/(a)) | (c) | -6.9% | -1.4% | -6.3% | -9.3% | -8.3% | -12.5% |
Gearing - represents the excess amount above shareholders' funds of total investments, expressed as a percentage of the shareholders' funds. If the amount calculated is negative, this is a 'net cash' position and no gearing.
|
|
| 30 September 2022 £'000 | 31 March 2022 £'000 |
| Investments held at fair value through profit or loss | (a) | 94,620 | 111,362 |
| Net assets | (b) | 95,129 | 111,215 |
| (Net cash)/gearing (c=(a/b)-1)% | (c) | -0.5% | 0.1% |
Total Return - the theoretical return to shareholders calculated on a per share basis by adding dividends/capital repayments paid in the period to the increase or decrease in the share price or NAV in the period. The dividends/capital repayments are assumed to have been re-invested in the form of shares or net assets, respectively, on the date on which the shares were quoted ex-dividend.
The effect of reinvesting these dividends/capital repayments on the respective ex-dividend dates and the NAV total returns and Share price total returns are shown below.
| | 30 September 2022 | 31 March 2022 | ||
| |
Ordinary shares/B shares |
Units |
Ordinary shares/B shares |
Units |
| NAV per share at start of period/year | 95.97p | 383.88p | 95.25p | 397.00p |
| NAV per share at end of period/year | 82.16p | 328.64p | 95.97p | 383.88p |
| Change in the period/year | -14.4% | -14.4% | -3.3% | -3.3% |
| Impact of dividend/capital repayment reinvestment† | +2.6% | +2.6% | +5.2% | +5.2% |
| NAV total return | -11.8% | -11.8% | +1.9% | +1.9% |
† During the six months to 30 September 2022 dividends/capital repayments totalling 2.87p (Ordinary shares/B shares) and 11.48p (units) went ex-dividend. During the year to 31 March 2022 the equivalent figures were 5.33p (Ordinary shares/B shares) and 21.32p (units).
|
| 30 September 2022 | 31 March 2022 | ||||
|
| Ordinary Shares | B Shares | Units | Ordinary Shares | B Shares | Units |
| Share price per share at start of period/year | 87.0p | 88.0p | 336.0p | 91.5p | 91.5p | 365.0p |
| Share price per share at end of period/year | 76.5p | 81.0p | 308.0p | 87.0p | 88.0p | 336.0p |
| Change in the period/year | -12.1% | -8.0% | -8.3% | -4.9% | -3.8% | -7.9% |
| Impact of dividend/capital repayment reinvestment† | +3.0% | +3.0% | +3.1% | +5.5% | +5.4% | +5.3% |
| Share price total return for the period/year | -9.1% | -5.0% | -5.2% | +0.6% | +1.6% | -2.6% |
† During the six months to 30 September 2022 dividends/capital repayments totalling 2.87p (Ordinary shares/B shares) and 11.48 (units) went ex-dividend. During the year to 31 March 2022 the equivalent figures were 5.33p (Ordinary shares/B shares) and 21.32p (units).
Yield - The total annual dividend/capital repayment expressed as a percentage of the period end share price.
|
|
| 30 September 2022* | 31 March 2022 | ||||
|
|
| Ordinary Shares | B Shares | Units | Ordinary Shares | B Shares | Units |
| Annual dividend/capital repayment |
(a) |
5.45p |
5.45p |
21.80p |
5.45p |
5.45p |
21.80p |
| Share price | (b) | 76.50p | 81.00p | 308.00p | 87.00p | 88.00p | 336.00p |
| Yield (c=a/b) | (c) | 7.1% | 6.7% | 7.1% | 6.3% | 6.2% | 6.5% |
*Based on expected minimum annual dividend/capital repayment of 5.45 pence per share in respect of the year ending 31 March 2023.
For further information, please contact:
Philip Webster, Columbia Threadneedle Investment Business Limited 0207 628 8000
Ian Ridge, Columbia Threadneedle Investment Business Limited 0207 628 8000
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