To: RNS
From: CT UK High Income Trust PLC
Date: 30 November 2023
LEI: 213800B7D5D7RVZZPV45
Unaudited Half-Year Results
The Board of CT UK High Income Trust PLC announces the unaudited half-year results of the Company for the six month period to 30 September 2023.
Financial Highlights for the six months
· Distribution yield(1) of 6.8% on Ordinary shares and 6.8% on B shares at 30 September 2023, compared to the yield on the FTSE All-Share Index of 3.8%.
· Net asset value total return(1) per share for the six months was -1.4%, compared to the total return of the Benchmark(2) of +1.4%.
· Ordinary share price total return for the six months was +1.8% compared to the total return of the Benchmark of +1.4%.
· B share price total return for the six months was -1.5% compared to the total return of the Benchmark of +1.4%.
Notes:
1. Yield and total return - see Alternative Performance Measures.
2. Benchmark - FTSE All-Share Index.
Chairman's Statement
Commenting on the period, the Chairman Andrew Watkins said: "With the possibility that both interest rates and inflation in the UK have peaked, the annual 6.8% yield (at 30 September 2023) from both the Company's Ordinary shares and B shares offers investors an attractive quarterly distribution".
Investment performance
For the six months to 30 September 2023 the net asset value ("NAV") total return for both the Ordinary shares and B shares was -1.4%, while the equivalent total return for the FTSE All-Share Index (the benchmark) was +1.4%.
Although our benchmark index delivered a small positive return for the period, the backdrop has nonetheless remained challenging with the market peaking in mid-April before falling to the end of June and then eventually recovering to finish slightly up by the end of September. The primary driver of market returns has been inflation expectations and resultant moves in UK bond yields. While the view that inflation was 'transitory' was disproved some time ago, the hope remained that the frequent rises we have seen in interest rates would lead to slowing inflation. It has taken many more months than forecast for stubborn inflation numbers to fall but the trend is now in place and, with the most recent number coming in at 4.6%, inflation may have more than halved by the calendar year-end, as promised by the Prime Minister. Meanwhile, the rising cost of living continues to impact household incomes and economic growth is conspicuous by its absence.
During the period, on 13 July 2023, the Board announced that David Moss would succeed Philip Webster as the Company's portfolio manager with immediate effect. David has worked for 25 years at the Company's Investment Manager, which became part of Columbia Threadneedle Investments in 2021, and is currently Head of European Equities Research Strategy. David has 27 years' industry experience, the majority of them in managing assets on behalf of a wide variety of clients, including Investment Trusts, and the Board believes that with his experience, David is very well suited to the role and to deliver for shareholders; the Company's investment policy and objective remain unchanged.
The portfolio manager believes that it is clear we are entering a new regime for investors much more akin to the 1990s than the last ten years. In his opinion we have moved from a period where money has been virtually 'free', as the cost of borrowing was artificially suppressed by central banks, to a more 'normal' environment. This should be applauded as it means the misallocation of capital driven by too-low borrowing costs is over and that too much debt again becomes a negative, rather than being regarded as an acceptable - but artificial - way to drive higher returns. As a result, some business models will simply not work anymore either because a higher cost of capital restricts investment or perhaps consumers will be more wary of their consumption when their own cost of borrowing has risen.
This view is particularly pertinent for investors in the UK market where economic growth (in common with most developed economies) is very dependent on consumption and consumer confidence is heavily influenced by house prices and, therefore, interest rates. Once again this can be seen in the better performance of the internationally focused companies in the FTSE 100 as compared to the more domestically focused FTSE 250, although the portfolio manager's belief is that the UK market, overall, is very attractively valued.
As a result of the change in portfolio manager, there has been considerable activity as he looks to invest appropriately for the backdrop I have referred to. There have been two clear objectives; firstly, to take advantage of the very high yields available from quality stocks in the UK to cover the Company's dividend and rebuild the revenue reserve and secondly, to sell stocks that he believes will struggle in this environment or may simply be too expensive. The portfolio manager also believes strongly that when the market or environment changes, we should not be dogmatic but should be prepared to change our minds and, as an example, the single largest position in our portfolio is now Shell, which has not been held since 2020. The portfolio manager believes strongly that oil and gas prices will stay at higher levels for longer, but even more importantly, he feels that it is now clear that Shell's management (and its peers) are holding their capital discipline and not - perhaps for the first time ever - responding to higher oil prices by hugely increasing capital expenditure. The result is that the prodigious cashflows that high oil prices bring are being returned to investors through dividends and share buybacks, with the latter being usefully accretive to shareholders. With regard to the second objective, the portfolio manager has exited positions in THG, Delivery Hero and ASOS, amongst others, all business models that he believes benefited from the era of free money and will struggle in the world he sees ahead.
Share price performance
Over the period, the discount to NAV at which the Company's Ordinary shares traded, narrowed from -8.9% to -6.4% at 30 September 2023 and consequently, the Ordinary share price total return for the period was +1.8%. The discount of the B shares to NAV widened slightly from -6.1% to -6.4% at the period end, thus generating a B share price total return of -1.5% for the period under review.
Your Board and Investment Manager continue to work 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 savings plans run by Columbia Threadneedle Investments or direct purchases by investors via the well-known trading platforms.
During the period, 1,750,000 Ordinary shares were bought back for treasury at an average discount of approximately 12% to the prevailing NAV. No B shares were bought back in the period under review. It continues to be the Board's strategy to buy back shares in line with the Company's stated policy, which helps to enhance the NAV per share for continuing shareholders, especially if a mismatch of demand and supply causes the discount to widen.
Earnings, dividends and capital repayments
In the period under review, your Company's revenue earnings per share has risen by 17.3% from 1.97p per share to 2.31p per share in comparison to the six months to 30 September 2022.
While your Board was pleased to increase dividends and capital repayments to shareholders in the year to 31 March 2023, this was in part made possible by the use of the revenue reserve that your Company had 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 and the past four years have shown how effectively this structure can work. However, as I have previously stated, it is a key objective of the Board and Investment Manager to return to a covered dividend and rebuild the revenue reserve. In this regard, we are encouraged by the recent progress that the portfolio manager has made and the Company's revenue position at the half-year stage is in a much improved condition.
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 2024 will be at least 5.51p 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 2023 the distribution yields on the Ordinary shares (6.8%) and B shares (6.8%) were both significantly greater than the benchmark index yield (3.8%).
Borrowing
At 30 September 2023, the Company had fully drawn down its £15 million revolving credit facility ("RCF") with The Royal Bank of Scotland International Limited. This facility provides flexibility for the Board and Investment Manager to utilise borrowing when investment opportunities arise or, conversely, reduce borrowing dependent on market conditions and outlook.
Outlook
It's unlikely that at this time last year I would have expected the world's geopolitical situation to get any worse. In fact, I was hoping for significant improvement, particularly with regard to Ukraine's war with Russia. How wrong could I be? Tensions on several fronts have not been as high for several decades and it's a wonder the investment environment has stayed relatively benign.
It is clear that the higher interest rate environment in the UK is having an impact, particularly for those struggling with the cost of living and higher monthly mortgage repayments. Whilst a good number have been protected by fixed-rate deals, these will unwind over the coming months and years, so the full impact of higher rates is likely to not yet have been felt by many. From an industry perspective, businesses have also been affected by higher costs of borrowing and sluggish productivity so, among other things, will be looking to the Government to find a way to encourage greater business investment, well before the expected date of the next General Election, in line with its pledge to make "long-term decisions for a brighter future" narrative.
The good news is that there finally seems to be some signs that inflation is easing with positive surprises in the UK and Europe of late. As a result, it is increasingly likely that interest rates have peaked (or be very close to peaking) and commentary from central banks appears to support this. This will, I believe, be particularly important for the UK partly due to the importance of housing on consumer sentiment and partly as stubbornly high UK inflation has been a real negative for investors. UK equities, whether small, medium or large-cap are very attractively valued on any metric, especially, relative to overseas developed markets and our portfolio manager believes that there is a large number of very attractive opportunities in the UK market where it is possible to buy high quality companies at attractive valuations with high dividend yields.
Last year I mentioned that, in my opinion, it has been a difficult period for portfolio managers to generate consistent, positive total returns of both capital and income. The half-year under review has not made their lives any easier. However, always the optimist, I consider the opportunities now available for our portfolio manager to invest in quality stocks with decent yields - whilst maintaining a differentiated approach - is suggestive of better times ahead, with commensurate returns to shareholders. David's investment approach is wholly supported by your Board.
As ever, thank you for being a shareholder in CT UK High Income Trust PLC and I sincerely hope for a more peaceful and settled world environment when I write to you again in the Annual Report.
Andrew Watkins
Chairman
29 November 2023
Condensed Unaudited Statement of Comprehensive Income
For the six month period to 30 September 2023
| | Six months to 30 September 2023 | ||
| | | | |
| Notes | Revenue | Capital | Total |
| | £'000 | £'000 | £'000 |
| |
|
|
|
| Losses on investments held at fair value | - | (3,694) | (3,694) |
| Exchange gains | - | 15 | 15 |
| Income 2 | 3,141 | - | 3,141 |
| Investment management fee 3 | (91) | (213) | (304) |
| Other expenses | (223) | - | (223) |
| Profit/(loss) before finance costs and taxation | 2,827 | (3,892) | (1,065) |
| | | | |
| Net finance costs | | | |
| Interest on bank loans | (122) | (283) | (405) |
| Total finance costs | (122) | (283) | (405) |
| | | | |
| Profit/(loss) before tax | 2,705 | (4,175) | (1,470) |
| Tax on ordinary activities 4 | (38) | - | (38) |
| Profit/(loss) for the period | 2,667 | (4,175) | (1,508) |
|
| | | |
|
| | | |
| Total comprehensive income for the period | 2,667 | (4,175) | (1,508) |
|
| | | |
| | | | |
| Earnings per share 5 | 2.31p | (3.62)p | (1.31)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 2022 | Year to March 2023* | ||||
| | | | | | | |
| Notes | Revenue | Capital | Total | Revenue | Capital | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
| Losses on investments held at fair value | - | (14,679) | (14,679) | - | (4,177) | (4,177) |
| Exchange gains/(losses) | 2 | (2) | - | 3 | (16) | (13) |
| Income 2 | 2,680 | - | 2,680 | 5,007 | - | 5,007 |
| Investment management fee 3 | (91) | (211) | (302) | (183) | (427) | (610) |
| Other expenses | (238) | - | (238) | (521) | - | (521) |
| Profit/(loss) before finance costs and taxation | 2,353 | (14,892) | (12,539) | 4,306 | (4,620) | (314) |
| | | | | | | |
| Net finance costs | | | | | | |
| Interest on bank loans | (33) | (76) | (109) | (67) | (155) | (222) |
| Total finance costs | (33) | (76) | (109) | (67) | (155) | (222) |
| | | | | | | |
| Profit/(loss) before tax | 2,320 | (14,968) | (12,648) | 4,239 | (4,775) | (536) |
| Tax on ordinary activities 4 | (34) | - | (34) | (47) | - | (47) |
| Profit/(loss) for the period | 2,286 | (14,968) | (12,682) | 4,192 | (4,775) | (583) |
|
| | | | | | |
|
| | | | | | |
| Total comprehensive income for the period | 2,286 | (14,968) | (12,682) | 4,192 | (4,775) | (583) |
|
| | | | | | |
| | | | | | | |
| Earnings per share 5 | 1.97p | (12.91)p | (10.94)p | 3.62p | (4.12)p | (0.50)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.
*audited figures
Condensed Unaudited Statement of Financial Position
| | | | |
| Notes | 30 September | 30 September | 31 March |
| | 2023 | 2022 | 2023* |
| | £'000 | £'000 | £'000 |
| |
|
|
|
| Non-current assets | | | |
| Investments held at fair value through profit or loss 9 | 112,301 | 94,620 | 113,018 |
| | 112,301 | 94,620 | 113,018 |
| | | | |
| Current assets | | | |
| Receivables 10 | 970 | 3,425 | 1,394 |
| Cash and cash equivalents | 282 | 5,090 | 2,288 |
|
| 1,252 | 8,515 | 3,682 |
| | | | |
| Total assets | 113,553 | 103,135 | 116,700 |
| Current liabilities | | | |
| Payables 11 | (506) | (506) | (529) |
| Bank loans 12 | (15,000) | (7,500) | (12,000) |
| Total liabilities | (15,506) | (8,006) | (12,529) |
| Net assets | 98,047 | 95,129 | 104,171 |
| | | | |
| Capital and Reserves |
|
|
|
| Share capital 13 | 134 | 134 | 134 |
| Share premium | 153 | 153 | 153 |
| Capital redemption reserve | 5 | 5 | 5 |
| Buy back reserve | 79,022 | 80,315 | 80,315 |
| Special capital reserve | 9,131 | 10,823 | 10,012 |
| Capital reserves | 5,648 | (370) | 9,823 |
| Revenue reserve | 3,954 | 4,069 | 3,729 |
| Equity shareholders' funds | 98,047 | 95,129 | 104,171 |
| Net asset value per Ordinary share 14 | 85.98p | 82.16p | 89.97p |
| Net asset value per B share 14 | 85.98p | 82.16p | 89.97p |
Approved by the Board, and authorised for issue, on 29 November 2023 and signed on its behalf by:
Andrew Watkins, Chairman
*audited figures
Condensed Unaudited Statement of Changes in Equity
for the six months to 30 September 2023
| |
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 2023 | 134 | 153 | 5 | 80,315 | 10,012 | 9,823 | 3,729 | 104,171 |
| (Loss)/profit for the period | - | - | - | - | - | (4,175) | 2,667 | (1,508) |
| Shares bought back for treasury | - | - | - | (1,293) | - | - | - | (1,293) |
| Dividends paid on Ordinary shares | - | - | - | - | - | - | (2,442) | (2,442) |
| Capital returns paid on B shares | - | - | - | - | (881) | - | - | (881) |
| Balance as at 30 September 2023 | 134 | 153 | 5 | 79,022 | 9,131 | 5,648 | 3,954 | 98,047 |
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 year to 31 March 2023 *
| |
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 | - | - | - | - | - | (4,775) | 4,192 | (583) |
| Shares bought back for treasury | - | - | - | (79) | - | - | - | (79) |
| Dividends paid on Ordinary shares | - | - | - | - | - | - | (4,690) | (4,690) |
| Capital returns paid on B shares | - | - | - | - | (1,692) | - | - | (1,692) |
| Balance as at 31 March 2023 | 134 | 153 | 5 | 80,315 | 10,012 | 9,823 | 3,729 | 104,171 |
*audited figures
Condensed Unaudited Cash Flow Statement
| | Six months to 30 September 2023 | Six months to 30 September 2022 | Year to 31 March 2023* |
| | £'000 | £'000 | £'000 |
| Cash flows from operating activities |
|
|
|
| Loss before tax | (1,470) | (12,648) | (536) |
| Adjustments for: | | | |
| Losses on investments held at fair value through profit or loss | 3,694 | 14,679 |
4,177 |
| Exchange (gains)/losses | (15) | - | 13 |
| Interest income | (36) | (29) | (70) |
| Interest received | 36 | 29 | 70 |
| Dividend income | (3,105) | (2,651) | (4,937) |
| Dividend income received | 3,576 | 3,122 | 4,698 |
| (Increase)/decrease in receivables | (2) | 8 | (64) |
| Decrease in payables | (22) | (38) | (15) |
| Finance costs | 406 | 109 | 222 |
| Overseas tax suffered | (97) | (43) | (76) |
| Cash flows from operating activities | 2,965 | 2,538 | 3,482 |
| Cash flows from investing activities | | |
|
| Purchases of investments | (37,247) | (22,001) | (45,856) |
| Sales of investments | 34,270 | 23,406 | 42,153 |
| Cash flows from investing activities | (2,977) | 1,405 | (3,703) |
|
| | | |
| Cash flows from financing activities | | | |
| Dividends paid on Ordinary shares | (2,442) | (2,444) | (4,690) |
| Capital returns paid on B shares | (881) | (881) | (1,692) |
| Interest on bank loans | (393) | (135) | (203) |
| Shares purchased for treasury | (1,293) | (79) | (79) |
| Drawdown of bank loans | 3,000 | - | 4,500 |
| Cash flows from financing activities | (2,009) | (3,539) | (2,164) |
|
| | | |
| Net (decrease)/increase in cash and cash equivalents | (2,021) | 404 | (2,385) |
| Effect of movement in foreign exchange | 15 | - | (13) |
| Opening net cash and cash equivalents | 2,288 | 4,686 | 4,686 |
| Closing cash and cash equivalents | 282 | 5,090 | 2,288 |
*audited figures
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 2023. 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 2023, which were prepared under UK-adopted International Accounting Standards.
2. Income
| | 30 September 2023 | 30 September 2022 | 31 March 2023 |
| | £'000 | £'000 | £'000 |
| |
|
|
|
| UK dividend income | 2,575 | 1,830 | 3,884 |
| UK dividend income - special dividends | - | - | 99 |
| Overseas dividend income | 464 | 776 | 880 |
| Overseas dividend income - special dividends | 25 | - | - |
| Property income distributions | 41 | 45 | 74 |
| | 3,105 | 2,651 | 4,937 |
| Other income | | | |
| Interest on cash and cash equivalents | 36 | 29 | 70 |
| | 3,141 | 2,680 | 5,007 |
3. The Company's investment manager Columbia Threadneedle 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.
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 115,437,141 shares (period to 30 September 2022 - 115,873,753; year to 31 March 2023 - 115,827,704), being the weighted average number of shares in issue during the period.
6. Earnings for the six months to 30 September 2023 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, 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
|
Dividends |
Payment Date | Six months to 30 Sept 2023 | Six months to 30 Sept 2022 | Year to 31 March 2023 | |
| |
| £'000 | £'000 | £'000 | |
| In respect of the previous period: |
|
|
|
| |
| Fourth interim dividend at 1.55p (2022: 1.55p) per Ordinary share |
5 May 2023 |
1,319 |
1,320 |
1,320 | |
| | | | | | |
| In respect of the period under review: |
|
|
|
| |
| First interim dividend at 1.32p (2023: 1.32p) per Ordinary share |
4 Aug 2023 |
1,123 |
1,124 |
1,124 | |
| Second interim dividend (2023: 1.32p) per Ordinary share | |
- |
- |
1,123 | |
| Third interim dividend (2023: 1.32p) per Ordinary share | |
- |
- |
1,123 | |
|
|
| 2,442 | 2,444 | 4,690 | |
A second interim dividend for the year to 31 March 2024, of 1.32p per Ordinary share, was paid on 3 November 2023 to Ordinary shareholders on the register on 6 October 2023.
|
Capital repayments |
Payment Date | Six months to 30 Sept 2023 | Six months to 30 Sept 2022 | Year to 31 March 2023 |
| |
| £'000 | £'000 | £'000 |
| In respect of the previous period: |
|
|
|
|
| Fourth capital repayment at 1.55p (2022: 1.55p) per B share |
5 May 2023 |
476 |
476 |
476 |
| | | | | |
| In respect of the period under review: |
|
|
|
|
| First capital repayment at 1.32p (2023: 1.32p) per B share |
4 Aug 2023 |
405 |
405 |
405 |
| Second capital repayment (2023: 1.32p) per B share | |
- |
- |
406 |
| Third capital repayment (2023: 1.32p) per B share | |
- |
- |
405 |
|
|
| 881 | 881 | 1,692 |
A second capital repayment for the year to 31 March 2024, of 1.32p per B share, was paid on 3 November 2023 to B shareholders on the register on 6 October 2023.
Although the above referenced payments on 3 November 2023 relate to the period ended 30 September 2023, under UK-adopted International Accounting Standards they will be accounted for in the six months to 31 March 2024, 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 | 110,910 | 250 | 111,160 |
| Gains brought forward | 1,858 | - | 1,858 |
| Fair value of investments at 31 March 2023 | 112,768 | 250 | 113,018 |
| Movement in the period: | | | |
| Purchases at cost | 37,247 | - | 37,247 |
| Sales proceeds | (34,270) | - | (34,270) |
| Losses on investments sold in the period | (4,322) | - | (4,322) |
| Gains on investments held at 30 September 2023 | 628 | - | 628 |
| Fair value of investments at 30 September 2023 | 112,051 | 250 | 112,301 |
| Cost at 30 September 2023 | 109,565 | 250 | 109,815 |
| Gains at 30 September 2023 | 2,486 | - | 2,486 |
| Fair value of investments at 30 September 2023 | 112,051 | 250 | 112,301 |
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 2023.
10. Receivables
| | 30 Sept | 30 Sept | 31 March |
| | 2023 | 2022 | 2023 |
| | £'000 | £'000 | £'000 |
| Income receivable from shares and securities | 704 | 436 | 1,175 |
| Due from brokers in settlement of sale of investments | - | 2,788 | - |
| Withholding tax recoverable | 199 | 150 | 140 |
| Sundry debtors and prepayments | 67 | 51 | 79 |
|
| 970 | 3,425 | 1,394 |
11. Payables
| | 30 Sept | 30 Sept | 31 March |
| | 2023 | 2022 | 2023 |
| | £'000 | £'000 | £'000 |
| Loan from subsidiary undertaking repayable on demand | 250 | 250 | 250 |
| Investment management fee payable to the investment manager | 148 | 144 | 154 |
| Loan Interest | 2 | 3 | 3 |
| Accrued expenses | 106 | 109 | 122 |
|
| 506 | 506 | 529 |
12. Bank Loans
The Company has an unsecured revolving credit facility ("RCF") with The Royal Bank of Scotland International Limited for £15 million which is available until 28 September 2025. At 30 September 2023, £15 million was drawn down (30 September 2022: £7.5 million; 31 March 2023: £12 million).
The loan agreement contains certain financial covenants with which the Company must comply. These include a financial covenant with respect to the ratio of the Adjusted Portfolio Value (as defined in the loan agreement) to the level of debt and also that the Adjusted Portfolio Value does not fall below £50 million. The Company complied with the required financial covenants throughout the period since drawdown.
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 annum. 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.
13. 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 2023 | 102,067,144 | 102,067 | (16,994,491) | (16,994) | 85,072,653 | 85,073 |
| Repurchased to be held in treasury | - | - | (1,750,000) | (1,750) | (1,750,000) | (1,750) |
| Balance at 30 September 2023 | 102,067,144 | 102,067 | (18,744,491) | (18,744) | 83,322,653 | 83,323 |
|
B Shares of 0.1p each | | | | | | |
| Balance at 1 April 2023 | 32,076,703 | 32,077 | (1,367,953) | (1,368) | 30,708,750 | 30,709 |
| Balance at 30 September 2023 | 32,076,703 | 32,077 | (1,367,953) | (1,368) | 30,708,750 | 30,709 |
| Total at 30 September 2023 | 134,143,847 | 134,144 | (20,112,444) | (20,112) | 114,031,403 | 114,032 |
During the period the Company bought back 1,750,000 Ordinary shares at a cost of £1,293,000 and bought back nil B shares to hold in treasury (period to 30 September 2022 - 100,000 Ordinary shares and nil B shares; year to 31 March 2023 - 100,000 Ordinary shares and nil B shares).
At 30 September 2023 the Company held 18,744,491 Ordinary shares and 1,367,953 B shares in treasury (30 September 2022 - 16,994,491 Ordinary shares and 1,367,953 B shares; 31 March 2023 - 16,994,491 Ordinary shares and 1,367,953 B shares).
14. The net asset value per share is based on shareholders' funds at the period end and on 83,322,653 Ordinary shares and 30,708,750 B shares, being the number of shares in issue at the period end (30 September 2022 - 85,072,653 Ordinary shares and 30,708,750 B shares; 31 March 2023 - 85,072,653 Ordinary shares and 30,708,750 B shares).
15. 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 2023.
16. Changes in liabilities arising from financing activities
| | Six months to 30 September 2023 | Six months to 30 September 2022 | Year to 31 March 2023 |
| | £'000 | £'000 | £'000 |
| Opening net debt at beginning of period/year | 12,000 | 7,500 | 7,500 |
| Cash flows: |
| | |
| Drawdown of revolving credit facility | 3,000 | 7,500 | 12,000 |
| Repayment of term loan | - | (7,500) | (7,500) |
| Closing net debt at end of period/year | 15,000 | 7,500 | 12,000 |
17. 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. The Board has, in particular, considered the impact of increased market volatility, more recently due to macroeconomic and geopolitical concerns.
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 an agreement relating to its borrowing facility with which it has complied. Cash is held only with banks approved and regularly reviewed by the Investment 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, 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. The current three year period for this purpose will run from 1 April 2022 to 31 March 2025.
18. 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.
19. The Company's auditor, Deloitte LLP, has not audited or reviewed the Half-Year Report to 30 September 2023 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 2023, 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 2023 are an extract from those financial statements. No full statutory financial statements in respect of any period after 31 March 2023 have been reported on by the Company's auditor or delivered to the Registrar of Companies.
The Half-Year Report to 30 September 2023 is available on the website maintained on behalf of the Company at ctukhighincome.co.uk
Statement of Principal Risks and Uncertainties
As an investment company, investing primarily in listed securities, most of the Company's principal risks and uncertainties that could threaten the achievement of its objective, strategy, future performance, liquidity and solvency are market related.
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 2023.
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 continues to review the key risk summary for the Company which identifies the risks that the Company is exposed to, the controls in place and the actions being taken to mitigate them. The Board has also considered the outlook for inflation and ongoing macroeconomic and geopolitical concerns which have impacted the value of investments. In addition, the operational resilience of the Investment Manager and the Company's other third party service providers has been considered. This is included within financial risk and operational risk. The integration of the Investment Manager's business and systems with Columbia Threadneedle Investments also continues to be monitored closely.
The Board considers that the Company's principal risks and uncertainties have not changed materially since 31 May 2023, the date that the Company's Annual Report was approved, and are not expected to change materially for the remainder of the Company's financial year. The Board has also considered these principal risks in relation to going concern, as set out in note 17.
Statement of Directors' Responsibilities in Respect of the Half-Year 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 Half-Year Report includes 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
29 November 2023
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 2023 | 31 March 2023 | ||||
|
|
| Ordinary Shares | B Shares | Units | Ordinary Shares | B Shares | Units |
| Net asset value per share | (a) | 85.98p | 85.98p | 343.92p | 89.97p | 89.97p | 359.88p |
| Share price | (b) | 80.50p | 80.50p | 317.00p | 82.00p | 84.50p | 323.00p |
| Discount (c=(b-a)/(a)) | (c) | -6.4% | -6.4% | -7.8% | -8.9% | -6.1% | -10.2% |
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 2023 £'000 | 31 March 2023 £'000 |
| Investments held at fair value through profit or loss | (a) | 112,301 | 113,018 |
| Net assets | (b) | 98,047 | 104,171 |
| (Net cash)/gearing (c=(a/b)-1)% | (c) | 14.5% | 8.5% |
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 2023 | 31 March 2023 | ||
| |
Ordinary shares/B shares |
Units |
Ordinary shares/B shares |
Units |
| NAV per share at start of period/year | 89.97p | 359.88p | 95.97p | 383.88p |
| NAV per share at end of period/year | 85.98p | 343.92p | 89.97p | 359.88p |
| Change in the period/year | -4.4% | -4.4% | -6.3% | -6.3% |
| Impact of dividend/capital repayment reinvestment† | +3.0% | +3.0% | +5.9% | +5.9% |
| NAV total return | -1.4% | -1.4% | -0.4% | -0.4% |
† During the six months to 30 September 2023 dividends/capital repayments totalling 2.87p (Ordinary shares/B shares) and 11.48p (units) went ex-dividend. During the year to 31 March 2023 the equivalent figures were 5.51p (Ordinary shares/B shares) and 22.04p (units).
|
| 30 September 2023 | 31 March 2023 | ||||
|
| Ordinary Shares | B Shares | Units | Ordinary Shares | B Shares | Units |
| Share price per share at start of period/year | 82.0p | 84.5p | 323.0p | 87.0p | 88.0p | 336.0p |
| Share price per share at end of period/year | 80.5p | 80.5p | 317.0p | 82.0p | 84.5p | 323.0p |
| Change in the period/year | -1.8% | -4.7% | -1.9% | -5.7% | -4.0% | -3.9% |
| Impact of dividend/capital repayment reinvestment† | +3.6% | +3.2% | +3.6% | +6.3% | +6.3% | +5.8% |
| Share price total return for the period/year | +1.8% | -1.5% | +1.7% | +0.6% | +2.3% | +1.9% |
† During the six months to 30 September 2023 dividends/capital repayments totalling 2.87p (Ordinary shares/B shares) and 11.48p (units) went ex-dividend. During the year to 31 March 2023 the equivalent figures were 5.51p (Ordinary shares/B shares) and 22.04p (units).
Yield - The total annual dividend/capital repayment expressed as a percentage of the period end share price.
|
|
| 30 September 2023* | 31 March 2023 | ||||
|
|
| Ordinary Shares | B Shares | Units | Ordinary Shares | B Shares | Units |
| Annual dividend/capital repayment |
(a) | 5.51p | 5.51p | 22.04p | 5.51p | 5.51p | 22.04p |
| Share price | (b) | 80.50p | 80.50p | 317.00p | 82.00p | 84.50p | 323.00p |
| Yield (c=a/b) | (c) | 6.8% | 6.8% | 7.0% | 6.7% | 6.5% | 6.8% |
*Based on expected minimum annual dividend/capital repayment of 5.51 pence per share in respect of the year ending 31 March 2024.
For further information, please contact:
David Moss, Columbia Threadneedle Investment Business Limited 0131 573 8300
Ian Ridge, Columbia Threadneedle Investment Business Limited 0131 573 8300
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
