TIDMCHI TIDMCHIB TIDMCHIU
RNS Number : 1139V
CT UK High Income Trust PLC
30 November 2023
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 GBP15
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
GBP'000 GBP'000 GBP'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 Year to March 2023*
2022
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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*
GBP'000 GBP'000 GBP'000
Non-current asset s
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
Capital Special
Share Share Redemption Buy Back Capital Capital Revenue
Capital Premium Reserve Reserve Reserve Reserves Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
Capital Special
Share Share Redemption Buy Back Capital Capital Revenue
Capital Premium Reserve Reserve Reserve Reserves Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 *
Capital Special
Share Share Redemption Buy Back Capital Capital Revenue
Capital Premium Reserve Reserve Reserve Reserves Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Six months
to to Year to
30 September 30 September 31 March
2023 2022 2023*
GBP'000 GBP'000 GBP'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 30 September 31
2023 2022 March
2023
GBP'000 GBP'000 GBP'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 25 - -
dividends
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
Six months Six months Year
Payment to to to
Date 30 Sept 30 Sept 31 March
Dividends 2023 2022 2023
GBP'000 GBP'000 GBP'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.
Six months Six months Year
Payment to to to
Date 30 Sept 30 Sept 31 March
Capital repayments 2023 2022 2023
GBP'000 GBP'000 GBP'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/ Subsidiary/
Quoted Unlisted
(Level (Level Total
1) 3) GBP'000
GBP'000 GBP'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
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------- -------- ---------
Income receivable from shares and securities 704 436 1,175
Due from brokers in settlement of sale - 2,788 -
of investments
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
GBP'000 GBP'000 GBP'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 GBP15
million which is available until 28 September 2025. At 30 September
2023, GBP15 million was drawn down (30 September 2022: GBP7.5
million; 31 March 2023: GBP12 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 GBP50 million. The
Company complied with the required financial covenants throughout
the period since drawdown.
Until 28 September 2022, the Company had a GBP7.5 million
unsecured term loan from Scotiabank Europe plc at a fixed interest
rate of 2.58% per annum. It also had a GBP7.5 million unsecured
multicurrency revolving credit facility ('RCF') with Scotiabank
(Ireland) Designated Activity Company. On 28 September 2022 both
loan facilities matured and the GBP7.5 million unsecured term loan
was repaid to Scotiabank Europe plc. At that time, GBPnil was drawn
down under the RCF.
13. Share Capital
Allotted, issued and fully paid
Listed Held in Treasury In Issue
Number GBP Number GBP Number GBP
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 GBP1,293,000 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 Six months Year to
to to 30 September 31 March
30 September 2022 2023
2023
GBP'000 GBP'000 GBP'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 GBP15 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 B Shares Units Ordinary B Shares Units
Shares Shares
------------------------ ----- --------- --------- -------- --------- --------- --------
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 31 March 2023
2023 GBP'000
GBP'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 Ordinary
shares/B shares Units 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 B Shares Units Ordinary B Shares Units
Shares Shares
----------------------------- --------- --------- ------- --------- --------- -------
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 B Shares Units Ordinary B Shares Units
Shares Shares
------------------------- ------- --------- --------- -------- --------- --------- --------
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
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END
IR FLFFRLALAFIV
(END) Dow Jones Newswires
November 30, 2023 02:00 ET (07:00 GMT)
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