CT UK Cap & Inc inv - Interim Results and Quarterly Dividend
01/06/2023 07:00
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RNS Number : 2258B CT UK Capital and Income Investment 01 June 2023
Date: 1 June 2023
Contact: Julian
Cane
Columbia
Threadneedle Investment Business Limited
020 7628
8000
LEI: 21380052ETTRKV2A6Y19
CT UK Capital and Income Investment Trust PLC
Unaudited Statement of Results
for the half-year ended 31 March 2023
Highlights for the half-year ended 31 March 2023:
· The dividend((1)) for this half-year of 5.50p represents an increase
of 3.8% in comparison to the six-months ended 31 March 2022 and provides
Shareholders with an annual yield((2)) of 4.1%.
· The Company is recognised as a "Dividend Hero" by the Association of
Investment Companies having increased its dividend every year since launch in
1992.
· Share price total return((3)) was 8.1%. The share price ended the
period at 296p.
· The Company's Net Asset Value ("NAV") total return((3)) was 12.4%,
outperforming the FTSE All-Share Index (the "Benchmark") which returned 12.3%
over the same period.
"The recovery of the Company's share price and net asset value per share,
together with a further increase in the dividend, are indicative of the
robustness of our investment strategy which continues to provide the
opportunity to deliver attractive longer term investment returns to
Shareholders."
Jonathan Cartwright
Chairman
SUMMARY OF RESULTS
Half-year ended Half-year ended
31 March 2023 31 March 2022
Share price total return((3)) +8.1% +2.1%
Net Asset Value total return((3)) +12.4% -1.3%
FTSE All-Share Index total return +12.3% +4.7%
Dividends per ordinary share
First interim dividend in respect of year to
30 September 2023 ((1)) 2.75p -
30 September 2022 - 2.65p
Second interim dividend in respect of year to
30 September 2023 ((1)) 2.75p -
30 September 2022 - 2.65p
Total interim dividends relating to the period 5.50p 5.30p
(1) The first interim dividend of 2.75 pence per share was paid on 31
March 2023 and the second interim dividend of 2.75 pence per share is payable
on 30 June 2023 to Shareholders registered on 9 June 2023 with an ex-dividend
date 8 June 2023.
(2) Calculated as the total of the four most recent quarterly dividends
declared divided by the period end share price.
(3) Total Return - the return to Shareholders calculated on a per share
basis by adding dividends paid in the period to the increase or decrease in
the Share Price or Net Asset Value in the period. The dividends 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 Chairman, commenting on the results, said:
Dear Shareholder,
In this interim report for the first half year ended 31 March 2023, I am
pleased to announce a recovery in your share price and Net Asset Value ("NAV")
per share, as well as another increase in the dividend.
Total Return Performance:
Our current financial year started at close to the lowest point for the UK
equity market since October 2020 following a period of unprecedented political
turmoil, including the infamous September 2022 "Mini-budget" introduced by the
short-lived Truss Administration. By contrast, the period since has been
somewhat calmer politically and this has helped government bond yields to
stabilise and equity markets to make some progress.
Your Company's NAV total return per share during the six months ended 31 March
2023 was 12.4%, outperforming the total return of the FTSE All-Share Index,
our benchmark, of 12.3%.
Although the political situation in the UK may have stabilised with a new
Prime Minister and Chancellor of the Exchequer, one of the key ongoing
concerns has been the rate of inflation. There is more than a single factor
causing the current inflationary surge, but to the extent that supply
constraints previously caused by COVID-19 have eased and energy prices
initially driven higher by Russia's war in Ukraine have decreased somewhat,
many had hoped that the rate of inflation would have started to decrease
decisively. However, in the UK at least, inflation has been more persistent
than anticipated, with the Consumer Price Index in the year to March 2023
rising by 10.1%. In addition bond yields are still considerably above the
levels that existed before the now infamous September 2022 'Mini-Budget'.
Nonetheless, this improvement in overall financial stability has provided a
positive enough background for the UK equity market and our portfolio to
record some useful gains. The strongest contribution to performance (a
function of the size of the investment and the magnitude of its return) was
from the bank and specialist mortgage lender OSB Group, with a total return of
22.8%. This though was far from the strongest percentage return over the
period with total returns of 53.5% from Melrose, 44.2% from Burberry, 43.2%
from CRH, 39.5% from Howden Joinery and 37.9% from Vistry. The amount of these
companies' share price increases far exceeded any improvement in their
underlying trading and was more a reflection of how severely their share
prices had been depressed last September when fears for the UK economy were at
their greatest.
Although the share prices of the companies mentioned above have recovered
well, the same does not apply to all of the portfolio: the shares of property
company LXi REIT, down 18.5% over the six-month period, struggled as the
market became concerned that higher interest rates may have an impact on its
property valuations. In addition, brick manufacturer Forterra shares were down
15.1% as housebuilders are expected to cut production, and hence demand for
bricks, in response to uncertainties in the mortgage and housing markets.
While understandable, these concerns are short-term in nature as LXi's assets
and leases are of exceptional quality and Forterra has a very strong position
in the brick market where there is considerable long-term demand due to the
underlying shortage of housing in the UK.
Taking a longer, three-year view, the recent rebound in our NAV is positive,
but not quite sufficient to outweigh the impact on our performance relative to
the FTSE All-Share Index that occurred in the first calendar quarter of 2022,
around the time of Russia's invasion of Ukraine, and the economic events of
August / September 2022 referred to above.
The strength in operating performance of many of our investments and the
undemanding valuations appear to be at odds with each other, but we have
confidence that, over the longer term, focusing on fundamental factors such as
earnings and dividends drives positive results for investors. We are aware
that in an actively managed fund there are inevitably periods when share price
performance can diverge from targets at a time when fundamental factors are
over ridden by macro-market effects that impact valuations.
Share Price Premium / Discount:
During the six months under review, the share price traded relative to NAV at
an average discount of 2.8% and within a range of a premium of 0.03% to a
discount of 5.05%.
The widening of the discount over the period meant the share price total
return of 8.1% was rather less than that of the NAV.
Share Issuance and Buy-backs:
As has been consistently stated over many years, we believe the share price
should not vary significantly from the underlying NAV in normal market
conditions and we are willing and able to buy or sell the Company's own shares
to assist in that approach. In the first six months of this financial year, we
bought 600,000 shares and sold 75,000. In line with our previous commitments,
the shares were bought at a discount to their concurrent NAV and were sold at
a premium. These purchases and sales help to add liquidity to the market, and
add very marginally to NAV per share - to the benefit of ongoing Shareholders.
Revenue, Earnings and Dividends:
Our income, which comprises the dividends we receive from our investments, has
continued to grow at a healthy rate, increasing by 11.6% compared to the first
six months of the previous financial year. This increase reflects a number of
factors when compared with the comparative period - which itself continued to
suffer from the effects of the COVID-19 pandemic. Since then, many of our
investee businesses have reported improved trading and, in addition, the
Company received a special dividend from OSB Group which alone added £0.5
million to our income for the period.
The Company paid a dividend per share of 2.75 pence in respect of the first
quarter of the financial year and I am pleased to say we will pay a further
2.75 pence in respect of the second quarter. This gives a total for the half
year of 5.50 pence per share, an increase of 3.8% compared to the rate for the
same period last year.
Dividend Cover and Revenue Reserve:
The dividends for the first half year are more than covered by earnings of
5.96 pence per share, allowing us to add to the Revenue Reserve which proved
so important in enabling us to maintain and grow the dividend to our
Shareholders through the period of interruption in business and social
activities caused by COVID-19.
We remain proud of our record of dividend growth, having increased the
dividend every year since launch in 1992, and that we are recognised as a
"Dividend Hero" by the Association of Investment Companies. We aim to extend
our dividend record yet further.
Balance Sheet and Gearing:
In March 2023 we renewed our loan facility with The Bank of Nova Scotia,
London Branch. We started the financial year having borrowed £24 million and
this was increased to £29 million during the six months, giving gearing as at
31 March 2023 of 8.7%.
Directorate Change:
As announced in our most recent Annual Report and Accounts, I shall be
retiring from the Board on 1 July 2023. Upon my retirement Jane Lewis, who
joined the Board in April 2015 will be appointed Chair. Jane holds a number of
investment trust directorships, and I am delighted that the Company and
Shareholders will benefit from her extensive experience, knowledge and
leadership.
It is announced that as part of the Board's succession planning, and following
a thorough selection process, Dunke Afe has been appointed as a Director of
the Company with effect from 1 June 2023. Dunke is an accomplished global
marketing executive with extensive experience in raising brand and product
awareness. She is employed by leading prestige beauty company Estee Lauder
where she is Executive Director, Global Marketing and Regions - Jo Malone
London.
As a further part of the Board's succession planning, it is anticipated that
Tim Scholefield, the Company's Senior Independent Director, will retire from
the Board at the conclusion of the 2024 Annual General Meeting. A new
Director will be appointed to the Board in advance of this retirement.
Outlook:
It might be tempting to think that the opportunities for UK equities are
lacklustre as the stock market has already shown some signs of recovery since
the start of the financial year, yet the economy is apparently struggling to
produce any meaningful growth. Furthermore, inflation is proving more
persistent than expected and interest rates are probably staying at higher
levels for longer, which would normally be considered a headwind for
businesses and share prices. We are also very aware of the emerging risk of
instability in the US financial sector but, as yet there appears very limited
read across to the UK.
All these points of caution, however, ignore the actual experience of many of
the companies in our portfolio where sales, profits, earnings and dividends
are increasing and where valuations appear undemanding. As has already been
stated, share prices can be impacted by macro-economic events but, across a
longer-term timeframe, fundamental value should be reflected in improving
individual share prices as companies deliver superior performance.
Your Board believes that the Company's investment strategy is sound, and it is
supported and executed by an exceptionally experienced investment manager.
Shareholders' overwhelming support in the continuation vote taken at the
Company's AGM in March of this year was very encouraging and we are determined
to continue a track record beneficial to Shareholders.
May I take this opportunity to thank all Shareholders for their support for
the Company. I look forward to seeing you at future general meetings.
On behalf of the Board
Jonathan Cartwright
31 May 2023
Forward -looking statements
This half-year report may contain forward-looking statements with respect to
the financial condition, results of operations and business of the Company.
Such statements involve risk and uncertainty because they relate to future
events and circumstances that could cause actual results to differ materially
from those expressed or implied by forward-looking statements. The
forward-looking statements are based on the Directors' current view and on
information known to them at the date of this report. Nothing should be
construed as a profit forecast.
Directors' Statement of Principal Risks and Uncertainties
Most of the Company's principal risks and uncertainties are market related and
no different from those of other investment trusts investing primarily in
listed equities. They are described in more detail under the heading
"Principal risks and future prospects" within the Strategic Report in the
Company's Annual Report for the year ended 30 September 2022.
The principal risks identified in the Annual Report were:
· Macroeconomic and geopolitical risk including the possibility of
a prolonged recession in the United Kingdom and the impact of the war in
Ukraine.
· Unfavourable markets or asset allocation, sector and stock
selection and use of gearing and derivatives are inappropriate giving rise to
investment underperformance as well as impacting capacity to pay dividends;
· Errors, fraud or control failures at service providers, or loss
of data through increasing cyber-threats or business continuity failure could
damage reputation or investors interests or result in losses; and
· Inappropriate business or marketing strategy particularly in
relation to investor needs or sentiment giving rise to a share price discount
to NAV per share.
At present the global economy continues to suffer considerable disruption due
to inflationary pressures, the war in Ukraine and the after-effects of the
COVID-19 pandemic. The Directors continue to review the key risk register for
the Company which identifies the risks that the Company is exposed to,
including those that are considered to be emerging, the controls in place and
the actions being taken to mitigate them.
The Board considers that the principal risks have not changed materially since
30 November 2022, the date of the Company's Annual Report. The Board has also
considered these principal risks in relation to going concern.
Directors' Statement of Responsibilities in Respect of the Half-Yearly
Financial Report
We confirm that to the best of their knowledge:
· the condensed set of financial statements have been prepared in
accordance with applicable UK Accounting Standards on a going concern basis
and give a true and fair view of the assets, liabilities, financial position
and return of the Company;
· the Chairman's Statement and the Directors' 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 financial statements;
· the Directors' 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-yearly 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 the
period, and any changes in the related party transactions described in the
last Annual Report that could do so.
On behalf of the Board
Jonathan Cartwright
Chairman
31 May 2023
Condensed Income Statement
Half-year ended 31 March 2023 Half-year ended 31 March 2022 (Unaudited)
(Unaudited)
Note Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
Gains/(losses) on investments - 30,778 30,778 - (10,402) (10,402)
Foreign exchange gains/(losses) 1 (59) (58) (2) (59) (61)
Income 7,317 - 7,317 6,536 - 6,536
Management fee (347) (347) (694) (377) (377) (754)
Other expenses (321) - (321) (356) - (356)
Net return before finance costs and
Taxation 6,650 30,372 37,022 5,801 (10,838) (5,037)
Finance costs (259) (259) (518) (72) (72) (144)
Net return before taxation 6,391 30,113 36,504 5,729 (10,910) (5,181)
Taxation - - - - - -
Net return attributable to
Shareholders 6,391 30,113 36,504 5,729 (10,910) (5,181)
2 Return per share - basic and diluted (pence) 5.96 28.08 34.04 5.34 (10.17) (4.83)
The total column of this statement is the profit and loss account of the
Company. The revenue return and capital return columns are supplementary to
this and are prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above
statement derive from continuing operations.
A Statement of Comprehensive Income is not
required as all gains and losses of the Company have been reflected in the
above statement.
Condensed Statement of Changes in Equity
Share Capital Total
Share premium redemption Special Capital Revenue Shareholders'
Half-year ended 31 March 2023 Capital account reserve Reserve Reserves reserve Funds
(Unaudited)
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance at 30 September 2022 26,822 141,380 4,146 2,642 110,200 11,093 296,283
Movements during the half-year
ended 31 March 2023
Dividends paid - - - - - (7,036) (7,036)
Ordinary shares issued from treasury
- (17) - 240 - - 223
Ordinary shares bought back and held in treasury
- - - (1,804) - - (1,804)
Costs relating to broker - (8) - - - - (8)
Net return attributable to Shareholders
- - - - 30,113 6,391 36,504
Balance at 31 March 2023 26,822 141,355 4,146 1,078 140,313 10,448 324,162
Half-year ended 31 March 2022
(Unaudited)
Balance at 30 September 2021 26,822 141,374 4,146 4,432 168,366 10,735 355,875
Movements during the half-year
ended 31 March 2022
Dividends paid - - - - - (6,860) (6,860)
Ordinary shares issued from treasury
- 21 - 567 - - 588
Ordinary shares bought back and held in treasury
Costs relating to broker - - - (1,036) - - (1,036)
- (8) - - - - (8)
Net return attributable to
Shareholders - - - - (10,910) 5,729 (5,181)
Balance at 31 March 2022 26,822 141,387 4,146 3,963 157,456 9,604 343,378
Year ended 30 September 2022
(Audited)
Balance at 30 September 2021 26,822 141,374 4,146 4,432 168,366 10,735 355,875
Movements during the year
ended 30 September 2022
Dividends paid - - - - - (12,532) (12,532)
Ordinary shares issued from treasury
- 21 - 568 - - 589
Ordinary shares bought back and held in treasury
- - - (2,358) - - (2,358)
Costs relating to broker - (15) - - - - (15)
Net return attributable to
Shareholders - - - - (58,166) 12,890 (45,276)
Balance at 30 September 2022 26,822 141,380 4,146 2,642 110,200 11,093 296,283
Condensed Balance Sheet
31 March 2023 31 March 2022 30 September 2022
(Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s
Fixed assets
Investments 349,391 366,869 318,796
Current assets
Debtors 3,923 3,308 5,106
Cash and cash equivalents 647 643 906
Total current assets 4,570 3,951 6,012
Current liabilities
Creditors: amounts falling within one year (799) (442) (4,525)
Loan (29,000) (27,000) (24,000)
Total current liabilities (29,799) (27,442) (28,525)
Net current liabilities (25,229) (23,491) (22,513)
Net assets 324,162 343,378 296,283
Capital and reserves
Share capital 26,822 26,822 26,822
Share premium account 141,355 141,387 141,380
Capital redemption reserve 4,146 4,146 4,146
Special reserve 1,078 3,963 2,642
Capital reserves 140,313 157,456 110,200
Revenue reserve 10,448 9,604 11,093
Total Shareholders' funds 324,162 343,378 296,283
Net Asset Value per ordinary share - pence 305.29 320.49 277.66
Condensed Statement of Cash Flows
Half-year ended Half-year ended
31 March 2023 31 March 2022
(Unaudited) (Unaudited)
£'000s £'000s
Cash flows from operating activities before interest and dividends received
and interest paid
(796) (1,128)
Dividends received 4,852 4,318
Interest received 27 1
Interest paid (503) (139)
Cash flows from operating activities 3,580 3,052
Investing activities
Purchase of investments (15,864) (1,892)
Sale of investments 15,708 3,047
Cash flows from investing activities (156) 1,155
Cash flows before financing activities 3,424 4,207
Financing activities
Equity dividends paid (7,036) (6,860)
Net proceeds from issuance of shares held in treasury 223 588
Costs associated with share issues (8) (8)
Costs of shares bought back and held in treasury (1,804) (1,036)
Drawdown of bank loan 5,000 2,000
Cash flows from financing activities (3,625) (5,316)
Net movement in cash and cash equivalents (201) (1,109)
Cash and cash equivalents at the beginning of the period 906 1,813
Effect of movement in foreign exchange (58) (61)
Cash and cash equivalents at the end of the period 647 643
Represented by:
Cash at bank 87 13
Short term deposits 560 630
647 643
Notes
1 Basis of preparation
These condensed financial statements, which are unaudited, have been prepared
on a going concern basis in accordance with the Companies Act 2006, FRS 102,
Interim Financial Reporting (FRS104) and the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital
Trusts" ("SORP") issued by the AIC.
The accounting policies applied in the condensed set of financial statements
are set out in the Company's annual report for the year ended 30 September
2022.
2 Earnings per ordinary share
Earnings per ordinary share attributable to Shareholders reflects the overall
performance of the Company in the period. Net revenue recognised in the
first six months is not necessarily indicative of the total likely to be
received in the full accounting year.
Half-year ended Half-year ended
31 March 2023 31 March 2022
£'000s £'000s
Revenue return 6,391 5,729
Capital return 30,113 (10,910)
Total return 36,504 (5,181)
Number Number
Weighted average ordinary shares in issue 107,233,665 107,210,621
Total return per share - pence 34.04 (4.83)
3 Dividend
The second interim dividend of 2.75 pence per share in respect of the year
ending 30 September 2023 will be paid on 30 June 2023 to all Shareholders on
the register at close of business on 9 June 2023, with an ex-dividend date of
8 June 2023. The total cost of this dividend, based on 105,835,845 shares in
issue, and entitled to the dividend on 30 May 2023, being the last practicable
date before publication, is £2,910,000.
4 Going concern
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council. They have
also considered the Company's objective, strategy and policy, the current cash
position of the Company, the availability of the loan facility and compliance
with its covenants and the operational resilience of the Company and its
service providers.
The global economy continues to suffer disruption due to the effects of
inflation, the war in Ukraine and the after-effects of the COVID-19 pandemic
and the Directors have given careful consideration to the consequences for
this Company. The Company has a number of banking covenants and at present the
Company's financial position does not suggest that any of these are close to
being breached.
The primary risk is that there is a very substantial decrease in the Net Asset
Value of the Company in the short to medium term. The Directors have
considered the remedial measures that are open to the Company if such a
covenant breach appears possible. As at 30 May 2023, the last practicable date
before publication of this report, borrowings amounted to £29 million. This
is in comparison to a Net Asset Value of £328.4 million. In accordance with
its investment policy the Company is mainly invested in readily realisable,
FTSE All-Share listed securities. These can be realised, if necessary, to
repay the loan facility and fund the cash requirements for future dividend
payments.
The Company operates within a robust regulatory environment. The Company
retains title to all assets held by the Custodian. Cash is held with banks
approved and regularly reviewed by the Manager and the Board.
Based on this information the Directors believe that the Company has the
ability to meet its financial obligations as they fall due for a period of at
least twelve months from the date of approval of these financial statements.
Accordingly, these financial statements have been prepared on a going concern
basis.
5 Results
The results for the half-year ended 31 March 2023 and 31 March 2022, which are
unaudited, constitute non-statutory accounts within the meaning of Section 434
of the Companies Act 2006. The latest published accounts which have been
delivered to the Registrar of Companies are for the year ended 30 September
2022; the report of the independent auditors thereon was unqualified and did
not contain a statement under Section 498 of the Companies Act 2006. The
abridged financial statements shown above for the year ended 30 September 2022
are an extract from those accounts.
6 Half-yearly report and accounts
The Company's report and accounts are available on the internet at
www.ctcapitalandincome.co.uk.
Printed copies may be obtained by contacting the Company Secretary at the
Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY.
By order of the Board
Columbia Threadneedle Investment Business Limited, Secretary
31 May 2023
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