CT UK Cap & Inc inv - Interim Results and Quarterly Dividend
29/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240529:nRSc1494Qa&default-theme=true
RNS Number : 1494Q CT UK Capital and Income Investment 29 May 2024
CT UK Capital and Income Investment Trust PLC
Unaudited Statement of Results
for the half-year ended 31 March 2024
Date: 29 May 2024
LEI: 21380052ETTRKV2A6Y19
Highlights for the half-year ended 31 March 2024:
· The Company's Net Asset Value ("NAV") total return((3)) was 12.9%,
outperforming the FTSE All-Share Index (the "Benchmark") which returned 6.9%
over the same period.
· Share price total return((3)) was 9.5%. The share price ended the
period at 319p.
· The dividend((1)) for this half-year of 5.70p represents an increase
of 3.6% in comparison to the six-months ended 31 March 2023 and provides
Shareholders with an annual yield((2)) of 3.9%.
· The Company is recognised as a "Dividend Hero" by the Association of
Investment Companies having increased its dividend every year since launch in
1992.
"During the period under review the Company has delivered NAV growth of 12.9%
per share on a total return basis compared to its FTSE All Share benchmark
which increased by 6.9% over the same period. The Company's share price
total return was 9.5%. A further interim dividend of 2.85p per share has
been declared, extending the Company's record of annual dividend increases.
The Board is pleased that the Company continues to demonstrate that it
offers shareholders a reliable income while at the same time seeking to grow
the size of their investment."
Jane Lewis
Chair
SUMMARY OF RESULTS
Half-year ended Half-year ended
31 March 2024 31 March 2023
Share price total return((3)) +9.5% +8.1%
Net Asset Value total return((3)) +12.9% +12.4%
FTSE All-Share Index total return +6.9% +12.3%
Dividends per ordinary share
First interim dividend in respect of year to -
30 September 2024 ((1)) 2.85p
30 September 2023 - 2.75p
Second interim dividend in respect of year to -
30 September 2024 ((1)) 2.85p
30 September 2023 - 2.75p
Total interim dividends relating to the period 5.70p 5.50p
(1) The first interim dividend of 2.85 pence per share was paid on 28
March 2024 and the second interim dividend of 2.85 pence per share is payable
on 28 June 2024 to Shareholders registered on 14 June 2024 with an ex-dividend
date 13 June 2024.
(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 Chair, commenting on the results, said:
Dear Shareholder,
I am pleased to report that over the six months to 31 March 2024, the UK stock
market, as measured by the FTSE All-Share Index, experienced a reasonable gain
of 6.9% (including dividends), while our own Net Asset Value ('NAV') per share
increased more with a gain of 12.9% (including dividends). With this half-year
report, we also announce another increase in our dividend.
Total Return - The Company offers reliable income while at the same time
seeking to grow the size of your investment
At face value, it is perhaps surprising that the UK stock market has made any
progress over the six months under review as early in the period, corporate
financial results were widely seen as disappointing, the UK economy was in
recession from October to December and geopolitical events continued to cause
concern. Despite this, our portfolio was able to make significant headway, in
both absolute terms and relative to our benchmark, the FTSE All-Share Index.
The first month of our reporting period, October 2023, was difficult for the
UK stock market as the FTSE All-Share Index fell by over 4%, largely as a
consequence of disappointing corporate results, or in some cases, just the
fear of poor results. October also marked Hamas's attack on Israel and the
start of greater insecurity in the wider Middle East. The equity market's low
point for the period was towards the end of that month, since when there has
been a reasonable rally.
The dominant theme behind the turn and subsequent strength of the market was
data indicating that inflation in the UK was falling which brought hope that
interest rates would start to reduce as well. The Bank of England's Official
Bank Rate (the 'Bank Rate') was unchanged throughout the six months at 5.25%,
but the direction of forecasts did change. At the start of October market
forecasts were for the Bank Rate to increase further, however, more recently
the expectation is that the Bank Rate, in six months' time, will be below 5%.
The fall in forecast rates may be relatively modest, but the change in
direction of rates is symbolic, allowing investment sentiment to become more
positive.
The strongest total returns from stocks within our portfolio came from CRH,
the building materials supplier (+54%), Intermediate Capital, the specialist
lender (+51%) and DS Smith, the packaging business (+41%). Both CRH and
Intermediate Capital are driving strong growth in their businesses, which will
be helped further by lower interest rates, while DS Smith received the first
of two take-over approaches.
In a balanced portfolio it is inevitable that at some point some companies
will perform poorly, the two worst in our portfolio during this six-month
period were XP Power, the supplier of power control systems (-54%) and Close
Brothers, the merchant banking group (-50%). The issues affecting these
companies were very different, XP Power suffered from volatility in customer
orders, which we expect to stabilise in time. Close Brothers was impacted by
the possibility of compensation claims within its motor finance division.
Looking now at longer term performance, it is notable that the effect on the
Company of the turmoil of 2022, including Russia's invasion of Ukraine, rising
interest rates and the Truss/Kwarteng 'mini-budget' are now outweighed by the
strength of performance in previous and subsequent years, leading to
outperformance of our benchmark, and supporting your Company's long term
growth objectives.
Income Growth - The Company has increased its dividend every year since it was
launched, through the market's ups and downs
We have previously announced a dividend for our first quarter of 2.85 pence
per share and I am pleased to announce we will also pay this amount for the
second quarter. The total, therefore, for the first half-year is 5.70p, an
increase of 3.6% over the comparable period last year.
Our revenue, which is the dividends we receive from our investments, fell
compared to the first six months of our previous financial year. This reflects
a number of specific issues, rather than a more general weakening of dividend
generating ability from the whole portfolio. First, there was the effect of
timing as dividends from two companies, totalling almost £1.4 million, which
were recorded in the first half last year will fall into our second half.
Dividends from these companies are expected to increase over the year as a
whole. Secondly, in a couple of instances, companies decided to suspend their
dividend payments in order to preserve cash and strengthen their balance
sheets. Our fund manager took the view that it would be disadvantageous to
sell these companies at what could prove to be a moment of exaggerated
pessimism and a temporarily depressed share price. This has certainly been the
case with Close Brothers and also Hipgnosis Songs Fund, the music royalties
business, which has subsequently had four public take-over bids. Finally,
other portfolio companies, such as Vistry Group, the house builder, returned
cash to shareholders through share buy-backs rather than dividends and its
share price has been strong in response.
Dividend Cover and Revenue Reserve
Although our dividends for the first half of the year are not fully covered by
earnings, our forecasts for the rest of the year and the stronger capital
generation demonstrated during the period under review lead us to be more
optimistic for the second half. At the start of this year, our Revenue Reserve
was £12.3 million and as we have noted in the past, we have the ability to
use this to help finance our dividend payment, where required.
We are proud of our record of more than 30 years of dividend growth and
recognise that it is an important attraction for our shareholders. We aim to
extend our record of dividend growth yet further.
Share Issuance and Buy-backs
As a principle, the Board believes our share price should not become too
detached from the underlying NAV per share. In order to try to keep the share
price and NAV relatively close together we are willing and able to buy and
sell the Company's own shares when they trade too far adrift from that anchor.
In the first six months of this financial year, we bought 2.3 million shares
at an average discount to NAV of 4% marginally adding to NAV for remaining
shareholders, while also providing some liquidity to the stock market.
Share Price Premium/Discount
Discounts have generally widened across investment trusts in recent months,
but with our share buy-back programme we are seeking to mitigate the widening
of our discount. During the six months under review, the share price traded at
an average discount to NAV of (3.8)% and within a range of (1.2)% to (5.8)%.
The shares ended the period trading at a wider discount (4.3)% than at the
start (1.2)% which meant that the share price total return of 9.5% was rather
less than that of the NAV, although it was still well ahead of the FTSE
All-Share Index.
Balance Sheet and Gearing
Our previous loan facility with The Bank of Nova Scotia came to an end in
March 2024 and a new facility with The Royal Bank of Scotland International
replaces it. We started the financial year having borrowed £25 million and
increased this to £26 million during the six months, giving net gearing as at
31 March 2024 of 6.4%.
Directorate Change
The Board recognises the value in both attracting fresh talent and the
maintenance of continuity and accordingly a plan has been developed to ensure
an orderly succession as Directors retire.
I was appointed to the Board in November 2015 and became Chair with effect
from 1 July 2023. As a part of the Board's ongoing succession planning and in
accordance with corporate governance best practice, I announce my intention to
retire from the Board at the conclusion of the Company's 2025 Annual General
Meeting.
Upon my retirement, Nicky McCabe, the Company's Senior Independent Director,
who was appointed to the Board in January 2021 will become Chair. Nicky has
extensive sector experience as she was formerly Head of Product and Investment
Trusts at Fidelity International as well as a director and Chief Operating
Officer of a number of Fidelity companies. Nicky is currently a non-executive
director of abrdn Asian Income Fund Ltd, Artemis Investment Management Limited
and EFG Asset Management (UK) Limited.
The Board will commence the process to recruit a new Director later this year.
Outlook
The UK stock market has made reasonable gains since the start of our financial
year. Nevertheless, UK equities have performed less well and are valued at a
lower level than many other international markets. This certainly provides
scope for additional progress.
There is also tangible evidence that certain stocks in the UK market are
cheap. The increasing number of corporate bids and acquisitions within the
UK stock market gives first-hand evidence that acquirors, whether they be
industry peers or financial buyers, recognise the value available and are
prepared to pay up for it, with take-over premiums being at levels
substantially above pre-bid share prices.
The Board continues to support our fund manager's investment in companies he
strongly believes in, many of which generate revenues outside of the UK and
which have the sustainable foundations to continue profitable growth into the
future.
On behalf of the Board
Jane Lewis
28 May 2024
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 2023.
The principal risks identified in the Annual Report were:
Market and Political Risks
Macroeconomic and geopolitical risk including rising international tensions
arising from the war in Ukraine, events in the Middle East, disputes in the
South China Sea, and UK and US elections.
Investment Performance Risks
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.
Cyber, Legal and Regulatory Risks
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.
Product Strategy Risks
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 disruption due to the war in
Ukraine, events in the Middle East and the after-effects of a high inflation
environment. 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
29 November 2023, 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 our 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 Chair'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
Jane Lewis
Chair
28 May 2024
Condensed Income Statement
Half-year ended 31 March 2024 Half-year ended 31 March 2023 (Unaudited)
(Unaudited)
Note Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
Gains on investments - 36,440 36,440 - 30,778 30,778
Foreign exchange (losses)/gains (1) (39) (40) 1 (59) (58)
Income 4,897 - 4,897 7,317 - 7,317
Management fee (361) (361) (722) (347) (347) (694)
Other expenses (407) - (407) (321) - (321)
Net return before finance costs and
Taxation 4,128 36,040 40,168 6,650 30,372 37,022
Finance costs (398) (398) (796) (259) (259) (518)
Net return before taxation 3,730 35,642 39,372 6,391 30,113 36,504
Taxation (18) - (18) - - -
Net return attributable to
Shareholders 3,712 35,642 39,354 6,391 30,113 36,504
2 Return per share - basic and diluted (pence) 3.59 34.45 38.04 5.96 28.08 34.04
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 2024 Capital account reserve Reserve Reserves reserve Funds
(Unaudited)
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance at 30 September 2023 26,822 141,367 4,146 - 130,082 12,330 314,747
Movements during the half-year
ended 31 March 2024
Dividends paid - - - - - (6,964) (6,964)
Ordinary shares bought back and held in treasury -
- - - (6,954) - (6,954)
Costs relating to broker - (6) - - (5) - (11)
Net return attributable to Shareholders
- - - - 35,642 3,712 39,354
Balance at 31 March 2024 26,822 141,361 4,146 - 158,765 9,078 340,172
Half-year ended 31 March 2023
(Unaudited)
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
Year ended 30 September 2023
(Audited)
Balance at 30 September 2022 26,822 141,380 4,146 2,642 110,200 11,093 296,283
Movements during the year
ended 30 September 2023
Dividends paid - - - - - (12,819) (12,819)
Ordinary shares issued from treasury
- - - 224 - - 224
Ordinary shares bought back and held in treasury
- - - (2,866) (4,380) - (7,246)
Costs relating to broker - (13) - - (5) - (18)
Net return attributable to
Shareholders - - - - 24,267 14,056 38,323
Balance at 30 September 2023 26,822 141,367 4,146 - 130,082 12,330 314,747
Condensed Balance Sheet
31 March 2024 31 March 2023 30 September 2023
(Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s
Fixed assets
Investments 360,881 349,391 336,112
Current assets
Debtors 1,836 3,923 2,833
Cash and cash equivalents 4,268 647 2,378
Total current assets 6,104 4,570 5,211
Current liabilities
Creditors: amounts falling within one year (813) (799) (1,576)
Loan (26,000) (29,000) (25,000)
Total current liabilities (26,813) (29,799) (26,576)
Net current liabilities (20,709) (25,229) (21,365)
Net assets 340,172 324,162 314,747
Capital and reserves
Share capital 26,822 26,822 26,822
Share premium account 141,361 141,355 141,367
Capital redemption reserve 4,146 4,146 4,146
Special reserve - 1,078 -
Capital reserves 158,765 140,313 130,082
Revenue reserve 9,078 10,448 12,330
Total Shareholders' funds 340,172 324,162 314,747
Net Asset Value per ordinary share - pence 333.38 305.29 301.67
Condensed Statement of Cash Flows
Half-year ended Half-year ended
31 March 2024 31 March 2023
(Unaudited) (Unaudited)
£'000s £'000s
Cash flows from operating activities before interest and dividends received
and interest paid
(902) (796)
Dividends received 4,706 4,852
Interest received 91 27
Interest paid (800) (503)
Cash flows from operating activities 3,095 3,580
Investing activities
Purchase of investments (16,457) (15,864)
Sale of investments 28,221 15,708
Cash flows from investing activities 11,764 (156)
Cash flows before financing activities 14,859 3,424
Financing activities
Equity dividends paid (6,964) (7,036)
Net proceeds from issuance of shares held in treasury - 223
Costs associated with share issues (11) (8)
Costs of shares bought back and held in treasury (6,954) (1,804)
Drawdown of bank loan 1,000 5,000
Cash flows from financing activities (12,929) (3,625)
Net movement in cash and cash equivalents 1,930 (201)
Cash and cash equivalents at the beginning of the period 2,378 906
Effect of movement in foreign exchange (40) (58)
Cash and cash equivalents at the end of the period 4,268 647
Represented by:
Cash at bank 98 87
Short term deposits 4,170 560
4,268 647
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
2023.
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 2024 31 March 2023
£'000s £'000s
Revenue return 3,712 6,391
Capital return 35,642 30,113
Total return 39,354 36,504
Number Number
Weighted average ordinary shares in issue 103,462,593 107,233,665
Total return per share - pence 38.04 34.04
3 Dividend
The second interim dividend of 2.85 pence per share in respect of the year
ending 30 September 2024 will be paid on 28 June 2024 to all Shareholders on
the register at close of business on 14 June 2024, with an ex-dividend date of
13 June 2024. The total cost of this dividend, based on 101,385,845 shares in
issue, and entitled to the dividend on 27 May 2024, being the last practicable
date before publication, is £2.9 million.
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 war in Ukraine,
events in the Middle East, disputes in the South China Sea and the
after-effects of a high inflation environment 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 27 May 2024, the last practicable date
before publication of this report, borrowings amounted to £26 million. This
is in comparison to a Net Asset Value of £355.1 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 2024 and 31 March 2023, 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
2023; 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 2023
are an extract from those accounts.
6 Half-Year Report
The Company's Half-Year Report is 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, Cannon Place, 78 Cannon Street, London EC4N 6AG.
By order of the Board
Columbia Threadneedle Investment Business Limited, Secretary
28 May 2024
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
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 (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FZGZKKRRGDZM