CT UK High Inc Tst CT UK High Inc-CHIB CT UK High Inc-CHIU - Half-year Report
30/11/2023 07:00
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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 £15 million
revolving credit facility ("RCF") with The Royal Bank of Scotland
International Limited. This facility provides flexibility for the Board and
Investment Manager to utilise borrowing when investment opportunities arise
or, conversely, reduce borrowing dependent on market conditions and outlook.
Outlook
It's unlikely that at this time last year I would have expected the world's
geopolitical situation to get any worse. In fact, I was hoping for significant
improvement, particularly with regard to Ukraine's war with Russia. How wrong
could I be? Tensions on several fronts have not been as high for several
decades and it's a wonder the investment environment has stayed relatively
benign.
It is clear that the higher interest rate environment in the UK is having an
impact, particularly for those struggling with the cost of living and higher
monthly mortgage repayments. Whilst a good number have been protected by
fixed-rate deals, these will unwind over the coming months and years, so the
full impact of higher rates is likely to not yet have been felt by many. From
an industry perspective, businesses have also been affected by higher costs of
borrowing and sluggish productivity so, among other things, will be looking to
the Government to find a way to encourage greater business investment, well
before the expected date of the next General Election, in line with its pledge
to make "long-term decisions for a brighter future" narrative.
The good news is that there finally seems to be some signs that inflation is
easing with positive surprises in the UK and Europe of late. As a result, it
is increasingly likely that interest rates have peaked (or be very close to
peaking) and commentary from central banks appears to support this. This will,
I believe, be particularly important for the UK partly due to the importance
of housing on consumer sentiment and partly as stubbornly high UK inflation
has been a real negative for investors. UK equities, whether small, medium or
large-cap are very attractively valued on any metric, especially, relative to
overseas developed markets and our portfolio manager believes that there is a
large number of very attractive opportunities in the UK market where it is
possible to buy high quality companies at attractive valuations with high
dividend yields.
Last year I mentioned that, in my opinion, it has been a difficult period for
portfolio managers to generate consistent, positive total returns of both
capital and income. The half-year under review has not made their lives any
easier. However, always the optimist, I consider the opportunities now
available for our portfolio manager to invest in quality stocks with decent
yields - whilst maintaining a differentiated approach - is suggestive of
better times ahead, with commensurate returns to shareholders. David's
investment approach is wholly supported by your Board.
As ever, thank you for being a shareholder in CT UK High Income Trust PLC and
I sincerely hope for a more peaceful and settled world environment when I
write to you again in the Annual Report.
Andrew Watkins
Chairman
29 November 2023
Condensed Unaudited Statement of Comprehensive Income
For the six month period to 30 September 2023
Six months to 30 September 2023
Notes Revenue Capital Total
£'000 £'000 £'000
Losses on investments held at fair value - (3,694) (3,694)
Exchange gains - 15 15
Income 3,141 - 3,141
2
Investment management fee (91) (213) (304)
3
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 (38) - (38)
activities 4
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 2.31p (3.62)p (1.31)p
share
5
The total column of this statement represents the Company's Income Statement
and Statement of Comprehensive Income, prepared in accordance with UK-adopted
International Accounting Standards. The supplementary revenue return and
capital return columns are both prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
All of the profit and comprehensive income for the period is attributable to
the owners of the Company.
Condensed Unaudited Statement of Comprehensive Income
Six months to 30 September 2022 Year to March 2023*
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Losses on investments held at fair value - (14,679) (14,679) - (4,177) (4,177)
Exchange gains/(losses) 2 (2) - 3 (16) (13)
Income 2,680 - 2,680 5,007 - 5,007
2
Investment management fee (91) (211) (302) (183) (427) (610)
3
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 (34) - (34) (47) - (47)
activities 4
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 1.97p (12.91)p (10.94)p 3.62p (4.12)p (0.50)p
share
5
The total column of this statement represents the Company's Income Statement
and Statement of Comprehensive Income, prepared in accordance with UK-adopted
International Accounting Standards. The supplementary revenue return and
capital return columns are both prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
All of the profit and comprehensive income for the period is attributable to
the owners of the Company.
*audited figures
Condensed Unaudited Statement of Financial Position
Notes 30 September 30 September 31 March
2023 2022 2023*
£'000 £'000 £'000
Non-current assets
Investments held at fair value through 112,301 94,620 113,018
profit or
loss
9
112,301 94,620 113,018
Current assets
Receivables 970 3,425 1,394
10
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 (506) (506) (529)
11
Bank (15,000) (7,500) (12,000)
loans
12
Total liabilities (15,506) (8,006) (12,529)
Net assets 98,047 95,129 104,171
Capital and Reserves
Share 134 134 134
capital
13
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 85.98p 82.16p 89.97p
14
Net asset value per B share 85.98p 82.16p 89.97p
14
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 Redemption Reserve Buy Back Reserve Special Capital Reserve
Share Capital Share Premium Capital Reserves Revenue Reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 April 2023 134 153 5 80,315 10,012 9,823 3,729 104,171
(Loss)/profit for the period - - - - - (4,175) 2,667 (1,508)
Shares bought back for treasury - - - (1,293) - - - (1,293)
Dividends paid on Ordinary shares - - - - - - (2,442) (2,442)
Capital returns paid on B shares - - - - (881) - - (881)
Balance as at 30 September 2023 134 153 5 79,022 9,131 5,648 3,954 98,047
for the six months to 30 September 2022
Capital Redemption Reserve Buy Back Reserve Special Capital Reserve
Share Capital Share Premium Capital Reserves Revenue Reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 April 2022 134 153 5 80,394 11,704 14,598 4,227 111,215
(Loss)/profit for the period - - - - - (14,968) 2,286 (12,682)
Shares bought back for treasury - - - (79) - - - (79)
Dividends paid on Ordinary shares - - - - - - (2,444) (2,444)
Capital returns paid on B shares - - - - (881) - - (881)
Balance as at 30 September 2022 134 153 5 80,315 10,823 (370) 4,069 95,129
for the year to 31 March 2023 *
Capital Redemption Reserve Buy Back Reserve Special Capital Reserve
Share Capital Share Premium Capital Reserves Revenue Reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 April 2022 134 153 5 80,394 11,704 14,598 4,227 111,215
(Loss)/profit for the period - - - - - (4,775) 4,192 (583)
Shares bought back for treasury - - - (79) - - - (79)
Dividends paid on Ordinary shares - - - - - - (4,690) (4,690)
Capital returns paid on B shares - - - - (1,692) - - (1,692)
Balance as at 31 March 2023 134 153 5 80,315 10,012 9,823 3,729 104,171
*audited figures
Condensed Unaudited Cash Flow Statement
Six months to Six months to Year to
30 September 2023 30 September 2022 31 March
2023*
£'000 £'000 £'000
Cash flows from operating activities
Loss before tax (1,470) (12,648) (536)
Adjustments for:
Losses on investments held at fair value through profit or loss 3,694 14,679
4,177
Exchange (gains)/losses (15) - 13
Interest income (36) (29) (70)
Interest received 36 29 70
Dividend income (3,105) (2,651) (4,937)
Dividend income received 3,576 3,122 4,698
(Increase)/decrease in receivables (2) 8 (64)
Decrease in payables (22) (38) (15)
Finance costs 406 109 222
Overseas tax suffered (97) (43) (76)
Cash flows from operating activities 2,965 2,538 3,482
Cash flows from investing activities
Purchases of investments (37,247) (22,001) (45,856)
Sales of investments 34,270 23,406 42,153
Cash flows from investing activities (2,977) 1,405 (3,703)
Cash flows from financing activities
Dividends paid on Ordinary shares (2,442) (2,444) (4,690)
Capital returns paid on B shares (881) (881) (1,692)
Interest on bank loans (393) (135) (203)
Shares purchased for treasury (1,293) (79) (79)
Drawdown of bank loans 3,000 - 4,500
Cash flows from financing activities (2,009) (3,539) (2,164)
Net (decrease)/increase in cash and cash (2,021) 404 (2,385)
equivalents
Effect of movement in foreign exchange 15 - (13)
Opening net cash and cash equivalents 2,288 4,686 4,686
Closing cash and cash equivalents 282 5,090 2,288
*audited figures
Notes to the Condensed Financial Statements (unaudited)
1. Accounting Policies
The condensed unaudited financial statements have been prepared on a going
concern basis and in accordance with UK-adopted International Accounting
Standard 34 "Interim Financial Reporting" and the accounting policies set out
in the statutory financial statements of the Company for the year ended 31
March 2023. The condensed financial statements do not include all of the
information required for full annual financial statements and should be read
in conjunction with the financial statements of the Company for the year ended
31 March 2023, which were prepared under UK-adopted International Accounting
Standards.
2. Income
30 September 2023 30 September 2022 31
March 2023
£'000 £'000 £'000
UK dividend income 2,575 1,830 3,884
UK dividend income - special dividends - - 99
Overseas dividend income 464 776 880
Overseas dividend income - special dividends 25 - -
Property income distributions 41 45 74
3,105 2,651 4,937
Other income
Interest on cash and cash equivalents 36 29 70
3,141 2,680 5,007
3. The Company's investment manager Columbia Threadneedle Investment
Business Limited receives an investment management fee of 0.60 per cent per
annum of the net asset value of the Company payable quarterly in arrears.
4. The taxation charge for the period represents withholding tax
suffered on overseas dividend income.
5. The earnings per share are based on the net profit/(loss) for the
period and on 115,437,141 shares (period to 30 September 2022 - 115,873,753;
year to 31 March 2023 - 115,827,704), being the weighted average number of
shares in issue during the period.
6. Earnings for the six months to 30 September 2023 should not be taken
as a guide to the results of the full year.
7. The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Company is engaged in a single
segment of business, of investing in equity, and that therefore the Company
has only a single operating segment. The Board of Directors, as a whole, has
been identified as constituting the chief operating decision maker of the
Company. The key measure of performance used by the Board to assess the
Company's performance is the total return on the Company's net asset value as
calculated under UK-adopted International Accounting Standards and therefore
no reconciliation is required between the measure of profit or loss used by
the Board and that contained in the condensed financial statements.
8. Dividends and capital repayments
Six months to Six months to Year
Payment 30 Sept 2023 30 Sept 2022 to
Date 31 March 2023
Dividends
£'000 £'000 £'000
In respect of the previous period:
Fourth interim dividend at 1.55p (2022: 1.55p) per Ordinary share
5 May 2023 1,319 1,320 1,320
In respect of the period under review:
First interim dividend at 1.32p (2023: 1.32p) per Ordinary share
4 Aug 2023 1,123 1,124 1,124
Second interim dividend (2023: 1.32p) per Ordinary share
- - 1,123
Third interim dividend (2023: 1.32p) per Ordinary share
- - 1,123
2,442 2,444 4,690
A second interim dividend for the year to 31 March 2024, of 1.32p per Ordinary
share, was paid on 3 November 2023 to Ordinary shareholders on the register on
6 October 2023.
Six months to Six months to Year
Payment 30 Sept 2023 30 Sept 2022 to
Date 31 March 2023
Capital repayments
£'000 £'000 £'000
In respect of the previous period:
Fourth capital repayment at 1.55p (2022: 1.55p) per B share
5 May 2023 476 476 476
In respect of the period under review:
First capital repayment at 1.32p (2023: 1.32p) per B share
4 Aug 2023 405 405 405
Second capital repayment (2023: 1.32p) per B share
- - 406
Third capital repayment (2023: 1.32p) per B share
- - 405
881 881 1,692
A second capital repayment for the year to 31 March 2024, of 1.32p per B
share, was paid on 3 November 2023 to B shareholders on the register on 6
October 2023.
Although the above referenced payments on 3 November 2023 relate to the period
ended 30 September 2023, under UK-adopted International Accounting Standards
they will be accounted for in the six months to 31 March 2024, being the
period during which they are paid.
9. Investments held at fair value through profit or loss
Listed/ Subsidiary/
Quoted Unlisted
(Level 1) (Level 3) Total
£'000 £'000 £'000
Cost brought forward 110,910 250 111,160
Gains brought forward 1,858 - 1,858
Fair value of investments at 31 March 2023 112,768 250 113,018
Movement in the period:
Purchases at cost 37,247 - 37,247
Sales proceeds (34,270) - (34,270)
Losses on investments sold in the period (4,322) - (4,322)
Gains on investments held at 30 September 2023 628 - 628
Fair value of investments at 30 September 2023 112,051 250 112,301
Cost at 30 September 2023 109,565 250 109,815
Gains at 30 September 2023 2,486 - 2,486
Fair value of investments at 30 September 2023 112,051 250 112,301
Accounting standards recognise a hierarchy of fair value measurements for
financial instruments which gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). The classification of
financial instruments depends on the lowest significant applicable input, as
follows:
· Level 1 - quoted (unadjusted) prices in active markets for identical
assets or liabilities.
· Level 2 - other techniques for which all inputs that have a
significant effect on the recorded fair value are observable, either directly
or indirectly. The Company held no such instruments during the period under
review.
· Level 3 - techniques that use inputs that have a significant effect
on the recorded fair value that are not based on observable market data. The
Company's investment in its subsidiary undertaking, Investors Securities
Company Limited, is included in Level 3 and is valued at its net asset value.
There were no transfers between levels of the fair value hierarchy during the
six months ended 30 September 2023.
10. Receivables
30 Sept 30 Sept 31 March
2023 2022 2023
£'000 £'000 £'000
Income receivable from shares and securities 704 436 1,175
Due from brokers in settlement of sale of investments - 2,788 -
Withholding tax recoverable 199 150 140
Sundry debtors and prepayments 67 51 79
970 3,425 1,394
11. Payables
30 Sept 30 Sept 31 March
2023 2022 2023
£'000 £'000 £'000
Loan from subsidiary undertaking repayable on 250 250 250
demand
Investment management fee payable to the 148 144 154
investment manager
Loan Interest 2 3 3
Accrued expenses 106 109 122
506 506 529
12. Bank Loans
The Company has an unsecured revolving credit facility ("RCF") with The Royal
Bank of Scotland International Limited for £15 million which is available
until 28 September 2025. At 30 September 2023, £15 million was drawn down (30
September 2022: £7.5 million; 31 March 2023: £12 million).
The loan agreement contains certain financial covenants with which the Company
must comply. These include a financial covenant with respect to the ratio of
the Adjusted Portfolio Value (as defined in the loan agreement) to the level
of debt and also that the Adjusted Portfolio Value does not fall below £50
million. The Company complied with the required financial covenants throughout
the period since drawdown.
Until 28 September 2022, the Company had a £7.5 million unsecured term loan
from Scotiabank Europe plc at a fixed interest rate of 2.58% per annum. It
also had a £7.5 million unsecured multicurrency revolving credit facility
('RCF') with Scotiabank (Ireland) Designated Activity Company. On 28 September
2022 both loan facilities matured and the £7.5 million unsecured term loan
was repaid to Scotiabank Europe plc. At that time, £nil was drawn down under
the RCF.
13. Share Capital
Allotted, issued and fully paid
Listed Held in Treasury In Issue
Number £ Number £ Number £
Ordinary Shares of 0.1p each
Balance at 1 April 2023 102,067,144 102,067 (16,994,491) (16,994) 85,072,653 85,073
Repurchased to be held in treasury - - (1,750,000) (1,750) (1,750,000) (1,750)
Balance at 30 September 2023 102,067,144 102,067 (18,744,491) (18,744) 83,322,653 83,323
B Shares of 0.1p each
Balance at 1 April 2023 32,076,703 32,077 (1,367,953) (1,368) 30,708,750 30,709
Balance at 30 September 2023 32,076,703 32,077 (1,367,953) (1,368) 30,708,750 30,709
Total at 30 September 2023 134,143,847 134,144 (20,112,444) (20,112) 114,031,403 114,032
During the period the Company bought back 1,750,000 Ordinary shares at a cost
of £1,293,000 and bought back nil B shares to hold in treasury (period to 30
September 2022 - 100,000 Ordinary shares and nil B shares; year to 31 March
2023 - 100,000 Ordinary shares and nil B shares).
At 30 September 2023 the Company held 18,744,491 Ordinary shares and 1,367,953
B shares in treasury (30 September 2022 - 16,994,491 Ordinary shares and
1,367,953 B shares; 31 March 2023 - 16,994,491 Ordinary shares and 1,367,953 B
shares).
14. The net asset value per share is based on shareholders' funds
at the period end and on 83,322,653 Ordinary shares and 30,708,750 B shares,
being the number of shares in issue at the period end (30 September 2022 -
85,072,653 Ordinary shares and 30,708,750 B shares; 31 March 2023 - 85,072,653
Ordinary shares and 30,708,750 B shares).
15. The fair values of the Company's financial assets and
liabilities are not materially different from their carrying values in the
financial statements.
The Company's financial risk management objectives and policies are consistent
with those disclosed in the Company's financial statements for the year ended
31 March 2023.
16. Changes in liabilities arising from financing activities
Six months to Six months to 30 September Year to
30 September 2022 31 March
2023 2023
£'000 £'000 £'000
Opening net debt at beginning of 12,000 7,500 7,500
period/year
Cash flows:
Drawdown of revolving credit facility 3,000 7,500 12,000
Repayment of term loan - (7,500) (7,500)
Closing net debt at end of period/year 15,000 7,500 12,000
17. Going concern
In assessing the going concern basis of accounting, the Directors have had
regard to the guidance issued by the Financial Reporting Council and have
undertaken a rigorous review of the Company's ability to continue as a going
concern. The Board has, in particular, considered the impact of increased
market volatility, more recently due to macroeconomic and geopolitical
concerns.
The Company's investment objective and policy, which is
subject to regular Board monitoring processes, is designed to ensure that the
Company is invested mainly in liquid, listed securities. The value of these
investments exceeds the Company's liabilities by a significant margin. The
Company retains title to all assets held by its custodian, and has an
agreement relating to its borrowing facility with which it has complied. Cash
is held only with banks approved and regularly reviewed by the Investment
Manager.
As part of the going concern review, the Directors
noted that a borrowing facility of a £15 million revolving credit facility is
committed to the Company until 28 September 2025 and loan covenants are
reviewed by the Board on a regular basis.
The Directors believe, having assessed the principal
risks and other matters, in light of the controls and review processes noted
and bearing in mind the nature of the Company's business and assets and
revenue and expenditure projections, that the Company has adequate resources
to continue in operational existence for a period of at least twelve months
from the date of approval of the financial statements. Accordingly, they
continue to adopt the going concern basis in preparing the financial
statements.
The Company does not have a fixed life. However, in the
event that the net asset value total return performance of the Company is less
than that of the FTSE All-Share Index over the relevant three year period, in
accordance with the Company's articles of association, shareholders will be
given the opportunity to vote on whether the Company should continue in
existence, by ordinary resolution at the Company's Annual General Meeting. The
current three year period for this purpose will run from 1 April 2022 to 31
March 2025.
18. Related party transactions
The Directors of the Company are considered a related party. The Directors
receive aggregated remuneration for services as Directors and for which there
were no outstanding balances at the period end. There have been no
transactions with related parties during the first six months of the current
financial year that have materially affected the financial position or
performance of the Company during the period and there have been no changes in
the related party transactions described in the last Annual Report that could
do so.
19. The Company's auditor, Deloitte LLP, has not audited or
reviewed the Half-Year Report to 30 September 2023 pursuant to the Auditing
Practices Board guidance on 'Review of Interim Financial Information'. These
are not full statutory financial statements in terms of Section 434 of the
Companies Act 2006 and are unaudited. Statutory financial statements for the
year ended 31 March 2023, which received an unqualified audit report and which
did not contain a statement under Section 498 of the Companies Act 2006, have
been lodged with the Registrar of Companies. The condensed financial
statements shown for the year ended 31 March 2023 are an extract from those
financial statements. No full statutory financial statements in respect of any
period after 31 March 2023 have been reported on by the Company's auditor or
delivered to the Registrar of Companies.
The Half-Year Report to 30 September 2023 is available on the website
maintained on behalf of the Company at ctukhighincome.co.uk
Statement of Principal Risks and Uncertainties
As an investment company, investing primarily in listed securities, most of
the Company's principal risks and uncertainties that could threaten the
achievement of its objective, strategy, future performance, liquidity and
solvency are market related.
These risks, and the way in which they are managed, are described under the
heading 'Principal Risks and Uncertainties and Viability Statement' within the
Strategic Report in the Company's Annual Report for the year ended 31 March
2023.
The principal risks identified in the Annual Report were:
• Financial Risk. The Company's assets consist mainly of listed equity
securities and its principal financial risks are therefore market related and
include market risk (comprising currency risk, interest rate risk and other
price risk), liquidity risk and credit risk
• Investment and strategic risk
• Regulatory risk
• Operational risk
• Custody risk
These include risks in relation to failures at service providers or loss or
sabotage of data through cyber threats or business continuity failure.
The Board continues to review the key risk summary for the Company which
identifies the risks that the Company is exposed to, the controls in place and
the actions being taken to mitigate them. The Board has also considered the
outlook for inflation and ongoing macroeconomic and geopolitical concerns
which have impacted the value of investments. In addition, the operational
resilience of the Investment Manager and the Company's other third party
service providers has been considered. This is included within financial risk
and operational risk. The integration of the Investment Manager's business and
systems with Columbia Threadneedle Investments also continues to be monitored
closely.
The Board considers that the Company's principal risks and uncertainties have
not changed materially since 31 May 2023, the date that the Company's Annual
Report was approved, and are not expected to change materially for the
remainder of the Company's financial year. The Board has also considered these
principal risks in relation to going concern, as set out in note 17.
Statement of Directors' Responsibilities in Respect of the Half-Year Report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with UK-adopted International Accounting Standard 34 "Interim
Financial Reporting" and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
· the Chairman's Statement and the Statement of Principal Risks and
Uncertainties (together constituting the Interim Management Report) include a
fair review of the information required by the Disclosure Guidance and
Transparency Rule ('DTR') 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year and their
impact on the condensed set of financial statements;
· the Statement of Principal Risks and Uncertainties is a fair review
of the principal risks and uncertainties for the remainder of the financial
year; and
· the Half-Year Report includes a fair review of the information
required by DTR 4.2.8R, being related party transactions that have taken place
in the first six months of the current financial year and that have materially
affected the financial position or performance of the Company during that
period, and any changes in the related party transactions described in the
last Annual Report that could do so.
On behalf of the Board
Andrew Watkins
Chairman
29 November 2023
Alternative Performance Measures ("APMs")
The Company uses the following APMs:
Discount/premium - the share price of an investment company is derived from
buyers and sellers trading their shares on the stock market. This price is not
identical to the net asset value (NAV) per share of the underlying assets less
liabilities of the Company. If the share price is lower than the NAV per
share, the shares are trading at a discount. This usually indicates that there
are more sellers of shares than buyers. Shares trading at a price above NAV
per share are deemed to be at a premium usually indicating there are more
buyers of shares than sellers.
30 September 2023 31 March 2023
Ordinary Shares B Shares Units Ordinary Shares B Shares Units
Net asset value per share (a) 85.98p 85.98p 343.92p 89.97p 89.97p 359.88p
Share price (b) 80.50p 80.50p 317.00p 82.00p 84.50p 323.00p
Discount (c=(b-a)/(a)) (c) -6.4% -6.4% -7.8% -8.9% -6.1% -10.2%
Gearing - represents the excess amount above shareholders' funds of total
investments, expressed as a percentage of the shareholders' funds. If the
amount calculated is negative, this is a 'net cash' position and no gearing.
30 September 2023 31 March 2023
£'000 £'000
Investments held at fair value through profit or loss (a) 112,301 113,018
Net assets (b) 98,047 104,171
(Net cash)/gearing (c=(a/b)-1)% (c) 14.5% 8.5%
Total Return - the theoretical return to shareholders calculated on a per
share basis by adding dividends/capital repayments paid in the period to the
increase or decrease in the share price or NAV in the period. The
dividends/capital repayments are assumed to have been re-invested in the form
of shares or net assets, respectively, on the date on which the shares were
quoted ex-dividend.
The effect of reinvesting these dividends/capital repayments on the respective
ex-dividend dates and the NAV total returns and Share price total returns are
shown below.
30 September 2023 31 March 2023
Ordinary shares/B shares Ordinary shares/B shares
Units Units
NAV per share at start of period/year 89.97p 359.88p 95.97p 383.88p
NAV per share at end of period/year 85.98p 343.92p 89.97p 359.88p
Change in the period/year -4.4% -4.4% -6.3% -6.3%
Impact of dividend/capital repayment reinvestment(†) +3.0% +3.0% +5.9% +5.9%
NAV total return -1.4% -1.4% -0.4% -0.4%
(†) During the six months to 30 September 2023 dividends/capital repayments
totalling 2.87p (Ordinary shares/B shares) and 11.48p (units) went
ex-dividend. During the year to 31 March 2023 the equivalent figures were
5.51p (Ordinary shares/B shares) and 22.04p (units).
30 September 2023 31 March 2023
Ordinary Shares B Shares Units Ordinary Shares B Shares Units
Share price per share at start of period/year 82.0p 84.5p 323.0p 87.0p 88.0p 336.0p
Share price per share at end of period/year 80.5p 80.5p 317.0p 82.0p 84.5p 323.0p
Change in the period/year -1.8% -4.7% -1.9% -5.7% -4.0% -3.9%
Impact of dividend/capital repayment reinvestment(†) +3.6% +3.2% +3.6% +6.3% +6.3% +5.8%
Share price total return for the period/year +1.8% -1.5% +1.7% +0.6% +2.3% +1.9%
(†) During the six months to 30 September 2023 dividends/capital repayments
totalling 2.87p (Ordinary shares/B shares) and 11.48p (units) went
ex-dividend. During the year to 31 March 2023 the equivalent figures were
5.51p (Ordinary shares/B shares) and 22.04p (units).
Yield - The total annual dividend/capital repayment expressed as a percentage
of the period end share price.
30 September 2023* 31 March 2023
Ordinary Shares B Shares Units Ordinary Shares B Shares Units
Annual dividend/capital repayment 5.51p 5.51p 22.04p 5.51p 5.51p 22.04p
(a)
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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