CT UK High Inc Tst CT UK High Inc-CHIB CT UK High Inc-CHIU - Half-year Report
05/12/2022 07:00
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RNS Number : 4951I CT UK High Income Trust PLC 05 December 2022
To: RNS
From: CT UK High Income Trust PLC
Date: 5 December 2022
LEI: 213800B7D5D7RVZZPV45
Unaudited Interim Results
The Board of CT UK High Income Trust PLC announces the unaudited interim
results of the Company for the six month period to 30 September 2022.
Highlights
· Net asset value total return((1)) per share for the six months was
-11.8%, compared to the Benchmark((2)) total return of -8.3%.
· Ordinary share price total return for the six months was -9.1%
compared to the Benchmark total return of -8.3%.
· B share price total return for the six months was -5.0% compared to
the Benchmark total return of -8.3%.
· Distribution yield((1)) of 7.1% on Ordinary shares and 6.7% on B
shares at 30 September 2022, compared to the yield on the FTSE All-Share Index
of 3.8%.
Notes:
1. Total return and yield - see Alternative Performance Measures.
2. Benchmark - From launch on 1 March 2007, the Company's benchmark index
was the FTSE All-Share Capped 5% Index. Following shareholder approval at the
Company's AGM on 5 July 2018, the benchmark was changed to the FTSE All-Share
Index.
Chairman's Statement
Investment performance
For the six months to 30 September 2022 the net asset value ("NAV") total
return for both the Ordinary shares and B shares was -11.8%, while the
equivalent total return for the FTSE All-Share Index (the benchmark) was
-8.3%.
The market backdrop has been very challenging given the war in Ukraine and the
knock-on impact of rising energy prices driving higher inflation. The Bank of
England had been slow to react to the much-heralded rise in inflation earlier
in the year but is now responding with unprecedented rate rises as it seeks to
slow inflation and begin the downward trend towards the guided 2% range.
Markets seemed to have calmed since Rishi Sunak took office and the effect of
the Autumn Statement has been to restore stability and confidence in the UK
market.
Philip Webster, our Portfolio Manager (the "Manager"), is using this
opportunity, one he believes is the first since he assumed management of the
investment portfolio in 2017, to buy into quality business models at
significantly more attractive valuations. He feels we have entered a new phase
for markets, especially in the UK mid-cap space, where there is quality on
offer at depressed multiples. While the NAV total return for the Company's
shares has underperformed the benchmark in the six months to 30 September
2022, we are encouraged by our discussions with the Manager and his conviction
that the investment portfolio is in a better position today than at any time
under his tenure.
The Manager has compelling sector-specific views which, in this current
environment, have created a headwind to performance. The strong performance of
some of the market behemoths, such as BP, Shell and AstraZeneca (to which the
investment portfolio has no exposure) have been a sustained challenge to
relative performance over most of the last twelve months. While there are many
commentators that believe the oil price will remain high and that these are
quality business models, he begs to differ. In the Manager's view, when the
market rotates towards a "risk-on" mindset, these defensive assets will
underperform. Approximately a third of the Company's investment portfolio is
in UK mid-cap companies, where the Manager feels better able to find higher
quality names at depressed valuations. The higher domestic concentration of
earnings has seen the FTSE 250 index fall 17% on a total return basis over the
interim period, nearly twice the fall of the wider FTSE All-Share Index. This
performance differential has provided the opportunity to initiate new
positions in Hargreaves Lansdown, Rotork and following the period end, One
Savings Bank. These are the sort of businesses that the Manager has been
patiently following until valuations better reflected their earnings.
The Manager has also been active with some of the Company's smaller investment
holdings. Positions in Prudential, Jupiter, Haleon and Just Eat Takeaway.com
have been exited - moves triggered by a pragmatic approach to capital
allocation that balances growth potential with our aim of returning to a
covered dividend. Aside from Jupiter, these investments all had a sub-market
yield. He has also reduced some of the top performers; Compass Group, Beazley
and Deutsche Boerse, where yields have contracted. Positions in the higher
yielding Intermediate Capital, Rio Tinto, Phoenix Group and Berkeley Group
have been increased on weakness. There is a balancing act to be struck here
and given the Manager's comfort in valuations and the quality available, he
has begun the process of adding gearing back into the portfolio.
Share price performance
Over the period there was a welcome narrowing of the discount to NAV at which
the Company's shares traded. For the Ordinary shares, the discount closed from
-9.3% at 31 March 2022 to -6.9% at 30 September 2022. Consequently, the share
price total return for the Ordinary shares for the period was -9.1%. The B
shares were trading at a discount to NAV of -8.3% at 31 March 2022 but this
closed to a discount to NAV of -1.4% at the period end, thus generating a
share price total return for the B shares of -5.0% for the period under
review.
Over several years your Board and Investment Manager have been working 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
Columbia Threadneedle Savings plans or direct purchases by investors via the
well-known trading platforms.
During the period, 100,000 Ordinary shares were bought back for treasury at an
average discount of -10.3% to the prevailing NAV. No B shares were bought back
in the period under review.
Earnings, dividends and capital repayments
In the period under review your Company's revenue earnings per share has
fallen by 10.9% from 2.21p per share to 1.97p per share in comparison to the
six months to 30 September 2021.
The decline in the revenue earnings has been driven by two factors. The first,
and most significant, is a reduction in the level of the Company's gearing.
The second impact was the one-off benefit we received from two large special
dividends from Rio Tinto and Berkeley Group in September 2021, which we are
not forecasting for this year.
At the interim results stage in 2021 we had drawn down most of our available
borrowing facilities as we sought to benefit from the post-pandemic recovery
in equities. While this was the correct strategy at that time, the backdrop
shifted dramatically towards the end of 2021 as we entered the beginning of an
interest rate tightening cycle, exacerbated by surging inflation. The Board
and Manager, therefore, felt it was prudent to unwind the gearing, reducing it
to around 1-2%. Strategically, we believe we made the right decision to be
more cautious as markets sold off but were aware that we had to reduce revenue
to protect capital.
We still have work to do in making up the shortfall in revenue but feel more
confident allocating capital post the pullback. Valuations in the UK domestic
mid-cap space look very compelling, even if the outlook is somewhat uncertain
as we enter 2023. We will continue to add gearing, seeking to be opportunistic
around stock-specific weakness. The Manager has also sought to mitigate the
worst of the earnings risk through buying quality business models with high
levels of dividend cover and robust balance sheets.
Your Board was again pleased to increase dividends and capital repayments to
shareholders in the year to 31 March 2022, made possible by the use of revenue
reserves that your Company has consistently 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. The past three years have shown how
effectively this structure can work. However, I wish to emphasise to
shareholders that it is a key objective of the Board and Manager to rebuild
revenue reserves and return to a covered dividend as soon as practicable.
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 2023 will be at least 5.45p 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 2022 the distribution yields on the Ordinary shares (7.1%) and
B shares (6.7%) were both significantly greater than the benchmark index yield
(3.8%).
Borrowing
At the end of September, the Company refinanced its borrowings and entered
into a three-year unsecured revolving credit facility ("RCF") with The Royal
Bank of Scotland International Limited for £15 million. This replaced the
Company's £7.5 million RCF with Scotiabank (Ireland) Designated Activity
Company and its £7.5 million unsecured term loan with Scotiabank Europe plc,
both of which matured on 28 September 2022.
It is believed that the RCF will provide suitable flexibility for the Board
and Manager to utilise borrowing when investment opportunities arise or,
conversely, reduce borrowing dependent on market conditions and outlook. At
the time of writing, borrowings total 3.7% of total assets.
Board changes
Following the Annual General Meeting on 20 July 2022, the Chairman, John
Evans, retired from the Board. John was a non-executive director of your
Company for nine years, of which three were as Chairman, during which time he
acted in the best interests of shareholders and with the utmost integrity at
all times. I would like to offer John my personal thanks for his exceptional
contribution and commitment to the Company throughout this time. From the same
date, I became Chairman of the Company.
Following the period end, we were delighted to welcome a new non-executive
Director to the Board. Angus Pottinger was appointed with effect from 24
November 2022. Angus has worked in financial services for over 35 years,
including most recently 22 years in Invesco's investment trust team, where he
was Head of Investment Company Services, specifically in charge of accounting,
company secretarial and administration functions. He has a wealth of relevant
experience that will complement the Board's current skill set.
Investment Manager and Name Change
As previously reported, on 8 November 2021, Columbia Threadneedle Investments,
part of Ameriprise Financial acquired BMO's EMEA asset management business
('BMO GAM (EMEA)'), which included your Company's Investment Manager ('BMO
Investment Business Limited').
As explained in our Annual Report, preparation was underway for the BMO GAM
(EMEA) business to be rebranded as Columbia Threadneedle Investments and this
was completed towards the start of July 2022. As part of this process, the
Company's Investment Manager was renamed Columbia Threadneedle Investment
Business Limited.
As many of the Company's shareholders invest through the Investment Manager's
savings plans and as its brand was changing to Columbia Threadneedle
Investments, the Board resolved that continuing to align with the brand of the
Investment Manager and the savings plans would avoid unnecessary confusion and
ensure the Company maximised the benefits of the broader Columbia Threadneedle
Investments brand and marketing.
On 29 June 2022 the Company therefore announced that it had changed its name
to CT UK High Income Trust PLC with immediate effect. The Company's website
address was also amended to ctukhighincome.co.uk and its trading instrument
display mnemonics ("TIDM") changed to CHI, CHIB and CHIU for the Company's
Ordinary shares, B shares and Units respectively.
There has been no change to the personnel running the activities of your
Company in terms of both portfolio management and administration.
Outlook
There is no doubt that we are facing a combination of economic and political
challenges which makes any forward-looking statements precarious. It is
probably fair to say that, at the very least, the medium-term outlook is
wholly dependent on an early resolution to the war in Ukraine.
The consumer is being squeezed from all angles due to global inflation, supply
line shortages and rising prices and there is no simple answer. The Government
support packages will help on energy prices, but with the Bank of England
anxious to make up lost ground in the fight against inflation, interest rates
are likely to continue to rise into 2023. This picture makes it very hard to
gauge whether we get a soft or hard landing, and whether company earnings'
expectations for 2023 have bottomed, or whether we have more downgrades to
come.
Being a Manager responsible for investors' money is not for the faint hearted.
The last three years have been difficult to navigate but your Board and
Manager remain confident that the investment portfolio is in a very strong
position once the outlook improves, given the quality companies it holds. As
already mentioned, the Manager believes this isn't the right time to be
seeking out defensive mega-caps and the Board wholly supports his desire to
manage a diversified portfolio which offers differentiation from the benchmark
index.
As ever, thank you for being a shareholder in CT UK High Income Trust PLC.
Phillip Webster remains dedicated to the task of delivering positive returns
of capital and income for all shareholders and, with the yield on the Ordinary
shares and B shares currently at 6.6% and 6.5% respectively, the Company
offers the prospects of an attractive total return over the medium term.
Andrew Watkins
Chairman
2 December 2022
Condensed Unaudited Statement of Comprehensive Income
For the six month period to 30 September 2022
Six months to 30 September 2022
Notes Revenue Capital Total
£'000 £'000 £'000
Losses on investments held at fair value - (14,679) (14,679)
Exchange gains/(losses) 2 (2) -
Income 2,680 - 2,680
2
Investment management fee (91) (211) (302)
3
Other expenses (238) - (238)
Profit/(loss) before finance costs and taxation 2,353 (14,892) (12,539)
Net finance costs
Interest on bank loans (33) (76) (109)
Total finance costs (33) (76) (109)
Profit/(loss) before tax 2,320 (14,968) (12,648)
Tax on ordinary (34) - (34)
activities 4
Profit/(loss) for the period 2,286 (14,968) (12,682)
Total comprehensive income for the period 2,286 (14,968) (12,682)
Earnings per 1.97p (12.91)p (10.94)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 2021 Year to March 2022*
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value - 2,850 2,850 - (1,087) (1,087)
Exchange gains - 1 1 - 5 5
Income 2,993 - 2,993 5,013 - 5,013
2
Investment management fee (117) (272) (389) (227) (529) (756)
3
Other expenses (247) - (247) (506) - (506)
Profit/ (loss) before finance costs and taxation 2,629 2,579 5,208 4,280 (1,611) 2,669
Net finance costs
Interest on bank loans (41) (95) (136) (78) (183) (261)
Total finance costs (41) (95) (136) (78) (183) (261)
Profit/ (loss) before tax 2,588 2,484 5,072 4,202 (1,794) 2,408
Tax on ordinary (23) - (23) (24) - (24)
activities 4
Profit/ (loss) for the period 2,565 2,484 5,049 4,178 (1,794) 2,384
Total comprehensive income for the period 2,565 2,484 5,049 4,178 (1,794) 2,384
Earnings per 2.21p 2.15p 4.36p 3.61p (1.55)p 2.06p
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.
*these figures are audited.
Condensed Unaudited Statement of Financial Position
Notes 30 Sept 30 Sept 31 March
2022 2021 2022*
£'000 £'000 £'000
Non-current assets
Investments held at fair value through 94,620 127,861 111,362
profit or
loss
9
94,620 127,861 111,362
Current assets
Receivables 3,425 562 3,210
Cash and cash equivalents 5,090 1,999 4,686
8,515 2,561 7,896
Total assets 103,135 130,422 119,258
Current liabilities
Payables (506) (518) (543)
Bank (7,500) (13,000) (7,500)
loans
10
Total liabilities (8,006) (13,518) (8,043)
Net assets 95,129 116,904 111,215
Capital and Reserves
Share 134 134 134
capital
11
Share premium 153 153 153
Capital redemption reserve 5 5 5
Buy back reserve 80,315 80,394 80,394
Special capital reserve 10,823 12,505 11,704
Capital reserves (370) 18,876 14,598
Revenue reserve 4,069 4,837 4,227
Equity shareholders' funds 95,129 116,904 111,215
Net asset value per Ordinary share 82.16p 100.88p 95.97p
12
Net asset value per B 82.16p 100.88p 95.97p
share 12
Approved by the Board, and authorised for issue, on 2 December 2022 and signed
on its behalf by:
Andrew Watkins, Chairman
*these figures are audited.
Condensed Unaudited Statement of Changes in Equity
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 six months to 30 September 2021
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 2021 134 153 5 80,394 13,340 16,392 4,589 115,007
Profit for the period - - - - - 2,484 2,565 5,049
Dividends paid on Ordinary shares - - - - - - (2,317) (2,317)
Capital returns paid on B shares - - - - (835) - - (835)
Balance as at 30 September 2021 134 153 5 80,394 12,505 18,876 4,837 116,904
for the year to 31 March 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 2021 134 153 5 80,394 13,340 16,392 4,589 115,007
(Loss)/profit for the year - - - - - (1,794) 4,178 2,384
Dividends paid on Ordinary shares - - - - - - (4,540) (4,540)
Capital returns paid on B shares - - - - (1,636) - - (1,636)
Balance as at 31 March 2022 134 153 5 80,394 11,704 14,598 4,227 111,215
*These figures are audited
Condensed Unaudited Cash Flow Statement
Six months to Six months to Year to
30 Sept 2022 30 Sept 2021 31 March 2022*
£'000 £'000 £'000
Cash flows from operating activities
(Loss)/profit before tax (12,648) 5,072 2,408
Adjustments for:
Losses/ (gains) on investments held at fair value through profit or loss 14,679 (2,850)
1,087
Exchange gains - (1) (5)
Interest income (29) - (5)
Interest received 29 - 5
Dividend income (2,651) (2,993) (5,008)
Dividend income received 3,122 3,444 4,935
Decrease/(increase) in receivables 8 2 (5)
(Decrease)/ increase in payables (38) (23) 2
Finance costs 109 136 261
Overseas tax suffered (43) (52) (49)
Cash flows from operating activities 2,538 2,735 3,626
Cash flows from investing activities
Purchases of investments (22,001) (5,675) (10,594)
Sales of investments 23,406 3,913 19,264
Cash flows from investing activities 1,405 (1,762) 8,670
Cash flows from financing activities
Dividends paid on Ordinary shares (2,444) (2,317) (4,540)
Capital returns paid on B shares (881) (835) (1,636)
Interest on bank loans (135) (133) -
Shares purchased for treasury (79) - (249)
(Repayment)/drawdown of Scotiabank loan (7,500) 2,000 (3,500)
Drawdown of RBS loan 7,500 - -
Cash flows from financing activities (3,539) (1,285) (9,925)
Net increase/(decrease) in cash and cash 404 (312) 2,371
equivalents
Effect of movement in foreign exchange - 1 5
Opening net cash and cash equivalents 4,686 2,310 2,310
Closing cash and cash equivalents 5,090 1,999 4,686
*These figures are audited
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 2022. 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 2022, which were prepared under UK-adopted International Accounting
Standards.
2. Income
30 Sept 2022 30 Sept 2021 31 March 2022
£'000 £'000 £'000
UK dividend income 1,830 2,147 3,920
UK dividend income - special dividends - 601 656
Overseas dividend income 776 179 305
Property income distributions 45 66 127
2,651 2,993 5,008
Other income
Interest on cash and cash equivalents 29 - 5
2,680 2,993 5,013
3. With effect from 1 April 2022, the Company's investment manager Columbia
Threadneedle Investment Business Limited (formerly BMO 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. Prior to 1
April 2022, the investment management fee was 0.65 per cent per annum of the
Company's net asset value.
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 115,873,753 shares (period to 30 September 2021 - 115,881,403; year to
31 March 2022 - 115,881,403), being the weighted average number of shares in
issue during the period.
6. Earnings for the six months to 30 September 2022 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 securities, 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 2022 30 Sept 2021 to
Date 31 March 2022
£'000 £'000 £'000
In respect of the previous period:
Fourth interim dividend at 1.55p (2021: 1.43p) per Ordinary share
6 May 22 1,320 1,218 1,218
Fourth capital repayment at 1.55p (2021: 1.43p) per B share
6 May 22 476 439 439
In respect of the period under review:
First interim dividend at 1.32p (2022: 1.29p) per Ordinary share
5 Aug 22 1,124 1,099 1,099
First capital repayment at 1.32p (2022: 1.29p) per B share
5 Aug 22 405 396 396
Second interim dividend (2022: 1.29p) per Ordinary share
- - 1,099
Second capital repayment (2022: 1.29p) per B share
- - 396
Third interim dividend (2022: 1.32p) per Ordinary share
- - 1,124
Third capital repayment (2022: 1.32p) per
B share - - 405
3,325 3,152 6,176
A second interim dividend for the year to 31 March 2023, of 1.32p per Ordinary
share, was paid on 4 November 2022 to Ordinary shareholders on the register on
7 October 2022.
A second quarter capital repayment of 1.32p per B share was paid on 4 November
2022 to B shareholders on the register on 7 October 2022.
Although these payments relate to the period ended 30 September 2022, under
UK-adopted International Accounting Standards they will be accounted for in
the six months to 31 March 2023, 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 104,515 250 104,765
Gains brought forward 6,597 - 6,597
Fair value of investments at 31 March 2022 111,112 250 111,362
Movement in the period:
Purchases at cost 22,001 - 22,001
Sales proceeds (24,064) - (24,064)
Gains on investments sold in the period 1,375 - 1,375
Losses on investments held at 30 September 2022 (16,054) - (16,054)
Fair value of investments at 30 September 2022 94,370 250 94,620
Cost at 30 September 2022 103,827 250 104,077
Losses at 30 September 2022 (9,457) - (9,457)
Fair value of investments at 30 September 2022 94,370 250 94,620
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 2022.
10. Bank loans
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 cent per annum
(30 September 2021 - £7.5 million; 31 March 2022 - £7.5 million). 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 (30 September 2021 - £5.5 million; 31 March 2022 - £nil).
On 28 September 2022, the Company entered into a three-year unsecured
revolving credit facility ("RCF") with The Royal Bank of Scotland
International Limited for £15 million of which £7.5 million was immediately
drawn down and remained drawn down at 30 September 2022.
11. 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 2022 102,067,144 102,067 (16,894,491) (16,894) 85,172,653 85,173
Repurchased to be held in treasury - - (100,000) (100) (100,000) (100)
Balance at 30 September 2022 102,067,144 102,067 (16,994,491) (16,994) 85,072,653 85,073
B Shares of 0.1p each
Balance at 1 April 2022 32,076,703 32,077 (1,367,953) (1,368) 30,708,750 30,709
Balance at 30 September 2022 32,076,703 32,077 (1,367,953) (1,368) 30,708,750 30,709
Total at 30 September 2022 134,143,847 134,144 (18,362,444) (18,362) 115,781,403 115,782
During the period, the Company bought back 100,000 Ordinary shares at a cost
of £79,000 and bought back nil B shares to hold in treasury (period to 30
September 2021 - nil Ordinary shares and nil B shares; year to 31 March 2022 -
nil Ordinary shares and nil B shares).
At 30 September 2022 the Company held 16,994,491 Ordinary shares and 1,367,953
B shares in treasury (30 September 2021 - 16,894,491 Ordinary shares and
1,367,953 B shares; 31 March 2022 - 16,894,491 Ordinary shares and 1,367,953 B
shares).
12. The net asset value per share is based on shareholders' funds at
the period end and on 85,072,653 Ordinary shares and 30,708,750 B shares,
being the number of shares in issue at the period end (30 September 2021 -
85,172,653 Ordinary shares and 30,808,750 B shares; 31 March 2022 - 85,172,653
Ordinary shares and 30,708,750 B shares).
13. 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 2022.
14. Changes in liabilities arising from financing activities
Six months to Six months to 30 September Year to
30 September 2021 31 March
2022 2022
£'000 £'000 £'000
Opening net debt at beginning of 7,500 11,000 11,000
period/year
Cash flows:
Drawdown of RBS/Scotiabank revolving credit facility 7,500 2,000 2,000
Repayment of Scotiabank revolving credit facility - - (5,500)
Repayment of Scotiabank term loan (7,500) - -
Closing net debt at end of period/year 7,500 13,000 7,500
15. 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 and specifically in the context of the COVID-19 pandemic. The Board
has, in particular, considered the impact of increased market volatility and
the present uncertainties in economic recovery from the COVID-19 pandemic and
geopolitical unrest.
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 agreements relating to its
borrowing facilities with which it has complied. Cash is held only with banks
approved and regularly reviewed by the 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, including the COVID-19 pandemic and 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
('AGM'). The current three year period for this purpose will run from 1 April
2022 to 31 March 2025. At the AGM held on 20 July 2022, an ordinary resolution
that the Company should continue in existence was passed. Also, a special
resolution that new articles of association be approved and adopted was
passed, which included reducing the performance measurement period from five
years to three years, as referenced above.
16. 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.
17. The Company's auditor, Deloitte LLP, has not audited or reviewed the
Interim Report to 30 September 2022 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 2022, 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 2022 are an extract from those financial
statements. No full statutory financial statements in respect of any period
after 31 March 2022 have been reported on by the Company's auditor or
delivered to the Registrar of Companies.
The Interim Report to 30 September 2022 is available on the website maintained
on behalf of the Company at ctukhighincome.co.uk.
Statement of Principal Risks and Uncertainties
Most of the Company's principal risks and uncertainties that could threaten
its objective, strategy, future performance, liquidity and solvency are market
related and comparable to those of other investment trusts investing primarily
in listed securities.
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
2022.
The Company's principal risks and uncertainties have not changed materially
since the date of that report and are not expected to change materially for
the remainder of the Company's financial year.
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 has also considered the impact of increased market volatility and
the present uncertainties in economic recovery from the COVID-19 pandemic and
geopolitical unrest which has impacted the value of investments. In addition,
the operational resilience of the Manager and the Company's other third party
service providers has been considered. This is included within financial risk
and operational risk.
Statement of Directors' Responsibilities in Respect of the Interim 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 Chairman's Statement together with the condensed set of financial
statements include 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
2 December 2022
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 2022 31 March 2022
Ordinary Shares B Shares Units Ordinary Shares B Shares Units
Net asset value per share (a) 82.16p 82.16p 328.64p 95.97p 95.97p 383.88p
Share price (b) 76.50p 81.00p 308.00p 87.00p 88.00p 336.00p
Discount (c=(b-a)/(a)) (c) -6.9% -1.4% -6.3% -9.3% -8.3% -12.5%
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 2022 31 March 2022
£'000 £'000
Investments held at fair value through profit or loss (a) 94,620 111,362
Net assets (b) 95,129 111,215
(Net cash)/gearing (c=(a/b)-1)% (c) -0.5% 0.1%
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 2022 31 March 2022
Ordinary shares/B shares Ordinary shares/B shares
Units Units
NAV per share at start of period/year 95.97p 383.88p 95.25p 397.00p
NAV per share at end of period/year 82.16p 328.64p 95.97p 383.88p
Change in the period/year -14.4% -14.4% -3.3% -3.3%
Impact of dividend/capital repayment reinvestment(†) +2.6% +2.6% +5.2% +5.2%
NAV total return -11.8% -11.8% +1.9% +1.9%
(†) During the six months to 30 September 2022 dividends/capital repayments
totalling 2.87p (Ordinary shares/B shares) and 11.48p (units) went
ex-dividend. During the year to 31 March 2022 the equivalent figures were
5.33p (Ordinary shares/B shares) and 21.32p (units).
30 September 2022 31 March 2022
Ordinary Shares B Shares Units Ordinary Shares B Shares Units
Share price per share at start of period/year 87.0p 88.0p 336.0p 91.5p 91.5p 365.0p
Share price per share at end of period/year 76.5p 81.0p 308.0p 87.0p 88.0p 336.0p
Change in the period/year -12.1% -8.0% -8.3% -4.9% -3.8% -7.9%
Impact of dividend/capital repayment reinvestment(†) +3.0% +3.0% +3.1% +5.5% +5.4% +5.3%
Share price total return for the period/year -9.1% -5.0% -5.2% +0.6% +1.6% -2.6%
(†) During the six months to 30 September 2022 dividends/capital repayments
totalling 2.87p (Ordinary shares/B shares) and 11.48 (units) went ex-dividend.
During the year to 31 March 2022 the equivalent figures were 5.33p (Ordinary
shares/B shares) and 21.32p (units).
Yield - The total annual dividend/capital repayment expressed as a percentage
of the period end share price.
30 September 2022* 31 March 2022
Ordinary Shares B Shares Units Ordinary Shares B Shares Units
Annual dividend/capital repayment
(a) 5.45p 5.45p 21.80p 5.45p 5.45p 21.80p
Share price (b) 76.50p 81.00p 308.00p 87.00p 88.00p 336.00p
Yield (c=a/b) (c) 7.1% 6.7% 7.1% 6.3% 6.2% 6.5%
*Based on expected minimum annual dividend/capital repayment of 5.45 pence per
share in respect of the year ending 31 March 2023.
For further information, please contact:
Philip Webster, Columbia Threadneedle Investment Business
Limited 0207 628 8000
Ian Ridge, Columbia Threadneedle Investment Business
Limited 0207 628 8000
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