CT UK High Income optimistic on mid-cap outlook, despite NAV drop

(Alliance News) - CT UK High Income Trust PLC on Monday said it swung to a loss but still declared an increased interim dividend to shareholders, as its portfolio manager cited investment opportunities in UK mid-cap companies.

The Edinburgh, Scotland-based investment trust said pretax loss in the six months that ended September 30 was GBP12.6 million, swinging from a profit of GBP5.2 million a year prior.

Net asset value per share was down 19% to 82.16 pence at September 30, from 100.88p a year before. The trust's NAV total return was negative 12%, compared to negative 8.3% for its benchmark, the FTSE All-Share Index.

Despite its declining financial performance, an interim dividend of 1.55p was declared, up 8.4% from 1.43p a year earlier.

The trust's portfolio manager, Philip Webster, felt the markets have entered a "new phase" especially in UK mid-cap companies, where quality investments are on offer at depressed multiples, according to comments from Chair Andrew Watkins.

Approximately a third of its investment portfolio is in UK mid-cap companies.

Watkins said Webster is "patiently following" these businesses, as the higher domestic concentration of earnings saw the FTSE 250 index total return fall by 17% over the interim period. This is nearly twice the fall of the wider FTSE All-Share Index - a performance differential which the firm believes will provide opportunities to initiate new investment positions.

"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," said Watkins.

Shares in CT UK High Income were up 0.6% to 83.00 pence in London on Monday morning.

In the medium term, CT UK High Income said its outlook is wholly dependent on an early resolution to the war in Ukraine, as consumers are "squeezed" by global inflation and supply line shortages.

It still expects an "attractive" total return, as its yields on ordinary shares and B shares are currently at 6.6% and 6.5% respectively.

By Greg Rosenvinge; [e-mail]

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