CT UK High Income Trust Reports 8.7% NAV Return in H1 2025 Amid Market Challenges

CT UK High Income Trust delivers 8.7% NAV return but trails the FTSE All-Share

CT UK High Income Trust’s unaudited half-year numbers to 30 September 2025 are in. The portfolio’s net asset value (NAV) total return was +8.7% for the six months, behind the FTSE All-Share’s +11.6%. Interestingly, the Ordinary share price total return beat the index at +12.5% thanks to the discount moving to a small premium. B shares returned +4.8%.

In short: good absolute progress, modest underperformance on NAV, and a stronger outcome for Ordinary shareholders at the market-price level.

Performance versus benchmark – why the gap opened up

Management points to a powerful market backdrop led by AI-linked winners and globally exposed sectors. UK domestic names, including housebuilders, lagged. The Trust’s income-first approach can mean short periods of underperformance when a narrow set of market leaders run hot, as we’ve just seen.

The Chairman also highlights a volatile macro mix: tariff sabre-rattling from the US, persistent inflation, and wobbles in UK politics and public finances. Despite that, the Trust still printed a positive +8.7% NAV total return, with the NAV rising from 101.12p to 106.56p and dividends contributing the rest.

Ordinary vs B shares – pricing and total returns

Total return is the change in price plus reinvested dividends (for Ordinary shares) or capital repayments (for B shares). Ordinary shares moved from a -2.1% discount to a +1.4% premium by period end, boosting shareholders’ returns to +12.5%. B shares saw the discount widen from -4.1% to -7.6%, which pulled the B share total return down to +4.8% despite the underlying NAV rising.

Takeaway: the Ordinary line benefited from a rerating; the B line did not.

Dividends and yield – 5.79p minimum targeted for FY26

Income remains the core proposition. Revenue earnings per share were 2.49p (H1 2024: 2.65p), with the Board flagging timing effects and a healthy underlying position. Three quarterly payments of 1.37p per share have been declared so far this year.

Importantly, “in the absence of unforeseen circumstances” the Board intends an aggregate distribution of at least 5.79p per Ordinary share and per B share for the year to 31 March 2026. At 30 September 2025, that equated to a 5.4% yield on the Ordinary share price and 5.9% for B shares, versus 3.3% for the FTSE All-Share.

Remember: Ordinary shares receive cash dividends; B shares deliver the same amount via capital repayments.

Balance sheet, gearing and the new £20 million RCF

The Trust refinanced and upsized its revolving credit facility with RBS International to £20 million on 26 September 2025 (available until 26 September 2027). £15 million was drawn at period end. Gearing – the amount invested above shareholders’ funds – stood at 8.9%.

Net assets were £123.539 million, with investments of £134.501 million and cash of £3.577 million. Finance costs for the half-year were £0.414 million. The balance sheet remains straightforward and liquid, which is what you want in an income-focused UK equity trust.

Portfolio moves – Burberry, SSP and Rathbones in; Tesco out

Trading activity aimed to improve quality and maximise income. Notable buys:

• Burberry – a new position where the Manager sees progress under refreshed leadership and the potential for growth to return.
• SSP – the travel caterer, bought when the market overlooked the value of its separately listed Indian joint venture.
• Rathbones – the UK wealth manager, added after the Investec Wealth integration progressed and the shares offered an attractive yield and valuation.

On the sell side, Tesco was exited after a more than 30% share price rise and the dividend yield fell back below the market.

Sectorally, housebuilders and other UK domestics were weak contributors in the period as the market chased global and AI-linked themes. The Manager still sees value in UK cyclicals, highlighting Taylor Wimpey as an example of a stock trading below net asset value despite a net cash balance sheet.

Share price dynamics and treasury activity

Demand for the Ordinary line picked up. The Company resold 1,150,000 Ordinary shares from treasury during the half-year at a small premium to NAV, and a further 1,550,000 have been resold since the period end. No buybacks were undertaken.

The shift from a -2.1% discount to a +1.4% premium helped deliver that +12.5% Ordinary share price total return. By contrast, the B share discount widened to -7.6%.

Profit and income statement – what sat behind returns

Total profit for the period was £9.888 million, split between £2.880 million revenue and £7.008 million capital. Income totalled £3.387 million, of which UK dividends were £2.780 million and overseas dividends £0.247 million, with £0.195 million of property income distributions. Investment gains at fair value contributed £7.549 million.

Cash decreased to £3.577 million from £9.514 million as the Trust net invested during the period and paid distributions and interest. Operating cash flow was £3.457 million.

Outlook – why the Manager still backs UK equities

The backdrop is messy: trade tensions, UK fiscal worries and a narrowing market led by AI beneficiaries. Even so, the Manager remains constructive on the UK. Employment is still robust, real wages are rising, and interest rates are moving down, easing mortgage costs. The hope is that recent policy steps become a “clearing event” for UK equities, allowing investors to refocus on fundamentals and valuations.

For shareholders, the prize is twofold: an attractive starting yield and the potential for discounts to close further if sentiment towards UK assets improves. Risks clearly remain – from geopolitics to domestic policy missteps – and the Trust acknowledges these in its principal risks. But valuation support and a covered dividend give a decent foundation.

Positives and watch-outs for investors

• Positives: strong absolute NAV gain of +8.7%; Ordinary share rerating to a +1.4% premium; yield of 5.4%/5.9% vs 3.3% for the index; increased £20 million RCF for flexibility; continued progress on covered dividends and revenue reserve rebuild.
• Negatives: NAV underperformed the FTSE All-Share by 2.9 percentage points; revenue EPS dipped to 2.49p due to timing; B share discount widened to -7.6%; macro and UK domestic sectors remain volatile.

Key numbers from the half-year at a glance

Metric	H1 2025
NAV total return	+8.7%
Benchmark (FTSE All-Share) total return	+11.6%
Ordinary share price total return	+12.5%
B share price total return	+4.8%
NAV per share (Ordinary/B)	106.56p
Ordinary premium/(discount)	+1.4% (from -2.1%)
B share discount	-7.6% (from -4.1%)
Revenue EPS	2.49p
Intended FY26 aggregate distribution	At least 5.79p per share
Yield at 30 September 2025	5.4% (Ordinary), 5.9% (B)
Net assets	£123.539 million
Investments at fair value	£134.501 million
Gearing	8.9%
RCF	£20 million (drawn £15 million)
Ordinary shares resold from treasury (H1)	1,150,000

My take

This is a steady set of numbers in a choppy market. NAV lagged the index, but the Ordinary line’s rerating tells you demand is returning for high, covered income from UK equities. The uplift to a £20 million facility gives the team room to lean into opportunities, and the portfolio refresh (Burberry, SSP, Rathbones) shows they are doing just that.

If you want UK equity income with potential for discount tailwinds, the Ordinary shares look the cleaner expression today. The B shares still carry a wider discount, which could be interesting if sentiment shifts, but the market is asking for more proof first. The big swing factor remains whether the UK market broadens out beyond AI winners and global behemoths – if it does, this Trust’s income-focused, valuation-aware approach should be well placed.