TIDMHSL
RNS Number : 6169Z
Henderson Smaller Cos Inv Tst PLC
26 January 2022
THE HERSON SMALLER COMPANIES INVESTMENT TRUST PLC
HERSON INVESTMENT FUNDS LIMITED
LEGAL ENTITY IDENTIFIER: 213800NE2NCQ67M2M998
26 JANUARY 2022
THE HERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Results for the Half-Year Ended 30 November 2021
This announcement contains regulated information
"In the six months to 30 November 2021, smaller companies
underperformed larger companies; principally due to the rise in
bond yields and a gravitation towards value over growth stocks.
Your Company outperformed its benchmark, continuing what has been a
consistent strong long term track record."
Penny Freer
Chairman
INVESTMENT OBJECTIVE
The Company aims to maximise shareholders' total returns
(capital and income) by investing in smaller companies that are
quoted in the United Kingdom.
PERFORMANCE
-- Net asset value ('NAV') total return(1) of -2.1% compared to
a total return from the benchmark(2) of -2.8%
-- Share price(3) total return of -7.9%
-- Interim dividend(4) of 7.0p (30 November 2020: 7.0p)
TOTAL RETURN PERFORMANCE (including dividends reinvested)
6 Months 1 Year 3 Years 5 Years 10 Years
% % % % %
------------------------------- --------- ------- -------- -------- ---------
NAV(1) -2.1 28.7 57.0 96.9 372.6
Benchmark(2) -2.8 24.0 31.8 47.8 196.4
Share price(3) -7.9 22.0 62.5 112.8 476.6
Average sector NAV(5) 2.5 32.1 42.4 70.4 261.6
Average sector share price(6) 0.8 31.9 41.2 83.5 307.8
FTSE All-Share Index 1.9 17.4 16.9 30.6 103.0
Sources: Morningstar Direct, Janus Henderson, Refinitiv
Datastream
1 Net asset value ('NAV') per ordinary share total return with
income reinvested
2 Numis Smaller Companies Index (excluding investment companies)
total return
3 Share price total return using mid-market closing price
4 Interim dividend of 7.0p (30 November 2020: 7.0p) to be paid to shareholders on 7 March 2022
5 Average NAV total return of the AIC UK Smaller Companies
sector
6 Average share price total return of the AIC UK Smaller
Companies sector
FINANCIAL SUMMARY
(Unaudited) (Unaudited) (Audited)
30 November 30 November 31 May
2021 2020 2021
----------------------------- ------------- ------------- ----------
Net assets GBP960.8m GBP760.0m GBP992.9m
NAV per ordinary share 1,286.2p 1,017.4p 1,329.1p
Share price per ordinary
share 1,164.0p 972.0p 1,280.0p
Total return per ordinary
share (26.2p) 174.8p 493.5p
Revenue return per ordinary
share 9.30p 5.00p 13.86p
Dividend per ordinary
share 7.00p 7.00p 23.75p
Gearing 10.6% 9.9% 8.8%
CHAIRMAN'S STATEMENT
In my first statement as your Chairman, I would like to begin by
paying tribute to Jamie Cayzer-Colvin's decade of leadership. Jamie
stepped down as Chairman at our AGM on 1 October 2021 leaving your
Company well positioned for the future.
COVID-19 continues to impact businesses and individuals. After a
period of increasing positivity stemming from the vaccination
rollout we have, more recently, again been affected by rising cases
from new variants and a return to some measure of restrictions.
Clearly the crisis is not over, although with greater numbers
vaccinated and seemingly milder symptoms, we are gradually seeing a
return to some degree of normality.
Performance
During the six months to 30 November 2021, UK equity markets
were broadly flat, although smaller companies underperformed larger
stocks as investor sentiment shifted from growth-oriented companies
to those with more value type characteristics. Against this
backdrop, your Company's net asset value total return fell during
the period under review by 2.1%, outperforming the Numis Smaller
Companies Index by 0.7% over the period. However, it underperformed
the AIC UK Smaller Companies sector average, which rose by 2.5% and
the share price underperformed the NAV during the period,
delivering a total return of -7.9%, as the discount widened to 9.5%
(31 May 2021: 3.7%) reflecting weaker investor sentiment towards
smaller companies. Nevertheless, the longer-term performance record
of the Company remains consistently strong, reflecting an unchanged
strategy adopted by the Fund Manager and his team.
Dividend
Your Board has decided to maintain the interim dividend at 7.0p
per ordinary share (30 November 2020: 7.0p).This will be paid on 7
March 2022 to shareholders on the register on 11 February 2022. The
shares will be marked ex-dividend on 10 February 2022. This
dividend is to be paid from the Company's revenue account.
Additional Loan Notes
I am pleased to announce that the Board has agreed to issue a
further GBP20 million of fixed-rate 30-year unsecured private
placement notes (the "Notes") at an annualised coupon of 2.77%.
These Notes will be in addition to the GBP30 million unsecured
notes currently in issue. This transaction will obtain fixed-rate
long-dated sterling-denominated financing at pricing that the Board
and Manager consider attractive and is expected to enhance long
term investment performance.
The funding date is expected to be 2 February 2022, subject to
customary closing conditions, with interest payable semi-annually.
The Notes are due to be repaid on 2 February 2052. The Notes will
be unsecured, which gives the Company increased flexibility to
manage its borrowings in the future. There has been no change in
the Company's policy on gearing, as set out on page 17 of the 2021
Annual Report. Gearing ended the period under review at 10.6% (31
May 2021: 8.8%).
Outlook
The economic background remains uncertain and changeable in the
face of new COVID-19 variants, but corporate earnings continue to
recover from the lows of 2020 and the health of the corporate
sector is much better than during the 2008-9 financial crisis.
Strong balance sheets and better than expected earnings recoveries
post the initial impact of COVID-19 give cause for optimism.
Corporate activity is high with M&A opportunities arising from
the impact of the pandemic. Tempering this is the prospect of
tightening monetary policy to counter higher inflation. Against
this background, your fund management team maintains a disciplined,
long term approach to investment and is focused on selecting the
companies which will emerge stronger from this period. I have
confidence that your Company can continue to deliver successful
outcomes for its investors in the years ahead.
Penny Freer
Chairman
FUND MANAGER'S REPORT
Market Review - Six Months to 30 November 2021
UK equity markets were broadly flat over the period. In the UK,
whilst most COVID-19 restrictions were relaxed on "freedom day",
rhetoric from the government remained cautious as the Delta variant
continued to spread. Towards the end of the period, discovery of
the new Omicron variant raised fears that restrictions would have
to be re-introduced. Global bond yields oscillated during the
period which resulted in a change of factor leadership in equity
markets. In the US, the Federal Reserve stepped away from its
initial view that inflation was transitory and became increasingly
hawkish. In September it announced that asset purchase tapering
would begin soon and by November the market was projecting three
interest rate rises in 2022. In the UK, the Bank of England decided
not to raise rates in November. Oil rallied initially but fell
sharply in November while sterling depreciated against the
dollar.
Smaller companies underperformed larger companies over the
period. This was driven principally by a rise in bond yields and a
gravitation towards value over growth stocks.
Fund Performance
The Company outperformed its benchmark during the period. The
net asset value fell by 2.1% on a total return basis. This compares
with a decline of 2.8% (total return) in the Numis Smaller
Companies Index (excluding investment companies).
Gearing
Gearing started the period at 8.8% and ended it at 10.6%. Debt
facilities are a combination of GBP30 million 20-year unsecured
loan notes at an interest rate of 3.33% and GBP85 million of short
term bank borrowings.
Attribution Analysis
The following tables show the top five contributors to, and
detractors from, the Company's relative performance. Some of the
stocks are included in the benchmark index but not held by the
Company. These have an effect on relative performance.
Top five contributors 6-month return Relative contribution
% %
Future +26.2 +0.8
--------------- ----------------------
Impax Asset Management +18.7 +0.7
--------------- ----------------------
Marshall Motors Holdings +121.3 +0.5
--------------- ----------------------
Watches of Switzerland +72.1 +0.5
--------------- ----------------------
CMC Markets* -49.2 +0.4
--------------- ----------------------
Top five detractors 6-month return Relative contribution
% %
--------------- ----------------------
Playtech* +62.2 -0.6
--------------- ----------------------
Clinigen -29.5 -0.6
--------------- ----------------------
Investec* +24.5 -0.4
--------------- ----------------------
Indivior* +46.9 -0.3
--------------- ----------------------
Drax Group* +28.5 -0.3
--------------- ----------------------
* In benchmark index but not
held by the Company.
Principal Contributors
Future is a special interest media group; Impax Asset Management
is a specialist fund manager; Marshall Motors Holdings is an
automotive retailer; Watches of Switzerland is a luxury watch
retailer; and CMC Markets is a financial derivatives dealer.
Principal Detractors
Playtech is a provider of technology and services to the
gambling industry; Clinigen is a pharmaceutical services and
products group; Investec is an international specialist bank and
asset manager; Indivior is a pharmaceutical group; and Drax Group
is a renewable power generation company.
Portfolio Activity
Our approach is to consider our investments as long term in
nature and to avoid unnecessary turnover. The focus has been on
adding stocks to the portfolio that have good growth prospects,
sound financial characteristics and strong management, at a
valuation level that does not reflect these strengths. Likewise, we
have been employing strong sell disciplines to dispose of stocks
that fail to meet these criteria.
During the period, we have added to a number of positions in our
portfolio and increased exposure to those stocks which we feel have
further catalysts to drive strong performance.
New additions to the portfolio include: Access Intelligence, a
software provider for the public relations and marketing services
industries; Bridgepoint, a private equity manager; Devolver
Digital, a video game publisher; RPS, an engineering consultancy
group; Sigmaroc, an aggregates and construction materials group;
Stelrad, a steel radiator manufacturer; and Wickes, a home
improvement retailer.
To balance the additions to our portfolio, we have disposed of
positions in companies which we felt were set for poor price
performance or where the valuation had become extended, including
the holdings in Coats, Go-Ahead Group, Johnson Service Group and
Rotork. Additionally we sold our holdings in Sanne, St Modwen and
Vectura, after these companies received agreed takeover bids.
Market Outlook
The COVID-19 outbreak dramatically changed expectations for
global economic growth. The lockdown measures we have seen across
the globe have had a profound effect on economic activity.
Government actions to protect consumers and businesses from the
worst impact of the shock softened the blow but ultimately can only
be short term in nature given the scale of the bail-out
required.
The positive vaccine news announced in November 2020 and the
subsequent successful vaccination programme has meant life has
returned to some sort of normality with a consequent rebound in
economic activity. Conditions remain fragile though and subsequent
'waves' of COVID-19 and new variants of the virus serve as
reminders that the crisis is not over.
One of the major concerns facing the equity market is the threat
of higher inflation and the need for central banks to start
tightening monetary policy. There is much debate as to whether
current indications of inflation, led by commodity, energy and
logistic costs, are temporary or are of a more permanent nature. A
sustained pick up in wage inflation will probably force monetary
authorities to act more quickly. The recent increase in UK base
interest rates and indications from the Federal Reserve of higher
rates gives a good indication as to the likely direction of central
bank policy in 2022.
In the corporate sector, conditions are intrinsically stronger
than they were during the financial crisis of 2008-9. Balance
sheets, in particular, are more robust. On the whole, so far, the
UK corporate sector has performed well during the crisis and most
companies are beating their initial post COVID-19 earnings and cash
expectations.
We are seeing a noticeable pickup in corporate activity. The IPO
market, after a quiet 2020, has exploded into life in recent
months. Given the amount of companies looking to float onto public
markets it is important to remain disciplined when sifting through
the multitude of new investment opportunities we have in front of
us. Likewise, we are also seeing a significant increase in M&A
activity as private equity, in particular, looks to exploit
opportunities thrown up by COVID-19. We expect this upsurge to
continue in the coming months as UK equity market valuations remain
markedly depressed versus other developed markets.
In terms of valuations, the equity market is now trading in line
with long term averages if we apply pre COVID-19 earnings.
Corporate earnings were sharply down in 2020 although we have seen
a sharp recovery in 2021 which is likely to continue into 2022.
Although uncertainty remains around short term economic
conditions, the virus will pass and corporate profitability and
economies are recovering. The movements in equity markets have
thrown up some fantastic buying opportunities and we expect many
listed companies to emerge stronger from the downturn. However, it
is important to be selective as any recovery will be uneven and
strength of franchise, market positioning and balance sheet will
determine the winners from the losers in a post COVID-19 world.
Neil Hermon
Fund Manager
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties associated with the
Company's business fall broadly under the following categories:
-- investment activity and strategy;
-- legal and regulatory;
-- operational; and
-- financial instruments and the management of risk.
Detailed information on these risks is given in the Strategic
Report and in the Notes to the Financial Statements in the
Company's Annual Report for the year ended 31 May 2021.
In the view of the Board these principal risks and uncertainties
are as applicable to the remaining six months of the financial year
as they were to the six months under review.
DIRECTORS' RESPONSIBILITY STATEMENT
The directors confirm that, to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34 Interim
Financial Reporting;
-- the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.7R (indication of important events during the first six months
and description of the principal risks and uncertainties for the
remaining six months of the year); and
-- the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.8R (disclosure of related-party transactions and changes
therein).
For and on behalf of the Board
Penny Freer
Chairman
INVESTMENT PORTFOLIO
at 30 November 2021
Valuation Portfolio Valuation Portfolio
Company GBP'000 % Company GBP'000 %
----------------------------- ---------- ---------- ------------------------- ------------ ----------
Impax Asset Management* 38,568 3.63 Cairn Energy 11,466 1.08
Future 37,411 3.52 Brewin Dolphin 11,371 1.07
Watches Of Switzerland 32,042 3.01 Alpha Financial Markets* 11,175 1.05
Bellway 25,256 2.38 Bodycote 10,992 1.03
Oxford Instruments 23,575 2.22 XP Power 10,928 1.03
RWS* 22,344 2.10 Midwich* 10,868 1.02
Synthomer 19,874 1.87 Victrex 10,858 1.02
Learning Technologies* 19,741 1.86 Vitec 10,513 0.99
Ultra Electronics 19,596 1.84 Bytes Technology 10,369 0.98
Team17* 19,520 1.84 Foresight Group 10,297 0.97
---------- ---------- ---------- ----------
10 largest 257,927 24.27 40 largest 679,416 63.94
OneSavings Bank 19,038 1.79 Just Group 10,257 0.97
Euromoney Institutional
Paragon 18,759 1.76 Investor 10,245 0.96
GB Group* 18,408 1.73 DFS 9,984 0.94
Gamma Communications* 17,955 1.69 Spectris 9,983 0.94
Dechra Pharmaceuticals 17,388 1.64 Inspecs* 9,927 0.94
Clinigen* 17,342 1.63 Chemring 9,384 0.88
Savills 17,009 1.60 Redde Northgate 9,271 0.87
Mitchells & Butlers 16,541 1.56 Serco 9,212 0.87
Softcat 15,801 1.49 Restore* 9,168 0.86
Ascential 15,588 1.47 Wickes 9,016 0.85
---------- ---------- ---------- ----------
20 largest 431,756 40.63 50 largest 775,863 73.02
Next Fifteen
IntegraFin 15,448 1.45 Communications* 8,690 0.82
Computacenter 14,689 1.38 CLS 8,526 0.80
Luceco 14,629 1.38 Serica Energy* 8,443 0.79
Liontrust Asset Management 14,076 1.33 Crest Nicholson 8,261 0.78
Volution 14,069 1.32 Auction Technology 8,143 0.76
Vesuvius 13,952 1.31 Countryside 7,509 0.71
Renishaw 13,847 1.30 Moneysupermarket.com 7,344 0.69
TI Fluid Systems 13,750 1.30 SThree 7,202 0.68
Tyman 12,518 1.18 Gym Group 7,198 0.68
Balfour Beatty 11,845 1.12 Moonpig 7,118 0.67
---------- ---------- ---------- ----------
30 largest 570,579 53.70 60 largest 854,297 80.40
Remaining 47 208,301 19.60
------------ ----------
Total 1,062,598 100.00
======= ======
* Quoted on the Alternative Investment Market ('AIM')
STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
30 November 2021 30 November 2020 31 May 2021
Revenue Capital Total Revenue Capital Total Revenue Capital Total
return return return return return return return return return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- ----------- ---------- --------- --------- --------- --------- ---------- ----------
Investment
income 8,088 - 8,088 4,555 - 4,555 12,269 - 12,269
(Losses)/gains
on
investments
held at
fair value
through
profit or loss - (24,756) (24,756) - 128,062 128,062 - 365,577 365,577
--------- ----------- ---------- --------- --------- --------- --------- ---------- ----------
Total income 8,088 (24,756) (16,668) 4,555 128,062 132,617 12,269 365,577 377,846
Expenses
Management and
performance
fees (note 3) (506) (1,182) (1,688) (323) (754) (1,077) (749) (6,284) (7,033)
Other expenses (366) - (366) (299) - (299) (726) - (726)
--------- --------- --------- --------- --------- --------- --------- ---------- ----------
Profit/(loss)
before
finance
costs and
taxation 7,216 (25,938) (18,722) 3,933 127,308 131,241 10,794 359,293 370,087
Finance costs (249) (579) (828) (200) (465) (665) (427) (995) (1,422)
--------- --------- --------- --------- --------- --------- --------- ---------- ----------
Profit/(loss)
before
taxation 6,967 (26,517) (19,550) 3,733 126,843 130,576 10,367 358,298 368,665
Taxation (1) - (1) - - - (14) - (14)
--------- --------- --------- --------- --------- --------- --------- ---------- ----------
Profit/(loss)
for
the period and
total
comprehensive
income 6,966 (26,517) (19,551) 3,733 126,843 130,576 10,353 358,298 368,651
===== ====== ====== ===== ====== ====== ===== ====== ======
Earnings per
ordinary
share (note 4) 9.33p (35.50p) (26.17p) 5.00p 169.80p 174.80p 13.86p 479.64p 493.50p
===== ====== ====== ===== ====== ====== ===== ====== ======
The total column of this statement represents the Statement of
Comprehensive Income, prepared in accordance with UK adopted
international accounting standards.
The revenue return and capital return columns are supplementary
to this and are prepared under guidance published by the
Association of Investment Companies.
The accompanying notes are an integral part of these financial
statements.
STATEMENT OF CHANGES IN EQUITY
Half-year ended Share Capital redemption Capital Revenue Total
30 November 2021 capital reserve reserves reserve equity
(unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------------- --------------------- ------------ ----------- -----------------
Total equity at
1 June 2021 18,676 26,745 935,307 12,170 992,898
Total comprehensive
income:
(Loss)/profit for
the
period - - (26,517) 6,966 (19,551)
Transactions with
owners,
recorded directly to
equity:
Ordinary dividend
paid - - (343) (12,170) (12,513)
---------- ---------- ---------- ---------- -----------
Total equity at
30 November 2021 18,676 26,745 908,447 6,966 960,834
====== ====== ====== ====== ======
Half-year ended Share Capital redemption Capital Revenue
30 November 2020 capital reserve reserves reserve Total equity
(unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------------- --------------------- ------------ ----------- -----------------
Total equity at
1 June 2020 18,676 26,745 577,009 19,366 641,796
Total comprehensive
income:
Profit for the
period - - 126,843 3,733 130,576
Transactions with
owners,
recorded directly to
equity:
Ordinary dividend
paid - - - (12,326) (12,326)
---------- ---------- ---------- ---------- -----------
Total equity at
30 November 2020 18,676 26,745 703,852 10,773 760,046
====== ====== ====== ====== ======
Capital
Share redemption Capital Revenue Total
capital reserve reserves reserve equity
Year ended 31 May
2021
(audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ---------------- --------------------- ------------ ----------- -----------------
Total equity at
1 June 2020 18,676 26,745 577,009 19,366 641,796
Total comprehensive
income:
Profit for the year - - 358,298 10,353 368,651
Transactions with
owners,
recorded directly to
equity:
Ordinary dividend
paid - - - (17,549) (17,549)
---------- ---------- ----------- ---------- -----------
Total equity at
31 May 2021 18,676 26,745 935,307 12,170 992,898
====== ====== ======= ====== ======
The accompanying notes are an integral part of these financial statements.
BALANCE SHEET
(Unaudited)
Half-year (Unaudited) (Audited)
ended Half-year Year ended
30 November ended 30 November 31 May
2021 2020 2021
GBP'000 GBP'000 GBP'000
--------------------------------------- --------------- ------------------- ---------------
Non current assets
Investments held at fair value
through
profit or loss 1,062,598 834,939 1,080,358
------------- ----------- --------------
Current assets
Securities sold for future settlement 4,730 - 3,079
Taxation recoverable - 16 9
Prepayments and accrued income 1,340 1,060 1,908
Cash and cash equivalents 5,262 5,331 2,962
----------- ----------- ----------
11,332 6,407 7,958
-------------- ----------- --------------
Total assets 1,073,930 841,346 1,088,316
-------------- ----------- --------------
Current liabilities
Securities purchased for future
settlement (2,221) (1,159) (474)
Accruals and deferred income (876) (1,154) (715)
Performance fee - - (4,537)
Bank loans (80,162) (49,159) (59,860)
----------- ----------- ------------
(83,259) (51,472) (65,586)
----------- ----------- ------------
Total assets less current liabilities 990,671 789,874 1,022,730
Non current liabilities (29,837) (29,828) (29,832)
----------- ----------- -----------
Net assets 960,834 760,046 992,898
====== ====== ======
Equity attributable to equity
shareholders
Called up share capital (note
6) 18,676 18,676 18,676
Capital redemption reserve 26,745 26,745 26,745
Retained earnings:
Capital reserves (note 7) 908,447 703,852 935,307
Revenue reserve 6,966 10,773 12,170
----------- ----------- -----------
Total equity 960,834 760,046 992,898
====== ====== ======
Net asset value per ordinary
share (note 8) 1,286.2p 1,017.4p 1,329.1p
======= ======= =======
The accompanying notes are an integral part of these financial
statements.
STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited)
Half-year Half-year (Audited)
ended ended Year ended
30 November 30 November 31 May
2021 2020 2021
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------- ------------- ------------
(Loss)/gain before taxation (19,550) 130,576 368,665
Add back interest payable 828 665 1,422
Gains/(losses) on investments held
at fair value through profit or loss 24,756 (128,062) (365,577)
Purchases of investments (79,124) (54,357) (157,850)
Sales of investments 72,129 59,810 155,399
Decrease in receivables 3 14 20
(Increase)/decrease in amounts due
from brokers (1,651) 2,740 (340)
Decrease/(increase) in accrued income 573 (692) (1,546)
(Decrease)/increase in payables (4,402) 671 4,743
Increase/(decrease) in amounts due
to brokers 1,747 (1,842) (2,527)
----------- ----------- -----------
Net cash (outflow)/inflow from operating
activities before interest (4,691) 9,523 2,409
----------- ----------- -----------
Interest paid (798) (659) (1,392)
----------- ----------- -----------
Net cash (outflow)/inflow from operating
activities (5,489) 8,864 1,017
====== ====== ======
Financing activities
Equity dividends paid (12,513) (12,326) (17,549)
Drawdown of bank loans 20,302 4,052 14,753
----------- ----------- -----------
Net cash inflow/(outflow) from financing
activities 7,789 (8,274) (2,796)
Increase/(decrease) in cash and cash
equivalents 2,300 590 (1,779)
Cash and cash equivalents at the start
of the period 2,962 4,741 4,741
---------- ---------- ----------
Cash and cash equivalents at the period
end 5,262 5,331 2,962
====== ====== ======
The accompanying notes are an integral part of these financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Accounting Policies - Basis of Preparation
The Henderson Smaller Companies Investment Trust plc (the 'Company')
is a company incorporated and domiciled in the United Kingdom
under the Companies Act 2006.
These condensed financial statements comprise the unaudited results
of the Company for the half-year ended 30 November 2021. They
have been prepared on a going concern basis and in accordance
with UK adopted international accounting standards and with the
Statement of Recommended Practice for Investment Trusts ('SORP')
dated April 2021, where the SORP is consistent with the requirements
of UK adopted international accounting standards.
For the period under review the Company's accounting policies
have not varied from those described in the Annual Report for
the year ended 31 May 2021.
These financial statements have been neither audited nor reviewed
by the Company's auditor.
2. Going Concern
The assets of the Company consist of securities that are readily
realisable and, accordingly, the directors believe that the Company
has adequate resources to continue in operational existence for
at least twelve months from the date of approval of the financial
statements. The directors have also considered the impact of
COVID-19, including cash flow forecasting, a review of covenant
compliance including the headroom above the most restrictive
covenants and an assessment of the liquidity of the portfolio.
They have concluded that they are able to meet their financial
obligations, including the repayment of the bank loan, as they
fall due for a period of at least twelve months from the date
of issuance. Having assessed these factors, the principal risks
and other matters discussed in connection with the Viability
Statement in the Annual Report for the year ended 31 May 2021,
the directors confirm that the financial statements have been
prepared on a going concern basis. The Company's shareholders
are asked every three years to vote for the continuation of the
Company. The next continuation vote will take place at the AGM
in 2022.
3. Expenses
Expenses, finance costs and taxation include provision for a
performance fee when the relevant criteria have been met. There
was no performance fee provision for the six months to 30 November
2021 (30 November 2020 GBPnil; 31 May 2021: GBP4,537,000). Any
provision for a performance fee is charged 100% to capital. The
actual performance fee, if any, payable to Janus Henderson for
the year to 31 May 2022 will depend on outperformance over the
full financial year, subject to a cap on the total fees paid
to Janus Henderson of 0.9% of the average value of the net assets
of the Company during the year. No performance fee is payable
if on the last day of the accounting year the Company's share
price or net asset value ('NAV') is lower than the share price
and NAV at the preceding year end. Details of the performance
fee arrangements are set out in the Annual Report for the year
ended 31 May 2021.
4. Earnings per Ordinary Share
The earnings per ordinary share figure is based on the net loss for
the half-year ended 30 November 2021 of GBP19,551,000 (half-year ended
30 November 2020: net profit of GBP130,576,000; year ended 31 May
2021: net profit of GBP368,651,000) and on 74,701,796 (half-year ended
30 November 2020: 74,701,796; year ended 31 May 2021: 74,701,796)
ordinary shares, being the weighted average number of ordinary shares
in issue during the period.
The earnings per ordinary share figure detailed above can be further
analysed between revenue and capital, as below.
(Unaudited) (Audited)
30 November (Unaudited) 31 May
30 November
2021 2020 2021
GBP'000 GBP'000 GBP'000
--------------------------------------- --------------- -------------- --------------
Net revenue profit 6,966 3,733 10,353
Net capital (loss)/gain (26,517) 126,843 358,298
---------- ---------- ------------
Net total (loss)/profit (19,551) 130,576 368,651
====== ====== =======
Weighted average number of
ordinary shares in issue
during the period 74,701,796 74,701,796 74,701,796
Pence Pence Pence
--------------------------------------- --------------- -------------- --------------
Revenue earnings per ordinary
share 9.33 5.00 13.86
Capital (loss)/earnings per
ordinary share (35.50) 169.80 479.64
--------- --------- ----------
Total (loss)/earnings per
ordinary share (26.17) 174.80 493.50
===== ===== ======
5. Dividends
The Board has declared an interim dividend of 7.0p (30 November 2020:
7.0p) to be paid on 7 March 2022 to shareholders on the register
at the close of business on 11 February 2022. The ex-dividend date
will be 10 February 2022. This dividend is to be paid from the Company's
revenue account. No provision has been made for the interim dividend
in these condensed financial statements.
The final dividend of 16.75p per ordinary share, paid on 11 October
2021, in respect of the year ended 31 May 2021, has been recognised
as a distribution in the period.
6. Share Capital
At 30 November 2021 there were 74,701,796 ordinary shares in issue
(30 November 2020: 74,701,796; 31 May 2021: 74,701,796). During the
half-year ended 30 November 2021 the Company did not buy back or
issue any shares (half-year ended 30 November 2020: nil; year ended
31 May 2021: nil). No shares have been bought back or issued since
the period end.
7. Capital Reserves
The capital reserve includes the capital reserve arising on investments
sold of GBP515,498,000 (30 November 2020: GBP461,076,000; 31 May 2021:
GBP482,446,000) and the capital reserve arising on revaluation of
investments held of GBP392,949,000 (30 November 2020: GBP242,776,000;
31 May 2021: GBP452,861,000).
The Company's capital reserve arising on investments sold (i.e. realised
capital profits) and revenue reserve may be distributed by way of
a dividend.
8. Net Asset Value ('NAV') per Ordinary Share
The NAV per ordinary share is based on the net assets attributable
to the equity shareholders of GBP960,834,000 (30 November 2020: GBP760,046,000;
31 May 2021: GBP992,898,000) and on 74,701,796
(30 November 2020: 74,701,796; 31 May 2021: 74,701,796) ordinary shares,
being the number of ordinary shares in issue at the period end.
9. Transaction Costs
Purchase transaction costs for the half-year ended 30 November 2021
were GBP204,000 (half-year ended 30 November 2020: GBP202,000; year
ended 31 May 2021: GBP487,000). These comprise mainly stamp duty
and commission. Sale transaction costs for the half-year ended 30
November 2021 were GBP34,000 (half-year ended 30 November 2020: GBP26,000;
year ended 31 May 2021: GBP68,000).
10. Financial Instruments
The investments are held at fair value through profit or loss. All
the net current liabilities are held in the Balance Sheet at a reasonable
approximation of fair value. At 30 November 2021 the fair value of
the Preference Stock was GBP4,000 (30 November 2020: GBP4,000; 31
May 2021: GBP4,000). The fair value of the Preference Stock is estimated
using the prices quoted on the exchange on which the investment trades.
The Preference Stock is carried in the Balance Sheet at par.
The unsecured loan notes are carried in the Balance Sheet at par
less the issue costs which are amortised over the life of the notes.
In order to comply with fair value accounting disclosures only, the
fair value of the unsecured loan notes has been estimated to be GBP34,681,000
(30 November 2020: GBP36,719,000; 31 May 2021: GBP34,035,000) and
is categorised as Level 3 in the fair value hierarchy as described
below. However, for the purpose of the daily NAV announcements, the
unsecured loan notes are valued at par in the fair value NAV because
they are not traded and the directors have assessed that par value
is the most appropriate value to be applied for this purpose.
The fair value of the unsecured loan notes is calculated using a
discount rate which reflects the yield of a UK Gilt of similar maturity
plus a suitable credit spread.
Fair value hierarchy
The table below sets out the fair value measurements using the IFRS
13 fair value hierarchy. Categorisation within the hierarchy has
been determined on the basis of the lowest level of input that is
significant to the fair value measurement of the relevant asset,
as follows:
Level 1: valued using quoted prices in active markets for identical
assets.
Level 2: valued by reference to valuation techniques using observable
inputs other than quoted prices.
Level 3: valued by reference to valuation techniques using inputs
that are not based on observable market data.
Level 1 Level 2 Level 3 Total
As at 30 November 2021 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- ------------ ------------ --------------
Equity investments 1,062,598 - - 1,062,598
------------- ----------- ----------- -------------
1,062,598 - - 1,062,598
======== ====== ====== ========
Level 1 Level 2 Level 3 Total
--------------------------
As at 30 November 2020 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- ------------ ------------ --------------
Equity investments 834,939 - - 834,939
----------- ----------- ----------- -----------
834,939 - - 834,939
====== ====== ====== ======
Level 1 Level 2 Level 3 Total
--------------------------
As at 31 May 2021 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- ------------ ------------ --------------
Equity investments 1,080,358 - - 1,080,358
------------- ----------- ----------- -------------
1,080,358 - - 1,080,358
======== ====== ====== ========
The valuation techniques used by the Company are explained in
the accounting policies note 1(c) of the Annual Report for the
year ended 31 May 2021.
11. Related-Party Transactions
During the first six months of the current financial year, no
transactions with related parties have taken place which have
materially affected the financial position of the Company during
the period. Details of related-party transactions are contained
in the Annual Report for the year ended 31 May 2021.
12. Comparative Information
The financial information contained in this half-year financial
report does not constitute statutory accounts as defined in section
434 of the Companies Act 2006. The financial information for the
half-years ended
30 November 2021 and 30 November 2020 has not been audited.
The information for the year ended 31 May 2021 has been extracted
from the statutory accounts for that year, which have been filed
with the Registrar of Companies. The report of the auditor on
those accounts was unqualified and contained no statement under
either section 498(2) or section 498(3) of the Companies Act 2006.
13. General Information
The Henderson Smaller Companies Investment Trust plc is registered
in England and Wales.
Company Number: 00025526.
Registered Office: 201 Bishopsgate, London EC2M 3AE
London Stock Exchange (TIDM) Code: HSL
SEDOL Number: 0906506
Global Intermediary Identification Number (GIIN): WZD8S7.99999.SL.826
Legal Entity Identifier (LEI): 213800NE2NCQ67M2M998
Directors and Corporate Secretary
The directors of the Company are Penny Freer (Chairman of the
Board), Alexandra Mackesy (Chairman of the Audit and Risk Committee),
David Lamb (Senior Independent Director), Victoria Sant, Michael
Warren and Kevin Carter. The Corporate Secretary is Henderson
Secretarial Services Limited, represented by Johana Woodruff,
ACG.
Website
Details of the Company's share price and NAV, together with general
information about the Company, monthly factsheets and data, copies
of announcements, reports and details of general meetings can
be found at www.hendersonsmallercompanies.com .
14. Financial Report for the Half-Year Ended 30 November 2021
The half-year report will shortly be available on the Company's
website or from the Company's registered office. An abbreviated
version, the 'Update', will be circulated to shareholders in February
2022 and will be available from the Corporate Secretary at the
Company's registered office, 201 Bishopsgate, London EC2M 3AE.
For further information please contact:
Neil Hermon Nathan Brown
Fund Manager Corporate Broking
The Henderson Smaller Companies Investment Numis Securities
Trust plc Telephone: 020 7260 1426/1275
Telephone: 020 7818 4351
James de Sausmarez Harriet Hall
Director and Head of Investment Trusts PR Manager Investment Trusts
Janus Henderson Investors Janus Henderson Investors
Telephone: 020 7818 3349 Telephone: 020 7818 2919
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website), are incorporated into, or form part of,
this announcement.
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END
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