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RNS

Annual Financial Report

Released 07:00 02-Aug-2019

RNS Number : 6468H
Henderson Smaller Cos Inv Tst PLC
02 August 2019
 

HENDERSON INVESTMENT FUNDS LIMITED

 

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

 

LEGAL ENTITY IDENTIFIER: 213800NE2NCQ67M2M998

 

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

 

ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MAY 2019

 

This announcement contains regulated information

 

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.

 

INVESTMENT POLICY1

Smaller companies are defined as any company outside the FTSE 100 Index. Once a portfolio company enters the FTSE 100 Index the Fund Manager has, in normal circumstances, six months to sell the position.

 

Investments may include shares, securities and related financial instruments, including derivatives. The following investment ranges apply:

·      Equities: 80% - 100% of total gross assets

·      Fixed Income and Cash: 0% - 20%

 

The Company maintains a diversified portfolio and cannot:

·      Invest more than 5% of its total gross assets in any one holding; or

·      Hold more than 10% of an investee company's equity,

 

in each case measured at the time of investment (or additional investment). The Board may give approval to the Manager to exceed these limits to as far as 10% and 20% respectively but only in exceptional circumstances.

 

It is the stated investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts).

 

Derivatives

The Company may use financial instruments known as derivatives for the purpose of efficient portfolio management.

 

Gearing

Net gearing (defined as all borrowings less cash balances and investments in cash funds) is limited by the Board to a maximum of 30% of shareholders' funds.

 

 

1 Following review of the wording of the investment policy and after consultation with the Company's Manager and corporate broker, the Board has taken the opportunity to make certain non-material amendments which are reflected above. The Board has been advised that these changes do not require shareholder approval.

 

 

 

PERFORMANCE

 

Total Return Performance for the period ended 31 May 2019

 

1 year

%

3 years

%

5 years

%

10 years

%

NAV1

-6.4

39.6

67.2

480.9

Share Price2

-9.0

49.6

76.1

533.3

Benchmark3

-6.1

22.5

33.1

249.6

Average Sector NAV4

-4.9

33.7

55.9

345.8

Average Sector Share Price5

-4.7

32.6

57.4

386.4

FTSE All-Share Index

-3.2

28.4

29.3

149.4

 

 

Performance

 

 

                 Year ended

31 May 2019

Year ended

31 May 2018

NAV per share at year end 

958.7p

1,046.9p

Share price at year end

858.0p

966.0p

Discount at year end6

10.5%

7.7%

Gearing at year end

8.4%

8.5%

Dividend for the year

23.0p7

21.0p

Revenue return per share

23.59p

22.79p

Dividend yield8

2.7%

2.2%

Total net assets

£716m

£782m

Ongoing charge excluding performance fee

0.42%

0.42%

Ongoing charge including performance fee

0.42%

0.99%

 

 

 

1 Net Asset Value ("NAV") per ordinary share total return with income reinvested

2 Share price total return using mid-market closing price with income reinvested

3 Numis Smaller Companies Index (excluding investment companies) total return

4 Average NAV total return of the AIC UK Smaller Companies sector

5 Average share price total return of the AIC UK Smaller Companies sector

6 Calculated using published daily NAVs with debt at par including current year revenue

7 This represents an interim dividend of 6.5p and a proposed final dividend of 16.5p

8 Based on the ordinary dividends paid and payable for the year and the mid-market share price at the year end

 

A glossary of terms and explanations of alternative performance measures are included in the Annual Report

Sources: Morningstar for the AIC, Janus Henderson, Datastream

 

 

 

CHAIRMAN'S REPORT

 

During the past year your Company's net assets fell by 6.4%, underperforming our benchmark by 0.3% on a total return basis, and the share price fell by 9.0%. This is only the second year in the past 16 that your Fund Manager, Neil Hermon, and his team have underperformed the benchmark. Despite any disappointment with this year's marginal underperformance, the last ten years' annualised return to shareholders of 19.2% and outperformance of 5.9% per annum, clearly demonstrate that Neil and his team's thoughtful stock selection creates value. The quality of our portfolio companies' earnings allows us to report a 9.5% increase in the proposed total dividend for the year, making it our 16th consecutive year of dividend growth, as the companies continue to trade well, maintain strong balance sheets and grow their dividends.

 

On your behalf, I would like to make particular thanks to Neil, Indriatti van Hien, our Deputy Fund Manager, and Shiv Sedani, the team's Analyst, for all their endeavours and for 'keeping their heads' in what was a particularly bleak Christmas period for investors. I would like also to thank the staff at Janus Henderson, and make special mention of Rachel Peat, who looked after your Company as the representative of the corporate secretary for five years. Her guidance and assistance were highly valued, and we wish her luck with her future career. Her role has been taken by Johana Woodruff.

 

Board changes

At this year's Annual General Meeting ("AGM"), Beatrice Hollond, our Senior Independent Director and Chairman of the Audit Committee, will step down from the Board. I would like to thank her for the wise and professional advice and the great commitment she has given your Company over the last nine years. Beatrice's stable and insightful leadership of the Audit Committee was of constant reassurance to the Board, in a period where there was much change in the world of reporting. During the autumn we welcomed two new directors, Penelope Freer and Alexandra Mackesy. Alexandra will assume the Chair of the Audit Committee and David Lamb will assume the role of Senior Independent Director.

 

Discount and share buy-backs

During the year, the AIC UK Smaller Companies sector as a whole traded at an average discount of 10.2% to NAV, with highs and lows of 12.1% and 8.0% respectively. At the year end, the Company's shares traded at a discount of 10.5%. The Company's discount ranged from 14.2% to 5.6%, with the average discount over the year being 9.1%. The Board continues to monitor the discount and will consider the merits of buying back shares as markets evolve, though we do not currently believe that share buy-backs represent the most effective way of generating long-term shareholder value. During the reporting year, no shares in the Company were bought back.

 

Revenue and dividend

The revenue return per share was 23.6p, compared with 22.8p for the previous year. The Board is proposing a final dividend for the year of 16.5p per share, making a total dividend for the year of 23.0p (2018: 21.0p), as an interim dividend of 6.5p was paid in March. The final dividend is, of course, subject to shareholder approval at the AGM.

 

Ongoing charge

The Board regularly reviews the ongoing charge and monitors the expenses incurred by the Company. For the year ended 31 May 2019, the base ongoing charge was unchanged at 0.42%, with no performance fee payable. The total charge payable last year, including performance fee, was 0.99%. Further details of the ongoing charge can be found in the Annual Report.

 

Continuation

Our shareholders are asked every three years to vote for the continuation of the Company, and a resolution to this effect will be put to the AGM in October. Your Company has shown that active investment management, well executed within the transparent and low-cost structure of an investment trust, is a highly effective means of gaining exposure to this class of equity. We therefore recommend that shareholders vote for the Company to continue.

 

Outlook

Populism has never been a more dominant influence in the political leadership of Western countries, and yet economies continue to grow, albeit at a slow pace, and unemployment continues to fall, creating new opportunities for investors. Global markets have responded positively to the latest round of interest rate signals emerging from the US and the expectation now is for lower rates, rather than rate increases, in the world's largest economy. Whilst progress on talks between the US and China on global trade has been mixed, any move forward here is likely to provide further support for investors.

 

Against this background, it is critical that the Brexit process is concluded, one way or another, and that there is some clarity around the UK's trading position with Europe and the rest of the world. This will help to remove any lingering uncertainty. Many companies had planned for the March Brexit by increasing their stock, only to find this was a wasted exercise; we shouldn't make companies do so again. I really hope that next year I shall be commenting on post-Brexit events, but in the meantime enjoy our increased dividend and your Company will continue its policy of seeking out quality growth at the right price. Your Board remains confident that Neil and his team are the best people to do this.

 

Annual General Meeting

The Company's AGM will be held at 11.30am on Friday, 4 October 2019 at the Company's registered office. We would encourage as many shareholders as possible to attend for the opportunity to meet the Board and watch a presentation from Neil reviewing the year and looking forward to the year ahead.

 

 

Jamie Cayzer-Colvin

Chairman

 

 

 

FUND MANAGER'S REPORT

 

Fund performance

The Company had a disappointing year in performance terms - falling in absolute terms and marginally underperforming its benchmark. The share price fell by 9.0% and the net asset value by 6.4% on a total return basis. This compared to a fall of 6.1% (total return) from the Numis Smaller Companies Index (excluding investment companies). The underperformance came from a negative contribution from gearing and expenses in the Company, partially offset by a positive contribution through underlying positive portfolio performance. This year marks only the second year of underperformance of the benchmark in the 16 years in which I have managed the investment portfolio.

 

Market - year under review

The year under review was a negative one for equity markets. To use a sporting metaphor it was a 'game of two halves'. In the first half of the year UK equity markets fell sharply as Brexit negotiations made limited progress, trade hostilities between US and China escalated, the Federal Reserve raised interest rates and oil and commodities prices fell.

 

However, equity markets recovered sharply in 2019. Factors driving the market higher included optimism that there would be progress on US and Chinese trade negotiations, a rally in the oil price, and the Federal Reserve softening its commentary around future interest rate increases.

 

Brexit negotiations have failed to make conclusive progress. The current situation is that the EU has granted an extension on the date the UK is to leave the EU until 31 October 2019 but with a new leader of the Conservative Party only recently installed and Parliament unable to come to a consensus on what deal, if any, it would approve, all scenarios remain possible.

 

The fundamentals of the corporate sector remained robust. Companies continued to grow their dividends whilst balance sheets remained strong. UK corporate earnings saw growth, helped by generally robust economic conditions and the continued weakness of Sterling increasing the value of overseas earnings for UK companies.

 

Smaller companies underperformed larger companies over the year. This is the third year in a row that the Numis Smaller Companies Index (excluding investment companies) has underperformed the FTSE All-Share Index, albeit not by significant amounts.

 

Gearing

Gearing started the year at 8.5% and ended it at 8.4%. Debt facilities are a combination of £30 million 20-year unsecured loan notes at an interest rate of 3.33% and £60 million of short-term bank borrowings. As markets fell, the use of gearing was a negative contributor to performance in the year, a contrast with the significant positive contribution it has made over the 16 years I have managed the investment portfolio.

 

Attribution analysis

The tables below show the top five contributors to, and the top five detractors from, the Company's relative performance.

 

 

Principal contributors

12-month return

%

Relative contribution

%

RWS Holdings

+75.6

+0.9

Aveva

+58.3

+0.8

Intermediate Capital

+18.0

+0.7

Gamma Communications

+59.5

+0.7

John Laing

+23.2

+0.6

 

RWS Holdings is a translation services business with particular strengths in intellectual property, life sciences and technology. The company has demonstrated long-term sustainable growth through a combination of organic and acquisitive expansion which has generated substantial shareholder return over the long term. Over the last year the much-improved trading performance of the recent acquisition, Moravia, has accelerated earnings growth and led to significant share price performance.

 

Aveva is an international provider of software and services to the engineering industry, particularly the oil and gas, mining, marine and power industries. It merged with Schneider Electric's industrial software business in 2018, significantly expanding the global reach of its digital transformation solutions. In this process Schneider took a controlling 60% stake in the business. The markets that Aveva is supplying are seeing robust expansion and the digitalisation of industrial markets is providing a further fillip to growth. The merger with Schneider is also providing cost saving synergies which is boosting profitability.

 

Intermediate Capital is an alternative finance provider and asset manager. It is a leading provider of mezzanine finance to LBO markets. It also owns a highly successful mezzanine, property lending and credit fund management operation. Its portfolio of investments is performing well but the primary growth engine of the business is the fund management operation. This division is having real success in asset gathering due to the strength of its performance track record, the quality of the team and underlying demand for its product in an income-hungry world. The management have also boosted the company's return on equity by returning substantial surplus capital.

 

Gamma Communications is a UK-based telecoms operator offering voice, data, mobile and internet based products to small and medium sized enterprises. The company has performed strongly over the last few years as it has utilised the channel network in order to gain market share. Gamma has an exciting product set that provides customers with flexibility and scalability in an environment where products are moving to internet based services. 2018 was a strong year for the group as Gamma expanded overseas into the Netherlands and launched new products with extra functionality.

 

John Laing is an international originator, active investor and manager of infrastructure projects. Its business is focused on major transport, social and environmental infrastructure projects awarded under governmental public-private partnership ("PPP") programmes and renewable energy projects. It does this across a range of international markets including the UK, Europe, Asia Pacific and North America. Our investment in the company provides us with exposure to growing infrastructural expenditure globally. The company has a large and growing pipeline of opportunities and raised further equity in 2018 to capitalise on these opportunities. The company is delivering healthy NAV growth, driven by new projects, the discount rate unwind and an ability to improve project returns throughout their life.

 

 

Principal detractors

12-month return

%

Relative contribution

%

Greggs1

+110.8

-0.9

Victoria

-50.7

-0.6

Dunelm1

+72.1

-0.6

Just Group

-66.9

-0.5

Renishaw

-26.3

-0.5

1 Not owned by the Company.

 

Greggs is a UK based convenience retailer of bakery products. The Company had no holding in Greggs. The bakery company has performed strongly, aided by the appeal of its value-for-money offering and the publicity around its launch of vegan sausage rolls. Strong profit growth has combined with a substantial valuation re-rating leaving Greggs on expensive earnings multiples.

 

Victoria is a pan-European floor coverings manufacturer. The company has bought, rationalised and integrated a number of UK carpet manufacturers. It has more recently expanded into the ceramic market in Europe through acquisitions in Italy and Spain. This expansion combined with a slowdown in trading saw debt expand to uncomfortable levels and combined with negative commentary from short sellers meant the shares underperformed. Recognising these concerns we sold our position in Victoria.

 

Dunelm is a UK retailer of homewares products. The Company had no holding in Dunelm. After a number of years of poor operational delivery and subdued earnings growth, Dunelm has seen an improvement in its performance, led by a new management team. This has led to a substantial valuation re-rating.

 

Just Group is a provider of enhanced annuities. The company has been impacted by its regulator, the PRA, deciding that the company needs to hold more capital against its portfolio of lifetime mortgages. To satisfy this capital requirement Just Group issued fresh debt and equity to restore its solvency position to more acceptable levels. The shares now trade at a substantial discount to both its tangible book value and embedded value and we believe they are very vulnerable to predatory interest.

 

Renishaw designs, develops and manufactures high technology precision measuring and calibration equipment. The business is a global leader in its field with strong patent protection. The company invests heavily in research and development to maintain its market leading technological position. Over the medium term the organic growth delivered has been one of the strongest in the capital goods sector. It has expanded its operations by diversifying into healthcare and additive manufacturing markets, both of which offer long-term attractive growth. In the short term the company is suffering from weakness in Asian demand and, given short visibility and high operational gearing, profitability is under pressure. That said, Renishaw, with a very strong balance sheet and a well-invested production base, is superbly positioned for the long term.

 

Portfolio activity

Trading activity in the portfolio was consistent with an average holding period of five years. 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 cut out stocks that fail to meet these criteria.

 

During the year we have added a number of new positions to our portfolio. These include:

 

Alliance Pharma acquires, markets and sells pharmaceutical and consumer healthcare products. The company has over 90 brands which are predominantly sold in the UK, US, China, France and Ireland. Alliance Pharma is an acquisition-driven business: the company buys niche products from major pharmaceuticals companies and looks to improve sales through focused marketing and expansion into new geographies. The company has solid underlying growth with strong cash generation and there remains a number of opportunities for the business to deploy capital to expand into new products.

 

Future is a tech-enabled global platform for specialised media which targets both consumers and business-to-business ("B2B") brands across Europe, America and Asia Pacific. The company creates specialised content to attract and grow high value audiences. These audiences are then monetised through memberships and subscriptions, print and digital advertising, e-commerce sales and events. Future has both an organic and inorganic growth strategy. Management are focused on purchasing new brands and titles to leverage their scalable technology and drive digital growth using its revenue optimisation model.

 

Savills is a real estate services company offering retail and corporate sales, valuation, fund management, property facilities and consulting for a broad range of clients across Europe, America, Asia and Australia. It is a business that has significantly diversified over the years, reducing its exposure to transactional services towards more predictable revenue streams. Our investment in Savills provides us with a quality, diversified real estate business with a strong management team and opportunities for expansion through tactical acquisitions.

 

Serica Energy is a North Sea focused oil and gas exploration and production company. The company expanded significantly through the acquisition of the Bruce, Rhum and Keith fields from BP, Total, BHP and Marubeni. This deal, which solved ownership issues of the vendors, was achieved at a fantastic price for Serica and transformed it into one of the major independent oil and gas producers in the North Sea. The company will generate substantial free cash flow in the coming years leaving it well placed to do further value-enhancing deals.

 

Vitec is a leading manufacturer and supplier of specialist camera/video accessories, lighting and sound equipment. The company has a high market share in each of its product categories and continues to outperform its peers through new product innovation. Whilst the consumer camera market has shifted to the use of mobile phones, there still remains an active professional and amateur photographer market that buys high quality equipment. Our investment in Vitec provides exposure to a company with an improving demand cycle, increasing margins through efficient manufacturing and the potential for small acquisitions of other niche brands.

 

In addition to the companies mentioned above, we invested in a number of initial public offerings ("IPOs") in the year. These included AJ Bell, an investment platform business, Codemasters, a software games developer and publisher, Tekmar, a provider of subsea protection systems and engineering services and Watches of Switzerland, a retailer of luxury branded watches.

 

To balance the additions to our portfolio, we have disposed of positions in companies which we felt were set for poor price performance. We sold our holding in Elementis, a speciality chemicals group, where the company made a poorly judged and expensive acquisition of Mondo Chemicals, an industrial talc company. This boosted leverage to levels we were uncomfortable with. We also disposed of our holding in NCC, a cybersecurity consultancy and escrow services business, as the company warned that recruitment and retention of employees was proving difficult. In addition the software escrow business is seeing structural decline as software moves to the cloud. Other companies we sold due to a belief that they were structurally challenged or suffering from poor operational performance included: Playtech, a software and services provider to the gaming industry; Ricardo, a consultant serving the automotive, rail and environmental markets; XPS Pensions, a pensions consultant; Accesso, a queueing and ticketing software business; and Ted Baker, a clothing brand and retailer. We also sold our positions, in line with our stated policy, in GVC, a gaming company and Melrose, a diversified industrial group, as both were elevated to the FTSE 100.

 

We benefited from a level of takeover activity in the year, albeit at reduced levels compared to previous years. Three portfolio companies received agreed bids. Within our portfolio, takeover bids were received for: Faroe Petroleum, an oil and gas exploration and production company, from DNO; Tarsus, an international exhibitions company, from Charterhouse Private Equity; and WYG, an engineering consultancy, from Tetra Tech.

 

Portfolio outlook

The following table shows the Company's top 10 stock positions and their active positions versus the Numis Smaller Companies Index (excluding investment companies) at the end of May 2019.

 

Top ten active positions

at 31 May 2019

Holding

%

Index Weight

%

Active Weight

%

Intermediate Capital

3.5

-

3.5

Bellway

3.1

-

3.1

Cineworld

2.9

-

2.9

Clinigen

2.8

-

2.8

John Laing

2.5

-

2.5

RWS Holdings

2.2

-

2.2

Paragon

2.2

0.8

1.4

Renishaw

2.1

-

2.1

Dechra Pharmaceuticals

2.0

-

2.0

Aveva

2.0

-

2.0

 

A brief description of the largest active positions (excluding Aveva, Intermediate Capital, John Laing, Renishaw and RWS Holdings which were covered earlier) follows:

 

Bellway is a national UK housebuilder. The UK new housing market is robust, due to low interest rates and Government initiatives, particularly Help to Buy. Bellway is looking to exploit these conditions by expanding its national footprint, whilst maintaining a strong land-bank and balance sheet. Operating margins are over 20% and volumes and profits are growing. The positive outlook for the sector is aided by: a benign land market, as the number of competitors has reduced from the previous cycle; the structural under-supply of housing in the UK; and the capital discipline Bellway and its peers are displaying.

 

Cineworld is an international cinema operator. The company has market leading positions in the UK, Israel, Eastern Europe and the USA. Historically growth has been driven by a rapid roll out of new capacity, particularly in Eastern Europe where cinema visits per capita markedly lag more developed economies. The company undertook significant expansion in 2018 by acquiring Regal Entertainment, a leading US cinema chain. Although the US is a mature market, Regal's valuation was depressed by poor 2017 financial results, which were a consequence of a weak film release schedule, particularly over the summer months. This provided Cineworld with an opportunity to acquire a good asset at a knockdown valuation. With a much stronger film slate, significant cost synergies and an opportunity to invest in a tired Regal asset base, the prospects for growth look good.

 

Clinigen is a global speciality pharmaceutical services business. Its core activity is providing comparator drugs and other services for clinical trials and providing market access for drugs that are difficult to obtain or yet to be licensed. It also has a speciality pharmaceutical division, which looks to acquire niche drugs from major pharmaceutical companies, where management think they can enhance performance through additional regulatory approval or increased targeted marketing. The company has seen strong growth since its IPO in 2012 and this is likely to continue given the positive structural growth of its end markets.

 

Paragon is principally a provider of buy-to-let mortgages. The company has changed its structure in the last few years by obtaining a banking licence, growing its lending in asset-backed car finance and specialist residential markets and diversifying its funding sources into the retail market. The company enjoys a very strong capital position, enabling it to pay higher dividends whilst buying back some of its own stock. The introduction of new regulations on complex underwriting should help the specialist lenders like Paragon grow market share, and at a modest premium to asset value, we believe Paragon represents good value.

 

Dechra Pharmaceuticals is an international specialist pharmaceuticals business that develops, manufactures and sells products exclusively for vets. It does this for companion animals, equine animals and food producing animals. Key product focus areas include dermatology, ophthalmology, endocrinology and antibiotics and vaccinations for food producing animals. Company strategy has been to grow the business both organically and inorganically and the long-standing CEO has successfully done this through growing the pipeline, diversifying geographically (most notably in the US) and undertaking some value accretive acquisitions. Our investment provides us with exposure to growing demand for veterinary pharmaceuticals as the trends of the humanisation of pets and increase in demand for protein continue.

 

As at 31 May 2019, the portfolio was weighted by company size as follows:

 

 

Weighting %

 

31 May 2019

31 May 2018

FTSE 100

0.0

2.5

FTSE 250

62.0

62.9

FTSE Small Cap

21.3

21.5

FTSE AIM

25.1

21.6

Gearing

-8.4

-8.5

 

Market outlook

The UK economy is showing anaemic growth. Brexit deliberations stumble on, with intermittent progress. There is clearly a range of outcomes but what deal, if any, the UK will end up with is, at this point, unclear. Extra complication is added by the weak position of the minority Conservative Government and that Boris Johnson has replaced Theresa May as Prime Minister. The battle to replace her and the Summer Parliamentary recess accounts for a significant proportion of the time before we are due to leave the EU. This political uncertainty is likely to weigh on consumer and business confidence and delay and postpone investment and purchasing decisions, further dampening economic growth.

 

Outside the UK, economic conditions are robust, but slowing. Europe, in particular, is showing signs of economic slowdown. Escalating trade tensions are providing additional negative commentary and after what seemed to be good progress between the US and China, recent rhetoric and actions have seen an increase in volatility of relations between the two countries. The rise in US interest rates in 2018 flagged to investors that loose global monetary conditions were reversing. However, commentary from the Federal Reserve has softened recently and the expectation is that there will be cuts in US rates in 2019.

 

In the corporate sector, conditions are intrinsically stronger than they were during the financial crisis of 2008-9. Balance sheets are more robust and dividends are growing. In addition, a large proportion of UK corporate earnings come from overseas, even among smaller companies, and should be boosted by the relative weakness of Sterling.

 

In terms of valuations, the equity market is now trading below long-term averages. Mergers and acquisitions ("M&A") remains a supportive feature for smaller companies. If corporate confidence does not deteriorate, M&A will increase, especially as little or no return can currently be generated from cash and the cost of debt is historically low. We have seen interest in UK corporates from abroad and from private equity and, given the relatively low valuation of UK equities and a weak currency, we expect this trend to continue. However, a return to a more vibrant M&A market depends on a Brexit resolution and clarity around the UK's trading position with Europe and the rest of the world.

 

In conclusion, the year under review has been a disappointing one for the Company. Absolute and relative performance were both negative. However, our portfolio companies have performed robustly, are soundly financed and attractively valued. Additionally, the smaller companies market continues to throw up exciting growth opportunities in which the Company can invest. We remain confident in our ability to generate significant value from a consistent and disciplined investment approach.

 

 

Neil Hermon

Fund Manager

 

 

 

INVESTMENT PORTFOLIO at 31 May 2019

Company

Principal activities

Valuation

£'000

Portfolio

%

Intermediate Capital

Mezzanine finance

25,426

3.28

Bellway

Housebuilder

21,928

2.82

Cineworld

Cinema operator

20,445

2.63

Clinigen1

Pharmaceuticals

20,160

2.60

John Laing

Infrastructure investor

17,885

2.30

RWS1

Patent translation services

15,500

2.00

Paragon

Buy-to-let mortgage provider

15,415

1.99

Renishaw

Precision measuring and calibration equipment

15,053

1.94

Dechra Pharmaceuticals

Veterinary pharmaceuticals

14,322

1.84

Aveva

Design software

14,230

1.83

10 largest

 

180,364

23.23

 

 

 

 

Sanne

Investment management services

13,324

1.72

Gamma Communications1

Telecommunication services

12,548

1.62

GB Group1

Data intelligence services

12,536

1.61

Victrex

Speciality chemicals

12,419

1.60

Burford Capital1

Litigation finance

12,335

1.59

Oxford Instruments

Advanced instrumentation equipment

12,033

1.55

OneSavings Bank

Banks

11,457

1.48

Ultra Electronics

Defence and aerospace products

11,160

1.44

St Modwen Properties

Real estate investment and services

10,872

1.40

SIG

Building materials distributor

10,238

1.32

20 largest

 

299,286

38.56

 

 

 

 

TI Fluid Systems

Automotive supplier

10,225

1.32

Balfour Beatty

International contractor

10,217

1.32

IntegraFin

B2B financial platform

10,118

1.30

Vesuvius

Materials technology for steel and foundry industry

9,988

1.29

Euromoney Institutional Investor

B2B information

9,979

1.29

Ibstock

Bricks manufacturer

9,758

1.26

Synthomer

Speciality chemicals

9,725

1.25

Learning Technologies Group1

E-learning

9,664

1.24

Softcat

Software reseller

9,550

1.23

Tarsus Group

Exhibition organiser

9,266

1.19

30 largest

 

397,776

51.25

 

 

 

 

Coats

Global threads provider

8,812

1.14

Midwich1

Audio-visual equipment distributor

8,596

1.11

Jupiter Fund Management

Investment management company

8,556

1.10

Ascential

Exhibition organiser and data services

8,535

1.10

Scapa1

Technical tapes

8,379

1.08

Cairn Energy

Oil & gas exploration and production

8,305

1.07

Impax Asset Management1

SRI investment management company

8,186

1.05

Hunting

Oil equipment and services

8,128

1.05

Countryside

Housebuilder

8,019

1.03

Premier Oil

Oil & gas exploration and production

7,874

1.01

40 largest

 

481,166

61.99

 

 

 

 

Brewin Dolphin

Wealth management

7,756

1.00

Grainger

Residential property investor

7,724

1.00

Vitec

Broadcast and camera systems

7,718

0.99

Spectris

Electronic control and process instrumentation

7,694

0.99

Northgate

Commercial vehicle hire

7,464

0.96

Computacenter

IT reseller

7,327

0.94

CLS

Real estate investment and services

6,967

0.90

Consort Medical

Healthcare products

6,900

0.89

Alpha Financial Markets1

Investment management consultancy

6,840

0.88

Team171

Games software developer

6,837

0.88

50 largest

 

554,393

71.42

  

 

 

 

Codemasters1

Games software developer

6,588

0.85

Rotork

Process control solutions

6,469

0.83

Avon Rubber

Defence and dairy industry products

6,211

0.80

Savills

Property transactional consulting services

6,141

0.79

SDL

Language software service provider

5,859

0.75

ITE Group

Exhibition organiser

5,802

0.75

DFS

Furniture retailer

5,789

0.75

Office property investor and developer

5,619

0.72

Gocompare.com

Price comparison website

5,615

0.72

Just Group

Enhanced annuity provider

5,600

0.72

60 largest

 

614,086

79.10

 

 

 

 

Hollywood Bowl Group

Ten-pin bowling operator

5,468

0.70

Restore1

Office service provider

5,390

0.69

Polypipe

Building products

5,366

0.69

Unite Group

Student accommodation investor

5,317

0.68

Howden Joinery

Kitchen manufacturer and retailer

5,275

0.68

Tyman

Building products

5,273

0.68

Eurocell

Building products

5,189

0.67

Safestore Holdings

Self-storage operator

5,171

0.67

SThree

Recruitment company

5,168

0.67

XP Power

Electrical power products

5,104

0.66

70 largest

 

666,807

85.89

 

 

 

 

Bodycote

Engineering group

5,057

0.65

Crest Nicholson

Housebuilder

4,857

0.63

Next Fifteen Communications1

PR and media services

4,735

0.61

Luceco

Electrical products

4,720

0.61

Watches of Switzerland

Luxury watch retailer

4,657

0.60

Lookers

Automotive retailer

4,510

0.58

Tribal Group1

Education support services and software

4,507

0.58

Future

Specialist internet, website and magazine company

4,464

0.57

Alliance Pharma1

Pharmaceutical products

4,385

0.56

Urban & Civic

Real estate investment and services

4,238

0.55

80 largest

 

712,937

91.83

 

 

 

 

Smart Metering Systems1

Energy smart meters

4,076

0.52

Aptitude Software

Software retailer

3,938

0.51

Safestyle1

Window replacement retailer

3,876

0.50

RM

Education software and services

3,743

0.48

Serica Energy1

Oil and gas exploration and production

3,594

0.46

Joules1

Clothing retailer

3,510

0.45

Marshall Motor1

Automotive retailer

3,441

0.44

AA

Roadside assistance

3,215

0.41

Blue Prism1

Robot processing automation

3,185

0.41

Gym Group

Gym operator

3,159

0.41

90 largest

 

748,674

96.42

 

 

 

 

Blancco Technology1

Data erasure software

2,960

0.38

Costain

Contractor

2,835

0.37

Tekmar1

Offshore wind protection systems

2,762

0.36

Sherborne Investors (Guernsey) C

Speciality finance

2,601

0.34

Severfield

Industrial engineering

2,520

0.32

Spire Healthcare

Hospital operator

2,385

0.31

Capital & Regional

Retail property investor

2,374

0.31

WYG1

Engineering consultancy

2,160

0.28

Thruvision1

Detection technology

1,747

0.23

AJ Bell

B2B and B2C investment platform

1,672

0.22

100 largest

 

772,690

99.54

 

 

 

 

Charles Taylor

Insurance management services

1,624

0.21

Xaar

Electronic equipment

1,239

0.16

AB Dynamics1

Automotive testing and measurement products

680

0.09

Total Equity Investments

 

776,233

100.00

 

There were no convertible or fixed interest securities at 31 May 2019 (2018: None)

1 Quoted on the Alternative Investment Market

 

PRINCIPAL RISKS AND UNCERTAINTIES

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks facing the Company which relate to the activity of investing in the shares of smaller companies that are listed (or quoted) in the United Kingdom. In carrying out this assessment, the Board has considered the market uncertainty arising from the result of the UK referendum to leave the European Union. Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly and it may not be possible to realise an investment at the Manager's assessment of its value. The companies in which investments are made may operate unsuccessfully, or fail entirely, such that shareholder value is lost. The Company is also exposed to the operational risk that one or more of its contractors or sub-contractors may not provide the required level of service.

 

The Board considers regularly the principal risks facing the Company in order to mitigate them as far as practicable. The Board has drawn up a risk matrix which identifies the substantial risks to which the Company is exposed. The Board has also put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy. The principal risks fall broadly under the following categories:

 

Risk

Controls and mitigation

Investment activity and strategy

Poor long-term investment performance (significantly below agreed benchmark or market/industry average)

 

Loss of the Fund Manager or management team

The Board reviews investment strategy at each board meeting. An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may lead to underperformance against the Company's benchmark and the companies in its peer group; it may also result in the Company's shares trading at a wider discount to the net asset value per share. The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings. The Manager operates in accordance with investment limits and restrictions determined by the Board; these include limits on the extent to which borrowings may be used. The Board reviews its investment limits and restrictions regularly and the Manager confirms its compliance with them each month. The Manager provides the directors with management information, including performance data and reports and shareholder analysis. The Board monitors the implementation and results of the investment process with the Fund Manager, who attends all board meetings, and regularly reviews data that monitor portfolio risk factors.

 

The Board obtains assurances from the Manager that the UK Smaller Companies team is suitably resourced and the Fund Manager is appropriately remunerated and incentivised in this role. The Board also considers the succession plan for the Fund Management team on an annual basis.

Accounting, legal and regulatory

Loss of investment trust status

 

Brexit and other UK political risk

 

Breach of company law or Listing Rules resulting in suspension

In order to qualify as an investment trust the Company must comply with section 1158 of the Corporation Tax Act 2010. A breach of section 1158 could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to corporation tax. The section 1158 criteria are monitored by the Manager and the results are reported to the directors at each board meeting. The Company must comply with the provisions of the Companies Act 2006 and, as the Company has a premium listing on the London Stock Exchange, the Company must comply with Listing, Prospectus and Disclosure Guidance and Transparency Rules of the UK Listing Authority ("UKLA").

 

A breach of the Companies Act could result in the Company and/or the directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of section 1158. The Board relies on its company secretary and its professional advisers to ensure compliance with the Companies Act and UKLA Rules.

 

The Board reviews the potential impact of Brexit and other fundamental political infrastructure change as an integral part of investment risks and will continue to assess the portfolio.

Operational

Failure of a key third-party service provider

 

Cyber-crime leading to loss of confidential data

 

Breach of internal controls

Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. Janus Henderson has contracted some of its operational functions, principally those relating to trade processing, investment administration and accounting, to BNP Paribas Securities Services. Details of how the Board monitors the services provided by Janus Henderson and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the Annual Report.

 

Cyber security is closely monitored by the Audit Committee as part of quarterly internal controls reports, and the Audit Committee receives an annual presentation from Janus Henderson's Head of Information Security.

Financial instruments and the management of risk

By its nature as an investment trust, the Company is exposed in varying degrees to market risk (comprising market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk. An analysis of these financial risks and the Company's policies for managing them are set out in the Notes to the financial statements within the Annual Report.

 

 

 

VIABILITY STATEMENT

The Company is a long-term investor. The Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of the Company's long-term horizon and what the Board believes to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented above and in the Annual Report. The assessment has considered the impact of the likelihood of the principal risks and uncertainties facing the Company, in particular investment strategy and performance against benchmark, whether from asset allocation or the level of gearing, and market risk, in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

 

The Board took into account the liquidity of the portfolio and the borrowings in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's loan and borrowing facilities and how a breach of any covenants could impact on the Company's net asset value and share price. The Board does not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place, and nor does the Board envisage any change in strategy or objective or any events that would prevent the Company from continuing to operate over that period - the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. Only a sustained financial crisis affecting the global economy could have an impact on this assessment. Whilst there is currently uncertainty in the markets due to the UK's negotiations to leave the European Union, the Board does not believe that this will have a long-term impact on the viability of the Company and its ability to continue in operation.

 

We are conscious that the continuation of the Company is due to be considered by shareholders at the forthcoming annual general meeting ("AGM"). This is the sixth such time the continuation vote has been put to shareholders, and the resolution has been successfully passed on each occasion. The Board supports the continuation of the Company and expects that it will continue to exist for the foreseeable future, being ideally suited for long-term investment in UK-listed/quoted smaller companies. If, however, such a vote were not passed, the directors would follow the provisions in the articles of association to wind up the Company's assets.

 

Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five-year period.

 

 

FUTURE DEVELOPMENTS

The future success of the Company is dependent primarily on the performance of its investments, which will to a significant degree reflect the performance of the stock market and the Manager.

 

While the Company invests in companies that are listed (or quoted) in the United Kingdom, the underlying businesses of those companies are affected by various external factors, many of an international nature. The Board's intention is that the Company will continue to pursue its stated investment objective and strategy, as explained in the Annual Report. The Chairman's Report and the Fund Manager's Report give commentary on the outlook for the Company.

 

 

RELATED-PARTY TRANSACTIONS

The Company's transactions with related parties in the year were with the directors and the Manager. There have been no material transactions between the Company and its directors during the year and the only amounts paid to them were in respect of remuneration, for which there were no outstanding amounts payable at the year end. The directors did not claim any expenses during the years to 31 May 2019 or 31 May 2018. Directors' shareholdings are disclosed in the Annual Report.

 

In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there have been no material transactions with the Manager affecting the financial position of the Company during the year under review. More details on transactions with the Manager, including amounts outstanding at the year end, are giving in the Notes to the financial statements in the Annual Report.

 

 

STATEMENT UNDER DISCLOSURE GUIDANCE AND TRANSPARENCY RULE 4.1.12

Each of the directors confirms that, to the best of his or her knowledge:

 

·      the financial statements, which have been prepared in accordance with IFRS as adopted by the European Union on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

 

·      the Strategic Report and financial statements in the Annual Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

 

 

For and on behalf of the Board

Jamie Cayzer-Colvin

Chairman

 

 

 

AUDITED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Year ended 31 May 2019

Year ended 31 May 2018

 

 

Notes

 

 

 

Revenue

return

£'000

Capital

return

£'000

 

Total

£'000

Revenue

return

£'000

Capital

return

£'000

 

Total

£'000

2

Investment income

19,431

-

19,431

18,662

-

18,662

3

Other income

80

-

80

138

-

138

 

(Losses)/gains on investments held at fair value through profit or loss

-

(64,758)

(64,758)

-

97,561

97,561

 

Total income

19,511

(64,758)

(45,247)

18,800

97,561

116,361

 

Expenses

 

 

 

 

 

 

4

Management and performance fees

(736)

(1,719)

(2,455)

(723)

(5,772)

(6,495)

 

Other expenses

(723)

-

(723)

(622)

-

(622)

 

Profit/(loss) before finance costs and taxation

18,052

(66,477)

(48,425)

17,455

91,789

109,244

 

Finance costs

(431)

(1,006)

(1,437)

(433)

(1,010)

(1,443)

 

Profit/(loss) before taxation

17,621

(67,483)

(49,862)

17,022

90,779

107,801

 

Taxation

-

-

-

-

-

-

 

Profit/(loss) for the year and total comprehensive income

17,621

(67,483)

(49,862)

17,022

90,779

107,801

5

Earnings per ordinary share - basic and diluted

23.59p

(90.34p)

(66.75p)

22.79p

121.52p

144.31p

 

The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.

 

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

 

 

 

AUDITED STATEMENT OF CHANGES IN EQUITY

 

 

 

Year ended 31 May 2019

 

 

                                  Retained earnings

 

 

 

Notes

 

 

Share

capital

£'000

Capital

redemption

reserve

£'000

 

Capital

reserves

£'000

 

Revenue

reserve

£'000

 

Total

equity

£'000

 

Total equity at 1 June 2018

18,676

26,745

713,788

22,859

782,068

 

Total comprehensive income:

(Loss)/profit for the year

 

-

 

-

(67,483)

17,621

(49,862)

 

Transactions with owners,

recorded directly to equity:

 

 

 

 

 

6

Ordinary dividends paid

-

-

-

(16,061)

(16,061)

 

 

 

 

 

 

 

 

Total equity at 31 May 2019

18,676

26,745

646,305

24,419

716,145

 

 

 

 

 

 

 

 

 

Year ended 31 May 2018

 

 

                                    Retained earnings

 

 

 

Notes

 

 

Share

capital

£'000

Capital

redemption

reserve

£'000

 

Capital

reserves

£'000

 

Revenue

reserve

£'000

 

Total

equity

£'000

 

Total equity at 1 June 2017

18,676

26,745

623,009

20,030

688,460

 

Total comprehensive income:

Profit for the year

 

-

 

-

90,779

17,022

107,801

 

Transactions with owners,

recorded directly to equity:

 

 

 

 

 

6

Ordinary dividends paid

-

-

-

(14,193)

(14,193)

 

 

 

 

 

 

 

 

Total equity at 31 May 2018

18,676

26,745

713,788

22,859

782,068

 

 

 

AUDITED BALANCE SHEET

 

 

Notes

 

 

  At 31 May

2019

£'000

  At 31 May

2018

£'000

 

Non-current assets

 

 

 

Investments held at fair value through profit or loss

 

776,233

848,330

 

 

Current assets

 

 

 

 

Receivables

 

3,215

3,334

 

Tax recoverable

 

19

19

 

Cash and cash equivalents

 

872

4,889

 

 

 

4,106

8,242

 

 

Total assets

 

780,339

 

856,572

 

 

 

 

 

 

Current liabilities

 

 

 

 

Payables

 

(5,284)

(8,612)

 

Bank loans

 

(29,087)

(36,079)

 

 

 

(34,371)

(44,691)

 

 

 

 

 

 

Total assets less current liabilities

 

745,968

811,881

 

Non-current liabilities

 

 

 

 

Financial liabilities

 

(29,823)

(29,813)

 

 

Net assets

 

716,145

 

782,068

 

Equity attributable to equity shareholders

 

 

 

7

Share capital

 

18,676

18,676

 

Capital redemption reserve

 

26,745

26,745

 

Retained earnings:

 

 

 

 

   Capital reserves

 

646,305

713,788

 

   Revenue reserve

 

24,419

22,859

 

Total equity

 

716,145

782,068

 

 

 

 

 

8

Net asset value per ordinary share

 

958.7p

1,046.9p

 

 

 

AUDITED STATEMENT OF CASH FLOWS

 

 

              Year ended

 

 

31 May

2019

£'000

31 May

2018

£'000

Operating activities

 

 

(Loss)/profit before taxation

(49,862)

107,801

Add back interest payable

1,437

1,443

Losses/(gains) on investments held at fair value through profit or loss

64,758

(97,561)

Purchases of investments

(135,343)

(196,351)

Sales of investments

142,682

197,318

Decrease/(increase) in receivables

207

(21)

(Increase)/decrease in amounts due from brokers

(14)

866

Increase in accrued income

(74)

(418)

(Decrease)/increase in payables

(3,646)

774

Increase/(decrease) in amounts due to brokers

323

(1,480)

 

 

 

Net cash inflow from operating activities before interest1

20,468

12,371

 

 

 

Interest paid

(1,432)

(1,428)

 

 

 

Net cash inflow from operating activities

19,036

10,943

 

 

 

Financing activities

 

 

Equity dividends paid

(16,061)

(14,193)

(Repayment)/drawdown of bank loans

(6,992)

4,310

Net cash outflow from financing activities

(23,053)

(9,883)

 

 

 

(Decrease)/increase in cash and cash equivalents

(4,017)

1,060

Cash and cash equivalents at the start of the year

4,889

3,829

Cash and cash equivalents at the end of the year

872

4,889

 

1 In accordance with IAS 7.31, cash flow from dividends was £19,357,000 (2018: £18,263,000) and cash inflow from interest was £6,000 (2018: £1,000).

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1

 

Accounting policies

a) 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. The financial statements of the Company for the year ended 31 May 2019 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the IFRS Interpretations Committee ("IFRS IC") that remain in effect, to the extent that IFRS have been adopted by the European Union.

 

The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments held at fair value through profit or loss. The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the year. Where presentational guidance set out in the Statement of Recommended Practice (the "SORP") for investment trusts issued by the Association of Investment Companies (the "AIC") in November 2014 and updated in February 2018 with consequential amendments is consistent with the requirements of IFRS. The directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP.

 

b) Going concern

The Company's shareholders are asked every three years to vote for the continuation of the Company. An ordinary resolution to this effect was put to the Annual General Meeting held on 23 September 2016 and passed by a substantial majority of the shareholders. The assets of the Company consist almost entirely of securities that are listed (or quoted on AIM) and, accordingly, the directors believe that the Company has adequate financial resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Having assessed these factors, the principal risks and other matters discussed in connection with the Viability Statement, the Board has decided that it is appropriate for the financial statements to be prepared on a going concern basis.

 

2

Investment income

 

 

 

 

 

 

 

2019

£'000

2018

£'000

Income from companies listed or quoted in the United Kingdom:

 

 

Dividends

17,154

15,954

Special dividends

1,827

2,133

 

Property income distributions

450

575

 

Total investment income

19,431

18,662

 

 

3

Other income

 

 

 

 

 

 

 

2019

£'000

2018

£'000

Bank and other interest

6

2

Underwriting income (allocated to revenue)1

74

136

 

80

138

 

1 None of the income receivable from sub-underwriting commitments was allocated to capital during the year (2018: £nil)

 

4

Management and performance fees

 

 

 

 

2019

2018

 

 

 

 

 

 

Revenue

return

£'000

Capital

return

£'000

Total

return

£'000

Revenue

return

£'000

Capital

return

£'000

Total

return

£'000

Management fee

736

1,719

2,455

723

1,686

2,409

Performance fee

-

-

-

-

4,086

4,086

 

736

1,719

2,455

723

5,772

6,495

 

A summary of the Management Agreement is given in the Annual Report.

 

5

Earnings per ordinary share

The earnings per ordinary share figure is based on the net loss for the year of a £49,862,000 (2018: net profit of £107,801,000) and on 74,701,796 (2018: 74,701,796) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

 

The earnings per ordinary share figure detailed above can be further analysed between revenue and capital, as below:

 

The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings per ordinary share are the same.

 

 

 

 

2019

£'000

2018

£'000

Net revenue profit

17,621

17,022

Net capital (loss)/profit

(67,483)

90,779

 

 

 

Net total (loss)/profit

(49,862)

107,801

 

 

 

Weighted average number of ordinary shares in issue during the year

74,701,796

74,701,796

 

 

 

 

2019

2018

Revenue earnings per ordinary share

23.59p

22.79p

 

Capital earnings per ordinary share

(90.34p)

121.52p

 

 

 

 

 

Total earnings per ordinary share

(66.75p)

144.31p

 

 

6

Ordinary dividends

 

 

 

 

 

 

 

 

 

Record Date

 

Pay date

2019

£'000

2018

£'000

Final dividend: 15.0p

(2017: 13.0p) for the year ended 31 May 2018

31 August 2018

28 September 2018

11,205

9,711

Interim dividend: 6.5p

(2018: 6.0p) for the year ended 31 May 2019

15 February 2019

8 March 2019

4,856

4,482

 

 

 

16,061

14,193

 

 

Subject to approval at the Annual General Meeting, the proposed final dividend of 16.5p per ordinary share will be paid on 8 October 2019 to shareholders on the register of members at the close of business on 9 August 2019. The shares will be quoted ex-dividend on 8 August 2019.

 

The proposed final dividend for the year ended 31 May 2019 has not been included as a liability in these financial statements. Under IFRS, the final dividend is not recognised until approved by the shareholders. All dividends have been paid or will be paid out of revenue profits.

 

The total dividends payable in respect of the financial year which form the basis of the test under section 1158 of the Corporation Tax Act 2010 are set out below:

 

 

 

 

2019

£'000

2018

£'000

 

 

Revenue available for distribution by way of dividends for the year

17,621

17,022

 

 

Interim dividend for the year ended 31 May 2019: 6.5p (2018: 6.0p) per ordinary share

(4,856)

(4,482)

 

 

Final dividend for the year ended 31 May 2018: 15.0p (based on 74,701,796 shares in issue at 6 August 2018)

-

 

(11,205)

 

 

Proposed final dividend for the year ended 31 May 2019: 16.5p (based on 74,701,796 shares in issue at 1 August 2019)

(12,326)

-

 

 

 

439

1,335

 

 

 

 

 

 

7

Share capital

 

 

 

 

 

 

2019

£'000

2018

£'000

 

Allotted, issued authorised and fully paid:

 

 

 

74,701,796 ordinary shares of 25p each (2018: 74,701,796)

18,676

18,676

 

 

 

 

 

During the year the Company made no purchases of its own issued ordinary shares (2018: nil). Since 31 May 2019 the Company has not purchased any ordinary shares.

 

 

8

Net asset value per ordinary share

 

 

The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £716,145,000 (2018: £782,068,000) and on the 74,701,796 ordinary shares in issue at 31 May 2019 (2018: 74,701,796).

 

The Company has no securities in issue that could dilute the net asset value per ordinary share.

 

The movement during the year of the net assets attributable to the ordinary shares was as follows:

 

 

 

 

2019

£'000

2018

£'000

 

Net assets attributable to the ordinary shares at 1 June

782,068

688,460

 

Net (losses)/gains for the year

(49,862)

107,801

 

Ordinary dividend paid in the year

(16,061)

(14,193)

 

 

 

 

 

 

Net assets attributable to the ordinary shares at 31 May

716,145

782,068

 

 

 

 

9

2019 financial information

 

 

The figures and financial information for the year ended 31 May 2019 are compiled from an extract of the latest financial statements of the Company and do not constitute the statutory accounts for that year. Those financial statements include the report of the auditor which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. They have not yet been delivered to the Registrar of Companies.

 

 

10

2018 financial information

 

 

The figures and financial information for the year ended 31 May 2018 are compiled from an extract of the published financial statements of the Company and do not constitute the statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

 

 

11

Annual Report

 

 

The Annual Report for the year ended 31 May 2019 will be posted to shareholders in August 2019 and will be available on the Company's website: www.hendersonsmallercompanies.com. Copies will be available thereafter from the corporate secretary at the Company's registered office, 201 Bishopsgate, London EC2M 3AE.

 

 

12

Annual general meeting ("AGM")

The AGM will be held at the registered office on Friday 4 October 2019 at 11.30 am. The Notice of AGM will be posted to shareholders with the Annual Report.

 

 

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.

 

               

 

For further information please contact:

 

Neil Hermon

Fund Manager 

The Henderson Smaller Companies Investment Trust plc

Telephone: 020 7818 4351

James de Sausmarez

Director and Head of Investment Trusts

Janus Henderson Investors

Telephone: 020 7818 3349

 

 

Laura Thomas

Investment Trust PR Manager

Janus Henderson Investors

Telephone: 020 7818 2636

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Annual Financial Report - RNS