Henderson Euro Focus - Half-year Report
22/05/2023 15:34
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RNS Number : 2404A Henderson European Focus Trust PLC 22 May 2023
JANUS HENDERSON FUND MANAGEMENT UK LIMITED
LEGAL ENTITY IDENITIFIER: 213800GS89AL1DK3IN50
HENDERSON EUROPEAN FOCUS TRUST PLC (the "Company")
Unaudited results for the half-year ended 31 March 2023
This announcement contains regulated information
Investment objective
The Company seeks to maximise total return (a combination of income and
capital growth) from a portfolio of stocks listed in Europe.
Performance highlights
· Net asset value ("NAV") per share total return(1) rose by 22.8%, outperforming
the benchmark(2) return by 1.1%
· Share price total return(3) rose by 28.3%
· Interim dividend of 1.30p per share declared, +8.3% on the prior year (2022:
1.20p)
Total return performance to 31 March 2023
6 months 1 year 3 years 5 years 10 years
% % % % %
NAV(1) 22.8 10.8 64.0 55.2 173.9
Benchmark index(2) 21.7 8.7 56.2 47.4 137.4
AIC Europe sector NAV(4) 22.3 7.1 54.7 51.3 159.0
Share price(3) 28.3 11.0 73.3 42.2 170.2
AIC Europe sector share price(4) 25.7 5.3 56.2 45.6 155.3
IA OEIC Europe sector(5) 21.7 6.6 55.2 39.2 125.0
Financial highlights
At 31 March 2023 At 30 September 2022
(unaudited) (audited)
Shareholders' funds
Net assets £377.6m £314.4m
NAV per ordinary share 177.47p 147.67p
Share price 159.00p 127.0p
Gearing at period end(6) 6.8% 1.9%
Half-year ended Year ended
31 March 2023 30 September 2022
(unaudited) (audited)
Total return to equity shareholders
Revenue return after taxation (£'000) 2,426 10,913
Capital return after taxation (£'000) 68,696 (58,341)
Total return (£'000) 71,122 (47,428)
Total return per ordinary share
Revenue 1.14p 5.11p
Capital 32.28p (27.32p)
Total return 33.42p (22.21p)
1 Net asset value ("NAV") total return per ordinary share (with dividends
reinvested)
2 FTSE World Europe ex UK Index on a total return basis in sterling terms
3 Share price total return (with dividends reinvested) using mid-market
closing price
4 Average for the Association of Investment Companies ("AIC") Europe sector of
seven companies
5 Investment Association ("IA") open-ended investment company ("OEIC") Europe
ex UK Equity sector average NAV, comprising 149 OEICs at 31 March 2023
6 Net gearing, as defined in the alternative performance measures in the
Annual Report for the year ended 30 September 2022
Sources: Morningstar Direct, Refinitiv Datastream and Janus Henderson
INTERIM MANAGEMENT STATEMENT
CHAIR'S STATEMENT
We are living through an era in which each half-yearly update seemingly
warrants a dedicated volume in the economic history books. The Company's
financial year end of 30 September 2022 coincided with a trough in European
equity markets. Since then, as our Fund Managers suggested (or hoped) would be
the case, European share prices have recovered. Why? Because they simply
became too cheap, judging by historical precedents and economies have proven
more robust than expected. Whilst the ongoing war in Ukraine continued to have
a major impact on supply shortages, higher food and energy prices, the mild
weather over the winter proved a blessing. For many companies and households -
more so for those on the Continent than here in the UK - the outcome in terms
of pressure on revenues and margins or general 'cost of living' has been less
pronounced than feared.
Moreover, the unthinkable has happened, at least in the eyes of the
professional investors who allocate assets across global equity markets:
Europe has outperformed the US, and by some margin. On a common currency
basis, the European index has seen a good 20% outperformance compared with the
S&P500, Dow Jones and the technology-heavy Nasdaq. That is not to say the
trend - if we dare to tempt fate by labelling it such - has not been tested.
The US Federal Reserve had to act quickly to avert contagion from a very
specific banking crisis at Silicon Valley Bank in California, but not before
banks globally came under the spotlight. Unfortunately, it highlighted the
ongoing travails at Credit Suisse in Switzerland, requiring the Swiss National
Bank to find a domestic solution in the guise of UBS and prompting a flight to
quality in European banking shares. Somewhat surprisingly, however, equity
markets shrugged it off relatively quickly to recoup these short-term losses,
ending the period with healthy double-digit increases.
Performance
In the six months to 31 March 2023, the Company's NAV total return per
ordinary share rose by 22.8%, outperforming the Company's benchmark, the FTSE
World Europe ex UK index by 1.1%. Our NAV performance was just above both the
average of our closed-ended peers in the AIC Europe sector (+22.3%) and also
above that of the IA OEIC Europe ex UK sector average (+21.7%).
The Company's share price total return saw a greater rise of 28.3%, mostly due
to a narrowing of the discount at which the shares trade relative to the
underlying NAV from 14.0% as at 30 September 2022 to 10.4% at 31 March 2023.
The existence of such a level of discount to NAV, given the strength of our
performance track record, is rather confounding but seems to be a trait of our
high-performing Europe sector where the average discount was 10.9% at the end
of March 2023. It is a source of frustration and discussion for the Board.
Buybacks have been - and will be - used judiciously to manage liquidity, but
we would much rather encourage new shareholders onto the register now that
European markets may be coming into vogue, than shrink the assets of the
Company.
Dividend
I am pleased to announce that the Company will pay an increased interim
dividend of 1.30p per ordinary share on 27 June 2023 to shareholders on the
register on 2 June 2023; this compares to 1.20p for the six months ending 31
March 2022. Note that as for last year, this reflects an element of
rebalancing between the interim and final dividend payments and should not be
taken as a proxy for the full-year dividend increase. The shares will be
quoted ex-dividend on 1 June 2023.
Loan notes and gearing
Net gearing was at 6.8% at 31 March 2023 (vs 1.9% at 30 September 2022),
having approached 11% during the period, with our Fund Managers holding some
cash on a short-term tactical basis if they anticipate better buying
opportunities ahead. Use of leverage made a small positive contribution to NAV
performance in this six-month period. Net gearing is 7.0% at 18 May 2023, and
as you will see from the Fund Managers' Report, is expected to be further
deployed in a considered manner over time.
Board changes
As indicated in the 2022 Annual Report, Eliza Dungworth will retire from the
Board with effect from 31 May 2023. I would like to thank Eliza for her many
years of service and wise counsel on the Company's affairs, and particularly
for her skilful and incisive chairmanship of the Audit and Risk Committee. In
line with our long-term succession planning, the Board is currently engaged in
a recruitment exercise. Meanwhile, I am pleased to announce that Robin
Archibald will be assuming the role of Chair of the Audit and Risk Committee,
in addition to his current role as Senior Independent Director, from 1 June
2023.
Outlook
The swift recovery has not been without its nuances. At the time of writing,
the market is in the throes of a 'defensives vs cyclicals' tug of war, as
markets struggle to contend with a potential recession. We are cognisant of
the near-term risks to our 'quality cyclicals', but we must not take our eye
off the long-term opportunities for those with the luxury of long-term capital
to deploy --- 'global champions' that live in Europe. This includes companies
which are highly competent in providing tangible goods and services which have
taken on renewed strategic importance in an increasingly multi-polar world:
clean-energy generation, onshore digital automated factories, smart
infrastructure, and their myriad components and raw materials. These are
companies and investment opportunities which, critically, in the eyes of our
valuation-conscious Fund Managers, come at reasonable valuations. As they
elucidate in their commentary, if the last decade was about owning
'asset-light', the next will be 'asset-heavy'. Mean reversion is alive and
well.
Vicky Hastings
Chair of the Board
22 May 2023
Fund Managers' Report
Even by recent historical standards, the half year ending 31 March 2023 was
eventful. While the collapse of Silicon Valley Bank and the fire sale of
Credit Suisse grabbed the headlines, there were a number of other significant
developments, including: 1) the emergence of a 'bull market' (say it quietly)
in European equities, which, at the time of writing, remains intact despite
the banking sector wobble; 2) a surprise OPEC oil supply cut which provided
further proof, if any were needed, that the era of US hegemony is over and
with it a 30 plus year project of ever greater globalisation; and 3) the
entrance into public consciousness, via ChatGPT, of the profound potential of
artificial intelligence ("AI") to transform society and the economic
activities which underpin it. These paradigm shifts - of a macroeconomic,
geopolitical and technological nature - guarantee that the coming decade will
not look like the last one. They also guarantee that winners and losers will
abound. It remains our firm conviction that Europe will have its fair share of
winners and we are resolutely focused on finding them and backing them.
Performance
From the close of our last financial year at the end of September 2022 until
31 March 2023, the total return NAV increased by 22.8%, 1.1% ahead of the
benchmark. On a one-year basis, NAV total return increased by 10.8%, 2.1%
ahead of the benchmark gain of 8.7%. Whether we have underperformed, or in
this case, outperformed the benchmark during the period under review, we
always advise caution; markets can be erratic over short periods.
Short-termism drives much of the trading activity by market participants who
are doing something very different to deploying your long-term capital.
Companies rapidly find themselves in and out of favour from one week to the
next, often with no news. Fundamentally, however, companies need longer than
this to deliver value to equity holders. Therefore, we ascribe higher value to
our performance figures, over three years and beyond, which are in good shape.
Key contributors over the half-year included our semiconductor exposure (BE
Semiconductor, ASM International, STMicroelectronics), Holcim and Kion, with
the latter recovering from a particularly punishing end to the last financial
year following a profit warning. That said, it remains a top-ten contributor
over three years. Our semiconductor, materials and cyclicals exposures were
major recipients of capital when we concluded that Europe had become too cheap
in September 2022 and we were thus rewarded.
Key detractors included Dutch insurer ASR Nederland - part of the collateral
damage of the 'banking crisis' - along with UPM-Kymmene and our oil exposures
(Shell and Aker BP), which trailed an emergent European bull market intent on
rewarding the prior year's laggards and duly punishing the leaders.
Activity
We added the world's biggest and most profitable brewer, Belgium-listed
Anheuser-Busch Inbev ("AB Inbev"), attracted to the organic growth and
debt-reduction strategy of its new CEO. The company has a long history of
being an over-indebted industry consolidator, which fostered a reputation for
brand-neglect with investors. Moreover, the inflationary backdrop and
corresponding end of the free-money era does not just have implications for
over-hyped tech valuations; in the brewing industry it significantly
undermines the competitive position of those thousands of low-margin 'craft'
entrants, which were lavished with easy funding over the last 10 to 15 years
and which smartly exploited the complacent brand strategies of the majors.
With many small breweries now falling by the wayside and those that do cling
on forced to rapidly raise prices in order to maintain any sort of margin, the
brewing industry is a tangible example of our 'Big is beautiful' sub-thesis
(which pertains to the tangible implications of the change in the price of
money). AB Inbev, which boasts an industry-leading gross margin of 55% even
after facing a commodity price squeeze, can simply raise prices more slowly
than craft players and regain market share. Correspondingly we exited
Carlsberg, which remains a leading company in a clearly attractive industry.
But, having been a long-term contributor to the Company and following the exit
of the management team which led us to invest in the stock over five years
ago, we felt now was the right time to recycle capital into the opportunity
taking shape at AB Inbev.
Siemens was another notable addition to the Company, complementing our
existing position in Schneider Electric. Both are global champions at the
heart of a number of the next decade's mega-themes, including the onshoring of
supply chains, electrification, digitalisation and automation. As already
mentioned, the pace of investment by corporates big and small in optimising
their operations has really struck us over recent months. Our own meetings
with management teams offered up some illuminating examples. Premier Foods, a
UK food producer, is allocating one third of its capital investment into 'cost
out' activities - automation projects with payback periods now as low as 2.5
years given the rising labour and energy costs which they help to mitigate.
Marks and Spencer, that charmingly inert stalwart of the UK high street, has
'near-shored' manufacturing of certain garments to Eastern Europe, away from
China, in order to improve supply chain resilience and also to enable it to be
more reactive to customer trends. As the world re-tools and re-calibrates, a
more streamlined and focused Siemens - now with 'only' around 300 thousand
employees compared to the half-a-million-strong blob of bureaucratic
complexity that we avoided for years - is set to be a critical enabler.
Elsewhere we returned to Adidas, another great franchise, but one which was in
urgent need of the fresh wind of management change. This has duly arrived in
the form of Bjorn Gulden, former CEO of Puma. We exited Amadeus IT, the
airline booking system software provider, as we chose to concentrate our
'travel recovery' exposure on aerospace names such as Airbus and Safran.
Outlook
At the time of writing the market is moving to price recession. Stocks with
defensive qualities such as food, beverages and healthcare are back in vogue,
while those of a more cyclical nature - such as chemicals, materials and
certain industrials - are given short shrift. You can, as always, expect us to
navigate the short-term tumult to the best of our abilities, while firmly
remaining focused on the profound long-term opportunities for the long-term
capital that we deploy on your behalf. Our net gearing intentions are
consistent with this: careful in the near term, but with the expectation that
we will further deploy over time to maximise value for shareholders.
At the risk of testing our readers' patience with repetition, it remains our
view that we are unlikely to return to the madness of the free-money era, that
inflation is likely to linger for longer, and that interest rates are more
likely to plateau than to pivot. As a result, we believe that valuation - the
price you pay for an asset - will regain its rightful place as the cornerstone
of one's investment framework. It is worth reflecting for a moment on just how
financially absurd recent history has been. The total value of negative
yielding bonds (yes, you pay the borrower to take your money…) peaked at 18
trillion dollars in 2020. The amount as of today is negligible. The withdrawal
of silly money has seismic consequences for the investment regime, but it will
take time to fully bear out.
Moreover, given the multi-polar geopolitical shifts now undoubtedly taking
place, we believe tangible goods - the energy, infrastructure and supply
chains that underpin a society's security and resilience - are to be desired
over the many intangible winners of the last decade - think software,
technology and other often over-hyped 'asset-light' business models. On this
basis Europe, which has now outperformed the US over the last six months by
over 20%, screens rather attractively; valuations are reasonable and the
region - often dismissed as the 'museum continent' - actually excels at
'making stuff'. It is home to global champions whose competencies include
renewable energy infrastructure, semiconductor manufacturing equipment, the
provision of digital automated factories, not to mention the vast and varied
skills, materials and components which they draw upon. It is no longer novel
to suggest that the Western world is urgently moving to rebuild its strategic
resilience, but what is still underappreciated by the market, in our opinion,
is the speed with which these new long-duration capital investment cycles are
emerging. A major takeaway from the full-year 2022 results season was the
number of companies: 1) highlighting a tangible benefit to their orderbooks
from these trends; and 2) taking action to improve their own supply-chain
resilience through the onshoring of manufacturing activities, or the
investment into automation.
'Asset-light' was a posterchild of the last decade, courtesy of monetary
abundance, non-existent inflation and a still largely unipolar world order.
'Asset-heavy' will have renewed significance in the next. In this realm,
Europe has winners.
Tom O'Hara and John Bennett
Fund Managers
22 May 2023
Investment portfolio at 31 March 2023
Company Sector Country of listing Valuation % of portfolio
£'000
Novo-Nordisk Pharmaceuticals and Biotechnology Denmark 21,683 5.4
Shell Oil, Gas and Coal United Kingdom 19,724 4.9
UPM-Kymmene Industrial Materials Finland 18,998 4.7
TotalEnergies Oil, Gas and Coal France 15,741 3.9
LVMH Moët Hennessy Louis Vuitton Personal Goods France 15,693 3.9
STMicroelectronics Technology Hardware and Equipment Switzerland 15,027 3.7
Saint-Gobain Construction and Materials France 14,573 3.6
BP Oil, Gas and Coal United Kingdom 14,174 3.5
BE Semiconductor Technology Hardware and Equipment Netherlands 13,902 3.5
ASR Nederland Non-life Insurance Netherlands 13,558 3.4
10 largest 163,073 40.5
Safran Aerospace and Defence France 12,954 3.2
Airbus Aerospace and Defence France 12,534 3.1
Adidas Personal Goods Germany 11,452 2.8
Hugo Boss Personal Goods Germany 10,898 2.7
Holcim Construction and Materials Switzerland 10,825 2.7
Schneider Electric Electronic and Electrical Equipment France 10,815 2.7
Linde Chemicals Germany 9,985 2.5
Solvay Chemicals Belgium 9,686 2.4
Arkema Chemicals France 9,498 2.4
Siemens General Industrials Germany 9,488 2.4
20 largest 271,208 67.4
Nordea Bank Banks Finland 9,068 2.2
Koninklijke Ahold Delhaize Personal Care, Drug and Grocery Stores Netherlands 8,898 2.2
Euronext Investment Banking and Brokerage Services Netherlands 8,604 2.1
ASM International Technology Hardware and Equipment Netherlands 8,537 2.1
Aker BP Oil, Gas and Coal Norway 7,745 1.9
Sandvik Industrial Engineering Sweden 7,586 1.9
L'Oréal Personal Goods France 7,524 1.9
Deutsche Boerse Investment Banking and Brokerage Services Germany 7,455 1.8
Sanofi Pharmaceuticals and Biotechnology France 7,151 1.8
Metso Outotec Industrial Engineering Finland 6,885 1.7
30 largest 350,661 87.0
Interpump Industrial Engineering Italy 6,605 1.6
Universal Music Media France 5,905 1.5
BNP Paribas Banks France 5,894 1.5
Anheuser-Busch InBev Beverages Belgium 5,699 1.4
Siemens Healthineers Medical Equipment and Services Germany 5,107 1.3
UCB Pharmaceuticals and Biotechnology Belgium 4,977 1.2
Essilor Luxottica Medical Equipment and Services France 4,839 1.2
Unicredit Banks Italy 3,817 0.9
ING Banks Netherlands 3,749 0.9
Grifols Pharmaceuticals and Biotechnology Spain 3,726 0.9
40 largest 400,979 99.4
Danone Food Producers France 2,233 0.6
Total investments at fair value 403,212 100.0
Country of listing (as a percentage of the portfolio excluding cash)
31 March 2023 31 March 2022
% %
France 31.1 25.2
Netherlands 17.9 17.9
Germany 13.5 13.1
Finland 8.7 8.3
UK 8.4 -
Denmark 5.4 7.0
Belgium 5.0 2.9
Switzerland 2.7 12.2
Italy 2.6 1.6
Norway 1.9 2.7
Sweden 1.9 5.1
Spain 0.9 4.0
100.0 100.0
Sector exposure (as a percentage of the portfolio excluding cash)
31 March 2023 31 March 2022
% %
Industrials 22.9 16.8
Energy 14.2 5.7
Financials 12.9 14.2
Consumer discretionary 12.7 12.5
Basic materials 12.0 12.9
Health care 11.8 16.2
Technology 9.3 8.0
Consumer staples 4.2 13.7
100.0 100.0
Principal Risks and Uncertainties
The principal risks and uncertainties associated with the Company's business
can be divided into the following main areas:
· Market
· Investment performance
· Business strategy and market rating
· Gearing
· Operational
· Regulatory and reporting
Information on these risks and how they are managed is given in the Annual
Report for the year ended 30 September 2022. In the view of the Board, with
the rising interest-rate environment clearly noted, these principal risks and
uncertainties at the year-end remain and are as applicable to the remaining
six months of the financial year as they were to the six months under review.
Related-Party Transactions
The Company's transactions with related parties in the period under review
were with the directors and the Manager, Janus Henderson. There have been no
material transactions between the Company and its directors during the period
other than amounts paid to them in respect of remuneration and expenses, for
which there were no outstanding amounts payable at the period end.
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 period under review.
Statement of Directors' Responsibilities
The directors (as listed in note 14) confirm that, to the best of their
knowledge:
(a) the condensed financial statements for the half-year ended 31 March 2023 have
been prepared in accordance with FRS 104 Interim Financial Reporting, and give
a true and fair view of the assets, liabilities, financial position and profit
or loss of the Company;
(b) the Interim Management Report and condensed financial statements include 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 principal risks and uncertainties for the remaining
six months of the year); and
(c) the Interim Management Report includes a fair review of the information
required by the Disclosure Guidance and Transparency Rule 4.2.8R (disclosure
of related-party transactions and changes therein).
On behalf of the Board
Vicky Hastings
Chair of the Board
22 May 2023
CONDENSED INCOME STATEMENT
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 2023 31 March 2022 30 September 2022
Revenue return £'000 Capital return £'000 Total return £'000 Revenue return £'000 Capital return £'000 Total return £'000 Revenue return £'000 Capital return £'000 Total return £'000
Gains/(losses) on investments held at fair value through profit or loss - 70,132 70,132 - (15,878) (15,878) - (55,148) (55,148)
Exchange losses on currency transactions - (361) (361) - (164) (164) - (1,142) (1,142)
Income from investments (note 2) 3,195 - 3,195 4,565 - 4,565 12,529 - 12,529
Other income 55 - 55 1 - 1 25 - 25
Gross revenue and capital gains/(losses) 3,250 69,771 73,021 4,566 (16,042) (11,476) 12,554 (56,290) (43,736)
Management fees (note 7) (290) (870) (1,160) (290) (871) (1,161) (548) (1,642) (2,190)
Other fees and expenses (331) - (331) (321) - (321) (561) - (561)
Net return/(loss) before finance costs and taxation 2,629 68,901 71,530 3,955 (16,913) (12,958) 11,445 (57,932) (46,487)
Finance costs (68) (205) (273) (33) (86) (119) 38 (272) (234)
Net return/(loss) before taxation 2,561 68,696 71,257 3,922 (16,999) (13,077) 11,483 (58,204) (46,721)
Taxation on net return (135) - (135) (245) - (245) (570) (137) (707)
Net return/(loss) after taxation 2,426 68,696 71,122 3,677 (16,999) (13,322) 10,913 (58,341) (47,428)
Return/(loss) per ordinary share (note 3) 1.14p 32.28p 33.42p 1.72p (7.96p) (6.24p) 5.11p (27.32p) (22.21p)
The total columns of this statement represent the Income Statement of the
Company prepared in accordance with FRS 104.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from continuing
operations. The Company had no recognised gains or losses other than those
disclosed in the Income Statement and the Statement of Changes in
Equity.
The accompanying notes are an integral part of the condensed financial
statements.
CONDENSED Statement of Changes in Equity
Half-year ended 31 March 2023 Revenue reserve Other reserves £'000 Total
Called-up
£'000
shareholders' funds £'000
(Unaudited) share Share Capital reserve
capital
£'000
premium account
£'000
£'000
At 30 September 2022 10,819 41,995 151,154 13,840 96,611 314,419
Net return after taxation - - 68,696 2,426 - 71,122
Ordinary dividend paid - - - (7,766) - (7,766)
Buyback of ordinary shares for treasury - - (183) - - (183)
At 31 March 2023 10,819 41,995 219,667 8,500 96,611 377,592
Half-year ended 31 March 2022 Revenue reserve Other reserves £'000 Total
(Unaudited) Called-up
£'000
shareholders' funds £'000
share Share Capital reserve
capital
£'000
premium account
£'000
£'000
At 30 September 2021 10,819 41,995 210,819 10,492 96,611 370,736
Net return after taxation - - (16,999) 3,677 - (13,322)
Ordinary dividend paid - - - (5,019) - (5,019)
Costs relating to sub-division of shares - - (17) - - (17)
Buyback of ordinary shares for treasury - - (427) - - (427)
At 31 March 2022 10,819 41,995 193,376 9,150 96,611 351,951
Year ended 30 September 2022 (Audited) Called-up Share premium account Capital reserve Revenue reserve Other Total
share
£'000
£'000
shareholders'
capital £'000 reserves £'000
funds £'000
£'000
At 30 September 2021 10,819 41,995 210,819 10,492 96,611 370,736
Net return after taxation - - (58,341) 10,913 - (47,428)
Ordinary dividend paid - - - (7,565) - (7,565)
Buyback of ordinary shares for treasury - - (1,324) - - (1,324)
At 30 September 2022 10,819 41,995 151,154 13,840 96,611 314,419
The accompanying notes are an integral part of the condensed financial
statements.
CONDENSED Statement of Financial Position
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 403,212 365,817 320,289
Current assets
Debtors 11,606 3,866 7,355
Cash at bank 15 14,510 21,272
11,621 18,376 28,627
Creditors: amounts falling due within one year (6,653) (2,838) (3,949)
Net current assets 4,968 15,538 24,678
Total assets less current liabilities 408,180 381,355 344,967
Creditors: amounts falling due after one year (30,588) (29,404) (30,548)
Net assets 377,592 351,951 314,419
Capital and reserves
Called-up share capital 10,819 10,819 10,819
Share premium account 41,995 41,995 41,995
Capital reserve 219,667 193,376 151,154
Revenue reserve 8,500 9,150 13,840
Other reserves (note 5) 96,611 96,611 96,611
Total shareholders' funds 377,592 351,951 314,419
Net asset value per ordinary share (note 6) 177.47p 164.80p 147.67p
The accompanying notes are an integral part of the condensed financial
statements.
CONDENSED cash flow statement
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended 30 Sept 2022
31 March 2023 31 March 2022 £'000
£'000 £'000
Cash flows from operating activities
Net return/(loss) before taxation 71,257 (13,077) (46,721)
Add back: finance costs 273 119 234
(Gains)/losses on investments held at fair value through profit or loss (70,132) 15,878 55,148
Losses on foreign exchange 361 164 1,142
Taxation paid (118) (181) (780)
Increase in debtors (824) (1,339) (87)
Increase/(decrease) in creditors 122 (97) (144)
Net cash inflow from operating activities 939 1,467 8,792
Cash flows from investing activities
Sales of investments held at fair value through profit or loss 163,809 115,341 277,186
Purchases of investments held at fair value through profit or loss (179,585) (115,681) (273,147)
Net cash (outflow)/inflow from investing activities (15,776) (340) 4,039
Cash flows from financing activities
Buyback of shares for treasury (183) (427) (1,324)
Costs relating to subdivision of shares - (17) -
Equity dividends paid (net of refund of unclaimed distributions) (7,766) (5,019) (7,565)
Drawdown/(repayment) of bank overdraft 2,095 (10,558) (10,558)
Issue of unsecured loan notes - 29,275 29,275
Costs relating to issue of unsecured loan notes - (173) (173)
Interest paid (243) (35) (271)
Net cash (outflow)/inflow from financing activities (6,097) 13,046 9,384
Net (decrease)/increase in cash and equivalents (20,934) 14,173 22,215
Cash and cash equivalents at beginning of period 21,272 199 199
(Losses)/gains on foreign exchange (323) 138 (1,142)
Cash and cash equivalents at end of period 15 14,510 21,272
Comprising:
Cash at bank 15 14,510 21,272
The accompanying notes are an integral part of the condensed financial
statements.
Notes to the condensed financial statements
1. Accounting policies
The condensed set of financial statements has been prepared in accordance
with: FRS 104, Interim Financial Reporting; FRS 102, the Financial Reporting
Standard applicable in the UK and Republic of Ireland; and the Statement of
Recommended Practice for "Financial Statements of Investment Trust Companies
and Venture Capital Trusts", which was updated by the Association of
Investment Companies in July 2022.
For the period under review, the Company's accounting policies have not varied
from those described in the Annual Report for the year ended 30 September
2022. The condensed set of financial statements has been neither audited nor
reviewed by the Company's auditor.
2. Income from investments
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
Listed investments:
Overseas dividends 2,533 4,565 12,181
UK dividends 662 - 348
3,195 4,565 12,529
3. Return/(loss) per ordinary share
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
31 March 31 March 30 September
2023 2022 2022
£'000 £'000 £'000
The return per ordinary share is based on the following figures:
Net revenue return 2,426 3,677 10,913
Net capital return/(loss) 68,696 (16,999) (58,341)
Net capital return/(loss) 71,122 (13,322) (47,428)
Weighted average number of ordinary 212,784,056 213,607,908 213,530,236
shares in issue for each period
Revenue return per ordinary share 1.14p 1.72p 5.11p
Capital return/(loss) per ordinary share 32.28p (7.96p) (27.32p)
Total return/(loss) per ordinary share 33.42p (6.24p) (22.21p)
The Company has no securities in issue that could dilute the return per
ordinary share. Therefore, the basic and diluted returns per share are the
same.
4. Called-up share capital
At 31 March 2023, there were 216,389,910 shares in issue, of which 3,621,788
were held in treasury. During the half-year period ended 31 March 2023,
145,000 shares were repurchased for treasury at a cost of £183,000 (half-year
ended 31 March 2022: 260,300 at a cost of £427,000, and year ended 30
September 2022: 912,658 shares at a cost of £1,324,000). No shares have been
issued or repurchased since 31 March 2023. As at 18 May 2023, 212,768,122
shares were entitled to a dividend.
5. Other reserves
31 March 2023 31 March 2022 30 Sept 2022
£'000 £'000 £'000
Special distributable reserve 25,846 25,846 25,846
Merger reserve 61,344 61,344 61,344
Capital redemption reserve 9,421 9,421 9,421
Total 96,611 96,611 96,611
6. Net asset value per share - basic and diluted (excluding treasury shares)
The net asset value per ordinary share is based on the 212,768,122 shares
(excluding treasury shares) in issue at 31 March 2023 (half year ended 31
March 2022: 213,565,480 shares; year ended 30 September 2022: 212,913,122
shares).
7. Management fees
Janus Henderson Fund Management UK Limited ("JHFMUK Ltd") is appointed to act
as the Company's alternative investment fund manager. JHFMUK Ltd delegates
investment management services to Janus Henderson Investors UK Limited ("JHIUK
Ltd"). References to 'Janus Henderson' or the 'Manager' within these results
refer to the services provided by both JHFMUK Ltd and JHIUK Ltd.
Management fees are charged in accordance with the terms of the management
agreement. The Manager receives a fee of 0.65% per annum of net assets up to
£300m and 0.55% of net assets above £300m. Any holdings in funds managed by
Janus Henderson are excluded from the calculation of the management fee. There
is no performance fee.
Management fees and finance costs are allocated 25% to revenue and 75% to
capital in the Condensed Income Statement.
8. Investments held at fair value through profit or loss
The table below analyses fair value measurements for investments held at fair
value through profit or loss. These fair value measurements are categorised
into different levels in the fair value hierarchy based on the valuation
techniques used and are defined as follows under FRS 102:
Level 1: the unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3: inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
Financial assets held at fair value through profit or loss at 31 March 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equities 403,212 - - 403,212
Total 403,212 - - 403,212
Financial assets held at fair value through profit or loss at 31 March 2022 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Quoted equities 365,817 - - 365,817
Total 365,817 - - 365,817
Financial assets held at fair value through profit or loss at 30 September Level 1 Level 2 Level 3 Total
2022
£'000 £'000 £'000 £'000
Quoted equities 320,289 - - 320,289
Total 320,289 - - 320,289
There have been no transfers between levels of fair value hierarchy during the
period.
The valuation techniques used by the Company are explained in the accounting
policies note 1(c) in the Company's Annual Report for the year ended 30
September 2022.
9. Borrowings
As at 31 March 2023, the Company's bank overdraft included in "Creditors:
amounts falling due within one year" was £2,095,000 (31 March 2022: £nil; 30
September 2022: £nil).
On 31
January
2022,
the
Company
issued
€35m
long
term
fixed
-rate
unsecur
ed
loan
notes
in two
tranche
s:
- €25m unsecured loan notes maturing on 31 January 2047 with a fixed
coupon of 1.53%; and
- €10m unsecured loan notes maturing on 31 January 2052 with a fixed
coupon of 1.66%.
Total proceeds from the issue of the notes were £29,275,000 less £173,000
issue costs.
The unsecured loan notes are carried in the Statement of Financial Position 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 £19,918,000 (31 March 2022:
£26,854,000; 30 September 2022: £20,774,000) and is categorised as Level 3
in the fair value hierarchy. However, for the purpose of the daily NAV
announcements, the unsecured loan notes are valued at par in the NAV because
they are not traded and the directors expect them to be held to maturity and,
accordingly, the directors have assessed that this is the most appropriate
value to be applied for this purpose.
10. Changes in net debt
The following table shows the movements during the period of net debt in the
statement of financial position:
At 1 October 2022 Cash flows Amortisation of issue costs Foreign exchange movements £'000 At 31 March
£'000 £'000 £'000 2023
£'000
Financing activities
Bank overdraft - (2,095) - - (2,095)
Unsecured loan notes (30,548) - (2) (38) (30,588)
(30,548) (2,095) (2) (38) (32,683)
Non-financing activities
Cash and cash equivalents 21,272 (20,934) - (323) 15
21,272 (20,934) - (323) 15
Total (9,276) (23,029) (2) (361) (32,668)
At 1 October 2021 Cash flows Amortisation of issue costs Foreign exchange movements £'000 At 31 March
£'000 £'000 £'000 2022
£'000
Financing activities
Bank overdraft (10,558) 10,558 - - -
Unsecured loan notes - (29,102) - (302) (29,404)
(10,558) (18,544) - (302) (29,404)
Non-financing activities
Cash and cash equivalents 199 14,173 - 138 14,510
199 14,173 - 138 14,510
Total (10,359) (4,371) - (164) (14,894)
At 1 October 2021 Cash flows Amortisation of issue costs Foreign exchange movements £'000 At 30 Sept
£'000 £'000 £'000 2022
£'000
Financing activities
Bank overdraft (10,558) 10,558 - - -
Unsecured loan notes - (29,102) (4) (1,442) (30,548)
(10,558) (18,544) (4) (1,442) (30,548)
Non-financing activities
Cash and cash equivalents 199 22,215 - (1,142) 21,272
199 22,215 (4) (1,142) 21,272
Total (10,359) 3,671 (4) (2,584) (9,276)
11. 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 these financial statements. Having assessed these
factors and the principal risks, as well as considering geopolitical risks and
macroeconomic factors, the directors consider it appropriate to adopt the
going concern basis of accounting in preparing these financial statements.
12. Dividends
The directors have declared an interim dividend of 1.30p per ordinary share
(2022: 1.20p), payable on 27 June 2023 to shareholders who are on the register
of members on 2 June 2023. The shares will be quoted ex-dividend on 1 June
2023. Based on the 212,768,122 shares in issue (excluding treasury shares) at
18 May 2023, the cost of this dividend will be £2,766,000 (2022 interim
dividend: £2,563,000).
13. Comparative information
The financial information contained in this half-year report does not
constitute statutory accounts as defined in s434 of the Companies Act 2006.
The financial information for the half years ended 31 March 2023 and 31 March
2022 has not been audited nor reviewed by the Company's auditor. The figures
and financial information for the year ended 30 September 2022 are an extract
based on the latest published accounts and do not constitute statutory
accounts for that year. Those accounts have been delivered to the Registrar of
Companies and included the Independent Auditor's Report which was unqualified
and did not contain a statement under either s498(2) or s498(3) of the
Companies Act 2006. A glossary of terms and details of alternative performance
measures can be found in the Annual Report for the year ended 30 September
2022.
14. General information
Company status
Henderson European Focus Trust plc is registered as an investment company in
England and Wales (no. 00427958), has its registered office at 201
Bishopsgate, London EC2M 3AE and is listed on the London Stock Exchange.
SEDOL/ISIN: BLSNGB0/GB00BLSNGB01
London Stock Exchange ("TIDM") code: HEFT
Global Intermediary Identification Number ("GIIN"): THMNPN.99999.SL.826
Legal Entity Identifier ("LEI") number: 213800GS89AL1DK3IN50
Directors and secretary
The directors of the Company are Vicky Hastings (Chair), Eliza Dungworth
(Chair of the Audit and Risk Committee), Robin Archibald (Senior Independent
Director), Stephen Macklow-Smith and Marco Bianconi. The corporate secretary
is Janus Henderson Secretarial Services UK Limited.
Website
Details of the Company's share price and net asset value, 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.hendersoneuropeanfocus.com (http://www.hendersoneuropeanfocus.com) .
15. Half-year report
The half-year report will shortly be available at
www.hendersoneuropeanfocus.com (http://www.hendersoneuropeanfocus.com) or from
the Company's registered office. An abbreviated version, the 'Update', will be
posted to shareholders in June 2023.
Fo
r
fu
rt
he
r
in
fo
rm
at
io
n,
pl
ea
se
co
nt
ac
t:
Vicky Hastings Harriet Hall
Chair of the Board Investment Trust PR Manager
Henderson European Focus Trust plc Janus Henderson Investors
Tel: 020 7818 2220 Tel: 020 7818 2919
Dan Howe
Head of Investment Trusts
Janus Henderson Investors
Tel: 020 7818 3349
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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