Henderson Eurotrust - Annual Financial Report
28/09/2023 07:00
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RNS Number : 9076N Henderson Eurotrust PLC 28 September 2023
JANUS HENDERSON FUND MANAGEMENT UK LIMITED
HENDERSON EUROTRUST PLC
LEGAL ENTITY IDENTIFIER: 213800DAFFNXRBWOEF12
28 September 2023
HENDERSON EUROTRUST PLC
Annual Financial Results for the year ended 31 July 2023
This announcement contains regulated information
Investment objective
Henderson EuroTrust plc ("the Company") aims to achieve a superior total
return from a portfolio of European (excluding the UK) investments where the
quality of the business is deemed to be high or significantly improving.
Performance highlights
Total return performance to 31 July 2023
1 year 3 years 5 years 10 years
% % % %
NAV(1) 16.7 23.0 44.6 157.9
Share price(2) 19.7 21.1 38.1 144.3
Benchmark(3) 16.1 36.7 39.2 124.3
Peer group NAV(4) 14.6 31.8 41.4 146.2
Year ended Year ended
31 July 2023 31 July 2022
NAV per share at year end 161.3p 142.1p
Share price at year end 139.5p 120.5p
Dividend for year(5) 3.8p 3.8p
Dividend yield(6) 2.7% 3.2%
Ongoing charge(9) 0.79% 0.75%
Gearing at year end £15.6m £7.3m
(% of NAV) 4.6% (2.5%)
Number of investments at year end(7) 47 41
Discount at year end(8) 13.5% 15.2%
Net assets £342.0m £301.0m
1 Net asset value ("NAV") per ordinary share total return (including dividends
reinvested)
2 Share price total return (including dividends reinvested)
3 FTSE World Europe (ex UK) Index
4 Association of Investment Companies ("AIC") Europe Sector (based on
cumulative fair net asset value returns)
5 Including the 0.8p interim dividend paid on 28 April 2023 and the 3.0p final
dividend which will be put to shareholders for approval at the Annual General
Meeting ("AGM") on 15 November 2023
6 Based on the share price at the year end
7 Excluding the nil value position in OW Bunker (2022: excluding OW Bunker)
8 Calculated using the mid-market closing price
9 Calculated using the methodology prescribed by the AIC
Sources: Morningstar Direct, Janus Henderson
CHAIRMAN'S STATEMENT
Summary:
· Over the year, the share price and the net asset value were ahead of
the benchmark index and ahead of the AIC peer group
· Stock selection has been the driver of the modest outperformance,
an encouraging outcome given that growth stocks on the whole have lagged the
market
· We have increased the board size to five and our new director
will be appointed Senior Independent Director following the conclusion of the
2023 AGM
The financial year to 31 July 2023 has seen a significant recovery in the
share price and net asset value after the disappointment of the previous
financial year. I am pleased to report that, over the year, the share price
and net asset value were moderately ahead of the benchmark index and
materially ahead of the AIC peer group. In the latest financial year, "value"
stocks in Europe outperformed "growth" stocks by over 9 percentage points but
individual stock selection in quite a difficult environment was strong enough
to result in modest overall outperformance.
In the year to 31 July 2023, net asset value total return was 16.7%. This
compared with a total return of 16.1% for the benchmark index (FTSE World
Europe (ex UK)) and 14.6% for the AIC peer group. The discount to net asset
value narrowed during the year, from 15.2% to 13.5%, and as a result, the
share price total return for the Company was 19.7%. The share price at 31 July
2023 was 139.5p, only slightly below the all-time high of 140.5p.
Dividend
We have proposed a final dividend of 3.0p, which brings the total dividend for
the year ended 31 July 2023 to 3.8p. Subject to shareholder approval the
dividend will be paid on 22 November 2023 to shareholders on the register as
at 20 October 2023. The shares will be quoted ex-dividend on 19 October 2023.
The Company's dividend approach is broadly to pay out the level of actual
income received. In the Chairman's Statement of October 2020, I explained that
the Board committed to pay out the majority of the (then significant) revenue
reserve over three to four years. The proposed final dividend of 3.0p for the
year ended 31 July 2023 means that commitment to shareholders will be
fulfilled and, once the dividend has been paid in November 2023, the revenue
reserve will effectively be zero.
The Board has also decided that, as only a very small part of the Company's
revenue is received in the first half of the financial year (for example, 0.3p
per share was received for the six months ended 31 January 2023), going
forward the Company will pay a final dividend only, and no interim dividend.
This is in line with the Company's commitment that, once the revenue reserve
had been paid out, dividends would broadly reflect the level of income
received.
Board changes
During the year we implemented a number of key recommendations following an
external Board evaluation exercise undertaken in June 2022. First, we expanded
the Board from four to five directors, to broaden the diversity of skills and
experience. Stephen White, who is a former European investment manager and
experienced investment trust director, joined the Board with effect from 1
December 2022 and will seek election from shareholders at the AGM in November
2023.
Second, we are appointing a Senior Independent Director with effect from the
AGM in November 2023. Subject to his election by shareholders, Stephen White
will assume this role, thereby providing shareholders with an alternative
point of contact to raise any concerns should they not wish to discuss these
with me or the Chairman of the Audit and Risk Committee.
In my statement last year, I indicated my intention to retire from the Board
at the AGM this year. However, the search for my successor has taken longer
than anticipated; the Directors have therefore asked me to stay on until its
completion. Consequently, I have agreed that I will retire from the Board, at
the latest, at the AGM in November 2024 and an update on the recruitment
process will be included in our half year results' announcement in March 2024.
Annual General Meeting
Our meeting will be held on Wednesday 15 November 2023 at 2.30pm at Janus
Henderson Investors' offices at 201 Bishopsgate, London EC2M 3AE. I hope as
many shareholders as possible will be able to attend to take the opportunity
to meet the Board and to hear a presentation from the Fund Manager. However,
if you are unable to attend in person, you can watch the meeting live by
visiting www.janushenderson.com/trustslive. Full details are set out in the
Notice which has been sent to shareholders with this report and are also
available online at www.hendersoneurotrust.com
(http://www.hendersoneurotrust.com) .
Outlook
We are heartened by the absolute and relative performance of the Company over
the last year. We believe that attitudes towards investing in European shares
are becoming more positive; Europe is home to many strong global businesses on
attractive valuations and also demonstrates an above average focus on
sustainability. Inevitably, there will be headwinds at times but we remain
committed to seeking out growth companies which have the ability to achieve
consistent growth in the long run. There is a wealth of such opportunities
in this region.
Over the financial year the discount to net asset value at which our shares
trade has ranged from approximately 11.4% to 18.7%, ending the year at 13.5%
(2022: 15.2%). In the long run, strong absolute and relative performance is a
necessary - but not sufficient - factor in reducing the discount. Therefore,
we continue to consider all other factors which might contribute to the appeal
of the Company to all types of shareholder, and retail investors in
particular. As part of this process, I extend an invitation to any
shareholders who have questions, whether specific or general, or who would
welcome a more general discussion with me or the Senior Independent Director
to get in touch via the Corporate Secretary
(itsecretariat@janushenderson.com). I also direct current and potential
shareholders to the wealth of materials on the Janus Henderson website
(www.janushenderson.com (http://www.janushenderson.com) ) including short
videos and articles by our portfolio manager Jamie Ross, and a video by Jamie
on our year end results at www.hendersoneurotrust.com
(http://www.hendersoneurotrust.com) .
Nicola Ralston
Chairman
27 September 2023
FUND MANAGER'S REPORT
Summary:
· I am pleased to report a positive year for performance, both in
absolute terms (the value of your shares has increased), and in relative terms
(our net asset value per share has increased by more than the index return).
· This performance has been driven by the positive impact of our
stock selection.
· We have also found opportunity to increase our exposure to some of
the highest quality companies in Europe.
Key messages
I am pleased to report a positive year for performance, both in absolute terms
(the value of your shares has increased), and in relative terms (our net asset
value per share has increased by more than the index return). This performance
has been achieved in an environment where our style of investing (buying and
owning high quality growing businesses) has been out of favour, but our stock
picking has been strong enough to outweigh this.
What has driven our performance?
The best performing sectors in the financial year tended to be those of a
cyclical, interest rate sensitive nature: consumer discretionary, financials,
industrials and technology. The sectors that lagged tended to be less
economically sensitive: consumer staples, health care, real estate and
telecommunications. As has been usual for us, our sector allocations have had
little bearing on our relative performance. Stock picking within each sector
has been a much more important determinant of performance: we are 'stock
pickers' not 'sector pickers'.
Our best performing positions were in three areas: financials, luxury goods
companies and semi-conductor equipment businesses.
Within financials, we were particularly well-rewarded for our decision to
maintain a large position in UniCredit even through the early days of the
Russia-Ukraine conflict in 2022, when investors were concerned about
UniCredit's Russian exposure. We felt that their exposure was small enough to
be manageable, even in a worst-case scenario, and that the undervaluation of
the company's shares was far too extreme for us to sell just at the time when
higher inflation and interest rates were coming back into the system
(typically a good thing for banks, at least initially). UniCredit shares have
delivered a total return of more than 150% over the last twelve months and
have benefitted from higher interest rates, strong control of the cost base, a
benign environment for loan losses and strong capital returns to shareholders.
Management have done an excellent job. Munich Re, a longstanding position for
us, has been another financial that has performed well in this environment.
We have three luxury goods companies in the portfolio: Hermès and Moncler
have been longstanding positions and LVMH was added more recently, in 2021.
Luxury goods companies sell aspiration and desirability - intangible
characteristics for which people are prepared to pay a high price. The best
companies curate their brand allure with decades of consistent investment,
avoid discounting and partner with well-known trend-setters. Within the
sector, we have taken the approach of owning brands with the strongest and
most longstanding cultural heritage. This approach has led us to owning
Hermès, Moncler and LVMH; these are three of the more expensive companies in
the sector, but we think it is worth paying up for brands of this quality. We
were pleased to see our companies perform well in the period, in part due to
short-term factors such as recovery in China after Covid restrictions were
lifted, but our investment view takes a much longer-term perspective. We
continue to see attractive growth prospects for these high margin and high
return companies over the medium- to long-term.
The semiconductor industry encompasses businesses of highly variable quality.
The industry is exposed to attractive structural growth drivers such as the
growing ubiquity of semiconductor usage and powerful technological themes such
as machine learning, artificial intelligence and the internet of things.
However, not all companies have a sufficiently commanding market position to
translate this growth potential into a high margin and high return business.
The three semiconductor companies that we own share one key characteristic:
they have consistently high market shares in their core technology. ASML has a
100% market share in high end lithography, ASM International has a commanding
market share in a packaging technology called Atomic Layer Deposition, while
Besi dominate the nascent area of Hybrid Bonding. Strong market shares in
niche technologies drive high margins and return on capital for these
companies. We have had a longstanding position in ASML and initiated a new
position in ASM International during the year and Besi in June 2022, taking
advantage of a period when investors seemed overly concerned about a potential
short-term cyclical downswing in industry demand. These two positions rallied
particularly strongly over the year.
Finally, Novo Nordisk is worthy of mention. Novo is our largest position and a
long standing holding in the portfolio. Novo has recently launched an obesity
drug in the US and this has attracted a huge amount of media attention. We
have been following their progress in this therapeutic area for a number of
years and it is pleasing to see the company finally able to bring an
efficacious and well-tolerated product to market. We believe that the obesity
franchise is extremely well positioned for growth and this reinforces our
positive views on the company. We continue to own a large position in Novo
even after the strong multi-year share price performance.
Our underperformers have tended to be defensive in nature. When investors want
to buy into improving economic sentiment, they tend to avoid steady,
consistent, dependable companies such as Roche, Cellnex and Sartorius. We
ignore these short-term swings in sentiment and continue to value the
long-term compounding nature of these businesses. In addition to this issue of
style, there were a small number of companies whose operational performance
was not as impressive as we would wish. Allfunds, DSM Firmenich and Kion have
each struggled this year.
Allfunds, a business that links up fund houses with fund distributors, is
exposed to three major drivers of growth in assets under administration: the
onboarding of new clients, inflows from existing clients and long-term growth
in market levels. Over the past year or two, market volatility across multiple
asset classes has impacted the latter two of these drivers whilst the
onboarding of new clients, an area where they have more control, has remained
resilient. We retain faith in the ability of this high market share, high
margin business to generate significant growth over time, but a period of more
benign markets would be welcome. DSM has struggled with a number of issues,
some industry-wide and some stockspecific. On the former, there has been some
post-Covid unwind with a number of US customers destocking their ingredients
inventory. On the latter, DSM has suffered from weakness in vitamin pricing
and have had to deal with disruption related to the Firmenich merger and
senior management changes. We have maintained our positions in both Allfunds
and DSM (now DSM Firmenich). Finally, Kion has suffered from cost overruns in
its warehouse automation business as well as signs of slowing demand. We felt
that our long-term thesis had been sufficiently challenged to sell out of our
position in Kion.
Average portfolio weight (%) Attribution Analysis(1)
Company Index Relative Sector allocation effect Stock selection effect Total effect
Aerospace & Defence 5.7 2.2 -3.5 0.3 0.7 1.0
Alternative Energy 0.0 0.5 0.5 0.0 0.1 0.1
Automobiles and Parts 0.0 3.3 3.3 0.0 -0.5 -0.5
Banks 7.0 7.5 0.4 1.5 -0.4 1.1
Beverages 2.3 2.1 -0.2 0.0 -0.1 -0.1
Cash -0.7 0.0 0.7 0.0 -0.1 -0.1
Chemicals 2.3 3.5 1.2 -0.1 0.0 -0.0
Construction & Materials 0.0 3.8 3.8 0.0 -0.1 -0.1
Consumer Services 0.7 0.2 -0.5 -0.1 -0.1 -0.1
Electricity 2.1 2.9 0.8 -1.0 0.1 -0.9
Electronic & Electrical Equipment 2.9 2.7 -0.2 -0.1 0.0 -0.1
Finance and Credit Services 1.5 0.0 -1.5 0.0 -0.7 -0.6
Food Producers 9.8 6.1 -3.8 -1.1 -0.8 -1.9
Gas, Water & Multiutilities 0.0 1.4 1.4 0.0 -0.1 -0.1
General Industrials 1.6 1.9 0.3 -0.5 -0.1 -0.6
Health Care Providers 0.0 0.3 0.3 0.0 -0.0 -0.0
Household Goods and Home Construction 0.0 0.4 0.4 0.0 0.0 0.0
Industrial Engineering 3.6 2.5 -1.1 0.4 -0.1 0.2
Industrial Materials 0.0 0.5 0.5 0.0 0.1 0.1
Industrial Metals & Mining 0.0 0.7 0.7 0.0 0.1 0.1
Industrial Support Services 0.4 1.7 1.4 -0.1 0.5 0.5
Industrial Transportation 0.0 2.6 2.6 0.0 -0.0 -0.0
Investment Banking and Brokerage Services 8.9 3.4 -5.6 0.2 -0.6 -0.3
Leisure Goods 0.0 0.1 0.1 0.0 0.0 0.0
Life Insurance 0.0 0.7 0.7 0.0 0.0 0.0
Media 1.9 1.0 -0.9 -0.2 0.0 -0.2
Medical Equipment and Services 1.7 3.1 1.4 0.1 0.3 0.4
Nonlife Insurance 3.2 5.1 1.9 1.2 0.0 1.2
Oil, Gas and Coal 5.3 4.1 -1.2 0.6 -0.2 0.3
Personal Care, Drug and Grocery Stores 3.2 1.3 -1.9 0.1 -0.1 -0.0
Personal Goods 9.5 7.0 -2.5 1.1 0.3 1.3
Pharmaceuticals & Biotechnology 15.4 13.0 -2.4 0.0 -0.3 -0.2
Precious Metals and Mining 0.0 0.0 0.0 0.0 -0.0 -0.0
Real Estate Investment and Services 0.0 0.7 0.7 0.0 0.4 0.4
Real Estate Investment Trusts 0.0 0.4 0.4 0.0 0.1 0.1
Retailers 0.0 0.7 0.7 0.0 -0.2 -0.2
Software & Computer Services 2.6 4.2 1.6 0.6 0.0 0.6
Technology Hardware & Equipment 5.8 4.6 -1.2 0.8 0.3 1.1
Telecommunications Equipment 0.0 0.6 0.6 0.0 0.3 0.3
Telecommunications Service Providers 3.3 2.8 -0.5 -0.5 -0.1 -0.6
Tobacco 0.0 0.1 0.1 0.0 -0.0 -0.0
Travel and Leisure 0.0 0.6 0.6 0.0 -0.1 -0.1
Total(1) 100.0 100.0 0.0 3.1 -1.2 1.9
1 Total may not sum to the value shown due to rounding differences
Source: Factset
What changes have we made?
We have now had three years of value outperforming growth and quality.
Notwithstanding the fact that we managed to outperform marginally over the
last year, this style environment has been tough for us. Our inclination
throughout the period has been to increase our exposure to high quality
companies at a time when they have been out of favour. Each of our purchases
and sales over the past twelve months can be seen as moving us in this
direction. I will illustrate this with two of our new positions highlighting
why we think these are high quality businesses with very attractive long-term
prospects.
In March, we initiated a new position in Alcon, the Swiss listed manufacturer
of ophthalmic equipment and contact lenses. Over the long term, the industry
has experienced healthy growth of 4-5% per annum. Alcon, after years of
underinvestment under Novartis ownership, is playing catch up. They have been
growing faster than the overall market and expect to continue to do so. Margin
potential since the spin-out from Novartis has been clear but the delivery has
been slower than hoped for. Recently, however, margin progress has started to
come through and the outlook for further margin gains is strong. Finally, on
valuation, in MedTech, investors tend to pay for durable growth, i.e. organic
revenue growth and the sector trades on around 25 times forward price to
earnings. Alcon has usually traded at a 0-10% premium, but when we bought our
position, it traded at a small discount. Over the next few years, revenue
growth should be faster than the sector (6% versus 4%) and so should earnings
per share growth (greater than 15% versus 11%) if they achieve margin progress
as guided. We thus see Alcon as a superior growth business capable of margin
improvement and a valuation rerating over time.
In May, we bought a position in the Swiss testing company SGS. We have long
liked the characteristics of the testing sector. The companies provide a
cheap, but essential function to a number of businesses across a wide range of
end markets. Often their work is mandated by regulation. The industry is
fragmented but is increasingly being consolidated by the large, listed
companies, with smaller players disadvantaged in a world where customers want
broad, global services. This means that the large companies can consistently
acquire the smaller ones at inexpensive valuations, taking advantage of
inherent scale benefits to create shareholder value over the medium term. We
also believe that increasingly stringent environmental testing regulation is
resulting in a boost to testing intensity and this should bring higher growth
rates for SGS and their peers especially in the consumer goods-facing part of
the business. SGS are the global leader in consumer testing and are in the
strongest position to benefit.
Our most notable sales during the period were Enel, CNH International and Kion
(a utility company, a tractor company and a forklift truck company
respectively).
Largest New Investments Largest Divestments
Company name Position size at year end (% of the portfolio) Company name Position size at start of year (% of the portfolio)
SGS 2.62 Koninklijke KPN 3.05
ASM International 2.25 Kion 2.00
Alcon 1.91 CNH Industrial 1.87
BNP Paribas 1.85 Enel 1.29
Heineken 1.71
Schneider Electric 1.66
Euronext 1.52
Brenntag 0.95
Industrie De Nora 0.81
Zealand Pharma 0.61
Our medium term outlook
I am pleased that we have managed to outperform modestly in yet another year
of value outperformance. We have used the last few years to increase our
exposure to growth and quality and I am confident that our companies are
well-placed to deliver strong growth, attractive margins and robust return on
capital.
Classification of holdings as at 31 July 2023
Compounders(1) Average Improvers(2) Average Company Average Index Average
Market Capitalisation (£m) 112,902 43,178 94,024 81,677
Price/book (x) 3.6 1.4 2.6 2.0
Trailing 12 month dividend yield (%) 2.2 2.6 2.3 3.0
Trailing 12 month price/earnings (x) 24.8 13.4 20.2 14.6
Forward 2024 price/earnings (x) 17.5 12.9 16.0 12.9
Historical 3-year earnings per share growth per annum (%) 11.5 16.3 12.8 23.9
Forecast next 12 months earnings per share growth (%) 12.7 8.4 11.5 9.4
Return on equity (%) 27.4 5.7 21.5 19.6
Operating margin (%) 25.1 13.5 22.0 18.3
Long term debt to capital (%) 31.0 33.9 31.8 33.1
Number of securities 32 15 47 577
Weight (%)(3) 76.6 28.4
Fundamentals are based on weighted averages at the stock level, excluding net
cash/borrowing
1 Compounders - high-return businesses
2 Improvers - companies whose return profile should materially improve over
time
3 The weight percentages of Compounders and Improvers are shown including net
cash/borrowing
Net cash/(borrowing) was -5.1% at 31 July 2023
OW Bunker, a nil value position, is not included in the analysis
Source: Factset/Fundamentals in Sterling and Janus Henderson
Top ten contributors to and bottom detractors from relative performance
Data illustrating the top ten contributors to relative performance is set out
below:
%
UniCredit 2.82
Munich Re. 1.54
Hermès 0.81
ASM International 0.77
Safran 0.70
Besi 0.57
Metso 0.48
Novo Nordisk 0.37
Moncler 0.37
Alcon 0.36
Data illustrating the bottom ten detractors from relative performance is set
out below:
%
Partners Group -0.31
Sartorius -0.40
Siemens -0.41
DSM Firmenich -0.41
Roche -0.49
Kion -0.61
Allfunds -0.65
Cellnex -0.86
EDP Renovaveis -0.95
Koninklijke DSM (prior to the merger with Firmenich) -1.60
Jamie Ross
Fund Manager
27 September 2023
PRINCIPAL RISKS AND UNCERTAINTIES
Managing our risks
The Board, with the assistance of the Manager, has carried out a robust
assessment of the principal risks and uncertainties facing the Company,
including those that would threaten its business model, future performance,
solvency and liquidity.
With the assistance of the Manager, the Board has drawn up a risk register
facing the Company and has put in place a schedule of investment limits and
restrictions, appropriate to the Company's Investment Objective and Policy, in
order to mitigate these risks as far as practicable. The Board monitors the
Manager, other suppliers and the internal and external environments in which
the Company operates to identify new and emerging risks. The Board's policy on
risk management has not materially changed from last year. The principal risks
which have been identified and the steps taken by the Board to mitigate these
are as follows:
Risk Mitigation
Investment activity and performance The Board monitors investment performance at each Board meeting and regularly
reviews the extent of its borrowings.
An inappropriate investment strategy (for example, in terms of stock or sector
attribution or the level of gearing) may result in underperformance against
the Company's benchmark index and the companies in its peer group.
The Board receives monthly updates from the Fund Manager.
Portfolio and market The Board reviews the portfolio at each meeting, regularly considers relevant
political, economic and environmental changes and mitigates risk through
Although the Company invests almost entirely in securities that are quoted on diversification of investments in the portfolio.
recognised markets, share prices may move rapidly. The companies in which
investments are made may operate unsuccessfully, or fail entirely. Significant
economic, political or environmental changes in Europe and globally may impact
investment returns. A fall in the market value of the Company's portfolio
would have an adverse effect on shareholders' funds.
Regulatory The Manager is contracted to provide investment, company secretarial,
administration and accounting services through qualified professionals. The
A breach of Section 1158 could lead to a loss of investment trust status, Board receives internal controls reports produced by Janus Henderson on a
resulting in capital gains realised within the portfolio being subject to quarterly basis, which confirm regulatory compliance.
corporation tax. A breach of the FCA's Listing Rules could result in
suspension of the Company's shares, while a breach of the Companies Act 2006
could lead to criminal proceedings, or financial or reputational damage.
Operational and cyber The Board monitors the services provided by the Manager and its other
suppliers and receives reports on the key elements in place to provide
Disruption to, or failure of, the Manager's accounting, dealing or payment effective internal control. During the year the Board received reports on the
systems or the Custodian's records could prevent the accurate reporting and Manager's approach to information security and cyber attack defence. The Board
monitoring of the Company's financial position. The Company is also exposed to considers the loss of the Fund Manager as a risk but this is mitigated by the
the operational risk that one or more of its service providers may not provide experience of the Equities team at Janus Henderson.
the required level of service. The Company may also be exposed to the risk of
cyber attack on its service providers.
ESG For those companies with a MSCI Laggard rating, the Board requires the Manager
to formally explain the rationale for the potential improvement of the MSCI
The Company is an Article 8 company under SFDR. Decisions on ESG matters can risk rating to a minimum of 'medium' within three years. See the Annual Report
be subjective and criteria may change as knowledge, technology and science for more detail.
evolves. There is a risk that an investment, assessed as appropriate at a
point in time, subsequently does not meet ESG criteria, and exposes the
Company to reputational risk.
The Company's ESG criteria are considered to be sufficiently clear and
measurable. These criteria and the Company's adherence to them are monitored
and reviewed on a regular basis. Should the Board or the Manager consider it
appropriate to review or alter the criteria, this would be considered on a
case by case basis against known factors prevailing at the time.
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 internal controls section of
the Corporate Governance report of the 2023 Annual Report. Further details of
the Company's exposure to market risk (including market price risk, currency
risk and interest rate risk), liquidity risk and credit and counterparty risk
and how they are managed are contained in the Notes to the Financial
Statements within the Annual Report.
VIABILITY STATEMENT AND GOING CONCERN
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 in the Strategic
Report within the Annual Report.
The Directors do not expect there to be any significant change in the current
principal risks and adequacy of the mitigating controls in place. In addition,
the Directors do not envisage any change in strategy or objectives or any
events that would prevent the Company from continuing to operate over that
period, as the Company's assets are liquid, its commitments are limited and
the Company intends to continue to operate as an investment trust. In coming
to this conclusion, the Board has considered the potential impact of the
principal risks and uncertainties facing the Company, in particular the impact
of the rise in inflation, COVID-19, the risks arising from the wider
ramifications of the conflict between Russia and Ukraine, investment strategy
and performance against the benchmark (whether from stock or sector
attribution or the level of gearing) and market risk, materialising in severe
but plausible scenarios, and the effectiveness of any mitigating controls in
place.
The Directors 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 borrowing facilities
and how a breach of any covenants could impact on the Company's net asset
value and share price. 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.
The Directors consider it appropriate to adopt the going concern basis of
accounting in preparing the Financial Statements (see note 1(b) for further
details).
BORROWINGS
During the year under review, the Company had in place an unsecured loan
facility of £25 million (2022: £25 million) which allowed it to borrow as
and when appropriate. The maximum amount drawn down in the year under review
was £17.7 million (2022: £12.8 million), with borrowing costs for the year
totalling £217,000 (2022: £84,000). £8.6 million of the facility was in use
at the year end (2022: £12.6 million). Actual gearing at 31 July 2023 was
4.6% (2022: 2.5%) of NAV. Since the year end the Company has put in place an
unsecured loan facility of €30 million to replace the previous facility. The
Board has delegated responsibility for day to day gearing levels to the Fund
Manager. The Fund Manager expects to maintain some level of gearing in most
conditions and the normal level of gearing is expected to be between 2% and 6%
of NAV, but at times it may be above or below these levels. The Fund Manager
does not use gearing in an attempt to time prospective market moves. Instead,
the Company's gearing will increase when the Fund Manager sees attractive,
stock specific, opportunities to deploy capital and will reduce gearing when
the Fund Manager is a net seller of existing positions, again for stock
specific reasons.
RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the year were with its
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 expenses and remuneration for which there were no
outstanding amounts payable at the year end. Directors' shareholdings are
disclosed in the 2023 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 given in the Notes to the
Financial Statements within the Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In accordance with Disclosure Guidance and Transparency Rule 4.1.12, each of
the Directors confirms that, to the best of his or her knowledge:
(a) the Company's Financial Statements, which have been prepared in accordance
with UK Accounting Standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
(b) the Annual Report and Financial Statements 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.
The Directors consider that the Annual Report and Financial Statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance, business model
and strategy.
On behalf of the Board
Nicola Ralston
Chairman
27 September 2023
TWENTY LARGEST HOLDINGS AS AT 31 JULY 2023
Market Value 2023
Company Country Sector £'000 Percentage of Portfolio
2023
1 Novo Nordisk Denmark Pharmaceuticals and Biotechnology 20,336 5.69
2 Nestlé Switzerland Food Producer 17,817 4.99
3 TotalEnergies France Oil, Gas and Coal 17,261 4.83
4 Roche Switzerland Pharmaceuticals and Biotechnology 15,766 4.41
5 Sanofi France Pharmaceuticals and Biotechnology 14,465 4.05
6 ASML Netherlands Technology Hardware and Equipment 13,009 3.64
7 Hermès France Luxury Goods 12,403 3.47
8 LVMH Moët Hennessy Louis Vuitton France Personal Goods 12,156 3.40
9 Safran France Aerospace and Defence 10,072 2.82
10 SAP Germany Software and Computer Services 9,968 2.79
Top 10 143,253 40.09
11 DSM Firmenich Switzerland Food Producer 9,860 2.76
12 Cellnex Spain Mobile Telecommunications 9,762 2.73
13 Airbus France Aerospace and Defence 9,642 2.70
14 SGS Switzerland Industrial Support Services 9,353 2.62
15 Partners Group Switzerland Private Equity Asset Manager 9,028 2.53
16 Beiersdorf Germany Personal Care, Drug and Grocery Store 8,650 2.42
17 Munich Re. Germany Insurance 8,441 2.36
18 Deutsche Börse Germany Financial Services 8,400 2.35
19 ASM International Netherlands Technology Hardware and Equipment 8,033 2.25
20 UniCredit Italy Banks 7,913 2.21
Top 20 232,335 65.02
Market capitalisation (excluding cash) of the portfolio by weight at 31 July
2023
Market cap % Portfolio weight % Benchmark weight
>€20bn 74.9 73.7
€10bn - €20bn 8.2 12.0
€5bn - €10bn 11.5 9.7
€1bn - €5bn 4.7 4.4
€0bn - €1bn 0.7 0.2
Performance drivers over the year ended 31 July 2023
%
Benchmark Return 16.1
Sector Allocation(1) (2.0)
Stock Selection 3.1
Currency Movements (relative to index) 0.9
Effect of Cash and Gearing (0.1)
Effect of Ongoing Charge (0.8)
Residual (due to timing and rounding) (0.5)
NAV Total Return 16.7
(1) Sector allocation is the effect of asset allocation, less the effects of
gearing, share buy-backs / issues and currency.
Source: Morningstar Direct, Janus Henderson
AUDITED INCOME STATEMENT
Year ended 31 July 2023 Year ended 31 July 2022
Revenue Capital Revenue Capital
return return Total return return Total
£'000 £'000 return £'000 £'000 return
£'000 £'000
Gains/(losses) on investments held - 43,816 43,816 - (54,923) (54,923)
at fair value through profit or loss
(note 2)
Investment income (note 3) 8,877 - 8,877 9,298 - 9,298
Other income 71 - 71 1 - 1
--------- ---------- --------- --------- ---------- ---------
Gross revenue and capital 8,948 43,816 52,764 9,299 (54,923) (45,624)
Gains/(losses)
Management fee (407) (1,628) (2,035) (410) (1,642) (2,052)
Other administrative expenses (553) - (553) (553) - (553)
--------- ---------- --------- --------- ---------- ---------
Net return/(loss) before finance costs and taxation 7,988 42,188 50,176 8,336 (56,565) (48,229)
Finance costs (43) (174) (217) (17) (67) (84)
--------- ---------- --------- --------- ---------- ---------
Net return/(loss)before taxation 7,945 42,014 49,959 8,319 (56,632) (48,313)
Taxation on net return (1,120) - (1,120) (69) (11) (80)
--------- ---------- --------- --------- ---------- ---------
Net return/(loss)after taxation 6,825 42,014 48,839 8,250 (56,643) (48,393)
===== ===== ===== ===== ===== =====
Return/(loss) per ordinary share 3.22p 19.83p 23.05p 3.89p (26.73p) (22.84p)
(basic and diluted) (note 4)
===== ===== ===== ===== ===== =====
The total return column of this statement represents the Income Statement of
the Company.
All revenue and capital items in the above statement derive from continuing
operations.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the AIC.
The Company had no recognised gains or losses other than those disclosed in
the Income Statement.
AUDITED STATEMENT OF CHANGES IN EQUITY
Year ended 31 July 2023 Called up
share Share Capital Capital Total shareholders'
capital premium redemption reserve reserves Revenue funds
£'000 account £'000 £'000 reserve £'000
£'000 £'000
1,060 41,032 263 251,065 7,590 301,010
At 1 August 2022
Net return after taxation - - - 42,014 6,825 48,839
Final dividend paid in respect of the year ended 31 July 2022 (paid 23 - - - - (6,356) (6,356)
November 2022)
Interim dividend paid in respect of the year ended 31 July 2023 (paid 28 April - - - - (1,695) (1,695)
2023)
---------- ----------- ---------- ----------- ---------- ------------
At 31 July 2023 1,060 41,032 263 293,079 6,364 341,798
====== ====== ====== ======= ====== =======
Year ended 31 July 2022 Called up
share Share Capital Capital Total shareholders'
capital premium redemption reserve reserves Revenue funds
£'000 account £'000 £'000 reserve £'000
£'000 £'000
1,060 41,032 263 307,722 4,633 354,710
At 1 August 2021
Net (loss)/return after taxation - - - (56,643) 8,250 (48,393)
Costs relating to sub-division of shares - - - (14) - (14)
Final dividend paid in respect of the year ended 31 July 2021 (paid 24 - - - - (3,602) (3,602)
November 2021)
Interim dividend paid in respect of the year ended 31 July 2022 (paid 22 April - - - - (1,695) (1,695)
2022)
Refund of unclaimed dividends over 12 years old - - - - 4 4
---------- ----------- ---------- ----------- ---------- ------------
At 31 July 2022 1,060 41,032 263 251,065 7,590 301,010
====== ====== ====== ======= ====== =======
AUDITED STATEMENT OF FINANCIAL POSITION
As at 31 July 2023 As at 31 July 2022
£'000 £'000
Fixed assets
Fixed asset investments held at fair value through profit or loss
Listed at market value - overseas 357,406 308,398
---------- ----------
Current assets
Debtors 3,445 6,192
Cash at bank and in hand 2,687 2,482
---------- ----------
6,132 8,674
Creditors: amounts falling due within one year (21,740) (16,062)
---------- ----------
Net current liabilities (15,608) (7,388)
---------- ----------
Total assets less current liabilities 341,798 301,010
---------- ----------
Net assets 341,798 301,010
====== ======
Capital and reserves
Called up share capital 1,060 1,060
Share premium account 41,032 41,032
Capital redemption reserve 263 263
Capital reserves 293,079 251,065
Revenue reserve 6,364 7,590
----------- -----------
Total shareholders' funds 341,798 301,010
====== ======
Net asset value per ordinary share (basic and diluted) 161.3p 142.1p
====== ======
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
(a) Basis of preparation
The Company is a registered investment company as defined in Section 833 of
the Companies Act 2006 and is incorporated in the United Kingdom. It operates
in the United Kingdom and is registered at 201 Bishopsgate, London EC2M 3AE.
The Financial Statements have been prepared in accordance with the Companies
Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland' and with the Statement of Recommended Practice: Financial
Statements of Investment Trust Companies and Venture Capital Trusts (the
'SORP') issued in July 2022 by the Association of Investment Companies.
The principal accounting policies applied in the presentation of these
Financial Statements are set out below. These policies have been consistently
applied to all the years presented. There have been no significant changes to
the accounting policies compared to those set out in the Company's Annual
Report for the year ended 31 July 2022.
As an investment company the Company has the option, which it has taken, not
to present a cash flow statement. A cash flow statement is not required when
an investment company meets all the following conditions: substantially all of
the entity's investments are highly liquid, substantially all of the entity's
investments are carried at market value, and the entity provides a statement
of changes in equity. The Directors have assessed that the Company meets all
of these conditions.
The Financial Statements have been prepared under the historical cost basis
except for the measurement at fair value of investments. In applying FRS 102,
financial instruments have been accounted for in accordance with Section 11
and 12 of the standard.
All of the Company's operations are of a continuing nature.
The preparation of the Company's Financial Statements on occasion requires the
Directors to make judgements, estimates and assumptions that affect the
reported amounts in the primary Financial Statements and the accompanying
disclosures. These assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of assets or liabilities
affected in the current and future periods, depending on circumstance.
The Directors do not believe that any accounting judgements or estimates have
been applied to this set of Financial Statements that have a significant risk
of causing a material adjustment to the carrying amount of assets and
liabilities within the next financial year.
(b) Going concern
The assets of the Company consist of securities that are primarily readily
realisable and, accordingly, the Directors believe that the Company has
adequate resources to continue in operational existence for at least 12 months
from the date of approval of the Financial Statements. Having assessed these
factors and the principal risks, as well as considering the impact of the rise
in inflation, COVID-19 and the risks arising from the wider ramifications of
the conflict between Russia and Ukraine, the Directors consider it appropriate
to adopt the going concern basis of accounting in preparing the Financial
Statements.
2. Gains/(losses)on investments held at fair value through profit or loss
2023 2022
£'000 £'000
Gains on sale of investments based on historical cost 10,558 4,271
Less: Revaluation gains recognised in previous years (591) (32,176)
------------ ------------
Gains/(losses)on investments sold in the year based on carrying value at 9,967 (27,905)
previous statement of financial position date
------------ ------------
Revaluation of investments held at 31 July 34,001 (27,108)
Exchange (losses)/gains(1) (152) 90
---------- ----------
43,816 (54,923)
====== ======
(1) Includes exchange losses of £34,000 (2022: £20,000) on bank loans
3. Investment income 2023 2022
£'000 £'000
Overseas dividend income 8,877 9,298
---------- ----------
8,877 9,298
===== =====
4. Return/(loss) per ordinary share (basic and diluted)
The total return per ordinary share is based on the net gain attributable to the ordinary shares of £48,839,000 (2022: loss £48,393,000) and on 211,855,410 ordinary shares (2022: 211,855,410), being the weighted average number of shares in issue during the year. The total return can be further analysed as follows:
2023 2022
£'000 £'000
Revenue return 6,825 8,250
Capital return/(loss) 42,014 (56,643)
---------- ----------
Total return/(loss) 48,839 (48,393)
====== ======
Weighted average number of ordinary shares 211,855,410 211,855,410
2023 2022
Pence Pence
Revenue return per ordinary share 3.22 3.89
Capital return/(loss) per ordinary share 19.83 (26.73)
---------- ----------
Total return/(loss) per ordinary share 23.05 (22.84)
====== ======
The Company has no securities in issue that could dilute the return per
ordinary share. Therefore the basic and diluted return per ordinary share are
the same.
5. Dividends on ordinary shares
Register date Payment date 2023 2022
£'000 £'000
Final dividend (1.7p) for the year ended 31 July 2021 22 October 24 November 2021 - 3,602
2021
Interim dividend (0.8p) for the year ended 31 July 2022 8 April 2022 22 April 2022 - 1,695
Final dividend (3.0p) for the year ended 31 July 2022 21 October 23 November 2022 6,356 -
2022
Interim dividend (0.8p) for the year ended 31 July 2023 11 April 2023 28 April 2023 1,695 -
Refund of unclaimed dividends over 12 years old - (4)
----------- ----------
8,051 5,293
======= =======
The proposed final dividend of 3.0p per share for the year ended 31 July 2023
is subject to approval by shareholders at the AGM and has not been included as
a liability in these Financial Statements. The final dividend will be paid on
22 November 2023 to shareholders on the register of members at the close of
business on 20 October 2023. The shares will be quoted ex-dividend on 19
October 2023.
All dividends have been paid or will be paid out of revenue profits and
revenue reserves.
The total dividends payable in respect of the financial year which form the
basis of Section 1158 of the Corporation Tax Act 2010 are set out below:
2023 2022
£'000 £'000
Revenue available for distribution by way of dividend for the year 6,825 8,250
Interim dividend of 0.8p (2022: 0.8p) paid 28 April 2023 (2022: 22 April 2022) (1,695) (1,695)
Proposed final dividend for the year ended 31 July 2023 of 3.0p (2022: 3.0p) (6,356) (6,356)
(based on 211,855,410 ordinary shares in issue at 27 September 2023 (2022:
211,855,410))
----------- ----------
Transfer (from)/to revenue reserve(1) (1,226) 199
======= =======
(1) There is no undistributed revenue in the current year (2022: £199,000 of
undistributed revenue).
6. Net asset value per ordinary share (basic and diluted)
The net asset value per ordinary share of 161.3p (2022: 142.1p) is based on
the net assets attributable to ordinary shares of £341,798,000 (2022:
£301,010,000) and 211,855,410 (2022: 211,855,410) ordinary shares in issue at
the year end. There were also 200,000 shares held in Treasury at the year end
(2022: 200,000).
The movements during the year of the assets attributable to the ordinary
shares were as follows:
2023 2023
£'000 £'000
Net assets attributable to the ordinary shares at start of year 301,010 354,710
Net return/(loss) after taxation 48,839 (48,393)
Costs relating to sub-division of shares - (14)
Dividends paid on ordinary shares in the year (8,051) (5,297)
Refund of unclaimed dividends over 12 years old - 4
----------- ----------
Total net assets attributable to the ordinary shares at 31 July 341,798 301,010
======= =======
7. Called up share capital
Nominal value of shares
Number of shares entitled to dividend Total number of shares £'000
Allotted and issued ordinary shares of 0.5p each at 31 July 2022 211,855,410 212,055,410 1,060
----------------- ---------------- ----------
At 31 July 2023 211,855,410 212,055,410 1,060
========== ========== =====
During the year the Company issued no shares (2022: none).
During the year the Company repurchased no shares (2022: none).
Shares held in treasury (2023: 200,000; 2022: 200,000) are not entitled to
receive a dividend.
There is a single class of ordinary share. Reserves that can be distributed as
a dividend are detailed in the Annual Report.
Since 31 July 2023, no shares have been repurchased or issued.
8. 2023 financial information
The figures and financial information for the year ended 31 July 2023 are
extracted from the Company's Annual Financial Statements for that period and
do not constitute statutory financial statements for that period. The
Company's Annual Financial Statements for the year ended 31 July 2023 have
been audited but have not yet been delivered to the Registrar of Companies.
The Independent Auditor's Report on the 2023 Financial Statements was
unqualified, did not include a reference to any matter to which the Auditors
drew attention without qualifying the report, and did not contain any
statements under sections 498(2) and 498(3) of the Companies Act 2006.
9. 2022 financial information
The figures and financial information for the year ended 31 July 2022 are
extracted from the Company's Annual Financial Statements for that period and
do not constitute statutory financial statements for that period. The
Company's Annual Financial Statements for the year ended 31 July 2022 have
been audited and delivered to the Registrar of Companies. The Independent
Auditor's Report on the 2022 Financial Statements was unqualified, did not
include a reference to any matter to which the Auditors drew attention without
qualifying the report, and did not contain any statements under sections
498(2) and 498(3) of the Companies Act 2006.
10. Annual Report and Annual General Meeting
The Annual Report for the year ended 31 July 2023 will be posted to
shareholders in October 2023 and copies will be available from the Corporate
Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M
3AE.
The Company's Annual General Meeting ('AGM' or 'Meeting') is currently
scheduled to take place at the registered office at 2.30pm on Wednesday 15
November 2023. The Notice of the AGM will be posted to shareholders with the
Annual Report and will be available on the Company's website.
11. Website
This document, and the Annual Report for the year ended 31 July 2023, will be
available on the following website: www.hendersoneurotrust.com
(http://www.hendersoneurotrust.com) .
For further information please contact:
Jamie Ross Dan Howe
Fund Manager Head of Investment Trusts
Henderson EuroTrust plc Janus Henderson Investors
Telephone: 020 7818 5260 Telephone: 020 7818 4458
Harriet Hall
Investment Trust PR Manager
Janus Henderson Investors
Tel: 020 7818 2919
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
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