Henderson Int Income - Half-year Report
03/05/2023 07:00
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RNS Number : 1692Y Henderson Intl. Income Trust PLC 03 May 2023
JANUS HENDERSON FUND MANAGEMENT UK LIMITED
HENDERSON INTERNATIONAL INCOME TRUST PLC
LEGAL ENTITY IDENTIFIER: 2138006N35XWGK2YUK38
HENDERSON INTERNATIONAL INCOME TRUST PLC
UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 28 FEBRUARY 2023
This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company's investment objective is to provide shareholders with a growing
total annual dividend, as well as capital appreciation.
PERFORMANCE HIGHLIGHTS FOR THE SIX MONTHS TO 28 FEBRUARY 2023
· The first interim dividend payment for the year ending 31 August 2023 of 1.85p
per ordinary share was paid to shareholders on 28 February 2023. A second
interim dividend payment for the year ending 31 August 2023 of 1.85p per
ordinary share has been declared and will be paid to shareholders on 31 May
2023.
· The share price at 28 February 2023 was 179.0p per share compared with 171.8p
at 31 August 2022.
· The net asset value ("NAV") per share as at 28 February 2023 was 181.7p
compared to 181.5p (with debt at par) at 31 August 2022 and 184.8p at 28
February 2023 compared to 183.4p as at 31 August 2022 (with debt at fair
value).
· The discount on the ordinary shares to the net asset value (with debt at par)
as at 28 February 2023 was 1.5% compared to a discount of 5.3% as at 31 August
2022.
· The dividend yield* on the ordinary shares was 4.1% as at 28 February 2023 (31
August 2022: 4.2%).
* Calculated using the share price at the period end of 179.0p and the last
four dividends paid.
TOTAL RETURN PERFORMANCE TO 28 FEBRUARY 2023
6 months 1 year 3 years 10 years Since launch
% % % % %
Diluted NAV (debt at par)(1) 2.2 6.7 31.9 136.1 183.8
Diluted NAV (debt at fair value)(1) 2.8 8.9 36.9 140.4 188.9
Share price(2) 6.5 12.6 31.3 127.3 183.0
MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted) 0.5 5.1 31.0 146.3 201.4
AIC Global Equity Income sector (NAV) 2.7 26.3 46.0 148.4 179.2
(1) Calculated using published daily NAVs including current year revenue
(2) The Company's share price total return. Since inception share price return
- launch price including discount (97.25p)
Sources: Morningstar Direct, Refinitiv Datastream and Janus Henderson
INTERIM MANAGEMENT REPORT
CHAIRMAN'S STATEMENT
Performance and markets
During the six months to 28 February 2023, the net asset value ("NAV") total
return per ordinary share was 2.2% (debt at par) and 2.8% (debt at fair
value). The Company's return on the ordinary share price was 6.5%. This
included dividends totalling 3.7p per share (2022: 3.6p), an increase of 2.8%
year on year. The total return of the Company's comparator index (MSCI ACWI
(ex UK) High Dividend Yield Index (sterling adjusted)) was 0.5%.
Over the period, inflation has proved to be more persistent than policy makers
had expected, and central banks have reacted by raising interest rates more
than markets had predicted. The US Federal reserve increased rates by 2.25%,
the Bank of England by 2.75% and the European Central Bank by 2.5%. These
increases have created problems for bond markets and business models that
relied on plentiful debt at low interest rates, as illustrated by recent
high-profile bank failures and difficulties within the property sector.
Nevertheless, there have been some positive developments that are helping
economies to offset the immediate impact of these higher interest rates. These
include the once feared "winter energy crisis", which in the event did not
transpire, China's abandonment of its zero Covid policy and employment levels
remaining high around the world. Together, these developments have helped
equity markets recover from last year's lows. Europe was the strongest
performing equity market, aided by lower energy prices and the year-on-year
benefit of an absence of Covid lockdowns. Japan and the US markets also
recovered. Sterling rallied over the period, slightly dampening the returns
from overseas equities for UK investors.
The Company's portfolio is diversified and with its focus on investments with
attractive valuations and secure balance sheets it has largely avoided the
areas of the market most impacted by rising interest rates. Our emphasis on
cash generation to finance investment and shareholder returns has allowed
portfolio companies to deal with higher borrowing costs and even, in some
cases, to gain market share. At a Company level, the earlier decision in 2019
to secure fixed borrowing for over 20 years means there is no risk of higher
borrowing costs for shareholders.
Earnings and dividends
The revenue return per ordinary share during the six months to 28 February
2023 was 1.96p (2022: 2.26p). A fourth interim dividend of 1.85p per ordinary
share, for the year ended 31 August 2022, was paid to shareholders on
30 November 2022, bringing the total dividend paid in respect of the year
ended 31 August 2022 to 7.25p per ordinary share (year ended 31 August 2021:
6.30p per ordinary share).
The board declared a first interim dividend payment for the year ending 31
August 2023 of 1.85p per ordinary share and this was paid to shareholders on
28 February 2023. Subsequently, we have declared a second interim dividend of
1.85p per ordinary share that will be paid to shareholders on 31 May 2023.
The long-term objective of your Company since launch has been to provide
shareholders with a growing total annual dividend, as well as capital
appreciation. To date, we have increased the dividend each year. We continue
to recognise the importance of dividend income to our shareholders and, if
needs be, we will utilise the Company's reserves in the event of any temporary
shortfall between the Company's distributions and portfolio income. So far
this financial year, the Company has distributed £7.251m from the earned
income and revenue reserves.
The board continues to monitor the level of dividend paid out to shareholders
and currently aims to maintain at least the same level of dividend for the
remaining six months of this financial year.
Gearing
Well-judged gearing enhances returns to shareholders. The board's current
policy is to permit the fund manager to gear up to 25% of net assets at the
time of drawdown. Borrowing limits for this purpose include implied gearing
through the use of derivatives. The gearing at the period end was 1.7%
(31 August 2022: 6.5%).
Discount control
The Company's share price has traded at a discount of between 2-11% over the
period. The board continues to monitor the premium/discount to NAV and will
consider appropriate action if the relationship between NAV and share price
moves and remains out of line with the Company's peer group. However, there is
a distinct limit to the board's ability to influence the premium or discount
to NAV. Accordingly, we believe it is not in shareholders' interests to have a
specific share issuance or buy-back policy. We believe that it is sensible to
retain flexibility; therefore, we shall consider share issuance and/or
buy-backs where appropriate and subject to market conditions.
Management fees
In 2022, your board agreed with Janus Henderson a reduction in the management
fee to a single rate of 0.575% per annum. This new rate took effect from 1
September 2022, the first day of your Company's current financial year.
Board composition and succession planning
This is the first opportunity that I have had to comment on the retirement of
our previous chairman, Simon Jeffreys, at last year's AGM. Simon made a major
contribution to the Company during his tenure as Chairman and I would like to
thank him on behalf of the board and all shareholders for his diligence and
hard work. The board consists of four directors, two women and two men. We are
currently looking to recruit a new director to return us to five, which the
board considers to be the long-term appropriate number of directors. We expect
to announce shortly the outcome of this process. It is the board's continuing
intention to consider carefully its mix of directors giving due weight to
their skill set, experience, gender and diversity.
The board has also given thought to longer-term succession planning. The
directors believe that they are in a strong position to effect a gradual
refreshment of the board, reflecting both tenure and the evolving skill sets
required to oversee successfully an investment company.
Outlook
The Covid pandemic and Ukraine conflict were globally significant economic and
humanitarian events. The disruption they caused makes it difficult to discern
what the real economic and supply/demand trends currently are across a range
of important variables, including inflation, commodity prices, demographics
and consumer spending. As a result of this uncertainty, investors remain
understandably cautious and have derated many sectors and regions of equity
markets, causing some to trade at low valuations compared to history.
The board and the fund manager remain focused on delivering the Company's
investment objectives and will continue to follow its existing strategy of
identifying attractively valued companies that have the capacity to grow their
earnings and dividends over the medium to long term. The diversified nature of
the Company's portfolio provides investors with a wide range of exposure to
different industries and global regions which is both beneficial and
appropriate in these uncertain times.
Richard Hills
Chairman
2 May 2023
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties associated with the Company's business
can be divided into the following main categories:
• Geopolitical risks;
• Investment activity and performance risks;
• Portfolio and market price risks;
• Political risks;
• Tax and regulatory risks; and
• Operational and cyber risks.
Information on these risks and how they are managed are given in the annual
report for the year ended 31 August 2022. In the view of the board, the
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.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that, to the best of their knowledge:
(a) the financial statements for the half-year ended 28 February 2023 have been
prepared in accordance with 'FRS 104 Interim Financial Reporting';
(b) the Interim Management Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of
important events during the first six months and description of 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 Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of
related party transactions and changes therein).
On behalf of the board
Richard Hills
Chairman
2 May 2023
For more information please contact:
Ben Lofthouse Harriet Hall
Fund Manager PR Manager, Investment Trusts
Henderson International Income Trust plc Janus Henderson Investors
Telephone: 020 7818 5187 Telephone: 020 7818 2919
Dan Howe
Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 4458
FUND MANAGER'S REPORT
Performance review
Over the last six months the portfolio produced a total return of 2.8% in NAV
per ordinary share over the period (debt at fair value). This return includes
dividends totalling 3.7p per share, a 2.8% increase year on year.
There has been a considerable dispersion between the returns of different
regions and sectors. Higher yielding stocks have outperformed the wider
market; the MSCI ACWI (ex UK) High Dividend Yield Index returned 0.5% compared
to -0.2% for the MSCI World (ex UK) Index (both sterling adjusted) and
European equities have outperformed the rest of the world. In sterling terms,
the MSCI Europe Index has risen 13.2%, significantly outperforming returns
from the US S&P500 of -2.7%, and -5.8% for the MSCI Asia ex Japan.
The overweight exposure to European stocks, which represented on average a
third of the portfolio, contributed most to performance. In the first half of
2022 stock markets around the world were rocked by the sudden invasion of
Ukraine by Russia, and the associated energy crisis that particularly impacted
European countries. Due to concerted efforts by both European governments to
increase gas inventory levels, and consumers to reduce consumption, energy
prices gradually abated over the period. This has contributed to European
stock markets being the strongest since global markets troughed in October
2022. Many of the portfolio's financial holdings have also been significant
positive contributors to performance due the combination of rising interest
rates and an improving economic environment. In recent years the portfolio has
maintained a significant exposure to financial companies because their
valuations have not reflected their profitability or dividend sustainability
both of which have endured despite the low interest rate environment of the
last decade. European financial companies BFF Group, ING Group, AXA, and asset
managers Van Lanschot Kempen and Amundi were amongst the most positive
individual contributors to performance. All of these companies have continued
to post good results, often beating expectations, and have strong capital and
balance sheet positions.
There have been other significant macroeconomic factors that influenced
returns over the period, and which we expect to continue to shape events over
the coming months. China surprised investors by abandoning its zero Covid
policy towards the end of 2022 and proceeded to re-open its economy. This was
another positive development for global growth and especially for the outlook
for European companies which generally have greater exposure to China than
their US counterparts. These factors have helped the consumer discretionary
companies in the portfolio to outperform the wider market. Demand for luxury
goods has been strong and as a result both Richemont and Mercedes-Benz profits
have exceeded forecasts helping them both into the top ten positive
contributors.
Stock performance has not been all about macroeconomic events. The portfolio
has a significant exposure to health care and although this is not a cyclical
sector it has performed well over the last six months; driven more by stock
specific news and stock selection rather than asset allocation. Novo Nordisk,
Sanofi and Merck reported good earnings and drug pipeline developments which
have given the market more confidence in their respective outlooks.
The most significant negative contributor to performance has been the
overweight exposure to the Asia Pacific region. Despite China's re-opening the
Asia Pacific stocks have been weaker than expected. The region makes up
approximately 25% of the portfolio and the return for the period was -2.5%.
Although the economic momentum following the re-opening has been positive,
corporate results for the second half of 2022 were below expectation,
indicating just how weak the Chinese economy had become as a result of the
Covid lockdowns. So far the average Chinese consumer seems to be less willing
to participate in 'revenge spending' than their western peers and this has
disappointed some commentators who expected a more dramatic response following
almost three years of lockdown. The tension with the US, over Taiwan and
semiconductors, has also not helped investor sentiment. We believe investors
need to see more evidence of economic and corporate recovery in the quarters
ahead.
At the sector level consumer staples and telecommunications holdings have
underperformed the market after strong performance in the first half of 2022.
Their results have generally been good, but their defensive earnings have not
been fully appreciated by the market. In some cases, we have used this
underperformance to add to holdings.
Operating conditions for many companies have been improving, helped by
moderating energy prices and supply chain constraints. Nevertheless, it is
still a difficult economic environment in which cost inflation has remained
high, employee availability tight, and interest rates have increased
significantly. Two companies held in the portfolio have taken longer to
recover from the pandemic period than we expected: payments company Fidelity
National Information Services (FIS) and leisure retailer VF Corp. As a result
we have evaluated both positions, and exited VF Corp after concluding the
investment case was no longer valid, however we continue to see upside in FIS,
and monitor progress there.
Gearing had a positive contribution to performance over the period as the
portfolio appreciated in value. The Company's long-term financing means that a
fair value and par value return is quoted. The fair value of the debt reflects
a theoretical market price and is impacted by changes in interest rate
expectations in the financial markets. The rise in interest rate expectations
during the period has reduced the fair value of the debt, enhancing the fair
value net asset value return.
Portfolio positioning
The composition of the portfolio has not changed significantly over the
period. Stock selection is driven by a combination of the attractiveness of
the company (leading competitive positioning, positive supply/demand outlook,
good cash flow generation, long-term sustainability of business model) and its
valuation. We remain focused on companies that have pricing power to cope with
cost inflation and higher interest rates, and which have improving operating
environments or industry trends that are not reflected in their valuations.
The rally in the technology and financial sectors since last summer has led us
to take some profits and as a result the gearing of the portfolio has fallen
from 6.5% to 1.7%. Positions closed on this basis included Taiwanese financial
conglomerate CTBC Financial, insurers Sampo and Manulife, and semi-conductor
companies MediaTek and Broadcom. The holding in OZ Minerals was sold as the
shares had performed well and were trading close to the takeover bid price
from BHP Group. The position in Nintendo was sold to take profits and the
proceeds were reinvested into Sony, which has underperformed over the last few
years despite having superior and more diversified long-term growth drivers
than many competitors.
Many stock valuations became more attractive during 2022 and we took advantage
of market volatility to open new positions in companies whose opportunities
for growth are underappreciated. Consumer staples companies Pernod and Ambev
were added. Both have material exposure to Asian and Latin American markets
and the potential to grow earnings and dividends throughout the economic
cycle. Derivative exchange operator CME was also purchased after a severe
de-rating driven by the sell-off in US equity markets last year. CME is one of
the largest providers of interest rate derivatives, used by investors and
financial companies to help manage interest rate risk, especially in times of
interest rate uncertainty.
Income trends
The Company's investment process focuses on companies with attractive dividend
yields, strong cash flow generation and the potential for capital growth from
rising earnings and distributions in the future.
Recent dividend announcements have generally reflected underlying earnings
trends, rather than the reinstatements or catch-up payments that occurred post
the pandemic. Despite the uncertainty arising from the conflict in Ukraine
companies have continued to report healthy dividend increases across a wide
range of sectors and geographies. Financial services companies AXA and CME
both increased their ordinary dividends by 10% on the back of improving
earnings growth, and CME increased its annual special dividend by 38%. Energy
company TotalEnergies and luxury goods producer Richemont both paid unexpected
special dividends reflecting stronger than anticipated cash generation from
their respective businesses. The health care holdings are also contributing to
dividend growth; Merck, Medtronic and Bristol-Myers Squibb all increased
dividends by over 5% over the period.
ESG and company engagement
The integration of environmental, social and governance factors into
investment decision making and ownership was detailed in the latest annual
report. During the period under review the investment team continued to
actively engage with investee companies. Recent discussions have focused on
climate related areas, including understanding how forestry products
manufacturer UPM-Kymmene has assessed the potential impact of climate change
on its forestry assets, discussing TotalEnergies' progress on methane emission
reductions, and industrial gas company Air Products & Chemicals'
investments in hydrogen generation to help the industrial complex decarbonise.
Outlook
Over the last few years companies, and obviously all the people that make them
what they are, have coped better than investors could have hoped with the
unexpected events that have occurred. The good news is that despite economic
and market volatility, corporate success has been reflected in portfolio
returns. Over the past three years the total return of the Company exceeds 30%
and dividends have grown from 1.50p to 1.85p a quarter, an increase of 23%.
In 2021 we were concerned about the impact of rising interest rates as the
need for stimulus abated. Central bank rate increases around the world last
year mean that interest rates have generally normalised, and whilst they may
not have peaked it is likely that most of the increases are behind us. The
impact of higher interest rates on asset values is already being felt in lower
bond, property and equity values, but the impact on inflation is not yet
clear. There is often a lag between higher interest rates and lower inflation,
but higher rates plus improved supply chains should result in inflation
abating in due course. We do not, however, expect an instant return to the
very low level of inflation and interest rates that the world has become used
to over the last decade.
Whilst the outlook for inflation and interest rates remains unclear, market
valuations have fallen over the last year and provide us with an opportunity
to invest in well-managed, resilient businesses at more attractive valuation
levels. We continue to focus on identifying companies with robust free cash
flow characteristics and strong balance sheets that we believe are well
positioned to navigate the challenging global economic environment. Robust
dividend growth from companies supports our confidence in the long-term
outlook for the businesses in which we invest your money.
Ben Lofthouse
Fund Manager
2 May 2023
INVESTMENT PORTFOLIO
at 28 February 2023
Market value %
Company Country £'000 of portfolio
Basic materials
Air Products & Chemicals US 9,185 2.5
UPM-Kymmene Finland 3,572 1.0
IGO Australia 2,782 0.8
15,539 4.3
Consumer discretionary
Compagnie Financière Richemont Switzerland 7,559 2.1
Sony Japan 5,074 1.4
Stellantis Italy 4,370 1.2
Midea China 4,050 1.1
Mercedes-Benz Germany 4,001 1.1
Li-Ning China 3,575 1.0
China Yongda Automobiles China 2,620 0.7
JD.com China 2,584 0.7
33,833 9.3
Consumer staples
Nestlé Switzerland 10,201 2.9
Coca-Cola US 9,095 2.5
Mondelez US 7,224 2.0
PepsiCo US 6,732 1.8
Ambev Belgium 5,494 1.5
Pernod-Ricard France 3,862 1.1
42,608 11.8
Energy
Woodside Energy Australia 7,424 2.1
TotalEnergies France 5,487 1.5
Aker Norway 3,650 1.0
16,561 4.6
Financials
AXA France 8,670 2.4
Amundi France 7,507 2.1
Macquarie Australia 6,171 1.7
CME Group US 5,809 1.5
AIA Hong Kong 5,055 1.4
United Overseas Bank Singapore 5,039 1.4
ING Netherlands 5,017 1.4
CITIC Securities Hong Kong 4,722 1.3
Bank Mandiri Indonesia 3,774 1.0
KB Financial Korea 3,612 1.0
Industrial Bank China 3,556 1.0
Van Lanschot Netherlands 3,520 1.0
BFF Banking Italy 3,456 1.0
Citigroup US 2,891 0.8
Travelers Companies US 2,675 0.7
71,474 19.7
Health care
Sanofi France 14,896 4.1
Merck & Co US 11,060 3.0
Roche Switzerland 8,620 2.4
Bristol-Myers Squibb US 8,095 2.2
Novartis Switzerland 7,267 2.0
Medtronic US 5,374 1.5
Johnson & Johnson US 3,938 1.1
Novo Nordisk Denmark 3,153 0.9
62,403 17.2
Industrials
nVent Electric US 8,569 2.4
Honeywell International US 5,160 1.4
Sandvik Sweden 4,483 1.3
Volvo Sweden 4,400 1.2
LG Corp Korea 4,317 1.2
China National Building Material China 2,513 0.7
29,442 8.2
Real estate
Crown Castle US 5,268 1.4
Sun Hung Kai Properties Hong Kong 4,399 1.2
CapitaLand Integrated Commercial Trust Singapore 3,900 1.1
13,567 3.7
Technology
Microsoft US 13,191 3.6
Corning US 5,443 1.5
Samsung Korea 4,222 1.2
Fidelity National Information US 3,741 1.0
Taiwan Semiconductor Manufacturing Taiwan 3,468 1.0
30,065 8.3
Telecommunications
Cisco Systems US 9,167 2.5
Deutsche Telekom Germany 5,954 1.6
Tele2 Sweden 5,468 1.5
Telus Canada 5,265 1.5
SK Telecom Korea 4,256 1.2
HKT Trust and HKT Ltd Hong Kong 3,827 1.1
Telekomunikasi Indonesia 2,700 0.7
36,637 10.1
Utilities
Iberdrola Spain 6,389 1.8
Enel Italy 3,730 1.0
10,119 2.8
Total investments 362,248 100.0
TEN LARGEST INVESTMENTS
at 28 February 2023
Company Sector Country Market value % of portfolio
£'000
Sanofi Health care France 14,896 4.1
Microsoft Technology US 13,191 3.6
Merck & Co Health care US 11,060 3.0
Nestlé Consumer staples Switzerland 10,201 2.9
Air Products & Chemicals Basic materials US 9,185 2.5
Cisco Systems Telecommunications US 9,167 2.5
Coca-Cola Consumer staples US 9,095 2.5
AXA Financials France 8,670 2.4
Roche Health care Switzerland 8,620 2.4
nVent Electric Industrials US 8,569 2.4
These investments total £102,654,000 which represents 28.3% of the portfolio.
Sector exposure as a percentage of the investment portfolio excluding cash
28 February 2023 31 August 2022
% %
Financials 19.7 19.6
Health care 17.2 16.0
Consumer staples 11.8 9.4
Telecommunications 10.1 9.8
Consumer discretionary 9.3 8.5
Technology 8.3 13.4
Industrials 8.2 7.0
Energy 4.6 4.5
Basic materials 4.3 5.4
Real estate 3.7 4.0
Utilities 2.8 2.4
100.0 100.0
Geographic exposure as a percentage of the investment portfolio excluding cash
28 February 2023 31 August 2022
% %
US 33.4 35.6
France 11.2 8.9
Switzerland 9.4 8.7
China 5.2 4.4
Hong Kong 5.0 4.7
Korea 4.6 4.7
Australia 4.6 5.2
Sweden 4.0 2.9
Italy 3.2 2.9
Germany 2.7 2.6
Singapore 2.5 2.3
Netherlands 2.4 2.0
Spain 1.8 1.6
Indonesia 1.7 0.9
Belgium 1.5 -
Canada 1.5 2.5
Japan 1.4 1.2
Norway 1.0 1.3
Finland 1.0 2.6
Taiwan 1.0 3.6
Denmark 0.9 1.4
100.0 100.0
Source: Janus Henderson
CONDENSED INCOME STATEMENT
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
28 February 2023
28 February 2022
31 August 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
return
return
£'000
return
return
£'000
return
return
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Gains/(losses) on investments held at fair value through profit or loss - 5,496 5,496 - (5,613) (5,613) - 1,834 1,834
Income from investments held at fair value through profit or loss 4,884 - 4,884 4,888 - 4,888 16,431 - 16,431
(Losses)/gains on foreign exchange - (621) (621) - 561 561 - (337) (337)
Other income 172 - 172 836 - 836 852 - 852
Gross revenue and capital gains/(losses) 5,056 4,875 9,931 5,724 (5,052) 672 17,283 1,497 18,780
Management fee (note 3) (245) (736) (981) (278) (834) (1,112) (563) (1,690) (2,253)
Other administrative expenses (334) - (334) (333) - (333) (682) - (682)
Net return before finance costs and taxation 4,477 4,139 8,616 5,113 (5,886) (773) 16,038 (193) 15,845
(81) (243) (324) (76) (230) (306) (158) (475) (633)
Finance costs
Net return before taxation 4,396 3,896 8,292 5,037 (6,116) (1,079) 15,880 (668) 15,212
Taxation on net return (553) - (553) (612) 22 (590) (1,439) (128) (1,567)
Net return after taxation (note 5) 3,843 3,896 7,739 4,425 (6,094) (1,669) 14,441 (796) 13,645
Return per ordinary share 1.96p 1.99p 3.95p 2.26p (3.11p) (0.85p) 7.37p (0.41p) 6.96p
The total columns of this statement represent the Income Statement of the
Company, prepared in accordance with FRS 104. The revenue and capital columns
are supplementary to this and are published under guidance from the
Association of Investment Companies.
The Company has no recognised gains or losses other than those disclosed in
the Income Statement and Statement of Changes in Equity.
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued during the period.
The accompanying notes are an integral part of the condensed financial
statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Half-year ended 28 February 2023 (unaudited) Called up Share Special Other Revenue Total
share
premium
reserve
reserve
£'000
capital
account
£'000 capital
£'000
£'000
£'000
reserves
£'000
At 31 August 2022 1,960 194,550 45,732 105,977 7,468 355,687
Net return after taxation - - - 3,896 3,843 7,739
Dividends paid (note 6) - - - - (7,251) (7,251)
At 28 February 2023 1,960 194,550 45,732 109,873 4,060 356,175
Half-year ended 28 February 2022 (unaudited) Called up Share Special Other Revenue Total
share
premium
reserve
reserve
£'000
capital
account
£'000 capital
£'000
£'000
£'000
reserves
£'000
At 31 August 2021 1,960 194,550 45,732 106,773 7,137 356,152
Net return after taxation - - - (6,094) 4,425 (1,669)
Dividends paid - - - - (7,054) (7,054)
At 28 February 2022 1,960 194,550 45,732 100,679 4,508 347,429
Year ended 31 August 2022 (audited) Called up Share Special Other Revenue Total
share
premium
reserve
reserve
£'000
capital
account
£'000 capital
£'000
£'000
£'000
reserves
£'000
At 31 August 2021 1,960 194,550 45,732 106,773 7,137 356,152
Net return after taxation - - - (796) 14,441 13,645
Dividends paid - - - - (14,110) (14,110)
At 31 August 2022 1,960 194,550 45,732 105,977 7,468 355,687
The accompanying notes are an integral part of the financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
At At At
28 February
28 February
31 August
2023
2022
2022
£'000
£'000
£'000
Investments held at fair value through profit or loss (note 4)
Fixed asset investments held at fair value through profit or loss 362,248 362,280 378,931
Current assets
Debtors 3,258 2,859 3,039
Cash at bank 18,886 8,522 6,590
22,144 11,381 9,629
Creditors: amounts falling due within one year (2,094) (1,286) (7,107)
Net current assets 20,050 10,095 2,522
Total assets less current liabilities 382,298 372,375 381,453
Creditors: amounts falling due after more than one year (26,123) (24,946) (25,766)
Total net assets 356,175 347,429 355,687
Capital and reserves
Called up share capital (note 8) 1,960 1,960 1,960
Share premium account 194,550 194,550 194,550
Special reserve 45,732 45,732 45,732
Other capital reserves 109,873 100,679 105,977
Revenue reserve 4,060 4,508 7,468
Total shareholders' funds 356,175 347,429 355,687
Net asset value per ordinary share (note 7) 181.7p 177.3p 181.5p
The accompanying notes are an integral part of the financial statements.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Half-year ended Half-year ended Year ended
28 February
28 February
31 August
2023
2022
2022
£'000
£'000
£'000
Cash flows from operating activities
Net return before taxation 8,292 (1,079) 15,212
Add back: finance costs 324 306 633
(Less)/add: (gains)/losses on investments held at fair value through profit or (5,496) 5,613 (1,834)
loss
Less: loss/(gain) on foreign exchange 621 (561) 337
Withholding tax on dividends deducted at source (553) (600) (2,553)
Taxation recovered - - 439
(Increase)/decrease in debtors (167) (281) 76
Increase/(decrease) in creditors 380 (64) (5)
Net cash inflow from operating activities 3,401 3,334 12,305
Cash flows from investing activities
Purchase of investments (43,497) (58,802) (117,656)
Sale of investments 60,235 54,214 105,417
Proceeds from capital dividends - - 4,206
Net cash inflow/(outflow) from investing activities 16,738 (4,588) (8,033)
Cash flows from financing activities
Equity dividends paid (net of refund of unclaimed distributions and reclaimed (7,251) (7,054) (14,110)
distributions)
Interest paid (322) (304) (628)
Net cash outflow from financing activities (7,573) (7,358) (14,738)
Net increase/(decrease) in cash and cash equivalents 12,566 (8,612) (10,466)
Cash and cash equivalents at start of year 6,590 17,199 17,199
Effect of foreign exchange rates (270) (65) (143)
Cash and cash equivalents at end of year 18,886 8,522 6,590
Comprising:
Cash at bank 18,886 8,522 6,590
18,886 8,522 6,590
The accompanying notes are an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
The half-year financial statements cover the period from 1 September 2022 to
28 February 2023.
1. Principal activity
The Company is an investment company as defined in section 833 of the
Companies Act 2006 and operates as an investment trust in accordance with
section 1158 of the Corporation Tax Act 2010.
2. Accounting policies - basis of preparation
The condensed set of financial statements has been prepared in accordance with
FRS 104, Interim Financial Reporting and FRS 102, the Financial Reporting
Standard applicable in the UK and Republic of Ireland. The financial
statements have also been prepared in accordance with the Statement of
Recommended Practice ("SORP"), 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued in April 2021.
The accounting policies applied are consistent with those of the most recent
annual financial statements for the period ended 31 August 2022.
The condensed set of financial statements has been neither audited nor
reviewed by the Company's auditor.
3. Management fee
The management fee is payable quarterly in arrears at a rate of 0.575% per
annum of the Company's net assets. This new rate was effective from 1
September 2022. Prior to that, the management fee was payable at the rate of
0.65% per annum of net assets up to £250 million, reducing to 0.60% per annum
of net assets in excess of £250 million. In accordance with the directors'
policy on the allocation of expenses between income and capital, in each
financial year 75% of the management fee payable is charged to capital and the
remaining 25% to income.
4. Financial instruments
The financial assets and financial liabilities are either carried in the
statement of financial position at their fair value or the statement of
financial position amount is a reasonable approximation of fair value (debtors
and creditors falling due within one year).
The table below analyses fair value measurements for investments held at fair
value through profit or loss.
Financial assets at fair value through profit or loss at 28 February 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 362,248 - - 362,248
Total financial assets carried at fair value 362,248 - - 362,248
Financial assets at fair value through profit or loss at 28 February 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 362,280 - - 362,280
Total financial assets carried at fair value 362,280 - - 362,280
Financial assets at fair value through profit or loss at 31 August 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 378,931 - - 378,931
Total financial assets carried at fair value 378,931 - - 378,931
There have been no transfers between levels of the fair value hierarchy during
the period.
Financial liabilities
The senior unsecured notes are carried in the statement of financial position
at par.
As at 28 February 2023, the fair value of the senior unsecured notes was
estimated to be £20,075,000 (28 February 2022: £26,545,000; 31 August 2022:
£22,004,000).
The fair value of the senior unsecured notes is calculated using a discount
rate which reflects the yield of a euro swap of similar maturity plus a
suitable credit spread. Within the terms of the senior unsecured notes are
clauses that would be enacted in certain scenarios should the notes be prepaid
by the Company before maturity. These clauses could impact the total amount
repayable.
The directors have assessed these and have concluded that these clauses are
highly unlikely to occur. The value of such additional payments has therefore
been deemed to be immaterial and has not been recognised in the financial
statements.
The senior unsecured notes are categorised as level 3 in the fair value
hierarchy.
Fair value hierarchy categories
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: Valued using quoted prices in active markets for identical assets.
Level 2: Valued by reference to valuation techniques using observable inputs
other than quoted prices included in level 1.
Level 3: Valued by reference to valuation techniques using inputs that are not
based on observable market data.
5. Return per ordinary share
(Unaudited) (Unaudited)
Half-year ended Half-year ended (Audited)
28 February 2023 28 February 2022 Year ended
£'000 £'000 31 August 2022
£'000
The return per ordinary share is based on the following figures:
Revenue return 3,843 4,425 14,441
Capital return 3,896 (6,094) (796)
Total 7,739 (1,669) 13,645
Weighted average number of ordinary shares in issue for each period 195,978,716 195,978,716 195,978,716
Revenue return per ordinary share 1.96p 2.26p 7.37p
Capital return per ordinary share 1.99p (3.11p) (0.41p)
Total return per ordinary share 3.95p (0.85p) 6.96p
The Company does not have any dilutive securities, therefore, the basic and
diluted returns per share are the same.
6. Dividends
£'000
Fourth interim dividend of 1.85p for the year ended 31 August 2022 (paid 30 3,626
November 2022)
First interim dividend of 1.85p for the year ending 31 August 2023 (paid 28 3,625
February 2023)
Total 7,251
The board has declared a second interim dividend of 1.85p per ordinary share
to be paid on 31 May 2023 to shareholders registered at the close of business
on 12 May 2023. The shares will be quoted ex-dividend on 11 May 2023.
7. Net asset value per ordinary share
The net asset value ("NAV") per ordinary share is calculated on the net assets
attributable to shareholders' funds and the number of ordinary shares in
issue. The NAV per ordinary share with debt at par and the NAV per ordinary
share with debt at fair value is calculated as follows:
(Unaudited) (Unaudited) (Audited)
28 February 2023
28 February 2022
31 August 2022
NAV per ordinary share with debt at par
Net assets (£'000) 356,175 347,429 355,687
195,978,716 195,978,716 195,978,716
Number of ordinary shares
181.7 177.3 181.5
NAV per ordinary share with debt at par (p)
NAV per ordinary share with debt at fair value
Net assets (£'000) 356,175 347,429 355,687
Add back debt at par (£'000) 26,123 24,946 25,766
Less debt at fair value (£'000) (20,075) (26,545) (22,004)
Net assets with debt at fair value (£'000) 362,223 345,830 359,449
195,978,716 195,978,716 195,978,716
Number of ordinary shares
184.8 176.5 183.4
NAV per ordinary share with debt at fair value (p)
8. Called up share capital
Number of shares in issue Nominal value
£'000
Ordinary shares of 1p each
In issue at start of year 195,978,716 1,960
At 28 February 2023 195,978,716 1,960
No ordinary shares were issued during the half-year to 28 February 2023
(half-year to 28 February 2022 and year to 31 August 2022: none).
9. Related party transactions
The Company's current related parties are its directors and Janus Henderson
Fund Management UK Limited ("Janus Henderson"). There have been no material
transactions between the Company and its directors during the period. The only
amounts paid to them were in respect of expenses and remuneration for which
there were no outstanding amounts payable at the period end.
In relation to the provision of services by Janus Henderson (other than fees
payable by the Company in the ordinary course of business and the provision of
marketing services) there have been no material transactions with Janus
Henderson affecting the financial position of the Company during the period
under review.
10. Going concern
The assets of the Company consist of securities that are readily realisable
and, accordingly, the directors believe that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of the financial statements. Having assessed these
factors, the principal risks and the heightened macroeconomic uncertainty
following Russia's invasion of Ukraine, the board has determined that it is
appropriate for the financial statements to be prepared on a going concern
basis.
11. Comparative information
The financial information contained in this half-year report does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. The figures and financial information for the year ended 31 August 2022
are extracted from the latest published accounts and do not constitute the
statutory accounts for that year. Those accounts have been delivered to the
Registrar of Companies and included the report of the independent auditor,
which was unqualified and did not include a statement under either section
498(2) or 498(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 31 August 2022.
12. Half-year report
The half-year report will shortly be available on the Company's website
(www.hendersoninternationalincometrust.com
(http://www.hendersoninternationalincometrust.com) ) or in hard copy from the
Company's registered office. An abbreviated version of this half-year
report, the 'update', will be circulated to shareholders in mid-May 2023.
13. General information
Company status
Registered as an investment company in England and Wales.
London Stock Exchange (TIDM) Code: HINT
SEDOL/ISIN number: Ordinary shares B3PHCS8/GB00B3PHCS86
Global Intermediary Identification Number (GIIN): WRGF5X.99999.SL.826
Legal Entity Identifier (LEI): 2138006N35XWGK2YUK38
Registered office
201 Bishopsgate, London EC2M 3AE
Company registration number
7549407
Directors
The directors of the Company are Richard Hills (chairman), Jo Parfrey (chair
of the audit committee), Lucy Walker (senior independent director) and Aidan
Lisser.
Corporate Secretary
Janus Henderson Secretarial Services UK Limited, represented by Sally Porter,
ACG.
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.hendersoninternationalincometrust.com
(http://www.hendersoninternationalincometrust.com) .
Financial assets at fair value through profit or loss at 28 February 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 362,280 - - 362,280
Total financial assets carried at fair value 362,280 - - 362,280
Financial assets at fair value through profit or loss at 31 August 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 378,931 - - 378,931
Total financial assets carried at fair value 378,931 - - 378,931
There have been no transfers between levels of the fair value hierarchy during
the period.
Financial liabilities
The senior unsecured notes are carried in the statement of financial position
at par.
As at 28 February 2023, the fair value of the senior unsecured notes was
estimated to be £20,075,000 (28 February 2022: £26,545,000; 31 August 2022:
£22,004,000).
The fair value of the senior unsecured notes is calculated using a discount
rate which reflects the yield of a euro swap of similar maturity plus a
suitable credit spread. Within the terms of the senior unsecured notes are
clauses that would be enacted in certain scenarios should the notes be prepaid
by the Company before maturity. These clauses could impact the total amount
repayable.
The directors have assessed these and have concluded that these clauses are
highly unlikely to occur. The value of such additional payments has therefore
been deemed to be immaterial and has not been recognised in the financial
statements.
The senior unsecured notes are categorised as level 3 in the fair value
hierarchy.
Fair value hierarchy categories
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: Valued using quoted prices in active markets for identical assets.
Level 2: Valued by reference to valuation techniques using observable inputs
other than quoted prices included in level 1.
Level 3: Valued by reference to valuation techniques using inputs that are not
based on observable market data.
5.
Return per ordinary share
(Unaudited)
Half-year ended
28 February 2023
£'000
(Unaudited)
Half-year ended
28 February 2022
£'000
(Audited)
Year ended
31 August 2022
£'000
The return per ordinary share is based on the following figures:
Revenue return
3,843
4,425
14,441
Capital return
3,896
(6,094)
(796)
Total
7,739
(1,669)
13,645
Weighted average number of ordinary shares in issue for each period
195,978,716
195,978,716
195,978,716
Revenue return per ordinary share
1.96p
2.26p
7.37p
Capital return per ordinary share
1.99p
(3.11p)
(0.41p)
Total return per ordinary share
3.95p
(0.85p)
6.96p
The Company does not have any dilutive securities, therefore, the basic and
diluted returns per share are the same.
6.
Dividends
£'000
Fourth interim dividend of 1.85p for the year ended 31 August 2022 (paid 30
November 2022)
3,626
First interim dividend of 1.85p for the year ending 31 August 2023 (paid 28
February 2023)
3,625
Total
7,251
The board has declared a second interim dividend of 1.85p per ordinary share
to be paid on 31 May 2023 to shareholders registered at the close of business
on 12 May 2023. The shares will be quoted ex-dividend on 11 May 2023.
7.
Net asset value per ordinary share
The net asset value ("NAV") per ordinary share is calculated on the net assets
attributable to shareholders' funds and the number of ordinary shares in
issue. The NAV per ordinary share with debt at par and the NAV per ordinary
share with debt at fair value is calculated as follows:
(Unaudited)
28 February 2023
(Unaudited)
28 February 2022
(Audited)
31 August 2022
NAV per ordinary share with debt at par
Net assets (£'000)
356,175
347,429
355,687
Number of ordinary shares
195,978,716
195,978,716
195,978,716
NAV per ordinary share with debt at par (p)
181.7
177.3
181.5
NAV per ordinary share with debt at fair value
Net assets (£'000)
356,175
347,429
355,687
Add back debt at par (£'000)
26,123
24,946
25,766
Less debt at fair value (£'000)
(20,075)
(26,545)
(22,004)
Net assets with debt at fair value (£'000)
362,223
345,830
359,449
Number of ordinary shares
195,978,716
195,978,716
195,978,716
NAV per ordinary share with debt at fair value (p)
184.8
176.5
183.4
8.
Called up share capital
Number of shares in issue
Nominal value
£'000
Ordinary shares of 1p each
In issue at start of year
195,978,716
1,960
At 28 February 2023
195,978,716
1,960
No ordinary shares were issued during the half-year to 28 February 2023
(half-year to 28 February 2022 and year to 31 August 2022: none).
9.
Related party transactions
The Company's current related parties are its directors and Janus Henderson
Fund Management UK Limited ("Janus Henderson"). There have been no material
transactions between the Company and its directors during the period. The only
amounts paid to them were in respect of expenses and remuneration for which
there were no outstanding amounts payable at the period end.
In relation to the provision of services by Janus Henderson (other than fees
payable by the Company in the ordinary course of business and the provision of
marketing services) there have been no material transactions with Janus
Henderson affecting the financial position of the Company during the period
under review.
10.
Going concern
The assets of the Company consist of securities that are readily realisable
and, accordingly, the directors believe that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of the financial statements. Having assessed these
factors, the principal risks and the heightened macroeconomic uncertainty
following Russia's invasion of Ukraine, the board has determined that it is
appropriate for the financial statements to be prepared on a going concern
basis.
11.
Comparative information
The financial information contained in this half-year report does not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. The figures and financial information for the year ended 31 August 2022
are extracted from the latest published accounts and do not constitute the
statutory accounts for that year. Those accounts have been delivered to the
Registrar of Companies and included the report of the independent auditor,
which was unqualified and did not include a statement under either section
498(2) or 498(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 31 August 2022.
12.
Half-year report
The half-year report will shortly be available on the Company's website
(www.hendersoninternationalincometrust.com
(http://www.hendersoninternationalincometrust.com) ) or in hard copy from the
Company's registered office. An abbreviated version of this half-year
report, the 'update', will be circulated to shareholders in mid-May 2023.
13.
General information
Company status
Registered as an investment company in England and Wales.
London Stock Exchange (TIDM) Code: HINT
SEDOL/ISIN number: Ordinary shares B3PHCS8/GB00B3PHCS86
Global Intermediary Identification Number (GIIN): WRGF5X.99999.SL.826
Legal Entity Identifier (LEI): 2138006N35XWGK2YUK38
Registered office
201 Bishopsgate, London EC2M 3AE
Company registration number
7549407
Directors
The directors of the Company are Richard Hills (chairman), Jo Parfrey (chair
of the audit committee), Lucy Walker (senior independent director) and Aidan
Lisser.
Corporate Secretary
Janus Henderson Secretarial Services UK Limited, represented by Sally Porter,
ACG.
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.hendersoninternationalincometrust.com
(http://www.hendersoninternationalincometrust.com) .
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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