Henderson Smllr Cos - Half-Year Report and Interim Dividend
29/01/2025 07:00
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RNS Number : 0310V Henderson Smaller Cos Inv Tst PLC 29 January 2025
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
JANUS HENDERSON FUND MANAGEMENT UK LIMITED
LEGAL ENTITY IDENTIFIER: 213800NE2NCQ67M2M998
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Results for the Half Year Ended 30 November 2024
This announcement contains regulated information.
"The Board is delighted to announce that Indriatti van Hien has been appointed
Co-Fund Manager of the Company. Since becoming the Company's Deputy Fund
Manager in 2016, Indriatti has been a source of demonstrable expertise and
investment acumen. This decision recognises her significant contribution
throughout those eight years which will continue in her new enhanced
capacity."
Penny Freer
Chair of the Board
INVESTMENT OBJECTIVE
The Company aims to maximise shareholders' total returns (capital and income)
by investing in smaller companies that are quoted in the United Kingdom.
PERFORMANCE SUMMARY (for the six months ended 30 November 2024)
· Net asset value ("NAV") total return(1) of -3.8%
· Share price(2) total return of -5.8%
· Interim dividend(3) of 7.5p (30 November 2023: 7.5p)
TOTAL RETURN PERFORMANCE (including dividends reinvested)
6 Months 1 Year 3 Years 5 Years 10 Years
% % % % %
NAV(1) -3.8 19.3 -20.2 5.9 92.4
Benchmark(4) 0.8 19.4 3.7 24.6 82.3
Average sector NAV(5) -1.1 17.0 -3.5 22.4 90.4
Share price(2) -5.8 17.4 -22.8 -3.5 94.8
Average sector share price(6) -1.7 15.8 -4.0 19.4 95.3
FTSE All-Share Index 1.9 15.7 25.5 32.2 81.1
Sources: Morningstar Direct, Janus Henderson, LSEG Datastream
1 Net asset value ("NAV") per ordinary share total return with income
reinvested
2 Share price total return using mid-market closing price
3 Interim dividend of 7.5p (30 November 2023: 7.5p) to be paid to shareholders
on 7 March 2025
4 Deutsche Numis Smaller Companies Index (excluding investment companies)
total return
5 Average NAV total return of the AIC UK Smaller Companies sector
6 Average share price total return of the AIC UK Smaller Companies sector
FINANCIAL SUMMARY
(Unaudited) (Unaudited) (Audited)
30 November 30 November 31 May
2024 2023 2024
Net assets £703.3m £609.5m £747.3m
NAV per ordinary share 947.1p 815.9p 1,003.1p
Share price per ordinary share 819.0p 720.0p 888.0p
Total return per ordinary share (36.91p) (69.21p) 124.99p
Revenue return per ordinary share 13.05p 15.11p 29.85p
Dividend per ordinary share 7.5p 7.5p 27.0p
Gearing 11.5% 13.0% 11.5%
CHAIR'S STATEMENT
Dear Shareholder
Over the past six months, the Company has faced headwinds to performance,
driven primarily by rising bond yields which continue to hamper economic
recovery and put pressure on company valuations. A strong start to the period
under review was soon undermined by the impact of the Labour Government's
first Budget and some stock specific issues. Following a recovery in UK
business and consumer confidence, the Government's decision to meaningfully
increase employers' national insurance and remove tax incentives for business
owners will likely put pressure on corporate profit margins, prove costly to
inflation and economic growth and in the short term has delayed the recovery
in UK small-cap equities.
Performance
Your Company's net asset value ("NAV") total return fell during the six months
ended 30 November 2024 by 3.8%, while the Deutsche Numis Smaller Companies
ex-Investment Companies Index rose by 0.8%, and the AIC UK Smaller Companies
sector average NAV fell by 1.1%. Your Company's share price total return fell
by 5.8% during the six months.
Gearing was stable during the period, starting and ending at 11.5%.
Dividend
The Board is pleased to declare an interim dividend of 7.5p (30 November 2023:
7.5p) per share, following continued strong cash generation in the underlying
portfolio. This will be paid on 7 March 2025 from the Company's revenue
account to shareholders on the register at 7 February 2025. The shares will be
marked ex-dividend on 6 February 2025.
Share rating
During the period, the Company's shares remained at a discount to NAV, with
the discount widening from 11.5% at 31 May 2024 to 13.5% at 30 November 2024.
This was largely reflective of deteriorating sentiment towards the UK economy
following the Budget and the widening average discount levels seen across the
investment trust sector as a whole, with the AIC UK Smaller Companies sector
similarly finishing the period at an average discount of 13.4%.
Share buybacks
The Company bought back 242,166 shares during the six months under review:
122,166 shares to be held in Treasury and 120,000 shares for cancellation.
With both the underlying portfolio and share price trading at wider discounts
to historic valuations and net asset values respectively, this intervention
reflects the Board's view that the 'double discount' provided a compelling
opportunity to enhance shareholder value. The buybacks are within the
authority granted at the last AGM which allows for the purchase of a maximum
of 14.99% of share capital. The shares bought back represent 0.3% of the total
number of shares in issue at the start of the year. Since the period end and
as at 24 January 2025, a further 713,453 shares have been bought back
representing 1.0% of share capital.
Appointment of Co-Fund Manager
The Board is delighted to announce that Indriatti van Hien has been appointed
Co-Fund Manager of the Company alongside Neil Hermon, effective immediately.
Indriatti has 18 years of financial industry experience, has been a valued
member of the Janus Henderson team since 2011 and, since becoming the
Company's Deputy Fund Manager in 2016, has been a source of demonstrable
expertise and investment acumen. This decision recognises her significant
contribution throughout those eight years which will continue in her new
enhanced capacity.
Outlook
Performance continued to be challenged during the period under review, but
there is evidence that too much doom and gloom has been priced into the market
following the Budget. Whilst interest rates may be cut more slowly, in
contrast to the last decade, their relatively high starting point provides a
strong and stimulating lever for policy makers to pull on should economic
activity slow further. In the meantime, the Fund Managers are confident that
starting valuations remain compelling and continued in-bound merger and
acquisition activity suggests that the Budget has not deterred domestic or
international buyers.
The Board continually assesses the drivers of the Company's performance.
Following a protracted period of underperformance, it has undertaken a
detailed review of the Fund Managers' investment process, which has delivered
excellent performance over the long term. The Board has concluded that the
Fund Managers have continued to follow a disciplined and unchanged long-term
approach, which is focused on bottom-up stock selection through a thorough
assessment of a company's market proposition, balance sheet strength and
management. The Board continues to closely monitor the Fund Managers' approach
and performance.
The Board remains confident that our portfolio of quality companies is well
positioned to prosper as economic conditions and market sentiment improve and
we share our Fund Managers' belief that the Company is well positioned to
deliver strong total returns in this environment.
Penny Freer
Chair of the Board
FUND MANAGERS' REPORT
Market review - six months to 30 November 2024
The broad UK equity market modestly rose over the period. Market concerns
focused around inflation, monetary policy, continued geopolitical turmoil and
the potential for a global economic downturn. Global interest rates started to
fall with the Bank of England announcing its first interest rate cut in four
years in August, lowering its benchmark rate by 25 basis points (bps) to 5.0%.
This was followed by another cut of 25 bps in November. Likewise in the US,
the Federal Reserve made a larger-than-expected cut of 50 bps in September,
followed by another 50 bps of combined cuts in November and December.
In the UK, the Labour Party resoundingly won the general election, providing
political stability for the medium term. However, talk of a fiscal 'black
hole' by the Government led to a fall in business and consumer confidence and
a subsequent flatlining of UK economic growth. The Budget delivered in October
was focused on taxes, spending and investing with a view to fixing the
foundations of the economy, but businesses reacted negatively to the
additional tax burden from increased National Insurance payments for
employers.
In the US, Donald Trump won a second term as US President alongside a clean
sweep as the Republicans took control of Congress. Both the US election
results and the UK Budget were seen as inflationary events, which alongside
the requirement for additional significant gilt and Treasury issuance caused
bond yields to rise. Economists are now forecasting that interest rate cuts in
2025 will be more modest and slower than was anticipated six months ago. After
rising strongly in the early months of the period, Sterling fell against the
US Dollar to end the period broadly unchanged. Oil prices fell with the
prospect of increased production plus weak global demand offsetting escalating
geopolitical tensions in the Middle East.
Smaller companies marginally underperformed their larger counterparts, with
the Deutsche Numis Smaller Companies ex Investment Companies Index up 0.8%
against a rise in the FTSE All-Share Index of 1.9%.
Fund performance
The Company had a disappointing period in performance terms, falling in
absolute terms and underperforming its benchmark. The share price fell by 5.8%
and NAV by 3.8% on a total return basis. This compared with the Deutsche Numis
Smaller Companies ex Investment Companies Index rise of 0.8% in total return
terms. The underperformance came from a combination of negative contributions
from stock selection, gearing and expenses. The negative contribution from
stock selection was a function of rising bond yields having a detrimental
impact on the valuations of our predominantly pro-cyclical and interest rate
sensitive portfolio. In addition, there were a small number of negative
company-specific issues which impacted performance. We believe these issues
are temporary or more than fully reflected in the underlying share prices and
expect these companies to recover over time.
Gearing
Gearing started the period at 11.5% and ended at 11.5%. Debt facilities are a
combination of £30 million 20-year unsecured loan notes at an interest rate
of 3.33%, £20m 30-year unsecured loan notes at 2.77% and £70 million
short-term bank borrowings. As the net asset value fell, the use of gearing
was a negative contributor to performance in the period.
Attribution analysis
The following tables show the top five contributors to, and detractors from,
the Company's relative performance. Some of the stocks are included in the
benchmark index but not held by the Company. These have an effect on relative
performance.
Top five contributors 6-month return % Relative contribution %
Ascential +73.9 +0.6
John Wood Group* -70.1 +0.6
Balfour Beatty +22.3 +0.6
Indivior* -38.8 +0.5
Just Group +38.8 +0.4
Top five detractors 6-month return % Relative contribution %
Next15 -57.2 -0.8
Playtech* +52.6 -0.5
Zegona Communications* +36.9 -0.5
Impax Asset Management -22.3 -0.4
Mitchells and Butlers -19.9 -0.4
* In benchmark index but not held by the Company.
Principal contributors
Ascential is a B2B media group. John Wood is an oil and power contracting
services group. Balfour Beatty is an international construction, support
services and infrastructure investor group. Indivior is a speciality
pharmaceuticals company. Just Group is a provider of individual and group
annuities.
Principal detractors
Next15 is a marketing services, data and communication group. Playtech is a
software and services provider to the gaming industry. Zegona Communications
is a Spanish telecoms company. Impax Asset Management is an ESG-focused asset
manager. Mitchells and Butlers is a UK pub and restaurant group.
Portfolio activity
Our approach is to consider our investments as long term in nature and to
avoid unnecessary turnover. The focus has been on adding stocks to the
portfolio that have good growth prospects, sound financial characteristics and
strong management, at a valuation level that does not reflect these strengths.
Likewise, we have been employing strong sell disciplines to dispose of stocks
that fail to meet these criteria.
During the period, we added to a number of positions in our portfolio and
increased exposure to those stocks which we feel have further catalysts to
drive strong performance.
New additions to the portfolio include: Cohort, an electronics equipment
provider for the defence sector; Currys, an electrical goods retailer; FRP
Advisory, a restructuring and administrations consultancy practice; Kitwave, a
distributor of food and drink products to the retail sector; Johnson Services
Group, a workwear and linen rental services provider; Raspberry Pi, a computer
products provider; and Trustpilot, an online reviews provider.
In addition, we added to our existing positions in: Domino's Pizza, a master
franchise operator of pizza take-away restaurants; Hill and Smith, a provider
of fabricated metal products and services; and Telecom Plus, a provider of
utility services, such as energy, telecoms and mobile communications, to
residential UK customers.
To balance the additions to our portfolio, we have disposed of positions in
companies which we felt were set for poor price performance or where the
valuation had become extended, including the holding in Liontrust Asset
Management. Additionally, we sold our holdings in Alpha Financial Markets,
Ascential, Spirent and Tyman after these companies received agreed takeover
bids.
Market outlook
Inflation has fallen significantly, and we have seen the start of interest
rate cuts around the globe. What is not clear is the timing of when rates will
be cut further and the speed of their descent. Optimism for a rapid decline in
rates has faded, particularly in the UK and US, as a consequence of the
inflationary impacts of the recent UK Budget and the Trump and Republican 'red
sweep' election victory in the US. In the meantime, the delayed transmission
mechanism of past interest rates and their impact means that economic
conditions are set to remain challenging in the short term. Notwithstanding
this, the prospect of a monetary easing cycle is likely to support global
equity markets and slowly allow valuation multiples to normalise.
Geopolitics remain challenging with the ongoing conflicts in Ukraine and the
Middle East and continuing tensions between China and the US. In the US,
Donald Trump will start his second term as President with a full agenda
focused on cutting domestic taxes and government spending, raising tariffs,
cutting immigration, de-regulation and the ending of current global military
conflicts. This will probably lead to significant volatility for global
financial markets. In the UK, the Labour Government's 'honeymoon period' post
its landslide election victory was short-lived culminating in a poorly
received Budget which was perceived as anti-business and potentially
inflationary. We, however, welcome Labour's commitment to 'boost investment'
and in particular its pledge to 'increase investment from pension funds in UK
markets.' Any incremental flow into the UK could breathe life into a generally
under-owned and, more importantly, undervalued UK equity market.
In the corporate sector we are encouraged by the fact that conditions are
intrinsically stronger than they were during the Global Financial Crisis of
2008-2009. Company balance sheets are more robust and, in recognition of the
deep undervaluation of their own equity, we are seeing an increasing number of
companies buying back stock.
The initial public offering ("IPO") market has been exceptionally quiet as UK
equity market confidence has diminished. The successful float of Raspberry Pi
in June, however, did provide evidence that the UK equity market remains open
for attractive, growing businesses. Merger and acquisition ("M&A")
activity has remained robust as acquirers, particularly private equity, look
to exploit opportunities thrown up by the recent equity market falls. We
expect this to continue in the coming months as UK equity market valuations
remain markedly depressed versus other developed markets.
In terms of valuations, the equity market is trading below its long-term
averages. In addition, smaller companies are trading at historically wide
discounts to their larger counterparts. The sharp rebound in corporate
earnings following the pandemic-induced shock in 2020 has now faded. Weak
economic activity and higher interest costs are leading to currently subdued
corporate earnings growth.
Although uncertainty remains around short-term economic conditions, we think
that the portfolio is well positioned both to withstand current challenging
economic conditions and to participate in any potential upswing. The
movements in equity markets have thrown up some fantastic buying
opportunities. However, we believe it is important to be selective as the
strength of franchise, market positioning and balance sheets will likely
determine the winners from the losers.
Neil Hermon and Indriatti van Hien
Fund Managers
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties associated with the Company's business
fall broadly under the following categories:
• investment activity and strategy;
• legal and regulatory;
• operational; and
• financial instruments and the management of risk.
Detailed information on these risks is given in the Strategic Report and in
the Notes to the Financial Statements in the Company's Annual Report for the
year ended 31 May 2024.
In the view of the Board, these principal risks and uncertainties are as
applicable to the remaining six months of the financial year as they were to
the six months under review.
DIRECTORS' RESPONSIBILITY STATEMENT
The directors confirm that, to the best of their knowledge:
· the condensed set of financial statements has been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting;
· the Interim Management Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of
important events during the first six months and description of the principal
risks and uncertainties for the remaining six months of the year); and
· the Interim Management Report includes a fair review of the information
required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of
related-party transactions and changes therein).
On behalf of the Board
Penny Freer
Chair of the Board
INVESTMENT PORTFOLIO
at 30 November 2024
Valuation Portfolio Valuation Portfolio
Company £'000 % Company £'000 %
Balfour Beatty 24,772 3.16 PageGroup 9,005 1.15
Paragon Banking 23,483 2.99 Savills 8,795 1.12
Bellway 22,697 2.89 MONY 8,722 1.11
Mitchells & Butlers 19,416 2.47 Bytes Technology 8,630 1.10
Future 18,921 2.41 Redde Northgate 8,563 1.09
Just Group 18,831 2.40 Rathbones 8,423 1.07
Gamma Communications* 17,380 2.22 Victrex 8,405 1.07
Oxford Instruments 17,262 2.20 Harworth 8,024 1.02
Vesuvius 17,097 2.18 Moonpig 7,859 1.00
IntegraFin 16,745 2.13 Clarkson 7,652 0.98
---------- ---------- ---------- ----------
10 largest 25.05 40 largest 506,497 64.55
196,604
OSB Group 16,096 2.05 Domino's Pizza 7,412 0.94
Volution 15,624 1.99 Crest Nicholson 7,273 0.93
GB Group* 14,947 1.91 XP Power 7,051 0.90
Chemring 12,762 1.63 Hunting 7,045 0.90
Trainline 11,418 1.46 JTC 7,033 0.90
Workspace 11,260 1.44 Wickes 6,922 0.88
Serco 11,204 1.43 Midwich* 6,863 0.87
Impax Asset Management* 10,989 1.40 Telecom Plus 6,840 0.87
SigmaRoc* 10,687 1.36 Bridgepoint 6,653 0.85
Softcat 10,652 1.36 Burford Capital* 6,527 0.83
---------- ---------- ---------- ----------
20 largest 322,243 41.08 50 largest 576,116 73.42
Genuit 10,530 1.34 Avon Technologies 6,319 0.81
QinetiQ 10,520 1.34 RWS Holdings* 6,136 0.78
Computacenter 10,453 1.33 Luceco 6,086 0.78
Watches of Switzerland 10,226 1.30 Wilmington 6,018 0.77
Foresight 10,091 1.29 Learning Technologies* 5,902 0.75
Morgan Sindall 10,070 1.28 Team17* 5,900 0.75
Bodycote 9,764 1.24 Serica Energy* 5,851 0.75
Renishaw 9,703 1.24 Spectris 5,667 0.72
Keller 9,553 1.22 Harbour Energy 5,441 0.69
Hollywood Bowl 9,266 1.18 DFS 5,344 0.68
---------- ---------- ---------- ----------
30 largest 422,419 53.84 60 largest 634,780 80.90
Remaining 44 149,769 19.10
---------- ----------
Total 784,549 100.00
======= =======
*Quoted on the Alternative Investment Market ("AIM")
STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
30 November 2024 30 November 2023 31 May 2024
Revenue Capital Revenue Capital Revenue Capital
return return Total return return return Total return return return Total return
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment income 10,987 - 10,987 12,414 - 12,414 24,656 - 24,656
Other income 82 - 82 105 - 105 190 - 190
(Losses)/profit on investments held at fair value through profit or loss - (34,806) (34,806) - (60,810) (60,810) - 75,521 75,521
Currency losses - (3) (3) - - - - - -
--------- --------- --------- --------- ------------ ----------- --------- ------------ ------------
Total income/(loss) 11,069 (34,809) (23,740) 12,519 (60,810) (48,291) 24,846 75,521 100,367
Expenses
Management fees (note 3) (371) (865) (1,236) (334) (780) (1,114) (679) (1,584) (2,263)
Other expenses (351) - (351) (301) - (301) (647) - (647)
--------- --------- --------- --------- --------- ---------- ---------- ---------- ----------
Profit/(loss) before finance 10,347 (35,674) (25,327) 11,884 (61,590) (49,706) 23,520 73,937 97,457
costs and taxation
Finance costs (637) (1,485) (2,122) (601) (1,401) (2,002) (1,235) (2,882) (4,117)
--------- --------- ---------- --------- ------------ ----------- --------- ----------- -----------
Profit/(loss) before taxation 9,710 (37,159) (27,449) 11,283 (62,991) (51,708) 22,285 71,055 93,340
Taxation (6) - (6) 5 - 5 5 - 5
--------- --------- --------- --------- ------------ ----------- --------- ----------- -----------
Profit/(loss) for the period and total comprehensive income 9,704 (37,159) (27,455) 11,288 (62,991) (51,703) 22,290 71,055 93,345
======= ======= ======= ===== ======= ======= ======= ======= =======
Earnings per ordinary 13.05p (49.96p) (36.91p) 15.11p (84.32p) (69.21p) 29.85p 95.14p 124.99p
share (note 4)
======= ======= ======= ====== ======= ======= ======= ======= =======
The total columns of this statement represent the Statement of Comprehensive
Income, prepared in accordance with UK adopted International Accounting
Standards.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
Half year ended 30 November 2024 (unaudited) Share Capital redemption reserve Capital reserves Revenue reserve Total equity
capital £'000 £'000 £'000 £'000 £'000
Total equity at 1 June 2024 18,627 26,794 682,267 19,652 747,340
Total comprehensive income: - - (37,159) 9,704 (27,455)
(Loss)/profit for the period
Buyback of shares for cancellation (30) 30 (1,057) - (1,057)
Buyback of shares to Treasury - - (1,001) - (1,001)
Transactions with owners recorded directly to equity:
Ordinary dividend paid - - - (14,505) (14,505)
---------- ---------- ------------ ----------- ------------
Total equity at 30 November 2024 18,597 26,824 643,050 14,851 703,322
====== ====== ======= ====== =======
Half year ended 30 November 2023 (unaudited) Share Capital redemption reserve Capital reserves Revenue reserve Total
capital £'000 £'000 £'000 £'000 equity
£'000
Total equity at 1 June 2023 18,676 26,745 612,810 17,156 675,387
Total comprehensive income: - - (62,991) 11,288 (51,703)
(Loss)/profit for the period
Transactions with owners, recorded directly to equity:
Ordinary dividend paid - - - (14,193) (14,193)
---------- ---------- ----------- ----------- ------------
Total equity at 30 November 2023 18,676 26,745 549,819 14,251 609,491
====== ====== ======= ====== =======
Year ended 31 May 2024 Share capital Capital redemption reserve Capital Revenue reserve Total
(audited) £'000 £'000 reserves £'000 equity
£'000 £'000
Total equity at 1 June 2023 18,676 26,745 612,810 17,156 675,387
Total comprehensive income: - - 71,055 22,290 93,345
Profit for the year
Buyback of shares for cancellation (49) 49 (1,598) - (1,598)
Transactions with owners, recorded directly to equity:
Ordinary dividend paid - - - (19,794) (19,794)
---------- ---------- ------------ ----------- ------------
Total equity at 31 May 2024 18,627 26,794 682,267 19,652 747,340
====== ====== ======= ====== =======
The accompanying notes are an integral part of these financial statements.
BALANCE SHEET
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended 30 November 2023 Year ended
30 November 2024 31 May
2024
£'000 £'000 £'000
Non-current assets
Investments held at fair value through 784,549 688,490 833,368
profit or loss
------------ -------------- -------------
Current assets
Securities sold for future settlement 1,378 274 -
Prepayments and accrued income 1,720 2,367 11,763
Cash and cash equivalents 2,420 11,891 9,249
------------- ------------- -------------
5,518 14,532 21,012
------------- ------------- -------------
Total assets 790,067 703,022 854,380
------------- -------------- -------------
Current liabilities
Securities purchased for future settlement (395) (2,528) (579)
Accruals and deferred income (974) (882) (935)
Bank loans (35,588) (40,344) (55,744)
------------- ------------ ------------
(36,957) (43,754) (57,258)
------------- ------------ ------------
Total assets less current liabilities 753,110 659,268 797,122
Non-current liabilities (49,788) (49,777) (49,782)
-------------- ------------ ------------
Net assets 703,322 609,491 747,340
======== ======= =======
Equity attributable to equity shareholders
Called-up share capital (note 6) 18,597 18,676 18,627
Capital redemption reserve 26,824 26,745 26,794
Retained earnings:
Capital reserves (note 7) 643,050 549,819 682,267
Revenue reserve 14,851 14,251 19,652
------------ ------------ ------------
Total equity 703,322 609,491 747,340
======= ======= =======
Net asset value per ordinary share (note 8) 947.1p 815.9p 1,003.1p
======= ======= =======
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
30 November 2024 30 November 2023 31 May
2024
£'000 £'000 £'000
Operating activities
(Loss)/profit before taxation (27,449) (51,708) 93,340
Add back interest payable 2,122 2,002 4,117
Losses/(profit) on investments held at fair value through profit or loss 34,806 60,810 (75,521)
Purchases of investments (70,968) (32,066) (89,274))
Sales of investments 84,980 42,922 91,583
Decrease in receivables 2 39 36
(Increase)/decrease in amounts due from brokers (1,378) 232 506
Decrease/(increase) in accrued income 10,036 279 (9,113)
Increase/(decrease) in payables 55 (36) (54)
(Decrease)/increase in amounts due to brokers (184) 2,528 579
----------- ----------- -----------
Net cash inflow from operating activities before interest 32,022 25,002 16,199
----------- ----------- -----------
Interest paid (2,132) (1,928) (3,968)
----------- ----------- -----------
Net cash inflow from operating activities 29,890 23,074 12,231
======= ======= =======
Financing activities
Buyback of ordinary shares (2,058) - (1,598)
Equity dividends paid (14,505) (14,193) (19,794)
(Repayment)/drawdown of bank loans (20,156) (10,328) 5,072
------------ ----------- -----------
Net cash outflow from financing activities (36,719) (24,521) (16,320)
Decrease in cash and cash equivalents (6,829) (1,447) (4,089)
Cash and cash equivalents at the start of the period 9,249 13,338 13,338
----------- ---------- ----------
Cash and cash equivalents at the period end 2,420 11,891 9,249
====== ====== ======
The accompanying notes are an integral part of these financial statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Accounting policies - basis of preparation
The Henderson Smaller Companies Investment Trust plc (the "Company") is a
company incorporated and domiciled in the United Kingdom under the Companies
Act 2006. These condensed financial statements comprise the unaudited results
of the Company for the half year ended 30 November 2024. They have been
prepared on a going concern basis and in accordance with UK adopted
International Accounting Standards and with the Statement of Recommended
Practice for Investment Trusts ('SORP') dated July 2022, where the SORP is
consistent with the requirements of UK adopted International Accounting
Standards. For the period under review, the Company's accounting policies have
not varied from those described in the Annual Report for the year ended 31 May
2024. These financial statements have not been audited or reviewed by the
Company's auditor.
2. Going concern
The assets of the Company consist of securities that are readily realisable
and, accordingly, the directors believe that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of the financial statements. In coming to this
conclusion, the directors have also considered the continued macroeconomic and
geopolitical uncertainty following Russia's invasion of Ukraine, continued
tensions between the US and China, conflict in the Middle East, the current
cost-of-living crisis, a new government in the UK, a new President and
administration in the US, the nature of the Company's covenants, the strength
of the Company's distributable reserves and the liquidity of the portfolio.
The directors have concluded that the Company is able to meet its financial
obligations, including the repayment of the bank loan, as they fall due for a
period of at least twelve months from the date of issuance. Having assessed
these factors, the principal risks and other matters discussed in connection
with the Viability Statement in the Annual Report for the year ended 31 May
2024, the directors confirm that the financial statements have been prepared
on a going concern basis.
The Company's shareholders are asked every three years to vote for the
continuation of the Company. The last continuation vote took place at the AGM
on 30 September 2022 and was passed by 99.2% of votes cast in favour of
continuation. The next continuation vote will take place at the AGM in 2025.
3. Expenses
Expenses, finance costs and taxation include provision for a performance fee
when the relevant criteria have been met. There was no performance fee
provision for the six months to 30 November 2024 (30 November 2023: £nil; 31
May 2024: £nil). Any provision for a performance fee is charged 100% to
capital. The actual performance fee, if any, payable to Janus Henderson for
the year to 31 May 2025 will depend on outperformance over the full financial
year, subject to a cap on the total fees paid to Janus Henderson of 0.9% of
the average value of the net assets of the Company during the year. No
performance fee is payable if, on the last day of the accounting year, the
Company's share price or net asset value ("NAV") is lower than the share price
and NAV at the preceding year end. Details of the performance fee arrangements
are set out in the Annual Report for the year ended 31 May 2024.
4. Earnings per ordinary share
The earnings per ordinary share figure is based on the net loss for the half
year ended 30 November 2024 of £27,455,000 (half year ended 30 November 2023:
net loss of £51,703,000; year ended 31 May 2024: net profit of £93,345,000)
and on 74,385,402 (half year ended 30 November 2023: 74,701,796; year ended 31
May 2024: 74,684,351) ordinary shares, being the weighted average number of
ordinary shares in issue during the period.
The earnings per ordinary share figure detailed above can be further analysed
between revenue and capital, as below.
(Unaudited) (Unaudited) (Audited)
30 November 30 November 2023 31 May
2024 £'000 2024
£'000 £'000
Net revenue profit 9,704 11,288 22,290
Net capital (loss)/profit (37,159) (62,991) 71,055
------------- ------------ --------------
Net total (loss)/profit (27,455) (51,703) 93,345
======== ======= ========
Weighted average number of ordinary shares in issue during the period 74,385,402 74,701,796 74,684,351
Pence Pence Pence
Revenue earnings per ordinary share 13.05 15.11 29.85
Capital (loss)/profit per ordinary share (49.96) (84.32) 95.14
------------ ---------- ------------
Total (loss)/profit per ordinary share (36.91) (69.21) 124.99
======= ====== =======
5. Dividends
The Board has declared an interim dividend of 7.5p (30 November 2023: 7.5p) to
be paid on 7 March 2025 to shareholders on the register at the close of
business on 7 February 2025. The ex-dividend date will be 6 February 2025. No
provision has been made for the interim dividend in these condensed financial
statements.
The final dividend of 19.5p per ordinary share, paid on 7 October 2024, in
respect of the year ended 31 May 2024, has been recognised as a distribution
in the period.
6. Share capital
At 30 November 2024 there were 74,262,965 ordinary shares in issue (30
November 2023: 74,701,796; 31 May 2024: 74,505,131), excluding shares held in
Treasury. During the half year ended 30 November 2024 the Company bought back
242,166 shares (half year ended 30 November 2023: nil; year ended 31 May 2024:
196,665). Since the period end and as at 24 January 2025, a further 713,453
shares have been bought back.
7. Capital reserves
Capital reserves include the capital reserve arising on investments sold of
£561,389,000 (30 November 2023: £538,498,000; 31 May 2024: £540,837,000)
and the capital reserve arising on revaluation of investments held of
£81,661,000 (30 November 2023: £11,321,000; 31 May 2024: £141,430,000). The
Company's capital reserve arising on investments sold (i.e. realised capital
profits) and revenue reserve may be distributed by way of a dividend.
8. Net asset value ("NAV") per ordinary share
The NAV per ordinary share is based on the net assets attributable to the
equity shareholders of £703,322,000 (30 November 2023: £609,491,000; 31 May
2024: £747,340,000) and on 74,262,965 (30 November 2023: 74,701,796; 31 May
2024: 74,505,131) ordinary shares, being the number of ordinary shares in
issue at the period end, excluding shares held in Treasury.
9. Transaction costs
Purchase transaction costs for the half year ended 30 November 2024 were
£254,000 (half year ended 30 November 2023: £115,000; year ended 31 May
2024: £371,000). These comprise mainly stamp duty and commission. Sale
transaction costs for the half year ended 30 November 2024 were £36,000 (half
year ended 30 November 2023: £18,000; year ended 31 May 2024: £37,000).
10. Financial instruments
The investments are held at fair value through profit or loss. All the net
current liabilities are held in the Balance Sheet at a reasonable
approximation of fair value. At 30 November 2024 the fair value of the
Preference Stock was £4,000 (30 November 2023: £4,000; 31 May 2024:
£4,000). The fair value of the Preference Stock is estimated using the prices
quoted on the exchange on which the investment trades. The Preference Stock is
carried in the Balance Sheet at par.
The unsecured loan notes are carried in the Balance Sheet at par less the
issue costs which are amortised over the life of the notes. To comply with
fair value accounting disclosures only, the fair value of the unsecured loan
notes has been estimated to be £36,340,000 (30 November 2023: £35,875,000;
31 May 2024: £35,823,000) and is categorised as Level 3 in the fair value
hierarchy as described below. However, for the purpose of the daily NAV
announcements, the unsecured loan notes are valued at par in the fair value
NAV because they are not traded and the directors have assessed that par value
is the most appropriate value to be applied for this purpose.
The fair value of the unsecured loan notes is calculated using a discount rate
which reflects the yield of a UK Gilt of similar maturity plus a suitable
credit spread.
Fair value hierarchy
The table below sets out the fair value measurements using the IFRS 13 fair
value hierarchy. Categorisation within the hierarchy has been determined based
on the lowest level of input that is significant to the fair value measurement
of the relevant asset, as follows:
Level 1: valued using quoted prices in active markets for identical assets.
Level 2: valued by reference to valuation techniques using observable inputs
other than quoted prices.
Level 3: valued by reference to valuation techniques using inputs that are not
based on observable market data.
As at 30 November 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 784,549 - - 784,549
------------- ------------- ------------- -------------
784,549 - - 784,549
======== ======== ======== ========
As at 30 November 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 688,490 - - 688,490
------------- ----------- ----------- -------------
688,490 - - 688,490
======== ====== ====== ========
As at 31 May 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 833,368 - - 833,368
------------- ----------- ----------- -------------
833,368 - - 833,368
======== ====== ====== ========
The valuation techniques used by the Company are explained in the accounting
policies note 1(c) of the Annual Report for the year ended 31 May 2024.
11. Related party transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position of the Company during the period. Details of related party
transactions are contained in the Annual Report for the year ended 31 May
2024.
12. Comparative information
The financial information contained in this half year financial report does
not constitute statutory accounts as defined in s434 Companies Act 2006. The
financial information for the half years ended 30 November 2024 and 30
November 2023 has not been audited.
The information for the year ended 31 May 2024 has been extracted from the
statutory accounts for that year, which have been filed with the Registrar of
Companies. The report of the auditor on those accounts was unqualified and
contained no statement under either s498(2) or s498(3) Companies Act 2006.
13. General information
The Henderson Smaller Companies Investment Trust plc is registered in England
and Wales.
Company Number: 00025526.
Registered Office: 201 Bishopsgate, London EC2M 3AE
London Stock Exchange (TIDM) Code: HSL
SEDOL Number: 0906506
Global Intermediary Identification Number (GIIN): WZD8S7.99999.SL.826
Legal Entity Identifier (LEI): 213800NE2NCQ67M2M998
Directors and Corporate Secretary
The directors of the Company are Penny Freer (Chair of the Board), Kevin
Carter (Senior Independent Director), Alexandra Mackesy (Chair of the Audit
and Risk Committee), Victoria Sant, Michael Warren and Yen Mei Lim. The
Corporate Secretary is Janus Henderson Secretarial Services UK Limited,
represented by Johana Woodruff, FCG.
Website
Details of the Company's share price and NAV, together with general
information about the Company, monthly factsheets and data, copies of
announcements, reports and details of general meetings can be found at
www.hendersonsmallercompanies.com (http://www.hendersonsmallercompanies.com) .
14. Financial report for the half year ended 30 November 2024
The half year report will shortly be available on the Company's website or
from the Company's registered office. An abbreviated version, the 'Update',
will be circulated to shareholders in February 2025 and will be available from
the Corporate Secretary at the Company's registered office, 201 Bishopsgate,
London, EC2M 3AE.
For further information please contact:
Neil Hermon and Indriatti van Hien Nathan Brown
Fund Managers Corporate Broking
The Henderson Smaller Companies Investment Trust plc Deutsche Numis Securities
Telephone: 020 7818 1818 Telephone: 020 7260 1426
Dan Howe Harriet Hall
Head of Investment Companies PR Director, Investment Trusts
Janus Henderson Investors Janus Henderson Investors
Telephone: 020 7818 1818 Telephone: 020 7818 2919
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website),
are incorporated into, or form part of, this announcement.
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