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 2023
This announcement contains regulated
information.
"The period under review was a
challenging one for the Company, but we do believe that inflation
is moderating and expect interest rates to decline during 2024. Our
portfolio of quality companies is well positioned to prosper in
this environment. The Board is encouraged
by the strong performance seen in the final months of the period
under review and since the period end."
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
2023)
· Net
asset value ("NAV") total return1 of -7.7% compared to a
total return from the benchmark2 of -0.2%
· Share
price3 total return of -5.8%
·
Interim dividend4 of 7.5p (30 November
2022: 7.0p)
TOTAL RETURN PERFORMANCE (including dividends
reinvested)
|
6 Months
%
|
1
Year
%
|
3
Years
%
|
5
Years
%
|
10
Years
%
|
NAV1
|
-7.7
|
-8.9
|
-13.9
|
5.0
|
67.3
|
Benchmark2
|
-0.2
|
-0.3
|
7.7
|
14.4
|
51.7
|
Share
price3
|
-5.8
|
-9.4
|
-19.8
|
6.8
|
79.6
|
Average sector
NAV5
|
-3.7
|
-3.6
|
1.2
|
10.4
|
68.6
|
Average sector share
price6
|
-3.3
|
-0.1
|
6.3
|
14.7
|
74.1
|
FTSE All-Share
Index
|
1.6
|
1.8
|
27.3
|
26.8
|
63.8
|
Sources: Morningstar Direct, Janus
Henderson, LSEG Datastream
1 Net asset value ("NAV") per
ordinary share total return with income reinvested
2 Numis Smaller Companies Index
(excluding investment companies) total return
3 Share price total return using
mid-market closing price
4 Interim dividend of
7.5p (30 November 2022:
7.0p) to be paid to shareholders on 5 March
2024
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)
30 November
2023
|
(Unaudited)
30 November
2022
|
(Audited)
31 May
2023
|
Net assets
|
£609.5m
|
£689.8m
|
£675.4m
|
NAV per ordinary share
|
815.9p
|
923.4p
|
904.1p
|
Share price per ordinary
share
|
720.0p
|
823.0p
|
785.0p
|
Total return per ordinary
share
|
(69.21p)
|
(134.00p)
|
(146.30p)
|
Revenue return per ordinary
share
|
15.11p
|
12.54p
|
29.38p
|
Dividend per ordinary
share
|
7.5p
|
7.0p
|
26.0p
|
Gearing
|
13.0%
|
11.6%
|
12.6%
|
CHAIR'S STATEMENT
The Company continued to face
significant headwinds during the six months ended 30 November 2023,
with performance being disappointing in both relative and absolute
terms. The broader UK equity market was affected by continuing
concerns surrounding inflation and high interest rates; this and a
challenging geopolitical backdrop led to significant market
volatility and ultimately a broadly flat performance over the
period.
Performance
Your Company's net asset value
("NAV") total return fell by 7.7% during the six months ended 30
November 2023, while the Numis Smaller Companies ex-Investment
Companies Index (the "Benchmark") was almost flat, and the AIC UK
Smaller Companies sector average NAV declined by 3.7%. Your
Company's share price total return fell by 5.8%
during the six months. The underperformance during the period was
largely due to compressed valuations and deratings in the
challenging market environment for smaller UK businesses. Growth
stocks continued to remain out of favour.
On a more positive note, it does
seem as though October 2023 may have marked a low point of
sentiment towards the UK equity market. Since then, we have had a
well-received Autumn Statement from the UK Chancellor and the
performance in the second quarter showed a marked improvement
compared with returns achieved in the first quarter. The
longer-term performance record of the Company remains consistently
strong, reflecting an unchanged and proven investment strategy
adopted by the Fund Manager and his team.
Dividend
Reflecting our confidence in the
underlying portfolio and underpinned by performance since the
period end, your Board has decided to pay a higher interim dividend
of 7.5p per ordinary share (30 November 2022: 7.0p) due to strong
income growth, and with a view to balancing interim and final
dividends. This will be paid on 5 March 2024 from the Company's
revenue account to shareholders on the register at 9 February 2024.
The shares will be marked ex-dividend on 8 February
2024.
Share rating and discount
During the period, the Company's
shares remained at a discount to NAV, but the discount narrowed
from 13.2% at 31 May 2023 to 11.8% at 30 November 2023.
We did not buy back shares during
the period and no new shares were issued. The Board regularly
reviews this position; we continue to believe that, with the small
and mid-cap market returning to favour, an increase in investor
confidence in the UK and strong performance by the Company are all
likely to be key factors in narrowing the discount.
Outlook
The period under review was a
challenging one for the Company, but we do believe that inflation
is moderating and expect interest rates to decline during 2024. Our
portfolio of quality companies is well positioned to prosper in
this environment and we share our Fund Manager's belief that we
have the potential to deliver strong total returns as the economic
background improves.
The Fund Manager has continued to
follow a disciplined and unchanged long-term approach which is
focused on bottom-up stock selection through a thorough assessemnet
of a company's market proposition, balance sheet strength and
management. The Board is encouraged by the strong performance seen
in the final months of the period under review and since the period
end. In December 2023 your Company's NAV rose by 12.4% compared
with the Benchmark return of 9.4%, while the three-month NAV
performance to 31 December 2023 was 12.5% compared with
the Benchmark return of 8.3%, all on a total return
basis.
The Board remains confident in the
Fund Manager's ability to create a portfolio which will benefit
from the opportunities that will progressively emerge as conditions
continue to improve.
Penny Freer
Chair of the Board
FUND MANAGER'S REPORT
Market review - six months to 30 November
2023
The broad UK equity market was flat
over the period. Market concerns focused around inflation, monetary
policy tightening and the potential for a global economic downturn
with a consequent corporate-earnings contraction. In the UK, GDP fell by 0.1% over the third quarter following
0.2% growth in the second quarter. There is a reasonable
probability the UK economy will enter a technical recession in the
fourth quarter of 2023. The UK annual inflation rate fell to a
two-year low of 4.6% in October. Central banks across the world,
led by the Federal Reserve, European Central Bank and Bank of
England, held interest rates over the period, although messaging on
their future path remained generally hawkish. However,
global economic indicators continued to point to a
slowdown in economic activity which supported the building
consensus view that the monetary policy tightening cycle was
complete. Investor debate is now focused on when, and how quickly,
rates will be cut. Sterling gained modestly against the US dollar.
Oil prices rose, with the market focusing on the conflict in the
Middle East potentially impacting supply, even though the
short-term demand picture looks unclear.
Smaller companies underperformed
their larger counterparts, with the Numis Smaller Companies
ex-Investment Companies Index down 0.2% against a rise in the FTSE
All-Share Index of 1.6%.
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 7.7% on a total return basis. This compared with the Numis
Smaller Companies Index (excluding investment companies) fall of
0.2% in total return terms. The underperformance came from a
combination of negative contribution from stock selection, gearing
and expenses. Negative
contribution from stock selection was a function of the
underperformance of growth companies as they de-rated in valuation
terms due to rising interest rates and higher bond yields. In
addition, negative company-specific issues impacted a number of our
larger holdings. We believe these issues are temporary or more than
fully reflected in the underlying share price and expect these
companies to recover over time.
Gearing
Gearing started the period at 12.6%
and ended at 13.0%. 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 £85 million
short-term bank borrowings. As markets 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 %
|
Playtech*
|
-31.6
|
+0.4
|
Computacenter
|
+19.7
|
+0.3
|
S4 Capital*
|
-61.9
|
+0.3
|
Aston Martin Lagonda*
|
-20.1
|
+0.3
|
Ascential
|
+22.6
|
+0.3
|
|
|
|
Top
five detractors
|
6-month return %
|
Relative contribution %
|
Team17
|
-57.0
|
-1.1
|
Impax Asset Management
|
-34.8
|
-1.0
|
Oxford Instruments
|
-22.5
|
-0.5
|
OSB Group
|
-21.6
|
-0.5
|
Deliveroo*
|
+35.6
|
-0.5
|
* In benchmark index but not
held by the Company.
|
Principal contributors
Playtech is a software and
services provider to the gaming industry. Computacenter is a global supplier of
IT equipment and services. S4
Capital is a digital advertising and marketing services
group. Aston Martin Lagonda
is a luxury car manufacturer. Ascential is a diversified media
group.
Principal detractors
Team17 is a computer games
developer and publisher. Impax
Asset Management is an ESG-focused asset manager.
Oxford Instruments is a
manufacturer of advanced scientific equipment. OSB Group is a specialist provider of
buy-to-let mortgages. Deliveroo is an online food delivery
platform.
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 have 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: Bloomsbury
Publishing, a leading consumer and educational publisher;
and Hill and Smith, a
provider of fabricated metal products and services. In addition we
added to our existing positions in: Clarkson, a leading global provider of
services to the shipping industry; Genuit, a diversified building
materials group; and PageGroup, a global recruitment
consultancy.
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 Safestyle. Additionally we sold our
holdings in Blancco
Technology, Ergomed,
Gresham House and
Restaurant Group after
these companies received agreed takeover bids.
Market outlook
Whilst inflation has fallen
significantly over the last year, it remains elevated against
official targets. Central banks led by the US Federal Reserve have,
therefore, retained their hawkish stance. However, it is clear we
are at the end of the monetary policy tightening cycle and even the
Chair of the Federal Reserve conceded that rate cuts were being
debated by the committee. What is not clear is the timing of when
rates start to fall and the speed of their decrease. In the
meantime, the delayed transmission mechanism of rising interest
rates and their impact means that economic conditions are likely to
remain difficult in the short term. Notwithstanding this, the
prospect of a monetary easing cycle is likely to support global
equity markets and allow valuation multiples to expand.
Geopolitics remain challenging, with
the ongoing conflicts in Ukraine and Gaza and continued tensions
between China and the US. The longer-term economic implications of
this are material. There is an urgent need to reduce European
dependence on Russian oil and gas supplies and a requirement to
decrease China's influence on the global supply chain through
investment in nearshoring capability. In addition, domestic politics are likely to be an area of
volatility with up to half of the global population going to the
polls in the coming 12 months in key elections in UK, USA, India,
Mexico, South Korea and the EU.
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. In
particular, balance sheets are more robust. Dividends have
recovered strongly and we are seeing an increasing number of
companies buying back their own stock.
After an active 2021, the initial
public offering ("IPO") market has become considerably quieter as
equity market confidence has diminished. There are no signs this is
likely to change in the short-term. Merger and acquisition
("M&A") activity has remained robust as acquirors, 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 long-term averages. In addition, smaller
companies are trading at a historically high discount to their
larger counterparts. A sharp rebound in corporate earnings
following the pandemic-induced shock in 2020 has now faded. Weak
economic activity has led to subdued corporate earnings growth in
2023 compounded by rising interest costs and a higher corporate tax
burden. These dynamics are unlikely to change in 2024. However, the
view that the UK economy is entering a moderate recession is now
consensual and the debate is now focused on whether the trough will
be deeper than expected.
Although uncertainty remains around
short-term economic conditions, we think that the portfolio is well
positioned to withstand an economic downturn and exploit any
opportunities this would present. The movements in equity markets
have thrown up some fantastic buying opportunities. However, 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
Fund Manager
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
2023.
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 2023
Company
|
Valuation
£'000
|
Portfolio %
|
|
Company
|
Valuation
£'000
|
Portfolio %
|
Bellway
|
22,137
|
3.22
|
|
Tyman
|
8,942
|
1.30
|
Oxford
Instruments
|
19,775
|
2.87
|
|
Softcat
|
8,869
|
1.29
|
Balfour Beatty
|
18,862
|
2.74
|
|
Alpha Financial Markets*
|
8,750
|
1.27
|
Mitchells &
Butlers
|
18,321
|
2.66
|
|
Genuit
|
8,411
|
1.22
|
Vesuvius
|
17,901
|
2.60
|
|
Redde Northgate
|
8,100
|
1.18
|
Paragon Banking
|
17,125
|
2.49
|
|
GB Group*
|
8,041
|
1.17
|
Ascential
|
17,119
|
2.49
|
|
Rathbones
|
7,950
|
1.16
|
OSB Group
|
15,562
|
2.26
|
|
Savills
|
7,737
|
1.12
|
Impax Asset
Management*
|
14,754
|
2.14
|
|
Hollywood Bowl
|
7,728
|
1.12
|
Future
|
14,254
|
2.07
|
|
Next Fifteen
Communications*
|
7,663
|
1.11
|
|
-----------
|
----------
|
|
|
-----------
|
----------
|
10
largest
|
175,810
|
25.54
|
|
40
largest
|
471,584
|
68.50
|
|
|
|
|
|
|
|
Computacenter
|
14,175
|
2.06
|
|
Crest Nicholson
|
7,606
|
1.11
|
Watches of
Switzerland
|
13,464
|
1.96
|
|
Midwich*
|
7,442
|
1.08
|
Bytes Technology
|
11,599
|
1.69
|
|
Burford Capital*
|
6,988
|
1.01
|
Gamma Communications*
|
11,594
|
1.68
|
|
Trainline
|
6,702
|
0.97
|
IntegraFin
|
11,313
|
1.64
|
|
Team17*
|
6,560
|
0.95
|
Chemring
|
11,279
|
1.64
|
|
SigmaRoc*
|
6,519
|
0.95
|
Volution
|
11,026
|
1.60
|
|
Qinetiq
|
6,512
|
0.95
|
Serco
|
10,948
|
1.59
|
|
Bridgepoint
|
6,143
|
0.89
|
Moneysupermarket.Com
|
10,692
|
1.55
|
|
Wickes
|
6,118
|
0.89
|
Just
Group
|
10,545
|
1.53
|
|
Morgan Advanced Materials
|
6,068
|
0.88
|
|
-----------
|
----------
|
|
|
-----------
|
----------
|
20
largest
|
292,445
|
42.48
|
|
50
largest
|
538,242
|
78.18
|
|
|
|
|
|
|
|
Workspace
|
10,296
|
1.50
|
|
Hunting
|
5,850
|
0.85
|
Victrex
|
10,168
|
1.48
|
|
Luceco
|
5,765
|
0.84
|
Serica
Energy*
|
10,010
|
1.45
|
|
SThree
|
5,366
|
0.78
|
Spectris
|
9,944
|
1.44
|
|
Moonpig
|
5,202
|
0.75
|
Pagegroup
|
9,830
|
1.43
|
|
Clarkson
|
5,110
|
0.74
|
Renishaw
|
9,722
|
1.41
|
|
Harworth
|
5,027
|
0.73
|
Foresight
|
9,696
|
1.41
|
|
JTC
|
4,428
|
0.64
|
Learning Technologies*
|
9,217
|
1.34
|
|
Harbour Energy
|
4,416
|
0.64
|
RWS Holdings*
|
9,090
|
1.32
|
|
Wilmington
|
4,401
|
0.64
|
Bodycote
|
8,975
|
1.30
|
|
Videndum
|
4,322
|
0.63
|
|
-----------
|
----------
|
|
|
-----------
|
----------
|
30
largest
|
389,393
|
56.56
|
|
60
largest
|
588,129
|
85.42
|
|
|
|
|
|
|
|
|
|
|
|
Remaining 38
|
100,361
|
14.58
|
|
|
|
|
|
------------
|
----------
|
|
|
|
Total
|
688,490
|
100.00
|
|
|
|
|
=======
|
======
|
* Quoted on the Alternative
Investment Market ("AIM")
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STATEMENT OF COMPREHENSIVE INCOME
|
(Unaudited)
Half-year
ended
30 November
2023
|
(Unaudited)
Half-year
ended
30
November 2022
|
(Audited)
Year
ended
31 May
2023
|
|
Revenue
return
|
Capital
return
|
Total
return
|
Revenue
return
|
Capital
return
|
Total
return
|
Revenue
return
|
Capital
return
|
Total
return
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Investment income
|
12,414
|
-
|
12,414
|
10,553
|
-
|
10,553
|
24,295
|
-
|
24,295
|
Other income
|
105
|
-
|
105
|
23
|
-
|
23
|
95
|
-
|
95
|
Losses on investments held at fair
value through profit or loss
|
-
|
(60,810)
|
(60,810)
|
-
|
(107,690)
|
(107,690)
|
-
|
(127,252)
|
(127,252)
|
|
---------
|
------------
|
-----------
|
---------
|
-----------
|
----------
|
---------
|
------------
|
------------
|
Total income/(loss)
|
12,519
|
(60,810)
|
(48,291)
|
10,576
|
(107,690)
|
(97,114)
|
24,390
|
(127,252)
|
(102,862)
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Management fees (note 3)
|
(334)
|
(780)
|
(1,114)
|
(362)
|
(844)
|
(1,206)
|
(710)
|
(1,657)
|
(2,367)
|
Other expenses
|
(301)
|
-
|
(301)
|
(365)
|
-
|
(365)
|
(731)
|
-
|
(731)
|
|
---------
|
---------
|
----------
|
---------
|
---------
|
----------
|
----------
|
----------
|
----------
|
Profit/(loss) before finance
costs and taxation
|
11,884
|
(61,590)
|
(49,706)
|
9,849
|
(108,534)
|
(98,685)
|
22,949
|
(128,909)
|
(105,960)
|
Finance costs
|
(601)
|
(1,401)
|
(2,002)
|
(476)
|
(931)
|
(1,407)
|
(997)
|
(2,325)
|
(3,322)
|
|
---------
|
------------
|
-----------
|
---------
|
---------
|
----------
|
---------
|
-----------
|
-----------
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) before taxation
|
11,283
|
(62,991)
|
(51,708)
|
9,373
|
(109,465)
|
(100,092)
|
21,952
|
(131,234)
|
(109,282)
|
Taxation
|
5
|
-
|
5
|
(5)
|
-
|
(5)
|
(5)
|
-
|
(5)
|
|
---------
|
------------
|
-----------
|
---------
|
---------
|
----------
|
---------
|
-----------
|
-----------
|
Profit/(loss) for the period and total comprehensive
income
|
11,288
|
(62,991)
|
(51,703)
|
9,368
|
(109,465)
|
(100,097)
|
21,947
|
(131,234)
|
(109,287)
|
|
=====
|
=======
|
=======
|
=====
|
======
|
======
|
=====
|
=======
|
=======
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary
share (note 4)
|
15.11p
|
(84.32p)
|
(69.21p)
|
12.54p
|
(146.54p)
|
(134.00p)
|
29.38p
|
(175.68p)
|
(146.30p)
|
|
======
|
=======
|
=======
|
=====
|
=======
|
======
|
======
|
=======
|
=======
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2023 (unaudited)
|
Share
capital
£'000
|
Capital redemption
reserve
£'000
|
Capital
reserves
£'000
|
Revenue
reserve
£'000
|
Total
equity
£'000
|
Total equity at 1 June 2023
|
18,676
|
26,745
|
612,810
|
17,156
|
675,387
|
Total comprehensive income:
(Loss)/profit for the period
|
-
|
-
|
(62,991)
|
11,288
|
(51,703)
|
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
|
|
======
|
======
|
=======
|
======
|
=======
|
|
|
Half-year ended 30 November 2022
(unaudited)
|
Share
capital
£'000
|
Capital
redemption reserve
£'000
|
Capital
reserves
£'000
|
Revenue
reserve
£'000
|
Total
equity
£'000
|
Total equity at 1 June
2022
|
18,676
|
26,745
|
744,044
|
13,134
|
802,599
|
Total comprehensive
income:
(Loss)/profit for the
period
|
-
|
-
|
(109,465)
|
9,368
|
(100,097)
|
Transactions with owners, recorded
directly to equity:
|
|
|
|
|
|
Ordinary dividend paid
|
-
|
-
|
-
|
(12,699)
|
(12,699)
|
|
----------
|
----------
|
-----------
|
-----------
|
------------
|
Total equity at 30 November
2022
|
18,676
|
26,745
|
634,579
|
9,803
|
689,803
|
|
======
|
======
|
=======
|
======
|
=======
|
|
Year ended 31 May 2023
(audited)
|
Share
capital
£'000
|
Capital
redemption reserve
£'000
|
Capital
reserves
£'000
|
Revenue
reserve
£'000
|
Total
equity
£'000
|
Total equity at 1 June
2022
|
18,676
|
26,745
|
744,044
|
13,134
|
802,599
|
Total comprehensive
income:
(Loss)/profit for the year
|
-
|
-
|
(131,234)
|
21,947
|
(109,287)
|
Transactions with owners, recorded
directly to equity:
|
|
|
|
|
|
Ordinary dividend paid
|
-
|
-
|
-
|
(17,925)
|
(17,925)
|
|
----------
|
----------
|
------------
|
-----------
|
------------
|
Total equity at 31 May
2023
|
18,676
|
26,745
|
612,810
|
17,156
|
675,387
|
|
======
|
======
|
=======
|
======
|
=======
|
The accompanying notes are an
integral part of these financial statements.
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET
|
(Unaudited)
Half-year
ended
30 November
2023
|
(Unaudited)
Half-year
ended 30 November 2022
|
(Audited)
Year
ended
31
May
2023
|
|
£'000
|
£'000
|
£'000
|
Non-current assets
|
|
|
|
Investments held at fair value
through
profit or loss
|
688,490
|
769,864
|
760,156
|
|
------------
|
--------------
|
-------------
|
Current assets
|
|
|
|
Securities sold for future
settlement
|
274
|
-
|
506
|
Prepayments and accrued
income
|
2,367
|
1,047
|
2,681
|
Cash and cash equivalents
|
11,891
|
2,192
|
13,338
|
|
-------------
|
-------------
|
-------------
|
|
14,532
|
3,239
|
16,525
|
|
-------------
|
-------------
|
-------------
|
Total assets
|
703,022
|
773,103
|
776,681
|
|
|
|
|
|
-------------
|
--------------
|
-------------
|
Current liabilities
|
|
|
|
Securities purchased for future
settlement
|
(2,528)
|
(634)
|
-
|
Accruals and deferred
income
|
(882)
|
(810)
|
(851)
|
Bank loans
|
(40,344)
|
(32,092)
|
(50,672)
|
|
-------------
|
------------
|
------------
|
|
(43,754)
|
(33,536)
|
(51,523)
|
|
-------------
|
------------
|
------------
|
|
|
|
|
Total assets less current
liabilities
|
659,268
|
739,567
|
725,158
|
|
|
|
|
Non-current liabilities
|
(49,777)
|
(49,764)
|
(49,771)
|
|
--------------
|
------------
|
------------
|
Net
assets
|
609,491
|
689,803
|
675,387
|
|
========
|
=======
|
=======
|
|
|
|
|
Equity attributable to equity
shareholders
|
|
|
|
Called-up share capital (note
6)
|
18,676
|
18,676
|
18,676
|
Capital redemption reserve
|
26,745
|
26,745
|
26,745
|
Retained earnings:
|
|
|
|
Capital reserves (note 7)
|
549,819
|
634,579
|
612,810
|
Revenue reserve
|
14,251
|
9,803
|
17,156
|
|
------------
|
------------
|
------------
|
Total equity
|
609,491
|
689,803
|
675,387
|
|
=======
|
=======
|
=======
|
|
|
|
|
Net
asset value per ordinary share (note
8)
|
815.9p
|
923.4p
|
904.1p
|
|
=======
|
=======
|
=======
|
|
|
|
|
The accompanying notes are an
integral part of these financial statements.
|
STATEMENT OF CASH FLOWS
|
(Unaudited)
Half-year
ended
30 November
2023
|
(Unaudited)
Half-year
ended
30
November 2022
|
(Audited)
Year
ended
31
May
2023
|
|
£'000
|
£'000
|
£'000
|
Loss before taxation
|
(51,708)
|
(100,092)
|
(109,282)
|
Add back interest payable
|
2,002
|
1,330
|
3,322
|
Losses on investments held at fair
value through profit or loss
|
60,810
|
107,690
|
127,252
|
Purchases of investments
|
(32,066)
|
(62,139)
|
(109,395)
|
Sales of investments
|
42,922
|
76,981
|
114,384
|
Decrease/(increase) in
receivables
|
39
|
(11)
|
(38)
|
Decrease in amounts due from
brokers
|
232
|
1,899
|
1,394
|
Decrease/(increase) in accrued
income
|
279
|
1,296
|
(316)
|
Decrease in payables
|
(36)
|
(88)
|
(66)
|
Increase/(decrease) in amounts due to
brokers
|
2,528
|
(1,447)
|
(2,081)
|
Overseas withholding tax
|
-
|
(5)
|
-
|
|
-----------
|
-----------
|
-----------
|
Net
cash inflow from operating activities before
interest
|
25,002
|
25,414
|
25,174
|
|
-----------
|
-----------
|
-----------
|
Interest paid
|
(1,928)
|
(1,338)
|
(3,303)
|
|
-----------
|
-----------
|
-----------
|
Net
cash inflow from operating activities
|
23,074
|
24,076
|
21,871
|
|
=======
|
=======
|
=======
|
Financing activities
|
|
|
|
Equity dividends paid
|
(14,193)
|
(12,699)
|
(17,928)
|
(Drawdown)/repayment of bank
loans
|
(10,328)
|
(18,176)
|
404
|
|
------------
|
-----------
|
-----------
|
Net
cash outflow from financing activities
|
(24,521)
|
(30,875)
|
(17,524)
|
|
|
|
|
(Decrease)/increase in cash and cash
equivalents
|
(1,447)
|
(6,799)
|
4,347
|
Cash and cash equivalents at the
start of the period
|
13,338
|
8,991
|
8,991
|
|
-----------
|
----------
|
----------
|
Cash
and cash equivalents at the period end
|
11,891
|
2,192
|
13,338
|
|
======
|
======
|
======
|
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 2023. 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 2023.
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. The directors
have further considered the global economic and geopolitical
environment, including the ongoing war in Ukraine and conflict in
the Middle East, the impact of these on supply chains and the
possible impact of climate change risk on the value of the
portfolio. The assessment incorporated cash flow forecasting, a
review of covenant compliance including the headroom above the most
restrictive covenants, and an assessment of the liquidity of the
portfolio. The directors have concluded that they are able to meet
their 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 2023, 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 a substantial majority of shareholders. 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 2023 (30 November 2022 £nil; 31 May
2023: £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 2024 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 2023.
|
4.
|
|
Earnings per ordinary share
The earnings per ordinary share
figure is based on the net loss for the half-year ended 30 November
2023 of £51,703,000 (half-year ended 30 November 2022: net loss of
£100,097,000; year ended 31 May 2023: net loss of £109,287,000) and
on 74,701,796 (half-year ended 30 November 2022: 74,701,796; year
ended 31 May 2023: 74,701,796) 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)
30 November
2023
£'000
|
(Unaudited)
30
November 2022
£'000
|
(Audited)
31
May
2023
£'000
|
|
|
Net revenue profit
|
11,288
|
9,368
|
21,947
|
|
|
Net capital loss
|
(62,991)
|
(109,465)
|
(131,234)
|
|
|
|
-------------
|
------------
|
--------------
|
|
|
Net total loss
|
(51,703)
|
(100,097)
|
(109,287)
|
|
|
|
========
|
=======
|
========
|
|
|
Weighted average number
of ordinary shares in issue
during the period
|
74,701,796
|
74,701,796
|
74,701,796
|
|
|
|
|
|
|
|
|
|
Pence
|
Pence
|
Pence
|
|
|
Revenue earnings per ordinary
share
|
15.11
|
12.54
|
29.38
|
|
|
Capital loss per ordinary
share
|
(84.32)
|
(146.54)
|
(175.68)
|
|
|
|
------------
|
----------
|
------------
|
|
|
Total loss per ordinary
share
|
(69.21)
|
(134.00)
|
(146.30)
|
|
|
|
=======
|
======
|
=======
|
|
|
5.
|
Dividends
The Board has declared an interim
dividend of 7.5p (30 November 2022: 7.0p) to be paid on 5 March
2024 to shareholders on the register at the close of business on 9
February 2024. The ex‑dividend date will be 8 February 2024. No
provision has been made for the interim dividend in these condensed
financial statements.
The final dividend of 19.0p per
ordinary share, paid on 9 October 2023, in respect of the year
ended 31 May 2023, has been recognised as a distribution in the
period.
|
6.
|
Share capital
At 30 November 2023 there were
74,701,796 ordinary shares in issue (30 November 2022: 74,701,796;
31 May 2023: 74,701,796). During the half-year ended 30
November 2023 the Company did not buy back or issue any shares
(half-year ended 30 November 2022: nil; year ended 31 May 2023:
nil). No shares have been bought back or issued since the period
end.
|
7.
|
Capital reserves
Capital reserves include the capital
reserve arising on investments sold of £538,498,000 (30 November
2022: £553,853,000; 31 May 2023: £542,034,000) and the capital
reserve arising on revaluation of investments held of £11,321,000
(30 November 2022: £80,726,000; 31 May 2023 £70,776,000). 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
£609,491,000 (30 November 2022: £689,803,000; 31 May 2023:
£675,387,000) and on 74,701,796 (30 November 2022: 74,701,796; 31
May 2023: 74,701,796) ordinary shares, being the number of ordinary
shares in issue at the period end.
|
9.
|
Transaction costs
Purchase transaction costs for the
half-year ended 30 November 2023 were £115,000 (half-year ended 30
November 2022: £284,000; year ended 31 May 2023: £479,000). These
comprise mainly stamp duty and commission. Sale transaction
costs for the half-year ended 30 November 2023 were £18,000
(half-year ended 30 November 2022: £37,000; year ended 31 May 2023:
£53,000).
|
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 2023 the fair value of the Preference stock
was £4,000 (30 November 2022: £4,000; 31 May 2023: £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. In order to comply with fair
value accounting disclosures only, the fair value of the unsecured
loan notes has been estimated to be £35,875,000 (30 November 2022:
£40,316,000; 31 May 2023: £36,068,000) 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 on the
basis of 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 2023
|
Level 1
£'000
|
Level 2
£'000
|
Level 3
£'000
|
Total
£'000
|
|
|
Equity investments
|
688,490
|
-
|
-
|
688,490
|
|
|
|
-------------
|
-------------
|
-------------
|
-------------
|
|
|
|
688,490
|
-
|
-
|
688,490
|
|
|
|
========
|
========
|
========
|
========
|
|
|
|
|
|
|
|
|
|
As at 30 November 2022
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Equity investments
|
769,864
|
-
|
-
|
769,864
|
|
|
|
-------------
|
-----------
|
-----------
|
-------------
|
|
|
|
769,864
|
-
|
-
|
769,864
|
|
|
|
========
|
======
|
======
|
========
|
|
|
|
|
|
|
|
|
|
As at 31 May 2023
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
Equity investments
|
760,156
|
-
|
-
|
760,156
|
|
|
|
-------------
|
-----------
|
-----------
|
-------------
|
|
|
|
760,156
|
-
|
-
|
760,156
|
|
|
|
========
|
======
|
======
|
========
|
|
|
|
|
|
|
|
|
|
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 2023.
|
|
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 2023.
|
12.
|
Comparative information
The financial information contained
in this half-year financial report does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The
financial information for the half years ended 30 November
2023 and 30 November 2022 has not been audited.
The information for the year ended
31 May 2023 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 section 498(2) or section
498(3) of the 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.
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14.
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Financial report for the half year ended 30 November
2023
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 2024 and will be available from the
Corporate Secretary at the Company's registered office, 201
Bishopsgate, London EC2M 3AE.
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For
further information please contact:
Neil Hermon
Fund Manager
The Henderson Smaller Companies
Investment Trust plc
Telephone: 020 7818 4351
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Nathan Brown
Corporate Broking
Deutsche Numis Securities
Telephone: 020 7260
1426/1275
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Dan Howe
Head of Investment
Companies
Janus Henderson Investors
Telephone: 020 7818 4458
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Harriet Hall
PR Director, Investment
Trusts
Janus Henderson Investors
Telephone: 020 7818 2919
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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.