Half Yearly Report

RNS Number : 2155O

Henderson Opportunities Trust PLC

25 June 2010

 



Page 1 of 13

HENDERSON OPPORTUNITIES TRUST PLC

25 JUNE 2010

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

The Company's investment objective is to provide shareholders with higher than average growth of capital over the medium to long term from a portfolio of predominantly UK companies. The strategy is to invest in a concentrated portfolio of shares on an unconstrained basis across the whole range of market capitalisations. The investment portfolio is characterised by focus on growth, recovery and "special opportunities" company shares which the Portfolio Manager believes should achieve the investment objective.

Chairman's Comment

The Company's net asset value total return over the six months to 30 April 2010 was 12.8%, the same as the total return of the FTSE All-Share Index.

The global economic recovery appears to be gaining momentum and this should help drive companies' profits forward. The UK economy has some severe problems but many of the companies in the portfolio are expected to prosper regardless of the domestic economic background, not least because they have businesses overseas or export from the UK.  The Portfolio Manager's view is that the valuation currently placed on equities is undemanding and that the market's expectations for earnings will be surpassed, as a result of strong margin improvement. 

George Burnett

Chairman

For further information please contact:

James Henderson Portfolio Manager Henderson Global Investors Telephone: [phone]

or

George Burnett Chairman Henderson Opportunities Trust plc Telephone: [phone]

Page 2 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Interim Management Report

Chairman's Statement

Review

Over the six months to 30 April 2010 the Company's net asset value rose 9.9% while the FTSE All-Share Index rose 10.8%.  On a total return basis, which takes account of the dividend paid on 26 March 2010, the figures are 12.8% for both.

The economic recovery which started in the second half of 2008 has continued.  Overall, companies' results have shown considerable improvement, with corporate debt falling and profits recovering.  Many companies had reduced their costs radically during 2008 and 2009, fearing that their orders would not recover in the near term.  The subsequent pick-up in activity is leading to margin expansion as increased turnover on a reduced cost base has resulted in improved profitability.  The share prices of some companies have moved up significantly during the period but the stock market remains volatile, reflecting continuing uncertainty about the durability of the recovery and the problems that are still to be tackled.

Portfolio

The exposure to medium and small companies makes up 90% of the Company's portfolio; the exposure to AIM stocks accounts for 34% of it.  This is very different from the FTSE All-Share Index, our benchmark, in which small and medium companies account for only 15% by market value but our Portfolio Manager continues to believe that there is substantial value in the smaller companies area.  When this value is better reflected in their share prices, the holdings in small companies will be reduced and the weighting to large companies will be increased, provided that this represents the best value opportunity for shareholders at the time of execution.  Although the portfolio has retained a substantial weighting to small companies, the liquidity of these stocks has improved significantly in the last year, mainly as a result of the realisation of some of the less liquid positions but also because of a general recovery in the saleability of shares.  

The portfolio was geared throughout the period, at an average of 15.6%; the gearing at 30 April 2010 stood at 15.4%.  The Board expects to maintain some degree of gearing in the second half of the year but to reduce it, at least in percentage terms, if share prices move ahead strongly. 

Earnings and Dividends

The revenue earnings per share for the half year were 4.25p, which compares with last year's 3.69p. The phase of dividend cutting has now passed and during the half year a number of companies paid dividends early.  The Portfolio Manager expects dividend growth from the companies in the portfolio to resume with effect from this year but higher distributions are expected to benefit the Company's revenue account in 2011 rather than this year.  Furthermore, the earnings per share for the full year to 31 October 2010 will not benefit from the VAT refund and related interest that enhanced the revenue return in 2009 by £328,000 (or 4p per share).  Accordingly, the directors expect a reduction in the distributable earnings for the year.  The interim dividend declared by the Board for payment on 24 September 2010 is 2p per share, which compares with 3p last year.

The Board

After 25 years as a director, Richard Smith will retire from the Board on 30 September 2010.  He was responsible for the launch of the Company and he was its first manager.  We shall miss Richard's investment expertise and his kindly wisdom and enthusiasm. 

Page 3 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Interim Management Report

Chairman's Statement, continued

We are delighted that Chris Hills joined the Board on 17 June 2010.  He is Chief Investment Officer of Rensburg Sheppards Investment Management, a position he has held (originally with Carr Sheppards) for fourteen years.  He brings a wealth of investment experience to the Board. 

Outlook

However, the very genuine opportunities for stock picking cannot be wholly divorced from the looming macro economic problems, not least the scale of government debt, and the dampening effects of the measures that will be necessary to address them.

The UK economy has some severe problems but many of the companies in the portfolio are expected to prosper regardless of the domestic economic background, not least because they have businesses overseas or export some of their goods and services from the UK. They thereby benefit from the weaker pound and from exposure to countries where the recovery is stronger than in the UK.  The Portfolio Manager's view is that the valuation currently placed on equities is undemanding and that the market's expectations for earnings will be surpassed, as a result of strong margin improvement. 

G B Burnett

Chairman

24 June 2010

Page 4 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Interim Management Report

Regulatory Disclosures

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 or performance of the Company during the period. Details of related party transactions are contained in the annual report.

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into various areas:

• Investment objective and policy

• Gearing

• Market movements and performance of the portfolio

Information on these risks is given in the Report of the Directors and in the Notes to the Financial Statements in the Company's Report and Financial Statements for the year ended 31 October 2009.

In the view of the Board these principal risks and uncertainties are 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:

(a) the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's Statement Half-Yearly Financial Reports;

(b) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (an indication of important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six

months of the financial year); and

(c) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

For and on behalf of the Board

G B Burnett

Chairman

24 June 2010

Page 5 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Interim Management Report

Portfolio Activity

During the period there was a cash bid for Delta from Valmont of the USA.  The proceeds have been invested selectively in building existing holdings and starting new ones, such as the Falklands Basin oil exploration company Rockhopper.  The holding in Mondi was reduced as the share price rose to reflect its value more accurately, while the holding in Xstrata was sold for the same reason.

As long term investors, we are asked from time to time by portfolio companies to support balance sheet restructuring or to provide additional capital for growth, by way of a rights issue or open offer.  In this period we supported e2v technologies and Hampson Industries, both of which restructured their balance sheets, and Avanti Communications, which raised capital to fund growth.  We took some profits in long term favourites Fidessa and Alterian.  We also sold out of Meggitt, for a good profit, and decided that we should exit eServGlobal, for a modest gain.  More recently we have invested in easyJet, the low cost airline.

J H Henderson and C M Hughes

Portfolio Information

Analysis of the equity portfolio by market index at 30 April 2010

	30 April 2010	30 April 2009	31 October 2009
	%	%	%
FTSE 100 Index	8.5	10.8	11.5
FTSE 250 Index	19.4	20.5	15.9
FTSE SmallCap Index	30.8	24.3	30.8
	----------	----------	----------
FTSE All-Share Index	58.7	55.6	58.2
FTSE Fledgling Index	2.4	8.4	3.8
FTSE AIM All-Share Index	31.0	29.6	30.6
other Official List	4.9	5.0	5.4
other AIM	3.0	1.4	2.0
	----------	----------	----------
	100.0	100.0	100.0
	======	======	======

Page 6 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Income Statement

for the half year ended 30 April 2010

	(Unaudited) Half year ended 30 April 2010			(Unaudited) Half year ended 30 April 2009			(Audited) Year ended 31 October 2009
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains from investments      held at fair value through      profit or loss	-	3,727	3,727	-	159	159	-	10,087	10,087
Income from investments held at    fair value through profit or loss	533	-	533	434	-	434	888	-	888
Interest on VAT refunds	-	-	-	-	-	-	146	-	146
Other interest receivable and    similar income	18	-	18	54	-	54	102	-	102
	----------	----------	----------	----------	----------	----------	----------	----------	---------
Gross revenue and capital    gains	551	3,727	4,278	488	159	647	1,136	10,087	11,223
	---------	----------	----------	---------	----------	----------	----------	----------	---------
Management fees (note 2)	(63)	(63)	(126)	(37)	(37)	(74)	(94)	(94)	(188)
Write-back of prior years' VAT     (note 3)	-	-	-	-	-	-	182	-	182
Other administrative expenses	(102)	-	(102)	(86)	-	(86)	(184)	-	(184)
	---------	----------	----------	---------	----------	----------	----------	----------	---------
	(165)	(63)	(228)	(123)	(37)	(160)	(96)	(94)	(190)
	---------	---------	---------	---------	---------	---------	---------	---------	---------
Net return on ordinary    activities before finance     charges and taxation	386	3,664	4,050	365	122	487	1,040	9,993	11,033
Finance charges (note 2)	(41)	(41)	(82)	(58)	(59)	(117)	(101)	(101)	(202)
	---------	--------	--------	---------	--------	--------	---------	---------	---------
Net return on ordinary     activities before taxation	345	3,623	3,968	307	63	370	939	9,892	10,831
Taxation on net return on    ordinary activities	-	-	-	(4)	-	(4)	(5)	-	(5)
	---------	--------	--------	---------	--------	--------	---------	---------	---------
Net return on ordinary    activities after taxation	345	3,623	3,968	303	63	366	934	9,892	10,826
	=====	======	======	=====	======	======	======	=====	=====
Return per ordinary share    (note 4)	4.25p	44.61p	48.86p	3.69p	0.77p	4.46p	11.38p	120.51p	131.89p
	=====	======	======	=====	=======	=======	=====	=====	=====

The total columns of this statement represent the Income Statement of the Company.  The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.  All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. The Company had no recognised gains or losses other than those disclosed in the Income Statement above and the Reconciliation of Movements in Shareholders' Funds below.

Page 7 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Reconciliation of Movements in Shareholders' Funds

	(Unaudited) Half year ended 30 April 2010
	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 October 2009	2,068	14,508	2,354	15,997	962	35,889
Net return on ordinary activities       after taxation	-	-	-	3,623	345	3,968
Buy-back of ordinary shares	(36)	-	36	(504)	-	(504)
Conversion of subscription shares	-	4	-	-	-	4
Dividend paid on the ordinary shares	-	-	-	-	(605)	(605)
	----------	----------	----------	----------	----------	----------
At 30 April 2010	2,032	14,512	2,390	19,116	702	38,752
	======	======	======	=====	======	======

	(Unaudited) Half year ended 30 April 2009
	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 October 2008	2,068	14,505	2,354	6,105	1,216	26,248
Net return on ordinary activities after    taxation	-	-	-	63	303	366
Conversion of subscription shares	-	3	-	-	-	3
Dividend paid on the ordinary shares	-	-	-	-	(944)	(944)
	----------	----------	----------	----------	----------	----------
At 30 April 2009	2,068	14,508	2,354	6,168	575	25,673
	======	======	======	======	======	======

	(Audited) Year ended 31 October 2009
	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 31 October 2008	2,068	14,505	2,354	6,105	1,216	26,248
Net return on ordinary activities after    taxation	-	-	-	9,892	934	10,826
Conversion of subscription shares	-	3	-	-	-	3
Dividends paid on the ordinary shares	-	-	-	-	(1,188)	(1,188)
	----------	----------	----------	----------	----------	----------
At 31 October 2009	2,068	14,508	2,354	15,997	962	35,889
	======	======	======	======	======	======

Page 8 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Balance Sheet

as at 30 April 2010

	(Unaudited) 30 April 2010 £'000	(Unaudited) 30 April 2009 £'000	(Audited) 31 October 2009 £'000
Investments held at fair value through profit or loss
Listed at market value	29,638	20,693	27,901
Quoted on AIM at market value	15,063	9,297	13,490
	-----------	-----------	-----------
	44,701	29,990	41,391
	-----------	-----------	-----------
Current assets
Investment held at fair value through profit or loss (note 6)	2	1,996	1,076
Debtors	258	329	194
Cash at bank	40	13	12
	-----------	-----------	-----------
	300	2,338	1,282
Creditors: amounts falling due within one year	(6,249)	(6,655)	(6,784)
	----------	----------	----------
Net current liabilities	(5,949)	(4,317)	(5,502)
	----------	----------	----------
Total net assets	38,752	25,673	35,889
	======	======	======
Capital and reserves
Called up share capital (note 7)	2,032	2,068	2,068
Share premium account	14,512	14,508	14,508
Capital redemption reserve	2,390	2,354	2,354
Other capital reserves	19,116	6,168	15,997
Revenue reserve	702	575	962
	----------	----------	----------
Equity shareholders' funds	38,752	25,673	35,889
	======	======	======
Net asset value per ordinary share (note 8)	480.55p	312.76p	437.21p
	======	======	======

The notes on pages 10 to 13 form part of these condensed financial statements.

Page 9 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Cash Flow Statement

for the half year ended 30 April 2010

	(Unaudited) Half year ended 30 April 2010 £'000	(Unaudited) Half year ended 30 April 2009 £'000	(Audited) Year ended 31 October 2009 £'000
Net cash inflow from operating activities	161	722	1,584
Net cash outflow from servicing of finance	(81)	(148)	(215)
Net tax recovered	-	-	58
Net cash inflow/(outflow) from financial investment	309	(1,856)	(3,214)
Equity dividends paid	(605)	(944)	(1,188)
Net cash inflow from management of liquid    resources	1,074	1,144	2,064
	----------	----------	----------
Net cash inflow/(outflow) before financing	858	(1,082)	(911)
Net cash (outflow)/inflow from financing	(425)	149	493
	----------	----------	----------
Increase/(decrease) in cash	433	(933)	(418)
	======	=====	======
Reconciliation of operating return to net cash    outflow from operating activities
Net total return before finance costs and       taxation	4,050	487	11,033
Less: capital return before finance costs    and taxation	(3,664)	(122)	(9,993)
	----------	----------	----------
Net revenue return before finance costs and taxation	386	365	1,040
(Increase)/decrease in accrued income	-	(2)	140
(Increase)/decrease in other debtors and prepayments	(145)	508	508
Decrease in other creditors	(17)	(103)	(10)
Expenses charged to capital	(63)	(37)	(94)
Overseas withholding tax suffered	-	(9)	-
	----------	----------	----------
Net cash inflow from operating activities	161	722	1,584
	======	=====	======
Reconciliation of net cash flow to movement in    net debt
Increase/(decrease) in cash as above	433	(933)	(418)
Net cash movement from increase in loans	(75)	(146)	(490)
Net cash flow from movement in liquid resources	(1,074)	(1,144)	(2,064)
Exchange movements	(1)	-	(1)
	----------	----------	----------
Movement in net debt	(717)	(2,223)	(2,973)
Net debt at the start of the period	(5,352)	(2,379)	(2,379)
	----------	----------	----------
Net debt at the end of the period	(6,069)	(4,602)	(5,352)
	======	=====	======
Represented by:
Cash at bank less overdrafts	4	(942)	(428)
Liquid resources (investment in cash fund)	2	1,996	1,076
Debt falling due within one year	(6,075)	(5,656)	(6,000)
	----------	----------	----------
Net debt	(6,069)	(4,602)	(5,352)
	======	=====	======

Page 10 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Notes to the Condensed Financial Statements

1		Accounting policies - basis of preparation
	The condensed set of financial statements has been prepared using the same accounting policies as are set out in the Company's Report and Financial Statements for the year ended 31 October 2009.
	The condensed set of financial statements has not been either audited or reviewed by the Company's auditors.
2	Expenses:  management fees and finance charges
	With effect from 1 November 2008 the Company allocates 50% of its management fees and finance charges to the capital return.  It had previously allocated 80% of its management fees and finance charges to the capital return.
	The management fee is calculated, quarterly in arrears, as 0.60% per annum of the assets under management.  No performance fee was earned or payable in the period, nor in the comparative periods.  The fee arrangements are unaffected by the allocation of costs described above.
3	VAT on management fees
	As at 31 October 2009 the Company had received back from HM Revenue & Customs ("HMRC") all of the VAT on investment management fees that had been borne by the Company in respect of the periods 1990 to 1996 and 2000 to 2007, as well as simple interest on those amounts.
	There remain outstanding claims relating to the period 1996 to 2000 and claims for compound interest from 1990 onwards.  No amounts have been recognised as it is uncertain whether any further amounts will be recovered.

Page 11 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Notes to the Condensed Financial Statements, continued

4	Return per ordinary share
			(Unaudited) Half year ended 30 April 2010 £'000	(Unaudited) Half year ended 30 April 2009 £'000	(Audited) Year ended 31 October 2009 £'000
		The return per ordinary share is based on the    following figures:
		Revenue return	345	303	934
		Capital return	3,623	63	9,892
			----------	----------	----------
		Total	3,968	366	10,826
			======	======	======
		Weighted average number of ordinary shares in    issue for the period	8,120,581	8,208,295	8,208,439
		Revenue return per ordinary share	4.25p	3.69p	11.38p
		Capital return per ordinary share	44.61p	0.77p	120.51p
			----------	----------	----------
			48.86p	4.46p	131.89p
			======	======	======

5	Dividends
	The Board has declared an interim dividend of 2.00p per ordinary share (2009: 3.00p), to be paid on 24 September 2010 to shareholders registered at the close of business on 27 August 2010. The ex-dividend date will be 25 August 2010. Based on the number of ordinary shares in issue at 24 June 2010 (8,064,087), this dividend will absorb £161,000.
	No provision has been made for the interim dividend in these accounts. The final dividend of 7.50p per ordinary share, paid on 26 March 2010 in respect of the year ended 31 October 2009, has been recognised as a distribution in the period.
6	Current asset investment
	The Company has a holding in Henderson Liquid Assets Fund plc, a money market fund which is viewed as a readily disposable store of value and which is used to invest cash balances that would otherwise be placed on short term deposit.  At 30 April 2010 this holding had a value of £2,000 (30 April 2009: £1,996,000; 31 October 2009: £1,076,000).
	Henderson Liquid Assets Fund plc is managed by Henderson Global Investors Limited ("Henderson").  The Company's holding is made through a class of shares that does not bear management fees and, accordingly, it has no effect on the management fees payable by the Company to Henderson (which are based on the value of the total assets under management, wherever held).

Page 12 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Notes to the Condensed Financial Statements, continued

7	Called up share capital
	During the half year ended 30 April 2010, 505 of the Company's subscription shares were converted into 505 ordinary shares.  Subscription shareholders have an opportunity to convert their subscription shares into ordinary shares, at the conversion price of 936p per share, in each of the years 2009 to 2014 inclusive.  During the half year 145,000 ordinary shares were bought back and cancelled.
	There were 8,064,087 ordinary shares of 25p each in issue at 30 April 2010 (30 April 2009 and 31 October 2009: 8,208,582).
	There were 1,640,753 subscription shares of 1p each in issue at 30 April 2010 (30 April 2009 and 31 October 2009: 1,641,258). The subscription shares were issued, as a bonus issue to the ordinary shareholders, on 19 January 2007.
8	Net asset value per ordinary share
	The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £38,752,000 (30 April 2009: £25,673,000; 31 October 2009: £35,889,000) and on the 8,064,087 ordinary shares of 25p each in issue at 30 April 2010 (30 April 2009 and 31 October 2009: 8,208,582).
9	Transaction costs
	Purchase transaction costs for the half year ended 30 April 2010 were £16,000 (half year ended 30 April 2009: £18,000; year ended 31 October 2009: £30,000).  These comprise mainly stamp duty and commissions.  Sale transaction costs for the half year ended 30 April 2010 were £8,000 (half year ended 30 April 2009: £3,000; year ended 31 October 2009: £8,000).  These comprise mainly commissions.
10	Going concern
	The directors consider that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. The assets of the Company consist almost entirely of securities that are listed (or quoted on AIM) and, accordingly, the directors believe that the Company has adequate resources to continue in existence for the foreseeable future. The directors consider this to be the case, notwithstanding the continuation vote to be held at the Annual General Meeting in 2011.
11	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 information for the year ended 31 October 2009 has been extracted from the statutory accounts for that year, which have been filed with the Registrar of Companies.  The report of the auditors on those accounts was unqualified and contained no statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Page 13 of 13

HENDERSON OPPORTUNITIES TRUST PLC

Financial Report for the half year ended 30 April 2010

Notes to the Condensed Financial Statements, continued

12	Financial Report for the half year ended 30 April 2010
	The full half year report, as printed for circulation to the shareholders, will be available today on www.hendersonopportunities.com for viewing.  Copies will be posted to the shareholders in early July 2010 and will be available thereafter from the Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE.

- ENDS -

 

END

 

 

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