Interim Results
Henderson Strata Investments PLC
27 June 2006
HENDERSON GLOBAL INVESTORS
HENDERSON STRATA INVESTMENTS PLC
27 June 2006
HENDERSON STRATA INVESTMENTS PLC
Unaudited Interim Results for the half year ended 30 April 2006
Henderson Strata Investments plc invests for capital growth in the fledgling end
of the UK stockmarket. At 30 April 2006 its portfolio comprised 114 holdings
with an average market capitalisation of £87 million.
Highlights:
• Net asset value per share up 24.0% over the period
• Outperformance of the benchmark index:
Henderson Strata NAV total return 6 months: 24.0% 12 months: 30.3%
Benchmark total return 6 months: 20.8% 12 months: 19.4%
'I am delighted to report on continuing strong progress. Our net asset value
per share increased by 24% over the half year and by 30.3% over the twelve
months, comfortably outperforming the benchmark index over both periods. We
expect to continue to benefit from active stock picking in what is a vibrant and
attractively valued area of the market.'
George Burnett, Chairman
For further information, please contact:
Colin Hughes or Sarah Gibbons-Cook
Fund Manager Investor Relations and PR Manager
Henderson Strata Investments plc Henderson Global Investors
Telephone: 020 7818 5714 Telephone: 020 7818 3198
or or
James de Sausmarez George Burnett
Head of Investment Trusts Chairman
Henderson Global Investors Henderson Strata Investments plc
Telephone: 020 7818 3349 Telephone: 01372 362300
Page 2 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Review of activity in the half year
The net asset value per share rose by 24.0% in the six months ended 30 April
2006 (twelve months ended 30 April 2006: 30.3%). Over the same six month period
the FTSE Fledgling (excluding investment companies) Index, our benchmark,
returned 20.8% (twelve months: 19.4%). The FTSE All-Share Index returned 17.3%
(twelve months: 32.4%). These figures include income.
Most of the changes to the portfolio, necessary to match our new objective of
investing in UK micro cap companies, had been made by 30 April 2005. In
essence, therefore, 30 April 2006 marked the first twelve months of our focus on
the smallest companies listed in the UK. The results are very encouraging, both
in absolute terms and relative to our benchmark. At 30 April 2006 our portfolio
comprised 114 holdings with a size-weighted average market capitalisation of £87
million.
October and November were difficult months but since December the portfolio has
performed very strongly. Good performance overall was the result of both
favourable market conditions and successful stock-picking. The pragmatic use of
our short term borrowing facility was also helpful, although gearing has been
consistently below 10%. Buoyant market conditions have attracted many new
companies to the market, particularly on to AIM. We have selected carefully
from this wide choice and made investments covering a broad range of sectors in
companies of quality and promise.
The discount
The Board is committed, as far as practicable, to maintaining the discount to
net asset value at which the Company's shares trade to close to the 8% level at
which the Tender Offer was made in January 2005. We have maintained an active
approach to buying back the Company's shares. A total of 428,000 shares were
bought in for cancellation during the half year, all but 25,000 prior to the
Annual General Meeting in February. In recent months an encouraging level of
interest from new investors allowed us to reduce our activity and since the
period end we have bought back a further 103,000 shares.
Market review and outlook
The six months to 30 April 2006 were supported by strong company results. The
subsequent market setback, after three years of almost uninterrupted gains, was
not unexpected but its timing and magnitude were not predictable. At the lower
levels, the market now offers reasonable value as well as many opportunities for
the discerning stock-picker. Despite the economic uncertainties and the
possibility of further rises in interest rates, we remain of the view that the
medium term fundamentals are supportive of equity investment. We expect our
portfolio to continue to benefit from active stock picking in a vibrant and
attractively valued area of the market.
Page 3 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Income Statement
for the half year ended 30 April 2006
(unaudited) (unaudited) (audited)
Half year ended Half year ended Year ended
30 April 2006 30 April 2005 31 October 2005
Revenue Capital Revenue Capital Revenue Capital
return return Total return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments
held at fair value through
profit or loss - 14,435 14,435 - 5,562 5,562 - 8,068 8,068
Income from investments
held at fair value
through profit or loss 400 - 400 563 - 563 1,023 - 1,023
Other interest
receivable and
similar income 15 - 15 68 - 68 99 - 99
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Gross revenue and
capital gains 415 14,435 14,850 631 5,562 6,193 1,122 8,068 9,190
Management fee (75) (300) (375) (363) - (363) (662) - (662)
Other administrative
expenses (110) - (110) (109) - (109) (181) - (181)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Net return on ordinary
activities before
finance costs and taxation 230 14,135 14,365 159 5,562 5,721 279 8,068 8,347
Finance costs (26) (103) (129) (9) - (9) (79) - (79)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Net return on ordinary
activities before taxation 204 14,032 14,236 150 5,562 5,712 200 8,068 8,268
Taxation on net return
on ordinary activities - - - (4) - (4) (7) - (7)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Net return on ordinary
activities after taxation 204 14,032 14,236 146 5,562 5,708 193 8,068 8,261
====== ====== ====== ====== ====== ====== ====== ====== ======
Return per ordinary
share (note 3) 1.85p 127.34p 129.19p 0.99p 37.86p 38.85p 1.48p 61.71p 63.19p
The total columns of this statement represent the profit and loss accounts of
the Company.
Page 4 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Reconciliation of Movements in Shareholders' Funds
for the half year ended 30 April 2006
Half year ended 30 April 2006
(unaudited) Called up Share Capital Other
share premium redemption capital Revenue
capital account reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 October 2005 3,041 16,479 1,365 42,473 (2,518) 60,840
Adjustment to bid
valuation (see note 1) - - - (209) - (209)
Net return from ordinary
activities - - - 14,032 204 14,236
Purchase of own shares
for cancellation (107) - 107 (2,289) - (2,289)
----------- ----------- ----------- ---------- ----------- -----------
At 30 April 2006 2,934 16,479 1,472 54,007 (2,314) 72,578
======= ======= ======= ======= ======= =======
Half year ended 30 April 2005
(unaudited) Called up Share Capital Other
share premium redemption capital Revenue
capital account reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 October 2004 4,276 16,479 130 62,705 (2,711) 80,879
Net return from ordinary
activities - - - 5,562 146 5,708
Purchase of own shares
for cancellation (1,157) - 1,157 (22,479) - (22,479)
Purchase of own shares
into treasury - - - (1,359) - (1,359)
----------- ----------- ----------- ---------- ----------- -----------
At 30 April 2005 3,119 16,479 1,287 44,429 (2,565) 62,749
======= ======= ======= ======= ======= =======
Year ended 31 October 2005
(audited)
Called up Share Capital Other
share premium redemption capital Revenue
capital account reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 October 2004 4,276 16,479 130 62,705 (2,711) 80,879
Net return from ordinary
activities - - - 8,068 193 8,261
Purchase of own shares
for cancellation (1,235) - 1,235 (24,012) - (24,012)
Purchase of own shares
into treasury - - - (4,288) - (4,288)
----------- ----------- ----------- ---------- ----------- -----------
At 31 October 2005 3,041 16,479 1,365 42,473 (2,518) 60,840
======= ======= ======= ======= ======= =======
Page 5 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Balance Sheet
at 30 April 2006
(unaudited) (unaudited) (audited)
30 April 2006 30 April 2005 31 October 2005
£'000 £'000 £'000
Fixed asset investments held at
fair value through profit or loss
Investments at market value 78,593 62,017 65,467
---------- ---------- ----------
Current assets
Debtors 219 941 196
Cash at bank and short term deposits 94 1,569 1,407
---------- ---------- ----------
313 2,510 1,603
Creditors: amounts falling due within one
year (6,328) (1,778) (6,230)
---------- ---------- ----------
Net current (liabilities)/assets (6,015) 732 (4,627)
---------- ---------- ----------
Total net assets 72,578 62,749 60,840
====== ====== ======
Capital and reserves
Called up share capital 2,934 3,119 3,041
Share premium account 16,479 16,479 16,479
Capital redemption reserve 1,472 1,287 1,365
Other capital reserves 54,007 44,429 42,473
Revenue reserve (2,314) (2,565) (2,518)
---------- ---------- ----------
Equity shareholders' funds 72,578 62,749 60,840
====== ====== ======
Net asset value per ordinary share (note 5) 670.01p 514.28p 540.30p
Page 6 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Cash Flow Statement
for the half year ended 30 April 2006
(unaudited) (unaudited) (audited)
Half year ended Half year ended Year ended
30 April 2006 30 April 2005 31 October 2005
£'000 £'000 £'000
Net cash (outflow)/inflow from operating activities (266) 109 678
Net cash outflow from servicing of finance (120) (5) (75)
Net tax recovered - 9 11
Net cash inflow from financial investment 901 24,862 23,201
---------- ---------- ----------
Net cash inflow before financing 515 24,975 23,815
Net cash outflow from financing (1,828) (23,838) (24,300)
---------- ---------- ----------
(Decrease)/increase in cash (1,313) 1,137 (485)
====== ====== ======
Reconciliation of operating return to net cash
(outflow)/inflow from operating activities
Total return before finance costs and taxation 14,365 5,721 8,347
Less: capital return before finance costs and taxation (14,135) (5,562) (8,068)
---------- ---------- ----------
Net revenue return before finance costs and taxation 230 159 279
(Increase)/decrease in accrued income (23) (38) 114
Decrease in other debtors and prepayments - 32 7
(Decrease)/increase in other creditors (173) (38) 285
Expenses charged to capital (300) - -
Tax on unfranked investment income deducted at source - (6) (7)
---------- ---------- ----------
Net cash (outflow)/inflow from operating activities (266) 109 678
====== ====== ======
Reconciliation of net cash flow to movement in net funds
Decrease/(increase) in cash as above (1,313) 1,137 (485)
Net cash from increase in loans (461) - (4,000)
Exchange movements - 52 67
---------- ---------- ----------
Movement in net (debt)/funds (1,774) 1,189 (4,418)
Net (debt)/cash at the start of the period (4,038) 380 380
---------- ---------- ----------
Net (debt)/cash at the end of the period (5,812) 1,569 (4,038)
====== ====== ======
Represented by:
Cash at bank and short term deposits 94 1,569 1,407
Debt falling due within one year (5,906) - (5,445)
----------- ----------- -----------
Net (debt)/cash (5,812) 1,569 (4,038)
====== ====== ======
Page 7 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Notes
1. Accounting policies
The accounts have been prepared under the historical cost convention, modified to include the
revaluation of investments, and in accordance with applicable accounting standards and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('SORP' dated
January 2003, revised December 2005). All of the Company's operations are of a continuing nature.
The same accounting policies used for the year ended 31 October 2005 have been applied with the
following exceptions:
(a) Valuation of fixed asset investments
Prior to 1 November 2005, listed investments, were valued at middle market prices. Following
the introduction of FRS 26, listed investments have been designated by the Board as held at fair
value through profit or loss and accordingly are valued at fair value, deemed to be bid market
prices. A similar treatment applies to investments which are unlisted but which are quoted on
an organised market. In accordance with the exemption conferred by FRS 26, comparatives have
not been restated for this change in accounting policy, and therefore listed investments shown
at 30 April 2005 and 31 October 2005 are stated at middle market prices. The adoption of bid
market prices at 1 November 2005 decreased the value of listed investments by £209,000. The
effect of this change in accounting policy is to decrease the value of investments at 30 April
2006 by £119,000 and increase the net return on ordinary activities after taxation for the
period then ended by £90,000.
Unquoted investments are valued by the directors using primary valuation techniques such as
earnings multiples, recent transactions and net assets. Where fair value cannot reliably be
measured, the investment will be carried at the previous reporting date value unless there is
evidence that the investment has since been impaired, in which case the value will be reduced.
Changes in the fair value of investments held at fair value through profit or loss and gains and
losses on disposal are recognised in the Income Statement as 'Gains or losses on investments
held at fair value through profit or loss'. Also included within this caption are transaction
costs in relation to the purchase or sale of investments, including the difference between the
purchase price of an investment and its bid price at the date of purchase. All purchases and
sales are accounted for on a trade date basis.
b) Expenses and finance costs
On the basis of the Board's expectation that over the long term the Company's investment returns
will be generated largely in the form of capital gains, management fees and finance costs are
allocated between capital and revenue in the ratio 80 : 20. Prior to 1 November 2005 all
expenses, other than investment transaction costs, were attributed to revenue. All expenses and
finance costs are accounted for on an accruals basis.
2. Issued share capital
There were 11,736,660 ordinary shares of 25p each in issue at 30 April 2006 (30 April 2005:
12,474,260; 31 October 2005: 12,164,660), including 904,246 shares held in treasury, either for
reissue to the market or for cancellation at a future date (30 April 2005: 273,000; and 31 October
2005: 904,246).
During the half year ended 30 April 2006 the Company made market purchases for cancellation of 428,000
of its own issued ordinary shares.
Page 8 of 8
HENDERSON STRATA INVESTMENTS PLC
Unaudited interim results for the half year ended 30 April 2006
Notes continued
3. Return per ordinary share
(unaudited) (unaudited) (audited)
Half year ended Half year ended Year ended
30 April 2006 30 April 2005 31 October 2005
£'000 £'000 £'000
The return per ordinary share is
based on the following figures:
Revenue return 204 146 193
Capital return 14,032 5,562 8,068
--------- --------- ---------
Total 14,236 5,708 8,261
====== ====== ======
Weighted average number of
ordinary shares in issue for
the period 11,019,099 14,690,628 13,073,684
Revenue return per ordinary share 1.85p 0.99p 1.48p
Capital return per ordinary share 127.34p 37.86p 61.71p
-------------- --------------- --------------
129.19p 38.85p 63.19p
========= ========= ========
4. Transaction costs
Purchase transaction costs for the half year ended 30 April 2006 were £30,000 (half year ended 30 April
2005: £120,000; year ended 31 October 2005: £164,000). These comprise mainly stamp duty and commission.
Sale transaction costs for the half year ended 30 April 2006 were £16,000 (half year ended 30 April 2005:
£102,000; year ended 31 October 2005: £119,000).
5. 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
£72,578,000 (30 April 2005: £62,749,000; 31 October 2005: £60,840,000) and on the 10,832,414* ordinary
shares of 25p each in issue at 30 April 2006 (30 April 2005: 12,201,260*; 31 October 2005: 11,260,414*).
* The number of shares has been adjusted for the shares held in treasury which, for this purpose, are not
treated as being in issue.
6. Accounts for the year ended 31 October 2005
The figures and financial information for the year ended 31 October 2005 are extracted from the latest
published accounts of the Company and do not constitute the statutory accounts for that year. Those
accounts have been delivered to the Registrar of Companies and included the report of the auditors which
was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the
Companies Act 1985.
7. Interim Report
The interim report will be sent to shareholders early in July 2006 and copies will be available from the
Company's registered office: 4 Broadgate, London EC2M 2DA.
- ENDS -
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