Final Results
Henderson Smaller Cos Inv Tst PLC
19 July 2005
19 July 2005
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
KEY POINTS
• Strong absolute and relative performance*
- NAV total return 24.5%
- Benchmark total return 19.0%
• Dividend increased to 1.15p per share
• Confidence in the outlook for UK smaller companies and in the ability
of the Trust to outperform
*source: Datastream
Extracts from the Chairman's Statement
Performance
I am pleased to report that the Company has enjoyed a further year of strong
investment performance. The net asset value per share increased by 24%, on a
total return basis. By comparison our benchmark index increased by 19%. The
gearing provided by our debenture stock has contributed to performance, as has
judicious short-term use of our bank facility. Share buy-backs, at an average
discount of over 19%, have added to the net asset value of the remaining shares.
Nevertheless, the main contribution to our performance continues to be the
disciplined and diligent approach of our fund management team at Henderson, Neil
Hermon and Theresa Wat.
Continuation vote
The Company's first triennial continuation vote was passed at the Annual General
Meeting on 24 September 2004. The clear majority for continuation - the proxy
votes received were 3.7 to 1 in favour - indicated that our investors share the
Board's confidence in the ability of our fund managers to achieve strong
investment performance from the active management of the Company's portfolio.
Revenue and dividend
The revenue account has continued to strengthen. Investment income has risen
and, notwithstanding the increase in the management fee and higher borrowing
costs, the revenue return per share rose by 23% to 1.44p. We propose a single
and final dividend for the year of 1.15p per share, an increase of 15% on that
paid last year.
Page 2 of 7
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
Extracts from the Chairman's Statement (continued)
Whilst we shall continue to pay due regard to investment income, capital growth
will remain our priority. Our largest variable item of expense, the management
fee, is calculated by reference to the value of our investments. If in future
the capital value of the portfolio grows more strongly than its income yield -
not itself an unwelcome outcome - our ability to distribute earnings to
shareholders could be restricted.
Share buy-backs
During the year we bought back thirteen million shares, equivalent to about 11%
of those in issue at 31 May 2004. Whilst it is disappointing that the recent
demand for investment trust company shares has been weak - particularly after a
twelve month period in which we bought back no shares at all - we are pleased to
welcome a number of new shareholders to our register. Since the year end we
have bought back a further 125,000 shares. We shall seek to renew the Company's
authority to buy back its own shares at the Annual General Meeting on 30
September 2005.
Management and performance fees
The fee arrangements with our Investment Manager, Henderson Global Investors
Limited, are subject to formal review every three years. The Board is in the
process of negotiating revised fee arrangements with Henderson and expects these
to include the introduction of a performance fee, to apply with effect from 1
June 2005. Details will be announced when the negotiations have been concluded.
Outlook
The stockmarket has recovered strongly from its low point in March 2003 and
smaller companies have experienced a significant re-rating over that period.
Whilst we do not expect such returns to be repeated in the coming year, we are
confident about the general outlook and we expect our fund managers'
stock-picking skills to give us relative advantage.
Page 3 of 7
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
Group Statement of Total Return (incorporating the consolidated revenue account)
Year ended 31 May 2005 Year ended 31 May 2004
Revenue Revenue Revenue Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Total capital gains from - 39,921 39,921 - 57,939 57,939
investments
Income from fixed asset investments 5,320 - 5,320 4,732 - 4,732
Other interest receivable and 136 - 136 110 - 110
similar income
------------- ------------- ------------- ------------- ------------- -------------
Gross revenue and capital gains 5,456 39,921 45,377 4,842 57,939 62,781
Management fee (1,120) - (1,120) (893) - (893)
Other administrative expenses (319) - (319) (334) - (334)
------------- ------------- ------------- ------------- ------------- -------------
Net return on ordinary activities
before interest payable and 4,017 39,921 43,938 3,615 57,939 61,554
taxation
Interest payable (2,454) - (2,454) (2,244) (2,244)
------------- ------------- ------------- ------------- ------------- -------------
Net return on ordinary activities
before taxation 1,563 39,921 41,484 1,371 57,939 59,310
Taxation on net return on ordinary - - - - - -
activities
------------- ------------- ------------- ------------- ------------- -------------
Net return on ordinary activities
after taxation 1,563 39,921 41,484 1,371 57,939 59,310
------------- ------------- ------------- ------------- ------------- -------------
Dividends - ordinary shares (note 3)
Final: 1.15p (2004: 1.00p) (1,116) - (1,116) (1,148) - (1,148)
------------- ------------- ------------- ------------- ------------- -------------
Transfer to reserves 447 39,921 40,368 223 57,939 58,162
======= ======= ======= ======= ======= =======
Return per ordinary share (note 1) 1.44p 36.71p 38.15p 1.17p 49.65p 50.82p
======= ======= ======= ======= ======= =======
The revenue columns of this statement represent the consolidated profit and loss
accounts of the Group.
Page 4 of 7
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
Balance Sheets Group Group Company Company
2005 2004 2005 2004
£'000 £'000 £'000 £'000
Fixed asset investments
Listed investments at market value 216,098 209,469 216,098 209,469
AIM investments at market value 28,805 16,876 28,805 16,876
Unquoted investments at directors' valuation 324 324 324 324
Subsidiary undertaking - - 2,269 2,270
------------- ------------- ------------- -------------
245,227 226,669 247,496 228,939
------------- ------------- ------------- -------------
Current assets
Debtors 1,157 1,406 1,157 1,406
Cash at bank and short term deposits - 488 - 488
------------- ------------- ------------- -------------
1,157 1,894 1,157 1,894
Creditors: amounts falling due within one year (9,304) (11,020) (11,573) (13,290)
------------- ------------- ------------- -------------
Net current liabilities (8,147) (9,126) (10,416) (11,396)
------------- ------------- ------------- -------------
Total assets less current liabilities 237,080 217,543 237,080 217,543
Creditors: amounts falling due after more than (20,000) (20,000) (20,000) (20,000)
one year
------------- ------------- ------------- -------------
Total net assets 217,080 197,543 217,080 197,543
======== ======== ======== ========
Capital and reserves
Called up share capital 25,423 28,700 25,423 28,700
Capital redemption reserve 20,002 16,725 20,002 16,725
Other capital reserves 167,494 148,404 169,763 150,674
Revenue reserve 4,161 3,714 1,892 1,444
------------- ------------- ------------- -------------
Shareholders' funds (including non-equity
interests of £9,000; 2004: £9,000) 217,080 197,543 217,080 197,543
======== ======== ======== ========
Net asset value per ordinary share 213.5p 172.1p 213.5p 172.1p
======== ======== ======== ========
Page 5 of 7
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
Group Cash Flow Statement 2005 2005 2004 2004
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 4,410 3,256
Servicing of finance
Debenture interest paid (3,150) (2,100)
Bank overdraft and loan interest paid (353) (157)
------------- -------------
Net cash outflow from servicing of finance (3,503) (2,257)
Net tax recovered - -
Financial investment
Purchases of investments (57,714) (70,843)
Sales of investments 78,181 63,807
------------- -------------
Net cash inflow/(outflow) from financial 20,467 (7,036)
investment
Equity dividends paid (1,106) (585)
Financing
Purchase of own shares (20,831) (3,109)
(Repayment)/drawdown of loans (286) 7,500
------------- -------------
Net cash (outflow)/inflow from financing (21,117) 4,391
------------- -------------
Decrease in cash (849) (2,231)
======== ========
Reconciliation of net cash flow to movements in net debt
Decrease in cash as above (849) (2,231)
Cash outflow/(inflow) from debt financing 286 (7,500)
------------- -------------
Change in net debt resulting from cash flows (563) (9,731)
Net debt at 1 June (27,012) (17,281)
------------- -------------
Net debt at 31 May (27,575) (27,012)
======== ========
Page 6 of 7
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
Notes:
1. Return per ordinary share
The revenue return per ordinary share is based on the earnings
attributable to the ordinary shares of £1,563,000 (2004: £1,371,000) and on the
weighted average number of ordinary shares in issue during the year of
108,747,775 (2004: 116,695,187).
The capital return per ordinary share is based on the net capital gains for the
year of £39,921,000 (2004: £57,939,000) and on the weighted average number of
ordinary shares in issue during the year, as above.
2. Issued share capital
There were 101,656,282 ordinary shares in issue at 31 May 2005 (31 May 2004:
114,761,840).
3. Dividend
Subject to approval at the annual general meeting, the recommended final
dividend of 1.15p per ordinary share will be paid on 7 October 2005 to
shareholders on the register of members at the close of business on 2 September
2005. A sum of £1,169,000 has been provided to cover this, based on the issued
share capital at 31 May 2005.
The final dividend accrued in respect of the year ended 31 May 2004, at 1.0p per
ordinary share, amounted to £1,148,000. The buy-backs of the Company's ordinary
shares, after 31 May 2004 but before the record date of the final dividend for
the year ended on that date, resulted in a write-back of £42,000 for dividends
accrued in respect of the year ended 31 May 2004 but not in the event payable.
In addition to this, £11,000 has been written back in respect of dividends
unclaimed for more than 12 years. The figure of £1,116,000 shown is net of
these amounts.
4. Basis of consolidation
The Group accounts consolidate the accounts of the Company and of
its wholly owned subsidiary undertaking, Henderson Smaller Companies Finance
Limited.
5. 2005 accounts
The preliminary figures for the year ended 31 May 2005, which do not
constitute statutory accounts, are an extract from the Group's draft accounts
for the year. These accounts have not yet been delivered to the Registrar of
Companies, nor have the auditors yet reported on them.
6. 2004 accounts
The figures and financial information for the year ended 31 May 2004
are an extract of the latest published accounts and do not constitute the
statutory accounts for that year. Those accounts have been delivered to the
Registrar of Companies and included the report of the auditors which was
unqualified and did not contain a statement under either section 237(2) or
section 237(3) of the Companies Act 1985.
Page 7 of 7
THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
Unaudited Preliminary Group Results for the year ended 31 May 2005
7. Annual General Meeting
The full annual report and accounts will be posted to shareholders in late
July 2005 and copies will be available thereafter from the Secretary at the
Company's Registered Office, 4 Broadgate, London EC2M 2DA. The Annual General
Meeting will be held on Friday 30 September 2005 at 2.00 pm.
For further information please contact :
Neil Hermon
Fund Manager
The Henderson Smaller Companies Investment Trust plc
Telephone: 020 7818 4351
Theresa Wat
Deputy Fund Manager
The Henderson Smaller Companies Investment Trust plc
Telephone: 020 7818 4644
James de Sausmarez
Head of Investment Trusts
Henderson Global Investors
Telephone: 020 7818 3349
Sarah Gibbons-Cook
Investor Relations and PR Manager
Henderson Global Investors
020 7818 3198
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