Half Yearly Report

RNS Number : 6919Z

Henderson Smaller Cos Inv Tst PLC

19 January 2011

 



 Page 1 of 11

19 January 2011

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Interim Management Report

Results and performance

The results for the half year ended 30 November 2010 are good, in both absolute and relative terms. The net asset value per share rose from 277.1p to 330.4p, a total return for the period of 22.1%. By comparison, the total return of the benchmark index was 12.7%. On 8 October 2010 the Company paid a final dividend of 3.6p per share, in respect of the year ended 31 May 2010. The share price total return for the period was 24.3%.

Equity markets continued their recovery over the half year, although the progress was not constant. Generally companies have produced strong results but against a background of variable macro economic news. The Manager's attribution of the Company's results for the period shows that the outperformance was attributable primarily to stock selection. Gearing was applied cautiously but to beneficial effect.

The revenue earnings per share were 1.48p (2009: 2.30p). The investment income per share grew by about 5% but the prior period included two sources of other income that have not been repeated: income from sub-underwriting commitments and interest from HM Revenue & Customs on the refunds of VAT received. The management fee increased, reflecting the recovery in the value of the Company's assets. Provision has been made for a performance fee to be paid; this assumes that the strong performance will be maintained to the year end (31 May 2011) and is allocated to capital.

Continuation

In accordance with the established three-year cycle, a continuation vote was put to the Annual General Meeting on 24 September 2010. A total of 53.8 million votes were cast of which only 0.9 million were against continuation.

Share buy-backs

No shares were bought back during the period. The Board is encouraged by the interest in the Company shown by new investors but monitors the discount closely. It will continue to buy back shares when to do so helps to maintain an orderly market and is in the interests of the shareholders generally.

Investment activity and outlook

The 60 largest companies in the portfolio, which account for 79% of the investments by value,  are listed on page 10. Most of the investments were held throughout the period.

The global economic situation is improving, with developed economies enjoying modest growth and emerging economies displaying stronger conditions. There are a number of headwinds, including the threat of inflation, sovereign debt risk and higher interest rates. However, corporate profitability is robust and equities represent good value, based on forecast earnings for 2011. In addition, corporate activity has increased, with small and medium sized companies in the UK attracting particular interest from foreign corporates. We expect the markets to remain choppy but to make progress over the coming months. Gearing will be used to take up particular investment opportunities as they arise.

Page 2 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Interim Management Report, continued

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 Company's Annual Report for the year ended 31 May 2010.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company relate to its activity of investing in the shares of smaller companies. Although the Company invests entirely in securities that are quoted on recognised markets, share prices may move rapidly and it may not be possible to realise an investment at the Manager's assessment of its value. The Company is exposed to gearing risk in that its borrowings, £20 million of which are fixed debt, increase the shareholders' exposure to equities. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service.

Information on these risks is given in the Directors' Report and in the Notes to the Financial Statements in the Company's Annual Report for the year ended 31 May 2010. 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 IAS 34;

(b)       the Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rules 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 Rules 4.2.8R (disclosure of related party transactions and changes therein).

For and on behalf of the Board

J Dudley Fishburn

Chairman

18 January 2011

Page 3 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Consolidated Statement of Comprehensive Income

for the half year ended 30 November 2010

	(Unaudited) Half year ended 30 November 2010			(Unaudited) Half year ended 30 November 2009			(Audited) Year ended 31 May 2010
	Revenue return	Capital return	Total	Revenue return	Capital return	Total	Revenue return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	2,772	-	2,772	2,647	-	2,647	5,961	-	5,961
Other income	4	-	4	606	-	606	627	-	627
Gains on investments held at   fair value through profit or loss	-	42,537	42,537	-	36,204	36,204	-	56,091	56,091
	----------	----------	----------	----------	----------	----------	----------	----------	---------
Total income	2,776	42,537	45,313	3,253	36,204	39,457	6,588	56,091	62,679
Expenses
Management fees	(413)	-	(413)	(303)	-	(303)	(679)		(679)
Performance fee	-	(1,008)	(1,008)	-	-	-	-	-	-
Write-back of VAT (note 2)	-	-	-	45	-	45	44	-	44
Other expenses	(194)	-	(194)	(209)	-	(209)	(373)	-	(373)
	---------	----------	----------	---------	----------	----------	----------	----------	----------
Profit before finance costs and taxation	2,169	41,529	43,698	2,786	36,204	38,990	5,580	56,091	61,671
Finance costs	(1,056)	-	(1,056)	(1,060)	-	(1,060)	(2,129)	-	(2,129)
	---------	----------	----------	---------	----------	----------	----------	----------	---------
Profit before taxation	1,113	41,529	42,642	1,726	36,204	37,930	3,451	56,091	59,542
Taxation	(1)	-	(1)	(1)	-	(1)	(2)	-	(2)
	---------	----------	----------	---------	----------	----------	---------	---------	---------
Profit for the period and total   comprehensive income	1,112	41,529	42,641	1,725	36,204	37,929	3,449	56,091	59,540
	=====	======	======	=====	======	======	=====	=====	======
Earnings per ordinary   share (note 3)	1.48p	55.44p	56.92p	2.30p	48.17p	50.47p	4.59p	74.70p	79.29p
	=====	======	======	=====	======	======	======	======	======

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the European Union.  The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The Group does not have any Other Comprehensive Income and hence the net profit, as disclosed above, is the same as the Group's Total Comprehensive Income.

All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of The Henderson Smaller Companies Investment Trust plc, the parent company.

There are no minority interests.

Page 4 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Consolidated Statement of Changes in Equity

for the half year ended 30 November 2010

	(Unaudited) Half year ended 30 November 2010
	Called up share capital	Capital  redemption reserve	Other capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000
Total equity at 31 May 2010	18,727	26,694	151,870	10,242	207,533
Total comprehensive income:   Profit for the period	-	-	41,529	1,112	42,641
Transactions with owners,   recorded directly to equity:
Ordinary dividend paid	-	-	-	(2,696)	(2,696)
Buy-backs of ordinary shares	-	-	-	-	-
	----------	----------	----------	--------	-----------
Total equity at 30 November 2010	18,727	26,694	193,399	8,658	247,478
	======	======	======	=====	======

	(Unaudited) Half year ended 30 November 2009
	Called up share capital	Capital  redemption reserve	Other capital reserves	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000
Total equity at 31 May 2009	19,343	26,078	99,930	10,998	156,349
Total comprehensive income:     Profit for the period	-	-	36,204	1,725	37,929
Transactions with owners,   recorded directly to equity:   Ordinary dividend paid	-	-	-	(4,204)	(4,204)
Buy-backs of ordinary shares	(578)	578	(3,814)	-	(3,814)
	----------	----------	----------	----------	----------
Total equity at 30 November 2009	18,765	26,656	132,320	8,519	186,260
	======	======	======	=====	======
	(Audited) Year ended 31 May 2010
	Called up share capital	Capital  redemption reserve	Other capital reserves	Revenue  reserve	Total
	£'000	£'000	£'000	£'000	£'000
Total equity at 31 May 2009	19,343	26,078	99,930	10,998	156,349
Total comprehensive income:     Profit the period	-	-	56,091	3,449	59,540
Transactions with owners,   recorded directly to equity:   Ordinary dividend paid	-	-	-	(4,205)	(4,205)
Buy-backs of ordinary shares	(616)	616	(4,151)	-	(4,151)
	----------	----------	----------	---------	----------
Total equity at 31 May 2010	18,727	26,694	151,870	10,242	207,533
	======	======	======	=====	======

Page 5 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Consolidated Balance Sheet

at 30 November 2010

	(Unaudited) 30 November 2010	(Unaudited) 30 November 2009	(Audited) 31 May 2010
	£'000	£'000	£'000
Non current assets
Investments held at fair value through   profit or loss	267,978	207,906	227,323
	-----------	-----------	-----------
Current assets
Securities sold for future settlement	1,055	101	1,431
Taxation recoverable	39	38	-
Prepayments and accrued income	323	443	-
Cash and cash equivalents	2,090	1,162	1,097
	----------	----------	----------
	3,507	1,744	2,528
	----------	----------	----------
Total assets	271,485	209,650	229,851
	----------	----------	----------
Current liabilities
Securities purchased for future settlement	(1,783)	(198)	(311)
Accruals and deferred income	(1,220)	(188)	-
Bank loans	(1,000)	(3,000)	(2,003)
	----------	----------	----------
	(4,003)	(3,386)	(2,314)
	----------	----------	----------
Total assets less current liabilities	267,482	206,264	227,537
Non current liabilities	(20,004)	(20,004)	(20,004)
	----------	----------	-----------
Net assets	247,478	186,260	207,533
	======	======	======
Equity attributable to equity shareholders
Called up share capital (note 5)	18,727	18,765	18,727
Capital redemption reserve	26,694	26,656	26,694
Retained earnings:
Capital reserves	193,399	132,320	151,870
Revenue reserve	8,658	8,519	10,242
	----------	----------	----------
Total equity	247,478	186,260	207,533
	======	======	======
Net asset value per ordinary share (note 6)	330.4p	248.1p	277.1p
	======	======	======

Page 6 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Consolidated Cash Flow Statement

for the half year ended 30 November 2010

		(Unaudited) Half year ended 30 November 2010	(Unaudited) Half year ended 30 November 2009	(Audited) Year ended 31 May 2010
		£'000	£'000	£'000
Net cash inflow from operating activities (note 7)		4,692	5,946	7,216
		----------	----------	----------
Net cash inflow before use of financing		4,692	5,946	7,216
Net cash outflow from financing activities		(3,699)	(5,018)	(6,353)
		----------	----------	-----------
Net increase in cash   and cash equivalents		993	928	863
Cash and cash equivalents at the start   of the period		1,097	234	234
		--------	--------	--------
Cash and cash equivalents at the  period end		2,090	1,162	1,097
		=====	====	=====

Page 7 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 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 May 2010 and in accordance with IAS 34. The condensed set of financial statements has not been either audited or reviewed by the Company's auditors.
2.	VAT on management fees As at 31 May 2010 the Company had received back from HM Revenue & Customs 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.
3.	Earnings per ordinary share The earnings per ordinary share figure is based on the net profit for the half year of £42,641,000 (half year ended 30 November 2009: £37,929,000; year ended 31 May 2010: £59,540,000) and on 74,906,796 (half year ended 30 November 2009: 75,151,294; year ended 31 May 2010: 75,089,586) 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 2010	(Unaudited) 30 November 2009	(Audited) 31 May 2010
		£'000	£'000	£'000
	Net revenue profit	1,112	1,725	3,449
	Net capital profit	41,529	36,204	56,091
		-----------	-----------	-----------
	Net total profit	42,641	37,929	59,540
		======	======	======
	Weighted average number of   ordinary shares in issue during   the period	74,906,796	75,151,294	75,089,586
		Pence	Pence	Pence
	Revenue profit per ordinary share	1.48	2.30	4.59
	Capital profit per ordinary share	55.44	48.17	74.70
		---------	---------	---------
	Total profit per ordinary share	56.92	50.47	79.29
		=====	=====	======

Page 8 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Notes to the Condensed Financial Statements, continued

4.	Dividends The Company has not declared an interim dividend (2009: nil). The final dividend of 3.60p per ordinary share, paid on 8 October 2010, in respect of the year ended 31 May 2010, has been recognised as a distribution in the period.
5.	Called up share capital At 30 November 2010 there were 74,906,796 ordinary shares in issue (30 November 2009: 75,060,296; 31 May 2010: 74,906,796).  During the half year ended 30 November 2010 the Company did not buy back any of its own issued ordinary shares in the market for cancellation (half year ended 30 November 2009: 2,310,000; year ended 31 May 2010: 2,463,500).  The cost of the share buy-backs, including stamp duty, amounted to £nil (half year ended 30 November 2009: £3,814,000; year ended 31 May 2010: £4,151,000).
6.	Net asset value per share The net asset value per ordinary share is based on the net assets attributable to the equity shareholders of £247,478,000 (30 November 2009: £186,260,000; 31 May 2010: £207,533,000) and on 74,906,796 (30 November 2009: 75,060,296; 31 May 2010: 74,906,796) ordinary shares, being the number of ordinary shares in issue at the period end.
7.	Reconciliation of the profit before taxation to the net cash inflow from operating activities
			(Unaudited) Half year ended 30 November 2010	(Unaudited) Half year ended 30 November 2009	(Audited) Year ended 31 May 2010
			£'000	£'000	£'000
	Profit before taxation		42,642	37,930	59,542
	Profit on investments held   at fair value through profit or loss		(42,537)	(36,204)	(56,091)
	Increase/(decrease) in purchases for   future settlement creditor		1,676	(682)	(773)
	Increase/(decrease) in sales for   future settlement debtor		(492)	411	(51)
	Net sales of investments		1,882	2,529	3,000
	Decrease in other receivables		505	1,007	622
	Decrease in other debtors		9	855	846
	Increase in accruals		1,016	101	117
	Taxation on investment income		(9)	(1)	4
			---------	---------	---------
			4,692	5,946	7,216
			=====	=====	=====

Page 9 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Notes to the Condensed Financial Statements, continued

8.	Transaction costs Purchase transaction costs for the half year ended 30 November 2010 were £139,000 (half year ended 30 November 2009: £60,000; year ended 31 May 2010: £145,000). These comprise mainly stamp duty and commission.  Sale transaction costs for the half year ended 30 November 2010 were £40,000 (half year ended 30 November 2009: £35,000; year ended 31 May 2010: £64,000).
9.	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 readily realisable and, accordingly, the Company has adequate financial resources to continue in existence for the foreseeable future.
10.	Comparative information The financial information contained in this half-yearly 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 2010 and 30 November 2009 has not been audited. The information for the year ended 31 May 2010 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.
11.	Financial Report for the half year ended 30 November 2010 The full half year report will be available on www.hendersonsmallercompanies.com for viewing on 19 January 2011.  Copies will be posted to shareholders in early February 2010 and will be available thereafter from the Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE.

Page 10 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

Investment Portfolio

at 30 November 2010

	Valuation at 30 November 2010 £'000	% of portfolio		Valuation at 30 November 2010 £'000	% of portfolio
Informa	9,092	3.39	Charter	2,841	1.06
WSP	8,496	3.17	Synergy Healthcare	2,794	1.04
Croda	7,851	2.93	Spirent Communications	2,755	1.03
Spectris	7,759	2.89	Carphone Warehouse	2,641	0.99
Domino Printing Sciences	6,894	2.57	Shaftesbury	2,610	0.97
Victrex	6,399	2.39	Taylor Wimpey	2,560	0.96
e2v technologies	6,072	2.27	Chime Communications	2,530	0.94
Intermediate Capital	5,943	2.22	CPP Group	2,515	0.94
Premier Oil	5,508	2.06	SIG	2,500	0.93
Melrose	5,279	1.97	Anite	2,475	0.92
	----------	--------		----------	----------
10 largest	69,293	25.86	40 largest	168,835	63.00
Oxford Instruments	4,923	1.84	Greene King	2,436	0.91
Carillion	4,816	1.80	Grainger	2,419	0.90
WS Atkins	4,550	1.70	CSR	2,384	0.89
Bellway	4,241	1.58	AZ Electronic Materials	2,380	0.89
Rotork	4,106	1.53	GlobeOp Financial Services	2,360	0.88
Paragon	3,955	1.47	ITE Group	2,245	0.84
Restaurant Group	3,809	1.42	Hyder Consulting	2,198	0.82
Balfour Beatty	3,696	1.38	LSL Property Services	2,160	0.81
Senior	3,596	1.34	Debenhams	2,150	0.80
Chemring	3,581	1.34	Dunelm	2,113	0.79
	---------	--------		------------	-----------
20 largest	110,566	41.26	50 largest	191,680	71.53
Laird	3,564	1.33	Costain	2,086	0.78
Ultra Electronics	3,434	1.28	NCC Group	2,038	0.76
Euromoney Institutional    Investor	3,352	1.25	Aberdeen Asset   Management	2,005	0.75
John Menzies	3,255	1.22	Heritage Oil	1,967	0.73
Interserve	3,185	1.19	Meggitt	1,955	0.73
Northgate	3,182	1.19	Halfords	1,881	0.70
Fidessa	3,170	1.18	Capital & Regional	1,845	0.69
Babcock International	3,037	1.13	Phoenix	1,841	0.69
Aveva Group	3,000	1.12	Kofax	1,811	0.67
Renishaw	2,869	1.07	Hochschild Mining	1,788	0.67
	-----------	----------		-----------	-----------
30 largest	142,614	53.22	60 largest	210,897	78.70
				======	======

Page 11 of 11

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Financial Report for the half year ended 30 November 2010

For further information please contact:

Neil Hermon

Fund Manager

The Henderson Smaller Companies Investment Trust plc

Telephone: [phone]

or

James de Sausmarez

Director

Head of Investment Trusts

Henderson Global Investors

Telephone: [phone]

or

Sarah Gibbons-Cook

Investor Relations and PR Manager

Henderson Global Investors

Telephone: [phone]

- END -

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) is incorporated into, or forms part of, this announcement.

 

END

 

 

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