Interim Results
Henderson High Income Trust PLC
01 August 2006
1 August 2006
HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Highlights:
* Net asset value total return per ordinary share increased by 3.5% over the
half year to 30 June 2006
* Market price total return per ordinary share increased by 2.6% over the
half year to 30 June 2006
Chairman's Statement:
This is my first statement as your Chairman and whilst I am glad to be able to
report substantial growth since this time last year, there has sadly been little
change in the value of our assets in the first half of this year, as well as an
underperformance against the FTSE All-Share Index. The reasons for this I will
cover later. However, given the strong performance seen over the previous few
years and the investment environment of recent months, such a performance,
particularly for a Company like ours with its emphasis on generating and paying
out a high level of income, is neither surprising nor something to be ashamed
about.
My predecessor, Bill Eason, and fellow director, Patrick Dalby, who retired
after the recent AGM, made a significant contribution to our Company and we will
miss their wise counsel. On behalf of us all, I would like to thank them for
their valuable service to the Company and its forerunners over many years.
Portfolio
The broader market in the UK, with the exception of the mining sector, has
struggled all year and income yielding shares, in particular, have been dull.
This is probably due to the expectation that interest rates are likely to rise
and bond yields have, therefore, risen over the first half of the year. Our
portfolio, as I said, has underperformed the UK market, although with over 20%
invested in bonds, which fell in value over the period, this outcome is not too
surprising.
The net asset value total return per ordinary share was 3.49%, whilst the FTSE
All-Share Index returned 6.11%; both figures include the reinvestment of income.
As I highlighted earlier, the mining sector, with the underlying rise in metal
prices driving the sector to new highs in early May before encountering a
sell-off later in that month, has been the star of the market. However, we have
had little exposure to mining and also oil stocks, as neither sector has been a
generous dividend payer in the past, preferring to invest their profits rather
than distribute to shareholders.
April was a difficult month for our portfolio when mining shares were very
strong, but much of this appreciation has been subsequently given back and there
must be the risk that commodity prices are being driven more by financial
speculation than fundamentals. Elsewhere financials, such as banks and
insurers, have been disappointing. We have taken this underperformance as an
opportunity to increase our holdings in both these sectors as we feel they
represent good value.
The portfolio has otherwise changed little over the period.
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Chairman's Statement cont'd
Earnings and Dividends
Over the first half of the year, the revenue earnings of the Company amounted to
4.04p compared with 4.93p a year ago. This reduced level of earnings is mainly
due to the new capital structure put in place last September, following the
repayment of the zero dividend preference shares. This fall, however, masks a
strong, often double digit, growth in dividends from UK equities in the
portfolio, as margins and profits have risen, although we expect going forward
this rate of increase to return to the 5-6% long term average.
The Board has today declared an unchanged second interim dividend of 1.9375p per
ordinary share to be paid on 31 October 2006.
Auditors
Deloitte & Touche LLP have been the Company's auditors since 1990 and have
served the Company well throughout the period. However, in line with corporate
governance recommendations, the Audit Committee recently undertook a review of
the Company's auditors. As a result, the Board has decided to appoint RSM
Robson Rhodes LLP to be the new independent auditors to the Company.
Prospects
At the time of writing this statement, the background to markets is very
uncertain with the oil price hitting new highs, instability in the Middle East
and mixed economic indicators. This is likely to be reflected in greater
volatility and markets may well find it difficult to progress much from, or
indeed hold, their current levels over the rest of the year, although by most
measures the UK equity market is not expensive.
On a positive note, we have a broadly defensive portfolio which should hold us
in good stead and our Portfolio Manager has steered us successfully through
difficult waters before. I remain confident that he will do so again and will
continue to deliver the high level of income required and to achieve growth in
capital over the longer term, notwithstanding any squalls we may encounter in
the shorter term.
Hugh Twiss
Chairman
1 August 2006
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Income Statement
for the half year ended 30 June 2006
(Unaudited) (Unaudited) (Audited)
Half year ended 30 June 2006 Half year ended 30 June Year ended 31 December
2005 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 - 3,791 3,791 - 8,115 8,115 - 19,355 19,355
Investment income 3,387 - 3,387 3,386 - 3,386 6,596 - 6,596
Other operating income 21 - 21 14 - 14 92 - 92
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross revenue and capital 3,408 3,791 7,199 3,400 8,115 11,515 6,688 19,355 26,043
gains
Management and performance (152) (956) (1,108) (144) (931) (1,075) (288) (1,210) (1,498)
fees
Other administrative (115) - (115) (184) (190) (374) (309) (173) (482)
expenses
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net return before finance
costs and taxation 3,141 2,835 5,976 3,072 6,994 10,066 6,091 17,972 24,063
Interest payable (252) (757) (1,009) (170) (511) (681) (358) (1,074) (1,432)
Movement in provision for
redemption of the zero
dividend preference shares
in subsidiary - - - - (1,480) (1,480) - (2,253) (2,253)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net return on ordinary
activities before taxation 2,889 2,078 4,967 2,902 5,003 7,905 5,733 14,645 20,378
Taxation on net return on
ordinary activities (86) 61 (25) (142) 134 (8) (217) 204 (13)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net return on ordinary
activities after taxation
attributable to equity
shareholders 2,803 2,139 4,942 2,760 5,137 7,897 5,516 14,849 20,365
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Transfer to reserves 2,803 2,139 4,942 2,760 5,137 7,897 5,516 14,849 20,365
====== ====== ====== ====== ====== ====== ====== ====== ======
Return per ordinary share 4.04p 3.09p 7.13p 4.93p 9.16p 14.09p 9.33p 25.12p 34.45p
(note 2)
====== ====== ====== ====== ====== ====== ====== ====== ======
The total columns of this statement represent the Company's income statement,
prepared in accordance with UK GAAP. The revenue and capital columns are
supplementary to this and are published under guidance from the Association of
Investment Trust Companies.
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Balance Sheet
as at 30 June 2006
(Unaudited and
(Unaudited) restated)* (Audited)
30 June 30 June 31 December
2006 2005 2005
£'000 £'000 £'000
Non-current assets
Investments held at fair value through profit or loss 147,811 141,881 141,845
----------- ----------- -----------
Current assets
Debtors 1,080 1,112 1,152
Cash at bank 1,152 156 1,834
----------- ----------- -----------
2,232 1,268 2,986
Current liabilities (39,448) (64,464) (38,226)
----------- ----------- -----------
(37,216) (63,196) (35,240)
----------- ----------- -----------
Total net assets 110,595 78,685 106,605
======= ======= =======
Capital and reserves
Called up share capital 3,484 2,801 3,433
Capital redemption reserve 26,302 26,302 26,302
Other capital reserves:
Share premium 28,288 9,034 26,620
Realised reserves 16,004 12,845 14,415
Unrealised reserves 32,845 24,152 32,295
Revenue reserve 3,672 3,551 3,540
---------- ---------- ----------
Equity shareholders' funds 110,595 78,685 106,605
======= ======= =======
Net asset value per ordinary share (note 3) 158.70p 140.44p 155.26p
======= ======= =======
* Restated in accordance with accounting policy at 31 December 2005
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Reconciliation of Movements in Shareholders' Funds
(Unaudited and
restated)*
(Unaudited) (Audited)
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 December 2005
£'000 £'000 £'000
Net revenue on ordinary activities after taxation 2,803 2,760 5,516
Dividends (2,671) (2,773) (5,539)
---------- ---------- ----------
132 (13) (23)
Increase in realised and unrealised profits 2,139 5,137 14,849
---------- ---------- ----------
2,271 5,124 14,826
Issue of shares 1,719 - 18,218
Shareholders' funds at start of period 106,605 73,561 73,561
---------- ---------- ----------
Shareholders' funds at end of period 110,595 78,685 106,605
====== ====== ======
* Restated in accordance with accounting policy at 31 December 2005.
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Cash Flow Statement
for the half year ended 30 June 2006
(Unaudited) (Unaudited)
Half Half (Audited)
year ended year ended year ended
30 June 30 June 31 December 2005
2006 2005 £'000
£'000 £'000
Net cash inflow from operating activities 2,100 1,936 4,761
Net cash outflow from servicing of finance (1,068) (788) (1,577)
Net tax recovered 3 10 7
Net cash (outflow)/inflow from financial investment (2,175) (3,209) 8,116
Equity dividends paid (2,671) (2,773) (5,540)
---------- ---------- ----------
Net cash (outflow)/inflow before financing (3,811) (4,824) 5,767
Net cash inflow/(outflow) from financing 3,129 3,291 (5,592)
---------- ---------- ----------
(Decrease)/increase in cash (682) (1,533) 175
====== ====== ======
Notes to the Cash Flow Statement
Reconciliation of operating revenue to net cash
inflow from operating activities
Net revenue before interest payable and taxation 3,141 3,072 6,091
Decrease/(increase) in accrued income 77 (29) (84)
(Decrease)/increase in creditors (119) 37 165
Tax deducted at source (43) (23) (28)
Management, performance and administrative fees
charged to capital (956) (1,121) (1,383)
--------- ---------- ----------
Net cash inflow from operating activities 2,100 1,936 4,761
====== ====== ======
Reconciliation of net cash flow
to movement in net debt
(Decrease)/increase in cash (682) (1,533) 175
Net drawdown of loans (1,410) (3,291) (15,558)
Exchange movements - 24 (6)
--------- ---------- ----------
Movement in net funds in the period (2,092) (4,800) (15,389)
Net debt at the beginning of the period (35,224) (19,835) (19,835)
--------- ---------- ----------
Net debt at the end of the period (37,316) (24,635) (35,224)
====== ====== ======
Represented by:
Cash at bank and short term deposits 1,152 156 1,834
Debt falling due within one year (38,468) (24,791) (37,058)
----------- ----------- -----------
Total (37,316) (24,635) (35,224)
====== ====== ======
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Notes:
1. Accounting policies
a) Basis of accounting
The accounts have been prepared on the historical cost basis of accounting, modified to include the
revaluation of investments and on the basis of accounting policies which are consistent with the last
annual financial statements. The accounts have been prepared in accordance with United Kingdom Generally
Accepted Accounting Practice ("UK GAAP") and the AITC Statement of Recommended Practice ("SORP") for
investment trusts dated January 2003 and revised in December 2005.
All of the Company's operations are of a continuing nature.
b) Expenses
All expenses are accounted for on an accruals basis. The Board's expectation is that over the long term
three quarters of the Company's investment returns will be in the form of capital gains. On this basis,
the Company charges to capital 75% of its finance costs and management fees (to the extent that the
management fees relate to the maintenance or enhancement of the valuation of investments). All performance
fees are charged to capital.
c) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis.
Income from fixed interest debt securities is recognised using the effective interest rate method. Bank
deposit interest, underwriting commission and stock lending income is accounted for on an accruals basis.
Special dividends are allocated as revenue return or capital return, depending on whether they are capital
or income in nature.
2. Returns per share
The return per ordinary share amounting to 7.13p (30 June 2005: 14.09p; 31 December 2005: 34.45p) is based
on the net gain attributable to the ordinary shares of £4,942,000 (30 June 2005: £7,897,000; 31 December
2005: £20,365,000) and on the 69,288,212 weighted average number of ordinary shares in issue during the
period (30 June 2005: 56,028,865; 31 December 2005: 59,111,073).
Revenue return per ordinary share amounting to 4.04p (30 June 2005: 4.93p; 31 December 2005: 9.33p) is
based on the earnings attributable to the ordinary shares of £2,803,000 (30 June 2005: £2,760,000; 31
December 2005: £5,516,000) and on the 69,288,212 weighted average number of ordinary shares in issue
during the period (30 June 2005: 56,028,865; 31 December 2005: 59,111,073).
Capital return per ordinary share amounting to 3.09p (30 June 2005: 9.16p; 31 December 2005: 25.12p) is
based on the net capital gains for the period of £2,139,000 (30 June 2005: £5,137,000; 31 December 2005:
£14,849,000) and on the 69,288,212 weighted average number of ordinary shares in issue during the period
(30 June 2005: 56,028,865; 31 December 2005: 59,111,073).
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HENDERSON HIGH INCOME TRUST PLC
Unaudited Interim Results for the half year ended 30 June 2006
Notes cont'd
3. 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
£110,595,000 (30 June 2005: £78,685,000; 31 December 2005: £106,605,000) and on the 69,687,798 ordinary
shares in issue (30 June 2005: 56,028,865; 31 December 2005: 68,662,798).
4. Dividends
Interim dividends are recognised in the period in which they are paid.
In respect of the year ended 31 December 2005, a third interim dividend of 1.9375p per ordinary share
(2004: 2.475p) was paid on 31 January 2006 to shareholders on the register at close of business on 6
January 2006. A fourth interim dividend of 1.9375p per ordinary share (2004: 2.475p) was paid on 28 April
2006 to shareholders on the register at close of business on 31 March 2006. These two dividends are
reflected in these interim accounts.
In respect of the year ending 31 December 2006, a first interim dividend of 1.9375p per ordinary share
(2005: 2.475p) was paid on 28 July 2006 to shareholders on the register on 23 June 2006. The aggregate
cost of this dividend was £1,350,000. A second interim dividend of 1.9375p per ordinary share (2005:
2.475p) will be paid on 31 October 2006 to shareholders on the register on 22 September 2006. The shares
will go ex-dividend on 20 September 2006. In accordance with FRS 21, the first and second interim
dividends have not been accrued for in the interim accounts as they are paid after the period end.
5. Comparative information
The financial information contained in this interim statement does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. The financial information for the half years ended 30
June 2005 and 30 June 2006 has not been audited. The figures and financial information for the year ended
31 December 2005 are extracted from 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 Independent Auditors, which was unqualified and did not include a statement under either
section 237(2) or 237(3) of the Companies Act 1985.
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For further information please contact:
Alex Crooke Sarah Gibbons-Cook
Fund Manager Investor Relations & PR Manager
Henderson High Income Trust plc Henderson Global Investors
Telephone: 020 7818 4447 Telephone: 020 7818 3198
James de Sausmarez
Head of Investment Trusts
Henderson Global Investors
Telephone: 020 7818 3349
This information is provided by RNS
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