Half Yearly Report

RNS Number : 6410P

Henderson Eurotrust PLC

27 March 2009

 



HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Financial Highlights

	(Unaudited) Half year ended  31 January  2009 in pence	(Unaudited) Half year ended  31 January  2008 in pence	% change	(Audited) Year  ended  31 July 2008 in pence	% change
Net asset value per ordinary share	456.3	522.6	-12.7	527.8	-13.5
Revenue return per ordinary share	2.2	2.9	-	10.1	-
Dividends per ordinary share	3.0	3.0	-	10.0	-
Price per ordinary share	421.5	449.5	-6.2	469.0	-10.1
Discount	7.6%	14.0%	-	11.1%	-

Interim Management Report 

Chairman's Statement

Economic Backdrop

In September I wrote in our Company's Annual Report that the next twelve months would be characterised by great volatility as one of the worst financial crises in history continued to unfold. And thus far it has indeed been volatile. During the first three months of the Company's financial year, from the end of July to the end of October, shareholders suffered a drop in the value of their holdings of over twenty percent. Following the collapse of Lehman Brothers in September, what had begun as a housing crisis in the US rapidly became a global slowdown affecting all sectors of the economy. Although like many I have described the crisis as financial, the close interaction between countries, between industries, and most importantly between lenders and borrowers is so extensive that few are left untouched. By way of example, more than three quarters of our investments are traded in Germany or in countries that have a land border with Germany; although Germany and its neighbours did not experience a house price boom in recent years, these economies are now contracting as well. 

During the second three months of the period under review - from the end of October to the end of January 2009, markets have been less volatile, but have continued to drift downwards. However, the British Pound has been weak against the Euro, and as a result in Sterling terms there was some recovery in net asset value and share price in the second half of the period.

Performance

In relative terms, the cautious stance of our portfolio manager has mitigated the market's fall. Although the net asset value per share fell by 11.1% (adjusting for the final and special dividends paid) in the six months under review, this compares to a 23.9% fall on a total return basis in the benchmark index. Shareholders will be pleased to hear that Henderson EuroTrust was the top ranking European investment trust over 1, 3, and 5 years, as measured by the AIC, at the end of the period under review, and recently won the 'Moneywise' award for Best Investment Trust in the European sector.

During the period under review the share price fell by 47.5p or 10.1%; over the same period however the discount to net asset value narrowed from 14.0% to 7.6%. We continue to monitor the discount and have bought back 18,000 shares in the period, which has helped to bring down the discount to nearer the sector average.

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Interim Management Report 

Chairman's Statement continued 

Dividend

The Board has decided that the interim dividend will be held at the same level as last year, at 3.0p per share. There are considerable uncertainties ahead in 2009, and our Manager highlights that the dividend payout is one area where companies are likely to seek to conserve cash, either by omitting, cutting, or at best maintaining it. However, at this stage I am confident that our own final dividend can at least be maintained.

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. Details of related party transactions are contained in the Annual Report and Financial Statements. 

Outlook (including principal risks and uncertainties) for the six months to 31 July 2009

Whilst governments across the world are taking drastic action to stimulate demand and rescue banks, it is unclear how or when these measures will be effective. It is still too early therefore to gauge how quickly demand, earnings and markets are likely to recover. Equity markets do tend to anticipate economic recovery well before that recovery becomes clear and that is also likely to be the case this time. The timing of any recovery however, remains far more difficult to predict, given the speed, depth and extent of the global slowdown. At the same time, we will continue to urge our portfolio manager to continue to search out opportunities and to invest - as he has always tried to do - in companies whose share price looks to have fallen to attractive levels in view of the quality and long term prospects of that company.

Mark Tapley

Chairman

27 March 2009

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Manager's Comments  

The first six months of our financial year have seen a further and dramatic deterioration in economies, company results, and markets. A year ago, writing my outlook for the half year report in January 2008, I said that there was no reason to adopt the gloomiest forecasts circulating then; in practice as the year progressed, and as reported in our Annual Report, we became increasingly more cautious. 

Writing now, the outlook does indeed seem gloomy, and it is becoming clearer that world economies have entered a deep recession and it seems unlikely that there will be an improvement in growth until 2010 at the earliest. 

Exemplifying our increasing caution, at the end of July we had five holdings in banks, and all except one were sold very shortly afterwards. We continue to fear that the whole banking sector will stay troubled for most of this year. We have also reduced our exposure to industrial stocks, with the sale of Atlas Copco and Tognum. We are still only near the beginning of a major adjustment to lower levels of demand and production, and expectations of a decline in earnings of only 10% or so may yet prove to be far too optimistic. 

There have been - and are likely to continue to be - sharp rallies, and we may be able to participate in some of these. But in the short term, we expect company results to reflect the sharp slowdown in demand that occurred in the last quarter of 2008, and outlook statements are almost certain to be guarded. It will however be necessary to try to look through the short term pessimism, and try to identify those companies that stand to exit this recession in a stronger competitive position. These are likely to be those with sound balance sheets and management, good market shares and the ability to generate cash from the business that can be reinvested in future growth. Amongst new additions to the portfolio are Nokia, SAP, Grifols and Ryanair.

Outlook

The recession which has hit the United States and Europe is a culmination of numerous factors. It comes also at a time when there seems to be a certain degree of consumer satiation, partly a result of demographic changes. This is likely to lead to a longer period of subdued demand, accentuated by the need to reduce debts in many countries. Parts of Continental Europe are less vulnerable than others, but that is unlikely to make a huge difference in equity markets. It will be right to try to look through this cloud, and indeed we intend to try to do just that by taking advantage of attractive valuation levels and sound balance sheets to build some good long term holdings. That will entail patience and courage on the one hand, and a watchful wariness on the other. 

Tim Stevenson

Portfolio Manager

27 March 2009

For further information please contact:

Tim Stevenson Portfolio Manager Henderson EuroTrust plc Telephone: [phone]

James de Sausmarez  Director, Head of Investment Trusts  Henderson Global Investors  Telephone: [phone]

Sarah Gibbons-Cook Investor Relations and PR Manager Henderson Global Investors Telephone: [phone]

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Income Statement

for the half year ended 31 January 2009

	(Unaudited) Half year ended 31 January 2009			(Unaudited) Half year ended 31 January 2008			(Audited) Year ended 31 July 2008
	Revenue return  £'000	Capital  return  £'000	Total  £'000	Revenue return  £'000	Capital  return £'000	Total  £'000	Revenue return  £'000	Capital  return £'000	Total  £'000
Losses from investments held at fair value through profit or loss	-	(15,216)	(15,216)	-	(7,022)	(7,022)	-	(6,790)	(6,790)
Income from investments held at fair value through profit or loss	567	-	567	486	-	486	3,303	-	3,303
Other interest receivable and similar income (note 5)	244	-	244	169	-	169	259	-	259
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Gross revenue and capital losses	811	(15,216)	(14,405)	655	(7,022)	(6,367)	3,562	(6,790)	(3,228)
Management and performance fees (note 4)	(78)	(310)	(388)	(90)	(362)	(452)	(179)	(1,026)	(1,205)
Write back of VAT  (note 5)	40	54	94	165	734	899	163	731	894
Other administrative expenses	(98)	-	(98)	(87)	-	(87)	(207)	-	(207)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Net return/(loss) on ordinary activities before finance costs and taxation	675	(15,472)	(14,797)	643	(6,650)	(6,007)	3,339	(7,085)	(3,746)
Finance costs	-	-	-	-	-	-	-	(1)	(1)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Net return/(loss) on ordinary activities before taxation	675	(15,472)	(14,797)	643	(6,650)	(6,007)	3,339	(7,086)	(3,747)
Taxation on net return on ordinary activities	(162)	72	(90)	40	(109)	(69)	(983)	516	(467)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Net return/(loss) on ordinary activities after  taxation	513	(15,400)	(14,887)	683	(6,759)	(6,076)	2,356	(6,570)	(4,214)
	=====	=====	=====	=====	=====	=====	=====	======	=====
Return/(loss) per ordinary share (note 2)	2.2p	(66.7)p	(64.5)p	2.9p	(29.0)p	(26.1)p	10.1p	(28.2)p	(18.1)p
	=====	=====	=====	=====	=====	=====	=====	======	=====

The total columns of this statement represent the Income Statement of the Company. 

All revenue and capital returns in the above statement derive from continuing operations.

No operations were acquired or discontinued during the half year ended 31 January 2009. The Company has no recognised gains or losses other than those recognised in the Income Statement and the Reconciliation of Movements in Shareholders' Funds.

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Reconciliation of Movements in Shareholders' Funds

for the half year ended 31 January 2009

Half year ended 31 January 2009 (unaudited)	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
As at 31 July 2008	1,153	33,814	130	84,176	2,464	121,737
Net (loss)/return on ordinary activities after taxation	-	-	-	(15,400)	513	(14,887)
Repurchase of ordinary shares	(1)	-	1	(76)	-	(76)
Final dividend for 2008 declared and paid	-	-	-	-	(1,153)	(1,153)
Special dividend for 2008 declared and paid	-	-	-	-	(461)	(461)
	--------	--------	--------	--------	---------	---------
As at 31 January 2009	1,152	33,814	131	68,700	1,363	105,160
	=====	=====	=====	=====	=====	=====
Half year ended 31 January 2008 (unaudited)
As at 31 July 2007	1,283	33,814	-	91,928	1,737	128,762
Net (loss)/return on ordinary activities  after taxation	-	-	-	(6,759)	683	(6,076)
Repurchase of ordinary shares into treasury	-	-	-	(164)	-	(164)
Cancellation of ordinary shares held in treasury	(120)	-	120	-	-	-
Final dividend for 2007 declared and paid	-	-	-	-	(932)	(932)
	---------	----------	----------	----------	----------	----------
As at 31 January 2008	1,163	33,814	120	85,005	1,488	121,590
	=====	======	======	======	======	======
Year ended 31 July 2008 (audited)
As at 31 July 2007	1,283	33,814	-	91,928	1,737	128,762
Net (loss)/return on ordinary  activities after taxation	-	-	-	(6,570)	2,356	(4,214)
Repurchase of ordinary shares	-	-	-	(1,182)	-	(1,182)
Cancellation of ordinary shares held in treasury	(130)	-	130	-	-	-
Final dividend paid 2007	-	-	-	-	(932)	(932)
Interim dividend paid 2008	-	-	-	-	(697)	(697)
	---------	----------	----------	----------	----------	----------
As at 31 July 2008	1,153	33,814	130	84,176	2,464	121,737
	=====	======	======	======	======	======

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Balance Sheet

as at 31 January 2009

	(Unaudited) 31 January 2009	(Unaudited) 31 January 2008	(Audited) 31 July 2008
	£'000	£'000	£'000
Fixed asset investments held  at  fair value through profit or loss	95,560	114,517	115,961
	----------	----------	----------
Current assets
Debtors	1,513	2,803	1,173
Cash at bank and short term deposits	8,581	4,611	5,360
	----------	---------	----------
	10,094	7,414	6,533
Creditors: amounts falling due  within one year	(494)	(341)	(757)
	----------	----------	----------
Net current assets	9,600	7,073	5,776
	-----------	----------	----------
Total net assets	105,160	121,590	121,737
	======	======	======
Capital and reserves
Ordinary called up share capital	1,152	1,163	1,153
Share premium account	33,814	33,814	33,814
Capital redemption reserve	131	120	130
Other capital reserves	68,700	85,005	84,176
Revenue reserve	1,363	1,488	2,464
	-----------	-----------	-----------
Total shareholders' funds	105,160	121,590	121,737
	======	======	======
Net asset value per ordinary share (note 3)	456.3p	522.6p	527.8p
	======	======	======

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Cash Flow Statement

for the half year ended 31 January 2009

	(Unaudited) Half year ended  31 January 2009 £'000	(Unaudited) Half year ended  31 January 2008 £'000	(Audited) Year ended  31 July 2008 £'000
Net cash (outflow)/inflow from operating activities	(299)	215	2,167
Servicing of finance	-	-	(1)
Total tax recovered/(paid)	18	(80)	25
Net cash inflow/(outflow) from financial investment	4,433	(380)	(151)
Equity dividends paid	(1,614)	(932)	(1,629)
	----------	----------	-----------
Net cash inflow/(outflow) before financing	2,538	(1,177)	411
Net cash outflow from financing	-	(165)	(1,182)
	-----------	-----------	-----------
Increase/(decrease) in cash	2,538	(1,342)	(771)
	=======	=======	=======
Reconciliation of operating revenue to net cash  (outflow)/inflow from operating activities
Net loss before finance costs and taxation	(14,797)	(6,007)	(3,746)
Capital loss before finance costs and taxation	15,472	6,650	7,085
Increase in prepayments, accrued  income and other debtors	(275)	(858)	(857)
(Decrease)/increase in creditors and accruals	(365)	127	523
Expenses (charged)/credited to capital	(256)	372	(295)
Tax on unfranked investment income  deducted at source	(78)	(69)	(543)
	-----------	-----------	-----------
Net cash (outflow)/inflow from operating activities	(299)	215	2,167
	=======	=======	=======
Reconciliation of net cash flow to movements in net funds
Increase/(decrease) in cash as above	2,538	(1,342)	(771)
Exchange movements	683	328	506
	-----------	-----------	-----------
Movement in net funds	3,221	(1,014)	(265)
Net funds at 1 August	5,360	5,625	5,625
	-----------	-----------	-----------
Net funds at end of the period	8,581	4,611	5,360
	=======	=======	=======
Represented by:
Cash at bank	8,581	4,611	5,360
	=======	=======	=======

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

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 Accounting Standards applicable in the United Kingdom, statements on half yearly financial reports issued by the Accounting Standards Board and the Revised Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('SORP') dated December 2005. All of the Company's operations are of a continuing nature.
2.	Return/(loss) per ordinary share
	Return/(loss) per ordinary share is based on the net loss attributable to the ordinary shares of £14,887,000 (half year ended 31 January 2008: £6,076,000 loss; year ended 31 July 2008: £4,214,000 loss) and on the 23,065,905 weighted average number of shares (half year ended 31 January 2008: 23,294,693; year ended 31 July 2008: 23,242,213) in issue.  Revenue return per ordinary share is based on the net revenue return attributable to the ordinary shares of £513,000 (half year ended 31 January 2008: £683,000; year ended 31 July 2008: £2,356,000) and on the 23,065,905 weighted average number of shares (half year ended 31 January 2008: 23,294,693; year ended 31 July 2008: 23,242,213) in issue. Capital loss per ordinary share is based on the net capital loss attributable to the ordinary shares of £15,400,000 (half year ended 31 January 2008: £6,759,000 loss; year ended 31 July 2008: £6,570,000 loss) and on the 23,065,905 weighted average number of shares (half year ended 31 January 2008: 23,294,693; year ended 31 July 2008: 23,242,213) in issue.
3.	Net asset value per ordinary share
	Net asset value per ordinary share is based on the 23,048,063 (half year ended 31 January 2008: 23,268,063; year ended 31 July 2008: 23,066,063) ordinary shares in issue. During the period ended 31 January 2009, 18,000 (half year ended 31 January 2008: 35,000; year ended 31 July 2008: 237,000) ordinary shares were repurchased at a total cost of £76,000 (half year ended 31 January 2008: £164,000; year ended 31 July 2008 £1,182,000).
4.	Management and performance fees
	Management and performance fees are charged in accordance with the terms of the management agreement. Performance fees are provided for, based on the out-performance of the Company's net asset value against the FTSE World Europe (ex UK) Index. For the half year ended 31 January 2009, there was no performance fee provision (half year ended 31 January 2008: £nil and year ended 31 July 2008: £311,000).
5.	Value Added Tax
	In 2004 the Association of Investment Companies (the 'AIC'), together with JPMorgan Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ('HMRC') to challenge whether the Value Added Tax ('VAT') should have been charged on fees paid for management services provided to investment trust companies. On 28 June 2007 the European Court of Justice delivered its judgment on the case in favour of the AIC. Since then HMRC has accepted that the provision of investment management services to investment trust companies is VAT exempt and has acknowledged its liability to pay claims in respect of VAT borne by investment companies. VAT has not been applied to investment management fees invoiced in respect of periods since June 2007. Since 31 January 2009 the Manager has reached agreement with HMRC and the Company has received an amount of £988,000 in respect of the period from 1 October 2000 to 30 June 2007, of which £894,000 was written back in the Financial Statements for the previous year. Accordingly, an additional £94,000 has been recognised in the Income Statement for the half year ended 31 January 2009. The write-back has been allocated between revenue return and capital return according to the allocation of the amounts paid originally. The Company will receive from the Manager any interest paid by HMRC on the amounts recovered. The Board has therefore included an estimate of £146,000 in 'Other interest receivable and similar income' in the Income Statement.

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HENDERSON EUROTRUST PLC

Financial Statements for the half year ended 31 January 2009

Notes continued

5.	Value Added Tax continued
	The Company expects to be able to reclaim VAT paid in respect of the period from 1 January 1990 to 4 December 1996, following the judgment of the House of Lords in a case concerning the time limits applicable to VAT claims. However, the Board considers that it is premature to incorporate an estimate of repayment at this stage. There is also a possibility of recovering VAT paid in the period from December 1996 to September 2000, but it is too early to predict the outcome of claims for this period.
6.	Interim dividend
	An interim dividend of 3.0p per ordinary share will be paid on 1 May 2009 to shareholders on the Register of Members on 3 April 2009. The Company's shares will be quoted ex-dividend on 1 April 2009.
7.	Comparative information
	The figures and financial information for the year ended 31 July 2008 are an extract based on the latest published accounts and do not constitute 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 237(3) of the Companies Act 1985. The half year report ended 31 January 2009 has been neither audited nor reviewed by the auditors.
8.	Financial Statements for the half year
	The Financial Statements for the half year will be posted to shareholders in April and will be available on the Company's website www.hendersoneurotrust.com and at the Registered Office at 201 Bishopsgate, London EC2M 3AE thereafter.

Directors' Responsibility Statement The Directors confirm that, to the best of their knowledge: the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports'; this report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and this report includes a fair review of the information required by the Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein). For and on behalf of the Board Mark Tapley Chairman 27 March 2009

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