Annual Financial Report
HENDERSON INVESTMENT FUNDS LIMITED
HENDERSON HIGH INCOME TRUST PLC
LEGAL ENTITY IDENTIFIER 213800OEXAGFSF7Y6G11
16 April 2020
HENDERSON HIGH INCOME TRUST PLC
Annual Financial Report for the year ended 31 December 2019
This announcement contains regulated information
PERFORMANCE HIGHLIGHTS
|
Total return performance to 31 December 2019 |
One year % |
Five years % |
|
Benchmark 1 |
17.2 |
40.2 |
|
NAV 2 |
25.6 |
41.7 |
|
Share price3 |
27.0 |
39.7 |
|
|
2019 |
2018 |
|
NAV per share4
|
189.76p |
159.46p |
|
Mid-market price per share
|
191.75p |
159.50p |
|
Revenue return per share
|
10.59p |
10.06p |
|
Net assets
|
£251.1m |
£210.8m |
|
Dividend for the year
|
9.80p |
9.60p |
|
Dividend yield5
|
5.1% |
6.0% |
|
Ongoing charge for the year
|
0.80% |
0.80% |
|
Gearing
|
21.5% |
27.1% |
1 The benchmark is a composite of 80% of the FTSE All-Share Index (total return) and 20% of the ICE BofAML Sterling Non-Gilts Index (total return) rebalanced annually
2 Net asset value with debt at fair value per ordinary share total return (including dividends reinvested and excluding transaction costs)
3 Includes dividends reinvested
4 Net asset value with debt at fair value as published by the AIC
5 Based on the dividends paid or announced for the year and the share price at the year-end
Sources: Morningstar for the AIC, Janus Henderson and Refinitiv DataStream. All data is either as at 31 December 2019 or for the year-ended 31 December 2019 .
CHAIRMAN'S STATEMENT
Performance
As I write this now, in the midst of the rapid spread of COVID-19 across the globe, I appreciate that these are unsettling times, particularly for some of our more elderly investors and, above all, I hope that each of you is keeping well and managing through this difficult period of self-isolation and social distancing.
Following the dramatic falls in financial markets, in response to this pandemic, we should try not to forget that 2019 finished on such a positive note for investors. In fact, over the year, the FTSE All-Share Index experienced its best performance since 2013. It was particularly pleasing that for the year of its 30th anniversary, the Company performed so well, both on a relative and absolute basis, delivering a NAV total return of 25.6% for 2019. This is a significant outperformance of its benchmark, at over 8.0%. Over the year the Company's shares moved to a small premium to their NAV (with debt at fair value), finishing the year at a 1.0% premium (2018: 0.0%). This resulted in the Company's shares delivering a total return, including dividends, of 27.0% for the full year.
2019 was a remarkable year for investments in general with most asset classes generating attractive returns in local currency terms, buoyed by the continuing easy monetary policy of the major central banks. These external influences should not, however, detract from the achievement of our Fund Manager, David Smith, who improved upon our benchmark's performance by a substantial margin. He will explain the reasons for this in more detail in his Fund Manager's Report.
Events have since taken an unexpected and very dramatic change of direction as the COVID-19 pandemic has spread quickly beyond Asia and markets are currently digesting the impact of this simultaneous supply and demand shock upon global growth and the participants in our economies. In these volatile conditions, it is important to remember the long-term benefits of income investing. Please refer to the Annual Report to read the 'Henderson High Income Story' which celebrates the significant milestone of the Company's 30th birthday in 2019 and powerfully demonstrates the superior returns that can be achieved over a long-term horizon. Over the past 30 years the Company has navigated its way through various financial storms ranging from Black Wednesday in 1992 and the Global Financial Crisis of 2007/08, through to the current Brexit negotiations, and has managed throughout to pay regularly a comparatively high level of dividend. A £10,000 investment in Henderson High Income Trust plc at its launch would have generated a total income of £24,000 over this period. By comparison the same £10,000 would only have earned £12,000 interest in a bank account, based on the Bank of England's base rate. If investors had reinvested the Company's dividends in the Company's shares, that £10,000 would be worth about £148,000, based on the Company's NAV total return over the 30 years to the end of 2019. The same £10,000 invested in the FTSE All-Share Index on a total return basis over those 30 years would be worth £93,000, less than two-thirds of the Company's total return over the same period. This certainly shows the advantages of the compounding effects of dividend reinvestment, but also the benefits of gearing and active portfolio management, as practised by the Company.
Dividends
During 2019 the Company's revenues remained healthy and grew by 5.3% with revenue return per ordinary share rising from 10.06p in 2018 to 10.59p in 2019. At the interim stage we were sufficiently confident in the cash generation of the portfolio to increase the Company's third interim dividend for the financial year-ended 31 December 2019 from 2.425p to 2.475p per ordinary share. We announced the fourth interim dividend at the same level, making a total of 9.80p per ordinary share for 2019, representing growth of 2.1% on the previous year. The dividend yield on the Company's share price as at year-end was 5.1%, comfortably higher than the FTSE All-Share Index yield of 4.1%.
We have now steadily increased our annual total dividend for the last seven years and over this period the Company's dividends have grown by more than inflation, as measured by the consumer price index (CPI). Our revenue reserves have now exceeded £10 million and represent nearly 10 months' worth of dividend cover, providing a reassuring cushion for any difficult times ahead.
It remains the Board's investment objective to increase the Company's dividend gradually, but it is subject to investment conditions at the time and whether we determine such an increase to be sustainable in the future. We are entering unchartered territory following the recent introduction of government measures, unprecedented in peace times, including building closures, home-working, travel restrictions, self-isolation and social distancing. All these will have an impact on the revenue generation of companies in our portfolio. In such circumstances some of our investee companies may take the decision to preserve cash in preference to maintaining their dividend. We will carefully monitor the level and sustainability of income received by the Company over the coming year and will assess this together with the level of our own revenue reserves to determine the Company's own dividends.
Gearing
Our policy on gearing is provided in our Investment Policy (please refer to the Annual Report). At the end of 2019 we had drawn down approximately £38 million of our £45 million floating rate revolving credit facility with Scotiabank, leaving some £7 million available for future investment opportunities. Investment of this floating rate facility, combined with the long-term fixed rate senior unsecured note of £20 million, helps to generate additional income and increase the Company's total return to shareholders. Our level of gearing had fallen from 27.1% at the end of 2018 to 21.5% at 2019 year-end, partly as an intentional strategy to reduce risk and partly as a result of the increasing capital value of the underlying assets. Nearly 80% of the Company's borrowings have been used to fund bonds within the portfolio, with the average yield providing a profitable margin over the Company's average cost of borrowing. The level of gearing allocated to equities (4.6% as at the end of 2019) was therefore considerably lower than the reported headline gearing figure.
In light of the recent market events, we have recently reduced borrowings further under this flexible facility and will continue to review our level of gearing going forward.
Liquidity Considerations
The issue of portfolio liquidity has been extensively covered by the press during last year and I would like to address this now in the context of this Company. The closed-ended structure of investment trusts, such as the Company's, naturally avoids the need to sell portfolio holdings to meet investor redemptions. Nonetheless, I would like to reassure our investors that the Company's investment portfolio comprises listed securities which are readily realisable and the Fund Manager is not permitted to invest in unquoted securities. Thus, liquidity risk is not considered to be material for the portfolio.
Responsible Investing
Responsible investing is a term that is growing in prominence and relates to how environmental, social and corporate governance (ESG) factors impact a company's long-term sustainability. Analysis of the sustainability of a business' profits has always been at the core of the Company's investment strategy, for which ESG considerations are incorporated. Please refer to the Fund Manager's Report for more detail on how ESG considerations are integrated into the investment process.
The Board believes that voting the Company's shareholdings at general meetings is essential to corporate stewardship and is an effective means of expressing its views on the policies and practices of its investee companies. These voting decisions reflect the provisions of Janus Henderson's Responsible Investment Policy which is publicly available at www.janushenderson.com and records the high standards of corporate behaviour that are expected. Ultimately, however, our Fund Manager makes the final decision on any controversial votes, after any necessary consultation with the Board. Janus Henderson will actively engage with those companies that fall below such expectations to encourage improvement over time, but the final sanction is the divestment of those holdings that fail to make an acceptable transition and adapt sufficiently. The Board monitors the process by reviewing on an annual basis a report on the Company's voting pattern. Details of specific votes cast against resolutions in the year under review can be found in the Environmental, Social and Governance Matters section in the Annual Report.
Growth
We continue to believe that it is in the best interests of all our shareholders for the Company to diversify and increase its capital base as this should with time increase the liquidity of the Company's shares and spread the Company's fixed costs over a larger number of shares. As the Company's shares traded at a small discount for most of 2019 until the General Election in December, we did not exercise the authority to allot shares at a premium to NAV, as granted by shareholders at the last AGM. This authority is due to expire at the forthcoming AGM and we are therefore asking shareholders to renew this authority so that the Company can expand further if and when appropriate.
Continuation Vote
The Company's Articles of Association provide that shareholders should have the opportunity every fifth year to vote on whether they wish to continue the life of the Company or to wind it up. Shareholders will, therefore, be asked to vote on this at the forthcoming AGM, as an ordinary resolution, which requires a majority vote in favour to pass.
The Board strongly recommends that you vote in favour so the Company can continue its objective of providing a regular high level of income while maintaining the prospect of capital growth over time. If the resolution fails to pass, the Board would be required to wind up the Company. If you are in any doubt as to what action you should take, please consult your financial advisor. The directors will be voting their own holdings in favour and encourage all other shareholders to do the same.
Succession Planning
The Board is now nearing the end of its five-year succession process to refresh itself so that a younger Board (both in age and tenure) will be in place when I retire at the 2021 AGM. As part of this process, Richard Cranfield was appointed to the Board on 1 March 2020. Richard is a partner of the law firm Allen & Overy where he is global chairman of the corporate practice and co-head of its financial institutions group. In 2019 he was appointed Chairman of IntegraFin Holdings plc, a FTSE 250 Company that owns Transact, an investment platform provider. More details of his experience and expertise can be found in the Board of Directors section in the Annual Report. Four new directors have now joined the Board since 2016 and their appointments have been phased annually to ensure that the required mix of skills, experience and corporate knowledge is retained during this process of refreshment. This succession plan complies with the new AIC Code of Corporate Governance issued in February 2019 and a formal policy on directors' tenure, including the Chairman's tenure, has recently been established by the Nominations & Remuneration Committee, details of which can be found in the Corporate Governance Report in the Annual Report.
Our plan includes five years of service by me as Chairman (after my eight years as a non-executive director on the Board), with my retirement scheduled for the conclusion of the AGM in 2021, following the Company's continuation vote this year. We will begin our search for a further director in the second half of this year and my successor as Chairman will be determined by the Nominations & Remuneration Committee ahead of my retirement and announced at the release of our 2020 financial results. It is our intention to maintain the number of board members at five but this will temporarily increase to six during this succession period. The Board believes this plan continues to achieve a sensible balance between continuity and reinvigoration and is in the best interests of the Company.
Anthony Newhouse who has served on the Board since July 2008, and more recently as Senior Independent Director, will be retiring from the Board at the forthcoming AGM. Anthony's legal expertise and commercial experience have been of enormous benefit to the Company. On behalf of the Company I would like to thank Anthony for his valuable contribution to the Board's discussions and his wise counsel during his twelve years of service. More personally I would also like to thank him for his unfailing support and advice to me during our many years of working together on the Board. Zoe King will become Senior Independent Director on Anthony's retirement.
AGM
We usually hold our AGM in early May however, in light of the current situation the Board has decided this year to hold the AGM on Tuesday 23 June 2020 at 12 noon. By this date 13 weeks will have passed since the beginning of the UK's "lockdown" and we hope that some of the restrictions will be lifted by then. The AGM is currently scheduled to be held at the offices of Janus Henderson at 201 Bishopsgate, London, EC2M 3AE however it may be necessary to change the venue and/or the date of the AGM, subject to the advice of the public health authorities and the UK government closer to the time. Any changes as to the venue and/or date and time of this year's AGM will be made available on a dedicated section of the Company's website at www.hendersonhighincome.com and additionally an announcement will be released to the Stock Exchange.
It is our current intention to live stream the formal business and the usual presentation from the Fund Manager, David Smith, which will be available to view by logging on to https://www.janushenderson.com/en-gb/investor/investment-trusts-live/ at 12 noon on Tuesday 23 June 2020.
In light of the current situation and respecting that shareholders may not wish to travel to the AGM, this year's voting will be conducted on a poll rather than a show of hands and we therefore encourage all shareholders to submit their votes as early as possible by proxy. Proxy votes can be lodged in advance either through postal voting or the CREST system.
Prospects and Outlook
Fears over the widespread transmission of COVID-19 and the effectiveness of government actions to contain the virus have weighed heavily on sentiment and market levels, while the decision by Saudi Arabia and Russia to instigate an oil price war in the middle of the crisis sent a fresh deflationary shock through the financial system. Although there will be a significant short-term impact on both global economic growth and company profitability from the disruption caused, governments and central banks are beginning to initiate a coordinated response, both in terms of further monetary and fiscal stimulus, to provide support. Caution is certainly warranted in these uncertain times, not least because of the unknown severity and duration of the impact of the virus over the medium-term but also because of the additional challenges of implementing the UK's withdrawal from the European Union and negotiating related trade agreements during such a period. In addition, markets may be further unsettled in the run up to the US elections in November. However, with interest rates and bond yields at extremely low levels, income generated from other sources will remain a focus for investors and is likely to be sought from equities which have the potential to pay dividends in all but extreme economic conditions.
We are confident that the well-diversified portfolio carefully constructed by David Smith is in a good position to continue to generate a relatively high income stream over the long run. This will continue to be highly valued by our shareholders, many of whom have been long-term holders. We would like to take this opportunity following our thirtieth anniversary to express our appreciation of our shareholders' loyalty and support over many years. We hope that you keep well and that our relationship will strengthen and continue for many more years to come.
Margaret Littlejohns
Chairman
16 April 2020
FUND MANAGER'S REPORT
Review of Year
Given the outbreak of COVID-19 across the world and the recent market turmoil, it is difficult to remember that 2019 turned out to be a strong year for equity markets, with the FTSE All-Share Index up 19.2% on a total return basis. The US Federal Reserve's decision to reverse its recent interest rate hiking cycle and start cutting rates was taken positively by investors and helped to offset slowing global growth. Markets were further supported later in the year by an initial agreement between the US and China on trade relations, a stabilisation in global manufacturing data and the Conservatives winning a significant majority in the UK's General Election. The Company's NAV rose 25.6%, outperforming the benchmark's rise of 17.2%. Good stock selection within the equity and bond portfolios were positive for performance, while gearing further enhanced returns given the strong market backdrop.
UK economic growth slowed to 1.1% in 2019 as Brexit uncertainty and political paralysis weighed on corporate confidence. Despite this, the more domestically focused FTSE 250 Index (+28.9%) significantly outperformed the FTSE 100 Index (+17.3%) which contains a larger proportion of multinational companies. While the UK General Election result in December provided some political clarity and a boost to domestic cyclical companies late in the year, they started to outperform from mid-summer, after Boris Johnson became Prime Minister, in the hope that the Brexit stalemate would be resolved.
The equity portfolio rose by 22.6% during the year, outperforming the FTSE All-Share Index return. The portfolio's holdings in domestic cyclicals, such as housebuilders Galliford Try and Bellway and brick manufacturer Ibstock, benefited performance. The removal of political uncertainty in the UK supported share prices, while Galliford Try was further buoyed by a bid for its Housebuilding and Partnerships divisions from competitor Bovis. The portfolio's positions in utilities, such as Severn Trent and National Grid, also benefited performance. Utilities in recent years had been weighed down by the prospect of renationalisation under a left-wing Labour led government, hence, the General Election result eliminated this risk thereby supporting the share prices.
Merger & Acquisition activity picked up during the year as international investors used weak sterling and low relative valuations as an opportunity to buy UK corporates. Within the portfolio the holdings in Greene King, KCOM and Manx Telecom were all subject to takeovers from foreign investors, which was positive for performance. Elsewhere the portfolio's positions in Phoenix and Intermediate Capital also aided returns. Life insurer Phoenix benefited from investors gaining comfort over the long-term sustainability of the dividend post the acquisition of Standard Life Assurance. Intermediate Capital meanwhile, delivered strong profit growth in the period, driven by good performance and robust net inflows in its fund management division.
The main detractors from returns were the portfolio's holdings in Ted Baker and Imperial Brands. Ted Baker has been particularly disappointing given the very tough retail environment and unprecedented levels of discounting severely impacting profitability. The holding was sold in October following the disappointing interim results with the company subsequently warning on profits again, suspending the dividend and the CEO and Chairman resigning. Imperial Brands warned that profits would be below expectations due to weakness in its vaping products. Despite the disappointing performance, we believe the current valuation does not fairly reflect the strong cash flow the company generates hence the holding has been maintained.
The fixed income portfolio also had a strong year, returning 13.4% on a total return basis, outperforming the 9.5% rise in the ICE BofAML Sterling Non-Gilts Index. The portfolio benefited from both government bond yields falling, with the UK 10-year gilt yield contracting to 0.82% as at the end of December, and credit spreads tightening (both positive for bond prices). It was particularly pleasing that the exposure to US investment grade credit, increased just over twelve months ago, performed well. Elsewhere holdings in Tesco and HCA (private healthcare service provider) aided performance after both had their credit ratings upgraded from high yield to investment grade in the period, which was taken positively by bond investors.
The revenue return over the year was strong at 10.59p per share (2018: 10.06p per share), with the majority of this growth driven by special dividends. Over the year the Company earned £710,000 in special dividends, significantly up from the previous year, with Rio Tinto, Coca-Cola HBC and International Consolidated Airlines (the holding company of British Airways) all paying supplemental payments to shareholders. Underlying dividend growth from the portfolio was more modest as the dividend cut from Vodafone offset good growth elsewhere from the likes of Intermediate Capital, Hilton Food and Tesco. The Company raised its own full year dividend for the seventh year in succession to 9.80p per ordinary share, an increase of 2.1%, and had over £1 million in retained revenues in the year to 31 December 2019, thus further strengthening the Company's revenue reserves to over £10 million. The outlook for dividends from the UK equity market this year is, however, very uncertain, as measures to slow the spread of COVID-19 cause the economy to contract in the short-term. We have already seen a number of investee companies suspend dividend payments in the first quarter of 2020, however, the Company's diversified equity portfolio, the income generated from its bond holdings and the level of its revenue reserves should all help mitigate this impact.
Portfolio Activity
At the start of the year, the allocation to the bond portfolio was increased further, specifically adding to US investment grade corporate bonds, such as cable company Charter Communication and the US dollar denominated bonds issued by Heineken. We also initiated a position in media company Entertainment One and added to our holding in Virgin Media, maintaining the portfolio's focus on non-cyclical businesses that provide a reliable, consistent income stream. Elsewhere we sold our holdings in Lockheed Martin and Iron Mountain, as both bonds had performed well and, therefore, did not offer a compelling enough yield going forwards. The allocation to the bond portfolio finished the year at 15.0% and 18.2% of the gross and net assets respectively.
Within the equity portfolio we initiated new positions in 3i, Reckitt Benckiser and French pharmaceutical company, Sanofi. 3i is a mid-market private equity company with a growing infrastructure business. The current management team have a strong track record of delivering good returns on investment, even in more anaemic economic conditions, given their disciplined approach. Reckitt Benckiser owns strong global brands, such as Nurofen, Strepsils and Gaviscon, with high market shares in growing categories focused on consumer healthcare. The valuation is attractive for a good quality company with the new CEO's turnaround plan likely to drive profit growth into the longer term. Sanofi is a well-diversified pharmaceutical business that also owns high quality consumer health care and vaccine assets. The new management team are focused on increasing research and development productivity and improving operational efficiencies to drive margins higher, while the valuation remains attractive with the shares trading at a significant discount to the global peer group .
Towards the end of the year, the Company increased the exposure to short cycle industrials, given the belief at the time that the manufacturing slowdown experienced over the last 18 months was stabilising and industrial production could start to recover with help from any truce in the US-China trade war. In this regard, the Company initiated positions in Bodycote and Vesuvius. Bodycote is the largest independent operator that provides heat treatment to industrial metals and alloys to improve material properties such as durability and ductility. The company is well diversified in terms of end customer exposure and has been growing its specialist technologies division which commands high barriers to entry and strong margins. Vesuvius is a good, albeit cyclical, business with global market leadership, strong cash flow and a robust balance sheet. The company manufactures systems which regulate and protect the flow of molten steel and also produces consumables products for the foundry casting process. Both companies' valuations had fallen due to the global industrial slowdown to very attractive levels, and although global manufacturing has undoubtedly been impacted by the spread of COVID-19, these companies should participate fully in any recovery in due course.
During the year we sold out of holdings in ITV, BAE Systems and Barclays. Although ITV has diversified its business towards content production in recent years, the majority of revenues are still derived from advertising which is more volatile, while growth of video streaming services, such as Netflix and Amazon Prime, could intensify the structural pressure on traditional broadcasting. BAE Systems had performed well over the longer term and the valuation had reached a less attractive level given the lack of visibility over margins and cash flow. Barclays' returns continue to disappoint and the current strategy to grow certain areas of the investment bank has high execution risk, will consume capital and constrain cash flow. Although the retail bank is currently trading well, loan impairments are at historical low levels at a time of subdued UK economic growth while competition in the mortgage market is putting pressure on margins. Following the takeovers of Greene King, KCOM and Manx Telecom we exited each holding during the year.
Responsible Investment Strategy
Responsible investing is the consideration of environmental, social and corporate governance (ESG) factors when evaluating a company's business model and prospects. Business sustainability has always been at the core of the investment strategy for the Company, which includes assessing ESG issues and how these could impact a company over the longer term.
Our approach to responsible investing is to integrate the analysis of ESG factors into the stock selection and monitoring process. While no company is specifically excluded from investment on ESG grounds, we seek to understand how a company is managing ESG risks through its policies and processes and how it is investing and evolving to remain sustainable over the longer term. As with managing a business's operational and financial risks, those companies with good processes for managing ESG risk factors generally outperform. We prefer to actively engage with companies and their management teams and if we believe material ESG policies and processes are not sufficient or improving, or that change is not being embraced, a position will be sold, or no investment will be made.
At Janus Henderson we use a variety of sources to help identify and monitor material ESG risks, including fund manager research and input from the independent Janus Henderson Governance and Responsible Investment Team and third-party data providers, such as Sustainalytics, RepRisk, Climetrics and ISS.
Outlook
After a strong year for equity markets in 2019, this year has started extremely poorly. The spread of COVID-19 across Asia and into Europe and the US has unnerved investors, compounded by the decision by Saudi Arabia and Russia to abandon previous moves to support the oil price. The short-term impact on economic growth from government actions to contain the virus will be significant and most companies will no doubt experience disruption, either through a lack of demand for their products and services or via their supply chains. Volatility is likely to remain elevated not least due to the virus outbreak, but also impacted by negotiations between the UK and EU about future trading relationships, the US presidential elections and any sustained oil price war implemented by Saudi Arabia.
With this uncertain outlook in the first quarter of the year we have reduced borrowings and lowered the Company's exposure to cyclical companies in favour of defensive businesses that have more dependable cash flows. Companies within the portfolio may prioritise conserving cash over paying dividends in the short-term but the Company's well-diversified portfolio and a focus on good quality investments should help reduce the impact of dividend cuts on the Company's income. The level of revenue reserves that the Company has built up over the last decade also provides reassurance.
Although the outlook is particularly uncertain, there is some early evidence from China that factories in most parts of the country are now returning to production, suggesting that the spread of COVID-19 can be managed. Also, governments and central banks globally have announced significant stimulus packages to help support economies while valuations have now fallen to very attractive levels. Although it is still a time to remain cautious, the recent market sell-off has created good opportunities for long-term investors, while the reduction in UK interest rates to just above zero should provide support for equities which generate reasonable dividend yields. These are unprecedented times, but we have confidence in our disciplined investment process, which has produced good performance over the longer term.
David Smith
Fund Manager
16 April 2020
Managing Risks
In accordance with the AIC Code and FRC Guidance, the Board has established procedures to identify and manage risk and to determine the principal risks to which the Company is exposed in achieving its long-term objectives. The Company's principal risks are considered to be those that would threaten its business model, future performance, solvency and liquidity. In addition, it is the Board's responsibility to identify emerging risks which it defines as events, trends or uncertainties that are at an early stage of development but could pose a significant threat to the Company's future and require further monitoring and investigation.
Principal Risks
The Board, with the assistance of the Manager, regularly carries out a robust assessment of the principal risks facing the Company and seeks assurance that the risks are appropriately evaluated and that effective mitigating controls are in place, where possible. To aid the process, the Company has drawn up a detailed risk matrix, where the individual risks and the application of any relevant controls are described. Such safeguarding measures may be established by the Board itself: for example, the Board has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, to which the Manager must adhere and report upon monthly. Alternatively, the design and application of controls may be delegated by the Board to the Company's third-party service providers, who report regularly to the Board on the effectiveness of their control environments. Using a colour coded traffic light system, each risk within the matrix is assessed, scored and prioritised according to the severity of its potential impact on the Company and its likelihood of occurrence. The principal risks which have been identified as part of this process, and the steps taken by the Board to mitigate these, are set out in the table below.
The Board does not consider these principal risks to have changed during the course of the reporting period and up to the date of this report with the exception of the 'risks associated with Brexit' that are now considered as an emerging risk. In light of the circumstances, COVID-19 and the oil price war instigated by Russia and Saudi Arabia are specifically referred to in market/financial risks. Additionally, operational and cyber risks have been expanded to include pandemic and epidemic risks and risks relating to terrorism and international conflicts.
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Principal Risk |
Mitigating Measures |
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Investment Risk Risk of long-term underperformance of the Company against the benchmark and/or peer group. This could result in the shares of the Company trading at a discount and reduced liquidity in the Company's shares.
Risk that insufficient income generation could lead to a cut in the dividend. |
Janus Henderson provides the Board with regular investment performance statistics against the benchmark and the peer group.
The implementation of investment strategy and results of the investment process for which the Fund Manager is responsible are discussed with Janus Henderson and reviewed at each Board meeting.
The premium/discount and the trading volume of the Company's shares are also regularly reviewed, taking account of market conditions.
The Fund Manager and the Board maintain close contact with the Company's broker to understand and regulate the supply and demand of shares.
The Board reviews the Income Statement and revenue forecasts at each Board meeting and monitors the Company's revenue reserves. |
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Market/Financial Risk Risk that market conditions lead to a fall in the value of the portfolio (magnified by any gearing) and/or a reduction of income. This could result in loss of capital value for shareholders and/or a cut in the dividend payment.
There is heightened uncertainty in the markets at this time due to the ongoing impact of COVID-19. There have recently been dramatic falls in the Company's NAV (this has also been seen in the wider market) as a direct result of these circumstances. In addition, there is uncertainty as a result of the recent oil price war instigated by Russia and Saudi Arabia. |
The Board reviews the Company's compliance with its loan covenants on a monthly basis and additional covenant testing is undertaken in extreme market conditions to give comfort that the Company can meet its financial liabilities.
The portfolio is diverse, containing a sufficient range of investments to ensure that no single investment puts undue risk on the sustainability of the income generated by the portfolio or indeed the capital value. Regard is also given to having a broad mix of companies in the portfolio, as well as a spread across a range of economic sectors. The Board reviews the portfolio on a monthly basis.
Janus Henderson operates within investment limits and restrictions set by the Board, including limits for gearing and derivatives. A monthly schedule of current positions against all established limits is reviewed by the Board. Janus Henderson confirms adherence to them each month. Any particularly high risks are highlighted and discussed, and appropriate follow up action is taken where necessary. A detailed analysis of the Company's financial risk management policies and procedures can be found in Note 15 to the financial statements within the Annual Report.
The Board reviews the Income Statement and revenue forecasts at each Board meeting and monitors the Company's revenue reserves. |
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Operational Risks including Cyber Risks, Pandemic and Epidemic Risks and Risks Relating to Terrorism and International Conflicts
Risk of loss through inadequate or failed internal procedures, policies, processes, systems or human error. This includes risk of loss to the Company's third-party service providers as a result of inadequate procedures, policies, processes, systems or human error.
Risk of financial loss, disruption or damage to the reputation of the Company, the Manager and the Company's other third-party service providers, as a result of failure of information technology systems.
Risk of loss as a result of external events outside of the Board's control such as pandemic and/or epidemic risks and risks relating to terrorism and/or international conflicts that disrupt and impact the global economy. This includes the risk of loss to the Company's third-party service providers that are also disrupted and impacted by such events. |
The Board receives a quarterly internal control report from the Manager to assist with the ongoing review and monitoring of internal controls and risk management systems it has in place.
The Board regularly receives reports from the Manager's Internal Audit, Risk, Compliance, Information Security and Business Continuity Teams. This provides assurance that the Manager has appropriate policies and procedures in place to be able to continue in operation and maintain stability in times of such risks. In particular, the Board asks the Manager to confirm that the Fund Manager can continue to manage the portfolio in these circumstances.
The Board makes similar enquiries of its key third-party service providers to gain assurance that they too have appropriate policies and procedures in place to be able to continue in operation and maintain stability in times of such risks.
Please refer to the Report of the Audit and Risk Committee in the Annual Report for further details about Internal Control and Risk Management. |
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Tax, Legal and Regulatory Risk Risk that a breach of, or a change in laws and regulations, could materially affect the viability and appeal of the Company, in particular s.1158/9 which exempts capital gains from being taxed within investment trusts. |
Janus Henderson has been contracted to provide investment, company secretarial, administration and accounting services through qualified professionals.
The Board receives internal control reports produced by Janus Henderson on a quarterly basis, which confirm tax, legal and regulatory compliance. |
Emerging Risks
With the help of the Manager's research resources and using its own market intelligence, the Board continually monitors the changing risk landscape and any emerging and increasing threats to the Company's business model. Such emerging risks could cause disruption for the Company, if ignored, but, if identified, could provide business opportunities. The emerging risks identified below are currently being evaluated and monitored.
|
Emerging Risk |
Mitigating Measures |
|
Risks Associated with Brexit Risk that whatever the implications of the UK's exit from the European Union and any forthcoming trade negotiations and transitional arrangements, the portfolio will be subject to greater market price risk volatility and specific stock risk as a result. |
It is difficult to evaluate all of the potential implications on the Company's business and the wider economy.
The Board is confident that the Manager and its other key service providers will continue to operate for the foreseeable future whatever the outcome of the trade negotiations and transitional arrangements following the UK's departure from the EU. |
|
Risks Associated with Climate Change Risk that investee companies within the Company's portfolio fail to respond to the pressures of the growing climate emergency and fail to limit their carbon footprint to regulated targets, resulting in reduced investor demand for their shares and falling market values. |
Please refer to Environmental, Social and Governance Matters in the Annual Report for details of how the Board considers the Responsible Investment policies of its service providers, in particular the Manager's Policy. |
Viability Statement
The Company seeks to provide superior income generation and long-term capital growth for its shareholders. The Board aims to achieve this by pursuing the Company's business model and strategy through the Investment Objective and Investment Policy (please refer to the Annual Report). The Board will continue to consider and assess how it can adapt the business model and strategy of the Company to ensure its long-term viability in relation to its principal and emerging risks as detailed above.
In assessing the viability of the Company, the Board also considers the prospects of the Company including the liquidity of the portfolio (which is mainly invested in readily realisable listed securities), the level of borrowings (which are restricted), the closed-ended nature as an investment company (therefore there are limited liquidity issues arising from unexpected redemptions) and a low ongoing charge (0.80% for the year-ended 31 December 2019 (2018: same)). Long-term borrowing is in place in the form of the 3.67% senior unsecured note which matures in July 2034 (the value of this long-term borrowing is relatively small in comparison to the value of net assets at 7.9% as at 31 December 2019). Furthermore, the Company retains title to all assets held by the Custodian (under the terms of the formal agreement with the Depositary), cash is held with approved banks and revenue and expenditure forecasts are reviewed at each Board meeting. The Fund Manager provides an additional stress tested, conservative revenue forecast once a year to assist the Board with its dividend decision making. The Company's revenue reserves have grown in the last few years and there is now approximately 10 months' annual dividend cover which gives additional comfort for any difficult years that may arise.
The Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of its long-term horizon and taking account of the Company's current position and the assessment factors detailed above.
The directors recognise that there is a continuation vote due to take place at the AGM in 2020. The Board has received feedback from the Fund Manager, the Janus Henderson Investment Trust Sales Team and the Company's broker from meetings held with shareholders so far this year. That feedback suggests that the shareholders are supportive of the Company continuing in operation for a further five-year period and beyond. In normal circumstances there is a good level of underlying demand for the Company's shares in the market. Notwithstanding the uncertainty caused by the current COVID-19 pandemic, the Company's above average dividend yield should remain attractive to investors, particularly given the current low level of interest rates. There has been a growing trend in the diversity of shareholders on the Company's share register and in 2019 a significant number of professional investors bought shares. The Board therefore feels confident that shareholders remain supportive of the Company going forward and the current situation serves to highlight the advantages of holding an investment trust. The directors firmly support the continuation of the Company and expect that it will continue to exist for the foreseeable future, at least for the period of this assessment.
When assessing the viability of the Company over the next five years the directors considered its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any covenants could impact on the Company's NAV and share price. There is heightened uncertainty in the markets at this time due to the ongoing impact of COVID-19. There have recently been dramatic falls in the Company's NAV (this has also been seen in the wider market) as a direct result of these circumstances. In addition, there is also uncertainty in the market with the recent oil price war instigated by Russia and Saudi Arabia. The Board has commissioned and reviewed additional loan covenant testing to better understand the implications to the Company and the actions that the Fund Manager is taking in these extreme market conditions.
The directors do not envisage any change in strategy or investment objective, or any events that would prevent the Company from continuing to operate over the next five years as the Company's assets are liquid, its commitments are limited, and the Company intends to continue to operate as an investment trust. The Board takes comfort in the robustness of the Company's position, performance, liquidity and the well-diversified portfolio as well as the Fund Manager's monitoring and is assured that the Company is well equipped to navigate a substantial global financial crisis. The Board therefore has a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due over the next five-year period.
Related Party Transactions
The Company's transactions with related parties in the year were with the directors and the Manager. There have been no material transactions between the Company and its directors during the year. The only amounts paid to them were in respect of remuneration for which there were no outstanding amounts payable at the year-end. Directors' interests in shares are disclosed in the Directors' Remuneration Report in the Annual Report. In relation to the provision of services by the Manager (other than fees payable by the Company in the ordinary course of business and the provision of marketing services) there have been no material transactions with the Manager affecting the financial position or performance of the Company during the year under review. More details on Transactions with the Manager, including amounts outstanding at the year-end, are given in Note 21 to the financial statements within the Annual Report.
The directors confirm that in accordance with Listing Rule 9.8.4(7) there are no further disclosures that need to be made in this regard.
Update Statement
In relation to the resolution at the 2019 AGM seeking the re-appointment of Anthony Newhouse as a director 9,206,131 (76.1%) proxy votes were received in favour, 2,587,566 (21.4%) proxy votes were received against, 305,387 (2.5%) proxy votes were discretionary and 55,424 proxy votes were withheld. The percentage of votes excludes votes withheld.
The Board committed at the time to make every effort to engage with shareholders who voted against this resolution to understand and discuss their concerns. The Chairman of the Board subsequently wrote to the largest shareholder behind the vote (following an analysis of the votes received) to ask for their feedback on the Board's succession plans but did not receive a response. Nevertheless, the Board issued an interim action statement on 25 July 2019 and confirms that Anthony Newhouse will retire as a director at the conclusion of the 2020 AGM as part of the Board's existing succession plan. There has been no additional feedback from any shareholders with regards to succession planning. The Board has now published a Policy on Tenure as a matter of good governance (please refer to the Annual Report).
Statement of Directors' Responsibilities
Each of the directors confirm that, to the best of his or her knowledge:
• the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards comprising FRS 102 and applicable law) give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
• the Strategic Report and financial statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
Margaret Littlejohns
Chairman
16 April 2020
AUDITED INCOME STATEMENT
|
| Year ended 31 December 2019 | Year ended 31 December 2018 | |||||
Notes |
| Revenue return £'000 | Capital return £'000 | Total £'000 | Revenue return £'000 | Capital return £'000 | Total £'000 | |
2 | Gains/(losses) on investments held at fair value through profit or loss | - | 41,212 | 41,212 | - | (45,211) | (45,211) | |
3 |
Income from investments held at fair value through profit or loss | 15,041 | - | 15,041 | 14,329 | - | 14,329 | |
4 |
Other interest receivable and similar income | 6 | - | 6 | 35 | - | 35 | |
|
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
| Gross revenue and capital gains/(losses) | 15,047 | 41,212 | 56,259 | 14,364 | (45,211) | (30,847) | |
|
|
|
|
|
|
|
| |
5 | Management and performance fees | (575) | (864) | (1,439) | (590) | (885) | (1,475) | |
|
Other administrative expenses | (405) | - | (405) | (429) | - | (429) | |
|
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
| Net return before finance costs and taxation | 14,067 | 40,348 | 54,415 | 13,345 | (46,096) | (32,751) | |
|
|
|
|
|
|
|
| |
| Finance costs | (385) | (1,156) | (1,541) | (338) | (1,015) | (1,353) | |
|
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
|
Net return before taxation | 13,682 | 39,192 | 52,874 | 13,007 | (47,111) | (34,104) | |
|
|
|
|
|
|
|
| |
|
Taxation on net return | (63) | - | (63) | (71) | - | (71) | |
|
| ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | |
|
Net return after taxation | 13,619 | 39,192 | 52,811 | 12,936 | (47,111) | (34,175) | |
|
| ====== | ====== | ====== | ====== | ====== | ====== | |
|
|
|
|
|
|
|
| |
6 | Return/(loss) per ordinary share | 10.59p | 30.48p | 41.07p | 10.06p | (36.63p) | (26.57p) | |
|
| ====== | ======= | ====== | ====== | ===== | ====== | |
|
| |||||||
| The total columns of this statement represent the Income Statement of the Company. All capital and revenue items derive from continuing operations. No operations were acquired or discontinued during the year. The Company has no other comprehensive income other than those items recognised in the Income Statement. | |||||||
AUDITED STATEMENT OF CHANGES IN EQUITY
Notes | Year ended 31 December 2019 | Called up share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 | Revenue reserve £'000 | Total '000 |
| At 1 January 2019 | 6,430 | 126,783 | 26,302 | 41,707 | 9,566 | 210,788 |
| Net return after taxation | - | - | - | 39,192 | 13,619 | 52,811 |
8 | Dividends paid | - | - | - | - | (12,511) | (12,511) |
|
| -------- | ----------- | --------- | --------- | --------- | ---------- |
| At 31 December 2019 | 6,430 | 126,783 | 26,302 | 80,899 | 10,674 | 251,088 |
|
| ===== | ====== | ====== | ===== | ===== | ====== |
|
|
|
|
|
|
|
|
| Year ended 31 December 2018 | Called up share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 | Revenue reserve £'000 | Total '000 |
| At 1 January 2018 | 6,430 | 126,783 | 26,302 | 88,818 | 8,910 | 257,243 |
| Net return after taxation | - | - | - | (47,111) | 12,936 | (34,175) |
8 | Dividends paid | - | - | - | - | (12,280) | (12,280) |
|
| -------- | ----------- | --------- | --------- | --------- | ---------- |
| At 31 December 2018 | 6,430 | 126,783 | 26,302 | 41,707 | 9,566 | 210,788 |
|
| ===== | ====== | ====== | ===== | ===== | ====== |
|
|
|
|
|
|
|
|
AUDITED STATEMENT OF FINANCIAL POSITION
Notes |
| At 31 December 2019 £'000 | At 31 December 2018 £'000 |
| Fixed assets |
|
|
| Investments held at fair value through profit or loss | 305,064 | 267,966 |
|
| ---------- | ---------- |
| Current assets |
|
|
| Debtors | 2,069 | 1,767 |
| Cash at bank and in hand | 2,701 | 2,581 |
|
| ---------- | ---------- |
|
| 4,770 | 4,348 |
|
| ---------- | ---------- |
| Creditors: amounts falling due within one year | (38,917) | (41,705) |
|
| ---------- | ---------- |
| Net current liabilities
| (34,147) | (37,357) |
| Total assets less current liabilities | 270,917 | 230,609 |
|
| ---------- | ---------- |
| Creditors: amounts falling due after more than one year | (19,829) | (19,821) |
|
| ---------- | ---------- |
| Net assets | 251,088 | 210,788 |
|
| ====== | ====== |
|
|
|
|
| Capital and reserves |
|
|
| Called up share capital | 6,430 | 6,430 |
| Share premium account | 126,783 | 126,783 |
| Capital redemption reserve | 26,302 | 26,302 |
| Other capital reserves | 80,899 | 41,707 |
| Revenue reserve | 10,674 | 9,566 |
|
| ---------- | ---------- |
| Total shareholders' funds | 251,088 | 210,788 |
|
| ====== | ====== |
|
|
|
|
| Net asset value per ordinary share (basic and diluted) | 195.25p ====== | 163.91p ====== |
AUDITED STATEMENT OF CASH FLOWS
|
|
Year ended 31 December 2019 |
Year ended 31 December 2018 |
|
|
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
Net return before taxation |
52,874 |
(34,104) |
|
Add back: finance costs |
1,541 |
1,353 |
|
Less: (gains)/losses on investments held at fair value through profit or loss |
(41,212) |
45,211 |
|
Withholding tax on dividends deducted at source |
(63) |
(71) |
|
Taxation recovered |
- |
21 |
|
Increase in prepayments and accrued income |
(302) |
(108) |
|
(Decrease)/increase in accruals and deferred income |
(287) |
37 |
|
|
---------- |
---------- |
|
Net cash inflow from operating activities1 |
12,551 |
12,339 |
|
|
---------- |
---------- |
|
Cash flows from investing activities |
|
|
|
Sales of investments held at fair value through profit or loss |
59,656 |
56,765 |
|
Purchases of investments held at fair value through profit or loss |
(56,240) |
(58,316) |
|
|
---------- |
---------- |
|
Net cash inflow/(outflow) from investing activities |
3,416 |
(1,551) |
|
|
---------- |
---------- |
|
Cash inflow/(outflow) from financing activities |
|
|
|
Equity dividends paid |
(12,511) |
(12,280) |
|
(Repayment)/drawdown of loans |
(1,847) |
4,159 |
|
Interest paid |
(1,533) |
(1,346) |
|
|
---------- |
---------- |
|
Net cash flow from financing activities |
(15,891) |
(9,467) |
|
|
---------- |
---------- |
|
Net increase in cash and cash equivalents |
76 |
1,321 |
|
Cash and cash equivalents at beginning of year |
2,581 |
1,245 |
|
Exchange movements |
44 |
15 |
|
|
---------- |
---------- |
|
Cash and cash equivalents at end of year |
2,701 |
2,581 |
|
|
---------- |
---------- |
|
Comprising: |
|
|
|
Cash at bank |
2,701 |
2,581 |
|
|
====== |
====== |
|
|
|
|
1 Cash inflow from dividends was £13,117,000 (2018: £13,006,000) and cash inflow from interest was £1,674,000 (2018: £1,383,000)
Notes to Financial Statements:
1a) Basis of Accounting
The Company is a registered investment Company as defined in section 833 of the Companies Act 2006. It operates in England and Wales and is registered at 201 Bishopsgate, London EC2M 3AE.
The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland, and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP). The new provisions of the SORP have an impact on the disclosure of investment holdings gains/(losses) and additional wording has been included in Note 11 to the financial statements within the Annual Report .
The principal accounting policies applied in the presentation of these financial statements are set out below. These policies have been consistently applied to all the years presented.
The financial statements have been prepared under the historical cost basis except for the measurement at fair value of investments.
In applying FRS 102, financial instruments have been accounted for in accordance with sections 11 and 12 of the standard. All of the Company's operations are of a continuing nature.
1b) Significant Judgment and Estimates
The decision to allocate special dividends as income or capital is a judgement but not deemed to be material. The allocation of expenses as income or capital is not material but has an impact on distributable reserves. Other than these exceptions the directors do not believe that any accounting judgments or estimates have been applied to this set of financial statements that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year.
1c) Going concern
The assets of the Company consist of securities that are readily realisable and, accordingly, the directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements.
The Company's shareholders are asked every five years to vote for the continuation of the Company. An ordinary resolution to this effect will be put to shareholders at the AGM in 2020 and the Board has no reason to believe that this resolution will not be passed. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, and the status of the negotiation of the renewal of the Scotiabank facility, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements. In coming to this conclusion, the directors also considered the post year-end impact of COVID-19 on the Company's NAV and share price which are set out in Note 22 to the financial statements within the Annual Report
.
2. Gains/(Losses) on Investments Held at Fair Value through Profit or Loss
|
|
2019 £'000 |
2018 £'000 |
|
Gains on the sale of investments based on historical cost |
2,003 |
1,800 |
|
Revaluation gains/(losses) recognised in previous years |
1,459 |
(4,515) |
|
|
--------- |
--------- |
|
Gains/(losses) on investments sold in the year based on carrying value at previous Statement of Financial Position date |
3,462 |
(2,715) |
|
|
--------- |
--------- |
|
Net movement on revaluation of investments |
37,077 |
(42,148) |
|
Effective yield movement |
(25) |
(17) |
|
Exchange gains/(losses) |
698 |
(331) |
|
|
-- --------- |
----------- |
|
|
41,212 |
(45,211) |
|
|
====== |
======= |
3. Income from Investments Held at Fair Value through Profit or Loss
|
|
2019 £'000 |
2018 £'000 |
|
UK dividend income - listed |
10,791 |
10,708 |
|
UK dividend income - special dividends |
358 |
312 |
|
|
---------- |
------- |
|
|
11,149 |
11,020 |
|
|
---------- |
------- |
|
Interest income - listed |
1,768 |
1,291 |
|
Overseas and other dividend income - listed |
1,772 |
2,018 |
|
Overseas and other dividend income - special dividends |
352 |
- |
|
|
------- |
------- |
|
|
3,892 |
3,309 |
|
|
---------- |
---------- |
|
|
15,041 |
14,329 |
|
|
====== |
===== |
4. Other Interest Receivable and Similar Income
|
|
2019 £'000 |
2018 £'000 |
|
Deposit interest |
3 |
3 |
|
Underwriting commission |
3 |
32 |
|
|
----- |
----- |
|
|
6 |
35 |
|
|
=== |
=== |
5. Management and Performance Fees
|
|
2019 |
2018 |
||||
|
|
Revenue return £'000 |
Capital return £'000 |
Total £'000 |
Revenue return £'000 |
Capital return £'000 |
Total £'000 |
|
Management fee |
575 |
864 |
1,439 |
590 |
885 |
1,475 |
|
Performance fee |
- |
- |
- |
- |
- |
- |
|
|
------ |
------- |
------- |
------ |
------- |
------- |
|
Total fee |
575 |
864 |
1,439 |
590 |
885 |
1,475 |
|
|
=== |
==== |
==== |
=== |
==== |
==== |
A summary of the terms of the management agreement is given in the Annual Report. An explanation of the split between revenue and capital is contained in Note 1g) to the financial statements within the Annual Report. No performance fee was earned during the year (2018: £nil).
6. Total Return/(Loss) per Ordinary Share
The return per ordinary share figure is based on the gain attributable to the ordinary shares of £52,811,000 (2018: loss of £34,175,000) and on the 128,596,278 weighted average number of ordinary shares in issue during the year (2018: 128,596,278).
The Company had no securities in issue that could dilute the return per ordinary share.
The return per ordinary share can be analysed between revenue and capital as shown below:
|
|
2019 £'000 |
2018 £'000 |
|
Net revenue return |
13,619 |
12,936 |
|
Net capital return |
39,192 |
(47,111) |
|
|
---------- |
------------ |
|
Total return |
52,811 |
(34,175) |
|
|
====== |
======= |
|
|
|
|
|
Weighted average number of ordinary shares |
128,596,278 |
128,596,278 |
|
|
|
|
|
Revenue return per ordinary share |
10.59p |
10.06p |
|
Capital return/(loss) per ordinary share |
30.48p |
(36.63p) |
|
|
---------- |
---------- |
|
Total return/(loss) per ordinary share |
41.07p |
(26.57p) |
|
|
====== |
======= |
7 . 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 £251,088,000 (2018: £210,788,000) and on the 128,596,278 ordinary shares in issue at 31 December 2019 (2018: 128,596,278).
The movements during the year of the assets attributable to the ordinary shares were as follows:
|
|
2019 £'000 |
2018 £'000 |
|
Net assets at start of year |
210,788 |
257,243 |
|
Total net return after taxation |
52,811 |
(34,175) |
|
Dividends paid in year |
(12,511) |
(12,280) |
|
|
----------- |
----------- |
|
|
251,088 |
210,788 |
|
|
======= |
======= |
8. Dividends Paid on Ordinary Shares
|
|
| Payment date | 2019 £'000 | 2018 £'000 |
Fourth interim dividend (2.375p) for the year ended 31 December 2017 | 26 January 2018 | - | 3,054 | ||
First interim dividend (2.375p) for the year ended 31 December 2018 | 27 April 2018 | - | 3,054 | ||
Second interim dividend (2.375p) for the year ended 31 December 2018 | 27 July 2018 | - | 3,054 | ||
Third interim dividend (2.425p) for the year ended 31 December 2018 | 26 October 2018 | - | 3,118 | ||
Fourth interim dividend (2.425p) for the year ended 31 December 2018 | 25 January 2019 | 3,118 | - | ||
First interim dividend (2.425p) for the year ended 31 December 2019 | 26 April 2019 | 3,118 | - | ||
Second interim dividend (2.425p) for the year ended 31 December 2019 | 26 July 2019 | 3,118 | - | ||
Third interim dividend (2.475p) for the year ended 31 December 2019 | 25 October 2019 | 3,183 | - | ||
Unclaimed dividends |
| (26) | - | ||
|
| ---------- | -------- | ||
|
| 12,511 | 12,280 | ||
|
| ====== | ===== | ||
The total dividends payable in respect of the financial year which form the basis of the test under section 1158 of the Corporation Tax Act 2010 are set out below:
| 2019 £'000 | 2018 £'000 |
Revenue available for distribution by way of dividend for the year | 13,619 | 12,936 |
First interim dividend of 2.425p (2018: 2.375p) | (3,118) | (3,054) |
Second interim dividend of 2.425p (2018: 2.375p) | (3,118) | (3,054) |
Third interim dividend of 2.475p (2018: 2.425p) | (3,183) | (3,118) |
Fourth interim dividend 2.475p (2018: 2.425p) | (3,183) | (3,118) |
| -------- | -------- |
1,017 | 592 | |
===== | ===== |
All dividends have been paid or will be paid out of revenue profits.
9. Subsequent Events
Since the year-end, the Board announced a first interim dividend of 2.475p per ordinary share, in respect of the year-ending 31 December 2020. This will be paid on 24 April 2020 to holders registered at the close of business on 3 April 2020. This dividend is to be paid from the Company's revenue account. The Company's shares went ex-dividend on 2 April 2020.
As a result of the COVID-19 pandemic, which the directors have determined is a non-adjusting post balance sheet event, there has been significant volatility in the financial markets since the Statement of Financial Position date. As at 9 April 2020 (being the latest practicable date before publication of this report) this has impacted the share price by a decrease of 27.4% and the NAV (with debt at par) by a decrease of 23.5% (based on the Company's published NAV with debt at par as at 31 December 2019).
The impact on financial markets may continue to remain volatile for some time as the effect on the economy is uncertain.
10. 2019financial information
The figures and financial information for the year ended 31 December 2019 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year ended 31 December 2019 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditors' Report on the 2019 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.
11. 2018 financial information
The figures and financial information for the year ended 31 December 2018 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year ended 31 December 2018 have been audited and delivered to the Registrar of Companies. The Independent Auditors' Report on the 2018 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.
12. Annual Report
The Annual Report for the year ended 31 December 2019 will be posted to shareholders in April 2020 and will be available thereafter on the Company's website (www.hendersonhighincome.com) or from the Corporate Secretary at the Company's registered office, 201 Bishopsgate, London EC2M 3AE.
13. Annual General Meeting
The AGM is currently scheduled to be held on Tuesday 23 June 2020 at 12 noon at the offices of Janus Henderson at 201 Bishopsgate, London, EC2M 3AE. It may be necessary to change the venue and/or the date of the AGM, subject to the advice of the public health authorities and the UK government closer to the time. Any changes as to the venue and/or date and time of this year's AGM will be made available on a dedicated section of the Company's website at www.hendersonhighincome.com and additionally an announcement will be released to the Stock Exchange.
For further information please contact:
David Smith
Fund Manager
Janus Henderson Investors
Telephone: 020 7818 4443
Hannah Gibson
Company Secretary
For and on behalf of Henderson Secretarial Services Limited
Telephone: 020 7818 2345
James de Sausmarez
Director and Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 3349
Laura Thomas
Investment Trust PR Manager
Janus Henderson Investors
Telephone: 020 7818 2636
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.
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