Half Yearly Report

RNS Number : 4955M

Henderson Smaller Cos Inv Tst PLC

20 January 2016

 

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Unaudited Results for the Half-Year Ended 30 November 2015

This announcement contains regulated information

INVESTMENT OBJECTIVE

The Company's investment objective is to maximise shareholders' total returns by investing mainly in smaller companies that are quoted in the United Kingdom.

FINANCIAL HIGHLIGHTS

	(Unaudited) 30 November 2015		(Unaudited) 30 November 2014	(Audited) 31 May 2015
Total net assets	£548 million		£465 million	£563 million
Net asset value per ordinary share	733.8p		622.1p	754.1p
Net asset value per ordinary share on an alternative basis*		732.6p	619.2p	752.1p
Share price per ordinary share	663.5p		545.0p	686.0p
Total (loss)/return per ordinary share	(10.3)p		(7.5)p	128.0p
Revenue return per ordinary share	6.9p		5.9p	15.0p
Dividend per ordinary share	4.0p		3.5p	13.5p
Gearing	8.9%		10.8%	7.5%

* calculated by deducting from the net assets the debt at its market value.

TOTAL RETURN PERFORMANCE (including dividends reinvested)

	6 Months %	1 Year %	2 Years %	3 Years %	5 Years %	10  Years %
NAV1	-1.0	19.7	23.9	75.9	137.7	240.7
Share price2	-1.8	24.3	34.5	97.6	173.2	292.5
Benchmark3	-3.3	11.9	11.2	53.4	92.1	161.8
Average Sector NAV4	1.2	18.8	20.5	68.9	110.7	201.1
Average Sector Share price5	2.3	21.4	22.5	79.4	131.5	231.9
FTSE SmallCap Index (excluding investment companies)	-2.3	12.4	12.1	64.9	95.3	77.7
FTSE All-Share Index	-6.4	0.6	5.4	26.3	45.2	80.9

1 Net asset value per ordinary share (including dividends reinvested) for 6 months, 1, 2, 3 and 5 years and Capital NAV plus income for 10 years. The Company's issue of Debenture Stock and Preference Stock included at par value.

2 Share price total return using mid-market prices

3 Numis Smaller Companies Index (excluding investment companies)

4 Average NAV of the AIC UK Smaller Companies Sector

5 Average share price of the AIC UK Smaller Companies Sector

Sources: Morningstar Funddata, Morningstar Direct, Henderson, Datastream

    For further information please contact:

Neil Hermon Fund Manager The Henderson Smaller Companies Investment Trust plc Telephone: [phone]	Nathan Brown / David Benda Corporate Broking Numis Securities Telephone: [phone]
James de Sausmarez Director and Head of Investment Trusts Henderson Global Investors Telephone: [phone]	Sarah Gibbons-Cook Investor Relations and PR Manager Henderson Global Investors Telephone: [phone]

INTERIM MANAGEMENT REPORT

CHAIRMAN'S STATEMENT 

Half-Year ended 30 November 2015

The last six months have been a volatile time for equity markets which ended the period broadly lower. The Company's net asset value (NAV) for the six months to the 30 November 2015 on a total return basis was down 1.0%. Our benchmark, the Numis Smaller Companies Index (excluding investment companies),  fell 3.3% on a total return basis in the period. The Company's share price total return declined by  1.8% over the same period, resulting in the Company's discount marginally increasing from 9.0% to 9.6%. Despite the short-term weakness in markets, the past twelve months have seen the Company's share price increase by 24.3% and by 173.2% over the past five years, giving the Company an annualised return of 22.3% for that period.

Shareholders will be fully aware of the many uncertainties now facing equity markets. However, as our results show, smaller companies remain a good investment for the long-term investor. In this ever and faster changing world, smaller companies have the ability to adapt more quickly to new and disruptive ways of doing business, they are better positioned to benefit from the domestic recovery and good investors can find companies that can continue to show attractive growth prospects, largely irrespective of the macroeconomic picture. Furthermore, these companies are often less well researched than larger ones, which present opportunities for the diligent investor. Performance supports this, as smaller companies have materially outperformed markets over the last ten years. What is more, I am pleased to report that your Fund Manager, Neil Hermon, has outperformed the benchmark and the FTSE SmallCap Index (excluding investment companies) in eleven of the last twelve financial years.

The Board have decided to pay an interim dividend of 4.0p per share. This reflects the continuing growth in the dividend payments from our portfolio companies. It is currently the Board's intention to at least maintain the final dividend, which was 10.0p for the year ended 31 May 2015.

Jamie Cayzer-Colvin

Chairman

20 January 2016

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties associated with the Company's business fall broadly under the following categories:

• Investment activity and strategy;

• Accounting, legal and regulatory;

• Operational risk; and

• Financial instruments and the management of risk

Detailed information on these risks is given in the Strategic Report and in the Notes to the Financial Statements in the Company's Annual Report for the year ended 31 May 2015. In the view of the Board these principal risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the six months under review.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that, to the best of their knowledge:

·     the condensed set of financial statements has been prepared in accordance with "IAS34 Interim Financial Reporting"; 

·      the Interim Management 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

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

For and on behalf of the Board

Jamie Cayzer-Colvin

Chairman

20 January 2016

FUND MANAGER'S REVIEW

Half-Year ended 30 November 2015

Market Review - Six months to 30 November 2015

The period under review was a negative one for equity markets. Global economic conditions have been mixed with modest growth in the US and the UK offset by continuing tough conditions in Europe, slowing growth in China and other emerging markets. Monetary conditions remained benign as quantitative easing was introduced by the ECB, inflation remained subdued and the prospect of a rise in UK interest rates was continually pushed back. Global geo-political concerns remained heightened with the continuing conflict in Ukraine, increased Western military intervention in Syria/Iraq and continuing violence in other Middle Eastern 'failed states'. Commodity prices remained under significant pressure with oil and many metal prices hitting new multi-year lows. 

Smaller companies outperformed larger companies over the period. This was driven principally by the pronounced weakness in those sectors that are heavily exposed to commodity prices with the weighting of these sectors being much higher in large cap compared to mid and small cap.

Fund Performance

The Company outperformed the benchmark in the period. The net asset value fell 1.0%, on a total return basis. This compares with a fall of 3.3% (total return) in the Numis Smaller Companies Index (excluding investment companies) and a decline of 2.3% (total return) in the FTSE SmallCap Index (excluding investment companies). The out-performance was due to the positive effect of stock selection in the Company.

Attribution Analysis

The table below shows the top five contributors to and the bottom five detractors from the Company's relative performance. Some of the following stocks are included in the benchmark index but not held by the Company. These have an effect on relative performance.

Top five contributors to relative performance	6 month return %	Relative contribution %
Bellway	+11.5	+0.5
Lonmin*	-92.8	+0.5
Paysafe	+28.2	+0.4
Kaz Minerals*	-59.9	+0.4
NCC	+37.9	+0.4
Top five detractors from relative performance	6 month return %	Relative contribution %
Northgate	-35.3	-0.4
JD Sports*	+50.1	-0.4
Oxford Instruments	-38.4	-0.4
Spectris	-23.1	-0.4
Renishaw	-22.1	-0.3
* in benchmark index but not owned by the Company

Principal Contributors

Bellway is a national UK housebuilder; Lonmin is a South African producer of platinum; Paysafe is a global payment solutions business; Kaz Minerals is a Kazakhstan copper company; and NCC is a global provider of independent escrow and information security assurance services.

Principal Detractors

Northgate is a light commercial vehicle rental business operating in the UK and Spain; JD Sports is a branded sports and leisure wear retailer; Oxford Instruments is an advanced instrumentation equipment manufacturer;  Spectris is an electronic control and process instrumentation business; and Renishaw is a high technology precision measuring and calibration equipment business.

Portfolio Activity

Our approach is to consider our investments as long term in nature and to avoid unnecessary turnover. The focus has been on adding stocks to the portfolio that have good growth prospects, sound financial characteristics and strong management, at a valuation level that does not reflect these strengths. Likewise we have been employing strong sell disciplines to cut out stocks that fail to meet these criteria.

In the period we have added to a number of positions in our portfolio and increased exposure to those stocks we feel are set to improve or will continue with strong performance.

New additions to the portfolio include Gamma Communications, the telecommunications provider, GB Group the data intelligence and fraud prevention software company, Ibstock, the bricks and concrete building products group, Kainos, the information technology services and consulting business, and Scapa, a manufacturer of technical tapes.

To balance these additions to our portfolio we have disposed of positions in companies which we felt were set for poor price performance or where the valuation had become extended, including the holdings in Countrywide, Fenner, Fidessa, Thomas Cook and Virgin Money. Additionally we realised a number of positions where the company had received an agreed bid from another corporate. These included Anite, Chime Communications, HellermannTyton, Quintain Estates and Synergy Healthcare.

Market Outlook

The period under review has been a more difficult one for equity markets. The outlook remains challenging with mixed economic performance across the globe. The recent rise in US interest rates has flagged to investors that loose global monetary conditions will at some stage reverse. However the 'normalisation' of monetary policy will be slow and measured. On a more positive note the collapse of oil prices should provide a boost to global growth, although certain oil producing economies are seeing a negative impact on their economic performance.

In terms of valuations, the equity market has gone from being cheap to more fairly rated and is now more in line with long term averages. To see the market make progress we need to see earnings growth accelerate, a situation which failed to happen in 2015 when the wider corporate sector saw minimal earnings growth, partly reflecting sterling's relative strength but also weak commodity prices.

Generally, balance sheets are strong and dividends are growing in the companies owned by the Company. M&A activity in 2015 has seen some pick-up from depressed levels, and our portfolio has seen a good number of bids. If corporate confidence improves, M&A will increase, especially as little or no return can currently be generated from cash and the cost of debt is historically low. This is a trend which will help smaller companies in particular as mergers and acquisition activity tends to be focused in this area.

In this environment and with a positive perspective on likely future medium term returns from our portfolio we retain a level of gearing which stood at 8.9% at 30 November 2015.

In conclusion, the period under review has been a negative one for the equity market. However the Company's absolute performance was resilient whilst relative performance was strong and our portfolio companies have, overall, performed robustly. Our investments are generally trading well, are soundly financed and attractively valued. Additionally, smaller companies continue to throw up exciting growth opportunities in which the Company can invest.

Neil Hermon

Fund Manager

20 January 2016

INVESTMENT PORTFOLIO

at 30 November 2015

	Company	Valuation £'000	% of Portfolio		Company	Valuation £'000	% of Portfolio
	Bellway	21,582	3.61		AA	6,480	1.09
	e2v Technologies	16,525	2.77		DFS Furniture	6,426	1.08
	Howden Joinery	13,910	2.33		Consort Medical	6,297	1.05
	NMC Health	13,425	2.25		SIG	6,201	1.04
	Informa	13,331	2.23		Jupiter Fund Management	6,118	1.02
	Paragon	12,347	2.07		Senior	5,971	1.00
	Victrex	11,997	2.01		Esure	5,964	1.00
	WS Atkins	11,925	2.00		Brown (N) Group	5,538	0.93
	Intermediate Capital	11,800	1.98		Eurocell	5,423	0.91
	Interserve	11,151	1.87		Cineworld	5,400	0.90
		----------	----------			----------	----------
	10 largest	137,993	23.12		40 largest	359,119	60.16
	Grainger	10,413	1.74		Crest Nicholson	5,367	0.90
*	Clinigen	10,082	1.69		LSL Property Services	5,334	0.89
	Playtech	10,047	1.68		The Restaurant Group	5,252	0.88
	Capital & Regional	9,408	1.58		Aldermore	5,196	0.87
	NCC	9,257	1.55		Oxford Instruments	5,101	0.86
	Balfour Beatty	8,744	1.46		St Modwen Properties	4,931	0.83
	Aveva	8,224	1.38		Dechra Pharmaceuticals	4,915	0.82
*	Paysafe	8,100	1.36		Unite	4,914	0.82
	Ted Baker	7,867	1.32		Euromoney Institutional Investor	4,883	0.82
	Laird	7,771	1.30		Tarsus Group	4,731	0.79
		----------	----------			----------	----------
	20 largest	227,906	38.18		50 largest	409,743	68.64
	Renishaw	7,724	1.30		Dunelm	4,604	0.77
	OneSavings Bank	7,694	1.29		Rotork	4,596	0.77
	Essentra	7,599	1.27	*	RWS	4,577	0.77
	John Laing	7,365	1.23		SSP	4,509	0.76
	RPC	7,268	1.22	*	EMIS	4,366	0.73
	Spectris	6,938	1.16		Tyman	4,364	0.73
	Northgate	6,884	1.15		Volution	4,320	0.72
	Sanne	6,769	1.14		CLS	4,319	0.72
	Ibstock	6,624	1.11		Lookers	4,198	0.71
	Melrose Industries	6,530	1.09		Vectura	4,114	0.69
		----------	----------			----------	----------
	30 largest	299,301	50.14		60 largest	453,710	76.01
						----------	----------
					Remaining 53	143,212	23.99
						----------	----------
					Total	596,922	100.00
						======	======
* listed on the Alternative Investment Market

 

STATEMENT OF COMPREHENSIVE INCOME

for the half-year ended 30 November 2015

	(Unaudited) Half-year ended 30 November 2015			(Unaudited) Half-year ended 30 November 2014			(Audited) Year ended 31 May 2015
	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return	Revenue return	Capital return	Total return
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	6,021	-	6,021	5,214	-	5,214	12,838	-	12,838
Other income	14	-	14	119	-	119	207	-	207
(Losses)/gains on investments held at fair value through profit or loss	-	(11,312)	(11,312)	-	(8,493)	(8,493)	-	89,494	89,494
	---------	----------	--------	---------	----------	--------	---------	----------	--------
Total income	6,035	(11,312)	(5,277)	5,333	(8,493)	(3,160)	13,045	89,494	102,539
Expenses
Management and performance fees	(284)	(663)	(947)	(266)	(622)	(888)	(538)	(3,256)	(3,794)
Other expenses	(252)	-	(252)	(231)	-	(231)	(472)	-	(472)
	---------	----------	--------	---------	----------	--------	---------	----------	--------
Net return/(loss)before finance costs and taxation	5,499	(11,975)	(6,476)	4,836	(9,115)	(4,279)	12,035	86,238	98,273
Finance costs	(366)	(854)	(1,220)	(396)	(924)	(1,320)	(789)	(1,841)	(2,630)
	---------	----------	--------	---------	----------	--------	---------	----------	--------
Net return/(loss) before taxation	5,133	(12,829)	(7,696)	4,440	(10,039)	(5,599)	11,246	84,397	95,643
Taxation	-	-	-	-	-	-	(12)	-	(12)
	---------	----------	--------	---------	----------	--------	---------	----------	--------
Net return/(loss) for the period and total comprehensive income	5,133	(12,829)	(7,696)	4,440	(10,039)	(5,599)	11,234	84,397	95,631
	=====	======	=====	=====	======	=====	=====	======	=====
Return/(loss) per ordinary share (note 3)	6.87p	(17.17)p	(10.30)p	5.94p	(13.44)p	(7.50)p	15.04p	112.98p	128.02p
	=====	======	=====	=====	======	=====	=====	======	======

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

 The accompanying notes are an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

	(Unaudited) Half-year ended 30 November 2015
	Called up share capital		Capital  redemption reserve		Other capital reserves		Revenue reserve		Total
	£'000		£'000		£'000		£'000		£'000
Total equity at 1 June 2015	18,676		26,745		501,974		15,926		563,321
Total comprehensive income:    (Loss)/profit for the period	-		-		(12,829)		5,133		(7,696)
Transactions with owners,   recorded directly to equity:
Ordinary dividend paid	-		-		-		(7,470)		(7,470)
	----------		----------		----------		--------		-----------
Total equity at 30 November 2015	18,676		26,745		489,145		13,589		548,155
	======		======		======		=====		======
	(Unaudited) Half-year ended 30 November 2014
	Called up share capital	Capital  redemption reserve		Other capital reserves		Revenue reserve		Total
	£'000	£'000		£'000		£'000		£'000
Total equity at 1 June 2014	18,676	26,745		417,577		13,283		476,281
Total comprehensive income:    (Loss)/profit for the period	-	-		(10,039)		4,440		(5,599)
Transactions with owners,   recorded directly to equity:
Ordinary dividend paid	-	-		-		(5,976)		(5,976)
	----------	----------		----------		--------		-----------
Total equity at 30 November 2014	18,676	26,745		407,538		11,747		464,706
	======	======		======		=====		======
	(Audited) Year ended 31 May 2015
	Called up share capital	Capital  redemption reserve		Other capital reserves		Revenue  reserve		Total
	£'000	£'000		£'000		£'000		£'000
Total equity at 1 June 2014	18,676	26,745		417,577		13,283		476,281
Total comprehensive income:    Profit for the year	-	-		84,397		11,234		95,631
Transactions with owners,    recorded directly to equity:   Ordinary dividend paid	-	-		-		(8,591)		(8,591)
	----------	----------		----------		---------		----------
Total equity at 31 May 2015	18,676	26,745		501,974		15,926		563,321
	======	======		======		=====		======
The accompanying notes are an integral part of these financial statements.

BALANCE SHEET

	(Unaudited) 30 November 2015	(Unaudited) 30 November 2014	(Audited) 31 May 2015
	£'000	£'000	£'000
Non current assets
Investments held at fair value through   profit or loss	596,922	514,906	605,776
	-----------	-----------	----------
Current assets
Securities sold for future settlement	-	186	731
Taxation recoverable	17	18	12
Prepayments and accrued income	731	628	2,003
Cash and cash equivalents	1,849	2,729	10,183
	-----------	-----------	----------
	2,597	3,561	12,929
	----------	----------	----------
Total assets	599,519	518,467	618,705
	-----------	-----------	----------
Current liabilities
Securities purchased for future settlement	(2,190)	(2,486)	(679)
Performance fee	-	-	(2,000)
Accruals and deferred income	(148)	(472)	(500)
Financial liabilities	(20,000)	-	(20,000)
Bank loans	(29,022)	(30,799)	(32,201)
	-----------	-----------	----------
	(51,360)	(33,757)	(55,380)
	-----------	-----------	----------
Total assets less current liabilities	548,159	484,710	563,325
Non current liabilities	(4)	(20,004)	(4)
	-----------	-----------	----------
Net assets	548,155	464,706	563,321
	======	======	======
Equity attributable to equity shareholders
Called up share capital (note 5)	18,676	18,676	18.676
Capital redemption reserve	26,745	26,745	26,745
Retained earnings:
Capital reserve	489,145	407,538	501,974
Revenue reserve	13,589	11,747	15,926
	-----------	-----------	----------
Total equity	548,155	464,706	563,321
	======	======	======
Net asset value per ordinary share (note 6)	733.8p	622.1p	754.1p
	======	======	======

 

CASH FLOW STATEMENT

	(Unaudited) Half-year ended 30 November 2015	(Unaudited) Half-year ended 30 November 2014	(Audited) Year ended 31 May 2015
	£'000	£'000	£'000
Net cash inflow from operating activities  (note 7)	2,315	2,782	11,449
	----------	----------	----------
Net cash inflow before use of financing	2,315	2,782	11,449
Net cash outflow from financing activities	(10,649)	(1,207)	(2,420)
	----------	----------	----------
Net (decrease)/increase in cash and cash equivalents	(8,334)	1,575	9,029
Cash and cash equivalents at the start of the period	10,183	1,154	1,154
	----------	----------	----------
Cash and cash equivalents at the period end	1,849	2,729	10,183
	=====	=====	=====
The accompanying notes are an integral part of these financial statements.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

	1.	Accounting policies - basis of preparation The Henderson Smaller Companies Investment Trust plc ('the Company') is a company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The financial statements of the Company for the year ended 31 May 2015 have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Financial Reporting Standards Committee ('IFRSC') that remain in effect, to the extent that IFRS have been adopted by the European Union. The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments held at fair value through profit or loss. Where presentational guidance set out in the Statement of Recommended Practice ('the SORP') for investment trusts issued by the Association of Investment Companies ('the AIC') in January 2009 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP.                              For the period under review the principal accounting policies adopted have not varied from those set out in the Annual Report for the year ended 31 May 2015.                                                 . These financial statements have been neither audited nor reviewed by the Company's Auditor.
	2.	Expenses Expenses, finance costs and taxation include provision for a performance fee when the relevant criteria have been met. For the six months to 30 November 2015 there was no performance fee provision (30 November 2014: £nil; 31 May 2015: £2,000,000). Any provision is charged 100% to capital. The actual performance fee, if any, payable to Henderson for the year to 31 May 2016 will depend on outperformance over the full financial year, subject to a cap on the total fees paid to Henderson of 0.9% of the average value of the net assets of the Company during the year. Details of the performance fee arrangements are set out in the Company's 2015 Annual Report.
	3.	Earnings per ordinary share The earnings per ordinary share figure is based on the net loss for the half-year of £7,696,000 (30 November 2014: net loss of £5,599,000; 31 May 2015: net profit of £95,631,000) and on 74,701,796 30 November 2014: 74,701,796; 31 May 2015: 74,701,796) ordinary shares, being the weighted average number of ordinary shares in issue during the period. The earnings per ordinary share figure detailed above can be further analysed between revenue and capital, as below.
			(Unaudited) 30 November 2015 £'000				(Unaudited) 30 November 2014 £'000			(Audited) 31 May 2015 £'000
		Net revenue profit	5,133				4,440			11,234
		Net capital (loss)/profit	(12,829)				(10,039)			84,397
			-----------				-----------			-----------
		Net total (loss)/profit	(7,696)				(5,599)			95,631
			======				======			======
		Weighted average number of ordinary shares in issue during the period	74,701,796				74,701,796			74,701,796
			Pence				Pence			Pence
		Revenue profit per ordinary share	6.87				5.94			15.04
		Capital (loss)/profit per ordinary share	(17.17)				(13.44)			112.98
			---------				---------			---------
		Total (loss)/profit per ordinary share	(10.30)				(7.50)			128.02
			=====				=====			======
	4.	Dividends The Board has declared an interim dividend of 4.0p (2014: 3.5p) to be paid on 4 March 2016 to shareholders on the register at the close of business on 12 February 2016. The ex dividend date will be 11 February 2016. No provision has been made for the interim dividend in these condensed financial statements. The final dividend of 10.0p per ordinary share, paid on 9 October 2015, in respect of the year ended 31 May 2015, has been recognised as a distribution in the period.
	5.	Called up share capital At 30 November 2015 there were 74,701,796 ordinary shares in issue (30 November 2014: 74,701,796; 31 May 2015: 74,701,796).  During the half-year ended 30 November 2015 the Company bought no ordinary shares in the market for cancellation (30 November 2014: nil; 31 May 2015: nil). The cost of the share buy-backs, including stamp duty, amounted to nil (30 November 2014: nil; 31 May 2015: nil). No shares have been bought back since the period end.
	6.	Net asset value per ordinary share The net asset value per ordinary share is based on the net assets attributable to the equity shareholders of £548,155,000 (30 November 2014: £464,706,000; 31 May 2015: £563,321,000) and on 74,701,796 (30 November 2014: 74,701,796; 31 May 2015: 74,701,796) ordinary shares, being the number of ordinary shares in issue at the period end.
	7.	Reconciliation of the (loss)/profit before taxation to the net cash inflow from operating activities
						(Unaudited) Half-year ended 30 November 2015		(Unaudited) Half-year ended 30 November 2014			(Audited) Year ended 31 May 2015
						£'000		£'000			£'000
		(Loss)/profit before taxation				(7,696)		(5,599)			95,643
		Losses/(gains) on investments held   at fair value through profit or loss				11,312		8,493			(89,494)
		Foreign exchange movements				34		-			-
		Increase in purchases for future settlement creditor				1,511		2,391			584
		Decrease in sales for  future settlement debtor				731		1,185			640
		Net (purchases)/sales of investments				(2,492)		(3,847)			3,270
		Decrease/(increase) in other receivables				1,277		697			(696)
		(Increase)/decrease in other debtors				(4)		(9)			9
		(Decrease)/increase in accruals				(2,353)		(528)			1,500
		Taxation on investment income				(5)		(1)			(7)
						---------		---------			---------
						2,315		2,782			11,449
						=====		=====			=====
8.		Financial Instruments
		The investments are held at fair value through profit or loss. All the net current liabilities are held in the Balance Sheet at a reasonable approximation of fair value. At 30 November 2015 the fair value of the Debenture Stock was £20,885,000 (30 November 2014: £22,160,000; 31 May 2015: £21,511,000). The fair value of the Debenture Stock is calculated using the prices quoted on the exchange on which the instrument trades. The Debenture Stock is carried in the Balance Sheet at par. At 30 November 2015 the fair value of the Preference Stock was £4,000 (30 November 2014: £4,000; 31 May 2015: £4,000). The fair value of the Preference Stock is estimated using the prices quoted on the exchange on which the investment trades. The Preference Stock is carried in the Balance Sheet at par. The Debenture Stock and Preference Stock are categorised as level 1 in the fair value hierarchy (see below for definitions). Fair value hierarchy The following table sets out the fair value measurements of the investments using the IFRS 13 fair value hierarchy. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used.
		Financial assets and financial liabilities at fair value through profit or loss at 30 November 2015		Level 1			Level 2		Level 3		Total
				£'000			£'000		£'000		£'000
		Equity investments		596,922			-		-		596,922
				-----------			--------		---------		----------
		Total financial assets and liabilities carried at fair value		596,922			-		-		596,922
				======			======		======		======
		Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1: valued using quoted prices in active markets for identical assets. Level 2: valued by reference to valuation techniques using observable inputs other than quoted prices included in Level 1. Level 3: valued by reference to valuation techniques using inputs that are not based on observable market data. The valuation techniques used by the Company are explained in the accounting policies note 1(c) of the Annual Report for the year ended 31 May 2015.
	9.	Transaction costs Purchase transaction costs for the half-year ended 30 November 2015 were £325,000 (30 November 2014: £164,000; 31 May 2015: £391,000). These comprise mainly stamp duty and commission.  Sale transaction costs for the half-year ended 30 November 2015 were £83,000 (30 November 2014: £52,000; 31 May 2015: £144,000).
	10.	Going concern Having reassessed the principal risks and uncertainties, the Directors consider that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. The assets of the Company consist almost entirely of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in existence for the foreseeable future.
	11.	Related party transactions During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or performance of the Company during the period. Details of related party transactions are contained in the Annual Report for the year ended 31 May 2015.
	12.	Comparative information The financial information contained in this half-yearly financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The financial information for the half-years ended 30 November 2015 and 30 November 2014 has not been audited. The information for the year ended 31 May 2015 has been extracted from the statutory accounts for that year, which have been filed with the Registrar of Companies.  The Report of the Auditors on those accounts was unqualified and contained no statement under either section 498(2) or section 498(3) of the Companies Act 2006.
	13.	General information Company Status The Henderson Smaller Companies Investment Trust plc is registered in England and Wales Company Nunber 25526, has its registered office at 201 Bishopsgate, London EC2M 3AE and is listed on the London Stock Exchange. The SEDOL number is 0906506. The London Stock Exchange (EPIC) Code is HSL. The Company's Global Intermediary Identification Number (GIIN) is WZD8S7.99999.SL.826 and its Legal Entity Identifier (LEI) is 213800NE2NCQ67M2M998. Directors and Corporate Secretary The Directors of the Company are Jamie Cayzer-Colvin (Chairman of the Board), Beatrice Hollond (Chairman of the Audit Committee), David Lamb, Keith Percy (Senior Independent Director) and Mary Ann Sieghart. The Corporate Secretary is Henderson Secretarial Services Limited, represented by Rachel Peat ACIS. Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, copies of announcements, reports and details of general meetings can be found at www.hendersonsmallercompanies.com
	14.	Financial Report for the Half-Year ended 30 November 2015 The Half-Year Report will shortly be available in typed format on the Company's website or from the Company's registered office. An abbreviated version, the 'Update', will be circulated to shareholders in January and will be available from the Corporate Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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