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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Henderson Diversified Income Trust Plc | LSE:HDIV | London | Ordinary Share | GB00BF03YC36 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 66.70 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMHDIV
RNS Number : 8771K
Henderson Diversified Income TstPLC
18 December 2018
HERSON INVESTMENT FUNDS LIMITED
HERSON DIVERSIFIED INCOME TRUST PLC
LEGAL ENTITY IDENTIFIER: 213800RV2228EO1JEN02
18 December 2018
Henderson Diversified Income Trust plc (the 'Company')
Unaudited results for half year ended 31 October 2018
This announcement contains regulated information
Total return performance
Hot Features
Premium
6 months 1 year 3 years(4) 5 years(4) 10 years(4)
% % % % %
---------------- --------- ------- ----------- ----------- ------------
NAV(1) -1.2 -3.2 12.4 26.6 159.5
Benchmark(2) 1.4 2.6 7.7 12.4 26.2
Share price(3) -8.2 -9.4 6.6 17.8 124.9
1 Net asset value total return including dividends reinvested
and excluding transaction costs
2 Benchmark is Libor plus 2%
3 Share price total return using mid-market closing price with
dividends reinvested
4 Performance prior to 27 April 2017 reflects the performance
of the predecessor company, Henderson
Diversified Income Limited that was launched on 18 July 2007
Sources: Janus Henderson, Datastream and Morningstar for the
AIC
Investment objective and policy
The Company's investment objective is to seek income and capital growth such that the total return on the net asset value of the Company exceeds the average return on a rolling annual basis of three month sterling Libor plus 2%.
The Company aims to deliver this outcome by investing in a diversified portfolio of global fixed and floating rate income asset classes including secured loans, government bonds, high yield (sub-investment grade) corporate bonds, unrated corporate bonds, investment grade corporate bonds and asset backed securities. The Company may also invest in high yielding equities and derivatives.
The Company uses a dynamic approach to portfolio allocation across asset classes and is permitted to invest in a single asset class if required. The Company seeks a sensible spread of risk at all times. It can invest in assets of any size, sector, currency or issued from any country.
Interim Management Report
Chairman's Statement
It gives me little pleasure to report that while we have been able to maintain the quarterly level of dividend at 1.10p, the total return was negative for shareholders in the period under review. This has been as a consequence of the re-pricing of risk and the decline in the rating of our own shares by the market.
It is important to appreciate that this has not been as a consequence of any defaults or credit issues. The capital of the Company has suffered as higher interest rates in the US and widening credit spreads have driven down bond and secured loan prices in US dollar terms.
In the last statement I highlighted the Managers' view that there was limited risk of defaults but that risk might be re-priced, leading to a reduction in the capital value of the portfolio. This is indeed what appears to have happened.
Shareholders might reasonably ask, like Cassandra, what the benefit of this foresight has been to them. Unfortunately, what the Managers describe as "the nasty concoction of late cycle conditions" has left little room for other outcomes for managers of an income-orientated portfolio.
Performance
The net asset value total return per ordinary share for the period 1 May 2018 to 31 October 2018 was -1.2% whilst the share price total return per ordinary share was -8.2%; both behind the benchmark target performance of +1.4%. The share price moved from trading at a premium to trading at a discount to the net asset value of 2.3%.
Dividends and dividend policy
On 28 September 2018 a first interim dividend of 1.10p per ordinary share for the period ended 30 April 2019 was paid. A second interim dividend of 1.10p per ordinary share for the period ended 30 April 2019 was declared on 27 November 2018 and will be paid to shareholders on 28 December 2018. These dividends have been paid as interest distributions for UK tax purposes. More information about interest distributions can be found on the Company's website:
www.hendersondiversifiedincome.com
Outlook
The outlook for both sterling and the euro look very volatile and it is difficult to anticipate what might happen over the months ahead. At the time of writing, commentators in the UK are almost entirely focussed on the outcome of Brexit. Happily, this portfolio is not as exposed as many to the potential volatility that may ensue from this quite fundamental change in our position in the world economy.
Of much greater importance, as highlighted in the annual report, is whether inflation does start to return to the global economy. The Managers remain of the view that it will not, foiled by the twin headwinds of globalisation and technological development. If this proves to be the case, then this should lead to more positive returns in the years ahead and valuations may become more attractive than 12 months ago.
This view is not universally held and the Managers are constantly vigilant for data that might challenge this opinion. As you will see in their report, they have not to date seen signs to support a change in their position. However, the unwind of Quantitative Easing, the increased threat to the hegemony of free trade, the challenge to the European Union and the apparently inexorable shift in the centre of economic gravity to Asia and the Pacific all suggest these secular and cyclical trends have no precedent. I would suggest they are prudent to prepare for any eventuality.
In view of this, as a temporary measure, we have agreed with the Managers that they may reduce the gearing level for the next two quarters, unconstrained by a requirement to cover the dividend, which will be covered by reserves if required. The Managers view is that 1.10p is the right level of dividend which we anticipate will be paid during this period and that covered dividends will be resumed in due course.
Angus Macpherson
Chairman
18 December 2018
Fund Managers' Report
Over the period under review, the Company produced a modest negative net asset value total return of -1.2% which is behind our Libor +2% target of 1.4% The share price return has been even more disappointing as the healthy premium we traded at the beginning of the period has been entirely eroded. Although the income stream has been secure we have lost some capital, not from the default of any of our investments but from a gradual repricing of risk across global capital markets which has resulted in falling bond prices. This should be of no surprise as we made clear in the last Annual Report to shareholders that the current stage in the cycle is the most challenging for bond managers, especially those running a geared income orientated strategy such as ours.
We have previously highlighted the nasty concoction of late cycle conditions which has made making positive returns challenging. If anything the last six months have been fairly easy to rationalise, albeit begrudgingly. The US Fed has continued to raise short term interest rates as they attempt to normalise monetary policy. Some of this tightening in monetary conditions has been needed to offset the loosening in fiscal policy from the ill-timed Trump tax cuts. Higher short rates for the US dollar have caused global financial conditions to tighten significantly. The high oil price, which is a classic late cycle indicator, has acted as a tax for many countries who import the commodity; particularly as it is priced in US dollars which has strengthened against many other currencies.
The flatness of the yield curve (the difference between short end and long end rates) also gives some pause for thought as the curve typically flattens significantly, or inverts, going into periods of financial stress as shown in the chart in the Half Year Update. This means that investors are not well rewarded for taking on longer dated risk relative to short dated investments. The flat yield curve also has negative implications for financial institutions, whose business model is predicated on borrowing on the short end and lending at longer maturities; as such financials exposure has come down modestly reflecting this outlook. "Real" interest rates in the US, which look at the interest rate adjusted for inflation, have risen above 1% for 10 year bonds which we consider is supressing economic activity.
During the period, high yield spreads contracted significantly in the US reflecting a somewhat skewed risk/reward balance on offer in the market. Value is hard to find in most markets. We expect greater volatility going forward as financial conditions tighten in the US and more globally. Indeed, this has been evident in the net asset value of the Company. It has shown up in extremis in other markets such as Bitcoin, ETF volatility products, emerging markets stress in countries such as Turkey and Argentina but also a number of single names/sectors such as General Electric, the FAANGs, or in "defensive" tobacco stocks.
These allegedly idiosyncratic risks are growing at a concerning rate against an unsupportive macroeconomic backdrop in which cyclical businesses are struggling, suggesting to us the economy is more late cycle than many think. The S&P hit record highs at the end of October 2018 but this was driven by an increasingly narrow subset of technology and growth stocks, which include some cash burning companies (for example Netflix and Tesla) in which we would not choose to invest.
With this concoction of risks growing, not to mention the extremely volatile political backdrop present in most parts of the world at the moment, it is no surprise most asset classes this year are delivering negative returns. Making money has been virtually impossible in this late cycle environment. Some assets, such as loans, have looked more appealing on a relative basis but the hunger for floating rate instruments has given issuers the power to pare back covenants and engage in aggressive repricing. We would prefer to remain cautious, stick to quality and lock in reliable yields in more stable companies as the cycle continues to mature.
We are continuing to see a world of low growth and contained inflation; the past two years have seen a modest cyclical increase in growth which has temporarily offset the longer term structural headwinds we have written about in previous reports. Patience and prudence has been required in order not to get drawn into the reflationary mindset that has characterised the past two years and precipitated a lot of marginal late cycle loan and bond issuance. A large part of our core mantra has been to say no to such deals and the performance of some of these issues in the past few weeks has left us feeling vindicated in this decision. The Bank of England, the US Fed and the BIS have all issued warnings in the past six months on excesses in the loan market. Many firms have chosen to eschew high yield markets to issue loans (which have fewer covenants and offer more flexibility for issuers), providing a positive technical back drop as high yield supply contracts.
Our preference for large cap non-cyclicals has insulated us from much of the dispersion in a growing number of names and industries which are now looking vulnerable to the turning economic cycle. Profit warnings are coming from a variety of different sources for a myriad of different reasons; increasing labour cost pressure, higher energy costs, tariffs, weakening export demand. These are in addition to the wider structural issues we have mentioned in previous reports such as technological disruption. The UK high street, for example, is under huge structural pressure. The number of investable sectors continues to shrink and we have been pleased with our stock selection on a macro and microeconomic level. Looking at our portfolio in the context of the current economic backdrop should provide comfort as we have resisted more cyclical, volatile issuance as well as the fashionable illiquid alternative assets. Illiquidity is appearing to flash warning signs to us, much like leverage during the last cycle, and investors should be wary of small cap lending, infrastructure, aviation finance, peer to peer lending etc. As these assets begin to turn, the rush for the exits can get crowded.
Regarding our geographical exposure, we have significantly reduced our sterling denominated exposure and continue to hold few European credits. Both areas have limited growth and growing political uncertainty. We have taken good profit on some of our legacy junior banking bonds. We have also trimmed some of our Swiss, French and Irish banking exposure. We have taken profit on some of our UK insurance holdings. Standard Life and Tesco both tendered at generous prices to buy back their bonds as both companies have restructured their balance sheets following corporate activity. TP ICAP was sold at a modest loss following an unforeseen profit warning. New holdings were introduced in stocks such as Comcast, Keurig Dr Pepper, Intertrust, Salesforce and Constellation Brands. Arqiva, the UK broadcast towers business, was re-financed. We very much favour tower businesses as we see them as modern day utilities given the advent of 5G. We also favour data centre businesses on a similar theme. Packaging and consumer facing businesses are also preferred. We also lent to Elanco, an animal health business.
Today nearly 80% of the portfolio is invested in American or global credits. The US has raised rates significantly, from very low levels; this is primarily due to the successful reflation of their economy albeit with moderate actual inflation. America not only has liquid, large, transparent and deep credit markets, it also has that scarce commodity - growth. We would much rather lend to a large company which can grow its cash flows rather than be plagued by patchy European growth with considerable political tail risks. Leverage is at slightly lower levels but is still necessary to maintain the dividend. It is our policy that all foreign currency bond exposure is hedged back to sterling. This involves selling the non-sterling currency risk on a rolling basis using a forward contract to offset the currency exposure, which is primarily in dollars as stated above. The Condensed Statement of Comprehensive Income shows a foreign exchange loss of GBP12,554,000, but this is offset by the rise in these foreign currency assets in sterling terms. This is exactly what you would expect to happen and should not concern shareholders.
The outlook remains challenging although we are confident in our ability to maintain the dividend. We feel stock selection has been strong and we remain choosy and vigilant in our stock selection. Credit markets tend to underperform at this stage in the cycle but not nearly as bad as equities. We retain the ability to add extra risk and hope to lock in higher yields for investors going forward. We believe growth, inflation and earnings have peaked and expect US interest rates policy to plateau in the foreseeable future. Once that happens bonds could become very interesting again. We expect the heightened political issues in the UK and Europe to continue, given the lack of clarity and leadership on show, and would be cautious on markets until some resolution emerges or the value proposition changes significantly. We do expect continued volatility in the capital of the Company but are not expecting any permanent capital impairment. We remain focused to providing a reliable, dependable and consistent dividend stream for our shareholders.
John Pattullo & Jenna Barnard, Fund Managers
12 December 2018
Principal risks and uncertainties
The principal risks and uncertainties associated with the Company's business can be divided into the following main areas:
-- General market risks associated with the Company's investments, including interest rate, credit and currency risks
-- Operational risks, including:
o Continued interest of the Fund Managers and Investment Manager.
o Effective operation of systems of internal control and management reporting.
o Credit standing and quality of service of the Depositary.
o Reliance on service providers.
Information on these risks and how they are managed is given in the Company's Annual Report for the period ended 30 April 2018.
In the view of the Board these principal risks and uncertainties were unchanged over the last six months and are as applicable to the remaining six over the last six months of the financial year as they were to the six months under review.
Statement of Directors' responsibilities
Each of the Directors confirm that, to the best of their knowledge:
(a) The condensed set of financial statements has been prepared in accordance with the International Accounting Standard 34 'Interim Financial Reporting';
(b) The Interim Management Report includes a fair review of the information required by Disclosure, Guidance and Transparency Rule 4.2.7R (indication of important events during the six month period and description of principal risks and uncertainties for the remaining six months of the year); and
(c) The Interim Management Report includes a fair review of the information required by Disclosure, Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).
For and on behalf of the Board
Angus Macpherson
Chairman
12 December 2018
Summary of portfolio as at 31 October(1)
2018 2017
% %
High yield bonds 62.3 58.7
Investment grade
bonds 24.9 24.8
Secured loans 9.8 13.7
Equities 2.1 2.0
Asset backed securities 0.9 0.8
Currency exposure of portfolio as at 31 October(1, 2)
2018 2017
% %
Sterling 23.8 33.3
Euro 4.0 8.5
US dollar 70.7 58.2
Australian dollar 1.5 -
1 Does not include credit default swaps
2 The Company hedges its foreign currency exposure back to sterling. There was therefore no material net currency exposure at 31 October 2018 (2017: same)
Twenty largest investments as at 31 October 2018
Company Principal activities Currency Geographical Valuation %
area GBP'000 of portfolio
Tesco Food GBP UK 4,707 2.64
HCA Consumer, non-cyclical $ US 4,433 2.49
Sirius Media $ US 4,392 2.47
Aramark Food service $ US 4,380 2.46
Warner Music Consumer, cyclical $ US 4,253 2.39
Ardagh Packaging & containers Euro/$ Ireland 4,197 2.36
Equinix Telecommunications Euro/$ US 4,197 2.36
Zayo Telecommunications $ US 4,008 2.25
IMS Consumer, non-cyclical $ US 3,998 2.24
Diversified financial
CPUK Finance services GBP UK 3,997 2.24 Service Corp Consumer, non-cyclical $ US 3,933 2.21 Wachovia Banks $ US 3,869 2.17 Lamb Consumer, non-cyclical $ US 3,859 2.17 Crown Industrial $ US 3,835 2.15 Co-Operative Group Food GBP UK 3,824 2.15 Credit Suisse Banks $ Switzerland 3,808 2.14 Barclays Diversified banking GBP/$ UK 3,787 2.12 Nationwide Building Society Banks GBP UK 3,781 2.12 PGH Capital Insurance GBP UK 3,723 2.09 First Data Technology $ US 3,600 2.02
These investments total GBP80,581,000 or 45.24% of the portfolio.
Condensed Statement of Comprehensive Income
(Unaudited) (Unaudited) (Audited)
Half year ended Period ended Period ended
31 October 2018 31 October 2017 30 April 2018
Revenue Capital Revenue Capital Revenue Capital
return return Total return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- --------- -------- -------- --------- -------- -------- -------- --------
Gains/(losses) on
investments held at fair
value through profit or
loss - 6,332 6,332 - 2,394 2,394 - (8,322) (8,322)
(Losses)/gains on foreign
exchange transactions at
fair value through profit
or loss - (12,554) (12,554) - 2,375 2,375 - 5,724 5,724
Investment income 5,136 - 5,136 4,747 - 4,747 9,570 - 9,570
Other operating income 21 - 21 3 - 3 5 - 5
------ ------- ------- ------ ------- ------- -------- ------- -------
Total income/(loss) 5,157 (6,222) (1,065) 4,750 4,769 9,519 9,575 (2,598) 6,977
Expenses
Management and performance
fees (260) (260) (520) (765) (765) (1,530) (1,037) (1,036) (2,073)
Other expenses (222) - (222) (288) - (288) (471) - (471)
------- -------- -------- ------- -------- -------- -------- -------- --------
Profit/(loss) before
finance costs and
taxation 4,675 (6,482) (1,807) 3,697 4,004 7,701 8,067 (3,634) 4,433
Finance costs (112) (112) (224) (94) (93) (187) (210) (209) (419)
-------- --------- -------- -------- --------- -------- -------- -------- --------
Profit/(loss) before
taxation 4,563 (6,594) (2,031) 3,603 3,911 7,514 7,857 (3,843) 4,014
Taxation (28) - (28) 48 - 48 40 - 40
-------- -------- -------- -------- -------- -------- ------- ------- --------
Profit/(loss) for the
period 4,535 (6,594) (2,059) 3,651 3,911 7,562 7,897 (3,843) 4,054
===== ==== ===== ===== ===== ===== ===== ===== =====
Return per ordinary share
(note 2) 2.39p (3.48p) (1.09p) 1.95p 2.08p 4.03p 4.19p (2.04p) 2.15p
===== ===== ===== ===== ===== ===== ===== ===== =====
The total columns of this statement represent the Statement Comprehensive Income of the Company, prepared in accordance with International Financial Reporting Standards 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 form an integral part of this condensed interim financial information
Condensed Statement of Changes
in Equity
Called Share
up share premium Distrib-utable Capital Revenue
Half-year ended 31 October 2018 capital account reserve reserves reserve Total
(unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- -------------- ---------- ---------- -----------
Total equity at 1 May 2018 1,896 - 165,538 (3,843) 2,208 165,799
Total comprehensive income:
(Loss)/profit after taxation - - - (6,594) 4,535 (2,059)
Transactions with owners recorded
directly to equity:
Cancellation of share premium
expenses - - (7) - - (7)
Dividends paid - - - - (4,172) (4,172)
-------- -------- -------- --------- -------- ----------
Total equity at 31 October 2018 1,896 - 165,531 (10,437) 2,571 159,561
===== ===== ===== ===== ===== ======
Called Share
up share premium Distrib-utable Capital Revenue
Period ended 31 October 2017 capital account reserve reserves reserve Total
(unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- -------------- ---------- ---------- -----------
Total equity at 23 February
2017 - - - - - -
Total comprehensive income:
Profit from after taxation - - - 3,911 3,651 7,562
Transactions with owners recorded
directly to equity:
Proceeds from Issue of shares 1,896 166,752 - - - 168,648
Issue costs - (460) - - - (460)
Transfer for cancellation of
share premium - (166,292) 166,292 - - -
Dividends paid - - (474) - (1,896) (2,370)
-------- -------- -------- --------- -------- ----------
Total equity at 31 October 2017 1,896 - 165,818 3,911 1,755 173,380
===== ===== ===== ===== ===== ======
Called Share
up share premium Distrib-utable Capital Revenue
capital account reserve reserves reserve Total
Period ended 30 April 2018 (audited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- -------------- ---------- ---------- -----------
Total equity at 23 February
2017 - - - - - -
Proceeds from issue of shares
on 27 April 2017 1,822 159,596 - - - 161,418
---------- ---------- ---------- ---------- ---------- ----------
Total equity at 27 April 2017 1,822 159,596 - - - 161,418
Total comprehensive income:
(Loss)/profit after taxation - - - (3,843) 7,897 4,054
Transactions with owners recorded
directly to equity:
Proceeds from issue of shares 74 6,795 - - - 6,869
Transfer for cancellation of
share premium - (166,391) 166,391 - - -
Dividends paid - - (853) - (5,689) (6,542)
--------- --------- --------- --------- --------- -----------
Total equity at 30 April 2018 1,896 - 165,538 (3,843) 2,208 165,799
===== ===== ===== ===== ===== ======
The accompanying notes form an integral part of this condensed interim financial information.
Condensed Statement of Financial Position
(Unaudited) (Unaudited) (Audited)
At 31 October At 31 October At 30 April
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------- --------------- --------------- -------------
Non-current assets
Investments held at fair value
through
profit or loss 178,106 199,765 197,439
Current assets
Other receivables 5,536 5,951 5,737
Cash and cash equivalents 3,062 2,276 370
----------- ----------- -----------
Total assets 186,704 207,992 203,546
Current liabilities
Other payables (5,518) (4,554) (10,937)
Bank Loan (21,625) (30,058) (26,810)
---------- ---------- -----------
Total assets less current liabilities 159,561 173,380 165,799
----------- ----------- -----------
Net assets 159,561 173,380 165,799
====== ====== ======
Equity attributable to equity
shareholders
Called-up share capital 1,896 1,896 1,896
Distributable reserve 165,531 165,818 165,538
Capital reserve (10,437) 3,911 (3,843)
Revenue reserve 2,571 1,755 2,208
----------- ----------- -----------
Total equity 159,561 173,380 165,799
====== ====== ======
Net asset value per ordinary share
(note 3) 84.15p 91.44p 87.44p
====== ====== ======
The accompanying notes form an integral part of this condensed interim financial information.
Condensed Cash Flow Statement
(Unaudited) (Unaudited) (Audited)
Half year Period ended Period ended
ended 31 October 31 October 30 April
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------------ -------------- --------------
Operating activities
Net (loss)/profit before tax (2,031) 7,514 4,014
Interest payable 224 187 419
(Gains)/losses on investments held
at fair value through profit or loss (6,332) (2,394) 8,322
Losses/(gains) on foreign exchange
transactions at fair value through
profit or loss 12,554 (2,375) (5,724)
(Receipt)/payment on settlement of
forward exchange contracts (12,407) 1,470 10,484
(Increase)/decrease in prepayments
and accrued income (388) (1,129) 120
(Decrease)/increase in other creditors (8) 1,484 491
Purchases of investments (43,696) (83,942) (145,430)
Sales of investments 64,563 71,799 125,642
---------- ---------- ----------
Net cash inflow/(outflow) from operating
activities before finance costs 12,479 (7,386) (1,662)
---------- ---------- ----------
Interest paid (248) (170) (372)
Taxation on investment income (28) 56 49
---------- ---------- ----------
Net cash inflow/(outflow) from operating
activities 12,203 (7,500) (1,985)
---------- ---------- ----------
Financing activities
Equity dividends paid (4,172) (2,370) (6,542)
Issue of ordinary shares - 6,869 6,869
Cash received from Henderson Diversified
Income Limited - 5,324 5,324
Issue costs (7) (460) (361)
Net loans (repaid)/drawn down (5,185) 123 (3,125)
---------- ---------- ----------
Net cash (outflow)/inflow from financing
activities (9,364) 9,486 2,165
---------- ---------- ----------
Net increase in cash and cash equivalents
2,839 1,986 180
Cash and cash equivalents at start
of period 370 - -
Exchange movements (147) 290 190
---------- ---------- ----------
Cash and cash equivalents at the
end of the period 3,062 2,276 370
====== ====== ======
Comprising:
Cash at bank 3,062 2,276 370
---------- ---------- ----------
3,062 2,276 370
====== ====== ======
The accompanying notes form an integral part of this condensed interim financial information.
Notes to the interim financial information:
1. Accounting policies - basis of accounting
Henderson Diversified Income Trust plc ('the Company") is a company incorporated and domiciled in the United Kingdom under the Companies Act 2006.
These condensed financial statements comprise the unaudited results of the Company for the half-year ended 31 October 2018. They have been prepared on a going concern basis and in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union and with the Statement of Recommended Practice for Investment Trusts ('SORP') issued by the Association of Investment Companies dated November 2014, and updated in February 2018 with consequential amendments, where the SORP is consistent with the requirements of IFRS.
For the period under review the Company's accounting policies have not varied from those described in the Annual Report for the period ended 30 April 2018. The Board has, however, clarified that all gains or losses resulting from currency forward exchange contracts be allocated to the capital return.
The condensed set of financial statements has been neither audited nor reviewed by the Company's auditors.
Although the Company was incorporated on 23 February 2017, because the Company did not hold any assets or earn any income prior to 27 April 2017 the comparative periods to 31 October 2017 and 30 April 2018 principally reflect the periods 27 April 2017 to 31 October 2017 and 27 April 2017 to 30 April 2018.
2. Return per ordinary share
(Unaudited)
Half year (Unaudited)
ended Period ended (Audited)
31 October 31 October Period ended
2018 2017 30 April 2018
GBP'000 GBP'000 GBP'000
----------------------------- ------------ -------------- ---------------
Net revenue return 4,535 3,651 7,897
Net capital return (6,594) 3,911 (3,843)
--------- --------- ---------
Net total return (2,059) 7,562 4,054
===== ===== =====
Weighted average number
of ordinary shares 189,618,240 187,795,092 188,686,956
Revenue return per ordinary
share 2.39p 1.95p 4.19p
Capital return per ordinary
share (3.48p) 2.08p (2.04p)
--------- ---------- ---------
Total return per ordinary
share (1.09p) 4.03p 2.15p
===== ===== =====
The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted earnings per ordinary share are the same.
3. Net asset value per ordinary share
The net asset value per ordinary share is based on the net asset value attributable to ordinary shareholders at 31 October 2018 of GBP159,561,000 (31 October 2017: GBP173,380,000; 30 April 2018: GBP165,799,000) and on 189,618,240 ordinary shares, being the number of ordinary shares in issue at 31 October 2018 (31 October 2017 and 30 April 2018: 189,618,240).
4. Share capital
During the half-year ended 31 October 2018, no ordinary shares were issued or bought back (periods ended 31 October 2017 and 30 April 2018: 189,618,240 new ordinary shares were issued for net proceeds of GBP161,418,000, comprised of GBP180,302,000 investments, GBP5,324,000 cash and GBP24,208,000 other net current liabilities. At 31 October 2018 there were 189,618,240 ordinary shares of 5p nominal value in issue. Since 31 October 2018, no shares have been issued or bought back. The Company has no shares held in Treasury.
5. Dividends paid
A fourth interim dividend for the period ended 30 April 2018 of 1.10p (2017: n/a) per ordinary share was paid on 29 June 2018 to shareholders on the register at close of business on 8 June 2018. This dividend was paid as an interest distribution for UK tax purposes from the Company's revenue account.
A first interim dividend payment for the year ending 30 April 2019 of 1.10p (2018: 1.25p) per ordinary share was paid on 28 September 2018 to shareholders on the register at close of business on 7 September 2018. This dividend was paid as an interest distribution for UK tax purposes from the Company's revenue account.
On 27 November 2018 the Board declared a second interim dividend payment for the year ending 30 April 2019 of 1.10p (2018: 1.25p) per ordinary share that will be paid on 28 December 2018 to shareholders on the register at close of business on 7 December 2018. The shares went ex-dividend on 6 December 2018. This dividend will be paid as an interest distribution for UK tax purposes from the Company's revenue account.
6. Financial instruments
The table below sets out the fair value measurements using the IFRS 13 fair value hierarchy. Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value measurement of the relevant asset as follows:
Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2: valuation techniques for which the lowest level of input that is significant to the fair value measurement is directly or indirectly observable; and
Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The financial assets and liabilities measured at fair value in the Condensed Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:
Level Level Level
1 2 3 Total
As at 31 October 2018 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss:
Investments 160,638 17,468 - 178,106
- 975 - 975
Credit default swaps -------- -------- ------- --------
160,638 18,443 - 179,081
Total ===== ===== ===== =====
Financial liabilities at fair value
through profit or loss:
Currency forward exchange contracts - 3,542 - 3,542
-------- -------- ------- --------
- 3,542 - 3,542
Total ===== ===== ===== =====
Level Level Level
1 2 3 Total
As at 31 October 2017 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss:
Investments 172,437 27,328 - 199,765
Credit default swaps - 786 - 786
Currency forward exchange contracts - 155 - 155
Total -------- -------- -------- ---------
172,437 28,269 - 200,706
===== ===== ===== =====
Level Level Level
1 2 3 Total
As at 30 April 2018 (audited) GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair value through
profit or loss:
Investments 177,762 19,677 - 197,439
Credit default swaps - 626 - 626
---------- ---------- ---------- ----------
177,762 20,303 - 198,065
Total ====== ====== ====== ======
Financial liabilities at fair value
through profit or loss:
Currency forward exchange contracts - 5,409 - 5,409
-------- -------- -------- --------
- 5,409 - 5,409
Total ===== ===== ===== =====
There have been no transfers between levels of fair value hierarchy during the period. Transfers between levels of fair value hierarchy are deemed to have occurred at the date of the event or change in circumstances that caused the transfer.
Valuation techniques used by the Company are explained in the accounting policies note in the Company's Annual Report for the period ended 30 April 2018.
There were no transfers to or from Level 3 during the period.
7. Related party transactions
The Company's transactions with related parties were with its Directors and Janus Henderson Investors ("the Manager"). There have been no material transactions between the Company and its Directors during the period under review other than the amounts paid to the Directors in respect of fees. 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 sales and marketing services there have been no material transactions with the Manager affecting the financial position of the Company during the period under review.
8. Going concern
The assets of the Company consist mainly of securities that are listed and readily realisable and, accordingly, the Directors believe that the Company has adequate financial resources to continue in existence for at least 12 months from the date of approval of the financial statements. Having assessed these factors, the principal risks, and other matters discussed in connection with the viability statement set out in the Annual Report to 30 April 2018, the Directors have decided that it is appropriate for the financial statement to be prepared on a going concern basis.
9. General information
a) Company status
The Company is a UK domiciled investment trust company which was incorporated on 23 February 2017. The Company number is 10635799. The Company is listed on the London Stock Exchange.
The ISIN code is GB00BF03YC36. The SEDOL number is BF03YC3.
The London Stock Exchange code is HDIV.
The Company's Global Intermediary Identification Number (GIIN) is QR3G93.99999.SL.826.
The Company's LEI number is 213800RV2228EO1JEN02
b) Directors, Secretary and Registered Office
The Directors of the Company are Angus Macpherson (Chairman), Ian Wright (Audit Committee Chairman), Denise Hadgill and Stewart Wood. The Corporate Secretary is Henderson Secretarial Services Limited, represented by Hannah Gibson, ACIS. The registered office is 201 Bishopsgate, London EC2M 3AE.
c) 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.hendersondiversifiedincome.com.
10. Half Year Report
The half year report will shortly be available on the Company's website (www.hendersondiversifiedincome.com) or in hard copy from the Company's registered office. An abbreviated version of this half year report, "the Update", will be circulated to shareholders in December 2018.
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
For further information contact:
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
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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December 18, 2018 10:33 ET (15:33 GMT)
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