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HEFT Henderson European Focus Trust Plc

180.50
-0.50 (-0.28%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Henderson European Focus Trust Plc LSE:HEFT London Ordinary Share GB00BLSNGB01 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.50 -0.28% 180.50 180.50 182.50 181.50 181.50 181.50 204,779 16:35:29
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Unit Inv Tr, Closed-end Mgmt 79.72M 75.29M 0.3539 5.13 386.17M

Henderson European Focus Trust PLC Final Results (4548Y)

05/12/2017 2:30pm

UK Regulatory


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TIDMHEFT

RNS Number : 4548Y

Henderson European Focus Trust PLC

05 December 2017

HERSON EUROPEAN FOCUS TRUST PLC

Annual Financial Report for the year ended 30 September 2017

This announcement constitutes regulated information.

Investment Objective

The Company seeks to maximise total return from a focused portfolio of listed stocks, mainly in Continental Europe.

Performance highlights

-- The ordinary share price(1) total return (including dividends reinvested) was 35.9% (2016: 8.6%).

-- The net asset value ("NAV") per ordinary share total return(2) (including dividends reinvested) was 21.7% compared to a total return from the benchmark(3) of 22.7%.

-- The NAV per ordinary share total return (including dividends reinvested) for the five years ended 30 September 2017 was 129.7% compared to a total return from the benchmark of 100.1%.

-- Increased proposed annual dividend: interim and final dividends of 9.00p and 20.50p per ordinary share respectively making a total of 29.50p (2016: 26.4p).

   --     Proposed special dividend of 1.40p per share. 

-- The ordinary shares were trading at a premium to NAV of 1.3% (2016: -9.3%) as at 30 September 2017.

 
 Total return performance for the year to 30 September 2017 (including 
  dividends reinvested and excluding transaction costs) 
                                   1 year      3 years     5 years     10 years 
                                        %            %           %            % 
-----------------------------  ----------  -----------  ----------  ----------- 
 NAV                                 21.7         54.0       129.7        162.8 
 Benchmark                           22.7         46.8       100.1         85.0 
 Share price                         35.9         55.3       167.7        183.5 
 AIC Europe sector(4)                22.8         54.0       113.8        129.9 
-----------------------------  ----------  -----------  ----------  ----------- 
 Ranking in sector                      4            3           1            2 
 

Financial highlights

 
                                        At 30 September   At 30 September 
                                                   2017              2016 
-------------------------------------  ----------------  ---------------- 
 Shareholders' funds 
 Net assets attributable to ordinary 
  shareholders (GBP'000)                        292,398           237,551 
 Net asset value per ordinary share           1,370.62p         1,153.12p 
 Mid-market price per ordinary share          1,389.00p         1,045.50p 
 
                                             Year ended        Year ended 
                                      30 September 2017      30 September 
                                                                     2016 
-------------------------------------------------------  ---------------- 
 Total return to equity shareholders 
 Net revenue return (GBP'000)                     7,024             5,507 
  Net capital return (GBP'000)                                     34,679 
                                                 43,535 
                                            -----------       ----------- 
                                                 50,559            40,186 
                                                 ======            ====== 
 Total return per ordinary share 
 Revenue return                                  33.81p            26.85p 
 Capital return                                 209.55p           169.05p 
                                            -----------       ----------- 
                                                243.36p           195.90p 
                                                 ======            ====== 
 Ongoing charge for year                          0.87%             0.90% 
 

1 Share price total return using mid-market closing prices

2 Net Asset Value per ordinary share with income reinvested for one, three and five years and capital NAV per ordinary share plus income reinvested for ten years

3 FTSE World Europe ex UK index on a total return basis in Sterling terms

4 The AIC Europe sector is comprised of eight trusts

Sources: Morningstar Direct, Janus Henderson, Datastream

CHAIRMAN'S STATEMENT

Performance

In the financial year to 30 September 2017, the Company produced a share price total return per ordinary share of 35.9% (2016: 8.6%). The Company's net asset value ("NAV") total return for the year was 21.7% (2016: 20.4%) compared to the total return of the benchmark, the FTSE World Europe ex UK in Sterling terms, of 22.7% (2016: 21.1%). The NAV total return per ordinary share for the five year period to 30 September 2017 was 129.7% compared with 100.1% for the benchmark.

The Company's shares traded at a premium for most the year, enabling the Company to issue a total of 897,500 shares during the year and up to the date of this report, raising a total of GBP12,370,000.

Dividend

The Board is recommending a final dividend of 20.50p per ordinary share which, subject to shareholder approval at the 2018 Annual General Meeting ("AGM"), will be paid on 2 February 2018. When added to the interim payment of 9.00p (2016: 7.50p) this brings the full year dividend to 29.50p, an increase of 11.7% (2016: 7.1%) over last year's distribution.

The Board is also recommending a special dividend of 1.40p per ordinary share which is the result of the successful return of withholding tax refunded by the French tax authority. If approved, the special dividend will be paid at the time of the final dividend.

Board changes

The Board was pleased to announce on 11 September 2017 that Eliza Dungworth would be succeeding Alexander Comba as Chairman of the Audit Committee with effect from the 2018 AGM. Alexander will remain as the Senior Independent Director of the Company and offers himself for re-election at the 2018 AGM.

The change forms part of the ongoing programme to refresh Board membership and to ensure that the Directors bring a diverse range of skills and experience to deliberations on the Company's business.

Investment Objective and Policy

As part of its considerations on strategy, the Board reviewed the Company's Investment Objective and Policy. In doing so, we were cognisant of the FCA's recommendations in terms of clarifying and simplifying the wording used in this type of documentation. We have taken the opportunity to enhance the Fund Manager's ability to focus the portfolio and have dropped the lower level of holdings to 45. We have also clarified the level of NAV which should be invested in Continental Europe. The updated Investment Objective and Policy is included in the resolutions which will be put to the 2018 AGM. We encourage shareholders to vote in favour of its adoption. Further details are provided in the Notice of Meeting.

Annual General Meeting ("AGM")

The AGM is due to be held on 25 January 2018 and the Directors will again be seeking to renew the authorities previously granted permitting the allotment and repurchase of the Company's ordinary shares. The Directors are also proposing a revised Remuneration Policy and amendments to the Company's Articles of Association.

Details on these resolutions are provided in the Notice of Meeting.

Manager

Henderson Group plc merged with Janus Capital Group, Inc. on 30 May 2017. I am pleased to confirm that this has not led to a change in the Fund Manager for your Company and the Board has been reassured that the strength of the European Equities team will be maintained.

Outlook

The period under review and extending back into 2016 has been dominated on the macro level by political concerns. There have been referenda and elections; most notably this year in the Netherlands, France and latterly Germany where the concerns of a comprehensive political upset have impacted the markets and, at the time of writing, remain unresolved. Notwithstanding that, it is clear that there are powerful discontents not far below the surface that will continue to have an influence on politics and policy making in Europe. In the last part of the financial year under review, there has been renewed unrest provoked by the Catalan "referendum", reminding everyone that the direction for Europe is far from settled. Although these events dominate the news and are clearly very important for the future of the Continent, accurately predicting every twist and turn and its impact on financial markets is, in our view, very unlikely. Consequently, as has always been the case, your Fund Manager combines a thematic approach to sector selection with a focus on a bottom up analysis of individual companies, their cash flows and trading prospects. Your portfolio is thus always a mix of stock and sector decisions based on the fundamental value of companies. It is our view that returns to financial assets fluctuate around a long run mean return made up of the real rate of interest and the relevant equity risk premium. Actual valuations often diverge significantly from their long run return and the process of adjustment back to the mean is often called mean reversion. In the light of our strongly held view that markets have an almost universal tendency to "revert to the mean", it is worth reflecting on the fact that there has been a very strong performance from all financial assets whether bond or equities, both in developed and emerging markets. Furthermore, this exceptional asset price performance has extended out to encompass real assets from real estate to the more exotic assets like fine art, fine wines and even vintage cars. There are a range of theories as to why this has occurred, but prime amongst those reasons must be the unprecedented central bank monetisation of debt.

European equities have been full beneficiaries of these favourable developments and in addition to this your Company has benefited from the weakness in Sterling, particularly when compared to the Euro, which came in the wake of widespread concerns expressed after the Brexit vote last year. The significant and long-lasting bull market that we have been enjoying has also contributed to the strong NAV and share price performance of the Company. It is your Fund Manager's opinion that this bull market is in a mature phase and that, as with all asset classes, eventually there will be a reversion to the mean. Exactly when that happens is not possible to forecast and it is worth remembering that periods of exuberance can be long-lasting and potentially extreme in nature. Whilst your Fund Manager will continue to seek opportunities to add value to the fund through careful stock and sector selection, vigilance for any indicators of impending reversion will be essential.

Rodney Dennis

Chairman

FUND MANAGER'S REPORT

In his statement the Chairman refers to the phenomenon of mean reversion. It has, of course, forever been something of a mug's game to attempt the art (luck) of market timing. Yet, we have always been informed by a belief that most things in the financial world have a tendency to revert to the mean. We find ourselves scratching our heads as we contemplate our faith at this juncture in economic and financial market history. Following a particularly lengthy American economic recovery, fuelled by a similarly ageless supply of easy money and associated domination of western world stock markets by "growth" stocks, our attention was grabbed by a recent research report asking the question "Is Mean Reversion Dead?"(1.)

Admittedly lumbered for life with a curmudgeonly scepticism for the "this time it's different" refrain (which usually accompanies the euphoric stage of bull markets) we had to take notice. The research drew some very reasonable conclusions, essentially arguing that mean reversion has not been allowed to function since the crisis of 2008, as central bankers have kept the foot to the pedal of the money printing machine. It is hard to argue with the contention that higher Return on Equity (ROE) businesses, far from seeing their returns eroded as competitive capital has come in to drive down returns, have enjoyed unusually persistent profitability. Similarly, it is hard to contest that low return companies have been allowed to stay in existence, courtesy of the extend and pretend approach to debt financing that accompanies near zero interest rates.

In essence, the above argues that Quantitative Easing policies have not only distorted asset prices, but have short circuited one of the principle rules of capitalism: mean reversion. Were we to engage in debate over this topic we would undoubtedly fall on the side of those who believe that mean reversion has been delayed rather than cancelled. At the risk of missing out on trees that grow to heaven (or Unicorns or Cryptocurrencies) we would rather hold onto a belief in mean reversion and express that belief via the stocks and sectors we commit capital to. Just one stock example serves to highlight our way of thinking:

Carlsberg

Carlsberg is a company operating in a mature sector: beer is not a growth industry (if measured by the top line). Historically we have avoided owning shares in Carlsberg, not because the industry was mature but because of the company's strategy: Carlsberg previously thought it could be a high growth company in a low growth industry. This often results in overreach, usually via acquisitions. Bankers often make the same mistake. In our view that very mistake, fuelled by leverage, is what led the banking system into trouble in the past. It is notable that our ownership of bank stocks is concentrated in those banks who are not in the business of overreaching, neither for yield nor growth, but are happy to stay "boring". This means they stay largely in their domestic markets, as they prioritise profits over revenue.

Having met with the management of Carlsberg earlier this year we became comfortable that here was a brewer finally ready to focus on profits rather than revenue.

Taken from the company's recent Capital Markets Day, Carlsberg's margins are a shadow of its competitors'. This is where the mean reversionist gets interested. It is not necessary to believe that Carlsberg can approach the eye watering profitability of Anheuser-Busch InBev ('ABInBev'). Indeed, the key reason that we have avoided owning ABInBev is that it sports optimised profit margins and a valuation to match.

We need only get comfort that Carlsberg has a decent chance of nearing the profitability of Heineken. Indeed we firmly believe that this is what is, belatedly, driving the company's management. Only in the hands of the right management team will our thesis have a chance of playing out. In that regard it is worth highlighting that the CEO and CFO are newcomers to the group and recent meetings with both have confirmed that the nettle has been grasped.

Unlike investors in Unicorns, Bitcoin or Tesla the investor in Carlsberg is not required to believe in new paradigms. And unlike such apparently alluring stories, beer is an industry that is unlikely to face existential or technological shocks. We need, therefore, only believe that the "iron law" of mean reversion will assert itself to the profit margins of Carlsberg. We need also to remind ourselves, however, that the commodity most precious to the mean reversionist is the commodity in short supply in modern financial markets: patience. We shall enjoy a glass of Grimbergen, a monastery beer dating from the year 1128 and now owned by Carlsberg, while we wait.

Medium Sized Companies

Once again the Company's year was influenced by a number of mid cap holdings. Particularly strong share price performance came from Interpump (73.5%), Tessenderlo (38.4%), IMA (36.0%) and IMCD (32.8%). We retain positions in each of these companies.

At the year end the portfolio's commitment to companies capitalised at less than EUR10 billion stood at 38.6%. We will always endeavour to be stock specific but we see the mid cap end of the market as a continuing source of alpha for the portfolio.

Outlook

Forever aware that market timing is best left to others, we are nevertheless somewhat cautious for near term prospects. As valuation conscious investors we struggle to contend that value is in plentiful supply across our markets. Rather, we believe that stock selection will be particularly crucial in the year ahead. It is no coincidence that portfolio gearing has been lowered and stands at 0.9% at the time of writing.

Personal Holding

As at 30 September 2017 my beneficial interest in the Company amounted to 314,850 shares.

John Bennett

Fund Manager

(1) Alliance Bernstein September 2017

Principal risks and uncertainties

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks facing the Company including those that would threaten its business model, future performance, solvency or liquidity. The assessment included consideration of the market uncertainty arising as a result of the UK referendum to leave the European Union. The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of Investment Limits and Restrictions, appropriate to the Company's Investment Objective and Policy, in order to mitigate these risks as far as practicable. The principal risks and mitigating steps are as follows:

-- Market risk

The Company's performance is dependent on the performance of the companies and markets in which it invests.

Investment risk is spread by holding a diversified portfolio of companies with strong balance sheets and above average growth prospects.

The Board considers this risk to have remained unchanged throughout the year under review.

-- Gearing

The Fund Manager has authority to use gearing in line with the Company's Investment Policy. In the event of a significant or prolonged fall in equity markets gearing would exacerbate the effect of the falling market on the Company's NAV and, consequently, its share price.

The Board has set a limit on gearing of 20% of net assets and monitors the level of gearing at each meeting.

The Board considers this risk to have remained unchanged throughout the year under review.

-- Other financial risks

The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk, currency risk and credit and counterparty risk.

The Company minimises the risk of a counterparty failing to deliver securities or cash by dealing through organisations that have undergone due diligence by the Manager. The Company holds its liquid funds, which are mostly denominated in Euros, almost entirely in interest bearing bank accounts in the UK or on short-term deposit. This, together with a portfolio which comprises mainly investments in large and medium-sized companies, mitigates the Company's exposure to liquidity risk.

The majority of the Company's assets and liabilities are denominated in currencies other than Sterling. No hedging of the currency exposure is undertaken. Consequently, exchange rate fluctuations reduce or enhance returns for Sterling based investors.

The Board considers this risk to have remained unchanged throughout the year under review.

-- Operational risks

Disruption to, or the failure of, the Manager's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting or monitoring of the Company's financial position. Janus Henderson contracts some of the operational functions (principally those relating to trade processing, investment administration and accounting) to BNP.

The Board receives regular reports on the internal controls in place at Janus Henderson, BNP and the Depositary, HSBC Bank Plc (which appoints the custodian) to mitigate the risk of failure of the systems. These include reports on business continuity planning and the procedures in place in relation to cyber risk.

The Board monitors the services provided by its third-party service providers and receives reports on the key elements in place to provide effective control.

-- Key man risk

The Company depends on the diligence, skill and judgement of the Manager's investment team. The continued service of these individuals could impact the future success of the Company.

The Board has been assured by the Manager that the Fund Manager and the European Equities team are appropriately remunerated and incentivised in their roles in a manner consistent with industry best practice and the applicable FCA regulation. The Company's performance fee provides an additional incentive. Janus Henderson has a strong European Equities team which supports the Fund Manager in the management of the Company's portfolio and looks to develop managers with the capability to succeed him in the fullness of time.

The Board considers this risk to have remained unchanged throughout the year under review.

VIABILITY STATEMENT

The Board considers it is appropriate to assess the viability of the Company over a three-year period. The Directors believe this is a reasonable period reflecting the longer term investment horizon of the Company, as well as that of its investors, and the inherent shorter term uncertainties in equity markets.

The Board considers the Company's viability as part of their continuing programme of monitoring risk. In carrying out their assessment the Board takes account of the likely impact of the principal risks and uncertainties facing the Company materialising in severe, but plausible scenarios. The effectiveness of any mitigating controls currently in place is considered as part of the process.

The Board takes into account the liquidity of the portfolio, the gearing and the income stream from the portfolio, and the Company's ability to meet its liabilities as they fall due. This includes consideration of how the forecast income stream, expenditure and levels of reserves could impact on the Company's ability to pay dividends to shareholders over that period. Detailed forecasts are made over a shorter time frame, however, the nature of the Company's business means that such forecasts are equally valid to be considered over the longer three-year period as a means of assessing whether the Company can continue in operation.

The Board concluded that the Company's assets are liquid, its commitments are limited and that the Company intends to continue operating as an investment trust. No significant changes to the Company's principal risks, or the mitigating controls in place, are anticipated over the period, and the Board is not aware of any events that would prevent the Company from continuing to operate in its current capacity.

Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meets it liabilities as they fall due over the next three-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 other than amounts paid to them in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. In relation to the provision of services by Janus Henderson, 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 transactions with the Manager affecting the financial position of the Company during the year under review.

STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DTR 4.1.12

Each of the Directors confirms 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 includes 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

Alexander Comba

Director

Top 10 investments as at 30 September 2017

 
                                                       Country         Valuation      Percentage 
   Company            Sector                            of listing       GBP'000    of portfolio 
 Autoliv            Automobiles & Parts                Sweden             10,846            3.43 
 Nestlé        Food Producers                     Switzerland        10,649            3.37 
 Novartis           Pharmaceuticals & Biotechnology    Switzerland        10,114            3.20 
 Carlsberg          Beverages                          Denmark             9,847            3.12 
 Bayer              Chemicals                          Germany             9,618            3.05 
 United Internet    Software & Computer Services       Germany             9,436            2.99 
 Tessenderlo        Chemicals                          Belgium             9,203            2.91 
 Galp Energia       Oil & Gas Producers                Portugal            9,121            2.89 
 ABN Amro           Banks                              Netherlands         8,950            2.83 
 ING                Banks                              Netherlands         8,141            2.58 
                                                                      ----------      ---------- 
 Total (10 largest)                                                       95,925           30.37 
                                                                          ======          ====== 
 

Sector exposure as at 30 September 2017

(as a percentage of the investment portfolio excluding cash)

%

 
 Financials            28.1 
 Industrials           16.5 
 Consumer goods        15.1 
 Health care           12.9 
 Basic materials       10.1 
 Technology             7.5 
 Oil & gas              5.1 
 Consumer services      3.1 
 Utilities              1.6 
 Telecommunications       - 
 

Geographic exposure as at 30 September 2017

(as a percentage of the investment portfolio excluding cash)

%

 
 Germany                      17.1 
 Netherlands                  11.7 
 Italy                        10.6 
 France                       10.5 
 Sweden                        9.8 
 Switzerland                   8.9 
 Denmark                       6.3 
 Belgium                       6.2 
 Finland                       6.0 
 Spain                         3.3 
 Portugal                      2.9 
 Norway                        2.4 
 United Kingdom                2.1 
 Ireland                       1.2 
 Austria                       1.0 
 

Income Statement

 
                                              Year ended                               Year ended 
                                           30 September 2017                        30 September 2016 
                                   Revenue        Capital        Total      Revenue        Capital        Total 
                                    return         return       return       return         return       return 
                                   GBP'000        GBP'000      GBP'000      GBP'000        GBP'000      GBP'000 
-----------------------------  -----------  -------------  -----------  -----------  -------------  ----------- 
 Gains on investments held 
  at fair value through 
  profit or loss                         -         46,560       46,560            -         37,048       37,048 
 Exchange losses on currency 
  transactions                           -        (1,214)      (1,214)            -          (906)        (906) 
 Income from investments 
  (note 3)                           8,770              -        8,770        7,139              -        7,139 
 Other income                          229              -          229            1              -            1 
                                ----------     ----------   ----------   ----------     ----------   ---------- 
 Gross revenue and capital 
  gains                              8,999         45,346       54,345        7,140         36,142       43,282 
 Management fee (note 4)             (441)        (1,324)      (1,765)        (359)        (1,077)      (1,436) 
 Performance fee (note 
  4)                                     -              -            -            -              -            - 
 Other fees and expenses             (557)              -        (557)        (472)              -        (472) 
                                ----------     ----------   ----------   ----------     ----------   ---------- 
 Net return on ordinary 
  activities before finance 
  costs and taxation                 8,001         44,022       52,023        6,309         35,065       41,374 
 Finance costs                       (247)          (487)        (734)        (129)          (386)        (515) 
                                ----------     ----------   ----------   ----------     ----------   ---------- 
 Net return on ordinary 
  activities before taxation         7,754         43,535       51,289        6,180         34,679       40,859 
 
 Taxation on net return 
  on ordinary activities 
  (note 5)                           (730)              -        (730)        (673)              -        (673) 
                                ----------     ----------   ----------   ----------     ----------   ---------- 
 Net return on ordinary 
  activities after taxation          7,024         43,535       50,559        5,507         34,679       40,186 
                                    ======         ======       ======       ======         ======       ====== 
 Return per ordinary share 
  (note 6)                          33.81p        209.55p      243.36p       26.85p        169.05p      195.90p 
                                    ======         ======       ======       ======         ======       ====== 
 

The total columns of this statement represents the Income Statement of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. The Company had no other comprehensive income other than that disclosed in the Income Statement. The net return is both the profit for the year and the total comprehensive income.

Statement of Changes in Equity

 
 Year ended        Called          Special       Share                   Capital 
 30              up share    distributable     premium      Merger    redemption      Capital      Revenue 
 September        capital          reserve     account     reserve       reserve      reserve      reserve        Total 
 2017             GBP'000          GBP'000     GBP'000     GBP'000       GBP'000      GBP'000      GBP'000      GBP'000 
------------  -----------  ---------------  ----------  ----------  ------------  -----------  -----------  ----------- 
 At 30 
  September 
  2016             10,371           25,846      30,074      61,344         9,421       89,306       11,189      237,551 
 Net return 
  on 
  ordinary 
  activities 
  after 
  taxation              -                -           -           -             -       43,535        7,024       50,559 
 Shares 
  issued              366                -       9,683           -             -            -            -       10,049 
 Ordinary 
  dividends 
  paid                  -                -           -           -             -            -      (5,761)      (5,761) 
               ----------       ----------   ---------   ---------    ----------   ----------   ----------   ---------- 
 At 30 
  September 
  2017             10,737           25,846      39,757      61,344         9,421      132,841       12,452      292,398 
                   ======           ======       =====       =====        ======       ======       ======       ====== 
 
                   Called 
                 up share          Special       Share                   Capital 
                  capital    distributable     premium      Merger    redemption      Capital      Revenue 
  Year ended      GBP'000          reserve     account     reserve       reserve      reserve      reserve        Total 
  30                               GBP'000     GBP'000     GBP'000       GBP'000      GBP'000      GBP'000      GBP'000 
  September 
  2016 
------------  -----------  ---------------  ----------  ----------  ------------  -----------  -----------  ----------- 
 At 30 
  September 
  2015              9,996           25,846      22,820      61,344         9,421       54,627       10,860      194,914 
 Net return 
  on 
  ordinary 
  activities 
  after 
  taxation              -                -           -           -             -       34,679        5,507       40,186 
 Shares 
  issued              375                -       7,260           -             -            -            -        7,635 
 Share issue 
  cost                  -                -         (6)           -             -            -            -          (6) 
 Ordinary 
  dividends 
  paid                  -                -           -           -             -            -      (5,178)      (5,178) 
               ----------       ----------   ---------   ---------    ----------   ----------   ----------   ---------- 
 At 30 
  September 
  2016             10,371           25,846      30,074      61,344         9,421       89,306       11,189      237,551 
                   ======           ======       =====       =====        ======       ======       ======       ====== 
 

Statement of Financial Position

 
                                               At 30 September     At 30 September 
                                                          2017                2016 
                                                       GBP'000             GBP'000 
------------------------------------------  ------------------  ------------------ 
 
 Fixed assets 
 Investments at fair value through profit 
  or loss                                              315,841             252,102 
                                                    ----------          ---------- 
 Current assets 
 Debtors                                                 3,536               7,969 
 Cash at bank                                           21,362              16,575 
                                                    ----------          ---------- 
                                                        24,898              24,544 
 
 Creditors: amounts falling due within 
  one year                                            (48,341)            (39,095) 
                                                    ----------          ---------- 
 Net current liabilities                              (23,443)            (14,551) 
                                                    ----------          ---------- 
 Net assets                                            292,398             237,551 
                                                        ======              ====== 
 Capital and reserves 
 Called up share capital                                10,737              10,371 
 Special distributable reserve                          25,846              25,846 
 Share premium account                                  39,757              30,074 
 Merger reserve                                         61,344              61,344 
 Capital redemption reserve                              9,421               9,421 
 Capital reserve                                       132,841              89,306 
 Revenue reserve                                        12,452              11,189 
                                                    ----------          ---------- 
 Shareholders' funds                                   292,398             237,551 
                                                        ======              ====== 
 Net asset value per ordinary share 
  (note 7)                                           1,370.62p           1,153.12p 
                                                       =======             ======= 
 

Cash flow statement

 
                                                    Year ended 30    Year ended 30 
                                                   September 2017   September 2016 
                                                          GBP'000          GBP'000 
------------------------------------------------  ---------------  --------------- 
Cash flows from operating activities 
Net return on ordinary activities before 
 taxation                                                  51,289           40,859 
Add back: finance costs                                       734              515 
Less gains on investments held at fair value 
 through profit or loss                                  (46,560)         (37,048) 
Stock dividend                                                  -            (274) 
Taxation paid                                               (383)            (673) 
Increase in debtors                                         (308)            (274) 
Increase/(decrease) in creditors                              169          (1,173) 
                                                       ----------       ---------- 
Net cash inflow from operating activities*                  4,941            1,932 
                                                       ----------       ---------- 
Cash flows from investing activities 
Sales of investments held at fair value 
 through profit or loss                                   336,042          239,936 
Purchases of investments held at fair value 
 through profit or loss                                 (347,278)        (252,055) 
                                                     ------------     ------------ 
Net cash outflow from investing activities               (11,236)         (12,119) 
                                                     ------------     ------------ 
Cash flows from financing activities 
Issue of new ordinary shares                               10,049            7,635 
Share issue expenses                                            -            (126) 
Equity dividends paid                                     (5,761)          (5,178) 
Drawdown/(repayment) of bank overdraft                      7,190             (42) 
Interest paid                                               (396)            (566) 
                                                         --------         -------- 
Net cash inflow from financing activities                  11,082            1,723 
                                                         --------         -------- 
Net increase/(decrease) in cash and equivalents             4,787          (8,464) 
Cash and cash equivalents at beginning of 
 period                                                    16,575           25,039 
                                                        ---------        --------- 
Cash and cash equivalents at end of period                 21,362           16,575 
                                                        ---------        --------- 
Comprising: 
Cash at bank                                               21,362           16,575 
                                                            =====            ===== 
 

*Cash inflow from dividends net of taxation was GBP8,387,000 (2016: GBP6,166,000) and cash inflow from interest was GBP229,000 (2016: GBP1,000).

NOTES TO THE FINANCIAL STATEMENTS

 
 1.    Accounting policies 
       Basis of preparation 
       The Company is a registered investment company as defined in 
        Section 833 of the Companies Act 2006 and is incorporated in 
        the United Kingdom. It operates in the United Kingdom 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, which is effective 
        for periods commencing on or after 1 January 2015, and with the 
        Statement of Recommended Practice: Financial Statements of Investment 
        Trust Companies and Venture Capital Trusts (the 'SORP') issued 
        in November 2014 and updated in January 2017 with consequential 
        amendments. The Company has early adopted the amendments to FRS 
        102 in respect of fair value hierarchy disclosures as published 
        in March 2016. 
 
        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 accounts 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. 
 
        The preparation of the Company's financial statements on occasion 
        requires the Directors to make judgements, estimates and assumptions 
        that affect the reported amounts in the primary financial statements 
        and the accompanying disclosures. These assumptions and estimates 
        could result in outcomes that require a material adjustment to 
        the carrying amount of assets or liabilities affected in the 
        current and future periods, depending on circumstance. 
 
        The Directors do not believe that any accounting judgements 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. 
       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 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, the Board has determined that it is appropriate for 
        the financial statements to be prepared on a going concern basis. 
 2.    Dividend 
       The Board is recommending a final dividend of 20.50p per ordinary 
        share which, subject to shareholder approval at the 2017 Annual 
        General Meeting ("AGM"), will be paid on 2 February 2018. The 
        shares will be marked ex-dividend on 4 January 2018. When added 
        to the interim payment of 9.00p (2016: 7.50p) this brings the 
        full year dividend to 29.50p, an increase of 11.7% (2016: 7.1%) 
        over last year's distribution. The Board is also recommending 
        a special dividend of 1.40p per ordinary share which is the result 
        of the successful return of withholding tax refunded by the French 
        tax authority. If approved, the special dividend will be paid 
        at the time of the final dividend. 
 3.    Income from investments 
                                                           2017               2016 
                                                        GBP'000            GBP'000 
      -------------------------------------  ------------------  ----------------- 
       Listed investments: 
  Overseas dividends                                      8,703              6,618 
  UK dividends                                               67                247 
  Stock dividends                                             -                274 
                                                      ---------          --------- 
                                                          8,770              7,139 
                                                          =====              ===== 
 
 
                                        2017                                 2016 
     Management and         Revenue     Capital        Total     Revenue     Capital        Total 
4.    performance fees      GBP'000     GBP'000      GBP'000     GBP'000     GBP'000      GBP'000 
     ------------------  ----------  ----------  -----------  ----------  ----------  ----------- 
 Management fee                 441       1,324        1,765         359       1,077        1,436 
     Performance fee              -           -            -           -           -            - 
                         ----------  ----------   ----------  ----------  ----------   ---------- 
                                441       1,324        1,765         359       1,077        1,436 
                             ======      ======        =====      ======      ======        ===== 
 
    Management fees are allocated 25% to revenue and 75% to capital 
    in the Income Statement. The performance fee (when payable) is 
    allocated 100% to capital. 
 
 
                                         Year ended 30 September             Year ended 30 September 
                                                   2017                                2016 
                                       Revenue     Capital       Total     Revenue     Capital       Total 
     Taxation on net return             return      return      return      return      return      return 
5.    on ordinary activities           GBP'000     GBP'000     GBP'000     GBP'000     GBP'000     GBP'000 
     -----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
     a) Analysis of charge 
      for the year 
 Corporation tax payable 
  due to refund of French 
  withholding tax                          347           -         347           -           -           - 
 Overseas tax suffered                     885           -         885         673           -         673 
 Refund of French withholding 
  tax                                    (502)           -       (502)           -           -           - 
                                    ----------  ----------  ----------  ----------  ----------  ---------- 
 Total tax charge for 
  the year                                 730           -         730         673           -         673 
                                        ======      ======      ======      ======      ======      ====== 
 
 
                                     Year ended 30 September             Year ended 30 September 
                                               2017                                2016 
 b) Factors affecting              Revenue     Capital       Total     Revenue     Capital       Total 
  the tax charge for                return      return      return      return      return      return 
  the year                         GBP'000     GBP'000     GBP'000     GBP'000     GBP'000     GBP'000 
 -----------------------------  ----------  ----------  ----------  ----------  ----------  ---------- 
 
 Return on ordinary 
  activities before taxation         7,754      43,535      51,289       6,180      34,679      40,859 
                                ----------  ----------  ----------  ----------  ----------  ---------- 
 Corporation tax at 
  19.5% (2016: 20.0%)                1,512       8,489      10,001       1,236       6,936       8,172 
 
 Effects of: 
 Non-taxable capital 
  profits                                -     (8,842)     (8,842)           -     (7,229)     (7,229) 
 Non-taxable income                (1,658)           -     (1,658)     (1,364)           -     (1,364) 
 Current year expenses 
  not utilised                         146         353         499         128         293         421 
 Overseas tax                          885           -         885         673           -         673 
 Refund of French withholding 
  tax                                (502)           -       (502)           -           -           - 
 Corporation tax payable 
  due to refund of French 
  withholding tax                      347           -         347           -           -           - 
                                ----------  ----------  ----------  ----------  ----------  ---------- 
 Total tax charge                      730           -         730         673           -         673 
                                    ======      ======      ======      ======      ======      ====== 
 
 
 The Company's profit for the accounting year is taxed at an effective 
  rate of 19.5% (2016: 20.0%). The standard rate of corporation 
  tax has been 19.0% since 1 April 2017. 
 No provision for deferred taxation has been made in the current 
  or prior accounting year. The Company has not provided for deferred 
  tax on capital gains or losses arising on the revaluation and 
  disposal of investments as it is exempt from tax on these items 
  because of its investment trust status. The Company has not recognised 
  a deferred tax asset totalling GBP2,811,000 (2016: GBP2,370,000) 
  based on a prospective corporation tax rate of 17% (2016: 17%). 
  The deferred tax asset arises as a result of having unutilised 
  management expenses and unutilised non-trade loan relationship 
  deficits. These expenses will only be utilised, to any material 
  extent, if the Company has profits chargeable to corporation 
  tax in the future because changes are made either to the tax 
  treatment of the capital gains made by investment trusts or to 
  the Company's investment profile which require or enable them 
  to be used. 
 
  During the year the Company received a refund of French withholding 
  tax of GBP502,000 with an additional interest amount of GBP229,000 
  relating to tax suffered in 2007 and 2008. This may result in 
  an element of these amounts being payable to HMRC as both corporation 
  tax payable and an interest payment there on. The Company has 
  therefore recognised the net of these amounts totalling GBP299,000 
  as income available for distribution to shareholders as a dividend 
  in the current year. 
 
 
 6.    Return per ordinary share 
       The return per ordinary share is based on the net return attributable 
        to the ordinary shares of GBP50,559,000 (2016: net return of 
        GBP40,186,000) and on 20,775,686 ordinary shares (2016: 20,513,466) 
        being the weighted average number of ordinary shares in issue 
        during the year. The return per ordinary share can be further 
        analysed between revenue and capital as below. 
                                                               2017             2016 
                                                            GBP'000          GBP'000 
      --------------------------------------------  ---------------  --------------- 
  Net revenue return                                          7,024            5,507 
  Net capital return                                         43,535           34,679 
                                                          ---------        --------- 
  Net total return                                           50,559           40,186 
                                                              =====            ===== 
 
  Weighted average number of ordinary shares 
   in issue during the year                              20,775,686       20,513,466 
  Revenue return per ordinary share                          33.81p           26.85p 
  Capital return per ordinary share                         209.55p          169.05p 
                                                         ----------       ---------- 
  Total return per ordinary share                           243.36p          195.90p 
                                                             ======           ====== 
 
  The Company does not have any dilutive securities, therefore 
   the basic and diluted returns per share are the same. 
 
 
 7.     Net Asset Value ("NAV") per ordinary share 
  The NAV per ordinary share is based on the net assets attributable 
   to the ordinary shares of GBP292,398,000 (2016: GBP237,551,000) 
   and on 21,333,261 (2016: 20,600,761) shares in issue on 30 September 
   2017, excluding Treasury shares. 
 
  The movements during the year of the assets attributable to the 
   ordinary shares were as follows: 
                                                                 2017          2016 
                                                              GBP'000       GBP'000 
       ------------------------------------------------  ------------  ------------ 
  Total net assets at 1 October                               237,551       194,914 
  Total net return on ordinary activities after 
   tax                                                         50,559        40,186 
  Issue of new ordinary shares                                 10,049         7,629 
        Net dividends paid in the year: 
  Ordinary shares                                             (5,761)       (5,178) 
                                                          -----------   ----------- 
  Net assets attributable to the ordinary shares 
   at 30 September                                            292,398       237,551 
                                                               ======        ====== 
 8.     2017 financial information 
         The figures and financial information for 2017 are extracted 
         from the annual report for that period and do not constitute 
         the statutory accounts. The Company's annual report for the year 
         ended 30 September 2017 has been audited but has not yet been 
         delivered to the Registrar of Companies. The Independent Auditor's 
         Report on the 2017 annual report was unqualified, did not include 
         a reference to any matter to which the auditor drew attention 
         without qualifying the report, and did not contain any statements 
         under Section 498 of the Companies Act 2006 (the "Act"). 
 9.     2016 financial information 
         The figures and financial information for 2016 are extracted 
         from the published annual report and financial statements for 
         the year ended 30 September 2016 and do not constitute the statutory 
         accounts for that year. The 2016 annual report and financial 
         statements have been delivered to the Registrar of Companies 
         and included the Independent Auditor's Report which was unqualified 
         and did not contain a statement under Section 498 of the Act. 
 10.    Annual Report 
         Copies of the Annual Report will be posted to shareholders in 
         December 2017 and will be available on the Company's website 
         www.hendersoneuropeanfocus.com or in hard copy format from the 
         Registered Office, 201 Bishopsgate, London EC2M 3AE. 
 11.    Annual General Meeting 
         The Company's Annual General Meeting will be held on Thursday 
         25 January 2018 at 2.30pm at 201 Bishopsgate, London EC2M 3AE. 
 

For further information contact:

 
 James de Sausmarez                 Sarah Gibbons-Cook 
  Director and Head of Investment    Investor Relations and PR Manager 
  Trusts                             Janus Henderson Investors 
  Janus Henderson Investors          Tel: 020 7818 3198 
  Tel: 020 7818 3349 
 

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.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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(END) Dow Jones Newswires

December 05, 2017 09:30 ET (14:30 GMT)

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