Over the year to the end of October 2014 Henderson Opportunities net asset value total return was 3.4%, ahead of its peer group (the AIC UK All Companies Sector) which returned 0.6% and ahead of the FTSE All-Share index which returned 1%. The share price did even better, returning 9.3%.
The manager’s report has a table that shows the top five positive and negative contributions to Henderson Opportunities’ returns over the period. We have reproduced this table below.
| 4D Pharma | 230.0 | 2.8 | Digital Barriers | (62.2) | (0.8) |
| Ashtead Group | 40.9 | 0.8 | Retroscreen Virology | (21.1) | (0.8) |
| Velocys | 37.3 | 0.7 | Latchways | (1.5) | (0.7) |
| Tracsis | 84.1 | 0.7 | WANdisco | (65.5) | (0.6) |
| Kofax | 38.8 | 0.6 | Aveva | (39.8) | (0.5) |
4D Pharma was also Henderson Opportunities’ largest new investment of the year, acquired through an IPO. The IPO was priced at 100p and the shares started trading in late February. They say the share price was initially strong but it only really made material progress after a subsequent further fund raising at 150p confirmed the continued progress of lead projects. They also supported that issue. As the shares continued to make good progress, they took profits along the way but retain a very meaningful position. As mentioned before, Ashtead was a top contributor to performance not only this year but last year as well. The twin benefits of cyclical recovery and a structural shift to greater rental penetration were reflected in good pricing and plant hire utilisation. This in turn led to consistent earnings upgrades but they took their profit in what they see as a highly cyclical business. Velocys, the developer of gas to liquid technology, has seen a gradual broadening of its pipeline of opportunities. A number of projects approaching their final investment decision in 2015 indicate to the manager that the market has moved from ‘if’ to ‘when’ on this becoming a mainstream technology. One small technology company that first entered the portfolio in 2012 had a very good 2014. The report says Tracsis, a supplier of scheduling software and condition monitoring equipment to the railway industry, has come of age. After the hiatus caused by the delay in franchise awards to the UK train operator market, to which the company supplies consultancy services, 2014 saw a strong comeback. In addition, Network Rail started ordering condition monitoring equipment again under a new framework agreement and the company secured its first orders into North America, a market multiple times the size of the UK. They also appointed a very experienced chairman who currently has the same role at Ashtead. Lastly following the significant re-rating of Kofax after the listing on the New York Stock Exchange, we were pleased to bank our profits.
On the negative side, they say Digital Barriers, a developer of covert security products and high definition low latency video, appeared to have a growing pipeline that was converting to commercial orders nicely but a series of contract delays, and more latterly the Ebola outbreak which impacted some West African clients, dented credibility. Retroscreen Virology, which provides bio-medical services, had a lack lustre year in share price terms although at the business level significant progress continued to be made. The shares peaked at 322p in August but finished the year at 260p. Latchways, who supply safety products for working at height, had a year to forget. Europe is a major market and suffered from weak underlying demand, while delays concerning utility feed-in tariffs impacted wind turbine demand. In North America, 3M, a key distributor, suffered internal dislocations, resulting in significantly reduced sales. The company has a very robust balance sheet so has maintained the dividend during this tough time. The sales team is being enlarged and upgraded to make the most of their sector leading product strategy. WANdisco, a big data play, had a tremendous 2013 but has given it all back in 2014 as proof of concepts have taken longer than expected to turn into firm contracts. Having taken good profits out of the stock at near to its highest levels, they kept the rump as they feel this is another market in which patience will pay off.
HOT : Henderson Opportunities outperforms in a difficult year