Henderson European Focus more or less matched the fall in its World Europe ex UK index benchmark over the 12 months ended 30 September 2022, returning -13.1% to the index’s -12.8%. However, a widening discount left investors with a share price return of -18.3%. Fortunately, the closing share price at 6 December 2022 was 149p, which is 17.3% higher than at the year end. This reflects both a recovery in the value of the underlying investments as well as a narrowing of the discount to 10.4% (from 14.0% year end).
The dividend increased substantially, rising by 31.4% to 4.35p per share. The board is also recommending a special dividend of 0.50p funded by the release of a tax provision that the fund no longer needs.
The company borrowed €35m at the start of the year (in two tranches, maturing in 25 and 30 years). This long-term debt comes at a weighted average interest rate of just 1.57%. This ought to make a meaningful contribution to HEFT’s returns in future years and was likely a contributing factor in its higher revenue per share.
Extract from the managers’ report
Our biggest ‘winners’ were Orron Energy (formerly Lundin Energy, with the oil and gas assets now trading as Aker BP, a case study in last year’s report), which, along with our other large energy exposures in Shell, BP and TotalEnergies, drove a sector contribution of nearly 2%. ASR Nederland (insurance) and UPM-Kymmene (pulp, paper and increasingly biofuels) rounded out the top three with high double digit basis point contributions, both due to strong execution from their management teams. At the other end of the table our biggest detractor was Nokian Renkaat, an unfortunate casualty of Russia’s abrupt economic isolation from the West as 80% of its tyre production capacity resided within the country. Spanish healthcare company Grifols and German chemical and pharmaceutical conglomerate, Bayer, round out the bottom three. We retain a smaller position in Grifols, while Bayer has since exited the portfolio.
HEFT : Henderson European Focus bounces back post year end