Henderson Opportunities results for the 12 months ended 31 October 2024 are out. The NAV return was 17.1%, ahead of the All-Share which returned 16.3%. The narrowing discount, achieved ahead of the announcement of the board’s plan to offer a cash exit or a rollover into an open-ended vehicle, meant that the share price return was 26.9%.

A fourth interim dividend of 2.6p per share for the year ended 31 October 2024 and a first interim dividend of 1.5p per share for the year ended 31 October 2025 will be paid on 11 March 2025.

The trust’s decent performance over this period is somewhat moot given subsequent events. The board has extended its gratitude to all of the company’s shareholders for their support and participation in the vote to defeat Saba. Now, the reconstruction looms. Two general meetings will be held on 21 February 2025 at 9.00am and on 14 March 2025 at 9.30am at Janus Henderson’s offices at 201 Bishopsgate, London EC2M 3AE to approve the scheme and the winding up of the company respectively. There will not be another AGM, unless the scheme is voted down.

Extracts from the manager’s report – the managers describe some truly depressing conditions for the UK small cap market over the period

Performance in the medium and smaller company area of the market was very mixed. Low valuations led to takeover approaches for a few companies and this buoyed some share prices, but there was no real pick-up in investor flows to the sector. Redemptions in trust portfolios investing in this sector continued, which meant there was a lack of real demand for shares. The demand there was would evaporate on the smallest concern about an individual company. This resulted in little appetite to take on risk so potential high growth early-stage companies were savagely sold down. The reliable, slower growing but cash generative business fared better as it was the sort of stock that could attract bid attention.”

The company’s weighting in AIM has continued to be a detractor from performance, with AIM underperforming the broader UK market. This means that over a three-year period, AIM has underperformed the FTSE All-Share by a staggering 55%.

In our view the material underperformance of the AIM market has come about for a number of reasons including fund managers’ increasing desire for liquidity, weak sentiment resulting in outflows from UK equities and, increasingly ahead of the Budget in October 2024, concern about the future of inheritance tax relief on AIM shares.

Stock selection has, overall, been positive (driven by the FTSE 100) but size allocation, and in particular the weight on AIM, has been a substantial detractor. In a rising market, the use of gearing was a modest positive contributor during the year:

Of the other best contributors, two (Rolls-Royce and Marks & Spencer) were driven by ongoing recovery. In the case of Rolls-Royce, under a new management team they have reduced costs and improved commercial delivery. In the case of Marks & Spencer, they are taking market share in both food and clothing under a new management team and a refreshed (and more competitively priced) offering. Smaller companies that performed well included Scottish housebuilder Springfield Properties, which has been successfully undertaking disposals in order to strengthen its balance sheet. Defence equipment provider Cohort benefited from a rising defence spending environment, while telecoms and utilities software provider IQGeo was taken over by private equity.

Examining the detractors in more detail, three of the top ten were exposed to the North Sea (Jersey Oil & Gas, Serica and Deltic Energy). In our view, the share price falls in this area were largely as a result of uncertainty around the future fiscal regime. The lack of clarity around, for example, the ability to offset taxation with capital spend meant that it was difficult for large projects (such as the Buchan field) to reach final investment decision. This impacted the share price of Jersey Oil & Gas in particular. Elsewhere, the detractors tended to be early-stage companies (Surface Transforms, ITM Power, AFC Energy and Creo Medical) where in some cases, such as Surface Transforms, there have been operational issues with scaling to meet demand.

HOT : Henderson Opportunities to bow out after a better year