Henderson Opportunities way ahead of benchmark

Over the year to the end of October 2015 Henderson Opportunities returned 13.5%, way ahead of the 2.9% return posted by the FTSE All-Share Index, its benchmark. The discount widened to 10% from 3% and so the return to shareholders was 6.3%. The full year dividend was increased from 12.5p to 18p.

Once again, 4D Pharma, which focuses on the development of live bio-therapeutics, was the biggest contributor to the fund’s performance. It enjoyed another exceptional year in share price performance as it continued developing its product pipeline ahead of the competition. They took profits in order to manage the risk exposure. During the year, a competitor company listed on NASDAQ at a significant premium to 4D’s market capitalisation despite being at an earlier stage in its development pipeline and with fewer targets. 4D recently announced that it had received regulatory approval to begin a phase 1 trial in Paediatric Crohn’s Disease with its lead product Thetanix. This has orphan drug status, and trials have commenced, somewhat earlier than planned.

The next largest contributor was Redde, previously known as Helphire, which provides car hire and repair services in ‘not at fault’ motoring accidents. This company has turned the corner from an adversarial relationship with major insurance groups, which had a significant negative effect on working capital, to one of near partnership with those same insurers where the common goal of cost reduction throughout the claims management process has led to significantly improved cash flow and rising profits. Combined with an attractive dividend policy, this led to the shares returning over 140% in the year. The company has recently made an earnings enhancing acquisition extending its reach in the corporate car repair market.

Johnson Service has gone about its business of linen rental and laundry services in aquietly efficient manner and made well thought out earnings enhancing acquisitions to add to organic growth. They have taken some profit here as the share rating now more adequately reflects group prospects.

Betfair was sold, having been the fund’s best individual share in the year rising some 170% and, enjoying multiple profit upgrades.

On the downside, Velocys, the developer of gas to liquids technology, the fifth largest holding last year, suffered from the sharp fall in oil price which resulted in a much slower sign up of new contracts. It also suffered from the inevitable disruption resulting from an internal dispute with its CEO who has now left. The company has a robust, cash-rich balance sheet and can withstand short-term pressures. We are hopeful of a more settled period going forward. The technology is still very relevant and world leading but it will require a stable oil price environment to really prosper. The shares fell by more than 60% in the period.

The drop in the oil price also hit Premier Oil hard with the shares falling over 70% in the year. The company has continued to develop new production assets in the North Sea, namely Solan and Catcher. A final decision on the Falkland Islands development is still awaited and material cost savings are being made but falling revenues from the low oil price means the company is proceeding with caution and looking for additional partners for that asset. The company is one of the most geared plays to a recovery in the oil price.

Self-inflicted problems were the major reason behind Tribal’s share price fall. As a software company, albeit in education, it still has a business model which relies on new licence sales. These did not materialise as hoped and the company warned on profits more than once. In addition the CEO stepped down and the management team under a new chairman will undergo further restructuring to put the company back on a growth path.

Oxford Instruments, a fallen star of the FTSE250 now in the small cap index, had a horrible year as demand from emerging markets in Russia and China evaporated. The market place for research instruments and tools has been difficult for all competitors over the last year but most recently Oxford announced an uptick in its order book and they are hopeful that the company’s fortunes are on the turn.

WANdisco, a big data software supplier, is transitioning its product from initial trial licences in a test environment to a live production environment. This has delayed take up as customers are rightly cautious when new elements are introduced into core business infrastructure. Sign up momentum has improved in recent quarters.

HOT : Henderson Opportunities way ahead of benchmark