HENDERSON INTERNATIONAL INCOME TRUST PLC
UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 28 FEBRUARY 2023
This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company’s investment objective is to provide shareholders with a growing total annual dividend, as well as capital appreciation.
PERFORMANCE HIGHLIGHTS FOR THE SIX MONTHS TO 28 FEBRUARY 2023
| · | The first interim dividend payment for the year ending 31 August 2023 of 1.85p per ordinary share was paid to shareholders on 28 February 2023. A second interim dividend payment for the year ending 31 August 2023 of 1.85p per ordinary share has been declared and will be paid to shareholders on 31 May 2023. |
| · | The share price at 28 February 2023 was 179.0p per share compared with 171.8p at 31 August 2022. |
| · | The net asset value (“NAV”) per share as at 28 February 2023 was 181.7p compared to 181.5p (with debt at par) at 31 August 2022 and 184.8p at 28 February 2023 compared to 183.4p as at 31 August 2022 (with debt at fair value). |
| · | The discount on the ordinary shares to the net asset value (with debt at par) as at 28 February 2023 was 1.5% compared to a discount of 5.3% as at 31 August 2022. |
| · | The dividend yield* on the ordinary shares was 4.1% as at 28 February 2023 (31 August 2022: 4.2%). |
* Calculated using the share price at the period end of 179.0p and the last four dividends paid.
TOTAL RETURN PERFORMANCE TO 28 FEBRUARY 2023
| 6 months% | 1 year% | 3 years% | 10 years% | Since launch% | |
| Diluted NAV (debt at par)1 | 2.2 | 6.7 | 31.9 | 136.1 | 183.8 |
| Diluted NAV (debt at fair value)1 | 2.8 | 8.9 | 36.9 | 140.4 | 188.9 |
| Share price2 | 6.5 | 12.6 | 31.3 | 127.3 | 183.0 |
| MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted) | 0.5 | 5.1 | 31.0 | 146.3 | 201.4 |
| AIC Global Equity Income sector (NAV) | 2.7 | 26.3 | 46.0 | 148.4 | 179.2 |
1 Calculated using published daily NAVs including current year revenue
2 The Company’s share price total return. Since inception share price return – launch price including discount (97.25p)
Sources: Morningstar Direct, Refinitiv Datastream and Janus Henderson
INTERIM MANAGEMENT REPORT
CHAIRMAN’S STATEMENT
Performance and markets
During the six months to 28 February 2023, the net asset value (“NAV”) total return per ordinary share was 2.2% (debt at par) and 2.8% (debt at fair value). The Company’s return on the ordinary share price was 6.5%. This included dividends totalling 3.7p per share (2022: 3.6p), an increase of 2.8% year on year. The total return of the Company’s comparator index (MSCI ACWI (ex UK) High Dividend Yield Index (sterling adjusted)) was 0.5%.
Over the period, inflation has proved to be more persistent than policy makers had expected, and central banks have reacted by raising interest rates more than markets had predicted. The US Federal reserve increased rates by 2.25%, the Bank of England by 2.75% and the European Central Bank by 2.5%. These increases have created problems for bond markets and business models that relied on plentiful debt at low interest rates, as illustrated by recent high-profile bank failures and difficulties within the property sector. Nevertheless, there have been some positive developments that are helping economies to offset the immediate impact of these higher interest rates. These include the once feared “winter energy crisis”, which in the event did not transpire, China’s abandonment of its zero Covid policy and employment levels remaining high around the world. Together, these developments have helped equity markets recover from last year’s lows. Europe was the strongest performing equity market, aided by lower energy prices and the year-on-year benefit of an absence of Covid lockdowns. Japan and the US markets also recovered. Sterling rallied over the period, slightly dampening the returns from overseas equities for UK investors.
The Company’s portfolio is diversified and with its focus on investments with attractive valuations and secure balance sheets it has largely avoided the areas of the market most impacted by rising interest rates. Our emphasis on cash generation to finance investment and shareholder returns has allowed portfolio companies to deal with higher borrowing costs and even, in some cases, to gain market share. At a Company level, the earlier decision in 2019 to secure fixed borrowing for over 20 years means there is no risk of higher borrowing costs for shareholders.
Earnings and dividends
The revenue return per ordinary share during the six months to 28 February 2023 was 1.96p (2022: 2.26p). A fourth interim dividend of 1.85p per ordinary share, for the year ended 31 August 2022, was paid to shareholders on 30 November 2022, bringing the total dividend paid in respect of the year ended 31 August 2022 to 7.25p per ordinary share (year ended 31 August 2021: 6.30p per ordinary share).
The board declared a first interim dividend payment for the year ending 31 August 2023 of 1.85p per ordinary share and this was paid to shareholders on 28 February 2023. Subsequently, we have declared a second interim dividend of 1.85p per ordinary share that will be paid to shareholders on 31 May 2023.
The long-term objective of your Company since launch has been to provide shareholders with a growing total annual dividend, as well as capital appreciation. To date, we have increased the dividend each year. We continue to recognise the importance of dividend income to our shareholders and, if needs be, we will utilise the Company’s reserves in the event of any temporary shortfall between the Company’s distributions and portfolio income. So far this financial year, the Company has distributed £7.251m from the earned income and revenue reserves.
The board continues to monitor the level of dividend paid out to shareholders and currently aims to maintain at least the same level of dividend for the remaining six months of this financial year.
Gearing
Well-judged gearing enhances returns to shareholders. The board’s current policy is to permit the fund manager to gear up to 25% of net assets at the time of drawdown. Borrowing limits for this purpose include implied gearing through the use of derivatives. The gearing at the period end was 1.7% (31 August 2022: 6.5%).
Discount control
The Company’s share price has traded at a discount of between 2-11% over the period. The board continues to monitor the premium/discount to NAV and will consider appropriate action if the relationship between NAV and share price moves and remains out of line with the Company’s peer group. However, there is a distinct limit to the board’s ability to influence the premium or discount to NAV. Accordingly, we believe it is not in shareholders’ interests to have a specific share issuance or buy-back policy. We believe that it is sensible to retain flexibility; therefore, we shall consider share issuance and/or buy-backs where appropriate and subject to market conditions.
Management fees
In 2022, your board agreed with Janus Henderson a reduction in the management fee to a single rate of 0.575% per annum. This new rate took effect from 1 September 2022, the first day of your Company’s current financial year.
Board composition and succession planning
This is the first opportunity that I have had to comment on the retirement of our previous chairman, Simon Jeffreys, at last year’s AGM. Simon made a major contribution to the Company during his tenure as Chairman and I would like to thank him on behalf of the board and all shareholders for his diligence and hard work. The board consists of four directors, two women and two men. We are currently looking to recruit a new director to return us to five, which the board considers to be the long-term appropriate number of directors. We expect to announce shortly the outcome of this process. It is the board’s continuing intention to consider carefully its mix of directors giving due weight to their skill set, experience, gender and diversity.
The board has also given thought to longer-term succession planning. The directors believe that they are in a strong position to effect a gradual refreshment of the board, reflecting both tenure and the evolving skill sets required to oversee successfully an investment company.
Outlook
The Covid pandemic and Ukraine conflict were globally significant economic and humanitarian events. The disruption they caused makes it difficult to discern what the real economic and supply/demand trends currently are across a range of important variables, including inflation, commodity prices, demographics and consumer spending. As a result of this uncertainty, investors remain understandably cautious and have derated many sectors and regions of equity markets, causing some to trade at low valuations compared to history.
The board and the fund manager remain focused on delivering the Company’s investment objectives and will continue to follow its existing strategy of identifying attractively valued companies that have the capacity to grow their earnings and dividends over the medium to long term. The diversified nature of the Company’s portfolio provides investors with a wide range of exposure to different industries and global regions which is both beneficial and appropriate in these uncertain times.
Richard Hills
Chairman
2 May 2023
INVESTMENT PORTFOLIO
at 28 February 2023
| Company | Country | Market value£’000 | %of portfolio |
| Basic materials | |||
| Air Products & Chemicals | US | 9,185 | 2.5 |
| UPM-Kymmene | Finland | 3,572 | 1.0 |
| IGO | Australia | 2,782 | 0.8 |
| 15,539 | 4.3 | ||
| Consumer discretionary | |||
| Compagnie Financière Richemont | Switzerland | 7,559 | 2.1 |
| Sony | Japan | 5,074 | 1.4 |
| Stellantis | Italy | 4,370 | 1.2 |
| Midea | China | 4,050 | 1.1 |
| Mercedes-Benz | Germany | 4,001 | 1.1 |
| Li-Ning | China | 3,575 | 1.0 |
| China Yongda Automobiles | China | 2,620 | 0.7 |
| JD.com | China | 2,584 | 0.7 |
| 33,833 | 9.3 | ||
| Consumer staples | |||
| Nestlé | Switzerland | 10,201 | 2.9 |
| Coca-Cola | US | 9,095 | 2.5 |
| Mondelez | US | 7,224 | 2.0 |
| PepsiCo | US | 6,732 | 1.8 |
| Ambev | Belgium | 5,494 | 1.5 |
| Pernod-Ricard | France | 3,862 | 1.1 |
| 42,608 | 11.8 | ||
| Energy | |||
| Woodside Energy | Australia | 7,424 | 2.1 |
| TotalEnergies | France | 5,487 | 1.5 |
| Aker | Norway | 3,650 | 1.0 |
| 16,561 | 4.6 | ||
| Financials | |||
| AXA | France | 8,670 | 2.4 |
| Amundi | France | 7,507 | 2.1 |
| Macquarie | Australia | 6,171 | 1.7 |
| CME Group | US | 5,809 | 1.5 |
| AIA | Hong Kong | 5,055 | 1.4 |
| United Overseas Bank | Singapore | 5,039 | 1.4 |
| ING | Netherlands | 5,017 | 1.4 |
| CITIC Securities | Hong Kong | 4,722 | 1.3 |
| Bank Mandiri | Indonesia | 3,774 | 1.0 |
| KB Financial | Korea | 3,612 | 1.0 |
| Industrial Bank | China | 3,556 | 1.0 |
| Van Lanschot | Netherlands | 3,520 | 1.0 |
| BFF Banking | Italy | 3,456 | 1.0 |
| Citigroup | US | 2,891 | 0.8 |
| Travelers Companies | US | 2,675 | 0.7 |
| 71,474 | 19.7 | ||
| Health care | |||
| Sanofi | France | 14,896 | 4.1 |
| Merck & Co | US | 11,060 | 3.0 |
| Roche | Switzerland | 8,620 | 2.4 |
| Bristol-Myers Squibb | US | 8,095 | 2.2 |
| Novartis | Switzerland | 7,267 | 2.0 |
| Medtronic | US | 5,374 | 1.5 |
| Johnson & Johnson | US | 3,938 | 1.1 |
| Novo Nordisk | Denmark | 3,153 | 0.9 |
| 62,403 | 17.2 | ||
| Industrials | |||
| nVent Electric | US | 8,569 | 2.4 |
| Honeywell International | US | 5,160 | 1.4 |
| Sandvik | Sweden | 4,483 | 1.3 |
| Volvo | Sweden | 4,400 | 1.2 |
| LG Corp | Korea | 4,317 | 1.2 |
| China National Building Material | China | 2,513 | 0.7 |
| 29,442 | 8.2 | ||
| Real estate | |||
| Crown Castle | US | 5,268 | 1.4 |
| Sun Hung Kai Properties | Hong Kong | 4,399 | 1.2 |
| CapitaLand Integrated Commercial Trust | Singapore | 3,900 | 1.1 |
| 13,567 | 3.7 | ||
| Technology | |||
| Microsoft | US | 13,191 | 3.6 |
| Corning | US | 5,443 | 1.5 |
| Samsung | Korea | 4,222 | 1.2 |
| Fidelity National Information | US | 3,741 | 1.0 |
| Taiwan Semiconductor Manufacturing | Taiwan | 3,468 | 1.0 |
| 30,065 | 8.3 | ||
| Telecommunications | |||
| Cisco Systems | US | 9,167 | 2.5 |
| Deutsche Telekom | Germany | 5,954 | 1.6 |
| Tele2 | Sweden | 5,468 | 1.5 |
| Telus | Canada | 5,265 | 1.5 |
| SK Telecom | Korea | 4,256 | 1.2 |
| HKT Trust and HKT Ltd | Hong Kong | 3,827 | 1.1 |
| Telekomunikasi | Indonesia | 2,700 | 0.7 |
| 36,637 | 10.1 | ||
| Utilities | |||
| Iberdrola | Spain | 6,389 | 1.8 |
| Enel | Italy | 3,730 | 1.0 |
| 10,119 | 2.8 | ||
| Total investments | 362,248 | 100.0 |
TEN LARGEST INVESTMENTS
at 28 February 2023
| Company | Sector | Country | Market value£’000 | % of portfolio |
| Sanofi | Health care | France | 14,896 | 4.1 |
| Microsoft | Technology | US | 13,191 | 3.6 |
| Merck & Co | Health care | US | 11,060 | 3.0 |
| Nestlé | Consumer staples | Switzerland | 10,201 | 2.9 |
| Air Products & Chemicals | Basic materials | US | 9,185 | 2.5 |
| Cisco Systems | Telecommunications | US | 9,167 | 2.5 |
| Coca-Cola | Consumer staples | US | 9,095 | 2.5 |
| AXA | Financials | France | 8,670 | 2.4 |
| Roche | Health care | Switzerland | 8,620 | 2.4 |
| nVent Electric | Industrials | US | 8,569 | 2.4 |
These investments total £102,654,000 which represents 28.3% of the portfolio.