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(Alliance News) - Henderson High Income Trust PLC on Friday said its net asset value declined in the first half of 2020 and it under performed its benchmark due to gearing.
The smaller companies investor reported a NAV per share of 150.2 pence as at June 30, down from 189.8p at the end of 2019.
Its NAV total return for the six months to June 30, with debt at fair value, was negative 18.1%, while its benchmark - a composite made up 80% of the FTSE All-Share index and 20% of the ICE BofAML Sterling Non-Gilts index - returned negative 13.3%.
Chair Margaret Littlejohns said: "Although its equity portfolio was positioned defensively, the company underperformed its benchmark, primarily because of gearing, which is a necessary component of the company's structure for generating a relatively high level of income."
Littlejohns further explained the company's gearing: "During this period the company made the decision to reduce its borrowings by approximately GBP13 million, principally by selling US investment grade bonds which had performed well in capital terms since their purchase. About three quarters of the company's loans are now being used to fund the company's fixed interest holdings which effectively yield 5.0% compared to the company's current average cost of borrowing of 2.4%. The overall level of gearing as at 30 June 2020 was 20.9%, but only about 6.0% relates to the financing of additional equities in the portfolio. The level of borrowing allocated to equities is therefore significantly lower than the headline gearing figure might suggest."
Henderson High Income paid dividends totalling 4.95 pence in the period, consisting of two interim payments of 2.475p per share. It announced a third quarter dividend of the same 2.475p per share amount, which will be paid in October, and expects to pay another fourth dividend at the same level, giving a total annual dividend per share of 9.90p, up 1.0% from 9.80p the year before.
Littlejohns said: "The portfolio remains well balanced, owning both resilient businesses that continue to pay attractive dividends and those companies that have the potential for capital recovery. The company is well positioned to address the challenges and opportunities that lie ahead."
Shares in Henderson High Income were up 1.1% at 135.16p in London on Friday afternoon.
By Anna Farley; annafarley@alliancenews.com
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