Legal Entity Identifier: 213800GS89AL1DK3IN50

HENDERSON EUROPEAN FOCUS TRUST PLC (the "Company")

Unaudited results for the half-year ended 31 March 2021

This announcement contains regulated information

Investment objective

The Company seeks to maximise total return (a combination of income and capital growth) from a portfolio of stocks listed in Europe.

Performance highlights

•      Net asset value ("NAV") per ordinary share total return¹ (with dividends reinvested) of 13.6% compared to the benchmark² return of 11.9%

•      Share price³ total return (with dividends reinvested) of 17.2%

•      Interim dividend of 9.60p per share declared (2020: 9.60p)

Total return performance to 31 March 2021 (with dividends reinvested)

1 Net asset value ("NAV") total return per ordinary share (with dividends reinvested)

2 FTSE World Europe ex UK Index on a total return basis in Sterling terms

3 Share price total return (with dividends reinvested) using mid-market closing price

4 Association of Investment Companies ("AIC") Europe sector of eight companies

Sources: Morningstar Direct, Refinitiv Datastream and Janus Henderson

Financial highlights

INTERIM MANAGEMENT REPORT

Chair's Statement

With the rapid authorisation of a number of effective vaccines, markets the world over have responded positively to renewed optimism in recent months on all fronts: social, economic and financial. Continental Europe has been no exception even though, as well publicised, the vaccine roll-out programme has been slower than in other major economies. The good news is that the economic data is coming through stronger than expected and the feared sharp recession has been relatively short lived, with the retail consumer in particular expected to be surprisingly resilient as job losses have been below expectations and support measures substantial. Expectations of inflation, however, remain in low positive territory with the first grants and loans from last year's landmark €750bn spending package expected to be made by the EU Commission this summer. Trading updates coming from corporates are generally more upbeat than anticipated and European stock markets have responded positively.

Performance

In the six months to 31 March 2021, the Company's NAV total return per ordinary share rose by 13.6% to 1,615 pence, compared to an increase of 11.9% in the Company's benchmark, the FTSE World Europe ex UK index. The Company's share price total return rose by 17.2% to 1,455 pence, as the discount narrowed from 12.6% at 30 September 2020 to 9.9% at 31 March 2021. Gearing remains at the lower end of its range at just under 0.2% of net assets at the period end and so performance was largely achieved through active investing - further detail of which is in our Fund Managers' Report.

Revenue and dividend

A maintained interim dividend of 9.6 pence per ordinary share (2020: 9.6 pence) will be paid on 25 June 2021 to shareholders on the register on 4 June 2021. The shares will be marked ex-dividend on 3 June 2021.

Future Board changes

We are well underway in a process to recruit a new Board member. Having undertaken both our annual Board evaluation and held a strategy session in the first calendar quarter of 2021, the Board has decided that broadening its membership would be beneficial and we expect to make an announcement in the relatively near future. The Board is using external consultants in finding suitable candidates for our succession.

Outlook

Looking forward, we think there are many reasons to be optimistic about the prospects for continental European companies. After a decade of austerity, the EU Commission response to the pandemic has clearly had to change: unprecedented fiscal and monetary support measures, allied to encouraging corporate news has underpinned a recovery in markets. Valuations are high but not excessive, certainly in the context of the US stock valuations, and whilst some inflation is forecast it is not high enough to derail average equity valuations although those at the 'growthier' end of the style spectrum may well come in for more scrutiny.

We expect this market environment to suit the Company as our 'all-weather' approach avoids ascribing rigid labels of 'value' or 'growth' to our investment style. This has allowed the emphasis within the portfolio to change from 12 months ago: having had an economic recovery bias led by industrials in summer 2020, the portfolio now favours a bias towards beneficiaries of the much anticipated 're-opening' of economies, led by the consumer.

Finally, investors are realising that many European companies are the leading the way in providing solutions for many of the challenges we face in providing for a more sustainable future and are rightly starting to pay more attention to the changes underway. The Company's investment process - as we described more fully in the Annual Report - is very much focused on identifying and responding to that change.

Vicky Hastings

Chair

26 May 2021

Fund Managers' Report

In writing this report twelve months ago, we found ourselves in the eye of the Covid-19 storm and its first devastating wave of infections. One year later and, courtesy of the wonders of human ingenuity, we can see and feel the beginning of the end of a period which has dealt the severest of challenges. Of course, financial markets, by their very nature, anticipate economic and financial developments. In this respect the past six - indeed twelve - months have been no exception.

In the Company's most recent Annual Report to the year ended 30 September 2020, we described, in some detail, how we seek to commit capital on behalf of shareholders. Hopefully, our overriding belief in pragmatism, shone from that report. It is exactly this characteristic of open-mindedness that, we believe, has been a requisite since the moment Covid-19 struck. Indeed, a glance at the graphic in the half-year update underscores this point: as equity markets have 'broadened out', beyond the narrow leadership of 'growth' stocks, your Company has continued to prosper: a demonstration of our mantra; that we should never be dictated to or constrained by an investing 'style'. The two charts shown in the update for the six months ended 31 March 2021 illustrate graphically this return to favour of 'value' stocks, particularly over the previous six months.

Shortly after the pandemic came to the shores of Europe, we identified the ingredients that would lead to a V-shaped recovery in the industrial world. In a nutshell, those ingredients included naturally occurring lows in the corporate inventory and capital expenditure cycles. The pandemic served to aggravate those lows, driving them yet deeper. Then came the quite extraordinary monetary stimulus from central banks worldwide, followed, to varying degrees, by fiscal expansion. The resultant recovery in demand for industrial goods, as factories and construction sites quickly reopened, has played to our strategy.

Then, as calendar 2020 drew to a close and Europe was suffering from a second wave of infections, we drew succour from the unequivocally excellent vaccine data. This encouraged us to strengthen our view that a second V-shape is likely: this time in the consumer sphere. During the six-month period under review, we tilted the portfolio towards the consumer discretionary sector. Notwithstanding, at times, hysterical media and political rhetoric concerning vaccine rollouts, vaccine efficacy and even vaccine nationalism, we have resolutely trusted the data. Thus, we have not been swayed in building the portfolio's positions in stocks we consider strong reopening beneficiaries. Prime examples include Adidas, Amadeus, Carlsberg, Daimler, Essilor Luxottica, Inditex, Mowi, Ryanair and Stellantis.

The Company's optimistic positioning for the 'reopening' can be illuminated through that familiar, but temporarily elusive, modern ritual: the summer holiday. It is quite likely that you will unwittingly book your flights and accommodation using the Amadeus Global Distribution System. You may well fly to your destination with Ryanair, or a different airline on an Airbus A320 jet. A new holiday wardrobe might include clothes from Zara, Ray-Ban sunglasses and La Roche-Posay sun cream. In doing so, you have generated sales for Inditex, Essilor Luxottica and L'Oreal respectively. You may dine in a restaurant supplied with salmon from Mowi and beverages from Carlsberg. The desire to travel, consume and experience is the common denominator. Our belief is that this desire will be expressed with renewed fervour.

The Company's current investment positioning, then, can be summed up fairly simply: it is one which seeks to benefit from what we believe will be a happy confluence: an army of immunised consumers, armed with exceptionally high savings ratios. After a year or more of being unnaturally confined, the consumer is a coiled spring, ready to live life again. If we are right that not even a bungling European Union can prevent that, we can look forward to its powerful effects on our portfolio companies.

John Bennett and Tom O'Hara

Fund Managers

26 May 2021

Portfolio information as at 31 March 2021

Country of listing (as a percentage of the portfolio excluding cash)

Sector exposure (as a percentage of the portfolio excluding cash)

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into the following main areas:

·    Market

·    Investment performance

·    Business strategy and market rating

·    Gearing

·    Operational

·    Regulatory and reporting

Information on these risks and how they are managed is given in the Annual Report for the year ended 30 September 2020. In the view of the Board, these principal risks and uncertainties at the year-end remain and are as applicable to the remaining six months of the financial year as they were to the six months under review. 

There are a number of risks stemming from the Covid-19 pandemic and the uncertainty that this has created in global markets, both economically and politically, that may impact the operation of the Company, as referenced in the Chair's Statement. The Fund Managers will continue to review carefully the composition of the Company's portfolio and be proactive in taking investment decisions where necessary.  Janus Henderson (the "Manager") and the Company's other third-party service providers remain fully operational and have implemented appropriate business continuity plans to ensure that there has been no change in service while the majority of staff are working from home.

Related-Party Transactions

The Company's transactions with related parties in the period under review were with the directors and the Manager. There have been no material transactions between the Company and its directors during the period other than amounts paid to them in respect of expenses and remuneration for which there were no outstanding amounts payable at the period end.

In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there have been no transactions with the Manager affecting the financial position of the Company during the period under review.

Statement of Directors' Responsibilities

The directors (as listed in note 13) confirm that, to the best of their knowledge:

(a)  the condensed financial statements for the half-year ended 31 March 2021 have been prepared in accordance with FRS 104

      Interim Financial Reporting, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the

      Company;

(b)  the Interim Management Report and condensed financial statements include a fair review of the information required by

      Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months and description

      of principal risks and uncertainties for the remaining six months of the year); and

(c)  the Interim Management Report includes a fair review of the information required by the Disclosure Guidance and

      Transparency Rule 4.2.8R (disclosure of related-party transactions and changes therein).

For and on behalf of the Board

Vicky Hastings

Chair

26 May 2021
 

CONDENSED Income Statement

The total columns of this statement represent the Income Statement of the Company prepared in accordance with FRS 104.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.  

All revenue and capital items in the above statement derive from continuing operations. The Company had no recognised gains or losses other than those disclosed in the Income Statement and the Statement of Changes in Equity.

The accompanying notes are an integral part of the condensed financial statements.           

CONDENSED Statement of Changes in Equity

The accompanying notes are an integral part of the condensed financial statements.

CONDENSED Statement of Financial Position

The accompanying notes are an integral part of the condensed financial statements.

CONDENSED Cash Flow Statement

The accompanying notes are an integral part of these financial statements

Notes to the condensed financial statements

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