Henderson Opportunities (HOT ) ended its financial year on a low, but its board hope the introduction of a share split will bring in new, younger investors and keep its top shareholder, activist Saba, at bay.

The UK All Companies trust run by Laura Foll and James Henderson saw its net asset value drop 9.7% in the 12 months to 31 October and a widening discount meant shareholders lost 12.2%, while the FTSE All Share rose 5.9% and the peer group’s underlying return average was 3%.

This contributed to ongoing underperformance, with the trust losing out to both its benchmark and peer group over three, five and ten years.

The company has been under pressure as in March last year just over 24% of voting shareholders voted against continuation. However, they represented just 6% of shareholders as many retail investors, who hold 77% of the issued shares, did not vote.

Saba is the largest shareholder with 7.1%, followed by Cazenove and Janus Henderson with 5.8% and 5.1% respectively.

Since then the board has taken measures to keep investors onside, including scrapping the performance fee, which was removed last October.

Its latest initiative is to split its ordinary shares, which are more than double in price what they were 10 years ago. The proposal, which will require shareholder approval at the upcoming annual general meeting, would see shares divided in five.

HOT closed at £10.02 on Friday, up just 1% this year, which means the shares would trade at 200p after the split.

Chaired Wendy Colquhoun said the share split would ‘assist monthly savers and those who reinvest their dividends, or those who are looking to invest smaller amounts (such as younger investors)’.

Income is a priority for the board who declared a final dividend of 13p per share, bringing the total for the year to 35.5p, a 4.4% increase. However, they had to dip into revenue reserves to fund the increase as earnings per share fell to 33.5p, including special dividends for the financial year, down from 40.6p the previous year.

Performance and portfolio

Foll and Henderson’s portfolio has suffered as UK small-medium sized companies were hit by poor sentiment to the UK.

The duo had 44.2% of assets in the AIM All-Share, 9.4% in FTSE Small-Cap and 13.3% in the FTSE 250 indices at the end of the financial year. The remaining 31.7% was in the FTSE 100.

Foll and Henderson said HOT had ‘enviable flexibility in being able to invest across the breadth of the UK market’.

‘It remains our view that the best opportunities for long-term sales and earnings growth can be found outside of the FTSE 100, and indeed on a long-term basis almost all of the top relative contributors to performance have been smaller companies,’ they wrote.

Things have begun to turn around as HOT’s share price rose 10.8% in November and 5.4% in December, outperforming the FTSE All Share’s 3% and 0.9% rise.

However, the managers struck a cautious tone and said ‘the bear market might have ended but we will not know for sure for a while’.

‘Every bear market has short violent bull runs within it. When we look back in time, if the autumn proves to have been the bottom we will say the catalyst was the peaking of rates. It is really that simple,’ they said.

The pair believe they are prepped for the upside and pointed to companies they bought in advance of the recovery, Rolls-Royce (RR) and Marks & Spencer (MKS), which were the third and fourth highest contributors to relative returns in the year and made up 2.6% and 1.9% of the portfolio respectively.

‘We had bought worthwhile holdings in both in advance of the recovery, recognising that change was underway,’ they said. ‘In hindsight, we should have bought more, as the recovery came faster than we expected.’

‘The speed of change at both the operating level and in stock market perception is fast. We recognise this and will build some new positions, and also cut some old ones if the market has genuinely moved into a new phase of economic recovery.’