Final Results

RNS Number : 5766I

Hansa Trust PLC

16 June 2011

 



HANSA TRUST PLC

Preliminary Announcement of Unaudited Results

for the year ended 31 March 2011

Hansa Trust PLC announces its Preliminary Results for the year ended 31 March 2011

Financial Highlights	Year ended 31 March 2011 (unaudited)	Year ended 31 March 2010
Net Asset Value - Total Return	23.3%	48.0%
Performance Benchmark	5.3%	6.2%
Capital return per equity share	204.6p	272.9p
Revenue return per share	3.5p	27.4p
Net asset value per share	1,100.5p	895.9p
Total dividend per equity share for the year	3.5p	25.0p
Total income (£000's)	3,009	8,370
Revenue before taxation (£000's)	836	6,584

The following are attached:

·              Chairman's Statement

·              Group Income Statement

·              Statement of Changes in Equity-Group and Company

·              Balance Sheet for the Group and Company

·              Cash Flow Statement

·              Notes

For further information, please contact:

Peter Gardner                Hansa Capital Partners LLP                    020 7647 5750

Chairman's Statement

2010-2011: Stock Market Recovery continues, currency crises abound

This last year has seen a continuation of the recovery of stock markets from their low points in March 2009 - following the severe battering that they had taken in the wake of the 2007/08 financial crisis. The crisis caused liquidity in many markets to implode - not only stock markets but also commodity, banking, money and other markets. In all probability, central banks had little option but to flood markets with money to reliquify the economic and financial systems, which might otherwise have ground to a halt with very severe consequences. But there will be costs down the line - some of which are anticipatable, others of which are not. In any event the reliquification has been very good for stock markets: money drives markets. However, it is not just money sloshing around that has driven these markets. Companies have done an excellent job at cutting costs and preparing themselves for difficult times. So we have witnessed lots of money chasing good profit performances with the excellent returns tabled below.

Stock market Index Changes (in £s) during two years (31st March 2009 to 2011)

(in £s:)	2009/10	2010/2011	2009/2011
Australia	+72.9%	+7.4%	+85.7%
Brazil	+107.9%	+1.5%	+111.0%
Canada	+62.3%	+15.7%	+87.8%
China	+23.8%	-7.1%	+15.0%
France	+36.3%	-0.4%	+35.8%
Germany	+45.1%	+13.6%	+64.8%
Japan	+36.6%	-6.2%	+28.1%
UK	+46.7%	+5.4%	+54.6%
USA	+39.1%	+7.2%	+49.1%

However the period has also been one of considerable turmoil in currency markets. Given that a number of nations had to put their national balance sheets on the line to bail out their errant banking industries while others have found that their national debts have become too big to manage, it is not surprising that there have indeed been currency crises. The Euro took quite a hammering in the spring and early summer of 2010 as the confidence in the national finances of the PIIGS, as they have become affectionately known, broke down. It has subsequently recovered. However the real story of the currency markets over these last two years has been the steady decline of the US Dollar against most major currencies (including the Euro). The table below shows the decline in the US Dollar against major currencies:

The US$	2009/10	2010/2011	2009/2011
Sterling £	-5.7%	-6.0%	-11.4%
Euro €	-1.8%	-4.6%	-6.3%
Japanese Yen	-4.7%	-10.6%	-14.8%
Chinese Yuan	-0.1%	-3.9%	-4.0%
Brazilian Real	-22.4%	-8.2%	-28.8%
Australian $	-25.7%	-10.8%	-33.7%
Canadian $	-18.4%	-4.6%	-22.2%
Source: OANDA web site

The steady decline of the US Dollar is a cause for concern albeit there is no Dollar crisis. Indeed there remains a lot of confidence in it - most especially when there are global problems (the uprisings in North Africa and in the Middle East for instance) - but the fact is that the combination of loose money and huge trade deficits creates more sellers than buyers. The US Dollar price of gold has risen by circa 60% over these two years. That just about says it all.

While our portfolio is invested entirely in the shares of UK listed companies, we have an international perspective when managing money in part because there is a considerable degree of correlation between the movements of stock markets around the world and in part because over 60% of the sales and profits earned by UK listed companies is earned overseas. An understanding of international trends sets the scene for managing and understanding our investment portfolio.

THE YEAR'S RESULTS

NAV: +22.8% to 1,100.5p per share
Benchmark: + 5.3%

Following last year's big recovery (the net asset value per share ("NAV") rose 41%), I am able to report that the NAV rose a further 22.8% this year, ending the year at 1,100.5p per ordinary and "A" ordinary share. I do each year remind shareholders - who I am sure do not need reminding - that it is our purpose to make money for you. It is for that reason that we have the benchmark that we do - one which compares our returns with that of a low risk, absolute return fixed interest government bond. Last year the benchmark returned 5.3%; that compares with a NAV return (including the reinvestment of dividends paid) of 23.3%.

Although not our benchmark, we do keep an eye on the performance of the market as a whole, using the FTSE All-share Index as a proxy for it. The Index rose by 5.4% and on a total return basis by 9.4% so we had the satisfaction of doing rather better than it. We will not always do so and - to repeat - the portfolio is not managed to do so.

Once again our holding in Ocean Wilsons (more of which below) was the main contributor to the gains made over the year. Of the 204.6p gain in the NAV, our holding in Ocean Wilsons made 90.6p; but there were some other excellent contributors, the next four being from our holdings in Cape (+18.4p), Kofax (+15.0p), BG Group (+14.7p) and Andor Technology (+14.0p). There really were only two losses of any significance - one coming from our holding in BP (-6.9p; that story is very well aired!) and the other from EAGA (-9.1p; the holding has now been sold). As always, John Alexander provides an excellent and detailed account of the activities in the portfolio during the year, in his manager's report, backed up with commentary on what has happened in the wider world and what our prospects are. (Available In the Annual Report)

Two of the characteristics that the investment trust sector is inclined to boast about - and quite rightly so in my view - are the long-term investment approach that closed end portfolio management allows and the relatively low cost of managing investment trusts. The best way to gauge the time horizons of the management of a portfolio is to look at the portfolio turnover - how long on average are holdings held for. High portfolio turnover is normally an indication of short-termism: in our case, our portfolio turnover last year amounted to 17.8% of the average total assets during the year. I should add that our capital structure also protects us from market pressures to produce short-term performance and that our benchmark protects us from the pressure to produce positive relative returns often at the expense of absolute returns (the latter being our goal).

The costs of running the Company, were low, our total expense ratio was 0.9% of the average shareholders' equity during the year. One of the reasons for the low number is that Hansa Capital, our Manager, does not charge a fee for the holding in Ocean Wilsons, which saves shareholders around £1 million each year.  We are always a little cautious about boasting about low expense ratios. A low expense ratio that produces rotten returns is actually money badly spent.  What my independent director colleagues and I feel is that what we have spent to earn the returns we and all other  shareholders, have enjoyed, has proven to be very good value for money.

OCEAN WILSONS

Value of Holding: +25.4% at £106.2m.

The value of our holding in Ocean Wilsons has once again made an excellent contribution to our own returns. Again, John's commentary provides a good review of its progress.

We should remember that Ocean Wilsons (market capitalisation: £401.3m) business now consists of:-

1.    its 58% owned subsidiary, Wilson Sons Ltd which is involved in maritime services in Brazil. The value of that holding at our year end amounted to $698m; and

2.    a portfolio of investments with a market value of circa $260m at our year end.

To repeat what I said last year: it is not our policy to trade in and out of our holding in Ocean Wilsons and one of the reasons for achieving the quotation for Wilson Sons shares three years ago, realising some cash from its investment in it, was to make Ocean Wilsons a geographically more diversified company. John's commentary provides some figures. So, although our holding of 26.5% of Ocean Wilsons accounts for 40% of our net asset value, as mentioned above, the commitment to any one country or to any single investment is much less.

DIVIDEND

3.50p per share

In the year to 31st March 2010, we earned rather more than we would usually expect owing to the timing of the payment of some of our dividends. We did not have the benefit of those dividends this year, so that the comparison of our income suffers twice - once for not receiving them and the second time because they were received twice the year before. So it is that our income from investment fell from £8.4 million to £3.0 million.

As a consequence the net income available to pay dividends has also declined - from £6.6 million to £0.8 million or 3.49p per share. As an interim dividend of 3.50p per share has already been paid, the Board are not declaring a final dividend.

Over the past two years, the total dividends declared have amounted to 28.5p per share. I would hope - but certainly not promise - that our dividend payments will become more normal this year - more in line with what we have been able to pay in prior years.

SHARE PRICE PERFORMANCE

Ordinary shares:	+25.1% to 951p per share;	Discount to NAV: 13.6%
"A" Ordinary shares:	+24.0% to 930p per "A" share;	Discount to NAV: 15.5%

With a small improvement in the discount at which both classes of shares sell in relation to their underlying net asset value, the rise in the price of our shares did a little better than the NAV itself:

the ordinary shares ended March 2011 at 951p, selling at a discount 13.6%. An interim dividend of 3.5p was paid providing a total return of 25.6% for the year (see table below);

the "A" ordinary shares ended March 2011 at 930p, selling on a discount of 15.5%; the payment of the interim dividend meant that the total return of the "A" ordinary shares for the year amounted to 24.4%;

The table below provides an attribution of shareholders' return over the course of the year - after taking into consideration the dividends paid during the course of the year, amounting to 3.5p per share:

Attribution of Shareholder Returns	Ordinary Shares		"A" Ordinary Shares
Share price change due to change in NAV	+174.0p	+22.9%	+171.8p	+22.9%
Share price change due to change in discount	+17.0p	+2.2%	+8.2p	+1.1%
Dividends paid during the year	+3.5p	+0.5%	+3.5p	+0.5%
Shareholders' Total Return	+194.5p	+25.6%	+183.5p	+24.4%

It has to be said that the discount that at the year end our shares are selling at in relation to the underlying net asset value is somewhat higher than the average for investment trusts generally and for our peer group, the AIC's UK Growth. We do take powers to buy back shares and will do so if the circumstances make it particularly attractive to do so. But, we do not seek to manage the share price over the short term with buy back programmes, content in the knowledge that over the long term

the share price return will not be materially different from the net asset value return. 

LONG TERM NAV RETURNS

5 Years: NAV: +34.6%;              Benchmark: +31.7%;                                   FTSE A-s Index: +0.6%
NAV: +47.2% (including reinvestment of dividends)
Ordinary share price:               +12.2% (including dividends +21.4%)
"A" Ordinary share price:       +13.7% (including dividends +22.5%)

We always stress the importance of long-term returns in these statements and we regard five years as an appropriate time over which to judge those returns. As the figures above show, the net asset value has risen by 34.6% since our 2006 year end; and, on a total return basis, by 47.2%. It is not a huge return - amounting to circa 6% per annum, 8% p.a. total return - but it is positive and it is a little bit better than our benchmark (+31.7% or 5.7% p.a.). It is certainly better than the stock market as measured by the FTSE All-share Index.

Last year we showed how the five-year rolling returns have worked out over the last ten years and we have reproduced the chart. It illustrates that, by and large and with the exception of one period, the five year per annum returns have been satisfactory - some very good periods, others not quite as good but, in nine out of the ten periods, money has been made for shareholders.

(CHART NOT INCLUDED)

Some shareholders do, from time to time, ask the question: How have you done if you exclude the holding in Ocean Wilsons. It is a very reasonable question to ask and I am happy to report that the answer is satisfactory. The table below sets out those returns:

NAV (ex OW holding) over:	NAV	FTSE All-Share Index
Over 1 Year	+21.3%	+5.4%
Over 3 Years	+6.2%	+4.8%
Over 5 Years	+3.9%	+0.6%
Over 10 Years	+59.2%	+13.2%

Each year it falls upon the shoulders of the independent directors to assess the performance of our Manager and to report to shareholders that we have done so. Obviously, the absolute and relative returns are satisfactory. But the assessment is broader based than a mere inspection of the numbers. Hansa Capital are diligent and efficient in carrying out their duties and very conscious of the needs of their client - you, the shareholders. We, the independent directors, had no trouble in concluding that it is very much in the interest of shareholders that Hansa Capital remain in situ as the Company's managers.

Our affairs are in good hands. It is appropriate for us, on behalf of all shareholders, to thank William Salomon, John Alexander, Peter Gardner and all their colleagues at Hansa Capital for all that they do for us and the returns they have earned for us over the years. Thank you.

ANNUAL GENERAL MEETING

2nd August 2011 at 11.30am at the Washington Hotel, Curzon Street.

The annual general meeting will be held at the Washington Hotel, Curzon Street, London at 11.30am on Tuesday 2nd August 2011. Your attendance is important to us because it gives us, the Directors and Management, the chance to hear your views, concerns and suggestions. Do please come and join us. As he always does, John will give his usual presentation of the events of the past year and the prospects for the current one. Following the formal AGM you will have the chance to meet the directors and the management and discuss any aspect of the Company's business - should you wish to do so.

OUTLOOK

John's Outlook, which ends his Investment Manager's Report, provides an excellent run through of the issues and the dilemmas facing the economies of the world, companies' sales, profits and dividends and thence stock markets themselves. He concludes that we are recovering from the financial crisis but that there will be pauses in the rate of recovery; getting there will require patience. The big issue that neither he nor anyone else can answer at this stage is where do we go to on the way to "there".

All major crises bring about change. The 2007/8 financial crisis has brought about many changes but questions hang in the air: are they the right changes? Are we not just papering over the root causes of the crisis with more rules and regulations designed to treat the symptoms rather than eliminate the causes? Changing the structure of regulation, designing new banking structures to protect depositors from bad banking practices, having almost zero interest rates, pumping money into the economy and many other policy initiatives - all are designed to protect us from the consequences of poor economic behaviour inherent in living - persistently - beyond our means.

The City - and indeed the broader financial community - finds itself in a dilemma when considering quite what the fiscal and monetary policies that have been adopted to deal with the crisis will bring about. On the whole it believes - in part because it wants to believe - that we will get ourselves out of the economic and financial mess that we are still embroiled in through gentle inflation, slow but sure economic growth and corporate prosperity. It may happen but it is unlikely. There are other scenarios and they include on the one hand inflation erupting out of control and on the other protracted deflation - much as Japan has suffered in the last twenty years. Given that we have no certain knowledge which of these three - or any other - scenarios will come to pass, we have to adopt an open mind. Arie de Geus, head of Shell Oil's Strategic Planning Group and a leader in the development of scenario planning, taught that strategists who focus on a single path of future events tend to filter out news that does not fit their view of the world. Companies with a single strategy or plan are "virtually blind" to new information.

Every year - at the turn of the year - your board and management have a strategy meeting to think about the longer-term future and about risk. This year we started questioning ourselves of the basic reasons that lie behind the financial mess that we are in. It is not an easy question to answer in a sentence but perhaps the most fundamental cause for the problems is the culture and obsession with short-term gratification - or short-termism as it is usually referred to. It has and continues to determine how we behave. An understanding of why it has all come about gives one a chance - outside maybe - of understanding what might happen going forward.

I believe that the single most important casualty of our short-termism is our country's level of savings. Short-termism encourages consumption today at the expense of saving for consumption tomorrow; but there are also other biases against saving, including our tax system, our current level of interest rates, our welfare state dependency culture and inflation. Given that we have got used to getting richer from rising house prices and stock markets, it all adds up to - "why bother to save?" And so - as a gross generalisation - we don't; rather we live beyond our means and we rely on government to do for us what personal savings would otherwise do. The truth of the matter is that we cannot enjoy long-term economic prosperity without an adequate level of savings. We not only need savings to invest in our future but we now need savings to repay our debts.

The purpose of these comments is to proffer the view that the basic cause for the financial mess that we are in - living beyond our means and not saving enough - has not been addressed in any of the policy initiatives. Rather they have been and continue to be about relieving the symptoms in a desperate attempt to put off the consequences of profligacy. Quantitative Easing does not constitute a policy to deal with our financial imbalances; new rules and regulations merely encourage more but different regulatory arbitrage; near zero rates of interest punish savers, subsidise borrowers and finance reckless speculation; stakeholders in banks want lower risks but institutional investors continue to demand higher returns; bad debts (including and importantly bank and sovereign debts) are rolled forward rather than recognised. And so on. None of these policies provides the fundamental changes that a crisis should provoke and which should lead on to better times.

So, while we are enjoying a lull in the storm, we should continue to expect the volatility that has characterised stock markets over the last ten or so years and is inherent in uncertainty. We can expect more of the same policies without knowing quite what their ultimate consequences will be. Excessive Quantitative Easing suggests inflation and, if wages don't keep pace, considerable political unrest. On the other hand, if individuals, faced with static income but higher household bills, higher inflation, higher taxes and debt repayments, decide to draw in their financial horns, then we could well face protracted deflation.

While all of the above sounds rather gloomy, I think it is sensible to be realistic about the future and not to close one's mind to any outturn. But for all of us, as shareholders of Hansa Trust, our own prospects ultimately depend on how well we invest. That involves, in part understanding the external environment and in part backing well-managed companies over the long haul. John has made the point that the corporate world is - by and large - in good financial health. That at least provides us with the opportunity to find the right companies for the times and to continue to make money for you. I am confident we will.

Alex Hammond-Chambers
Chairman             

Group Income Statement - (Unaudited)

for the year ended 31 March 2011

	Revenue		Capital		Total		Revenue		Capital		Total
	2011		2011		2011		2010		2010		2010
	£000		£000		£000		£000		£000		£000
Gains on investments	-		49,127		49,127		-		66,232		66,232
Loss on derivatives	-		(16)		(16)		-		(744)		(744)
Exchange losses on currency	-		(4)		(4)		-		-		-
balances
Investment income	3,009		-		3,009		8,370		-		8,370
	3,009		49,107		52,116		8,370		65,488		73,858
Investment Management fee	(1,386)		-		(1,386)		(1,264)		-		(1,264)
Write back of prior years' VAT	51		-		51		97		-		97
Other expenses	(724)		-		(724)		(618)		-		(618)
	(2,059)		-		(2,059)		(1,785)		-		(1,785)
Profit before finance costs
and taxation	950		49,107		50,057		6,585		65,488		72,073
Finance costs	(114)		-		(114)		(1)		-		(1)
Profit before taxation	836		49,107		49,943		6,584		65,488		72,072
Taxation	(4)		-		(4)		(4)		-		(4)
Profit for the year	832		49,107		49,939		6,580		65,488		72,068
Return per Ordinary and 'A'
non-voting Ordinary share	3.5p		204.6p		208.1p		27.4p		272.9p		300.3p

The Company does not have any income or expense that is not included in the profit for the year. Accordingly the "Profit for the year" is also the "Total comprehensive income for the year", as defined in IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.

The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

Statement of Changes in Equity - Group - (Unaudited)

for the year ended 31 March 2011

				Capital								Capital
		Share		redemption		Retained				Share		redemption		Retained
		capital		reserve		earnings		Total		capital		reserve		earnings		Total
		2011		2011		2011		2011		2010		2010		2010		2010
		£000		£000		£000		£000		£000		£000		£000		£000
Net assets at 1 April		1,200		300		213,514		215,014		1,200		300		150,906		152,406
Profit for the year		-		-		49,939		49,939		-		-		72,068		72,068
Dividends		-		-		(840)		(840)		-		-		(9,460)		(9,460)
Net assets at 31 March		1,200		300		262,613		264,113		1,200		300		213,514		215,014

Statement of Changes in Equity - Company - (Unaudited)

for the year ended 31 March 2011

			Capital								Capital
	Share		redemption		Retained				Share		redemption		Retained
	capital		reserve		earnings		Total		capital		reserve		earnings		Total
	2011		2011		2011		2011		2010		2010		2010		2010
	£000		£000		£000		£000		£000		£000		£000		£000
Net assets at 1 April	1,200		300		213,514		215,014		1,200		300		150,906		152,406
Profit for the year	-		-		49,939		49,939		-		-		72,068		72,068
Dividends	-		-		(840)		(840)		-		-		(9,460)		(9,460)
Net assets at 31 March	1,200		300		262,613		264,113		1,200		300		213,514		215,014

Balance Sheet of the Group and Company - (Unaudited)

as at 31 March 2011

	Group		Group		Company		Company
	2011		2010		2011		2010
	£000		£000		£000		£000
Non-current investments
Investment in subsidiary	-		-		633		634
Investments at fair value through
profit or loss	266,435		216,309		266,435		216,309
	266,435		216,309		267,068		216,943
Current assets
Trade and other receivables	281		631		281		631
Cash and cash equivalents	8,295		1,824		8,295		1,824
	8,576		2,455		8,576		2,455
Current liabilities
Trade and other payables	(10,898)		(3,750)		(11,531)		(4,384)
Net current liabilities	(2,322)		(1,295)		(2,955)		(1,929)
Net assets	264,113		215,014		264,113		215,014
Capital and reserves
Called up share capital	1,200		1,200		1,200		1,200
Capital redemption reserve	300		300		300		300
Retained earnings	262,613		213,514		262,613		213,514
Total equity shareholders' funds	264,113		215,014		264,113		215,014
Net asset value per Ordinary and 'A' non-voting Ordinary share	1,100.5p		895.9p		1,100.5p		895.9p

Cash Flow Statement - (Unaudited)

for the year ended 31 March 2011

	2011		2010		2011		2010
	£000		£000		£000		£000
Cash flows from operating activities
Gain before finance costs and taxation	50,057		72,073		50,057		72,073
Adjustments for:
Realised (gains)/losses on investments	(3,689)		1,704		(3,689)		1,704
Unrealised gains on investments	(45,438)		(67,936)		(45,437)		(67,935)
Effect of foreign exchange rate changes	(4)		-		(4)		-
Decrease in trade and other receivables	350		519		350		519
Increase in trade and other payables	182		27		181		26
Taxes paid	(4)		(4)		(4)		(4)
Purchase of non-current investments	(24,688)		(16,075)		(24,688)		(16,075)
Sale of non-current investments	23,755		5,025		23,755		5,025
Net cash inflow/(outflow) from operating activities	521		(4,667)		521		(4,667)
Cash flows from financing activities
Interest paid on bank loans	(114)		(1)		(114)		(1)
Dividends paid	(840)		(9,460)		(840)		(9,460)
Drawdown of loans	6,900		3,500		6,900		3,500
Net cash inflow/(outflow) from financing activities	5,946		(5,961)		5,946		(5,961)
Increase/(decrease) in cash and cash equivalents	6,467		(10,628)		6,467		(10,628)
Cash and cash equivalents at 1 April	1,824		12,452		1,824		12,452
Effect of foreign exchange rate changes	4		-		4		-
Cash and cash equivalents at 31 March	8,295		1,824		8,295		1,824

Notes

INCOME

	Revenue		Revenue
	2011		2010
	£000		£000
Income from quoted investments
Dividends	2,353		3,446
Overseas dividends	649		4,869
	3,002		8,315
Other operating income
Interest receivable on AAA rated money market funds	2		24
Other interest receivable	5		31
	7		55
Total income	3,009		8,370
Total income comprises:
Dividends	3,002		8,315
Interest	7		55
	3,009		8,370

DIVIDENDS PAID

	Revenue		Revenue
	2011		2010
	£000		£000
Amounts recognised as distributions to equity holders in the year:
Final dividend for 2010: nil (2009: 14.5p)	-		3,480
Interim dividends for 2011: 3.5p (2010: 25.0p)	840		6,000
Unclaimed dividends refunded	-		(20)
	840		9,460

We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of s.1158 CTA 2010 are considered. The Company's revenue available for distribution by way of dividend for the year is £832,000 (2010: £6,580,000).

	Revenue		Revenue
	2011		2010
	£000		£000
Interim dividends for 2011: 3.5p (2010: 25.0p)	840		6,000

The Board are not proposing a final dividend.

Notes:

1.     This Preliminary Announcement is not the Company's statutory accounts. It is an abridged version of the Company's full draft accounts for the year ended 31 March 2011, which have not yet been approved, audited or filed with the Registrar of Companies.

2.     The full draft accounts for the year ended 31 March 2011 have been prepared in accordance with International Financial Reporting Standards ("IFRS") and using the same accounting policies as those in the last published annual accounts, being those to 31 March 2010.

3.     Statutory accounts for the 12 months ended 31 March 2010 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain statements under Section 498 of the Companies Act 2006.

Hansa Capital Partners LLP - Company Secretary

16 June 2011

 

END

 

 

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