Interim Management Statement

RNS Number : 6417L

Hansa Trust PLC

03 August 2011

 



HANSA TRUST PLC

INTERIM MANAGEMENT STATEMENT (UNAUDITED)

This interim management statement covers the period from 1 April 2011 to 30 June 2011. It has been produced for the sole purpose of providing information to the Company's shareholders in accordance with the requirements of the UK Listing Authority's Disclosure and Transparency Rules.

The Directors are not aware of any significant events or transactions, which have occurred between 30 June 2011 and the date of publication of this statement, which have had a material impact on the financial position of the Company.

CORPORATE RESULTS

			1st Quarter to 30 June 2011		Year Ended 31 March 2011
STATISTICS
Shareholders' Funds			£295.5m		£264.1m
Share Price
Ordinary share			1,020.0p		951.0p
'A' Ordinary share			1,010.0p		930.0p
Discount
Ordinary shares			17.1%		13.6%
'A' Ordinary shares			18.0%		15.5%
Net Asset Value  per share
Opening Net Asset Value			1,100.5p		895.9p
Dividends			-		(3.5p)
Revenue and capital return			130.6p		208.1p
Closing Net Asset Value			1,231.1p		1,100.5p
PERFORMANCE
Net Asset Value Return			11.9%		22.8%
Performance Benchmark			1.2%		5.3%
Ordinary Share			7.3%		25.1%
'A' Ordinary Share			8.6%		24.0%
FTSE All-Share Index			0.9%		5.4%
Total Return (Dividends Reinvested)
Ordinary Shares			7.3%		25.6%
'A' non-voting Ordinary shares			8.6%		24.4%
FTSE All-Share Index Total Return Index			2.0%		9.4%

INVESTMENT MANAGER'S COMMENTS - SUMMARY OF A PRESENTATION AT THE AGM on 2 AUGUST 2011

BACKGROUND

1.  Debt busts are deflationary and economic recoveries that follow financial recessions tend to be much weaker, slower and more erratic / uneven than those that follow non-financial recessions, as the necessary process of deleveraging drags on.

2.  Sovereign debt and banking problems are a typical aftershock of any international financial crisis, just as anaemic growth with sustained high unemployment is par for the course in the early stages of post financial recoveries.

3.  The developed economies have suffered the mother of all debt busts, and they are buried in debt. Governments are way over-borrowed, and banks are trying to re-build their balance sheets in a more harshly regulated world and are lending less. Meanwhile consumers in the developed world are still in the early stages of an unprecedented process of retrenchment after a buying binge that has resulted in record levels of household debt and very low savings. Ready availability of credit and ever-rising property prices are a thing of the past. An extended period of household retrenchment lies ahead in the West as consumers reduce their debt levels and save for the future, at a time when incomes are lagging rising inflation, and household bills and taxation are rising.

4.  The global economy moves forward as a two speed jagged / stalling recovery. Sluggish growth and very low interest rates in the developed world coupled with corrosion in the Eurozone. The lack of employment and income growth and continued tight credit conditions are stalling the business cycle. Austerity in the West. In comparison, much faster growth in developing markets coupled with higher inflation and monetary policy tightening. Good times in the East.

5.  The corporate sector is in good shape and the peak in profitability still looks some years off, with good top line growth in developing markets, depressed wage inflation in developed markets, and the benefits to come from an increase in productivity- improving capital expenditure. Scope to reduce capital intensity as a % of revenue. Equities remain attractive.

6.  Corporate sector is likely to be a net buyer of equities , both through cash-financed M&A activity and share buybacks, Equity withdrawal.

7.  Asset prices fluctuate much more than fundamentals, as investor sentiment oscillates wildly between greed and fear, optimism and pessimism, with little sense of moderation. So, volatility is a given on the equity journey. Low share trading volumes also make markets more volatile as smaller trades move prices.

INVESTMENT THEMES

1.  London quoted companies with a strong position in their home markets and a growing international customer base. Global companies. Over 80% portfolio.

2.  Companies with leading market positions, offering top line growth, and pricing power in what is an inflationary environment. "The strong get stronger".

3.  Companies which enjoy high margins and generate good levels of free cash flow.

4.  Companies that re-invest in the products and services that they offer their customers.

5.  Companies with good revenue predictability and visibility.

6.  Prefer B to B rather than B to C.

WARY OF

1.  Companies largely dependent on developed world consumer and public sector spending. The balancing of western economies away from consumer expenditure and government spending towards net trade and fixed investment by companies.

2.  Companies threatened by higher input prices.

PORTFOLIO REVIEW

OCEAN WILSONS HOLDINGS LIMITED (OWHL):

·     OWHL -  43.2% of Hansa Trust portfolio

·     Market Capitalisation OWHL  - £482.7m at 30.06.11

TWO PRINCIPAL SUBSIDIARIES:

1)   WILSON SONS LIMITED (WSL - 58.25% owned)

·   Autonomous Bermuda company listed on Sao Paulo & Luxembourg Stock Exchanges.

·   Floated May 2007. OWHL sells down from 100% to 58.25%, raising U$206m (invests U$183m in OWIL). WSL raises U$119m of new monies.

·   One of largest providers of maritime services in Brazil. Entered Offshore Oil & Gas support segment in 2003, after Petrobras's discovery of huge pre-salt oil fields.

·   Wilson Sons Ultratug Offshore (WSUT - 50% owned) formed in 2008 to operate Platform Supply Vessels and Anchor Handling Tug Supply.  Vessels built by WSL. 12^th vessel delivered and by 2017 WSUT expects to operate 34 joint venture owned OSV's.

·   Over next 6yrs WSL expects to invest over US$1.8bn, not including acquisitions (Marine Merchant Fund), US$0.84bn in Offshore Support Services, balance in Towage and Shipyards as both will also benefit from offshore E&P activities. Brasco (100% owned) has signed a contract for the acquisition of Briclog for R$125m. Briclog is located in the city of Rio de Janeiro and has been providing port services to the oil and gas industry since 2004.

·   Value 58.25% WSL as at 30.06.11 is £502.3m, and WSL represents 32.9% of Hansa Trust portfolio.

2)   OCEAN WILSONS INVESTMENTS LIMITED (OWIL, 100% owned)

·     Unquoted Bermudan investment company run by Hanseatic Asset Management.

·     Invests in a portfolio of diversified assets including global equities, fixed income and alternative assets, with a particular emphasis on emerging markets.

·     Value 100% OWIL as at 30.06.11 is £157.2m, and OWIL represents 10.3% of Hansa Trust portfolio

DISCOUNT OWHL as at 30.06.11:

·     Value 58.25% WSL :                 £502.3m

·     Value 100% OWIL  :                 £157.2m

·     Total:                                        £659.5m

·     Market Cap. OWHL:                 £477.4m

·     OWHL share discount:                 26.0%

LATEST NEWS UPDATEs from next 21 holdings representing 50.9% NAV:

DV4 LIMITED - A consortium consisting of its subsidiaries and funds advised by Area Property Partners(UK) Ltd has made a recommended cash offer for Minerva PLC.

BG GROUP - 1Q results from and weaker near-term volume guidance have not altered the medium term outlook. BG now expects only "modest" production growth for FY11, but emphasises that its plans for production ramp-up in 2012-13, as well as its 2020 goals, are unaffected. Subsequently announced a material upgrade for its interests in the pre-salt Santos Basin offshore Brazil. Mean Total Reserves and Resources are now estimated to amount to some 6 billion barrels of oil equivalent net to BG Group, which represents a doubling of BG Group's previous best estimate of 3 billion prevailing at the time of the Group's February 2010 Strategy Presentation.

ANDOR TECHNOLOGY - a global leader in the development and manufacture of digital cameras, announced an excellent set of interim figures and stated "we now believe full year performance will exceed those revised expectations". Andor is focused on investment and innovation, ensuring that it remains a global leader in its selected markets.

HARGREAVES SERVICES - a leading supplier of solid fuels and bulk material logistic services in Europe provided a positive pre-close trading update, confirming that trading for the year to May 2011 is in line with expectations and that net debt is better than expected.

CAPE -  a leading global supplier of essential non-mechanical support services to the energy and resources sectors, issued an  IMS confirming that trading is in line with expectations and H2 is likely to see the next step change in activity, both in the Mid and Far East. The Group's tax residence is moving to Singapore and Jersey and the share listing has moved from AIM to the Main Market.

WEIR GROUP - released a strong trading update driven by its Minerals and Oil & Gas divisions and management raised its FY11 PBT guidance by £20m. Weir hosted a seminar for its upstream oil & gas equipment business, focusing on the pressure pumping equipment market. The Weir SPM operation is market leader in one of the fastest growing upstream oil and gas sectors, with growth in the installed base and increased operating intensities driving further aftermarket opportunities and an accelerated original equipment replacement cycle.

BHP BILLITON - is the largest mining company in the world, focusing on coal, iron ore and a large E&P company, and it has recently bought back over 4% of its issued share capital, since the company generates about U$30bn of cash flow a year. The company has just announced its largest acquisition to date, with the U$12bn purchase of shale gas producer Petrohawk, a top-class asset, which takes BHP into the top 10 of oil & gas companies globally. Its June quarter and FY2011 production results showed stand-out performances in iron ore and oil & gas.

NCC GROUP - the international, independent provider of Escrow and Assurance, announced a strong set of interim figures, with both businesses continuing to see predictable long term expansion with strongly recurring revenues throughout. There are considerable opportunities to develop the Assurance division further into an international leader in information security.

HERALD INVESTMENT TRUST - is a top performing small cap technology fund, with a UK rather than US bias, and some 220 holdings.

EXPERIAN - the global information services company, expects another good year of organic revenue growth of 6-8% and improving margins. The company continues to be acquisitive, recently buying US Medical Present Value for U$185m and Columbia's Computec for U$400m.

KOFAX - the leading global provider of document driven business process automation solutions, announced that it has closed on the sale of its hardware business in accordance with the terms and conditions originally announced in January 2011, and closed on the acquisition of Atalasoft. Kofax is now a cash rich, US based, global software and services provider.

HANSTEEN HOLDINGS - is an investor in Continental European industrial real estate, with 60% of its portfolio in Germany. The company recently raised £150m to capitalise on attractive acquisition opportunities in the UK and Europe, taking advantage of capital starved markets. Readily accessible capital will give the company a competitive advantage over competing bids for portfolios from lenders.

GREAT PORTLAND ESTATES - is entirely focused on Central London and mainly West End, a property market more dislocated from the rest of the UK economy than it ever has been. There is huge overseas demand for prime Central London property, so it's like an export.  The near term development pipeline could potentially provide an additional 1.8m sq ft from 11 schemes which could be delivered by 2014.

CAIRN ENERGY - proposed sale of 40% of Cairn India to Vedanta has been granted conditional consent by the Government of India, which should see an initial cash inflow of U$1.4bn which will fund this year's four well drilling programme in Greenland, with a further U$4bn due on receipt of the necessary consents and approvals.

CENTRICA - the UK's largest energy supplier, has issued a reassuring trading update. It owns producing assets and sells to residential customers, so this vertical integration smooths out swings in commodity prices. Its American unit, Direct Energy, is one of North America's largest energy and energy-related services providers, and Centrica is planning to double its operating profits via organic growth and acquisitions.

HSBC - strategic review emphasised the need to reduce costs and boost returns by focusing on the most profitable countries and businesses to be in. In Hong Kong and the UK, HSBC will continue to build on its large retail presence, but in many parts of the world, where it is sub-scale, it will exit. At least 39 out of 87 countries are ear-marked for possible exit.

GLAXOSMITHKLINE - "expects underlying sales growth to translate into sustainable reported earnings growth from 2012 onwards". This is a story about cost cutting, developing the vaccines business and its consumer healthcare business, and selling branded drugs in to developing markets, along with share buy-backs. This could be "the new tobacco" ?

UNITED BUSINESS MEDIA - provided a confident Q1 update, with underlying revenue growth of 7.5% and a positive outlook for Events and PR Newswire. The Chinese / emerging markets Events operations are some of the best operating units of any company in the sector. There has been need for increased investment to combat margin pressure in Targeting, Distribution & Monitoring and Data, Services & Online.

BP  - continues to put the Macondo well disaster in the Gulf of Mexico behind it, and is well on track to meet its target of achieving up to U$30bn of divestments by the end of 2011, giving the company more than sufficient cash to pay for the US escrow account, while leaving the company with a leaner portfolio of assets. BP is poised to become a major player in the Indian gas business after signing a U$20bn deal with Reliance Industries covering exploration and development.

ENI - share price decline has strengthened the valuation case considerably. The Libyan conflict has seen a 15% volume drop in ENI's E&P volumes, as well as hitting its gas marketing business.

GALLIFORD TRY - IMS led to a significant upgrade in forecasts with new housing sales 20% ahead year-on-year, while 70% of the land bank is secured at current market prices. Construction has also benefited from contract awards, with 80% of next year's revenue now secure. "We enter the new financial year with confidence".

KEY INFORMATION

Significant Holdings - either those more than 5% of Gross Assets (inc.Income) or Top Ten Holdings (%):

Ocean Wilsons Holdings	43.2
BG Group	3.8
Andor Technology	3.6
Hargreaves Services	3.5
Cape	3.3
Weir Group	3.2
BHP Billiton	2.8
NCC Group	2.6
Herald Investment Trust	2.5
Experian	2.4
Total	70.9
No. of Holdings	55

Analysis of Assets (£m):

Total Investments	297.5
Net current assets/(liabs)	(3.2)
Total assets	294.2
Short-term borrowing	(1.9)
YTD revenue / (loss)	3.1
Net assets (ex. Income)	295.5
Gearing	1.1%
Net Cash	0.0

There are no Listed Investment Company holdings where the investee company has a policy that does not limit them to investing less than 15% of gross assets in other listed Investment Companies and there are no material changes to the most recent price and Net Asset Value (%):

Share Price on £100 (£):	Ordinary	'A' Ordinary
1 Year	143.4	142.3
3 Years	122.9	123.2
5 Years	134.7	138.9
10 Years	223.0	259.0

Performance Statistics (%):	Fin.YTD	1 Yr	3 Yrs	5 Yrs	10 Yrs
Net Asset Value (#)	11.8	47.0	31.1	60.4	193.2
Total Return on Net Asset Value (#)	11.8	47.5	38.6	74.0	240.9
Benchmark	1.2	5.1	14.9	31.5	66.6
Share Price - Ordinary	7.3	43.4	22.9	34.7	123.0
Total Return on Ordinary Shs (#)	7.3	43.9	31.1	47.7	164.5
Share Price - 'A' Ordinary	8.6	42.3	23.2	38.9	159.0
Total Return on 'A' Ordinary Shs(#)	8.6	42.8	31.6	52.7	208.4
FTSE All-Share Index	0.9	21.8	8.4	4.4	13.5
Total Return on FTSE All-Share (#)	2.0	26.2	22.7	27.2	65.9

FSA - Standardised Performance Information

12 mths Period (Bid to Bid)	2006Q2 to 2007Q2	2007Q2 to 2008Q2	2008Q2 to 2009Q2	2009Q2 to 2010Q2	2010Q2 to 2011Q2
Total Return %age - Ord	47.91	(24.27)	(22.29)	8.53	42.86
Total Return %age - A.Ord	43.55	(20.39)	(23.78)	11.2	42.45

Fund Details

Fund Manager:	John Alexander of Hansa Capital Partners LLP
Launch Date:	1912 (name changed to Hansa Trust in October 2001)
Investor Sector:	UK Growth
Capital Structure:	8,000,000 Ordinary shares of 5p
	16,000,000 'A' non-voting Ordinary shares of 5p
Year End:	31st March
Dividend:	Final - ex date June, payment date August
	Interim - ex date and payment date December
Directors:	R.A. Hammond-Chambers, Chairman
	W.H. Salomon, Lord Borwick,
	Prof. G.E. Wood
Ownership	Board of Directors and connected parties own or are interested in 52.7% of the Ordinary shares.
Managers:	Hansa Capital Partners LLP - authorised and regulated by the Financial Services Authority (FSA)
Management Fee:	Maximum of 1.00%  per annum (payable by the Trust)
Benchmark:	3 year rolling average composite of 5 year Govt.Bond Yield (with interest being re-invested semi-annually) + 2% from 1 April 2003
Investment Goals, Policy and Benchmark	To achieve growth of shareholder value Hansa Trust PLC invests in a portfolio of special situations, where individual holdings or specific sectors may constitute a significant proportion of the portfolio or that of the equity of the companies concerned.  This investment approach may produce returns which are not replicated by movements in any market indices.  Performance is measured against an absolute benchmark derived from the three-year average rolling rate of return of the five year government bond with interest being re-invested semi-annually, plus 2 percent.  Investments are intended to add value over the medium to longer term through a non-market correlated, conviction based investment style.
FSA Investment Restriction:	It is the stated policy of the Board not to limit investments in Investment Companies to less than 15% of gross assets as detailed in the FSA Listing Rules Chapter 21.20 (i)

#  NOTES:-

Net Asset Value per share is calculated in accordance with the guidelines of the Association of Investment Companies (AIC) in that income received by the company in the period since the last annual accounts is included. With effect from 1 June 2008 Net Asset Values and returns have been restated on a cum income basis in accordance with a change in the AIC guidelines. Hansa Trust PLC is a member of the Association of Investment Companies.

Total Returns on Net Asset Value and Shares has been sourced from unaudited internal management information and from the Close WINS Investment Trusts database, and assumes that all dividends are re-invested.

Other than Standardised Performance Information prices quoted are mid-price and performance returns are mid to mid.

Risk warning: The information provided here has been issued by Hansa Capital Partners LLP, which is regulated by the Financial Services Authority.  Share and performance information has been compiled by Hansa Capital Partners LLP. Past performance is not necessarily a guide to future performance as market and exchange rate movements may cause the value of shares and income from them to fall as well as rise, and an investor may not get back the amount invested.  Investment Trust share prices may not fully reflect underlying net asset values. The spread on Investment Trusts typically averages 1-2% each way on the mid-market price (the price halfway between the bid and offer prices).  However, investors wishing to invest in Hansa Trust 'A' shares should note that the market for these shares is at times quite illiquid which leads to a large spread between the buying and the selling prices, the bid to offer spread.  For example, for the 'A' shares, as at 30 June 2011 the bid to offer spread was 4.04%*.            *Source:  Bloomberg

 

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