Interim Management Statement

RNS Number : 9162Y

Hansa Trust PLC

30 January 2014

 



HANSA TRUST PLC

INTERIM MANAGEMENT STATEMENT (UNAUDITED)

This Interim Management Statement covers the period from 1 April 2013 to 31 December 2013. 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 31 December 2013 and the date of publication of this statement, which have had a material impact on the financial position of the Company.

CORPORATE RESULTS

			Nine months to 31-12-2013		Year Ended 31-03-2013
STATISTICS
Shareholders' Funds			£277.8m		£259.9m
Share Price
Ordinary share			830.0p		837.0p
'A' Ordinary share			831.0p		815.0p
Discount #
Ordinary shares			28.3%		22.7%
'A' Ordinary shares			28.2%		24.7%
Net Asset Value  per share
Opening Net Asset Value			1,082.9p		1,117.5p
Dividends			(16.5p)		(14.5p)
Revenue and capital return			91.2p		(20.1p)
Closing Net Asset Value			1,157.6p		1,082.9p
PERFORMANCE
Net Asset Value movement			6.9%		(1.8%)
Performance Benchmark			2.5%		3.8%
Ordinary Share			(0.8%)		(9.0%)
'A' Ordinary Share			2.0%		(6.6%)
FTSE All-Share Index			6.8%		12.6%
Total Return (Dividends Reinvested)
Ordinary Shares			1.3%		(7.3%)
'A' non-voting Ordinary shares			4.1%		(4.8%)
FTSE All-Share Index Total Return Index			9.9%		17.4%

PORTFOLIO PERFORMANCE STATISTICS

					Nine months to 31-12-13		Year Ended 31-03-13
					%		%
Portfolio Time Weighted Return					9.5		(0.9)
-     ex Ocean Wilsons Holdings Ltd					13.7		5.3
Benchmark					2.5		3.8
FTSE All Share - Total Return					9.9		17.4
Weighting	Sector				Time Weighted Returns
16.8	Energy				6.2			(8.6)
29.6	Growth				14.1			3.4
5.8	Large Cap				12.6			23.6
11.4	Property				23.9			28.8
35.0	Strategic				2.4			(9.8)
2.4	Other				11.6			(7.6)
(1.0)	Cash & Commitments				(1.1)			(1.7)
100.0	Total				9.5			(0.9)

Top Ten Contributors - pence per share

					Nine months to 30-09-13						Year to 31-03-13
NCC Group					15.5			Ocean Wilsons Holdings Ltd			(44.6)
Andor Technology					12.9			Hargreaves Services Plc			(14.6)
Ocean Wilsons Holdings					9.5			BG Group Plc			(10.6)
Hansteen Holdings					8.7			Galliford Try Plc			10.0
Galliford Try					8.3			Weir Group Plc			9.7
Kofax					7.0			Andor Technology Ltd			(9.3)
BG Group					6.5			Great Portland Estates Plc			8.3
Herald Investment Trust					6.5			Experian Group			7.0
Great Portland Estates					6.3			HSBC Holdings Plc			6.4
Lloyds Banking Group					5.8			Cape Plc			(6.3)
Other investments					13.4			Other investments			32.1
Before expenses & dividends					100.4			Before expenses & dividends			(11.9)

PORTFOLIO ANALYSIS                                           NET ASSET VALUE 31 DECEMBER 2013

	Mkt.Cap		%		Fair Value		Percentage of
Investments	£		Held		£		Net Assets
Ocean Wilsons Holdings Limited	367,775,616		26.45%		97,268,808		35.00%
NCC Group PLC	385,512,790		3.60%		13,875,000		5.00%
Andor Technology PLC	167,146,989		6.16%		10,290,410		3.70%
Experian Group (Inc GUS & Home Group)	11,126,143,444		0.09%		10,008,000		3.60%
Herald Investment Trust PLC	532,104,890		1.80%		9,574,245		3.40%
The Weir Group PLC	4,544,539,199		0.21%		9,380,800		3.40%
Kofax LTD	396,004,427		1.85%		7,339,500		2.60%
UBM PLC	1,606,031,170		0.37%		5,881,500		2.10%
Cape PLC	336,971,705		1.45%		4,869,375		1.80%
Wolseley PLC	9,103,073,846		0.05%		4,565,354		1.60%
Goals Soccer Centres PLC	92,212,186		3.99%		3,675,000		1.30%
Brooks Macdonald Group PLC	194,247,185		1.49%		2,903,671		1.00%
Total Growth					82,362,855		29.60%
BG Group PLC	44,232,557,885		0.02%		10,924,950		3.90%
Hargreaves Services PLC	273,287,097		3.02%		8,260,000		3.00%
BHP Billiton PLC	39,411,259,713		0.02%		6,251,100		2.20%
Centrica PLC	17,651,250,970		0.03%		5,967,500		2.10%
BP PLC	9,966,143,187		0.05%		4,880,500		1.80%
Eni S.p.A.	63,561,901,422		0.01%		4,365,225		1.60%
Royal Dutch Shell PLC	56,368,369,268		0.01%		3,274,866		1.20%
Cairn Energy PLC	1,605,465,067		0.09%		1,434,845		0.50%
Petroceltic International PLC	303,679,711		0.42%		1,265,031		0.50%
Camco Clean Energy PLC	10,406,358		1.19%		124,000		0.00%
Total Energy					46,748,017		16.80%
Great Portland Estates PLC	2,058,398,002		0.40%		8,270,181		3.00%
Hansteen Holdings PLC	691,468,110		1.19%		8,247,272		3.00%
DV4 Ltd #					7,457,601		2.70%
Galliford Try PLC	957,170,958		0.78%		7,444,169		2.70%
DV3 Limited #					339,753		0.10%
Kimberly Enterprises NV	307,222		3.02%		9,275		0.00%
Total Property					31,768,251		11.40%
GlaxoSmithKline PLC	78,243,313,495		0.01%		6,446,000		2.30%
HSBC Holdings PLC	124,710,022,041		0.01%		5,864,110		2.10%
Lloyds Banking Group PLC	56,131,274,867		0.01%		3,670,143		1.30%
Total Other Large Cap					15,980,253		5.80%
Other Investments less than 1% of NAV					6,749,040		2.40%
Net Current Liabilities					-3,046,645		-1.10%
Total Net Asset Value					277,830,580		100.00%
Banking Facility - £30 million - Utilization at 31 December 2013 - £2.8 million
# Unquoted

INVESTMENT REPORT

The Investment Manager presents its report for the quarter ended 31 December 2013

BACKGROUND

The year ended with the Federal Reserve expressing enough confidence in the US labour market to start tapering asset purchases while promising to hold interest rates close to zero, a start on the long road of the post-crisis normalisation of markets in the world's largest economy. The Fed's decision to only scale back its monthly asset purchases from U$85bn to U$75bn as of January 2014, together with doveish forward guidance, namely "measured steps" for further tapering and the Fed funds rate to remain at 0-0.25% until "well past" 6.5% unemployment, was generally well received by markets. In addition, the Fed said inflation would be "monitored carefully" and the persistently low inflation could slow the pace of the anticipated taper and the timing of the eventual first Fed Funds hike going forwards. The most likely outcome would be that the future path of tapered bond purchases would be around U$10bn reductions at each of the Open Markets meetings through 2014, while any monetary tightening is unlikely until well in to 2015, meaning US monetary conditions are likely to remain stimulative until after the US economy has achieved a long period of above-trend growth. China's Third Plenum made reference to a move towards a number of important economic and social reforms, including allowing more equal competition between private and state enterprises, a move to more market-based pricing, and liberalizing financial and resources markets.

OVERALL PERFORMANCE

During the Quarter under review, the Ordinary and "A" Ordinary share prices rose by 5.0% and 6.7% respectively compared with a rise of 4.8% in the FTSE All-Share Index, with the discount to net asset value widening on the Ordinary and "A" Ordinary shares. The time weighted total return of the portfolio was 8.5%. The Company's benchmark rose by 0.8% against a rise of 5.5% in the FTSE All-Share Index- Total Return.

SECTOR WEIGHTING AND PERFORMANCE

Sector	Sector Weighting at 31 December 2013	Nine months' Performance to 31 December 2013
	%	%
Strategic	35.0	2.4
Growth	29.6	14.1
Energy	16.8	6.1
Property	11.4	23.9
Large Cap	5.7	12.7
Other	2.4	11.6
Net current liabilities (inc. loans)	(1.0)	(1.1)

UPDATE ON THE PORTFOLIO'S TOP HOLDINGS  

OCEAN WILSONS HOLDINGS LTD - (£367.8m; 35.0% of NAV; 2.4% performance)

WILSON SONS Q3 2013 results saw a rise in quarterly and YTD Net Income, as a consequence of a better operational performance, especially in Oil&Gas Terminals, Towage, and Shipyard businesses. From the company's IPO in 2007 up to the beginning of 2013, Wilson Sons completed a large capital expenditure programme in the development of Brazilian infrastructure, totalling some U$1bn. These investments included capacity expansion and new equipment in the Tecon Rio Grande and Tecon Salvador Container Terminals, a doubling of Guaruja Shipyard capacity, and the construction of new tugboats as well as the maintenance of the existing tugboat fleet, and the new vessel construction and maintenance of the joint venture Offshore Support Vessel fleet. Following the successful completion of a large number of significant investments, management have a clear focus on increased utilisation and free cash generation going forward.

Wilson Sons had a good November, with mid-teen growth in container handling and towage manoeuvres, business divisions which represent some 57% of consolidated revenue and produce over 70% of the company's EBITDA. The mix also improved, with full containers representing 70% of the total volume. With the addition of one Offshore Supply Vessel in the fleet, the offshore division also produced good numbers for the month, while the Shipbuilding division delivered an OSV. Wilson Sons has signed a R$333m contract with Oceanpact Servicos Maritimos Ltda for the construction of four Oil Spill Recovery Vessels, which are expected to be delivered in 2016, and which will be built in Wilson Son's Shipyard complex in Guaruja, Sao Paulo. This is the second contract signed this year to build OSVs for third parties, and this new contract increases the Shipyard's utilisation rate to over 70%, and reduces the dependence on intra-company orders for OSVs by the Wilson Sons Ultratug Offshore venture. With the utilisation rate exceeding 70% of Shipyard capacity, Wilson Sons may postpone the construction of one or more of the five tugboats planned for 2014, emphasising the flexibility of the Shipbuilding division, which can easily allocate capacity to attend third-party demand, while postponing intra-company vessel construction. The number of Towage manoeuvres can still grow without increasing the size of the fleet given the spare utilisation capacity in the Towage fleet.

NCC GROUP - (£385.5m; 5.0% of NAV; 36.3% performance)

NCC Group's four month IMS recorded organic growth of 16% in the period, with all divisions showing encouraging growth rates and Group Escrow termination rates continuing to remain below 12%. NCC's Artemis project aims to create a universal environment for companies to gain much needed higher security over new and existing domains in order for end users to operate and navigate the Internet with safety and security. The systems, processes and environments developed so far are currently being beta tested in two major corporations from the Pioneer Group set up by Artemis, and the project remains on time and cost.

EXPERIAN - (£11.1bn; 3.6% of NAV; -1.2% performance)

Experian's interim figures were broadly in line with expectations, but with two key features, namely organic revenue slowed in Q2 as a result of subdued trading conditions in some emerging markets like Brazil, and Experian has suspended its U$500m (U$322m completed) share buyback programme following the U$850m cash acquisition of Passport Health Communications Inc., a leading provider of data, analytics and software in the US healthcare payments market, making Experian the clear leader in this high growth market. Passport Health provides services to healthcare providers across all 50 US states, helping them manage the administrative tasks associated with obtaining payment for healthcare services. Passport Health has attractive financial characteristics, with revenues that are largely subscription based, renewal rates of about 95% and average contract duration of 3 to 5 years. CEO Don Robert has a good record of driving organic and acquisition-led growth.

WEIR GROUP - (£4.5bn; 3.4% of NAV; -4.0% performance)

Weir Group guided FY2013 expectations downward by 6% as a result of project delivery delays impacting Minerals, a slower than expected recovery in Oil & Gas, while Power & Industrial has been impacted by power plant outage deferrals, with further headwinds from the translation impact of recent weakness in certain currencies. Aftermarket orders grew in both Minerals and Oil & Gas, and now account for 63% of orders. Weir remains a high quality business with leading market positions, excellent margins and strong cash generation.

ANDOR TECHNOLOGY - (£167.1m; 3.7% of NAV; 38.2% performance)

Andor Technology and Oxford Instruments reached agreement on a raised 525p pence per share offer in cash to acquire Andor, representing a 25% premium to the indicative proposal of 420p on 9 July, and a 77% premium to the price on 8 July. In aggregate Oxford Instruments has received irrevocable undertakings and letters of intent representing approximately 18% of Andor's existing issued share capital, including director holdings of 4.25%.

KOFAX - (£396.0m; 2.6% of NAV; 29.7% performance)

Kofax announced Q1 results, showing an increase of 17.2% in software license revenue, improving margins, U$19.8m of cash generation leading to a quarter end cash balance of U$72.0m, while the U$47.5m cash acquisition of Kapow, provides Kofax with a big data integration software platform, which is expected to allow the company to speed its time to market with new solutions and customers' realisation of ROIs. Kofax announced the pricing of its initial NASDAQ offering of 2,000,000 shares of common stock at a price to the public of U$5.85 per share.

UNITED BUSINESS MEDIA ("UBM") - (£1.6bn; 2.1% of NAV; -3.8% performance)

UBM reported a Q3 IMS that was broadly in line with expectations, with good performance in Events, but weaker than expected performance in PR Newswire. The Chinese events business remains fundamentally strong. Guidance comments noted that underlying growth will be at or slightly below the bottom end of the guided 3-5% range, with margins at the top of the 22-23% range. The company continues to make good progress in restructuring Marketing Services.

WOLSELEY - (£9.1bn; 1.6% of NAV; 7.2% performance)

Wolseley's FY results were better than expected, and included a surprise £300m capital return, in addition to last year's £350m special dividend. Capex has been restrained and management have resisted expensive acquisitions, while the improvement in returns shows that management is raising the quality of the business. Wolseley continues to be highly cash generative and has the resources to fund future investment in the business alongside growth in ordinary dividends. Wolseley's Q1 trends were very similar to those recorded for Q4, with like-for-like sales growth of 3.5%, and operating profit growth of 9%, in line with general expectations of a 10% growth forecast for the full year. US trends are stable but not presently accelerating.

CAPE - (£337.0m; 1.8% off NAV; -5.6% performance)

Cape's IMS announced that whilst the third quarter was in line with expectations the Board expects the full year result will be further impacted by operational challenges on a specific project in Qatar. Importantly the large maintenance-led UK business continues its robust performance, while Cape Australia Onshore entered in to an agreement with Bechtel for the provision of painting, insulation, and fireproofing services on the Wheatstone Project, with a contract value of over £155m, a material addition to the company's £482m order book, and complimenting the winning of the scaffold erection and dismantling contract of £45m on the same project.

BROOKS MACDONALD - (£194.2m; 1.0% of NAV; 4.5% performance)

Brooks Macdonald's Q1 IMS saw a successful start to the year, although asset growth in the current year is being offset by the investment in infrastructure, which was announced in July.

ENERGY - (16.8% of NAV; 6.1% performance)

The oil majors have faced a very tough operating environment over the past few years, confronting a number of operational issues which could neatly be summed up as being "trapped in a cycle of spending more but finding less", leaving investors fretting that companies are not yet generating sufficient cash to fund capital expenditure plans as well as returns to shareholders, as a result of which the European Integrated Oil sector has been de-rated. While cash generation is expected to improve, the market has decided that the expansion of the capital base will see returns do no more than stabilise at best, thereby undermining the case for a structural re-rating. Undoubtedly investors are confronted with an extensive list of operational issues, as exemplified by the latest Q3 announcements.

BG GROUP - (£44.2bn; 3.9% of NAV; 16.6% performance)

Investors are waiting on the outcome of two massive investment projects at BG GROUP, each of which has the potential to transform the business from a cash flow point of view going forwards. In Queensland, Australia, a U$20.4bn project to tap coal seam gas and convert it into LNG is making good progress, with the first cargo due to be shipped in 2014. In Brazil, well performance from the Santos Basin is exceeding expectations and more reserves are being discovered, making it a potentially transformative project for BG. Both projects enjoy high margins, so earnings are expected to grow faster than production. After 2015 annual capex should fall from U$12-13bn to U$8-10bn and the balance sheet should have been deleveraged following asset disposal, which will see the business focused on 10-15 high quality core assets, leaving the Group in a strong position to return positive free cash flow to shareholders.

HARGREAVES SERVICES - (£273.3m; 3.0% of NAV; 1.2% performance)

Hargreaves Services, the UK's leading supplier of solid fuels and bulk material logistics provided a trading update for the first half of the year, confirming that trading has been in line with expectations. The Group is pleased with the strong performance in coal trading and the progress in its surface mining operations. Tower is performing well and there will be eight Scottish surface coal mines operating shortly. UK coal demand remains high and a landmark 5 year Industrial Services contract has been secured with China Light & Power at Castle Peak Power Station in Hong Kong, the Group's first significant Asian win. The German Operation now has a lower Hargreaves equity participation giving greater autonomy and flexibility to the German management, whilst capping Hargreaves' exposure. This restructuring has no major economic impact on the Group, but it means the German operation is now equity accounted as an associated undertaking rather than being fully consolidated. German debt will now also not be consolidated. Hargreaves has ceased to manage Hatfield Colliery, continuing the Group's focus on surface mining and away from deep mining.

CENTRICA - (£17.6bn; 2.1% of NAV; -1.2% performance)

Centrica, the largest energy supplier to UK households, has agreed to sell three gas-fired power stations in Texas for £420m, and plans to return the proceeds to shareholders by extending its share buyback programme next year. Centrica started a £500m share-repurchase programme in February this year, as the company decided not to invest in the UK nuclear power industry, and which is now largely complete. Centrica has decided that buying its own shares provides a better return than investing in areas outside the North Sea and keeping its core business maintained, stating "the continuation of the buyback should be moderately earnings-enhancing". Not surprising given the pressure on earnings after Ed Miliband's promise of a price freeze at the Labour Party Conference earlier this year.

BHP BILLITON - (£39.4bn; 2.2% of NAV; 1.4% performance)

BHP Billiton announced it is cutting annual capital and exploration expenditure from U$22bn to around U$15bn, as it looks to simplify the business and deliver higher growth, higher margins and stronger investment returns, focussing on the four key pillars of Iron ore, coal, petroleum and copper, in order to substantially increase free cash flow and grow total returns to shareholders.

ROYAL DUTCH SHELL - (£56.4bn;1.2% of NAV; 8.4% performance)

BP - (£91.0bn; 1.8% of NAV; 10.2% performance)

ENI - (£63.6bn; 1.6% of NAV; 4.6% performance)

Royal Dutch Shell, BP and ENI saw downstream profits decline due to weak industry refining margins, driven by on-going structural weaknesses in the industry due to overcapacity, shrinking demand and high feedstock costs. Royal Dutch Shell operates almost half of Nigeria's oil production and saw earnings from the region decline due to security problems and a blockade of Nigerian LNG, while ENI saw a 3.8% reduction in oil and gas production due to extraordinary reductions in Nigeria and Libya, although first oil was produced from the vastly over budget (and time) Kashagan oil field (16.8% interest), while large exploration successes have been made offshore Mozambique, the Congo and Australia. However, Q3 announcements show that the "value over volume message" has clearly been taken on board and companies are well down the path in terms of transitioning portfolios, moving the focus of guidance away from production and toward the constituents of free cash flow, namely operating cash flow, capital investment and net divestments. ENI's Board of Directors has approved a EU6bn share buy-back programme. BP made a commitment to distribute more cash to shareholders, raising the quarterly dividend by 5.6% and planning a further U$10bn of divestments by the end of 2015, with the proceeds going to share repurchases, in addition March's announcement of an U$8bn return following the U$12bn sale of its 50% stake in TNK-BP to Rosneft (19.75% stake). Capital expenditure this year will be U$24bn and will hold below U$27bn through 2020, while increasing investment in exploration, with 18 exploration wells being drilled this year. "The strong operational progress we are now seeing across the group, combined with our focus on disciplined investment, underpins our confidence in growing long-term sustainable free cash flow and being able to increase shareholder distributions". Shell is predicting that 2013 will represent a peak year for net capital spending and is expecting to grow cash flow in 2014 and beyond, with the pace of divestments accelerating in 2014. Royal Dutch Shell dropped plans for a multibillion-dollar flagship plant in the US that would have converted natural gas in to diesel and jet fuel, amid concerns over the costs of the U$20bn-plus project, citing the likely cost, "uncertainties on long-term oil and gas prices and differentials", and the company's strict capital discipline. Shell has come under mounting pressure from investors to demonstrate more capital discipline, after spending a record U$45bn this year.

HANSTEEN - (£691.5m; 3.0% of NAV; 32.7% performance)

Hansteen released a positive Q3 IMS, with improvement across each of its key occupier markets as well as highlighting growing investment demand for secondary multi-let industrial property. Hansteen offers good earnings per share visibility from high yielding acquisitions with like for like rental growth being driven by reductions in the 19% void rate, with the possibility of high single digit growth in a 4.8% 2014 dividend yield. Hansteen Holdings has announced the acquisition of a loan secured against a portfolio of mostly multi-let industrial estates in the Netherlands for EU41.7m from UniCredit, at a 51% discount to par. The loan constitutes half of the debt secured against a portfolio of 40 industrial estates in The Netherlands, with the other 50% held by ING. After further costs, the end price could represent a gross yield on cost of about 15% and capital values of just EU25psf, about 30% less than Hansteen's existing Benelux valuations. This is a classic Hansteen deal, being income accretive and with scope to add meaningful value given the 20% void rate in the portfolio.

GREAT PORTLAND ESTATES - (£2.1bn; 3.0% of NAV; 22.0% performance)

Great Portland Estates received planning permission for Rathbone Place, its largest ever development, which will deliver 414,000sqft of brand new space 50yds north of Crossrail Oxford St , having underwritten the project with 360,000sqft of net space, a 16% uplift in space. Great Portland Estates announced a 9.2% increase in first-half net asset value, with an expectation of further strong rental growth and downside risk to yields due to excess demand over supply. Great Portland announced the formation of a 50/50 JV with the Hong Kong Monetary Authority to develop its Hanover Square mixed-use development site. This transaction has an interesting read across for Great Portland's other major redevelopment site in the West End at Rathbone Place.

GALLIFORD TRY - (£957.2m; 2.7% of NAV; 32.1% performance)

Galliford Try's IMS outlined a 21% increase in housing sales after a strong autumn selling season, while sales prices have increased by between one and three per cent since the start of the year. The land bank increased by 24% to a record 13,000 plots, with 95% of land secured for the financial year to 30 June 2015. The Company continues to see good opportunities to acquire land which meets its defined return and hurdle rates.

GLAXOSMITHKLINE - (£78.2bn; 2.3% of NAV; 8.5% performance)

GlaxoSmithKline's FY13 guidance remains in place for subdued revenue growth of 1% but a 3-4% pick up in earnings. New product launches and improving operational leverage are expected to drive growth, while the Group remains committed to enhancing shareholder returns via an on-going share buy-back programme and by continuing to grow the dividend.

HSBC HOLDING - (£124.7bn; 2.1% of NAV; -1.6% performance)

HSBC Holding's Q3 2013 results were helped by a drop in the bad debt charge, particularly in the US unit, and good cost control. During the quarter U$0.4bn of sustainable cost savings were achieved, taking the annualised total to U$4.5bn since the start of 2013. HSBC performed well in its key markets of Hong Kong and the UK which contributed more than half of the Group's underlying PBT. HSBC thinks that the economic outlook will be fairly supportive for the bank with the UK outperforming the Eurozone, the US economy continuing to grow and a soft landing in China supporting the rest of the Asia Pacific region, but management are far more cautious about the regulatory and capital environment.

LLOYDS BANKING GROUP - (£56.1bn; 1.3% of NAV; 61.5% performance)

Lloyds Banking Group produced a strong underlying performance in Q3, reflecting a better than expected net interest margin and reduction in impairments, offset at the bottom line by another significant PPI top-up and disposal losses, and remains confident of achieving its target of £1.9bn of annual run rate cost savings by the end of 2014, as well as hoping to pay a dividend this year.

QINETIQ - (£1.4bn; 0.8% of NAV; 6.1% performance)

Qinetiq's interim results met expectations, with cash conversion of 118% and £120m of net cash in the bank, and the potential proceeds from a disposal of the US Services business. Management are confident that the "Core" businesses and newer "Explore" growth opportunities like OptaSense and Cyveillance will drive an increase in sustainable earnings, and hence the 27.3% increase in the interim dividend.

OUTLOOK

The global story is one of a gradually improving economic growth outlook, supported by diminishing fiscal drag and a consumer recovery in the US and Europe. It is also a story of persistent deflationary forces coupled with a prolonged period of low interest rates, which are more likely to fuel a recovery in investment spend by cash-rich companies this time round, rather than a consumption spree by indebted consumers. While stock market gains in 2013 have largely been driven by the expansion of price-to-earnings multiples against a supportive background of accommodative central bank policies, improving economic fundamentals mean that further gains in 2014 may now come through stronger top-line growth and better earnings per share performance. Future returns are expected to be positive in 2014, but are likely to depend much more on individual stock-selection.

Hansa Capital Partners LLP

 

END

 

 

IMSSDUFLSFLSELF