Final Results
Hansa Trust PLC
14 June 2007
HANSA TRUST PLC
Preliminary Announcement of Results
for the year ended 31 March 2007
Hansa Trust PLC announces its Preliminary Results for the year ended 31 March
2007
Financial Highlights Year ended Year ended
31 March 2007 31 March 2006
(unaudited) (audited)
Net Asset Value - Total Return 28.4% 42.4%
Performance Benchmark 6.7% 6.6%
Capital return per equity share 218.2p 233.2p
Revenue return per equity share 12.8p 10.8p
Net asset value per equity share 1039.4p 818.2p
Total dividend per equity share for the year 12.5p 9.75p
Total income (£000's) 5,215 4,261
Revenue before taxation (£000's) 3,116 2,618
A final dividend of 9.0p per share (amounting to £2,160,000) is to be proposed
on 31 July 2007 at the Annual General Meeting.
Ex-dividend date: 20 June 2007
Record date: 22 June 2007
Payment date: 10 August 2007
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
THE YEAR'S RESULTS:
NAV +27.0% to 1,039.4p per share
Being able to report on very good results for the year can be as difficult as
very poor ones, if only because such results cannot be expected every year and
it is important that they should not raise expectations about future returns;
they will not always be this good in the short-term. A return of 27.0% from the
net asset value ('NAV') - it rose 221.2p after a dividend payment of 9.75p to
1,039.4p per share - is excellent under most circumstances and, given that our
benchmark produced a return of 6.7% and the stockmarket (as measured by the FTSE
All-Share Index) of 7.7%, this year's returns were indeed excellent.
Furthermore, the return was the highest amongst our peer group, the Association
of Investment Companies' UK Growth section. John Alexander, our portfolio
manager with Hansa Capital, provides his usual excellent review on page 20,
covering events in the stockmarket and in our portfolio and, on behalf of all
Shareholders, I would like to extend our thanks to William Salomon, John and
their colleagues for these results.
An analysis of the contributions made by the different holdings in the portfolio
shows that our holding in Ocean Wilsons, which was already a large proportion of
the total when the year started, had another very successful year (more of which
later); the value of our holding rose by £30.6 million, contributing 127.4p per
share to the overall rise of 221.2p, referred to above. The holdings in
Cathedral Capital, which was taken over during the year, contributed 13.1p, in
Resolution PLC 9.4p, in Ark Therapeutics 8.2p and DV3 Limited 8.1p - making a
total of 166.2p per Hansa Trust share. Only 21 of the 71 holdings held during
the course of the year failed to make a positive contribution - a good winners/
losers ratio - a lot of which were our investments in large companies whose
shares have become quite cheap; the five largest losers were our holdings in
Media Square, Cairn Energy, Leadcom Integrated Solutions, Burst Media and BP,
losing between them 17.7p per share.
It is important to point out that, although Ocean Wilsons was the biggest
contributor to our returns, the rest of the portfolio performed well too. For
the record the net asset value of the Company, excluding the investment in Ocean
Wilsons, rose by 14.8%, which also compares favourably with the benchmark, the
market and with most of our competition.
DIVIDEND
+28.2% to 12.5p per share
As is often - but not always - the case in a good year, our net income from
investments also rose, producing earnings per share of 12.8p per share (10.8p in
2006). As a consequence the Board is recommending to Shareholders a final
dividend of 9.0p per share, which, if approved, will bring the total for the
year to 12.5p per share - an increase of 28.2%. It should be remembered that
the portfolio is managed on the basis of seeking capital appreciation, so that
in any one year the level of income earned will depend on the portfolio during
that year and may well be lower than the previous year; in such circumstances
the dividends paid may also be lower.
SHAREHOLDERS' RETURNS:
Ordinary shares: +32.5% to 1,123.0p per share;
Premium to NAV: 8.0%
'A' Ordinary shares: +25.0% to 1,022.5p per share;
Discount to NAV: 1.6%
The returns earned by Shareholders were largely influenced by the increase in
the net asset value, but were also affected by the change in the premium/
discount at which the two classes of shares sell to the NAV. In the case of the
Ordinary shares the premium at which they sold rose from 3.6% to 8.1 %, adding
another 54.3p to the share price; however the 'A' Ordinary shares sold at a
small discount, 1.6% at the year end, reducing its share price by 16.7p. The
total return earned by Shareholders during the course of the year, which
includes the dividends is shown in the table below:
Attribution of Shareholders' Return
Ordinary shares 'A' Ordinary shares
Change in the NAV +221.2p +221.2p
Change in the premium/discount +54.3p -16.7p
Dividends +12.5p +12.5p
Shareholders' Return +288.0p (+33.9%) +217.0p (+26.5%)
CHAIRMAN'S STATEMENT
(continued)
LONG-TERM RETURNS:
3 Years: NAV Total Return: +151.8%; Benchmark: +20.0%; FTSE All-Share Index
+66.3%
5 Years: NAV Total Return: +198.3%; Benchmark: +34.2%; FTSE All-Share Index
+54.2%
We have highlighted before that we assess the long-term performance of the
Company on the basis of the five year returns. There are those who regard three
years as the duration of 'long-term' and for that reason we include the three
year numbers above. However given that our stated objective is to make money
for Shareholders and given the volatile nature of equities, it seems to us that
five years is the more appropriate time span to assess our returns against our
objective. As can be seen from the above numbers, William, John and their
colleagues have done an excellent job over the longer time span; and, as
analysed above, the long-term returns calculated without the holding in Ocean
Wilsons are also excellent - on both an absolute and a relative basis.
I should state here that, based in part on the five year record and in part on
the experience, skills and commitment of the Manager in both portfolio
management and administration, the independent directors have had no difficulty
in confirming that it is in Shareholders' best interests that the Manager
remains in situ. During the course of the year, we reassessed the management
fee arrangements and have made certain adjustments, changing the fee chargeable
to 1% but reducing the fee base from total assets to shareholders' funds (both
exclude the value of the holding in Ocean Wilsons).
OCEAN WILSONS HOLDINGS LTD:
The rewards stemming from patient, long-term investment.
Shareholders will be well aware of the large holding we have in the shares of
Ocean Wilsons Holdings Ltd. Its value started the year at £44.26 million,
representing 22.5% of the net asset value; during the course of the year it rose
by 69.0% and ended the year worth £74.82 million, equivalent to 30.0% of the net
asset value. It has produced quite spectacular returns for Hansa Trust
Shareholders and is an example of the benefits accruing from patient, long-term
investment.
The holding in the company came about at the beginning of 1959 when Sir Walter
Salomon, William's father, acquired control of Ocean Wilsons utilising an issue
of 'A' Ordinary shares in Scottish and Mercantile Investment Trust (as Hansa
Trust was then named). The transaction had a value of about £21/2 million and
consisted of Wilson Sons and a portfolio of cash and shares. Thereafter Wilson
Sons disposed of all but its business in Brazil and, without injecting any new
money into the company, it has grown and become a quoted company worth today
approximately $900 million. Two things have been of particular relevance
recently. Firstly Brazil's economy, having promised so much for so many years,
is starting to deliver; the effect of the surging growth of the Chinese economy
and its effect in turn on the volume and price of many commodities have been a
particular boon to Brazil and its external trade. Wilson Sons - with its
Brazilian port business - has been a beneficiary; its revenue has grown from
$218 million to $334 million (+53%) and its net income from $24.5 million to
$43.5 million (+77%) over the last two years. Secondly, in May this year Wilson
Sons achieved a listing for its shares on the Luxembourg Stock Exchange and on
the Sao Paolo Stock Exchange (in the form of Brazilian Depository Receipts),
thereby unlocking the value so long inherent within the shares of its parent
company, Ocean Wilsons (itself listed on the London Stock Exchange).
Over the last 48 years the Company's holding in Ocean Wilsons has never changed.
There have been times when its performance was not as good as the rest of the
portfolio or indeed the market. But William, and before him his father, always
had great faith in it as a good, well managed business, recognising that one day
it would be possible to unlock its value to the great benefit of Hansa Trust's
Shareholders. That day arrived during 2007. I would like to commend William on
the very hard work that he put into Ocean Wilsons as a non-executive director
(remember, as stated above, the Manager does not charge a management fee on the
value of the holding) and on the patience and courage he exhibited in
maintaining the holding over the years. For the record its value over the last
20 years is as follows:
Value of Ocean Wilsons Holding:
1987 £3.7 million
1992 £4.7 million
1997 £8.3 million
2002 £6.5 million
2007 £74.8 million
CHAIRMAN'S STATEMENT
(continued)
Really large returns from investments are seldom made from in-and-out trading in
a portfolio, nor from index tracking; the pay day from long-term investments
often comes after a long wait, making the wait very worthwhile. Such has been
the case here, being right out of the Warren Buffet School as an example of the
benefits of patient, long-term investing.
I should add that we have no plans to reduce the holding in Ocean Wilsons -
despite the large proportion of the Company's assets it accounts for. While it
may be said that we may have too many of our eggs in that one basket, we -
through William - have taken a lot of trouble to look after the basket and we
will continue to do so. However, it is important to point out that there is a
great deal of risk inherent in the holding - not because Ocean Wilsons is a
particularly risky business but because the large size of the holding exposes us
to those risks it runs (Brazilian politics, the Brazilian economy, Brazilian
trade, the Real etc).
ANNUAL GENERAL MEETING
31 July 2007 at 11.30am at the Washington Hotel, 5 Curzon Street, London
The AGM will be held at the Washington Hotel, 5 Curzon Street, London at 11.30am
on Tuesday 31 July 2007. We usually have a good turnout which is important to
us because it gives us, the Directors and Management, the chance to hear your
views, concerns and suggestions. So I do urge as many Shareholders as possible
to join us for the occasion at which John will give his presentation of the
events of the past year and the prospects for the current one. Please come and
join us.
OUTLOOK
Short-term cautious, long-term bullish
On re-reading what I wrote last year, I perceive that today's outlook has not
changed much, having summarised it then as 'short-term cautious, long-term
bullish'. In as much as the market rose approximately 8% (a long-term average),
the caution has proven to be unwarranted but we remain of the same view. The
bull market, in recovering from its mid March 2003 low, has more than doubled
and is now in its fifth year of expansion. It must therefore be quite mature
and the signs are that it is. Share prices continue to rise against a
background of rising interest rates, of a speculative frenzy in China, and of a
large amount of merger and acquisitions activity - the latter being a fairly
classic indicator of market tops. There is a lot of money around and almost
certainly central banks are concerned that inflation could rise further.
Whether the market will correct suddenly and viciously, as it did in 1987, or
rather more gently, as is usually the case, time alone will tell; but decline at
some point in time it must surely do.
However, John - in his report - is somewhat less cautious in the short-term and,
having uttered that note of caution above, I should reiterate the long-term
bullish case. The global economy is driven by an unusual set of circumstances:
the mature economies are growing at reasonably good rates - especially and
importantly Europe and Japan after a period of lacklustre performance - while
many of the emerging economies - most notable BRIC (Brazil, Russia, India and
China), as it has been nicknamed, with its combined population of 21/2 billion
people (40% of the world's population) - are growing at really quite high rates.
Unusual also is the fact that, what would have in the past created very high
rates of inflation, is not doing so because the output of China and India is
keeping a competitive lid on prices - all except commodities that is.
Technology, both electronic and bio, is a tremendous aid to productivity,
another dampener of inflation.
Although the investment remit of your Company confines its investments largely
to the shares of companies listed on the London Stock Exchange, the background
and prospects for those companies is truly international. The proportion of
sales of the companies that make up the FTSE All-Share Index which occur
overseas is circa 60% and the proportion of profits is likewise largely earned
outside the UK. By value at least, the top companies are all multinational
giants; about half of the Index is accounted for by four sectors - banks (over
20%), oil & gas (circa 15%) and healthcare and telecom (circa 15%) - most of
whose companies are international in their scope of operations. So, it can be
argued, the international outlook is more important than the domestic one in
assessing the UK market's prospects. Given what is happening in the global
economy - referred to above - the outlook for the UK stockmarket seems set fair
in anything but the short-term.
CHAIRMAN'S STATEMENT
(continued)
Smaller UK companies, in which we invest quite a lot, are much more dependent on
local matters. The big event of recent days is the change of prime minister.
While much has been and continues to be written about Mr Blair, he is, as they
say, 'history'. What matters now is the political leadership of Mr Brown. He
has the reputation of being very hands-on and dictatorial in his leadership
style; he is a strange mixture of old, red Labour and capitalist in his
policies; his naked ambition for the job suggests that the role is more
important to him than the welfare of the country, always a dangerous
characteristic in a politician; in a quite different way he is as adept at spin
and self promotion as is Mr Blair. Quite what it will mean for the UK is
impossible to predict but his leadership creates a new uncertainty for the
economy.
The UK economy has the City of London as its main contributor. Despite the dire
prediction of the Financial Times and other Europhiles - that the City would be
sidelined within Europe if we did not sign up to the Euro - the City has gone
from strength to strength and is now quite widely recognised as the leading
financial centre in the world. It brings a good flow of invisible earnings to
the balance of payments and creates a lot of well paid jobs (some would argue
excessively so); it is a very important part of the country's tax base (a point
not lost on Mr Brown or the Treasury). The City itself is an important part of
the global economy. Unless there is a long and sustained global bear market,
the City and thence the UK economy should continue to prosper and that should
provide a good back cloth for smaller companies.
Ultimately of course our prospects depend on ourselves. As in all fund
management, the prospects depend on the quality, experience and skills of those
managing the portfolios. We are fortunate in having John, William and their
colleagues batting on our behalf. The mixture of strategic investments, special
situations and good sound portfolio management has and should continue to serve
us well. We are also fortunate that the Company is run much as a proprietor's
company is, removing the pressure to produce short-term results at the expense
of much better long-term returns. Your Board and Management remain bullish
about Hansa Trust over the longer-term.
GROUP INCOME STATEMENT
For the year ended 31 March 2007
Revenue Capital Total Revenue Capital Total
Notes 2007 2007 2007 2006 2006 2006
£000 £000 £000 £000 £000 £000
Gains on investments 11 - 52,403 52,403 - 55,973 55,973
Loss on derivative - (20) (20) - - -
Exchange (losses) /gains on
currency balances - (10) (10) - (12) (12)
Investment income 2 5,215 - 5,215 4,261 - 4,261
5,215 52,373 57,588 4,261 55,961 60,222
Investment management fee 3 (1,312) - (1,312) (1,034) - (1,034)
Other expenses 4 (561) - (561) (539) - (539)
(1,873) - (1,873) (1,573) - (1,573)
Profit before finance costs
and taxation 3,342 52,373 55,715 2,688 55,961 58,649
Finance costs 5 (226) - (226) (70) - (70)
Profit before taxation 3,116 52,373 55,489 2,618 55,961 58,579
Taxation 6 (58) - (58) (31) - (31)
Profit for the year 3,058 52,373 55,431 2,587 55,961 58,548
Return per Ordinary and 'A' 8 12.8p 218.2p 231.0p 10.8p 233.2p 244.0p
non-voting Ordinary share
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 Trust Companies.
All revenue and capital items in the above statement derive from continuing
operations.
STATEMENT OF CHANGES IN EQUITY - GROUP
For the year ended 31 March 2007
Share Capital Retained Total Share Capital Retained Total
Note Capital redemption earnings Capital redemption earnings
reserve reserve
2007 2007 2007 2007 2006 2006 2006 2006
£000 £000 £000 £000 £000 £000 £000 £000
Net assets at 1 1,200 300 194,875 196,375 1,200 300 138,547 140,047
April
Profit for the - - 55,431 55,431 - - 58,548 58,548
year
Dividends paid 7 - - (2,340) (2,340) - - (2,220) (2,220)
Net assets at 31 March 1,200 300 247,966 249,466 1,200 300 194,875 196,375
STATEMENT OF CHANGES IN EQUITY - COMPANY
For the year ended 31 March 2007
Share Capital Retained Total Share Capital Retained Total
Note Capital redemption earnings Capital redemption earnings
reserve reserve
2007 2007 2007 2007 2006 2006 2006 2006
£000 £000 £000 £000 £000 £000 £000 £000
Net assets at 1 1,200 300 194,875 196,375 1,200 300 138,547 140,047
April
Profit for the - - 55,431 55,431 - - 58,548 58,548
year
Dividends paid 7 - - (2,340) (2,340) - - (2,220) (2,220)
Net assets at 31 March 1,200 300 247,966 249,466 1,200 300 194,875 196,375
BALANCE SHEET OF THE GROUP AND COMPANY
as at 31 March 2007
Group Group Company Company
2007 2006 2007 2006
Notes £000 £000 £000 £000
Non-current investments
Shares in Group undertaking 10 - - 638 643
Investments held at fair value through 11 243,641 202,099 243,641 202,099
profit and loss
243,641 202,099 244,279 202,742
Current assets
Other receivables 13 737 930 737 930
Investments 14 4,667 - 4,667 -
Cash and cash equivalents 1,424 241 1,424 212
6,828 1,171 6,828 1,142
Current liabilities
Other payables falling due within one 15 (1,003) (6,895) (1,641) (7,509)
year
Net current assets / (liabilities) 5,825 (5,724) 5,187 (6,367)
Net assets 249,466 196,375 249,466 196,375
Capital and reserves
Called up share capital 16 1,200 1,200 1,200 1,200
Capital redemption reserve 17 300 300 300 300
Retained earnings 18 247,966 194,875 247,966 194,875
Total equity shareholders' funds 249,466 196,375 249,466 196,375
Net asset value per Ordinary and 'A' 19 1,039.4p 818.2p 1,039.4p 818.2p
non-voting Ordinary share
CASH FLOW STATEMENT
for the year ended 31 March 2007
Group Group Company Company
2007 2006 2007 2006
Notes £000 £000 £000 £000
Cash flows from operating activities
Profit before finance costs & taxation 55,715 58,649 55,715 58,649
Adjustments for:
Realised gains on investments 11 (32,063) (13,705) (32,063) (13,705)
Unrealised gains on investments 11 (20,340) (42,268) (20,335) (42,481)
Effect of foreign exchange rate changes 10 12 10 12
Interest paid - (1) - (1)
Decrease in current asset investments - (255) - -
(Increase)/decrease in prepayments & accrued 13 (391) 146 (391) 146
income
Increase in other creditors and accruals 15 - 110 24 507
Taxes paid (58) (31) (58) (31)
Purchase of non-current investments (65,752) (53,066) (65,752) (53,066)
Sale of non-current investments 77,905 49,302 77,905 48,839
Net cash inflow/(outflow) from operating 15,026 (1,107) 15,055 (1,131)
activities
Cash flows from financing activities
Interest paid on bank loans (226) (69) (226) (69)
Dividends paid (2,340) (2,220) (2,340) (2,220)
(Repayment)/ drawdown of loans (6,600) 3,565 (6,600) 3,565
Net cash (outflow)/inflow from financing (9,166) 1,276 (9,166) 1,276
activities
Increase in cash and cash equivalents 5,860 169 5,889 145
Cash and cash equivalent at 1 April 241 84 212 79
Effect of foreign exchange rate changes (10) (12) (10) (12)
Cash and cash equivalents at 31 March 6,091 241 6,091 212
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 2007, 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 2007 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 2006.
3. Statutory accounts for the 12 months ended 31 March 2006 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 237 (2) and (3) of the Companies Act 1985.
Hansa Capital Partners LLP - Company Secretary
14 June 2007
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