Interim Management Statement

RNS Number : 9070M

Hansa Trust PLC

21 July 2014

 



HANSA TRUST PLC

INTERIM MANAGEMENT STATEMENT (UNAUDITED)

30 JUNE 2014

This Interim Management Statement covers the period from 1 April 2014 to 30 June 2014. 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 2014 and the date of publication of this statement, which have had a material impact on the financial position of the Company.

 

CORPORATE RESULTS

			Quarter to 30 June 2014		Year Ended 31 March 2014
STATISTICS
Shareholders' Funds			£298.0m		£287.4m
Share Price
Ordinary share			950.0p		879.2p
'A' Ordinary share			934.0p		877.5p
Discount #
Ordinary shares			23.5%		26.6%
'A' Ordinary shares			24.8%		26.7%
Net Asset Value  per share
Opening Net Asset Value			1,197.6p		1,082.9p
Dividends			(0.0p)		(16.5p)
Revenue and capital return			44.2p		131.2p
Closing Net Asset Value			1,241.8p		1,197.6p
# The overall discount is 24.4%. However, if Ocean Wilson Holdings was valued at the look through value i.e. market value of the quoted subsidiary plus the investment portfolio, shareholder funds would be £326.3m giving a discount of 30.9%. Note, in arriving at the figures below, we have used the last available quoted value of Ocean Wilsons Investments Ltd which was made in the financial statements for Ocean Wilson Holdings for the year ended 31 December 2013.  NAV  NAV per share  Discount  Hansa Trust Reported results £298.0m   1,241.80p 24.4%  Ocean Wilson Holdings Limited  -  revaluation £28.3m      117.80p  Hansa Trust Revised results £326.3m   1,359.60p 30.9%

PERFORMANCE
Net Asset Value Return			3.7%		10.6%
Performance Benchmark			0.8%		3.3%
Ordinary Share price			8.1%		5.1%
'A' Ordinary Share price			6.4%		7.7%
FTSE All-Share Index			1.3%		5.2%
Total Return (Dividends Reinvested)
Ordinary Shares			9.3%		7.3%
'A' non-voting Ordinary shares			7.7%		9.9%
FTSE All-Share Index Total Return Index			2.3%		9.3%

PORTFOLIO PERFORMANCE STATISTICS

		Quarter to 30 June 2014		Year Ended 31 March 2014
		%		%
Portfolio Time Weighted Return		4.7		13.4
-     ex Ocean Wilsons Holdings Ltd		0.1		16.6
Benchmark		0.8		3.3
FTSE All Share - Total Return		2.3		9.3

Weighting	Sector					Time Weighted Returns
27.7	Strategic					13.5			6.8
41.5	UK Equity Special Situations					(0.6)			16.7
12.8	Eclectic & Diversifying Assets					10.5			9.0
17.1	Core Funds					2.9			0.2
0.9	Cash / Loans					(0.1)			(1.2)
100.0	Total					4.7			13.4
Top Ten Contributors - pence per share
			Quarter to 30-06-14					Year Ended 31-03-14
Ocean Wilsons Holdings Ltd			56.7		Ocean Wilsons Holdings Ltd			30.9
BG Group			4.7		NCC Group			18.2
Findlay Park American Fund			2.7		Andor Technology			13.2
JO Hambro Japan Fund			2.0		Kofax			12.8
Weir Group			2.0		Galliford Try			11.6
BP			1.7		Hansteen Holdings			9.5
Select Equity Offshore			1.1		Great Portland Estates Plc			8.2
Vulcan Value Equity Fund			1.1		Goals Soccer Centres			7.9
BHP Billiton			0.9		Herald Investment Trust			7.1
NCC Group			0.8		Weir Group			5.8
Other Investments			(14.6)		Other investments			17.7
Before expenses and dividends			59.1		Before expenses and dividends			142.9

PORTFOLIO ANALYSIS                                                                   NET ASSET VALUE 30 JUNE   2014

	Mkt.Cap		%		Mkt.Val		% of
	£000,000		Held		£000		NAV
Strategic
Wilson Sons *	698.8		11.80		77,087		25.86
Total Strategic					77,087		25.86
UK Equity Special Situations
BG Group PLC	42,118.5		0.02		7,410		2.49
BHP Billiton PLC	39,907.6		0.01		3,779		1.27
BP PLC	94,955.7		0.01		5,149		1.73
Brooks Macdonald Group PLC	209.3		1.47		3,073		1.03
Cairn Energy PLC	1,152.5		0.09		1,064		0.36
Cape PLC	356.3		1.45		5,149		1.73
Centrica PLC	15,732.7		0.03		5,371		1.80
Consolidated Investment Funds Ltd	0.0				630		0.21
Experian Group Limited	9,792.9		0.09		8,892		2.98
Galliford Try PLC	939.4		0.64		5,986		2.01
Goals Soccer Centres PLC	128.6		3.91		5,026		1.69
Great Portland Estates PLC	2,213.2		0.29		6,435		2.16
Hansteen Holdings PLC	704.8		1.04		7,337		2.46
Hargreaves Services PLC	247.8		2.12		5,243		1.76
Herald Investment Trust PLC	504.9		1.80		9,085		3.05
Hilton Food	362.1		0.50		1,825		0.61
Kofax LTD	459.7		1.36		6,238		2.09
NCC Group PLC	397.1		2.52		10,001		3.36
Petroceltic International PLC	335.0		0.34		1,146		0.38
Qinetiq Group PLC	1,354.3		0.15		2,068		0.69
The Weir Group PLC	5,588.0		0.16		9,167		3.08
UBM PLC	1,635.6		0.37		5,990		2.01
Wolseley PLC	8,535.6		0.05		4,269		1.43
12 other investments					3,242		1.09
Total UK Equity Special Sits.					123,575		41.46
Eclectic & Diversifying Assets
DV3 Limited					299		0.10
DV4 Ltd					7,636		2.56
Ocean Wilson (Investments) Limited *					35,613		11.95
Total Eclectic & Diversifying Assets					43,548		14.61
Core Funds
Prince Street Institutional Offshore Ltd					3,456		1.16
Select Equity Offshore, Ltd					6,676		2.24
Adelphi European Select Equity Fund					6,991		2.35
BlackRock European Hedge Fund					3,470		1.16
Findlay Park American Fund					11,677		3.92
JO Hambro Japan Fund					6,687		2.24
Odey Absolute Return Fund					5,278		1.77
Vulcan Value Equity Fund					6,683		2.24
Total Core Funds					50,917		17.08
Cash & Commitments					2,911		0.98
Total NAV					298,039		100.00
Banking Facility £30m-utilisation 30 June £0.0m

* Note: The market value of the Company's holding in Ocean Wilsons Holdings Ltd, as at 30 June 2014, has been split between the 'Strategic' stake in Wilson Sons and the 'Eclectic and Diversified' exposure of Ocean Wilson (Investments) Ltd. The market value was split based upon the relative values of each asset as at their last available quoted market value. Their most recent quoted market value was as of 31 December 2013.

PORTFOLIO MANAGER'S COMMENTARY

Hansa Trust Commentary - Q2 2014

The second quarter of 2014 has seen further significant progress in the evolution of Hansa Trust.   We have been selectively reducing or selling some of our UK equity exposure, including many of the larger capitalisation names and those investments which were relatively small in the context of the overall portfolio.  This has enabled us to increase our focus on those special situations which can add real value and where we have a high conviction in the investment case.

The Hansa House View……..

Our investments are driven by the 'Hansa House View', where we assess markets through the lens of where we stand within the business and valuation cycle. Here, at the risk of sounding rather consensual, we view developed markets as being in mid-cycle territory with the macro backdrop steadily improving, albeit lagging that which is normally seen at this stage of a recovery.  The US is leading the way and, despite the weather-related issues experienced at the start of the year, is exhibiting its customary blend of dynamism and ability by its corporate sector to regenerate.  This should lead to robust growth in the second half of the year.  In contrast, prospects in Europe are mixed, with the stronger Northern economies, such as Germany, doing well while growth in the Southern nations is more subdued.  Whilst the recovery is coming through in Europe, it is fragile and likely to be vulnerable to shocks that will occur from time to time.  From a valuation perspective, developed market price/earnings ratios have risen as investors have anticipated the recovery.  Nevertheless, despite some of the headlines, they are not at the upper end of their historical ranges and appear reasonable, particularly if we make the assumption that economic growth will translate into improving profitability.

Reflecting this positive view on equities, three US-focused funds have been purchased this year: Findlay Park American, Select Equity Offshore and Vulcan Value Equity.  Findlay Park is well known to Hansa, having been owned in portfolios for many years.  It possesses an excellent performance track record and the managers apply a value driven approach using a bottom-up method of picking stocks.  Select and Vulcan complement this position by being smaller funds, with the former focusing on small- and mid-capitalisation companies and the latter typically exposed to larger companies.

In Europe we have exposure to Adelphi European Select Equity fund which is a concentrated portfolio, again targeting strong companies through a bottom-up selection process, which we think is essential in light of the challenges facing Europe.  European exposure was increased in May through the purchase of Blackrock European Hedge Fund.  This is a fund that takes both long and short positions in European companies and derives its edge through its highly experienced portfolio manager, Alister Hibbert, who has demonstrated an ability to preserve capital in challenging market conditions.  We appreciate his ability to combine well-formed views on the macro backdrop with astute stock knowledge.  The purchase highlights a key strength of the Hansa Team.  Having been founder investors in the fund, which subsequently closed to new investors, we were offered the opportunity to invest when the fund opened for a short period of time, which we snapped up on behalf of Hansa Trust.  Developed Market exposure is also provided by Odey Absolute Return fund, which was bought for the Trust in April.  The fund takes long and short positions across Developed Markets, with a particular focus on the UK and US.

Away from the US and Europe, the Japanese stock-market is dancing to its own tune, as it so often does.  As a nation, Japan continues to face a number of deep-seated structural challenges, with excessive levels of debt and poor demographics.  Offsetting this, the new Prime Minister, Shinzo Abe, is re-energising the economy through a programme of liquidity injections (quantitative easing), measures to increase the demand for equities and encouraging corporates to become more efficient.  Combined with an attractive valuation versus other developed markets and a better profitability profile, this leads us to continue viewing prospects positively.  We have accessed the market through JO Hambro Japan, a fund that is run by two very experienced portfolio managers.

The investment case for Emerging Markets is much more challenging.  They have come under significant pressures in recent years as growth, especially in China, has waned and structural issues have arisen from the misallocation of capital following a decade of over-investment. Increasingly, though, valuations are starting to look attractive, albeit experience reminds us that this type of setback rarely ends calmly but rather in collapse and revulsion.  Our stance is to be tentative and selective, reflecting our concerns while also acknowledging that the various countries are very different in their make-up.   We have purchased a holding in Prince Street Institutional fund; an Emerging Market focused hedge fund that also provides exposure to Frontier Markets and which has a strong macro tilt to its investment process.  We are currently considering two additional managers that are focused on Asian markets.

UK Equities…….

In terms of our direct UK equity exposure, UK smaller companies started the year well, but the second quarter saw a significant reversal. The FTSE 100 has ended the half year at breakeven level, outperforming the FTSE 250 and Small Cap indices as investors moved to defensives, with the FTSE 250 and Small Cap down 6% and 4% respectively from their March peaks, the trend accelerating in June as a glut of IPO's soaked up any general buying appetite, while ongoing earnings downgrades had a marked impact on valuations across many sectors.

Regarding portfolio activity this year, several stocks have been trimmed in order to take profits, including NCC Group, Hargreaves Services, Kofax, Great Portland Estates, Galliford Try and Hansteen Holdings. Since Hansa Trust's March year end, the holdings in HSBC, ENI, Royal Dutch Shell, GlaxoSmithkline and Lloyds Banking Group have been sold raising £23.8m, and the holdings in Weir Group, BHP Billiton and BG Group have been reduced, raising a further £3.6m. Two stock purchases were made, adding to the holding in Hansteen and a new holding in Hilton Food.

Risks…….

As is often the case as a cycle matures, risks are also rising.  Geopolitical risks are ever-present, most obviously in Eastern Europe and the Middle East, deflation is a real threat in Europe and perhaps most pertinent is the shift from an extraordinarily loose liquidity environment to one that is tighter.  We believe that liquidity has been one of the major factors behind the rise in markets and we wonder how prices will fare as the US ends its bond buying programme and interest rates start to rise both in the US and the UK.  Market volatility may well rise initially from its current low, complacent levels but, looking through this, whilst we do see the change in rates as another road sign in the maturing of the market cycle, we would view such an event as an indication of the strength of the economy which ultimately is positive for stock markets.

Overall, we are well on our journey in transitioning the Trust into its new form.  As mentioned previously, we are sensitive to valuations and will not simply let the strategy dictate the speed at which we do things. We remain on course for completion by the end of the year.

 

END

 

 

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