Interim Results
Hansa Trust PLC
23 November 2006
HANSA TRUST PLC
Announcement of Interim Results
for the six month ended 30 September 2006
Hansa Trust PLC announces its Interim Results for the six month 30 September
2006
Financial Highlights Restated
Six months ended Year ended
30 September 2006 31 March 2006
(unaudited) (audited)
Net Asset Value - Total Return (0.7%) 42.4%
Benchmark 3.3% 6.6%
Capital return per equity share (12.5p) 233.2p
Revenue return per equity share 8.3p 10.8p
Net asset value per equity share 807.7p 818.2p
Interim Dividend 3.5p 3.5p
Total income (£000's) 3,152 4,261
Revenue before taxation (£000's) 2,020 2,618
An interim dividend of 3.5p per share (amounting to £840,000) is to be paid.
Ex-dividend date: 29 November 2006
Record date: 1 December 2006
Payment date: 18 December 2006
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
HALF YEAR RESULTS: NAV: 807.7p per share (-1.3%)
During the first half of our year our net asset value declined by a small amount
- 10.5p per Ordinary and 'A' non-voting Ordinary share (of which 6.3p relates to
a dividend payment) - ending the period 1.3% lower at 807.7p. The change in the
net asset value can be attributed as follows:
Starting Net Asset Value 818.2p
Final Dividend (2005/06) -6.3p
Net Income Earned +8.3p
Decline in value of the portfolio -12.5p
Closing Net Asset Value 807.7p
It was a period when the stock market itself marked time, the FTSE All-share
Index being essentially unchanged. Our own benchmark, however, returned 3.3%
and will always be difficult to beat during such times. It is the nature of
equities that they provide volatile returns and so it is that we will not always
beat our benchmark over short time periods. However, as we stressed in the
annual report, while we monitor returns over a number of time periods - long,
medium and short - we attach most importance to the five year returns; those
remain excellent.
John Alexander's investment manager's report, which follows this statement, goes
into the results of the period in some detail, examining the events and
prospects for each of the different areas of investment within the portfolio.
He divides it up into the different themes that he is exposing the portfolio to.
Given that the portfolio contains some strategic and unquoted investments,
some of which account for a significant proportion of the assets, there is
always likely to be some divergence in the returns with those of the stock
market generally. In this period our top contributor was our holding in
Resolution PLC, a closed life-assurance company, in which we invested a further
£8.4 million (or circa 4% of our assets) by taking up our entitlement in its
rights issue. It is now a large investment amounting to £23.1 million and
accounting for 11.9% of our gross assets. By contrast our large holding in
Ocean Wilsons, which produced good increases in half year turnover and profits,
declined in value. It should be remembered that it has been a wonderful
performer for the portfolio over the years and we remain excited about its
long-term prospects. Our top three and bottom three contributors to our net
asset value return were:
Resolution PLC +7.9p Engel East Europe -3.5p
Hunting +5.0p Cairn Energy -4.1p
Xstrata +3.6p Ocean Wilsons -19.0p
John's report highlights the decision to reduce our considerable and very
profitable exposure in the natural resources sector - both metals and oil and
gas. It has been a hot sector of the market and may well have become
over-owned, making their share prices quite vulnerable but the long-term
prospects remain good and I anticipate that we may build up the exposure at a
later date. We'll see.
Since the half year end we have received and accepted a cash bid for our holding
in Cathedral Capital, a Lloyds insurance underwriter. This came about through
the process of the company looking for fresh capital - as is highlighted in
Investment Manager's Report. The consequence of this is that the value of our
holding - since the half year end - has risen from £5.5 to £8.6 million,
equivalent to an increase of circa 13p per share.
EXTRAORDINARY GENERAL MEETING
The Board of Directors decided that it is appropriate that the Memorandum and
Articles of Association of the Company should be brought up to date with the
many changes in company law. In particular the Board is concerned that
shareholders should be protected from the consequences of the Company suddenly
finding that it had become subject to the taxation provisions of a close company
and is proposing changes which would provide such protection. It is a
complicated and technical area of company taxation and if any shareholder would
like to know more about it and the reasons for undertaking the changes, please
give us a call or send us an email. An Extraordinary General Meeting will be
called when the Board together with its advisors are satisfied that the proposed
changes are appropriate
INTERIM DIVIDEND
The Board has declared an interim dividend of 3.5p per Ordinary and 'A'
non-voting Ordinary share to be paid to shareholders on 18 December 2006.
OUTLOOK
We do not see any reason to be other than optimistic about the long-term
prospects for the stock markets in which we operate. The world's economy is
going through an unusual period in that, following the dismantling of socialist
management of so many economies after the fall of the Berlin wall, there has
emerged the globalisation which is synchronising global economic growth. It is
driven by huge advances in both electronic and bio technologies and the
emergence of the economies of the two largest countries by population: China and
India. Despite some of its well heralded problems, the American economy remains
robust and also remains the most important engine of global growth. It all
provides an excellent backdrop for company profits and thence stock market
values.
However it is not without risks, some of which we highlighted in the last annual
report. Given that the current bull market is now over 31/2 years old and that
there remains so much optimism and so much money around, there needs to be
degree of caution. Things always look best at the top and excess money tends to
drive up inflation and thence interest rates. It is far from certain that
inflation will remain benign. Our own prospects, however, are importantly
determined by the investments we make. Your board believes we have some
interesting and unusual ones (otherwise what would we have to offer
shareholders) and that over the long-term they will produce good returns which
means that we can also produce good returns for you, the shareholders.
Alex Hammond-Chambers
November 2006
GROUP INCOME STATEMENT
for the six months ended 30 September 2006
(Unaudited) (Unaudited ) (Audited)
Six months ended Six months ended Year ended
30 September 2006 30 September 2005 31 March 2006
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
(Loss)/Gains on investments - (3,013) (3,013) - 25,100 25,100 - 55,973 55,973
Exchange gains/(losses) on
currency balances - 5 5 - - - - (12) (12)
Investment income (see note 2) 3,152 - 3,152 2,715 - 2,715 4,261 - 4,261
3,152 (3,008) 144 2,715 25,100 27,815 4,261 55,961 60,222
Investment management fees (645) - (645) (478) - (478) (1,034) - (1,034)
Other operating expenses (262) - (262) (246) - (246) (539) - (539)
-
(907) - (907) (724) - (724) (1,573) - (1,573)
Profit/(Loss) before finance
costs and taxation 2,245 (3,008) (763) 1,991 25,100 27,091 2,688 55,961 58,649
Finance costs (225) - (225) (39) - (39) (70) - (70)
Profit/(Loss) before taxation 2,020 (3,008) (988) 1,952 25,100 27,052 2,618 55,961 58,579
Taxation (33) - (33) (36) - (36) (31) - (31)
Profit/(Loss) for the period 1,987 (3,008) (1,021) 1,916 25,100 27,016 2,587 55,961 58,548
Return per Ordinary and 'A'
non-voting Ordinary share (see
note 3) 8.3p (12.5p) (4.2p) 8.0p 104.6p 112.6p 10.8p 233.2p 244.0p
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The supplementary revenue return 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
for the six months ended 30 September 2006
(Unaudited)
Capital
Share redemption Retained
Capital reserve Earnings Total
£ 000 £ 000 £ 000 £ 000
Net assets at 1 April 2006 1,200 300 194,875 196,375
Loss for the period - - (1,021) (1,021)
Dividends paid - - (1,500) (1,500)
Balance at 30 September 2006 1,200 300 192,354 193,854
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2005
(Unaudited)
Capital
Share redemption Retained
Capital reserve earnings Total
£ 000 £ 000 £ 000 £ 000
Net assets at 1 April 2005 1,200 300 138,547 140,047
Profit for the period - - 27,016 27,016
Dividends paid - - (1,380) (1,380)
Balance at 30 September 2005 1,200 300 164,183 165,683
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2006
(audited)
Capital
Share redemption Retained
Capital reserve earnings Total
£ 000 £ 000 £ 000 £ 000
Net assets at 1 April 2005 1,200 300 138,547 140,047
Profit for the year - - 58,548 58,548
Dividends paid - - (2,220) (2,220)
Balance at 31 March 2006 1,200 300 194,875 196,375
CONSOLIDATED BALANCE SHEET
as at 30 September 2006
(Unaudited) (Unaudited ) (Audited )
30 September 30 September 31 March
2006 2005 2006
£000 £000 £000
Non -current investments
Investments held at fair value through profit and 170,534 159,773 202,099
loss
Current Assets
Other receivables 1,598 234 930
Cash and cash equivalents 21,959 6,722 241
23,557 6,956 1,171
Current Liabilities
Other payables falling due within one year (237) (1,046) (6,895)
Net current assets/(liabilities) 23,320 5,910 (5,724)
Net assets 193,854 165,683 196,375
Equity
Called up share capital 1,200 1,200 1,200
Capital redemption reserve 300 300 300
Retained earnings 192,354 164,183 194,875
Total equity shareholders' funds 193,854 165,683 196,375
Net asset value per Ordinary and 807.7p 690.3p 818.2p
'A' non-voting quarter Ordinary share (see note 5)
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 September 2006
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2006 2005 2006
£000 £000 £000
Cash flows from operating activities
(Loss)/Profit before finance costs and taxation (763) 27,091 58,649
Adjustments for:
Realised gains on investments (22,171) (5,708) (13,705)
Unrealised gains/(loss) on investments 25,185 (19,401) (42,268)
Effect of foreign exchange rate changes (5) 9 12
Interest paid - - (1)
Increase/(decrease) in current asset investments - 208 (255)
(Decrease)/increase in prepayments and accrued (186) 258 146
income
(Increase)/decrease in other creditors and (58) 144 110
accruals
Taxes paid (9) (36) (31)
Purchase of non- current investments (17,286) (19,718) (53,066)
Sale of non-current investments 45,331 28,254 49,302
Net cash inflow/(outflow) from operating 30,038 11,101 (1,107)
activities
Cash flows from financing activities
Interest paid on bank loans (225) (39) (69)
Dividends paid (1,500) (1,380) (2,220)
(Repayment)/drawdown of loans (6,600) (3,035) 3,565
Net cash (outflow)/inflow from financing (8,325) (4,454) 1,276
activities
Increase in cash and cash equivalents 21,713 6,647 169
Cash and cash equivalent at 1 April 241 84 84
Effect of foreign exchange rate changes 5 (9) (12)
Cash and cash equivalents at period end 21,959 6,722 241
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The financial statements of the Group and Company have been prepared in
accordance with International Financial Reporting Standards ('IFRS'). These
comprise standards and interpretations approved by the International Accounting
Standards Board ('IASB'), together with interpretations of the International
Accounting Standards and Standing Interpretations Committee approved by the
International Accounting Standards Committee ('IASC') that remain in effect, to
the extent that IFRS have been adopted by the European Union.
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the Group operates.
(a) Basis of preparation
The financial statements have been prepared on an historical cost basis, except
for the revaluation of certain financial assets. The principal accounting
policies adopted are set out below. Where presentational guidance set out in the
Statement of Recommended Practice ('SORP') for investment trusts issued by The
Association of Investment Companies (AIC) in January 2003 (and revised in
December 2005) is consistent with the requirements of IFRS, the Directors have
sought to prepare the financial statements on a basis compliant with the
recommendations of the SORP.
(b) Basis of Consolidation
The Financial Statements comprise the accounts of the Company and its subsidiary
undertaking made up to 30 September 2006. In the Company's Financial
Statements, the investment in its subsidiary undertaking is stated at the net
asset value as shown by the most recent accounts.
(c) Presentation of income statement
In order to reflect better the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the income statement between items of a revenue and capital nature has
been presented alongside the income statement. In accordance with the Company's
status as a UK investment company under section 266 of the Companies Act 1985,
net capital returns may not be distributed by way of dividend. Additionally the
net revenue is the measure that the Directors believe to be appropriate in
assessing the Company's compliance with certain requirements set out in section
842 of the Income and Corporation Taxes Act 1988.
(d) Non- current investments
All investments have been designated upon initial recognition as fair value
through profit and loss. Investments are recognised and de-recognised on the
trade date where a purchase or sale is under a contract whose terms require
delivery within the timeframe established by the market concerned. Subsequent to
initial recognition, investments are measured at fair value. For listed
investments, this is deemed to be bid market prices or closing prices for SETS
stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange
electronic trading service covering most of the market including all FTSE 100
constituents and most liquid FTSE 250 constituents along with some other
securities. Gains and losses arising from changes in fair value are included in
net profit or loss for the period as a capital item in the income statement and
are ultimately recognised in the Capital Reserves. Unquoted investments are
stated at fair value as determined by the Directors.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and short term deposits with an
original maturity of three months or less.
NOTES TO THE FINANCIAL STATEMENTS
(continued)
1. ACCOUNTING POLICIES continued
(f) Investments held as Current Assets
Listed investments are stated individually at fair value.
(g) Investment Income
Dividends receivable on equity shares are recognised on the ex-dividend date.
Where no ex-dividend date is quoted, dividends are recognised when the Company's
right to receive payment is established. Dividends and interest on investments
in unlisted shares and securities are recognised when they become receivable.
Dividends are stated net of related tax credits.
Underwriting commission is recognised as revenue insofar as it relates to shares
not required to be taken up. Where a proportion of the shares underwritten is
required to be taken up the same proportion of the commission received is
recognised as capital, with the balance taken to the revenue account.
(h) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue column of the Income Statement except as follows:
(i) Expenses which are incidental to the acquisition of an investment are
expensed, via the capital column of the Income Statement through Realised
Capital Reserves at the time of the transaction;
(ii) Expenses which are incidental to the disposal of investments are deducted
from the sale proceeds;
(iii) Expenses are charged, via the capital column of the Income Statement to
Realised Capital Reserve where a connection with the maintenance or enhancement
of the value of the investments can be demonstrated.
(i) Taxation
The tax expenses represent the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit before tax as reported in the income statement
because it excludes items of income or expenses that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates
that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation is recognised in respect of all temporary differences that
have originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more or a right to pay less tax in
future have occurred at the balance sheet date measured on an undiscounted basis
and based on enacted tax rates. This is subject to deferred tax assets only
being recognised if it is considered probable that there will be suitable
profits from which the future reversal of the underlying temporary differences
can be deducted. Temporary differences are differences arising between the
Company's taxable profits and its results as stated in the accounts, which are
capable of reversal in one or more subsequent periods.
Due to the Company's status as an investment trust company, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided for deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
j) Foreign Currencies
Transactions denominated in foreign currencies are recorded in the local
currency at the actual exchange rates as at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the year
end are reported at the rate of exchange prevailing at the year end. Any gain or
loss arising from a change in exchange rates, subsequent to the date of the
transaction, is included as an exchange gain or loss in the capital or revenue
column of the Income Statement, depending on whether the gain or loss is of a
capital or revenue nature respectively.
NOTES TO THE FINANCIAL STATEMENTS
(continued)
1. ACCOUNTING POLICIES continued
(k) Reserves
Capital reserves - Realised
The following are credited or charged to this reserve:
- gains and losses on the realisation of investments, via the capital column
of the Income Statement;
- realised exchange differences of a capital nature;
- transaction costs on the acquisition of investments.
Capital reserves - Unrealised
The following are credited or charged to this reserve, via the capital column of
the Income Statement;
- increases and decreases in the valuation of investments held at the year
end;
- unrealised exchange differences of a capital nature.
-
2. INVESTMENT INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2006 2005 2006
£000 £000 £000
Income from listed investments
Dividends 2,021 1,359 2,673
Overseas dividends 1,101 1,056 1,232
3,122 2,415 3,905
Other operating income
Subsidiary profit - 255 255
Placement and underwriting income 14 6 28
Interest receivable 16 39 73
30 300 356
Total income 3,152 2,715 4,261
Total income comprises:
Dividends 3,122 2,415 3,905
Interest 16 39 73
Other income 14 261 283
3,152 2,715 4,261
NOTES TO THE FINANCIAL STATEMENTS
(continued)
3. RETURNS PER SHARE
The returns stated below are based on 24,000,000 shares, being the weighted
average number of shares in issue during the period.
Total Revenue Capital
Pence Pence Pence
Period £000 per share £000 per share £000 per share
Six months ended 30 September 2006 (1,021) (4.2) 1,987 8.3 (3,008) (12.5)
Six months ended 30 September 2005 27,016 112.6 1,916 8.0 25,100 104.6
Year ended 31 March 2006 58,548 244.0 2,587 10.8 55.961 233.2
4. FINANCIAL INFORMATION
The financial information contained in this Interim Report is not the Company's
statutory accounts. The financial information for the six months ended 30
September 2006 and 30 September 2005 is not for a financial year, has not been
audited and has been prepared in accordance with accounting policies consistent
with those set out in the Annual Report and Accounts for the year ended 31 March
2006.
The statutory accounts for the financial year 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 matters to which the auditors
drew attention by way of emphasis without qualifying the report, and did not
contain statements under section 237(2) and (3) of the Companies Act 1985.
The interim financial information was approved by the Board of Directors on 23
November 2006.
5. NET ASSET VALUE PER SHARE
The Net Asset Value per share is based on the net assets attributable to equity
shareholders of £193,854,000 (six months ended 30 September 2005: £165,683,000
as restated; year ended 31 March 2006: £196,375,000 as restated) and on
24,000,000 shares, being the number of shares in issue at the period end.
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