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Brazil’s woes knock Hansa

Hansa Trust, which has published results for the year ended 31 March 2016, says it has had a challenging year, particularly due to its exposure to the Brazilian market and the economic woes that Brazil continues to face. However, there have been a number of bright spots within the portfolio. The NAV has fallen from 1138.6p to 1064.9p (-6.5%). The dividend has been maintained at 16p. The Hansa share price fell 14.6% and the Hansa A share price fell by 12.3% leaving them on discounts of 31.0% and 31.9% respectively. The MSCI AC World, FTSE All Share Index and Brazilian stock market returned -1.4%, -3.9% and -9.3% respectively, over the same period.

Wilson Sons released its fourth quarter results in March, which showed the company remains resilient, despite 2015 being an extremely challenging year for the Brazilian economy. Among the headwinds faced by the firm during the year were the substantial decline in the oil price, which has impacted exploration activity worldwide and the fall in the Brazilian Real, which lost a third of its value against the USD. While revenues increased 11% in Brazilian Reals compared to the same period in 2014, the currency impact resulted in a decline of 25% in USD. However, EBITDA fell by only 3%, as EBITDA margins expanded across almost all business units, especially Towage, with the business benefiting from having a greater proportion of revenues than costs being linked to USD. Other positive factors, including good cost control, a diversified business and lower investment requirements following a strong capex cycle in the recent past, led to solid EBITDA growth for the year as a whole, at $208m, up from $199m in the previous year.

The currency decline had a significant impact on revenues in Terminals, which fell by 22% in the fourth quarter. However, overall volumes were up, with increased exports at Tecon Rio Grande and Tecon Salvador more than compensating for reduced imports. Revenues declined within the Towage division, but the EBITDA margin expanded strongly, largely as a result of growth in special operations (which have higher margins). The company exercised a preference right in March 2016 over six tugboats and other minor support assets, which had been operating within the fleet for a number of years under lease contracts. Offshore Vessels remains a challenging market and EBITDA came in at $9.6m, down 14% on the prior year, although with an increased margin of 57%. The company is expecting to receive a further international vessel, Pardela, which should be available in Brazil by June 2016.

OWHL’s Investment subsidiary was valued at $244.4m at the end of December 2015, which was down 2.9% from the 31 December 2014 value of $251.7m, although during this period $7.0m was withdrawn from the portfolio to contribute to the dividend paid by the parent company. The portfolio continues to be biased towards equities, both public and private, reflecting its long–term nature.

In the first quarter of the year, the share price of OWHL fell by 2.0% in Sterling, meaning it is down 12.8% over the Company’s financial year, or down 8.5% with dividends reinvested. The share price represents a discount to the look–through NAV of 36.8%, based on the market value of the Wilson Sons’ shares, together with the latest valuation of the investment portfolio.

Within the funds portfolio, standout performers included the BlackRock European Hedge Fund managed by Alister Hibbert. Through a combination of good macro and stock calls, the fund returned just under 14% for the year, some 27% ahead of the (currency hedged) European equity index. Their other European fund, Adelphi, which is long–only, also significantly beat its underlying benchmark. Other names to note include the Odey Absolute Return Fund, a global hedge fund, and Goodhart Hanjo Fund. The latter returned 4.6% for the year, beating its (currency hedged) index by over 15%.  On the more disappointing side, Pershing Square generated very poor returns for the year, falling by 41%. Driving this under–performance was its position in Valeant, a speciality pharmaceutical group.

Notable performers within the Eclectic silo included good recent performance from Global Event Partners. The fund seeks to isolate events such as mergers and spin–offs, while removing broader market risk. The manager views the current backdrop as one of the most attractive in his career. On the more negative side, JLP Credit Opportunity Fund has been impacted by the recent turmoil in the stressed credit market, exacerbated by a lack of liquidity.

The time–weighted performance of the UK Equity silo during the last 12 months was slightly negative, with a fall of 0.5%, but this was ahead of the broad UK equity market. Several of the biggest positions produced good performances, such as NCC Group (+30.3%), UBM (+18.1%) and Experian Group (+13.9%), while there were falls registered by companies including Hansteen Holdings (-7.2%), Great Portland Estates (-9.6%) and Goals Soccer Centres (-57.3%). This silo now comprises 24.3% of the portfolio.

HAN / HANA : Brazil’s woes knock Hansa

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