Hansard Global Share Discussion Threads

[solarno lopez] 03/5/2012 13:32

Notice the down channel with this stock wonder where the bottom is

[paul_butcher1999] 21/4/2012 00:45

Robsy 2 thanks for the response to Boros10. Isnt targeting middle east and far east going to keep fees and growth high though? I didnt realise they even sold in UK so are changes to independent financial advisor fees in UK really relevant?

Rapidly growing business and 9.4% yield does indeed seem too good to be true though and recent falls are worrying/ in need of explanation - so interested to hear views on this. I bought in about a year ago and sold out with a 10% profit as I just did not understand it enough. I still dont understand it - but bought back in last week as was tempted by the lows . ... but am nervous I admit!

[boros10] 20/4/2012 21:22

Robsy2

Thank you for your reply. In the event I did not add any more stock and have since sold the smallish position I had. Good to see your thinking is on similar lines.

[boros10] 20/4/2012 21:21

Robsy2

Thank you for your reply. In the event I did not add any more stock and have since sold the smallish position I had. Good to see your thinking is on similar lines.

[robsy2] 19/4/2012 19:12

I assume the argument would be that unlike Capita which will need to spend further resources each year fulfilling these contracts, Hansard's work is largely completed when the premium is paid? But is it as simple as this?
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yes pretty much so
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Hansard needs to provide information systems to support its independent financial advisers during the life of the policy, it needs to maintain relationships with asset management companies who invest the funds etc, but how visible are operating profits on an EEV basis?
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They are good at this, that is why they are market leaders in this area I would be reasonably confident of profits on an EEV basis ++++++++++++++++++++++++++++++++++++++++++++++++
I am also concerned about the costs being borne by the policyholders. I see the Company is currently facing legal action from disgruntled policyholders who are disappointed with their returns. In many cases it is excessive costs which result in poor returns rather than the underlying performance of a fund.
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Correct, but high costs are not illegal and Hansard is not responsible for dissapointing returns . I cannot see how the legal actions can have any success.
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+
I see the bid/offer spread on its "co branded" unit trusts are a whopping 7.5% to 8%. Further, the management fees on the unit trusts are 1.5% and the TER is often in excess of 2% p.a. Is this model really sustainable as investors become more sophisticated and begin to realise that high management costs can eat up a large chunk of total returns.
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This is the long term problem. The problems of high costs , poor fund performance , transparency and tighter regulation drives them away from developed markets.
Thye have a good business and they know what they are doing but their are clouds over the long-term side of it , re ownership , regulatory change etc etc , not alarming but enough for me to sell out , The gentle but consistent slide in the share price tells the whole story.
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Hansard say that they get to keep just 1% of funds under management but say nothing about initial fees. Where do the balance of the fees go?
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The advisers
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My final concern relates to the changes in the UK with IFA and commissions. Will the introduction of up front fees for IFA advice hit Hansard's UK business and are up front fees likely to be the way it goes internationally?
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Fees are the driving force of the business and they are under attack. This is the problem.
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I am sorry if my initial observations are a little negative but I really want to get my head around the downside risks before I commit more capital.
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I advise caution!
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R2

[morwood] 10/4/2012 22:39

This just keeps getting cheaper! Crazy yeild to hold onto until the share price picks up.

[boros10] 07/3/2012 14:15

Wilmdav

Thank-you for the excellent data presentation.

I have taken a small position in Hansard as the company looks undervalued and the dividend yield is excellent.

The last investment I had in a similar company was Standard Life as a result of its demutalisation in the mid noughties. If I'm honest I never really got my head around EEV at the time and am struggling with it now.

My simplistic understanding of EEV is that it seeks to capture the net present value of future premiums. I assume the justification for capturing this value upfront in the P&L and balance sheet is that the costs associated with securing this flow of premiums have largely been expensed in the current period (although some IT costs might be capitalised and charged to the P&L overtime).

I have tried to apply this thinking to the contracts won by some of the outsourcing stocks I own such as Capita. Now if Capita had secured a 10 year contract worth £20m a year it would not seek to bring into its current income the present value of the profits it expects to generate during the projects life. So why does Hansard feels justified in taking credit for future income?

I assume the argument would be that unlike Capita which will need to spend further resources each year fulfilling these contracts, Hansard's work is largely completed when the premium is paid? But is it as simple as this?

Hansard needs to provide information systems to support its independent financial advisers during the life of the policy, it needs to maintain relationships with asset management companies who invest the funds etc, but how visible are operating profits on an EEV basis?

I am also concerned about the costs being borne by the policyholders. I see the Company is currently facing legal action from disgruntled policyholders who are disappointed with their returns. In many cases it is excessive costs which result in poor returns rather than the underlying performance of a fund.

I see the bid/offer spread on its "co branded" unit trusts are a whopping 7.5% to 8%. Further, the management fees on the unit trusts are 1.5% and the TER is often in excess of 2% p.a. Is this model really sustainable as investors become more sophisticated and begin to realise that high management costs can eat up a large chunk of total returns.

Hansard say that they get to keep just 1% of funds under management but say nothing about initial fees. Where do the balance of the fees go?

My final concern relates to the changes in the UK with IFA and commissions. Will the introduction of up front fees for IFA advice hit Hansard's UK business and are up front fees likely to be the way it goes internationally?

I am sorry if my initial observations are a little negative but I really want to get my head around the downside risks before I commit more capital.

Thanks

[soi] 06/3/2012 06:50

Wilmdav

You`ve presented that very well, thanks.

I`ll take a closer look another time, have a holding and unsure whether I`ll hang on to it or not.

[cestnous] 04/3/2012 16:55

24 February 2012 Investors chronicle

TIP UPDATE
Hansard Global PLC (uk:HSD)
INCOME
MEDIUM RISK
Buy
Our previous tip
WE SAIDBuy
WHEN21 July 2011
PRICE172p
TIP PERFORMANCE TO DATE-12%
Hansard Global managed to attract plenty of new investments in the half year, but profits took a knock as a result of weakness in equity markets. However, management's confidence was translated by another dividend increase, which takes the yield above 9 per cent.
The group provides a range of tax-efficient investment products within a life insurance wrapper, primarily for rich clients in Latin America and the Far East. Demand remained strong, with new business sales on a regular premiums basis rising 41 per cent to £67.6m. Single premium sales fell from £66.6m to £22.1m, but this was up against last year's tough comparative. New business margins after tax rose from 7.4 per cent to a record 10.4 per cent, and the group continues to generate positive cash flows to fund new business.
Set against this, a fall in equity values, which will have an impact on future asset-based income streams, meant that last year's £17.8m profit was turned into an investment return loss of £15m on an embedded value basis. Hansard continues to invest in its internet operation Hansard OnLine, and more than 1,000 policies were introduced electronically, around 76 per cent of regular premium policies.
Numis is forecasting full-year embedded value of 179p (187p in 2011).
HANSARD GLOBAL (HSD)
ORD PRICE: 151p MARKET VALUE: £207m
TOUCH: 149-153p 12-MONTH HIGH: 175p LOW: 145p
DIVIDEND YIELD: 9.2% PE RATIO: 16
NET ASSET VALUE: 34p EMBEDDED VALUE: 177p
Half-year to 31 Dec Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2010 8.6 6.1 5.75
2011 5.2 3.8 5.90
% change - - +3
Ex-div: 29 Feb
Payment: 29 Mar
SHARE TIP UPDATE:
Hansard's management remains sufficiently confident to increase the dividend, which now yields a chunky 9 per cent. The shares are down from our buy tip (172p, 21 July 2011), but trade on a discount to embedded value, so we reiterate our buy recommendation.
Last IC view: Buy, 172p 26 September 2011.

[wilmdav] 26/2/2012 13:01

My take on interim results:

[solarno lopez] 23/2/2012 15:30

thanks the feeling is mutual

[the shuffle man] 23/2/2012 12:04

I get a bit worried when the dividend is not covered by earnings.

[solarno lopez] 23/2/2012 08:13

comments on the results please

[hew] 31/1/2012 09:15

Shuffle,

Have to see that para with the para 3 prior:

"The shift in business mix toward higher margin regular premium business has had a short-term impact on IFRS earnings, due to the negative impact of expense recognition in the early period of a policy's life, of approximately £0.8m lower compared to H1 2011. For business written this year, this is expected to unwind over the next 12-18 months."

That seems entirely reasonable in that it should arise and that it will unwind.

HOWEVER: I wonder therefore why in the para you quote, they should say "below expectations", significantly or not? It should have been very clearly expected!

Other reasons for the lower FY IFRS now "expected" (so they have opened their eyes!) also are apparently reasonable: Sterling/Euro changes - who could have guessed what that would be ? (and will be for the rest of the year!), and increased regulatory overheads - imposed during 2011 - which increased the planned admin overhead to £1.0m from approx £0.5m.

(This post just on that topic, not a view overall, IOTS, DYOR)

[the shuffle man] 31/1/2012 07:56

Are they trying to hide a pofits warning. Buried down in the detail was this:

As a result of the above, the Board expects IFRS profit for the full year to be significantly below expectations. Nevertheless the Group's Embedded Value at H1 2012 is in line with our expectations and our balance sheet remains highly robust.

[wilmdav] 21/1/2012 21:14

A little more detail from my own notes(!). Would have been extracted from an earlier AR. But a lot of it is in this board's header anyway.

"The Group offers a range of 200 flexible, unit-linked, long-term savings and investment products in a tax-efficient life-assurance wrapper. These are sold exclusively through over 540 independent intermediaries to more than 43,000 policyholders in over 170 countries. Products are single and regular premium and have been designed to appeal to affluent investors. Policyholders bear the risks. HSD do not offer investment advice. Principal office is in Isle of Man, a zero % corporation tax location. The Group's internet platform allows intermediaries access to real time information about the investments of policyholders whom they have introduced. The Group is well capitalised holding at in excess of 16 times its minimum requirement."

As far as I am aware there has not been much comment about the internet platform. This has been upgraded and is said to represent significant cost savings for IFAs. HSD are optimistic about its potential for growth.

[wilmdav] 20/1/2012 16:23

The setup I picture, which might not be correct, is that HSD's products allow choices among a range of funds, managed by one third party organisation or several, but that there is no provision for the IFA to offer a fund outside the range stipulated by HSD. The funds that have got into trouble appear to be quite complex.

I don't wish to give the impression that I am pessimistic about the outcome of forthcoming court cases, merely that I don't see it as a one way bet.

[stemis] 20/1/2012 13:19

I believe the client will be advised by his IFA. Hansard sell their products through IFA's not directly to clients.

[grahamburn] 20/1/2012 12:48

But equally the company says that its own legal advice points to the opposite view and, more importantly, no provision has been made in the current accounts for any claims. That in itself is reasonably indicative that the claims may well be without much foundation - the auditors would have had sight of the legal opinions and would have required a provision if there was a reasonable doubt about the possibility of a payout.

[wilmdav] 20/1/2012 12:25

As a holder I hope you are right, Robsy, but I don't feel able to be quite so dismissive. Generally speaking, lawyers don't advise their clients to proceed unless they think there is some chance of success.

I wonder who manages these funds - not HSD obviously.

[robsy2] 19/1/2012 16:28

Thanks for your post. Interesting.

"It would also be interesting to know just how much latitude the policyholder has in choosing assets to be attached to a policy."

Hansard offers a menu of funds, as they say they do not offer advice and it's the policyholder who makes teh fund choice so it's hard to see what claim a disgruntled investor could have against Hansard.

[wilmdav] 18/1/2012 21:23

Thanks, SteMiS.

What follows is derived from a further plough through the long and somewhat repetitive 2011 report and most recent IMR.

Market volatility was reflected by assets under administration which rose by 8.4% in year to 30/06/11 and fell 13.5% in the following 3 months. Major capital markets fell by 15%-20% during that same 3 months. More significantly EEV fell from £257m to £250m during the 3 month period, a drop of only 2.7%. The reason for this was strong generation of regular premium new business, with NPV of that business offsetting market related falls in asset values.

Cash generation was excellent during the whole 15 month period. On 30/06/11 the Group had £71.1m of liquid assets, "held with a wide range of deposit institutions and in highly rated money market liquidity funds". This was £8.7m less than at 12m previously. In the low interest environment the Group felt the best use of its capital was continued investment in regular premium contracts. These investments earn a return of at least 15%. £25.6m was invested in new business in the year. Construction of the Group's products mean the investment will be recouped within 3 years. However continued investment of this sort puts short term pressure on cash flow due to commission and other costs incurred at inception of a contract.

Expenses were higher in FY11, due to higher new business levels, investment in the Group's propositions and distribution capabilities as well as strengthening governance and controls.

"A significant portion of the increase in administrative and other expenses in the year under review follows the Board's decision to restore pension contributions to employees' individual pension plans with effect from 1 July 2010, following a suspension of those contributions in March 2009, and to reverse the pay cuts accepted by senior management in February 2009."

I have not looked into this but it might have some bearing on recent conversations about increases in directors' pay.

Although assets under administration remained strong in FY11, "certain assets selected by policyholders in previous financial years were impacted by the global financial crisis. During the first six months of this financial year we saw an increase in liquidations and other efforts to resolve uncertainty over those policyholder asset values but in the last quarter a further small number of funds held by policyholders ceased offering redemptions on normal terms. This has caused us to apply a prudent valuation by writing down those assets by £30m in Q4 . . . "

"The write-downs in this financial year, as well as prudent valuations on other assets similarly affected, have reduced asset-based fees in the current financial year and impacted EEV profits. . . . Any continued reductions in AUA will cause declines in the Group's future asset-based income." (See SteMiS's preceding post)

"Financial services institutions are increasingly drawn into disputes in cases where the value and performance of assets selected by or on behalf of policyholders fails to meet their expectations. This is particularly true of more complex structured products distributed throughout Europe that have been selected for inclusion in policies. At the balance sheet date a number of those fund structures remain affected by liquidity or other issues that hinder their sales or redemptions on normal terms with a consequent adverse impact on policy transactions.

A Group company has been served with a number of writs arising from such complaints and other asset-related issues, and believes that other writs might be served in the next few months. While it is not possible to forecast or determine the final results of pending or threatened legal proceedings, based on the pleadings and advice received from the company's legal representatives, the Directors believe that the company will be successful in its defence of these claims. Accordingly no provisions have been made.

The Groups products are unit-linked regular or single premium life assurance contracts. Policyholders bear all the investments risk and benefits are directly linked to the value of assets selected by the policyholder. The Group does not provide investment advice."

Additional resources have been made available for risk management, including a new committee and at least three high level appointments. This has no doubt been partly prompted by the above legal activity but also by increasing regulatory requirements.

Any court hearings are not anticipated to take place before February 2012. It would be informative if one of our number were able to attend one. It would also be interesting to know just how much latitude the policyholder has in choosing assets to be attached to a policy.

New business results for half-year to 31/12/11 are due on 31/01/12. Trading results for that half will be announced on 23/02/12.

[stemis] 17/1/2012 18:31

HSD doesn't invest funds themselves (other than surplus cash) so isn't directly exposed to investment performance. The sector is generally weak (look at MAN). The concerns seems to be that falling FUM will hit fees, although why this is a problem now when markets seem to be rebounding a little is not clear.

[wilmdav] 16/1/2012 19:29

I would hazard an uneducated guess that the reason for current weakness is due to concerns, justified or not, about where their funds are invested (e.g. sovereign debt?)

[fangorn2] 10/11/2011 09:02

Interim Management statement out.(July to Sept'11 Quarter)

ADVFN competitor.uk-wire.com/cgi-bin/articles/201111100700168182R.html

Mixed in my view. Given this comes on top of the controversy surrounding the massive management pay rises recently I'm glad I sold fairly recently. But it is one I will keep my eye on as the dividend is exceptionally tasty in these troubled times.