Annual Financial Report for the year ended 31 March 2024
The statements below are extracted from the Company’s annual report for the year ended 31 March 2024 (the Annual Report). The Annual Report, will be posted to shareholders on 13 June 2024. Copies of the Annual Report will be available in hard copy format from the Company Secretary, Frostrow Capital LLP, 25 Southampton Buildings, London WC2A 1AL or from the Company’s website at www.worldwidewh.com where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.
The Annual Report will be submitted to the Financial Conduct Authority and will shortly be available in full, unedited text for inspection on the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual General Meeting will be held on Wednesday, 10 July 2024.
COMPANY PERFORMANCE
HISTORIC PERFORMANCE
FOR THE YEARS ENDED 31 MARCH
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |
| Net asset value per share (total return)*^ | 13.7% | 6.5% | 30.0% | (5.8)% | (0.1)% | 12.0% |
| Benchmark (total return)* | 21.1% | 5.7% | 16.0% | 20.4% | 2.5% | 10.9% |
| Net asset value per share | 272.3p | 286.9p | 370.3p | 346.5p | 343.5p | 381.1p |
| Share price | 273.0p | 292.0p | 369.5p | 327.5p | 311.5p | 335.0p |
| Premium/(discount) of share price to | ||||||
| net asset value per share | 0.3% | 1.8% | (0.2)% | (5.5)% | (9.3)% | (12.1)% |
| Dividends per share | 2.65p | 2.5p | 2.2p | 2.7p | 3.1p | 2.8p |
| Leverage | 4.9% | 12.0% | 7.6% | 10.9% | 10.5% | 10.8% |
| Ongoing charges^ | 0.9% | 0.9% | 0.9% | 0.9% | 0.8% | 0.9% |
| Ongoing charges (including performance fees paid or crystallised during the year)^ | 1.1% | 0.9% | 0.9% | 1.4% | 0.8% | 0.9% |
Comparative periods have been restated for the sub-division of each share of 25p each into 10 new shares of 2.5p each, approved at the AGM held on 18 July 2023 and effective on 27 July 2023.
* Source: Morningstar
^ Alternative Performance Measure (see Glossary).
* Source: Morningstar
STATEMENT FROM THE CHAIR
INVESTMENT PERFORMANCE
I am pleased to present your Company’s Annual Report and Financial Statements for the year ended 31 March 2024.
Stock market volatility continued in the year under review, with company and healthcare industry fundamentals often taking a back seat to macroeconomic forces and geopolitical events. The first half of the year was dominated by investor uncertainty and concerns regarding lingering inflation and continued high interest rates. The second half of the year saw these concerns abate, which helped markets to rise, in some cases, back to all-time highs.
Against this backdrop, I am pleased to report that the Company performed well, with a net asset value per share total return of +12.0% (2023: -0.1%), outperforming the Company’s Benchmark, the MSCI World Health Care Index measured on a net total return, sterling adjusted basis, which returned +10.9% (2023: +2.5%).
The Company’s share price total return during the year was +8.6% (2023: -4.1%). The disparity between the performance of the Company’s net asset value per share and its share price was reflected in the widening of our share price discount to our net asset value per share from 9.3% at 31 March 2023 to 12.1% at 31 March 2024.
Principal contributors to our outperformance were Big Pharma, Medtech and Emerging Biotech stocks. A key part of our Portfolio Manager’s strategy is to be overweight the Emerging Biotech sector. This reflects both the high levels of innovation and growth found in these companies as well as their potential to be acquisition targets by larger pharmaceutical companies seeking growth opportunities.
While the Company has underperformed the Benchmark on a five-year view (+45.8% compared to +68.3%), our long-term performance continues to be strong. From the Company’s inception in 1995 to 31 March 2024, the total return of our net asset value per share has been +4,733%, equivalent to a compound annual return of +14.4%. This compares to a cumulative blended Benchmark return of +2,438% and a compound annual return of 11.9% over the same period.
Further information on the healthcare sector, the Company’s investments and performance during the year can be found in the Portfolio Manager’s Review.
CAPITAL
Since the beginning of 2022, and for a variety of reasons, share price discounts across the investment company sector in the UK have widened. The average level of discount in the broader sector currently stands at c.14.0%*. This compares to the Company’s share price discount of 9.4% as at 5 June 2024.
It is the Board’s policy to buy back our shares if the Company’s share price discount to the net asset value per share exceeds 6% on an ongoing basis. Shareholders should note, however, that it remains possible for the discount to be greater than 6% for extended periods of time, particularly when sentiment towards the Company, the sector and to investment trusts generally remains poor. In such an environment, buybacks may prove unable to prevent the discount from widening. However, they enhance the net asset value per share for remaining shareholders and go some way to dampening discount volatility, which can adversely affect investors’ risk adjusted returns.
Over the year, the Company remained committed to its share buyback and issuance policy, regularly repurchasing shares. This commitment was demonstrated by the fact that a total of 80,265,298 shares were repurchased for treasury at a cost of £253m and at an average discount of 10.5%. In addition to increasing the Company’s net asset value per share, during the period under review this activity made the Company the most active acquirer of its own shares both in its sector and across the investment trust sector as a whole.
* Source: Winterflood Investment Trusts
The shares repurchased during the year under review equated to 12.8% of the Company’s share capital at the beginning of the year. The total number of shares shown to have been repurchased during the year has been adjusted to reflect the share split of each of the Company’s shares of 25p each into 10 shares of 2.5p each which took effect from 27 July 2023.
On 31 March 2024, there were 545,942,332 shares in issue (excluding the 55,722,868 shares held in treasury). From the beginning of the new financial year to 5 June 2024, a further 10,677,869 shares have been bought back for treasury, at a cost of £36.5m and at an average discount of 10.1%.
In a change to the Company’s stated policy, I confirm that all shares held in treasury at the date of the Company’s Annual General Meeting to be held on 10 July 2024, will not be cancelled and will continue to be held in treasury for re-issue at a premium to the net asset value per share.
REVENUE AND DIVIDEND
Shareholders will be aware that it remains the Company’s investment policy to pursue capital growth for shareholders and to pay dividends at least to the extent required to maintain investment trust status. Therefore, the level of dividends declared can go down as well as up. An unchanged interim dividend of 0.7p per share for the year ended 31 March 2024, was paid on 11 January 2024 to shareholders on the register on 24 November 2023.
The Company’s net revenue for the year as a whole decreased to £16.1m from £19.7m. This was due largely to a decrease in exposure to higher yielding stocks in the portfolio as well as a reduction in the size of the portfolio due to shares bought back by the Company during the year. As a result, the revenue return per share was 2.7p (2023: 3.0p per share).
Accordingly, the Board is proposing a slightly reduced final dividend for the year of 2.1p per share (2023:2.4p per share). Together with the interim dividend already paid, this makes a total dividend for the year of 2.8p per share (2023: 3.1p per share).
The effect of share buybacks means that the reported dividend per share, which is based on the number of shares in issue at the end of the financial year, is higher than the reported revenue return per share, which is based on the average number of shares in issue over the year.
Based on the closing mid-market share price of 353.5p on 5 June 2024, the total dividend payment for the year represents a current yield of 0.8%.
The final dividend will be payable, subject to shareholder approval, on 24 July 2024, to shareholders on the register of members on 14 June 2024. The associated ex-dividend date will be 13 June 2024.
The Company’s dividend policy will be proposed for approval at the forthcoming Annual General Meeting.
BOARD OF DIRECTORS
Humphrey van der Klugt will retire at the conclusion of the Company’s Annual General Meeting on Wednesday, 10 July 2024.
Humphrey has served on the Board since 2016 and was the Chair of the Audit & Risk Committee from 2016 to 2023. Humphrey’s accounting, general finance and portfolio management experience, including his deep knowledge of the investment trust sector, have been invaluable to the Board. His friendship and wise counsel will be greatly missed. The Board is in the process of recruiting a new Director to join the Board later in the year and we will keep shareholders informed of developments.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) MATTERS
ESG matters continue to be an important priority for the Board. Our objective is to have full, transparent disclosure on the topic. Our Senior Independent Director, Bina Rawal, works closely with our Portfolio Manager on this matter.
Our Portfolio Manager remains committed to taking a leading role in the development of meaningful ESG engagement practices in the healthcare sector. As part of this, they facilitate dialogue and an exchange of leading practices among investors, companies and other relevant experts on ESG, in particular, the large capitalisation pharmaceutical sector. They also engage with a broad range of companies on a regular basis where areas of improvement can be identified. Further information on both ESG matters and climate change can be found in the Portfolio Manager’s ESG report.
CONTINUATION VOTE
The Board has committed to undertaking a continuation vote every five years, with a resolution tabled at the Annual General Meeting falling in the fifth year. Accordingly, such a resolution is included in the notice of Annual General Meeting contained within this report.
In the light of the Company’s long-term track record of outperformance, the positive outlook for the healthcare sector globally and the Company’s unique ability to provide shareholders with access to a broad range of healthcare investment opportunities worldwide, the Board unanimously recommends that shareholders vote in favour of the resolution allowing the Company to continue as an investment trust for a further five years.
ANNUAL GENERAL MEETING (“AGM”)
The Company’s AGM will again be held at Saddlers’ Hall, 40 Gutter Lane, London EC2V 6BR on Wednesday, 10 July 2024 at 1.00pm. As well as the formal proceedings, there will be an opportunity to meet the Board and the Portfolio Manager and to receive an update on the Company’s strategy. We look forward to seeing as many of you as possible there.
For those investors who are not able to attend the meeting in person, a video recording of the Portfolio Manager’s presentation will be uploaded to the website after the meeting. Shareholders can submit questions in advance by sending them to wwh@frostrow.com.
I encourage all shareholders to exercise their right to vote at the AGM and to register your votes online in advance of the meeting. Registering your vote in advance will not restrict you from attending and voting at the meeting in person should you wish to do so. The votes on the resolutions to be proposed at the AGM will again be conducted on a poll. The results of the proxy votes will be published following the conclusion of the AGM by way of a stock exchange announcement and will also be able to be viewed on the Company’s website at www.worldwidewh.com.
OUTLOOK
While stock market volatility is to be expected, and in the coming year may be influenced by elections in the US and UK, our Portfolio Manager, OrbiMed, continues to remain positive on the outlook for the healthcare sector and our Company’s strategy for maximizing shareholder value over time. They believe that the overall future of the healthcare industry remains strong due to increasing demand globally, driven by a combination of the world’s aging population and improving access to healthcare products and services worldwide. At the same time, the rapid pace of innovation continues unabated, leading to the availability of new products and treatments.
OrbiMed further believes that the challenging investment backdrop for healthcare stocks that had existed since the easing of the COVID pandemic appears to be changing and that the recent upturn in share prices across the industry is more representative of its positive fundamentals.
Lastly, OrbiMed expects the currently high level of merger and acquisition activity in the healthcare sector to continue, supported by attractive valuations, healthy balance sheets and, within the pharmaceutical sector, a need to address future patent expirations.
Your Board shares OrbiMed’s optimism. We believe the prospects for the global healthcare sector are strong and that your Company is uniquely placed to take advantage of opportunities in a wide variety of companies around the world. Accordingly, we believe that long-term investors in the Company will continue to be rewarded.
Doug McCutcheon
Chair