Chairman's Report
Highlights
· NAV total return of -8.4%, underperforming the benchmark's return of -6.5% by 1.9%
· 5 year NAV total return of 52.1%, compared with 44.6% for the benchmark
· Share price discount to NAV 1.3% at year-end (2017: 1.6%)
· Dividend increased by 11.9% to 23.5 pence, more than double that paid in 2008 and an unbroken run of increases since 1974
Witan has invested with a multi-manager approach since 2004. Over this period we have beaten the returns on our equity benchmark and raised the dividend significantly faster than the rate of inflation. After several years of strong performance, our net asset value fell in 2018 and we underperformed, in what proved to be a challenging year.
During 2018, US economic growth (helped by a following wind from tax cuts) was stronger than in other developed economies, while growth elsewhere generally fell short of forecasts. In the UK the extended Brexit negotiations and related government disunity also continued to weigh on corporate and investor confidence. In addition, the US Federal Reserve steadily raised rates during the year and began to withdraw the liquidity from its earlier quantitative easing policy. Although this reflected strength in its own economy, the resulting squeeze put pressure on borrowers of dollars elsewhere, particularly in emerging markets.
With generally positive news on corporate earnings contending with these emerging concerns about a future trade war and the tightening of global liquidity, market fortunes fluctuated. A volatile first quarter was followed by generally positive returns in the middle quarters of the year and a very weak final quarter, on fears that the US rate tightening may have gone too far and might push the US into recession.
For much of the year, Witan's returns were positive and ahead of our benchmark but the weakness towards the end of the year delivered a setback in both absolute and relative terms. The net asset value ('NAV') total return was -8.4%, 1.9% behind our benchmark's total return of -6.5%. The share price total return was -8.1 %.
Taking a longer perspective, over the past five years Witan has achieved a NAV total return of 52.1%, compared with the benchmark's 44.6% return over this period. During the ten years from the depths of the 2008 financial crisis to the end of 2018, shareholders have had a NAV total return of 207.1%, compared with the benchmark's return of 163.4%.
2018's dividend
A fourth interim dividend of 7.75 pence was declared in February 2019, payable on 21 March 2019. As a result, the dividend for the year increased by 11.9% to 23.5 pence per share (2017: 21.0 pence), well ahead of the 2.1% rate of UK inflation at the year end. The dividend is fully covered by revenue earnings, with £4.7m added to revenue reserves. We have increased the dividend every year for the last 44 years, with the latest dividend more than double that paid in 2008. A chart in the annual report shows the dividend's growth over the past 10 years, compared with inflation.
Proposed share split
The Board is proposing a share split, whereby shareholders will receive five shares with a par value of 5 pence in place of every share of 25 pence par value currently held. In addition, the current voting arrangement whereby shareholders have one vote for every four shares held will be replaced by one vote for each new share of 5 pence par value.
This will make no fundamental difference to the value of shareholdings. Assuming the proposal is approved by shareholders, the share price, net asset value per share and dividend per share can be expected to be one fifth of the level prevailing the day before the split, exactly reflecting the increase in the number of shares.
The intention is to make Witan's shares more accessible, particularly for those making regular savings or reinvesting dividends, where the approximately £10 share price in recent years may not be an ideal unit size to deal in. Furthermore, the previous position of one vote per four shares held was anomalous.
The Board is committed to the benefits of having a diverse board and is aware that in 2018 it had a less diverse board with fewer female directors than the desired minimum of 25%. This is unusual, as the Company met this test for the five years from 2012 to 2016, and it results from the pattern of retirements and appointments since 2017. As part of its succession planning, the Company has put in place a search for an additional new director, with re-emphasised guidelines having been given to the search consultant to ensure a fully diverse list of qualified candidates. An announcement will be made when this search has been completed.
AGM
Our Annual General Meeting will be held at Merchant Taylors' Hall on Wednesday 1 May 2019 at 2.30 pm. Formal notice of the meeting will be sent to shareholders when the annual report is published. We look forward to the opportunity to meet you then for the Company's 111th AGM.
Harry Henderson
Chairman
11 March 2019
Financial Highlights as at 31 December 2018
Key data
|
|
2018 |
2017 |
% change |
|
Share price |
971.0p |
1079.0p |
-10.0 |
|
NAV per ordinary share (debt at par value)(3) |
995.1p |
1109.8p |
-10.3 |
|
NAV per ordinary share (debt at fair value)(3) |
983.4p |
1096.2p |
-10.3 |
|
Discount (NAV including income, debt at fair value)(3) |
1.3% |
1.6% |
|
Total return performance
|
|
1yr % Return
|
3yrs % Return |
5yrs % Return |
|
Share price total return(1)(3) |
-8.1 |
32.8 |
61.6 |
|
NAV total return(1)(3) |
-8.4 |
34.0 |
52.1 |
|
Witan benchmark(1) |
-6.5 |
32.4 |
44.6 |
|
FTSE All-Share Index(2) |
-9.5 |
19.5 |
22.1 |
|
FTSE All-World Index(2) |
-3.4 |
42.4 |
64.9 |
Dividend information
|
|
2018 |
2017 |
% change |
|
Revenue per share |
25.9p |
23.8p |
8.8 |
|
Dividend per share |
23.5p |
21.0p |
11.9 |
Other financial information
|
|
2018 |
2017 |
|
Gearing(3) |
11.6% |
9.7% |
|
Ongoing charge excluding performance fee(3) |
0.75% |
0.76% |
|
Ongoing charge including performance fee(3) |
0.83% |
0.78% |