Friday 27 May, 2022
Worldwide Healthcare Trust Plc
Audited Results for the year ended 31 March 2022
LONDON STOCK EXCHANGE ANNOUNCEMENT
Worldwide Healthcare Trust PLC (the “Company”)
Audited Results for the Year Ended 31 March 2022
The Company’s annual report will be posted to shareholders on 6 June 2022. Members of the public may obtain copies from 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 Company's annual report for the year ended 31 March 2022 has been submitted to the UK Listing Authority, and will shortly be available for inspection on the National Storage Mechanism (NSM):
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(Documents will usually be available for inspection within two business days of this notice being given)
Mark Pope, Frostrow Capital LLP, Company Secretary – 0203 008 4913
COMPANY PERFORMANCE
HISTORIC PERFORMANCE FOR THE YEARS ENDED 31 MARCH
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
||
|
Net asset value per share (total return)* † |
28.9% |
2.8% |
13.7% |
6.5% |
30.0% |
(5.8%) |
|
|
Benchmark (total return)* † |
24.5% |
(2.5%) |
21.1% |
5.7% |
16.0% |
20.4% |
|
|
Net asset value per share |
2,367.2p |
2,411.1p |
2,722.9p |
2,868.9p |
3,703.0p |
3,465.2p |
|
|
Share price |
2,304.0p |
2,405.0p |
2,730.0p |
2,920.0p |
3,695.0p |
3,275.0p |
|
|
(Discount)/Premium of share price to net asset value per share† |
(2.7%) |
(0.3%) |
0.3% |
1.8% |
(0.2%) |
(5.5%) |
|
|
Dividends per share |
22.5p |
17.5p |
26.5p |
25.0p |
22.0p |
26.5p] |
|
|
Leverage† |
16.9% |
16.4% |
4.9% |
12.0% |
7.6% |
10.9% |
|
|
Ongoing charges† |
0.9% |
0.9% |
0.9% |
0.9% |
0.9% |
0.9% |
|
|
Ongoing charges (including performance fees paid or crystallised during the year)† |
1.0% |
1.2% |
1.1% |
0.9% |
0.9% |
1.4% |
* Source: Morningstar
† Alternative Performance Measure (see Glossary).
CHAIRMAN’S STATEMENT
SIR MARTIN SMITH
INVESTMENT PERFORMANCE
Following last year’s strong returns, both on an absolute and on a relative basis, the year under review has proved to be a challenging one for the Company. The Company’s net asset value per share total return was -5.8% (2021:+30.0%) and the share price total return was -10.8% (2021: +27.4%), both significantly underperforming the Company’s Benchmark, the MSCI World Health Care Index measured on a net total return, sterling adjusted basis, which rose by 20.4% during the year (2021: rose by 16.0%). The disparity between the performance of the Company’s net asset value per share and its share price is reflected in the widening of the Company’s share price discount to its net asset value per share from 0.2% at the start of the Company’s financial year to 5.5% at 31 March 2022.
The majority of the Company’s assets are denominated in U.S. dollars, and it should be noted that the Company’s net asset value performance was helped by the weakness of sterling over the year, particularly against the dollar, where it depreciated by 4.6%.
The negative absolute return over the year to 31 March 2022 reflected a mildly positive first half, where the net asset value per share total return was +0.4% (2021:+23.1%) compared to a rise in the Benchmark of 13.0% (2021: a rise of 15.3%) and a weaker second half where the net asset value total return was -6.2% (2021-5.6%) compared to a rise in the Benchmark of 7.4% (2021: 0.7%).
During the year the Company’s Portfolio Manager continued to pursue a strategy of being underweight in large pharmaceutical companies and overweight in both emerging markets and emerging biotechnology companies; an approach which had served the Company well during the previous year but was the principal reason for the Company’s relative underperformance during the year under review.
While the healthcare sector as a whole performed well during the year, macro considerations rather than company fundamentals were deemed to be most important by investors. In addition, the “growth-to-value” rotation which has tended to favour well-established companies despite their less-exciting growth prospects also showed that investors have been less willing to take on investment risk more generally. This risk aversion has hurt those sectors where we have been strategically overweight, including emerging biotechnology, China healthcare, and innovative tools.
Risk aversion has also resulted in further pressure on performance as the value of the smaller capitalisation stocks we own has lagged while large capitalisation pharmaceutical stocks have outperformed the rest of the healthcare sector, particularly during the last quarter of the financial year. It should be emphasised, however, that this extraordinary fall in the valuation of the biotechnology and other sectors reflects a change in investor sentiment rather than any significant deterioration in the performance of the underlying companies. It is for this reason that we remain confident that these stocks will recover in due course.
Our Portfolio Manager continues to adopt both a pragmatic and tactical approach with regard to the use of leverage. Leverage levels varied over the course of the year, with the net effect of a detraction of 1.0% from performance.
The long-term performance of the Company, however, continues to be strong, and it should be noted that from the Company’s inception in 1995 to 31 March 2022, the total return of the Company’s net asset value per share has been +3,866.7%, equivalent to a compound annual return of +14.7%. This compares to a cumulative blended Benchmark return of +2,133.6%, equivalent to a compound annual return of +12.2% 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
The Company’s share price traded close to the net asset value per share for much of the year under review. In accordance with the Company’s share price premium management policy 1,227,500 new shares were issued during the year at an average premium of 0.8% to the Company’s cum income net asset value per share. This issuance gave rise to the receipt of £45.5m of new funds to the Company, which have been invested in line with the investment policy. The Company’s ongoing share issuance programme triggered the requirement for the Company to publish a prospectus in July 2021 which provided authority for the issuance of 20 million new shares.
However, toward the end of the calendar year, the Company’s share price fell to a discount to the net asset value per share and 80,509 shares were repurchased during the Company’s financial year for treasury, in accordance with the Company’s share price discount management policy, at a discount of 8.4% to the Company’s cum income net asset value per share, at cost of £2.5m.
At the year-end there were 65,457,246 shares in issue (excluding the 80,509 shares held in treasury (2021: 64,310,255 with no shares held in treasury)). Since the year-end, to 25 May 2022, the latest practicable date prior to the publication of this report, a further 223,842 shares were repurchased for treasury at a discount of 7.0% to the Company’s cum income net asset value per share, at cost of £7.3m. At the time of writing the share price discount stands at 4.6%.
REVENUE AND DIVIDEND
Shareholders will be aware that it remains the Company’s 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 increased interim dividend of 7.0p per share for the year ended 31 March 2022, was paid on 11 January 2022 to shareholders on the register on 19 November 2021 (2021: 6.5p per share). Due in large part to an increase in exposure to higher yielding stocks in the portfolio and also to the weakness of sterling, the Company’s revenue return per share for the year as a whole increased to 26.8 pence (2021: 24.1 pence). Accordingly, the Board is proposing an increased final dividend of 19.5 p per share (2021:15.5p per share) which, together with the interim dividend already paid, makes a total dividend for the year of 26.5p (2021: 22.0p per share). Based on the closing mid-market share price of 3040.0p on 25 May 2022, the total dividend payment for the year represents a current yield of 0.9%.
The final dividend will be payable, subject to shareholder approval, on 15 July 2022 to shareholders on the register of members on 10 June 2022. The associated ex-dividend date will be 9 June 2022.
The Company’s dividend policy will be proposed for approval at the forthcoming Annual General Meeting.
THE BOARD
The process of Board refreshment continues and, as indicated in my last year-end statement, following David Holbrook’s retirement last year, I shall be stepping down from the Board on 6 July 2022, the date of this year’s Annual General Meeting. It has been agreed that in the interests of maintaining an orderly succession process, Doug McCutcheon will extend his term and assume the Chairmanship following my retirement. I wish him every success for the future. Bina Rawal will take over as Chair of the Management Engagement & Remuneration Committee at the same time.
I have served on the Board for 14 years, 13 of which as Chairman, and have been fortunate to be supported by a group of very loyal, professional and hard working colleagues during that time. I would also like to pay tribute to the unswerving dedication of both our Portfolio Manager, OrbiMed and our AIFM, Company Secretary and Administrator, Frostrow Capital. Although recent results have been disappointing, I believe that it will be only a matter of time before the skills and experience of our Portfolio Manager will enable the Company to resume its excellent long-term record.
The process of recruiting a new Director is ongoing. Shareholders will be kept informed of developments as they occur. As new members are recruited, the Board will remain mindful of its commitment to a policy of diversity.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) MATTERS
ESG matters are an important priority for the Board and Bina Rawal and I have been working closely with our Portfolio Manager to identify an appropriate set of policies to address them.
Our Portfolio Manager continues to develop tools for assessing the sustainability of the Company’s portfolio including measuring the net impacts that individual portfolio companies have on both the environment and society, as much as is possible with the availability and consistency of the reporting of non–financial data pertaining to both ESG matters and also to climate change. OrbiMed is 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 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.
PERFORMANCE FEE
I mentioned last year that as a result of the continued cumulative outperformance in the year, there was a provision in our year-end accounts of £31.7 million for future performance fee payments. However, only if outperformance was maintained to the relevant quarterly calculation dates would this provision become payable. During the year under review, a performance fee of £12.9 million crystallised and became payable on 30 June 2021. However, due to underperformance against the Benchmark during the year, the remainder of the performance fee accrual as at 31 March 2021 was reversed. No performance fees were accrued or payable at the Company’s year-end as at 31 March 2022.
OUTLOOK
Global markets are currently experiencing unusually high levels of uncertainty. In addition to the appalling human cost, Russia’s invasion of Ukraine has created near-term risks for markets as high energy prices, rising food prices and disrupted supply chains threaten a substantial increase in global inflation. It has also cast a shadow over the longer-term outlook with the prospect of continued raised levels of geopolitical risk and an increase in investor risk aversion, both of which may affect markets and economic confidence for some time.
This comes in addition to existing market and economic concerns that troubled investors before the invasion, including the onset of U.S. Federal Reserve tightening, the impact of COVID-19 lockdowns on supply chains and inflation and also the outlook for China where there are problems in the real estate sector, as well as around its zero-tolerance COVID-19 policy and heavy-handed regulation of technology firms.
Against this challenging background, however, our Portfolio Manager OrbiMed remains positive on the outlook for healthcare with certain of the perceived risks associated with the sector such as an inefficient drug approval process in the U.S. and also the spectre of drug price reform having receded. Fundamentals, however, remain strong, particularly given the amount of innovation that is fuelling the industry’s growth. They further believe that the sector’s defensive growth characteristics should continue to prove attractive in times of global uncertainty.
Your Board continues to believe that long-term investors in this sector will be rewarded.
ANNUAL GENERAL MEETING
After COVID restrictions prevented holding meetings in person, the Board is pleased to welcome all shareholders back to the Company’s Annual General Meeting which offers an opportunity to meet the Directors and also to hear the views of our Portfolio Manager. The meeting will be held at etc. venues 1-3 Bonhill Street, London EC2A 4BX on Wednesday, 6 July 2022 at 12.30pm. Of course, should circumstances change and restrictions be reintroduced, we will keep shareholders informed of the final arrangements for the meeting via the Company’s website at www.worldwidewh.com.
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 Annual General Meeting 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, subject of course to any government guidance to the contrary. The votes on the resolutions to be proposed at the Annual General Meeting will be conducted on a poll. The results of the proxy votes will be published immediately 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.
Sir Martin Smith
Chairman
26 May 2022