Oslo, London, Luxembourg, Scottsdale
The Chairman's report - July 2017
We are a private investment company with a diversified portfolio of both stocks and bonds listed on a stock exchange as well as privately held businesses. During the last 20 years we have taken an active role in the development of most of the companies and businesses we have an interest in, with generally speaking positive results.
The conservative risk profile which we follow every year has not stopped us from earning an average of about 9 % p.a. on our equity capital during the last two decades. The year 2008 was not very different for our company while most investment funds – not excluding the Norwegian Sovereign Fund - lost around 40% of investors' money. It is often forgotten how hard it is to re-build asset value from 60 back up to 100. If in the first year after the crash you earn 10%, you are only back to 66, a long way behind the 109 which we could show at the end of 2008.
The calendar year 2016
During 2016 we consolidated our Norwegian property portfolio by selling the last 25 freehold apartments which were built for us by Skanska in conjunction with our successful Haslekollen project. It is pleasing to observe how the 5 hectare property of the former ABB factorynow presents itself as a modern and well designed residential area with its own park and school as well as a convenience store. The fact that the new tram station (direct to Oslo city) was opened recently next door to our development, is a great plus for the residents and for the users of our business centre.
Generally, our property investments in Arizona and in Monaco were steadily improving while some sales generated reasonable returns both for Centennial and its local managers.
We continued our engagement with new businesses, notably in the area of “voice and signals over the internet”. Our long struggle to make a success of the “Vyke” business may finally show some return. In the meantime we have managed to transfer some of the technology and principles to “COM4” where we have increased our ownership interest in order to support the impressive organic growth of their “machine to machine” internet sim-card business.
Another fast growing business is that of drones. We support the drone team of “Robot Aviation” who have delivered an impressive array of working drones based on its triple secure navigation system. Some of these can fly with useful workloads up to 30 hours while sending videos back to the controlling unit. Production is now in Poland and the demonstration and testing activities in the US will move to Arizona.
In October last year we bought 75% of a small dry cargo ship-owning company managed from Bergen, Norway, owning two older dry cargo vessels and operating two newer handy size vessels chartered in from Japanese owners. One of the older vessels was recently sold with a reasonable profit, in essence reducing our exposure substantially. We are in the process of investing in a 9 year old product/chemical carrier which is being moved from the Baltic region to the Med on contract to Eni, the Italian oil company.
Last year we participated actively in the start-up of a new bank, “Maritime and Merchant Bank ASA” to be based in Oslo but with an international outlook to the shipping industry. Centennial AS, together with its Chairman, owns 25% of the shares of the bank. After the first six months of operation, the Bank has provided secured loans to a tenfold shipping projects and management expect a break-even result for the full year of operation.
After exiting from the third property investment in Monaco, we decided to use the profits to invest in a price controlled apartment complex to be built in SanRemo, in the neighbourhood of Monaco but with a very different price level. Buyers will have to register their formal residence in the apartments they buy. With the very recent tax ruling by the Italian Government, Europeans taking up residence in this way will benefit from a flat yearly tax of Euros 100,000 guaranteed for five years, regardless of changes in the government. After 5 years, the apartments can be sold on the open market which traditionally has been around 35% higher than the price controlled market.
At the end of June 2017, Centennial AS and its subsidiaries have built a relatively substantial cash position and expect to be in a good position to balance further investments in such a way that a possible fall in property values can be balanced with other activities.