ALLIANCE TRUST PLC 4 March 2016
Results for year to 31 December 2015
Financial Highlights | As at 31 Dec 2015 | Change from Dec 2014 | Total Return |
Share price | 517.0p | +8.0% | 10.7% |
NAV per share | 562.4p | +2.9% | 5.4% |
Total dividend | 12.43p | +0.4% | Including special dividend of 1.46p |
Ongoing Charges Ratio | 0.59% | - 1.7% |
Improve investment performance
Total Shareholder Return (TSR) of 10.7% and Net Asset Value (NAV) Total Return for the Trust of 5.4%, compared to the MSCI ACWI benchmark return of 3.8%.
Narrow the discount
A year-end discount of 8.1%, compared to 12.4% a year earlier. Dividend Progression
Total dividend of 12.43p, up 0.4% on 2014 and representing a yield of 2.4% for the year. This is the 49th year of consecutive dividend increases.
Reduce Costs
Ongoing Charges Ratio reduced to 0.59% and on track to achieve target of 0.45% by end of 2016, one of the lowest in the Global investment trust sector.
Simplifying the corporate structure
The Board now consists solely of non-executive directors, with independent boards for Alliance Trust Investments and Alliance Trust Savings.
Alliance Trust Investments
Alliance Trust Investments (ATI) generated net inflows of £81m, ending the year with third party assets under management (AUM) of £2.1bn. Losses reduced by 36% to £2.1m.
Following ATI's appointment as the investment manager for Alliance Trust PLC, AUM now stands at around £5bn.
Alliance Trust Savings
Significant progress made in 2015.
Assets under administration rose by 32% and customer accounts rose by 18%, reflecting strong organic growth and initial benefits of Stocktrade acquisition.
Net revenue grew by 7% to £13.7m.
Following an external valuation, the fair value of the business has increased to £54m, an increase of 71% from last year.
Lord Smith of Kelvin, Chairman of Alliance Trust PLC commented: "2015 was an eventful year for Alliance Trust and highlighted that shareholders expected change. In order to deliver this, we set out a package of changes on 1 October to enhance shareholder value and the process to implement them is well under way.
We have already made good progress. In particular, the investment team is continuing to deliver improved investment returns, significantly outperforming the benchmark. At the same time the discount to NAV has narrowed and we are on target to achieve our cost cutting objectives."
ENDS-
For more information, please contact: George Renouf
Director of Investor Relations Alliance Trust PLC
T: 01382 321022
Stephen Malthouse, Martin Pengelley Tulchan Communications T: 020 7353 4200
Having paid three interim dividends of 2.5325p for last year together with a special dividend of 1.46326p paid in December, the Directors have declared a fourth interim dividend of 3.3725p payable on 31 March 2016 to shareholders on the register on 18 March 2016. The ex-dividend date is 17 March 2016. The total dividend for the year is 12.43p.
At the Annual General Meeting on 6 May 2016 John Hylands will be standing down from the Board but all other Directors are standing for election or re-election.
Chairman's StatementI am pleased to be writing my first statement as Chairman of Alliance Trust. Alliance Trust is an important business with a long and proud history in Scotland and around the world. I am looking forward to playing my part in delivering the changes that are necessary to return the Trust to the levels of performance upon which it has earned its reputation and success.
We believe that there is an appetite among shareholders for a global equity investment trust offering strong and consistent investment returns through a combination of capital growth and a growing dividend at a low cost. We aim to deliver this for our shareholders through a focus on investment in those companies which demonstrate sound business models and strong management in order to generate returns over the long term at an acceptable level of risk. Our performance in 2015 demonstrates that we can do so:
A Total Shareholder Return of 10.7% and a Net Asset Value Total Return for the Trust of 5.4%, compared to the 3.8% return of the MSCI All Country World Index in Sterling (MSCI ACWI)
A year-end discount of 8.1%, compared to 12.4% a year earlier
An increase in our total dividend to 12.43p, which represents a yield of 2.4% at 31 December 2015 and is the 49th consecutive year of dividend growth
An Ongoing Charges Ratio of 0.59%, compared to 0.60% for 2014.
2015 was an eventful year for Alliance Trust and the extensive media commentary has perhaps overshadowed the positive developments during the year. However the events around our AGM clearly demonstrated that our shareholders expected the Board to make changes.
After the 2015 AGM we undertook an extensive consultation exercise, listening to the views of our shareholders, and following our annual Board strategy review we announced a package of changes on 1 October intended to enhance shareholder value. These were:
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Clarifying the investment mandate to improve performance, with a focus on global equities and the appointment of our subsidiary Alliance Trust Investments to manage the portfolio, against a target to outperform the benchmark
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A commitment to narrow the discount into single figures, supported by the use of share buybacks
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Clarifying our dividend policy, with the aim of maintaining our commitment to a progressive dividend and distributing all net income earned in the form of ordinary dividends
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Reducing costs, with a cost-reduction programme to deliver savings of £6m across the investment business during 2016 in order to target an Ongoing Charges Ratio of 0.45% by the end of 2016
- Simplification of the structure, with a non-executive Board for the Trust and independent boards for our two subsidiary investments, Alliance Trust Investments and Alliance Trust Savings, to increase their accountability and focus.
Good progress has been made against all of these objectives which reflect the first steps in our aim of improving the performance of the Trust.
We have not changed our investment objective - to be a core investment for investors seeking increasing value over the long term - and our investment policy allows us to invest in a wide range of asset classes throughout the world. When market conditions are favourable we can use gearing to increase equity exposure, in order to enhance returns from the portfolio. We believe that moderate structural gearing at a cost effective rate is beneficial for shareholders over the long term. At the year end, with total assets of £3.4bn and net gearing of 13%, our equity portfolio represented 102% of net assets and in normal markets we would expect our equity portfolio to represent at least 100% of NAV.
The performance of our equity portfolio has continued to be strong following the change to the investment management team in 2014 and is already well ahead of the benchmark. At the same time we have reduced our non-equity investments, with our fixed income portfolio reduced to £73.3m and the sale of our remaining commercial property. We initiated the sale of our mineral rights portfolio prior to the year end. Since then, oil prices have slumped, depressing the marketability of our holdings, and no satisfactory offers were received. We will therefore continue to hold these assets until we perceive a positive change in the market. The improved investment performance has had a positive impact on our discount which narrowed to 8.1% at the year end. We bought back 4.9% of the Company's shares in the period between the announcement on 1 October and 31 December 2015, which also helped the discount to narrow.
We have completed the process of appointing Alliance Trust Investments to manage the portfolio at an investment management charge of 0.35% of NAV - one of the lowest in the investment trust sector. We are comfortable that Alliance Trust Investments has the resources to provide us with the service we require from our asset manager. We have established a Management Engagement Committee, as recommended by the AIC Code of Corporate Governance, to oversee and review the performance of the investment manager.
New independent boards have been appointed for Alliance Trust Savings and Alliance Trust Investments. Alliance Trust Investments has seen an increase in assets under management and, with the addition of the Trust's mandate, has a strong base for future growth and improved profitability in 2016. Alliance Trust Savings, with its acquisition of the assets and business of Stocktrade and new technology platform, is positioned to deliver a profit in 2016. We anticipate both of these investments will provide positive returns to the Trust in the future.
Board changes
The Board at the start of 2016 is significantly different from 12 months ago. Anthony Brooke, Rory Macnamara, Chris Samuel and Karl Sternberg (Senior Independent Director) were appointed as non-executive directors during the year. These Directors bring with them the skills and expertise we believe will contribute to the success of the Company under our new structure and details of their skills and experience can be found on pages 22 and 23 of the Annual Report. I welcome the contribution which all have made to the strategic changes which we announced in October and their subsequent implementation. Gregor Stewart took on the role of Deputy Chairman in February 2016 and will chair the Audit and Risk Committee after our AGM.
A number of directors have left the Board since the last AGM. My predecessor, Karin Forseke, and Alastair Kerr both left the Board at the year end, having overseen the transition to the new governance arrangements. I would like to thank them both for their contribution during a period in which Alliance Trust has faced a number of challenges but has also made good progress in its long-term aims. Alan Trotter, Chief Financial Officer, also left following the changes which we announced in October, having played a key role throughout the review process for which I am grateful. I wish all three well for the future.
Susan Noble and Katherine Garrett-Cox left the Alliance Trust PLC Board in February 2016. Susan became Chairman of Alliance Trust Investments and I look forward to working with Susan in her new role. Katherine Garrett-Cox will leave Alliance Trust Investments on 11 March 2016. Katherine has done much over the past nine years to refocus the investment performance to its traditional strengths in global equities. I, and the rest of the Board, wish her every success in the future.
John Hylands will retire as a director at the 2016 AGM following eight years as a director and Chairman of the Audit Committee. I and my Board colleagues will miss his wise counsel and consistent support throughout his time as a member of the Board.
Finally, I am acutely aware of the lack of gender diversity on the current board as a result of the recent changes. Alliance Trust has long been a leader in the area of board diversity, and this is an issue which I am determined to address at the earliest opportunity. I report on wider corporate governance issues on page 24 of the Annual Report.
I am pleased with the progress to date on the initiatives announced on 1 October and look forward to delivering further improvements in the coming years.
I hope you find the rest of this report interesting and informative. Lord Smith of Kelvin
Chairman
Summary
The NAV return for 2015 was 5.4% versus the benchmark MSCI ACWI return of 3.8%.This is a result of the investment returns of the global equity portfolio; investments in fixed income, private equity and mineral rights; and the value of the subsidiary companies.
Over 2015 the total shareholder return was 10.7%, which captures the benefit of a reduction in the discount.
Equities, at 89% of our total investments at the year end, are by far the most significant asset class. Overall gearing through the year was 13%.
Contribution Analysis (%) | Average Weight | Total Return | Contribution to Total Return |
Equity Portfolio | 98.7 | 6.0 | 6.0 |
Fixed Income | 5.2 | 2.6 | 0.1 |
Other Investments | 7.6 | 4.1 | 0.3 |
Cash & Accruals | 2.2 | N/A | (0.4) |
Gearing | (13.7) | 2.1 | (0.3) |
Total | 100.0 | 5.7 | |
Expenses | (0.8) | ||
Buybacks | 0.5 | ||
NAV Total Return | 5.4 | ||
Effect of Discount | 5.3 | ||
Share Price Total Return | 10.7 | ||
MSCI ACWI Total Return | 3.8 |
Source: Alliance Trust and FactSet
Alliance Trust plc issued this content on 04 March 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 04 March 2016 07:07:04 UTC
Original Document: http://www.alliancetrust.co.uk/pdfs/Alliance-Trust-Annual-Results-2016.pdf
