Dividend rises for 49th year
Smith declares progress at Alliance Trust in ‘eventful year’
Unveiling a 49th consecutiv increase in the dividend, he said the “extensive media commentary perhaps overshadowed the positive developments during the year”.
A number of board changes were forced on the company at the agm in April followed by the appointment of Lord Smith in the chair and the ousting of previous chief executive Katherine Garrett-Cox who, in May, had been announced as businesswoman of the year.
In his statement with today’s results, Lord Smith said the new strategy involved:
• 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
• A commitment to narrow the discount into single figures, supported by the use of share buybacks
• Clarifying the 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
• 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,” said the chairman.
“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.
“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.
There was a fall in annual pre-tax profits from £228.8 million to £145m but the total dividend of 12.43p is up 0.4% on 2014 and represents a yield of 2.4% for the year. This is the 49th year of consecutive dividend increases.
The ongoing charges ratio is reduced to 0.59% and is on track to achieve the target of 0.45% by the end of 2016, one of the lowest in the global investment trust sector.
The board now consists solely of non-executive directors, with independent boards for Alliance Trust Investments and Alliance Trust Savings.
Alliance Trust Investments generated net inflows of £81m, ending the year with third party assets under management (AUM) of £2.1bn. Losses were reduced by 36% to £2.1m.
Following ATI’s appointment as the investment manager for Alliance Trust PLC, AUM now stands at around £5bn.
Significant progress has been made at Alliance Trust Savings, said Lord Smith.
Assets under administration rose by 32% and customer accounts rose by 18%, reflecting strong organic growth and initial benefits of the 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 said: “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.”