Profits fall in eventful year but Trust is ‘progressing’

FINANCIAL SERVICES: Alliance Trust maintains dividend record for 49th year

New chairman Lord Smith of Kelvin declared 2015 an “eventful year” for Dundee’s Alliance Trust yesterday but said he was confident the business was making progress in its reform agenda.

The FTSE 250 group’s share price edged ahead in early trading after results for the 12 months to December 31 showed a 5.4% increase in Net Asset Value for the full year, a performance that beat the benchmark MSCI All Countries World Index return of 3.8%.

Total shareholder return was 10.7% in the year and the Trust declared a full-ear dividend of 12.43p, a 0.4% increase on 2014 and the 49th consecutive year in which the Trust has delivered dividend progression.

Revenues were more than £73 million lower at £200.2m and pre-tax profits for the year fell by £83.4m to £145m.

However, Lord Smith – who took up his seat on the board in January – said progress was being made.

“2015 was an eventful year for Alliance Trust and highlighted that shareholders expected change,” he said.

“In order to deliver this, we set out a package of changes on October 1 to enhance shareholder value and the process to implement them is well under way.”

The changes followed a failed £2.4m bid to face down a pre-AGM attack from Elliott Advisors, the group’s single largest shareholder.

The fall-out led to a consultation with shareholders in the months following the annual meeting and the announcement of major reforms to the corporate governance of the business.

A number of high-profile names – including former chairman Karin Forseke – have gone and former CEO Katherine Garrett-Cox will leave the Trust at the end of this week.

The full year results showed that both the savings (ATS) and investment (ATI) arms of the business were loss-making in 2015.

ATS saw its losses increases by £1.3m to £5.2m in the year as lower than anticipated revenues, costs associated with new technology and the introduction of a revised management and board structure impacted on performance.

However, assets under administration by ATS grew by 32% in the year to £8.5 billion – a proportion of the uplift was due to the acquisition of Stocktrade assets – and a business revaluation exercise saw the firm’s value increase by 71% to £54m.

ATI cut its full-year losses by £1.1m to £2.1m but the fair value of the subsidiary was revised downwards by 19% to £19.8m as directors recognised the busi- ness was going through a transition.

The main Trust continued to trim its equity portfolio to hold positions with 61 companies by the year end, 15 fewer than at December, 2014.

The top five holdings are Visa, Pfizer, Accenture, Prudential and Disney.

The other major move of the year related to a buyback campaign to narrow the Trust’s discount.

A total of £135m was spent in the last quarter to bring the discount in ot 8.1% from 12.4% a year earlier.

The buybacks have continued into 2016, with millions more shares purchased and cancelled in the first quarter taking overall spend to in excess of £160m since October.

Lord Smith said he was pleased with progress to date and was looking forward to playing a role in improving the business in the years ahead.

However, he signalled that further change was on the horizon.

“I am acutely aware of the lack of gender diversity on the current board as a result of the recent changes,” the chairman said.

“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.”

Shares in Alliance Trust closed yesterday’s trading session up 1% at 505p.

Lord Smith of Kelvin took over as Alliance Trust chairman in January.