2017 Interim Report
Chairman’s Statement
Our new investment approach supports our aim of achieving consistent outperformance at a competitive cost, while maintaining our progressive dividend policy. With the approval of our shareholders at the General Meeting in February, the management of the investment portfolio transitioned to Willis Towers Watson (WTW). It is responsible for selecting eight underlying managers that it rates as ‘best-in-class’, each of whom manages concentrated portfolios of their top stock selections. We are targeting an Ongoing Charges Ratio of below 0.65%.
Alliance Trust Investments (ATI) was responsible for the Trust’s performance to 17th March, at which point the transition commenced. The new strategy became effective on 1st April, with the official appointment of WTW and the transition completed on 12th April. ATI was sold, at what we believe was a fair price, to Liontrust Asset Management, and that this is a good home for the team. We are grateful to all the team at ATI for their work on our behalf.
This first half of 2017 has been characterised by the transition the business has gone through, and we strongly believe we now have the foundations in place to deliver strong and sustainable performance for our shareholders in the future.
“THE TRUST HAS SUCCESSFULLY IMPLEMENTED ITS NEW INVESTMENT APPROACH. WE ARE CONFIDENT THAT OUR ALLIANCE OF BEST IDEAS WILL DELIVER ATTRACTIVE RETURNS FOR SHAREHOLDERS OVER THE LONG TERM.”
Financial performance
Over the period, the Trust performed well. Total Shareholder Return was 10.8%, Net Asset Value (NAV) Total Return was 12.4% and the share price rose 9.7% to 700.0p.
We are encouraged that, despite undertaking the transition to the new portfolio, the Trust outperformed its benchmark on a NAV total return basis by 6.0%, primarily driven by the outperformance of the equity portfolio. Additionally, the costs of the transition were much lower than originally anticipated, which is a meaningful saving for the business and our administration expenses for the period are showing only a modest increase at £8.4m (2016: £7.7m).
Alliance Trust Savings (ATS) has seen growth in both assets under administration and customer accounts. Whilst we had hoped that ATS would report a profit for the period, additional costs were incurred in the second quarter contributing to a loss for the half year of £1.5m (2016: £0.4m profit). In the second half of the year ATS plans to continue to invest to improve its levels of customer service. We expect it to report a loss for the year.
Dividend
We are very proud of our dividend track record and the Board is delighted that the Trust has achieved 50 years of consecutive dividend growth, and has been recognised by the AIC through its Dividend Hero Award. The Board continues its progressive dividend policy and has declared a dividend of 3.29p per ordinary share payable on 2nd October 2017 to shareholders on the register on 1st September 2017.
Buybacks
Towards the end of last year, we introduced a more active approach to share buybacks, supporting our determination to narrow materially the Trust’s discount to NAV which averaged 5.1% over the period. Consistent with this programme, the Trust also repurchased Elliott’s shareholding following shareholder approval in February.
In summary
The first half of 2017 has been transformational for the Trust. We have a new investment approach which, although still in its early days, is demonstrating that it can deliver outperformance at competitive cost. We believe we now have a compelling offering and look forward to continuing to invest for generations.
Lord Smith of Kelvin, Chairman
26 July 2017
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