Alliance Trust narrows discount in ‘turbulent year’

Business-Corporate-Board-Room-Meeting-Hire-Hiring-700x450.jpgAlliance Trust has narrowed the discount on the trust, from 12.4 per cent at the end of 2014 to 8.1 per cent at the end of last year, after a turbulent year.

In its annual results ending 31 December, the trust reported a net asset value return of 5.4 per cent, compared to the MSCI ACWI benchmark return of 3.8 per cent. However, with the narrowing of the share price that results in a total return of 10.7 per cent.

The move marks the end of a “turbulent year” for Alliance Trust, says Richard Troue, head of investment analysis at Hargreaves Lansdown, as it saw a shake-up of the business, the departure of chief executive Katherine Garrett-Cox and a £6m cost cutting programme.

“It’s been a turbulent year for Alliance Trust, as activist investor Elliot Associates challenged the trust’s strategy and ultimately forced change at the top,” says Troue.

“Some progress has been made bringing the trust back to its roots – a core, low-cost global equity portfolio that is well diversified, capable of steady growth and a rising income.”

Alliance Trust also announced in its annual results that it was increasing the dividend by 0.4 per cent to 12.43p a share, marking the 49th year of dividend increases.

Less progress has been made on the cost of the trust. Last year Alliance Trust laid out plans to reduce the charges on the investment trust, and says it has made progress on that. However, the ongoing charges ratio has only dropped to 0.59 per cent for the year, compared to 0.6 per cent for 2014. The trust says it is on track to reach ongoing charges of 0.45 per cent by the end of this year.

Troue adds: “Shareholders will be pleased to see some outperformance, though one swallow doesn’t make a summer. It’s still early days for the investment team, but they are off to a positive start.”

Robert Smith, chairman of Alliance Trust, says that one issue arising from the recent departures and board shake-up is the lack of gender diversity on the board, which he says he is “determined to address at the earliest opportunity”.

He adds: “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.”