TIDMATST
RNS Number : 9276E
Alliance Trust PLC
22 July 2016
Alliance Trust PLC
22 July 2016
Results for six months ended 30 June 2016
Financial Highlights As at 30 As at 31 As at 30
June 2016 Dec 2015 June 2015
Share price 524.0p 517.0p 484.8p
NAV per share 591.4p* 561.1p** 545.9p**
Total dividend 5.65p 12.43*** 5.065p
* Balance sheet value calculated with debt at fair value
** Balance sheet value calculated with debt at par
***Full year dividend for the year ended 31 December 2015
Lord Smith of Kelvin, Chairman of Alliance Trust PLC commented:
"In volatile markets we continue to make good progress against the
initiatives outlined last year to enhance shareholder value. Costs
are coming down, ATI and ATS are making good strides towards
profitability, and a fully non-executive Board is in place. In
addition we announced during the period that the Board has
initiated a strategic review of the Group, encompassing a broad
range of potential courses of action. This review is progressing
well and we will report back on the outcome later in the year.
"Investment performance in the period underperformed the
benchmark, reflecting the turbulent market conditions around the EU
referendum when the Trust's quoted equity portfolio gave up the
outperformance it had recorded over the prior five months. However,
since the period end Alliance Trust's share price has reached new
highs."
Progress Against our Objectives
Improve investment performance
-- Total Shareholder Return (TSR) of 2.6% and Net Asset Value
(NAV) Total Return for the Trust of 6.6%, compared to the MSCI ACWI
benchmark return of 12.0%
-- The underperformance occurred in June, when the quoted equity
holdings gave up the outperformance they had recorded versus the
benchmark over the first five months of the year
-- Since the period end our share price has risen to a new high of 553p (as of 20th July 2016)
Narrow the discount
-- A period-end discount of 11.4%, compared to 7.9% at the end
of December, at a time of widening discounts for investment trusts
in our peer group
Dividend Progression
-- Second interim dividend of 2.825p declared, bringing the
total to 5.65p for the half year, up from 5.065p a year earlier
Reduce Costs
-- Remain on track to achieve target of an Ongoing Charge Ratio
of 0.45% by end of 2016, one of the lowest in the Global investment
trust sector; with expenses down by 30% to GBP7.7m versus the prior
year
Simplifying the corporate structure
-- The Board now consists solely of non-executive directors,
with independent boards for Alliance Trust Investments and Alliance
Trust Savings
-- Experienced new non-executive, Clare Dobie, appointed to the Board since the AGM
Alliance Trust Investments
-- Alliance Trust Investments (ATI) generated third-party net
inflows of GBP25m, ending the period with assets under management
(AUM) of GBP5.2bn
-- Clear focus on costs and investment proposition which is
accelerating ATI's progress towards profitability
Alliance Trust Savings
-- Assets under administration rose by over 40% and customer
accounts rose by 31%, reflecting the positive impact of the
acquisition of Stocktrade
-- New corporate partnership account won during the period which
will benefit the second half of 2016
-S-
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
Alliance Trust PLC Interim Report 2016
Results for 6 months to 30 June 2016
Chairman's Statement
Set out below is a brief summary of the progress we have made
implementing the changes announced in October 2015. These are
intended to enhance shareholder value and better position the Trust
to deliver consistent outperformance in a cost effective manner. I
also provide a brief overview of our investment performance over
the first half of the year.
In the period we have:
-- Implemented changes to the Board, so that it is entirely
non-executive. A new Non-Executive Director, Clare Dobie, was
appointed
-- Signed an Investment Management Agreement with Alliance Trust
Investments to manage our portfolio for a fee of 0.35% of net
assets under management, with a target of outperforming the MSCI
All Country World Index in Sterling (MSCI ACWI) by at least 1% a
year over a three year rolling period
-- Simplified our structure and appointed independent directors
to our subsidiaries, Alliance Trust Investments and Alliance Trust
Savings
-- Focused the portfolio on global equities and reduced the number of non-core investments.
The first half of 2016 has been marked by significant volatility
in markets, particularly around the time of the
EU Referendum. The quoted equity part of the Trust's portfolio
outperformed the MSCI ACWI for the five month period to the end of
May. In June, and following the EU Referendum, this out-performance
was reversed resulting in the equity portfolio returning 9.5% for
the period against the benchmark's 12.0% return. The NAV was also
impacted by a number of other items such as the value of debt and a
pension scheme buy in transaction. The combination of these items
generated the Trust's NAV Total Return of 6.6%, with a Total
Shareholder Return (TSR) at 2.6%. Against this background it should
be noted that since the change in our investment management team in
September 2014, the quoted equity part of the Trust's portfolio has
performed slightly ahead of the MSCI ACWI. In common with many of
our peers, the Trust's share price discount to NAV widened at the
end of the period. Since the period end, after the immediate EU
Referendum volatility, the Company's share price reached a record
high of 553p, with a NAV of 626.2p, at the close on 20 July.
The Trust's expenses have reduced by over 30%, falling to
GBP7.7m from GBP11.1m in the comparable period last year.
The Trust paid an interim dividend of 2.825p per share on 30
June 2016 and will pay a second interim dividend of 2.825p on 30
September 2016 to shareholders on the register on 26 August
2016.
On 30 May, we announced that we had received an unsolicited
approach from RIT Capital Partners PLC for a merger of the two
companies. On 7 June, RIT Capital Partners withdrew its proposal.
We told our shareholders at the time that we would consider any
proposal as part of the Group strategic review that we had already
initiated. This review is ongoing and includes a broad range of
possible courses of action. We are making good progress and intend
to report on the outcome of our review later in the year.
Lord Smith of Kelvin
Chairman
21 July 2016
Company Performance
30 June 31 December 30 June
2016 2015 2015
------------------ -------- ------------ ---------
Share price 524.0p 517.0p 484.8p
------------------ -------- ------------ ---------
Net Asset Value 591.4p* 561.1p** 545.9p**
(NAV) per share
------------------ -------- ------------ ---------
Discount to NAV 11.4% 7.9% 11.2%
------------------ -------- ------------ ---------
*Balance sheet value calculated with debt at fair value.
**Balance sheet value calculated with debt at par.
Portfolio Performance
Contribution Analysis Average Total Contribution
(%) Weight Return to Total
Return
----------------------------- -------- -------- -------------
Equities* 101.5 9.5 9.0
----------------------------- -------- -------- -------------
FX Contracts and
Index Futures N/A N/A -0.2
----------------------------- -------- -------- -------------
Other Investments 2.6 -23.0 -0.7
----------------------------- -------- -------- -------------
Non-core Investments 7.0 0.9 0.0
----------------------------- -------- -------- -------------
Cost of Gearing -12.8 1.1 -0.1
----------------------------- -------- -------- -------------
Cash and Accruals 1.7 N/A 0.1
----------------------------- -------- -------- -------------
Investment Portfolio
Total 100.0 8.1
----------------------------- -------- -------- -------------
Pension Fund Contribution** -0.8
----------------------------- -------- -------- -------------
Fair Value Debt
Adjustment** -0.7
----------------------------- -------- -------- -------------
Buybacks 0.2
----------------------------- -------- -------- -------------
NAV Total Return 6.6
----------------------------- -------- -------- -------------
Management Expenses -0.2
----------------------------- -------- -------- -------------
Effect of Discount -4.0
----------------------------- -------- -------- -------------
Share Price Total
Return 2.6
----------------------------- -------- -------- -------------
MSCI ACWI Total
Return 12.0
----------------------------- -------- -------- -------------
* Includes investments in Funds. **Non-recurring.
Source: Alliance Trust and FactSet
Alliance MSCI All
Trust Country
World Index Stock Total
Quoted Equity Portfolio Sector Sector Allocation Selection Relative
Portfolio
Attribution Return Return Effect Effect Effect
(%)
------------------ ---------- ------------ ------------------ ---------- ---------
Equity Portfolio
Attribution 9.5 12.0 -0.9 -1.6 -2.5
Source: Alliance Trust and FactSet
Shareholder Return
As at 30 June 6 months 1 year 3 years 5 years
2016
------------------- --------- ------- -------- --------
Total Shareholder
Return (TSR) 2.6% 10.9% 32.4% 54.2%
------------------- --------- ------- -------- --------
NAV Total Return 6.6% 10.9% 27.8% 46.1%
------------------- --------- ------- -------- --------
MSCI ACWI 12.0% 13.9% 37.4% 60.4%
------------------- --------- ------- -------- --------
Company Expenses
6 months Year to 6 months
to 31 December to
30 June 2015 30 June
2016 2015
----------------- --------- ------------- ---------
Company Expenses GBP7.7m GBP24.0m GBP11.1m
----------------- --------- ------------- ---------
Investment Management Report
Alliance Trust Investments' mandate is to focus on global quoted
equities and progressively reduce the Trust's non-core
investments.
Summary
Global equity markets endured a volatile six month period
between January and June 2016, yet delivered strong returns, with
the MSCI ACWI in Sterling up 12.0%. Much of this positive return
was due to the depreciation of Sterling over the period. Large-cap
'bond proxy' stocks and other low growth sectors such as utilities
and telecommunications were the main drivers of the performance of
the market.
The UK vote to exit the European Union was the key market driver
in the last week of the six month period. While market reaction has
thus far been confined to weakness in UK domestic and financial
stocks, the risk of a global recession is a key concern heading
into the second half of the year.
Market Review
Global equity markets at the beginning of 2016 were very
volatile. China was the key source of investor concern as pressure
mounted on the world's second largest economy as it continues to
transition away from investment-led growth to consumption-led
growth. This was accompanied by a falling oil price and investor
concern that central banks across the world were running out of
options to battle low growth. The US Federal Reserve had hoped that
the global economy would improve, allowing it to pursue its policy
of normalising US interest rates following its first rate hike in
eight years last December.
Market conditions improved from late February, as Chinese
authorities decided to inject credit into the economy to support
growth; the oil price recovered; and, the US Fed softened its
expectations for interest rate rises over 2016 in the US. However,
the end of June 2016 saw global equity markets sell off
aggressively as the UK electorate voted to leave the EU, which has
created risks to UK, European and global economic stability.
Following the UK's vote to leave the EU, Sterling fell
dramatically, finishing the period at levels not seen since the
1980s. The Bank of England has now shifted from a bias towards
increasing interest rates to a situation in which it may need to
loosen monetary policy. Weak investment and consumption for the
short, and possibly, medium-term are key risks for the UK economy,
which will place further pressure on the currency.
Quoted Equity Portfolio Performance
The Trust's quoted equity portfolio produced a return of 9.5%
for the period against the benchmark's 12.0% return. Much of the
under-performance over the period came during June as the portfolio
was impacted by the dislocation of markets resulting from the EU
Referendum.
The Trust's best performers came from companies associated with
cloud computing. Equinix, a provider of internet related services,
is a key beneficiary of the acceleration of cloud computing
adoption across the enterprise technology landscape. Its
co-location datacentres have become a key hub in the infrastructure
of cloud technology. Accenture, a leading IT service and consulting
firm, has also performed well, as it benefits from the need for
large corporations to integrate the benefits of cloud computing
into its technology infrastructure.
The financial sector was a source of underperformance for the
Trust as two core holdings - Prudential and Legal & General -
performed poorly over the period. Both companies have been hit by
fears around the implications of the EU Referendum, particularly
the risk that higher interest rates and bond yields in the UK are
now many years away. The fund is overweight the UK versus the MSCI
ACWI (16.7% compared to 6.4%), which also pressured performance
over June and in the first six months of the year.
Across the materials, telecoms and utilities sectors the growth
bias of the Trust's process was a headwind during the first half of
the year. With bond yields currently reaching fresh lows and
Chinese authorities pumping large amounts of credit into their
economy, the market rewarded companies with the lowest valuations,
rather than those with the strongest growth and fundamental
tailwinds.
Non-core Investments
During the period it was concluded that, given the prevailing
weakness in oil and gas prices, it was not an appropriate time to
complete the sale of the Trust's mineral rights assets. The Trust
will continue to benefit from the revenue generated by these assets
and the possibility of a sale will be reassessed when energy prices
are more favourable. The Trust's private equity investments have
increased in value since the year end and provided a small positive
contribution to investment returns over the first half of 2016.
EU Referendum Actions
In the period ahead of, and immediately after, the EU Referendum
two hedging positions intended to de-risk the equity portfolio from
market volatility were implemented. Given the risk to the value of
Sterling a three month currency hedge was taken out in March. This
currency position mitigated the equity portfolio's relative
overweight to Sterling compared to the US Dollar, equivalent to
4.8% of the portfolio. As Sterling depreciated over the post EU
Referendum period this position contributed positively to the
Trust's overall performance. This hedge has been rolled over for a
further three months.
The second hedge was a short position on the FTSE 100 future put
in place to protect the Trust's capital in the event of an extreme
market fall-out. The decision was taken to hedge 5% of the
portfolio's UK overweight position relative to the MSCI ACWI. When
combined with the currency hedge, this neutralised the Trust's
overweight position relative to the benchmark. The future position,
a protection against a worst case outcome, was entered as soon as
the leave vote was confirmed on 24 June and was closed on 1 July
when the risk of a disorderly market collapse had abated.
Fortunately, the market regained stability relatively swiftly. This
protection did incur a cost, and the net contribution of these two
measures on the Trust's performance was -0.2%.
Aside from the hedges, the Trust's gearing was reduced by GBP90m
while still maintaining an equity position of at least 100% of net
assets throughout the period.
Investment Outlook
The economic outlook for the second half of 2016 appears unclear
after the EU Referendum vote. The UK economy appears set for at
least a mild recession as investment and consumption freeze up in
the midst of so much uncertainty. The question remains as to
whether this will spill over into Europe and result in a slowdown
across the global economy. The unprecedented nature of the current
situation makes forecasting the impact particularly
challenging.
Political risks abound; from the US presidential election in
November to other important elections and referendums in China,
Germany, France and Italy over the next 18 months. With global
economic growth already fragile, political uncertainty is sure to
be a headwind for equity markets. In this uncertain environment we
believe a defensive portfolio that is invested in companies that
are growing through structural change - rather than those that are
dependent on cyclical tailwinds - will be key to investment
performance.
Alliance Trust Investments
Investment Manager
6 Month Equity Portfolio Sector Attribution to End June 2016
Index: MSCI ACWI in Sterling. Gross value of quoted equities in
portfolio.
Alliance Trust MSCI All Country
World Index
Sector Stock Total
Equity Portfolio Average Portfolio Contribution Average Sector Allocation Selection Relative
to
Attribution Weight Return Equity Weight Return Effect Effect Effect
(%) Return
------------------------ -------- ---------- ------------- ---------- ------- ----------- ---------- ---------
Consumer Discretionary 8.6 0.9 0.0 12.7 5.9 0.2 -0.4 -0.2
Consumer Staples 8.4 20.5 1.8 10.8 20.0 -0.2 0.0 -0.2
Energy 4.9 29.1 1.4 6.5 28.7 -0.2 0.0 -0.2
Financials 23.3 1.9 0.4 20.6 3.3 -0.2 -0.3 -0.5
Health Care 17.4 10.4 1.7 12.3 8.9 -0.2 0.1 -0.1
Industrials 6.9 16.5 1.0 10.4 14.8 -0.1 0.2 0.1
Information
Technology 19.2 10.6 2.1 14.6 10.1 -0.1 0.1 0.0
Materials 4.3 11.4 0.5 4.7 20.9 -0.1 -0.4 -0.5
Telecommunication
Services 3.3 6.2 0.2 4.0 21.1 0.0 -0.5 -0.5
Utilities 3.7 14.1 0.4 3.4 25.3 0.0 -0.4 -0.4
Total 100.0 9.5 9.5 100.0 12.0 -0.9 -1.6 -2.5
------------------------ -------- ---------- ------------- ---------- ------- ----------- ---------- ---------
Source: Alliance Trust and FactSet
Subsidiaries
Our subsidiary businesses, Alliance Trust Investments and
Alliance Trust Savings, are now operating as standalone businesses
and both have seen growth and an increasing level of profitability
during the period.
Alliance Trust Investments
During the period, a number of developments have taken place.
These demonstrate the continued positive growth in Alliance Trust
Investments which:
-- increased its assets under management from GBP2.1bn on 31
December 2015 to GBP5.2bn at the end of June 2016
-- had net third party inflows in the period of GBP25m
The Alliance Trust Investments' range of Sustainable Future
equity and fixed income funds (9 OEICs and 1 SICAV) had a
challenging first half of 2016. At the end of May half of these
funds were above the median for 2016 versus their peers however by
June only one fund was above median. The principal impact came in
the last week of June following the UK's vote to leave the EU. The
impact on Sterling hit the UK funds particularly hard, but the
effect of the increased economic uncertainty it precipitated was
felt across the range. The longer-term performance remains strong
across the range over 3 and 5 years. In addition the Monthly Income
Bond Fund continued to deliver an annual income yield of close to
6%.
Alliance Trust Investments is seeing continued interest from
prospective wholesale and institutional clients in its sustainable
investment expertise. A number of initiatives continued to take
place during the period to reduce costs and focus on the clarity of
its investment proposition. These changes are expected to
accelerate its path to profitability.
The Company has made a further investment of GBP2m in the
period. This further investment has not yet been recognised in the
fair value of the business and this remains as stated in our 2015
Annual Report and Accounts as GBP19.8m. The Directors will reassess
the fair value in light of the continuing development of the
business in the second half of the year.
Alliance Trust Savings
During the first half of 2016, Alliance Trust Savings has
focused on three areas:
-- the completion of the acquisition of Stocktrade
-- developing the governance and management of the standalone business
-- continuing the development of an enhanced operating platform for the business
Good progress was made in all three areas, with the Stocktrade
acquisition completed at the end of April, the new Alliance Trust
Savings Board and Executive Committee in place and the new platform
technology launched for new business in the intermediary business
channel.
Assets under administration rose from GBP8.5bn at 31 December
2015 to GBP12bn at 30 June 2016, a rise of 40%. In the same period
the net increase in customer accounts is over 26,000 (31%). This
growth was from the completion of the Stocktrade acquisition and
further organic growth. It has won a new corporate partnership
account which will bring additional business in the second half of
2016.
Alliance Trust Savings has made good progress towards delivering
profitability in 2016. Benefiting from the increased scale from the
Stocktrade acquisition, it achieved a small profit for the first
half of the year.
It is expected that customer numbers will continue to increase,
attracted by:
-- its flat fee structure
-- award winning customer service
-- differentiated proposition, including banking
-- improved functionality with the new technology
The Company has made a further investment of GBP15m in the
period. This further investment has not yet been recognised in the
fair value of the business and this remains as stated in our 2015
Annual Report and Accounts as GBP54.0m. The Directors will reassess
the fair value in light of the continuing development of the
business, embedding Stocktrade and leveraging the enhanced
operating platform in the second half of the year.
Company Portfolio Review
Quoted equity holdings as at 30 June 2016
Stock Country Sector % of Value
of
listing equity GBPm
portfolio
Visa United States Information Technology 3.1 95.0
Pfizer United States Health Care 3.1 93.8
Accenture United States Information Technology 2.9 89.6
CVS Health United States Consumer Staples 2.5 75.7
Amgen United States Health Care 2.5 75.7
Reckitt Benckiser United Kingdom Consumer Staples 2.5 75.2
TJX United States Consumer Discretionary 2.4 72.7
National Grid United Kingdom Utilities 2.4 72.3
American Tower United States Financials 2.4 72.1
Equinix United States Financials 2.3 70.8
Macquarie Infrastructure United States Industrials 2.2 66.9
CSL Australia Health Care 2.2 66.3
Daikin Industries Japan Industrials 2.1 64.8
Blackstone United States Financials 2.0 62.2
Tencent Hong Kong Information Technology 2.0 60.9
Danaher United States Industrials 2.0 60.2
Roche Switzerland Health Care 1.9 58.6
Toronto-Dominion
Bank Canada Financials 1.9 57.7
Wells Fargo United States Financials 1.8 55.3
SS&C Technologies United States Information Technology 1.8 54.2
NASDAQ OMX United States Financials 1.8 53.9
Prudential United Kingdom Financials 1.8 53.8
Walt Disney United States Consumer Discretionary 1.7 52.4
WPP United Kingdom Consumer Discretionary 1.7 52.2
ARM United Kingdom Information Technology 1.7 51.8
Ecolab United States Materials 1.7 50.4
Telecommunication
Vodafone United Kingdom Services 1.6 49.4
Swedbank Sweden Financials 1.6 49.3
Total France Energy 1.6 48.8
Statoil Norway Energy 1.6 48.5
Thermo Fisher
Scientific United States Health Care 1.6 48.4
Linear Technology United States Information Technology 1.6 48.2
Activision Blizzard United States Information Technology 1.5 47.3
Enterprise Products
Partners United States Energy 1.5 47.2
Telecommunication
Deutsche Telekom Germany Services 1.5 45.4
Acuity Brands United States Industrials 1.5 44.9
Johnson Matthey United Kingdom Materials 1.4 44.0
Microsoft United States Information Technology 1.4 42.6
Cadence Design
Systems United States Information Technology 1.4 42.4
Alphabet United States Information Technology 1.4 42.2
Novo Nordisk Denmark Health Care 1.4 41.9
Continental Germany Consumer Discretionary 1.4 41.7
ORIX Japan Financials 1.3 40.1
GlaxoSmithKline United Kingdom Health Care 1.3 39.0
AmBev Brazil Consumer Staples 1.3 38.8
Henkel Germany Consumer Staples 1.3 38.3
Unilever United Kingdom Consumer Staples 1.2 38.1
AmerisourceBergen United States Health Care 1.2 37.4
DNB Norway Financials 1.2 36.9
Dentsu Japan Consumer Discretionary 1.2 36.5
SAP Germany Information Technology 1.2 36.0
Mitsui Fudosan Japan Financials 1.2 35.9
Norsk Hydro Norway Materials 1.1 35.1
Schlumberger United States Energy 1.0 31.3
Legal & General United Kingdom Financials 1.0 30.5
Schneider Electric France Industrials 1.0 29.2
Bangkok Bank Thailand Financials 0.9 28.4
Roper Technologies United States Industrials 0.9 28.2
First Republic
Bank San Francisco United States Financials 0.8 24.1
ENN Energy Hong Kong Utilities 0.6 18.9
Melrose Industries United Kingdom Industrials 0.2 5.0
---------- --------
Total
value 3,054.4
---------- --------
Funds as at 30 June 2016
Alliance Trust Investment Country of Value GBPm
Funds registration
--------------------------------- ---------------- -----------------
Sustainable Future Pan-European
Equity Fund Luxembourg 62.8
Sustainable Future Cautious
Managed Fund United Kingdom 11.0
Sustainable Future Defensive
Managed Fund United Kingdom 11.0
-----------------
Total value 84.8
-----------------
Other investments as at 30 June 2016
Investment Region Value GBPm
------------------- ---------------------------- ------------
Private Equity United Kingdom/Europe/Asia 115.1
Mineral Rights North America 14.8
Alliance Trust
Savings United Kingdom 54.0
Alliance Trust
Investments United Kingdom 19.8
Indirect Property United Kingdom 9.4
Other United Kingdom 2.1
------------
Total value
215.2
------------
Total investments as at 30 June 2016
Investment Value GBPm
------------------- -------------
Quoted equities 3,054.4
Funds 84.8
Other investments 215.2
-------------
Total value
3,354.4
-------------
Source - Alliance Trust
A full portfolio listing, similar to that displayed above, is
available on a monthly basis on our website at
http://investor.alliancetrust.co.uk/ati/investorrelations/list-of-stock-holdings.htm
Risks and Uncertainties
The Company invests in both quoted and unquoted securities, its
subsidiary businesses, other asset classes and financial
instruments in order to achieve its investment objectives. Its
principal risks and uncertainties are therefore:
-- Prudential and Market
-- Operational
-- Strategic
-- Regulatory & Conduct
The Company's Operational and Regulatory & Conduct risks are
now managed by Alliance Trust Investments.
These risks, and the way in which they are managed, are
described in more detail within the Risk section on pages 18 and 19
of the Company's Annual Report and Accounts for the year ended 31
December 2015, which is available on the Company's website at
www.alliancetrust.co.uk.
Although the outcome of the referendum on the UK's membership of
the EU may provide additional risk from a market perspective we do
not expect our principal risks to change for the remainder of the
financial year.
Related Party Transactions
The nature of related party transactions has not changed
significantly from those described in the Company's Report and
Accounts for the year ended 31 December 2015. With effect from 1
January 2016 staff contracts have been transferred to Alliance
Trust Investments and Alliance Trust Savings. Alliance Trust
Investments was appointed alternative investment fund manager with
responsibility for portfolio investment for the Trust on 3 February
2016. In the period the Company subscribed to additional capital in
Alliance Trust Savings and Alliance Trust Investments as disclosed
on page 6. There were no transactions with related parties during
the six months ended 30 June 2016 which have a material effect on
the results or the financial position of the Company or of the
Group.
Defined Benefit Pension Scheme
In May 2016 the Board decided to inject GBP19.2m into its closed
defined benefit pension scheme to fund the purchase of an annuity
policy with Legal & General to match the scheme's liabilities
to its members. The annuity was purchased by the Trustees of the
Alliance Trust Companies' Pension Scheme on 31 May 2016, prior to
the fall in bond yields that followed the EU referendum vote. This
has removed volatility and risk from the Company balance sheet but
has impacted Total Return in the period by -0.8%.
Buybacks and Discount
In the first half of 2016 the sector average discount widened as
market and economic concerns undermined investor confidence. The
Company discount closed the period at 11.4% compared to 7.9% at 31
December 2015.
During the period the Company bought back and cancelled
11,365,096 shares. This represents 2.2% of the Company's share
capital. On 7 June, the Company announced that it had suspended its
share buybacks until it had concluded its strategic review. No
shares are held in Treasury. The weighted average discount of these
buybacks was 10.2%.
Going Concern Statement
The factors impacting on Going Concern are set out in detail on
page 33 of the Company's Annual Report and Accounts for the year
ended 31 December 2015.
As at 30 June 2016 there have been no significant changes to
these factors. The Directors, who have reviewed budgets, forecasts
and sensitivities, consider that the Group has adequate financial
resources to enable it to continue in operational existence for the
foreseeable future. Accordingly, the Directors believe it is
appropriate to continue to adopt the going concern basis for
preparing the financial statements.
Responsibility Statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements have been prepared
in accordance with IAS 34 "Interim Financial Reporting" as adopted
by the EU;
-- The interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period, and any changes in the related party transactions
described in the last annual report that could do so.
Signed on behalf of the Board
Lord Smith of
Kelvin
Chairman
21 July 2016
Financial Statements
Consolidated income statement (unaudited) for the
period ended 30 June 2016
------------------------------------------------------------------------------------------------------------------
Year to
6 months to 6 months to 31 Dec 2015
30 June 2016 30 June 2015 (audited)
--------------------- ---- --------------------------- --------------------------- ---------------------------
GBP000 Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
--------------------- ---- ------- -------- -------- -------- ------- -------- -------- ------- --------
Revenue
Income 3 50,779 -- 50,779 63,378 -- 63,378 114,386 - 114,386
Profit on fair
value designated
investments -- 190,968 190,968 -- 375 375 -- 85,137 85,137
Profit on investment
property -- - - -- - - -- 720 720
Loss on fair
value of debt -- (21,670) (21,670) -- - - -- - -
--------------------- ---- ------- -------- -------- -------- ------- -------- -------- ------- --------
Total Revenue 50,779 169,298 220,077 63,378 375 63,753 114,386 85,857 200,243
Administrative
expenses (3,866) (3,825) (7,691) (21,508) (709) (22,217) (44,460) (1,585) (46,045)
Finance costs 4 (1,381) (2,762) (4,143) (1,964) (2,465) (4,429) (3,972) (5,281) (9,253)
Gain on revaluation
of office premises -- - - -- - - -- 175 175
Foreign exchange
gains/(losses) -- 4,691 4,691 -- (460) (460) -- (84) (84)
--------------------- ---- ------- -------- -------- -------- ------- -------- -------- ------- --------
Profit/(Loss)
before tax 45,532 167,402 212,934 39,906 (3,259) 36,647 65,954 79,082 145,036
Tax 5 (3,211) - (3,211) (3,444) - (3,444) (5,362) - (5,362)
--------------------- ---- ------- -------- -------- -------- ------- -------- -------- ------- --------
Profit/(Loss)
for the period/year 42,321 167,402 209,723 36,462 (3,259) 33,203 60,592 79,082 139,674
--------------------- ---- ------- -------- -------- -------- ------- -------- -------- ------- --------
All profit/(loss) for the period/year is attributable to equity
holders of the parent.
Earnings per share attributable to equity holders of the
parent
Basic (p per
share) 78.20 32.42 40.62 6.61 (0.59) 6.02 11.05 14.42 25.47
Diluted (p per
share) 78.18 32.37 40.55 6.60 (0.59) 6.01 11.03 14.39 25.42
Consolidated statement of comprehensive income (unaudited)
Year to
6 months to 6 months to 31 Dec 2015
30 June 2016 30 June 2015 (audited)
--------------------- ---- --------------------------- ------------------------ -------------------------
GBP000 Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
--------------------- ---- ------- -------- -------- ------- ------- ------ ------- ------- -------
Profit/(Loss)
for the period/year 42,321 167,402 209,723 36,462 (3,259) 33,203 60,592 79,082 139,674
--------------------- ---- ------- -------- -------- ------- ------- ------ ------- ------- -------
Items that will
not be reclassified
subsequently
to profit or
loss:
Defined benefit
plan net actuarial
(loss)/gain 8 - (26,112) (26,112) - 4,492 4,492 - (22) (22)
Retirement benefit
obligations
deferred tax - - - - - - - (96) (96)
--------------------- ---- ------- -------- -------- ------- ------- ------ ------- ------- -------
Other comprehensive
(loss)/gain - (26,112) (26,112) - 4,492 4,492 - (118) (118)
--------------------- ---- ------- -------- -------- ------- ------- ------ ------- ------- -------
Total comprehensive
income for the
period/year 42,321 141,290 183,611 36,462 1,233 37,695 60,592 78,964 139,556
--------------------- ---- ------- -------- -------- ------- ------- ------ ------- ------- -------
All total comprehensive income for the period/year is
attributable to equity holders of the parent.
Consolidated statement of changes in equity (unaudited)
for the period ended 30 June 2016
-----------------------------------------------------------------------------------
Year to
6 months 6 months 31 Dec
to to 2015
30 June 30 June
GBP000 2016 2015 (audited)
---------------------------------------------- ---------- ---------- -----------
Called up share capital
At 1 January 13,160 13,835 13,835
Own shares purchased and
cancelled in the period/year (285) (27) (675)
---------------------------------------------- ---------- ---------- -----------
At 30 June / 31 December 12,875 13,808 13,160
---------------------------------------------- ---------- ---------- -----------
Capital reserves
At 1 January 2,169,142 2,233,915 2,233,915
Profit/(Loss) for the period/year 167,402 (3,259) 79,082
Defined benefit plan actuarial
(loss)/gain (26,112) 4,492 (118)
Own shares purchased and
cancelled in the period/year (56,171) (5,110) (136,479)
Share based payments 223 1,017 521
Dividends paid - - (7,779)
---------------------------------------------- ---------- ---------- -----------
At 30 June / 31 December 2,254,484 2,231,055 2,169,142
---------------------------------------------- ---------- ---------- -----------
Merger reserve
---------------------------------------------- ---------- ---------- -----------
At 1 January, 30 June and
31 December 645,335 645,335 645,335
---------------------------------------------- ---------- ---------- -----------
Capital redemption reserve
At 1 January 5,838 5,163 5,163
Own shares purchased and
cancelled in the period/year 285 27 675
---------------------------------------------- ---------- ---------- -----------
At 30 June / 31 December 6,123 5,190 5,838
---------------------------------------------- ---------- ---------- -----------
Revenue reserve
At 1 January 112,565 120,916 120,916
Profit for the period/year 42,321 36,462 60,592
Dividends (32,001) (41,552) (68,982)
Unclaimed dividends (redistributed)/returned (2) - 39
---------------------------------------------- ---------- ---------- -----------
At 30 June / 31 December 122,883 115,826 112,565
---------------------------------------------- ---------- ---------- -----------
Total equity
---------------------------------------------- ---------- ---------- -----------
At 1 January 2,946,040 3,019,164 3,019,164
---------------------------------------------- ---------- ---------- -----------
At 30 June / 31 December 3,041,700 3,011,214 2,946,040
---------------------------------------------- ---------- ---------- -----------
Consolidated balance sheet (unaudited) as at 30 June
2016
----------------------------------------------------------------------------------
30 June 30 June 31 Dec
GBP000 Note 2016 2015 2015 (audited)
--------------------------------- ----- ---------- ---------- ----------------
Non--current assets
Investments held at fair
value 10 3,343,938 3,408,527 3,307,397
Investment property held
at fair value - 4,830 -
Property, plant and equipment:
Office premises 4,540 4,365 4,540
Other fixed assets 29 352 299
Intangible assets - 1,012 917
Pension scheme surplus 8 235 11,299 6,882
Deferred tax asset 1,238 1,039 1,238
--------------------------------- ----- ---------- ---------- ----------------
3,349,980 3,431,424 3,321,273
Current assets
Outstanding settlements
and other receivables 43,366 23,282 12,125
Recoverable overseas tax 2,754 1,244 1,483
Cash and cash equivalents 42,817 33,505 25,153
--------------------------------- ----- ---------- ---------- ----------------
88,937 58,031 38,761
Total assets 3,438,917 3,489,455 3,360,034
Current liabilities
Outstanding settlements
and other payables (70,222) (10,265) (17,570)
Tax payable (3,991) (3,991) (3,991)
Bank loans 13 (200,000) (362,000) (290,000)
--------------------------------- ----- ---------- ---------- ----------------
(274,213) (376,256) (311,561)
Total assets less current
liabilities 3,164,704 3,113,199 3,048,473
Non--current liabilities
Unsecured fixed rate loan
notes (121,670) (100,000) (100,000)
Deferred tax liability (1,238) (1,039) (1,238)
Amounts payable under
long term Investment Incentive
Plan (96) (946) (1,195)
(123,004) (101,985) (102,433)
Net assets 3,041,700 3,011,214 2,946,040
Equity
Share capital 14 12,875 13,808 13,160
Capital reserve 2,254,484 2,231,055 2,169,142
Merger reserve 645,335 645,335 645,335
Capital redemption reserve 6,123 5,190 5,838
Revenue reserve 122,883 115,826 112,565
Total Equity 3,041,700 3,011,214 2,946,040
All net assets are attributable to the equity holders of the
parent.
Net asset value per ordinary share attributable to equity
holders of the parent
Basic (GBP) 9 GBP5.91 GBP5.46 GBP5.61
Diluted (GBP) 9 GBP5.91 GBP5.45 GBP5.60
Consolidated cash flow (unaudited) for the period
ended 30 June 2016
------------------------------------------------------------------------------------
Year to
6 months 6 months 31 Dec
to to 2015
30 June 30 June
GBP000 2016 2015 (audited)
---------------------------------------------- ---------- ---------- ------------
Cash flows from operating activities
Profit before tax 212,934 36,647 145,036
Adjustments for:
Gains on investments (190,968) (375) (85,857)
Loss on fair value of debt 21,670 - -
Foreign exchange (gain)/loss (4,691) 460 84
Depreciation (122) 118 193
Amortisation of intangibles - 165 329
Gain on revaluation of offices
premises - - (175)
Share based payment expense 223 1,017 521
Interest 4,143 4,429 9,253
Movement in pension scheme
surplus (19,465) (1,610) (1,707)
Operating cash flows before
movements in working capital 23,724 40,851 67,677
(Increase)/Decrease in receivables (4,720) (7,796) 3,367
(Decrease)/Increase in payables (7,771) 3,311 10,067
---------------------------------------------- ---------- ---------- ------------
Net cash inflow from operating
activities before income taxes 11,233 36,366 81,111
Taxes paid (4,482) (3,693) (5,948)
---------------------------------------------- ---------- ---------- ------------
Net cash inflow from operating
activities 6,751 32,673 75,163
Cash flows from investing activities
Proceeds on disposal at fair
value of investments through
profit and loss 586,168 691,897 1,325,859
Purchase of investments at
fair value through profit and
loss (398,933) (765,105) (1,206,841)
Disposal/(Purchase) of plant
and equipment 389 (3) (25)
Disposal/(Purchase) of other
intangible assets 920 (142) (214)
Net cash inflow/(outflow) from
investing activities 188,544 (73,353) 118,779
Cash flows from financing activities
Dividends paid -- Equity (32,001) (41,552) (76,761)
Unclaimed dividends (redistributed)/returned (2) - 39
Purchase of own shares (56,171) (5,110) (136,479)
Bank loans and unsecured fixed
rate loan notes raised - 82,000 10,000
Repayment of borrowing (90,000) - -
Interest payable (4,148) (4,795) (9,606)
Net cash (outflow)/inflow from
financing activities (182,322) 30,543 (212,807)
Net increase/(decrease) in
cash and cash equivalents 12,973 (10,137) (18,865)
Cash and cash equivalents at
beginning of period/year 25,153 44,102 44,102
Effect of foreign exchange
rate changes 4,691 (460) (84)
---------------------------------------------- ---------- ---------- ------------
Cash and cash equivalents at
the end of period/year 42,817 33,505 25,153
1 General Information
The information contained in this report for the period ended 30
June 2016 does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. A copy of the statutory
accounts for the year ended 31 December 2015 has been delivered to
the Registrar of Companies. The auditor's report on those financial
statements was prepared under s495 and s496 of the Companies Act
2006. The report was not qualified, did not contain an emphasis of
matter paragraph and did not contain statements under section
498(2) or (3) of the Companies Act.
The interim results are unaudited. They should not be taken as a
guide to the full year and do not constitute the statutory
accounts.
2 Accounting Policies
Basis of preparation
The annual financial statements were prepared using accounting
policies consistent with International Financial Reporting
Standards (IFRS) as adopted by the EU. The condensed set of
financial statements included in this half yearly financial report
have been prepared in accordance with IAS 34 'Interim Financial
Reporting', as adopted by the EU.
Going concern
The Directors have a reasonable expectation that the Company and
Group have sufficient resources to continue in operational
existence for the foreseeable future. Accordingly the financial
statements have been prepared on a going concern basis.
Segmental reporting
The Group has identified a single operating segment, the
investment trust, which aims to maximise shareholders returns. As
such no segmental information has been included in these financial
statements.
Application of accounting policies
The same accounting policies, presentations and methods of
computation are followed in these financial statements as were
applied in the Group's last annual audited financial statements
with the exception of the following changes that have been made to
the basis of accounting estimates:
-- From 1 January 2016 the Company attributes indirect
expenditure one third to revenue and two thirds to capital costs.
In prior periods the Company allocated all indirect expenditure
against revenue profits save that two thirds of the costs of bank
indebtedness, an indirect cost, were allocated against capital
profits save for the costs associated with seeding the fixed income
bond fund which was all charged to revenue. This is consistent with
the Statement of Recommended Practice ('SORP') "Financial
Statements of Investment Trust Companies and Venture Capital
Trusts" for investment trusts issued by the Association of
Investment Companies ('AIC') in November 2014 which states that
either a proportion of all indirect expenditure or no indirect
expenditure is allocated against capital profits.
-- From the 1 June 2016 the unsecured fixed rate loan notes are
recognised at fair value. In prior periods they have been included
at par value.
Group Consolidation
The Company qualifies as an investment entity under IFRS 10
meeting all the key characteristics and as such is no longer
required to consolidate its subsidiaries on a line by line basis,
but instead recognise them as investments at fair value through the
income statement.
The 'Consolidated Group', represents the results of the Company
('Alliance Trust PLC') and Alliance Trust Services Limited
('ATSL'). ATSL is required to be consolidated as it provides
services that relate directly to the investment activities of the
Company however it is not itself an investment entity.
The investment mandate of the Company was awarded to Alliance
Trust Investments ('ATI') in February. The primary objective of ATI
however remains to grow its third party asset management business,
with the Company being one client and as such we consider it would
not be appropriate to consolidate ATI as at 30 June 2016.
All other subsidiaries within the Group are valued at fair value
through the income statement as they do not provide services that
relate directly to the investment activities of the Company or they
are themselves regarded as an investment entity.
The same accounting policies, presentations and methods of
computation are followed in these financial statements as were
applied in the Group's last annual audited financial
statements.
3 Revenue
6 months 6 months
to to
30 June 30 June Year to
GBP000 2016 2015 31 Dec 2015
----------------------- --------- ---------- -------------
Deposit interest 3 5 17
Dividend income* 49,950 50,076 88,247
Mineral rights income 826 1,928 3,311
Property rental income - 230 565
Recharged costs** - 11,139 22,027
Other income - - 219
----------------------- --------- ---------- -------------
Total revenue 50,779 63,378 114,386
* Designated at fair value through profit and loss on initial
recognition
** ATSL acted as a paymaster company and as such staff costs and
all indirect costs for the two trading business, Alliance Trust
Savings Limited ('ATS') and Alliance Trust Investments Limited
('ATI'), were included within income and expenses in the
Consolidated Income Statement as these are recharged by ATSL in the
results to 31 December 2015 and to 30 June 2015. From 1 January
2016 staff costs and indirect costs were paid directly by the two
trading businesses and as such were not recharged through ATSL.
4 Finance Costs
6 months to 6 months to Year to 31 Dec
30 June 2016 30 June 2015 2015
--------------- ----------------------- ----------------------- -----------------------
GBP000 Revenue Capital Total Revenue Capital Total Revenue Capital Total
--------------- ------- ------- ----- ------- ------- ----- ------- ------- -----
Bank loans
and unsecured
fixed rate
loan notes 1,381 2,762 4,143 1,964 2,465 4,429 3,972 5,281 9,253
Total finance
costs 1,381 2,762 4,143 1,964 2,465 4,429 3,972 5,281 9,253
Finance costs include interest of GBP2.2m (GBP1.7m at 30 June
2015 and GBP4.3m at 31 December 2015) on the GBP100m 4.28%
unsecured fixed rate loan notes which were drawn down in July 2014
for 15 years.
5 Taxation
UK corporation tax for the period to 30 June 2016 is charged at
20.0% (20.3% for the period to 30 June 2015) of the estimated
taxable profits for the period. A reduction in the main rate of UK
corporation tax to 20.0% was substantively enacted in April 2016.
Taxation levied by other jurisdictions is calculated at the rates
prevailing in those jurisdictions, such taxation mainly comprises
withholding taxes levied on the investment returns generated on
foreign investments such as overseas dividend income.
6 Dividends
6 months 6 months
to to Year to
30 June 30 June 31 Dec
GBP000 2016 2015 2015
---------------------------------- -------- -------- -------
Fourth interim dividend for the
year ended 31 December 2014 of
2.4585p per share - 13,555* 13,555*
First interim dividend for the
year ended 31 December 2015 of
2.5325p per share - 13,961 13,962
Second interim dividend for the
year ended 31 December 2015 of
2.5325p per share - - 13,965
Third interim dividend for the
year ended 31 December 2015 of
2.5325p per share - - 13,464
Fourth interim dividend for the
year ended 31 December 2015 of
3.3725p per share 17,473* - -
First interim dividend for the
year ended 31 December 2016 of
2.825p per share 14,528 - -
---------------------------------- -------- -------- -------
32,001 27,516 54,946
Special dividend for the year
ended 31 December 2014 of 2.546p
per share - 14,036* 14,036*
Special dividend for the year
ended 31 December 2015 of 1.463p
per share - - 7,779
---------------------------------- -------- -------- -------
32,001 41,552 76,761
---------------------------------- -------- -------- -------
*Dividends for the year ended 31 December 2015 have been
adjusted to reflect share buybacks and changes in shares held by
the Trustee of the Employee Benefit Trust.
7 Earnings Per Share
From continuing operations
The calculation of the basic and diluted earnings per share is
based on the following data:
6 months to 6 months to Year to 31 Dec
30 June 2016 30 June 2015 2015
-------------------- ------------------------- ------------------------ -------------------------
GBP000 Revenue Capital Total Revenue Capital Total Revenue Capital Total
-------------------- ------- ------- ------- ------- ------- ------ ------- ------- -------
Ordinary shares
Earnings for
the purposes
of basic earnings
per share being
net profit
attributable
to equity holders
of the parent 42,321 167,402 209,723 36,462 (3,259) 33,203 60,592 79,082 139,674
Number of shares
Weighted average
number of ordinary
shares for
the purposes
of basic earnings
per share 516,332,453 551,532,534 548,480,531
Weighted average
number of ordinary
shares for
the purposes
of diluted
earnings per
share 517,100,606 552,517,817 549,465,141
The weighted average number of ordinary shares is arrived at by
excluding 698,062 (886,173 at 30 June 2015 and 886,173 at 31
December 2015) ordinary shares acquired by the Trustee of the
Employee Benefit Trust with funds provided by the Company.
IAS 33.41 requires that shares should only be treated as
dilutive if they decrease earnings per share or increase the loss
per share. The earnings per share figures on the income statement
reflect this.
8 Pension Schemes
The Group sponsors two pension arrangements.
The Alliance Trust Companies' Pension Fund ('the Scheme') is a
funded defined benefit pension scheme which closed to future
accrual on 2 April 2011. In November 2015, following the
announcement of changes made to the management of Alliance Trust
PLC, the Trustees requested that Alliance Trust PLC consider
funding the Scheme to allow them to secure the benefits of the
members with an insurance company. The Board of Alliance Trust PLC,
after a tender exercise had been carried out by the Trustees,
approved in May 2016 additional funding to allow the Trustees to
enter into an agreement with Legal and General Assurance Society
Limited for a policy to secure all of the benefits of the members.
The Trustees entered into such an Agreement effective 31 May
2016.
Employees are entitled to receive contributions into their own
Self Invested Personal Pension ('SIPP') provided by ATS.
Defined Benefit Scheme
The net actuarial loss made in the period and recognised in the
Consolidated Statement of Comprehensive Income was GBP26,112,000
(30 June 2015 net actuarial gain of GBP4,492,000 and 31 December
2015 net actuarial loss of GBP22,000) calculated by a qualified
independent actuary.
Certain actuarial assumptions have been used to arrive at the
retirement benefit scheme surplus of GBP0.2m as at 30 June 2016 (30
June 2015 surplus of GBP11.3m and 31 December 2015 surplus of
GBP6.9m). The change in the period is due to the purchase of the
bulk annuity policy with Legal and General, which means the assets
now match the liabilities of the Scheme, with the exception of the
amount held in the bank account. The actuarial assumptions are set
out in the following table:
30 June 30 June 31 Dec
2016 2015 2015
----------------------------------- -------- -------- -------
% per % per % per
annum annum annum
----------------------------------- -------- -------- -------
Retail Price Index Inflation 3.30 3.15 3.50
Consumer Price Index Inflation 2.40 2.25 2.60
Rate of discount 3.25 3.40 3.80
Allowance for pension in payment
increases of RPI (subject to
a maximum increase of 5% p.a) 3.20 3.05 3.35
Allowance for revaluation of
deferred pensions of CPI (subject
to a maximum increase of 5% p.a) 2.40 2.25 2.20
9 Net Asset Value Per Ordinary Share
The calculation of the net asset value per ordinary share is
based on the following:
30 June 30 June 31 Dec
2016 2015 2015
---------------------------------- ----------- ----------- -----------
Equity shareholder funds (GBP000) 3,041,700 3,011,214 2,946,040
Number of shares at period
end -- Basic 514,277,739 551,447,973 525,454,724
Number of shares at period
end -- Diluted 514,975,801 552,334,146 526,340,897
The number of ordinary shares has been reduced by 698,062
(886,173 at 30 June 2015 and 886,173 at 31 December 2015) ordinary
shares held by the Trustee of the Employee Benefit Trust in order
to arrive at the Basic figures above.
10 Hierarchical valuation of financial instruments
The Group refines and modifies its valuation techniques as
markets develop. While the Group believes its valuation techniques
to be appropriate and consistent with other market participants,
the use of different methodologies or assumptions could result in
different estimates of fair value at the balance sheet date.
Financial instruments excludes the Investment Property.
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2 - Inputs other than quoted prices included within level
1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices)
Level 3 - Inputs for the asset or liability that are not based
on observable market data (that is, unobservable inputs)
The following table analyses the fair value measurements for the
Group's assets and liabilities measured by the level in the fair
value hierarchy in which the fair value measurement is categorised
at 30 June 2016. All fair value measurements disclosed are
recurring fair value measurements.
Group valuation hierarchy fair value through profit and loss
As at 30 June 2016
Level Level Level
GBP000 1 2 3 Total
--------------------------- --------- ----- ------- ---------
Listed investments 3,124,036 - - 3,124,036
Foreign exchange contracts - 4,690 - 4,690
Unlisted investments
Private Equity - - 124,500 124,500
Alliance Trust Savings - - 54,000 54,000
Alliance Trust Investments - - 19,800 19,800
Alliance Trust Finance - - 720 720
Mineral rights - - 14,778 14,778
Other - - 1,414 1,414
--------------------------- --------- ----- ------- ---------
3,124,036 4,690 215,212 3,343,938
As at 30 June 2015
Level Level Level
GBP000 1 2 3 Total
--------------------------- --------- ------ -------- ----------
Listed investments 3,176,679 - - 3,176,679
Foreign exchange contracts - (5) - (5)
Unlisted investments
Private Equity - - 132,898 132,898
Alliance Trust Savings - - 31,573 31,573
Alliance Trust Investments - - 24,269 24,269
Alliance Trust Finance - - 8,871 8,871
Mineral rights - - 33,087 33,087
Other - - 1,155 1,155
--------------------------- --------- ------ -------- ----------
3,176,679 (5) 231,853 3,408,527
As at 31 Dec 2015
Level Level Level
GBP000 1 2 3 Total
--------------------------- --------- ------ -------- ----------
Listed investments 3,088,881 - - 3,088,881
Unlisted investments
Private Equity - - 125,254 125,254
Alliance Trust Savings - - 54,000 54,000
Alliance Trust Investments - - 19,800 19,800
Alliance Trust Finance - - 720 720
Mineral rights - - 17,535 17,535
Other - - 1,207 1,207
--------------------------- --------- ------ -------- ----------
3,088,881 - 218,516 3,307,397
There have been no transfers of recurring measurements during
the year between Levels 1, 2 and 3.
Fair Value Assets in Level 1
The quoted market price used for financial investments held by
the group is the current bid price. These investments are included
within Level 1 and comprise of equities, bonds and exchange traded
derivatives.
Fair Value Assets in Level 2
The fair value of financial instruments that are not traded in
an active market (for example, over--the--counter derivatives) is
determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is
available and with minimal reliance on entity specific
estimates.
Fair Value Assets in Level 3
Level 3, excluding the valuations of the subsidiaries, are
reviewed at least annually by the Valuation Committee who are
assigned responsibility by the Board of Alliance Trust PLC. The
valuations of the subsidiaries are approved at least annually by
the Audit Committee and then recommended to the Valuation
Committee. The Valuation Committee considers the appropriateness of
the valuation models and inputs used in accordance with the Group's
valuation policy. The Valuation Committee will determine the
appropriateness of any valuation of the underlying assets.
The following table shows the reconciliation from the beginning
balances to the ending balances for fair value measurement in Level
3 of the fair value hierarchy.
Group
------------------------------------ -----------------------------
June
GBP000 June 16 15 Dec 15
------------------------------------ -------- --------- --------
Balance at 1 January 218,516 232,531 232,531
Net loss from financial instruments
at fair value through profit or
loss (15,043) (2,390) (16,556)
Purchases at cost 17,817 9,519 42,908
Sales proceeds (9,187) (10,085) (38,175)
Realised gain/(loss) on sale 3,109 2,278 (2,192)
Balance at 30 June / 31 December 215,212 231,853 218,516
Investments in subsidiary companies (Level 3) are valued in the
Company's accounts at GBP168.0m (GBP170.6m at 30 June 2015 and
GBP173.0m at 31 December 2015) being the Directors' estimate of
their fair value, using the guidelines and methodologies on
valuation published by the International Private Equity and Venture
Capital Board. This includes ATS at GBP54.0m (GBP31.6m at 30 June
2015 and GBP54.0m at 31 December 2015), ATI at GBP19.8m (GBP24.3m
at 30 June 2015 and GBP19.8m at 31 December 2015) and ATF GBP0.7m
(GBP8.9m at 30 June 2015 and GBP0.7m at 31 December 2015). This
represents the Directors' view of the amount for which the
subsidiaries could be exchanged between knowledgeable willing
parties in an arm's length transaction. This does not assume that
the underlying business is saleable at the reporting date or that
the Company currently has any intention to sell the subsidiary
business in the future. The Directors have used several valuation
methodologies as prescribed in the guidelines to arrive at their
best estimate of fair value, including discounted cash flow
calculations, revenue and earnings multiples and recent market
transactions where available.
The following key assumptions are relevant to the fair valuation
of our investment in our subsidiary companies, and are consistent
with prior years. The multiples applied in valuing our subsidiaries
are derived from comparable companies sourced from market data.
-- ATS -- This is valued as a trading business. For the fair
valuation of ATS as at 31 December 2015 the Board used an external
valuation. A discounted cash flow, revenue multiple and an earnings
before interest, tax, depreciation and amortisation multiple
approach were used for comparative purposes. No change has been
made to the fair valuation as at 30 June 2016.
-- ATI -- This is valued as a trading business. A discounted
cashflow, revenue multiple and an earnings before interest, tax
depreciation and amortisation multiple valuation approach was
adopted as at 31 December 2015. No change has been made to the fair
valuation as at 30 June 2016.
The fair value of both ATS and ATI are as stated in the 2015
Annual Report and Accounts. These have been reassessed by the
Directors and are still regarded as best estimation of the fair
value for financial reporting purposes as at 30 June 2016. The
Directors will review the fair value on an ongoing basis and will
reassess the fair value in light of progress in the new business
integration and operating platform with specific respect to ATS and
in respect of delivery of business plans and profitability for both
companies, prior to the financial year end.
Mineral rights are carried at fair value and are valued in the
Company's accounts at GBP14.8m (GBP33.1m at 30 June 2015, GBP17.5m
at 31 December 2015) being the Directors' estimate of their fair
value, using the guidelines and methodologies on valuation
published by the Oklahoma Tax Commission and for non--producing
properties, the Lierle US Price Report.
The table below details how an increase or decrease in the input
variables would impact the valuation disclosed for the relevant
Level 3 assets.
Fair
Value
at Input Change in
GBP000 June Valuation Unobservable sensitivity valuation
Investment 2016 Method inputs Input +/- +/-
------------------- ------ ------------------- ------------------- ----- ------------ ---------------
Average of
discounted
cash flow
methodology
Alliance and comparable DCF Discount
Trust Savings 54,000 trading multiples. rate 13.2% 1% 6,000/(6,000)
------------------- ----- ------------ ---------------
AUA Growth 1 1 12,000/(12,000)
------------------- ----- ------------ ---------------
EBITDA multiple 1 1 6,300/(6,300)
------------------- ----- ------------ ---------------
Average of
discounted
cash flow
methodology
Alliance and comparable DCF Discount
Trust Investments 19,800 trading multiples. rate 15% 1% (600)/600
------------------- ----- ------------ ---------------
Revenue
multiple 2 1 6,000/(6,000)
------------------- ----- ------------ ---------------
EBITDA multiple 6 1 470/(470)
------------------- ----- ------------ ---------------
Oklahoma Tax
Commission
multiples
and Lierle
US Price report Revenue
(for non producing multiple
Mineral Rights 14,778 properties). - gas 7 1 1,100/(1,100)
------------------- ------------------- ----- ------------ ---------------
Revenue
multiple
- oil 4 1 800/(800)
------------------- ------------------- ----- ------------ ---------------
Revenue
multiple
- 4 1 400/(400)
products/condensate
------------------- ----- ------------ ---------------
Average
bonus 1 0.5 1,000/(1,000)
multiple
non producing
------------------- ------ ------------------- ------------------- ----- ------------ ---------------
The change in valuation disclosed in the above table shows the
direction an increase or decrease in the respective input variables
would have on the valuation result. For ATS, an increase in the
assets under administration (AUA) growth multiple and EBITDA
multiple or a decrease in the discount rate would lead to an
increase in the estimated value. For ATI, an increase in the
revenue and EBITDA multiple or a decrease in the discount rate
would lead to an increase in the estimated value. For mineral
rights, an increase in the revenue multiple and average bonus
multiple would lead to an increase in the estimated value.
Private equity investments, both fund--to--fund and direct
included under Level 3, are valued in accordance with the
International Private Equity and Venture Capital Valuation
Guidelines issued in December 2012. Unlisted investments in private
equity are stated at the valuation as determined by the Valuation
Committee based on information provided by the General Partner. The
General Partner's policy in valuing unlisted investments is to
carry them at fair value. The General Partner will generally rely
on the fund's investment manager's fair value at the last reported
period, rolled forward for any cashflows. However, if the General
Partner does not feel the manager is reflecting a fair value they
will select a valuation methodology that is most appropriate for
the particular investments in that fund and generate a fair value.
In those circumstances the General Partner believes the most
appropriate methodologies to use to value the underlying
investments in the portfolio are: Price of a recent investment,
Multiples, Net assets, and Industry valuation benchmarks. An entity
is not required to create quantitative information to comply with
this disclosure requirement if quantitative unobservable inputs are
not developed by the entity when measuring fair value (for example,
when an entity uses prices from prior transactions or third--party
pricing information without adjustment). Alliance Trust PLC
receives information from the General Partner on the underlying
investments which is subsequently reviewed by the Valuation
Committee. Where Alliance Trust PLC does not feel that the
valuation is appropriate, an adjustment will be made.
The Company's unsecured fixed rate loan notes are initially
recognised at a carrying value equivalent to the proceeds received
net of issue costs associated with the borrowings. After initial
recognition, unsecured fixed rate loan notes are subsequently
measured at amortised cost using the effective interest rate
method. The effective rate of interest is 4.30%.
No interrelationships between unobservable inputs used in the
above valuations of Level 3 investments have been identified.
11 Financial Commitments
As at 30 June 2016 the Group and Company had financial
commitments, which have not been accrued, totaling GBP26m (GBP42m
at 30 June 2015 and GBP44m at 31 December 2015). Of this amount
GBP26m (GBP42m at 30 June 2015 and GBP44m at 31 December 2015) was
in respect of uncalled subscriptions in investments structured as
limited partnerships all of which relates to investments in our
private equity portfolio. This is the maximum amount that the
Company may be required to invest. These limited partnership
commitments may be called at any time up to an agreed contractual
date. The Company may choose not to fulfil individual commitments
but may suffer a penalty should it do so, the terms of which vary
between investments.
The Company has provided letters of support in connection with
funding made available to certain of its subsidiaries, including
ATS and ATI, confirming ongoing support for at least 12 months from
the date the annual financial statements were signed, to make
sufficient funds available if needed to enable them to continue
trading, meet commitments and not to seek repayment of any amounts
outstanding.
On 25 March 2011 the Company granted a floating charge of up to
GBP30m over its listed investments to the Trustees of the Alliance
Trust Companies Pension Fund.
12 Share Based Payments
The Group operates two share based payment schemes. Full details
of these schemes (LTIP and AESOP) are disclosed in the December
2015 Annual Report and financial statements and the basis of
measuring fair value is consistent with that disclosed therein.
Long Term Incentive Plan ('LTIP')
The disclosure in this note relates to the 2014 and 2015 plans;
no awards have been granted for a 2016 scheme. As of 1 January
2016, employee contracts have been transferred to ATI and ATS and
as such no ongoing remuneration costs are incurred by the Company.
However, the Company will continue to incur some costs in relation
to the 2014 and 2015 plans through to vesting dates for previous
Company employees. The actual pay out values are to be recognised
in the Company accounts at the respective plan vesting dates and
are contingent on the performance of the business in accordance
with the performance measures in the plan rules.
In the period ended 30 June 2016 no Company shares were
purchased (98,002 at 30 June 2015 and 31 December 2015) at a price
of GBP Nil (GBP5.10 at 30 June 2015 and 31 December 2015) per
share. Matching awards of up to Nil (317,880 at 30 June 2015 and 31
December 2015) shares, and performance awards of up to Nil (552,263
at 30 June 2015 and 31 December 2015) shares were granted.
Matching awards and performance awards made during the period
were valued at GBPNil (GBP588,000 at 30 June 2015 and at 31
December 2015) and GBPNil (GBP1,022,000 at 30 June 2015 and at 31
December 2015) respectively. The fair value of the awards was
calculated using a binomial methodology.
The cumulative charge to the income statement during the period
for the 2014 and 2015 LTIP awards was GBP213,000 (GBP452,000 at 30
June 2015 and GBP52,000 at 31 December 2015) for the Group.
These costs are adjusted if certain vesting conditions are not
met, for example if a participant leaves before the end of the
three year (2014 scheme) and five year (2015 scheme) vesting
period.
13 Bank loans and unsecured fixed rate loan notes
As at As at As at
30 June 30 June 31 Dec
GBP000 2016 2015 2015
------------------------------------ --------- --------- --------
Bank loans repayable within
one year 200,000 362,000 290,000
------------------------------------ --------- --------- --------
Analysis of borrowings by currency:
Bank loans -- Sterling 200,000 362,000 290,000
The weighted average % interest
rates payable:
Bank loans 1.24% 1.39% 1.33%
The Directors' estimate of
the fair value of the borrowings:
Bank loans 200,000 362,000 290,000
Unsecured fixed rate loan notes 121,670 100,000 100,000
------------------------------------ --------- --------- --------
The effective interest rates
payable:
Unsecured fixed rate loan notes 4.30% 4.30% 4.30%
GBP100m of unsecured fixed rate loan notes were drawn down in
July 2014, over 15 years at 4.28%. Up until 31 December 2015, these
were accounted for at par. With effect from 1 June 2016 these are
accounted for at fair value. The fair value at 30 June 2016 was
GBP121.7m (30 June 2015 GBP107.0m and 31 December 2015
GBP109.0m).
The total weighted average
% interest rates payable: 2.25% 2.01% 2.09%
14 Share Capital
As at As at As at
30 June 30 June 31 Dec
GBP000 2016 2015 2015
------------------------------- --------- ---------- --------
Allotted, called up and fully
paid:
514,975,801 (552,334,146 at
30 June 2015 and 526,340,897
at 31 December 2015) ordinary
shares of 2.5p each 12,875 13,808 13,160
Share Buybacks
As at As at As at
30 June 30 June 31 Dec
GBP000 2016 2015 2015
------------------------------- --------- ---------- --------
Ordinary shares of 2.5p each
Opening share capital 13,160 13,835 13,835
Share buybacks (285) (27) (675)
------------------------------- --------- ---------- --------
Closing share capital 12,875 13,808 13,160
The Interim Report and Accounts will be available on the
Company's website www.alliancetrust.co.uk later today.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFLIDTILFIR
(END) Dow Jones Newswires
July 22, 2016 02:00 ET (06:00 GMT)
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