Alliance Trust PLC : Half-yearly report
2 August 2012
Alliance Trust PLC
Interim Results for the six months ended 30 June 2012
Financial Highlights
| As at 30 June 2012 | Total Return | Global Growth Sector Index Return | |
| NAV Per Share | 423.2p | +5.5% | +5.3% |
| Share Price | 352.3p | +4.2% | +5.0% |
Company Highlights
Alliance Trust is building a track record of consistent performance in volatile markets
NAV Total Return ranked 13/33 in the Global Growth peer group over 6 months and above median 1, 2 & 4 years
Total Shareholder Return (TSR) ranked 13/33 in the Global Growth peer group over 6 months and above median over 1, 2, 4 & 5 years
Outperformed Global Growth Sector index over 1, 2, 4 & 5 years on both a NAV & TSR basis
Investment reorganisation focused on higher conviction investing and sustainable income
ATS on track to achieve sustainable monthly profit by the end of 2012
ATI enters into an investment advisory agreement with Aviva Investors over £1.2bn Sustainable and Responsible (SRI) assets.
Commenting on the results, Katherine Garrett-Cox, Chief Executive, said:
"Alliance Trust has delivered another positive set of results and we are reporting good progress across all parts of the organisation. We have built a further 6 month period of strong performance in volatile markets on the back of what we delivered in 2011. Our NAV continues to outperform the Global Growth sector and illustrates that our priority is to produce consistent returns for our shareholders.
While the performance of the equity portfolio will continue to be the main driver of the NAV for the foreseeable future, the announcement today of our agreement with Aviva Investors is a significant step forward for Alliance Trust Investments. The deal will contribute towards its path to profitability and will provide a stepping stone for future growth. This deal underlines the current momentum in our subsidiaries, with Alliance Trust Savings also moving towards a sustainable profit, enhancing the returns of the Trust to all shareholders.
The economic outlook continues to be challenging as the UK remains in recession, Europe struggles to find a solution to the Euro issue, the US has not seriously addressed its debt issues and China's growth rate appears to be slipping. Companies with experienced management and a sound business strategy can still thrive in these conditions and provide great opportunities for investors who have the skills and flexibility to invest for the long term as valuations are increasingly attractive. Our record proves that we can compete in these market conditions and I am confident that we have the team and the processes in place to ensure that we will continue to do so."
- ENDS -
For more information please contact:
James Leviton and Clare Dundas
RLM Finsbury
020 7251 3801
Evan Bruce-Gardyne
Head of Investor Relations, Alliance Trust
01382 321169
Mobile: 07501 500243
Alliance Trust PLC Interim Report 2012
Company Highlights
Outperformed the Global Growth sector over 6 months, 1, 2, 4 and 5 years (Net Asset Value)
Ranked second quartile over 6 months, 1, 2 and 4 years (Net Asset Value)
Outperformed the Global Growth sector over 1, 2, 4 and 5 years (Share Price)
Ranked second quartile over 6 months, 1, 2, 4 and 5 years (Share Price)
On track for the 46th consecutive year of dividend increase
Company expenses increased by 3.3% excluding defence costs in both periods and the closure of the defined benefit pension scheme in the prior period
Performance Summary
This interim report sets out the results of Alliance Trust PLC for the six months ended 30 June 2012.
Over the six months the total return of the Company's Net Asset Value (NAV) per share was 5.5%. This NAV return was broadly in line with the sector average and we were ranked 13/33 in our peer group.
The Total Shareholder Return (TSR) was 4.2% and was ranked 13/33 in our peer group for the period.
Equity markets started the year by continuing a recovery that had begun in late November and saw markets rise between 15% and 20% in four months. This reflected how well many companies with strong balance sheets were positioned, enabling them to weather the gloomy economic outlook. However, as the financial and political situation in Europe came under renewed pressure so did equity markets and by April they started to retrench to varying degrees. The MSCI Europe ex UK Index was worst affected and fell over 12% from its peak in March whilst the S&P 500 and the FTSE 100 indices were down 3% and 6% respectively. The return of the MSCI All Country World Index over the period was 5.0%.
We have been alert to the likely underperformance of European equity markets as well as the potential for the Euro to weaken. Throughout the period we have continued to invest in European stocks and have benefited from a positive contribution from stock selection. However, because of our fundamental concerns we have held a short futures position on the Euro Stoxx 50 Index as a means of protecting the underlying portfolio from the worst effects of the weakness in Europe. In June we further reduced our exposure to European equities by 5% which resulted, after netting off the future, in the effective net exposure of the Trust to Europe falling to around 3% and the net exposure to equities reduced to 90.1%. We took similar preventative action with the Euro by hedging our position in January, covering around half of our European exposure, increasing this in March as concern over the currency heightened. As the currency stabilised towards the end of the period we closed out the position, resulting in
a gain of some €7m, adding 31 basis points to performance.
| NAV Total Return | 6 months | 1 year | 2 years | 3 years | 4 years | 5 years |
| Alliance Trust (%) | 5.5 | (4.2) | 17.3 | 41.9 | 16.9 | 6.7 |
| Global Growth Sector (%) | 5.3 | (6.6) | 16.1 | 43.2 | 13.6 | 6.5 |
| Ranking | 13/33 | 10/32 | 13/32 | 17/32 | 16/32 | 14/27 |
| Total Shareholder Return | 6 months | 1 year | 2 years | 3 years | 4 years | 5 years |
| Alliance Trust (%) | 4.2 | (6.3) | 21.9 | 40.9 | 26.1 | 9.7 |
| Global Growth Sector (%) | 5.0 | (7.3) | 15.8 | 41.0 | 13.8 | 7.7 |
| Ranking | 13/33 | 12/32 | 10/32 | 17/32 | 9/32 | 11/27 |
source: Morningstar/Factset
| Alliance Trust | MSCI All Country World Index | |||||
| Average | Average | Asset | Stock | |||
| Weight | Return | Weight | Return | Allocation | Selection | |
| Attribution | (%) | (%) | (%) | (%) | (%) | (%) |
| UK | 34.2 | 3.6 | 8.4 | 2.4 | (0.7) | 0.4 |
| North America | 26.2 | 11.1 | 50.7 | 7.4 | (0.5) | 0.9 |
| Europe ex UK | 12.9 | 6.9 | 15.0 | 1.9 | 0.1 | 0.6 |
| Pan Asia | 17.7 | 0.6 | 20.4 | 3.6 | 0.0 | (0.5) |
| Global | 6.5 | (1.1) | 5.5 | 5.0 | 0.0 | (0.4) |
| Total Equities | 97.5 | 5.0 | 100.0 | 5.0 | (1.1) | 1.0 |
| Fixed Income | 4.3 | 7.4 | 0.0 | 6.0* | 0.0 | 0.1 |
| Futures | (5.4) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Other Assets | 7.0 | 4.1 | 0.0 | 0.0 | (0.1) | (0.2) |
| Return on Discretionary Assets | 103.5 | 5.1 | 100.0 | 5.0 | (1.2) | 0.9 |
| Asset Allocation | - | (1.2) | - | - | - | - |
| Stock Selection | - | 0.9 | - | - | - | - |
| Expenses | - | (0.4) | - | - | - | - |
| Cash | 7.5 | (0.1) | - | - | - | - |
| Gearing | (11.0) | 0.3 | - | - | - | - |
| Buy Backs | - | 0.9 | - | - | - | - |
| Total Return | 100.0 | 5.5 | 100.0 | 5.0 | - | - |
Source: Factset/Alliance Trust
iBoxx Sterling Corporate 5-15 Year Index
Asset Allocation: measures the effect of being strategically overweight or underweight in an asset class compared to the reference point, the MSCI All Country World Index.
Stock Selection: measures how the stocks within each asset class have performed compared to the reference point, the MSCI All Country World Index.
Effect of Buybacks: measures the effect of decreasing the number of shares in issue through share buybacks.
Impact of Gearing: measures the impact of borrowings on the portfolio return.
Restructure of the investment portfolio
We announced on 5 July that we will restructure the equity portfolio. In future, the equity portfolio will be managed on a truly global basis, replacing the structure whereby the equity investments were managed as four separate regional portfolios. These have all been merged into the global portfolio. We expect annualised cost savings of £2m across the group as a result, with one-off reorganisation costs of £1m. The Company will now bear a direct share of the cost of the global equities team which is currently borne by Alliance Trust Investments. The net ongoing saving to the Company is not therefore expected to be material.
We recruited Ilario Di Bon in July 2011 to create an investment team capable of managing the equity holdings as a single portfolio, rather than the regional portfolios we had used in the past. Last month we were finally in a position to announce the restructure of the portfolio, and its management, on a truly global basis as he had built and strengthened the team. This move is all part of the execution of the strategy which we outlined in December 2008 to take Alliance Trust back to its roots as a global investor in equities and fixed income. We have been working on this for the last three and a half years and it was in delivering on this challenge that we closed the office in Hong Kong in 2009, began to wind down the direct property portfolio in 2010 and announced our intention to exit private equity in 2011.
As a consequence of the changes to the investment portfolio framework, we are in the process of reorganising the investment team which will manage the Trust. The portfolio will be characterised by an unconstrained approach applied to the generation of both capital growth and income for the Trust.
The search for growth stocks will be managed on a global sector basis, looking for the best investment opportunities, irrespective of where the companies may be listed. At the same time, income will be generated from a combination of dividend producing equities and fixed income instruments.
Under the new structure the number of holdings will be reduced from around 200 at the start of the year to less than 100 by the end of 2012.
Alliance Trust Investments
Alliance Trust Investments is entering into an agreement for Aviva Investors' Sustainable and Responsible Investment (SRI) Funds, amounting to some £1.2bn. This will be implemented by 31 August 2012. Five members of the Aviva Investors SRI investment team will transfer to Alliance Trust Investments and will be based in our London office. The consideration for the transaction will be a payment of £1m by Alliance Trust Investments, together with further amounts under a revenue-sharing arrangement between Alliance Trust Investments and Aviva Investors. It is intended that the funds will transfer to Alliance Trust Investments in early 2013 subject to legal and regulatory approval. The Head of this team will report directly to our Chief Investment Officer. This is a significant step forward for Alliance Trust Investments and will contribute towards its path to profitability.
Discount and Share Buybacks
We remain committed to our flexible buyback programme which has contributed to the reduced volatility in our discount compared to that of our peers.
In the first half of the year, the Company has bought back 30.3m shares (5.1% of the issued share capital) at a total cost of £106.8m and at a weighted average discount of 16.5%. At the Annual General Meeting in April 2012, shareholders renewed the authority for the Board to buy back up to 14.99% of the share capital in the Company and since then 3.0% of the shares have been bought back and cancelled.
The discount was largely unchanged at around 16% until early April, when it became markedly more volatile; narrowing until the end of April, when it reached 14.0%, and then widening out for a month to 17.9%. Since the middle of June we have seen the discount come back in to 16.7% at the period end. This reflects the experience of the sector as a whole and the other large trusts with which we are most closely compared.
Dividend
We announced at our AGM that we were considering the implications of recent changes in the regulations governing distributions by investment trusts, recognising the importance to shareholders of a sustainably rising dividend alongside capital growth. These changes bring flexibility, particularly for those trusts with less predictable revenue streams. Alongside the restructuring of our equity portfolio along global lines, as described elsewhere in this report, we are evaluating the projected income flows from the portfolio under various scenarios.
In accordance with our quarterly dividend policy, the Company paid an interim dividend of 2.3175p per share on 2 July 2012. A second interim dividend of 2.3175p per share will be paid on or around 1 October 2012 to shareholders on the register on 31 August 2012. For the financial year ending 31 December 2012, in the absence of any unforeseen developments, we expect to pay a third interim dividend of 2.3175p per share on 31 December 2012 and a fourth interim dividend of at least 2.3175p per share on or around 5 April 2013. Total 2012 dividends are therefore expected to be at least 9.27p, an increase of 3% on the prior period.
Outlook
Politics will play a major part in how markets behave in the second half of the year. The increased level of state indebtedness will be a critical factor in the economic decisions of central government and how they manage the balance between fiscal austerity and economic growth. Chancellor Merkel will face her electorate in 2013 and this will potentially have a significant impact on the future direction of European politics. The US has elections in November and for President Obama the result is much less clear than it appeared six months ago. Indeed, as many focus on Europe and the austerity budgets, they are not seeing the impending problems facing the US, where the debt to GDP ratios are growing and there is a likelihood that the federal debt ceiling will be reached in the final months of 2012. With the Senate in the control of the Democrats and the House of Representatives controlled by the Republicans, gaining political agreement for important decisions will only come after much bargaining and at some cost. The downside risk is that the debt focused decisions will impact upon future economic recovery. This is of particular importance in the US where the consumer accounts for over 70% of GDP.
Although many western economies are faced with the same fundamental problem Asia, and many emerging markets, are not burdened in the same way by high levels of sovereign or consumer debt. We expect economic growth in China to slow to around 8%. This is still substantial by comparison to the UK, US or Europe where we expect levels to be well below the trend rates and perhaps in negative territory in the case of the Eurozone. Inflation is also slowing which helps many emerging economies, particularly those with high energy importing requirements. This reduction in input costs will have a positive effect on margins for many companies and may help provide some positive earnings surprises.
Global equity markets face a number of headwinds, especially from Europe, and will remain volatile until we see a coordinated resolve to formulate a sustainable plan to ensure greater economic and political stability. Although recent events suggest this is closer, investor confidence remains fragile and this could easily tip over into all-out pessimism. However, we maintain our central scenario that a meltdown in Europe will be averted, despite our assumption that Greece will leave the Euro this year, and that global growth, although anaemic, will still be positive. Despite this assumption of lower growth, markets will eventually refocus on the fundamentally strong companies and it for this reason that we remain cautiously optimistic over the medium-term for equity markets.
In this environment, and with the high levels of debt, we expect western government bond yields to edge slightly higher from the current multi-year lows with corporate bond spreads improving in line with equity markets.
Our two key priorities, on which we reported in more detail in our Annual Report and Accounts, are to focus on investments in equities and fixed income and to continue to improve performance. Here we provide a summary of our activities during the period.
| Our businesses | Objectives for 2012 | Progress to date |
| Alliance Trust PLC | ||
| We are an investment trust whose purpose is to grow the value of the capital that our shareholders have invested with us. This has been our aim for over 120 years and we maintain a prudent approach to investment with an emphasis on long term returns. We are the UK's largest generalist investment trust by market value listed on the London Stock Exchange. As at 30 June 2012 we managed net assets of £2.4bn. | We will continue the work that has been taking place over the last few years and which has been aimed at streamlining the portfolio to deliver improved investment performance. We will seek to deliver strong performance in order to narrow the discount between our Net Asset Value and share price. | Announced a restructuring of our portfolio to a global investment approach Delivered investment returns in line with our peers, ranking in the second quartile for our sector over 6 and 12 months Reduced our equity exposure to Europe by almost £120m Successfully hedged our currency risk with a gain of €7m |
| Alliance Trust Investments | ||
| We are a boutique fund management business which launched its first fund in 2009 and which offers a broad selection of open ended funds and investment solutions. As at 30 June 2012 we managed third party assets of over £150m. | We will launch new funds where we have the appropriate level of skills and identify a demand. | Rationalised our fund range Positive inflow of third party funds under management against difficult market conditions Third party funds under management up 17% Loss over the period £2.7m against £1.8m for the first half of last year Investment advisory agreement with Aviva Investors for £1.2bn of Sustainable and Responsible Investment assets |
| Alliance Trust Savings | ||
| Since 1986 we have been providing a tax-efficient way for shareholders to hold shares in Alliance Trust. Today we provide high quality financial products to private investors, financial advisers and discretionary fund managers. | We will build on the growth and momentum achieved in recent years. We will continue to enhance our customer and adviser propositions and further significantly develop our online capabilities. Our i.nvest platform is well positioned in both the retail and intermediated markets to take full advantage of the changes being introduced through the Retail Distribution Review in 2013. | Announced further price increases, to be implemented from 1 August 2012, but remain competitively priced Increased the number of new accounts opened in the period against the same period last year by 91% Divested non-core Small Self Administered Schemes (SSAS) pension book realising a profit of £0.4m Operational loss over the period £0.9m against £1.5m for the first half of last year On track to achieve a sustainable monthly profit by the end of 2012. |
Portfolio Review
Our overriding objectives are to create and preserve the wealth of our shareholders and to generate a rising dividend. To enable us to achieve these objectives we take a long term investment approach and invest in a high-conviction portfolio of global equities and fixed income securities.
The objective of our investment strategy is to select stocks that can add to shareholder value throughout the economic cycle and in some cases have a particular niche that allows them to capitalise on regional specific themes. For us, stock picking requires detailed analysis of company accounts, meeting with senior management and a full understanding of what gives them the edge over their competitors.
As part of this fundamental analysis we have to assess what is a fair price for a stock that clearly demonstrates these characteristics. In many cases this competitive advantage may already be priced into a share price, leaving little in the way of upside potential. However, in others it may not and these are the stocks we aim to invest in. The current environment, where many domestic economies are struggling, can create great opportunities as share prices are driven in the short-term by economic concerns and not by company fundamentals. However, over the long-term these fundamental company specific drivers will re-assert themselves and provide significant rewards for the patient investor.
The process of monitoring and assessing the potential value of stocks already in the portfolio allows us to shape the Trust to benefit from the key drivers of long-term value. It also allows us to isolate holdings that have reached their full potential or their competitive advantage has changed to the extent that we would sell the holding.
As an investor we are committed to a long-term relationship with the companies in which we invest. We welcomed the introduction of the UK Stewardship Code which promotes dialogue between shareholders and the boards of their investee companies and transparency about how investors oversee those companies. We reported on our voting activities in our Annual Report and Accounts and further details can be found on our website www.alliancetrust.co.uk.
We are also signatories to the UN Principles for Responsible Investment which advocates environmental, social and corporate governance considerations when taking investment decisions. We use a non profit making organisation, Ethical Investment Research Services, to assist in the process.
Our investment themes, as outlined on the following pages, are little changed from those published at the end of last year. We provide commentary here on our portfolio activity over the period.
| Theme | Portfolio Activity |
| Asian Growth | |
| The combination of increased industrialisation, the growth both in the number and wealth of the Asian consumer and the massive public sector infrastructure developments in China and other markets, are creating massive demand for raw materials such as copper and steel. These factors are also creating opportunities for companies from all parts of the economic spectrum to service these new markets. There has been a slight cooling off of the expectations for Asian economies as fear of contagion from the Eurozone issue dampens the outlook, but consensus GDP growth for China for 2012 is 8.1% and for India is 6.3%, which compares with a forecast contraction within Western Europe of 0.2%. | Our exposure to Asia has been maintained over the last six months at around 19%. We continue to favour domestic consumer facing companies over firms that export goods to developed markets. This has resulted in new additions to the portfolio in the ASEAN region, such as the Philippines and Thailand, at the expense of Taiwan and Korea. We also take advantage of the strong growth story through companies that derive significant revenue from Asia but are not listed in the region. Standard Chartered is an example of this, where it is listed in the UK but around 70% of its revenue comes from Asia. Our own analysis shows that some 22% of the Trust's total portfolio revenue comes from Asia. |
| Eurozone Crisis | |
| The future for Europe is far from clear. Despite extensive discussions and negotiations, no solution to what is an intractable problem has been agreed upon by the European politicians. The situation in Greece is out of the headlines at the moment, simply because the situation in Spain is more significant and immediate in terms of Europe as a whole. This uncertainty has filtered through to the Euro which weakened by over 7% against Sterling in the first half of the year and to equity markets - the MSCI Spain had fallen over 25% by June and the MSCI Greece index fell almost 50% between February and June. This provides a backdrop against which stock pickers can identify undervalued companies. | Euro dominated markets rose less than 0.5% compared to 5.0% for the MSCI All Country World Index. Southern and peripheral countries were largely responsible for dragging the Index down, while core Europe generated positive returns (Greece, Spain and Portugal all fell more than 15%, while Italy, Finland and Austria were the only other countries to post negative returns). At a sector level energy, telecoms and utilities fell over 5% on a total return basis, and with financials also falling by around 3%, over 40% of the Index fell in value at the sector level. When looking at stocks that are active in Europe, we have been alert to the likely impact on their earnings of the cost of resolving the Eurozone crisis, which will inevitably fall hardest on those companies with high levels of dependency on the peripheral European markets. However, our thematic approach has led us to conclude that there remain interesting investment opportunities in Europe. In particular, we remain heavily exposed to international companies in less cyclical industries. |
| Income Generation | |
| The dividends we receive from the investment portfolio are distributed to shareholders after the costs of the Trust have been paid. We have grown the dividend paid to shareholders in each of the last 45 years and this year, in the absence of any unforeseen developments, we will increase the dividend by at least 3.0% to 9.27p, or a total payment for the period of around £52.3m. | Over the period we have reduced the cyclical exposure of the portfolio further and repositioned some of our holdings in the quality income segment of the market, across all geographic regions. Our managers consider the dividend policy of the companies in which they invest because we believe that a dividend policy is a useful discipline for companies. Over recent years we have reduced our exposure to the high-yielding UK portfolio, but source income elsewhere to match our dividend commitment. Our UK investments generated a yield of nearly 4% in the year. We have been able to diversify income generation which now includes a significant contribution from the fixed income portfolio, yielding over 6%. |
| Demographics and Pressure on the Consumer | |
| Growing population growth is a long running theme and will continue to impact many parts of the global economy. It puts greater pressure on land use with the ever-increasing demand for protein. As average incomes in developing economies rise, so does consumer demand whether that be for food, healthcare or consumer discretionary items. Over the period inflationary pressures have reduced slightly, mainly driven by the drop in energy prices especially oil and gas. However food inflation continues to be a concern in certain areas. | The increase in life expectancy across the globe will have a significant bearing on spending patterns both of Governments and individuals. As the level of disposable income of the population in developed markets rises, so the demand for pharmaceuticals and healthcare products will rise. Governments will see the pressure on state funded health and welfare systems increase and we see this most starkly in the ongoing debate in the US. As a consequence, 3 of the top 20 positions are in Pharma & Biotech companies and we have been building a position in Express Scripts the largest pharmacy benefit manager in the US. They help health plans and companies manage their drug spend and with the increased expenditure in this sector and their market share we anticipate further benefits for shareholders. |
| "Macro Bear - Micro Bull" | |
| Despite slowing growth and European debt issues corporate profits continue to be strong in many areas. The lack of wage pressures and drop in energy and raw material costs have helped maintain margins and corporate levels of cash remain strong. As investors, we focus on the main drivers of corporate profits and share prices. In certain stressed periods macro-economic events will dominate share price movements but, over the longer term, fundamental company valuations prevail. This is why we base much of our portfolio strategy on our own detailed company analysis and look to take advantage in periods when quality stocks become undervalued by the market. In some cases this can take time to be realised but high quality companies with strong balance sheets and experienced management will, over time, provide meaningful returns to patient investors. | Despite the gloomy prognosis from the economists, we see investment opportunities at the company level. It is easy to get fixated on the movement of equity markets, but at the individual company level there are companies that have developed sought-after niche products to drive their profitability forward. In the US, where the economy continues to struggle to put the credit crisis behind it, Apple continues to define the way in which the market looks at technology. We did take some profits in March at $596, but it remains a top 10 position. |
| Deleveraging | |
| Sovereign levels of debt continue to increase in most developed countries and the proposed austerity measures will do little to reverse this significantly in the short term. To redress this the levels of economic growth need to increase, fuelling greater tax receipts and revenues for many beleaguered western economies. Reducing debt and stimulating growth is a very fine balance and has so far proved elusive, and given the backdrop of the slowdown seen in Europe and Asia over the past few months, it seems unlikely to tip in favour of growth in the near term unless a rise in consumer and business confidence can be created by government intervention and a credible action plan. From a UK household perspective the deleveraging process that began in 2008 now seems to have slowed but consumer confidence is still low as is spending on discretionary items, this looks set to continue for some time. | This theme is reflected in the portfolio where we have negligible exposure to consumer discretionary spending. In this environment, it is companies with strong business models, generating solid cash flow, that are able to take advantage of lower borrowing costs and the selective lending appetite from banks. Legal & General is one of our top 20 holdings and has consistently delivered customer focused solutions for insurance, savings and investment. Established in 1836 it can demonstrate credibility and experience throughout every kind of economic climate. Its strong balance sheet has allowed it to develop and grow even in the current deleveraging phase. In 2011 the full year dividend was up 35%, net cash generation was up 11% and worldwide sales up 7%. The current yield is approximately 5%. |
| Technological Advances | |
| Technological advances have the potential to revolutionise the way in which businesses interact with each other and consumers. Identifying the companies that have the ideas and the means to deliver them to the market is critical as the potential gains available to those that make the first move are significant. There is a tendency to presume that most of these advances are taking place in the computer based sectors, but we see opportunities across all markets and sectors. | One area where significant technological advance is taking place is in the oil sector. "Fracking", which is the process of fracturing shale rock to release natural gas and oil, has led to a reversal of a decades long decline in US oil production to the point where the reserves of shale gas and oil could lead to the US becoming self sufficient in energy. Investment in exploration and production companies is one way to invest in this development, however, fracking is not without its issues such as potential contamination of groundwater. We have been investors in Clean Harbors whose products and services came to the fore in the aftermath of the Gulf of Mexico disaster in 2010, but the more interesting opportunities lie in using its expertise to prevent and handle hazardous waste from fracking. |
Risks and Uncertainties
The Company invests in both quoted and unquoted securities, fixed income securities, its subsidiary businesses, other asset classes and financial instruments for the long term in order to achieve its investment objectives. Its principal risks and uncertainties are therefore:
· Strategic
· Market
· Gearing
· Accounting, legal and regulatory; and
· Operational
These risks, and the way in which they are managed, are described in more detail within the Risk Factors section on pages 22 and 23 of the Company's Annual Report and Accounts for the period ended 31 December 2011, which is available on the Company's website at
www.alliancetrust.co.uk.
The Directors do not consider that the nature of the Company's principal risks and uncertainties has changed materially since the period end. In reaching that assessment they have had regard to the deterioration in the forecasts for the economies of the Eurozone area and have put in place plans to mitigate the Company's exposure by reducing investment in the geographical areas most susceptible to economic failure and have in place business continuity and damage limitation plans to minimise the impact on the Company should any country leave the Euro common currency.
Other than the impact of a potential failure of the current Euro structure we believe that our principal risks are not expected 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 period ended 31 December 2011. There were no transactions with related parties during the six months ended 30 June 2012 which have a material effect on the results of financial position of the Company or of the Group.
Going Concern Statement
The factors impacting Going Concern are set out in detail in the Accounting and Audit section of the Company's Report and Accounts for the period ended 31 December 2011.
As at 30 June 2012 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 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
| Karin Forseke | Katherine Garrett-Cox | |
| Chairman | Chief Executive | |
| 1 August 2012 | 1 August 2012 | |
Top 50 quoted equity holdings as at 30 June 2012
| Stock | Sector | Country of | Value | % of |
| listing | £m | quoted | ||
| equities | ||||
| Royal Dutch Shell | Energy | UK | 60.8 | 2.7 |
| BP | Energy | UK | 57.8 | 2.6 |
| GlaxoSmithKline | Pharma, Biotech & Life Sciences | UK | 57.3 | 2.6 |
| HSBC Holdings | Banks | UK | 41.2 | 1.8 |
| British American Tobacco | Food Beverage & Tobacco | UK | 37.3 | 1.7 |
| Pfizer | Pharma, Biotech & Life Sciences | USA | 37.1 | 1.7 |
| BG Group | Energy | UK | 36.9 | 1.7 |
| Apple | Technology Hardware & Equipment | USA | 36.1 | 1.6 |
| American Tower | Real Estate | USA | 36.0 | 1.6 |
| Prudential | Insurance | UK | 35.5 | 1.6 |
| Vodafone Group | Telecommunication Services | UK | 35.3 | 1.6 |
| Lions Gate Entertainment | Media | USA | 34.5 | 1.5 |
| AstraZeneca | Pharma, Biotech & Life Sciences | UK | 30.3 | 1.4 |
| National Grid | Energy | UK | 29.7 | 1.3 |
| Diageo | Food Beverage & Tobacco | UK | 29.5 | 1.3 |
| InterOil | Energy | Canada | 28.7 | 1.3 |
| Legal & General Group | Insurance | UK | 28.0 | 1.3 |
| BHP Billiton | Materials | UK/Australia | 27.5 | 1.2 |
| Philip Morris International | Food Beverage & Tobacco | USA | 26.6 | 1.2 |
| Ross Stores | Retailing | USA | 25.2 | 1.1 |
| Unilever | Food Beverage & Tobacco | UK | 24.7 | 1.1 |
| Microsoft | Software & Services | USA | 24.6 | 1.1 |
| Standard Chartered | Banks | UK | 24.5 | 1.1 |
| Rio Tinto | Materials | UK | 24.4 | 1.1 |
| Elementis | Materials | UK | 24.1 | 1.1 |
| Bank of Nova Scotia | Banks | Canada | 24.0 | 1.1 |
| Clean Harbours | Commercial & Professional Services | USA | 24.0 | 1.1 |
| Visa | Software & Services | USA | 23.8 | 1.1 |
| New York Community Bancorp | Banks | USA | 23.1 | 1.0 |
| Enterprise Products Partners | Energy | USA | 21.4 | 1.0 |
| Yamana Gold | Materials | Canada | 21.1 | 0.9 |
| Express Scripts Holding | Health Care Equipment & Services | USA | 20.7 | 0.9 |
| DaVita | Health Care Equipment & Services | USA | 20.0 | 0.9 |
| Caterpillar | Capital Goods | USA | 19.5 | 0.9 |
| Experian | Commercial & Professional Services | UK | 19.2 | 0.9 |
| Pearson | Media | UK | 18.8 | 0.8 |
| BT Group | Telecommunication Services | UK | 18.1 | 0.8 |
| Melrose | Capital Goods | UK | 18.0 | 0.8 |
| RSA Insurance Group | Insurance | UK | 18.0 | 0.8 |
| Tullow Oil | Energy | UK | 17.2 | 0.8 |
| Xstrata | Materials | UK | 16.7 | 0.7 |
| Suncor Energy | Energy | Canada | 16.6 | 0.7 |
| Monsanto | Materials | USA | 16.3 | 0.7 |
| Kingfisher | Retailing | UK | 16.3 | 0.7 |
| BE Aerospace | Capital Goods | USA | 15.7 | 0.7 |
| Apache | Energy | USA | 15.5 | 0.7 |
| Taiwan Semiconductor Manufacturing | Technology Hardware & Equipment | Taiwan/USA | 15.4 | 0.7 |
| Astellas Pharma | Pharma, Biotech & Life Sciences | Japan | 15.3 | 0.7 |
| Tetra Tech | Commercial & Professional Services | USA | 15.1 | 0.7 |
| Rolls-Royce Holdings | Capital Goods | UK | 14.9 | 0.7 |
These investments may be held directly and/or indirectly through investment in Alliance Trust Investment Funds. A full list of companies in which we invest and their weightings can be found on our website www.alliancetrust.co.uk
Consolidated Income Statement (Unaudited)
For the period ended 30 June 2012
| 6 months to 30 June 2012 | 6 months to 31 July 2011 | 11 month period to 31 Dec 2011 (audited) | ||||||||
| £000 | Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Revenue | ||||||||||
| Income | 3 | 58,962 | - | 58,962 | 65,983 | - | 65,983 | 104,610 | - | 104,610 |
| Profit/(Loss) on fair value designated investments | - | 78,002 | 78,002 | - | (30,354) | (30,354) | - | (253,611) | (253,611) | |
| Profit/(Loss) on investment property held | - | - | - | - | 115 | 115 | - | (240) | (240) | |
| -------- | --------- | --------- | -------- | -------- | --------- | -------- | -------- | --------- | ||
| Total Revenue | 58,962 | 78,002 | 136,964 | 65,983 | (30,239) | 35,744 | 104,610 | (253,851) | (149,241) | |
| Administrative expenses | (19,118) | (714) | (19,832) | (17,127) | (1,908) | (19,035) | (37,419) | (1,957) | (39,376) | |
| Finance (costs)/income | 4 | (4,730) | (7,742) | (12,472) | (4,805) | (2,185) | (6,990) | (8,736) | 5,914 | (2,822) |
| Loss on disposal of office premises | - | - | - | - | - | - | - | (5) | (5) | |
| Loss on revaluation of office premises | - | - | - | - | (5) | (5) | - | - | - | |
| Foreign exchange gains/(losses) | 18 | 9,950 | 9,968 | - | (1,632) | (1,632) | - | 1,275 | 1,275 | |
| -------- | --------- | ---------- | -------- | --------- | --------- | -------- | --------- | --------- | ||
| Profit/(Loss) before tax | 35,132 | 79,496 | 114,628 | 44,051 | (35,969) | 8,082 | 58,455 | (248,624) | (190,169) | |
| Tax | 5 | (2,377) | - | (2,377) | (2,722) | - | (2,722) | (2,562) | (100) | (2,662) |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Profit/(Loss) for the period | 32,755 | 79,496 | 112,251 | 41,329 | (35,969) | 5,360 | 55,893 | (248,724) | (192,831) | |
| ======== | ======= | ======= | ====== | ======== | ======= | ====== | ======= | ======= | ||
| All profit/(loss) for the period is attributed to equity holders of the parent. | ||||||||||
| Earnings/(Loss) per share from continuing operations attributable to equity holders of the parent | ||||||||||
| Basic (p per share) | 7 | 5.74 | 13.93 | 19.67 | 6.54 | (5.69) | 0.85 | 8.91 | (39.66) | (30.75) |
| Diluted (p per share) | 7 | 5.72 | 13.89 | 19.61 | 6.52 | (5.69) | 0.83 | 8.89 | (39.66) | (30.77) |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
| 6 months to 30 June 2012 | 6 months to 31 July 2011 | 11 month period to 31 Dec 2011 (audited) | ||||||||
| £000 | Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Profit/(Loss) for the period | 32,755 | 79,496 | 112,251 | 41,329 | (35,969) | 5,360 | 55,893 | (248,724) | (192,831) | |
| Defined benefit plan net actuarial (loss) | 8 | - | (2,103) | (2,103) | - | (798) | (798) | - | (767) | (767) |
| Retirement benefit obligations deferred tax | - | 146 | 146 | - | (554) | (554) | - | 449 | 449 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Other comprehensive loss | - | (1,957) | (1,957) | - | (1,352) | (1,352) | - | (318) | (318) | |
| Total comprehensive income/(loss) for the period | 32,755 | 77,539 | 110,294 | 41,329 | (37,321) | 4,008 | 55,893 | (249,042) | (193,149) | |
| ======= | ======= | ====== | ======= | ====== | ====== | ====== | ====== | ====== | ||
| All total comprehensive income/(loss) for the period is attributed to equity holders of the parent | ||||||||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the period ended 30 June 2012
| 6 months to 30 June 2012 | 6 months to 31 July 2011 | 11 month period to 31 Dec 2011 | |
| £000 | (audited) | ||
| Called up share capital | |||
| At 1 January 2012 | 14,833 | 16,527 | 16,527 |
| Own shares purchased and cancelled in the period | (758) | (999) | (1,694) |
| ---------- | ---------- | ---------- | |
| At 30 June 2012 | 14,075 | 15,528 | 14,833 |
| ---------- | ---------- | ---------- | |
| Capital reserves | |||
| At 1 January 2012 | 1,665,692 | 2,158,630 | 2,158,630 |
| Profit/(Loss) for the period | 79,496 | (35,969) | (248,724) |
| Defined benefit plan acturial net loss | (1,957) | (1,352) | (318) |
| Own shares purchased and cancelled in the period | (107,307) | (151,315) | (245,534) |
| Share based payments | 538 | 821 | 1,638 |
| ---------- | ---------- | ---------- | |
| At 30 June 2012 | 1,636,462 | 1,970,815 | 1,665,692 |
| ---------- | ---------- | ---------- | |
| Merger reserve | |||
| At 1 January 2012 and 30 June 2012 | 645,335 | 645,335 | 645,335 |
| ---------- | ---------- | ---------- | |
| Capital redemption reserve | |||
| At 1 January 2012 | 4,165 | 2,471 | 2,471 |
| Own shares purchased and cancelled in the period | 758 | 999 | 1,694 |
| ---------- | ---------- | ---------- | |
| At 30 June 2012 | 4,923 | 3,470 | 4,165 |
| ---------- | ---------- | ---------- | |
| Revenue reserve | |||
| At 1 January 2012 | 73,348 | 71,541 | 71,541 |
| Profit for the period | 32,755 | 41,329 | 55,893 |
| Dividends | (28,255) | (28,157) | (54,090) |
| Unclaimed dividends | 37 | 31 | 4 |
| ---------- | ---------- | ---------- | |
| At 30 June 2012 | 77,885 | 84,744 | 73,348 |
| ---------- | ---------- | ---------- | |
| Total equity | |||
| At 1 January 2012 | 2,403,373 | 2,894,504 | 2,894,504 |
| ---------- | ---------- | ---------- | |
| At 30 June 2012 | 2,378,680 | 2,719,892 | 2,403,373 |
| ---------- | ---------- | ---------- |
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 30 June 2012
| £000 | Note | 30 June 2012 | 31 July 2011 | 31 Dec 2011 |
| (audited) | ||||
| Non-current assets | ||||
| Investments held at fair value | 2,613,162 | 2,961,787 | 2,625,615 | |
| Investment property | 9,775 | 10,130 | 9,775 | |
| Property, plant and equipment: | ||||
| Office premises | 6,025 | 6,025 | 6,025 | |
| Other fixed assets | 8 | 20 | 15 | |
| Intangible assets | 1,296 | 2,095 | 1,598 | |
| Pension scheme surplus | 8 | 2,555 | 2,899 | 3,150 |
| Deferred tax asset | 907 | 149 | 907 | |
| ---------- | ---------- | ---------- | ||
| 2,633,728 | 2,983,105 | 2,647,085 | ||
| Current assets | ||||
| Outstanding settlements/other receivables | 474,093 | 63,063 | 190,644 | |
| Withholding tax debtor | 1,237 | 837 | 789 | |
| Corporation tax debtor | 100 | 79 | 179 | |
| Cash and cash equivalents | 512,615 | 403,136 | 415,435 | |
| ---------- | ---------- | ---------- | ||
| 988,045 | 467,115 | 607,047 | ||
| Total assets | 3,621,773 | 3,450,220 | 3,254,132 | |
| Current liabilities | ||||
| Outstanding settlements/other payables | (941,485) | (467,937) | (600,539) | |
| Tax payable | (141) | (1,969) | (141) | |
| Bank overdrafts and loans | 13 | (300,000) | (259,530) | (248,768) |
| ---------- | ---------- | ---------- | ||
| (1,241,626) | (729,436) | (849,448) | ||
| Total assets less current liabilities | 2,380,147 | 2,720,784 | 2,404,684 | |
| Non-current liabilities | ||||
| Deferred tax liability | (761) | (622) | (907) | |
| Amounts payable under long term Investment Incentive Plan | (706) | (270) | (404) | |
| ---------- | ---------- | ---------- | ||
| Net assets | 2,378,680 | 2,719,892 | 2,403,373 | |
| Equity | ||||
| Share capital | 14 | 14,075 | 15,528 | 14,833 |
| Capital reserves | 1,636,462 | 1,970,815 | 1,665,692 | |
| Merger reserve | 645,335 | 645,335 | 645,335 | |
| Capital redemption reserve | 4,923 | 3,470 | 4,165 | |
| Revenue reserve | 77,885 | 84,744 | 73,348 | |
| --------- | ---------- | ---------- | ||
| Total equity | 2,378,680 | 2,719,892 | 2,403,373 | |
| All net assets are attributed to equity holders of the parent | ||||
| Net asset value per ordinary share attributable to equity holders of the parent | ||||
| Basic (£) | 9 | 4.24 | 4.39 | 4.06 |
| Diluted (£) | 9 | 4.23 | 4.38 | 4.05 |
CONSOLIDATED CASH FLOW (unaudited)
| For the period ended 30 June 2012 | 6 months to | 6 months to | 11 month period to |
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| £000 | (audited) | ||
| Cash flows from operating activities | |||
| Profit/(loss) before tax | 114,628 | 8,082 | (190,169) |
| Adjustments for: | |||
| (Gains)/losses on investments | (78,002) | 30,239 | 253,851 |
| Foreign exchange (gains)/losses | (9,968) | 1,632 | (1,275) |
| Scrip dividends | (455) | (230) | (886) |
| Depreciation | 7 | 7 | 12 |
| Amortisation of intangibles | 435 | 936 | 1,732 |
| Loss on disposal/revaluation of property | - | 5 | 5 |
| Share based payment expense | 538 | 821 | 1,638 |
| Interest | 12,472 | 6,990 | 2,822 |
| Pension funding | (1,508) | (2,851) | (3,071) |
| --------- | --------- | --------- | |
| Operating cash flows before movements in working capital | 38,147 | 45,631 | 64,659 |
| Increase in amounts due to depositors | 28,503 | 24,871 | 43,876 |
| (Decrease)/increase in receivables | (447,950) | (18,195) | 9,630 |
| Increase/(decrease) in payables | 9,222 | (1,541) | (6,759) |
| --------- | --------- | --------- | |
| Net cash (outflow)/inflow from operating activities before income taxes | (372,078) | 50,766 | 111,406 |
| Taxes paid | (2,746) | (2,085) | (4,377) |
| --------- | --------- | --------- | |
| Net cash (outflow)/inflow from operating activities | (374,824) | 48,681 | 107,029 |
| Cash flows from investing activities | |||
| Proceeds on disposal of fair value through profit and loss investments | 644,795 | 948,592 | 1,526,557 |
| Purchase of fair value through profit and loss investments | (99,068) | (660,923) | (1,176,618) |
| Disposal of plant and equipment | - | 240 | 240 |
| Purchase of intangible assets | (104) | (686) | (985) |
| --------- | --------- | --------- | |
| Net cash inflow from investing activities | 545,623 | 287,223 | 349,194 |
| Cash flows from financing activities | |||
| Dividends paid - Equity | (41,035) | (28,190) | (41,310) |
| Unclaimed dividends repaid | 37 | 31 | 4 |
| Purchase of own shares | (107,307) | (151,315) | (245,534) |
| New bank loans raised | 51,232 | - | - |
| Repayment of borrowing | - | (79,467) | (90,229) |
| Third party investment in subsidiary OEIC - Alliance Trust Investment Funds | 20,291 | 39,427 | 50,711 |
| Interest payable | (6,805) | (6,977) | (11,060) |
| --------- | --------- | --------- | |
| Net cash outflow from financing activities | (83,587) | (226,491) | (337,418) |
| --------- | --------- | --------- | |
| Net increase in cash and cash equivalents | 87,212 | 109,413 | 118,805 |
| Cash and cash equivalents at beginning of period | 415,435 | 295,355 | 295,355 |
| Effect of foreign exchange rate changes | 9,968 | (1,632) | 1,275 |
| --------- | --------- | --------- | |
| Cash and cash equivalents at end of period | 512,615 | 403,136 | 415,435 |
Notes to the Financial Statements
1 General Information
The information contained in this report for the period ended 31 December 2011 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for the period ended 31 December 2011 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 has sufficient resources to continue in operational existence for the forseeable future. Accordingly the financial statements have been prepared on a going concern basis.
Changes in accounting policies
The same accounting policies, presentations and methods of computation are followed in these financial statements as are applied in the Group's latest audited financial statements. No material changes in accounting policies are anticipated in the forthcoming financial statements for the year ended 31 December 2012.
3 Revenue
| £000 | 6 months to | 6 months to | 11 month period to |
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| Deposit interest | 1,666 | 1,410 | 2,939 |
| Dividend income | 50,270 | 56,585 | 87,791 |
| Mineral rights income | 489 | 754 | 1,224 |
| Property income | 383 | 1,433 | 2,176 |
| Savings and Pension Plan charges | 5,678 | 4,657 | 8,855 |
| Other income | 476 | 1,144 | 1,625 |
| --------- | -------- | -------- | |
| Total revenue | 58,962 | 65,983 | 104,610 |
| --------- | -------- | -------- |
4 Finance Costs/(Income)
| 6 months to | 6 months to | 11 month period to | |||||||
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |||||||
| £000 | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Interest payable | |||||||||
| Payable to depositors | 3 | - | 3 | 1 | - | 1 | 25 | - | 25 |
| Net gains/(losses) attributable to third party investment in subsidiary OEIC | 3,349 | 6,093 | 9,442 | 2,908 | 643 | 3,551 | 5,681 | (8,864) | (3,183) |
| Bank loans and overdrafts | 1,378 | 1,649 | 3,027 | 1,896 | 1,542 | 3,438 | 3,030 | 2,950 | 5,980 |
| --------- | -------- | -------- | --------- | -------- | -------- | --------- | -------- | -------- | |
| Total finance costs/(income) | 4,730 | 7,742 | 12,472 | 4,805 | 2,185 | 6,990 | 8,736 | (5,914) | 2,822 |
| --------- | -------- | -------- | --------- | -------- | -------- | --------- | -------- | -------- | |
5 Taxation
UK corporation tax for the period to 30 June 2012 is charged at 24.5% (26.5% for the period to 30 June 2011) of the estimated taxable profits for the period, a reduction in the main rate of UK corporation tax to 24% was substantively enacted on 26 March 2012. Taxation levied by other jurisdictions is calculated at the rates prevailing in those jurisdictions, such taxation mainly comprises withholding taxes levied on the investment return generated on foreign investments such as overseas dividend income.
6 Dividends
| £000 | 6 months to | 6 months to | 11 month period to |
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| Fourth interim dividend for the year ended 31 January 2011 of 2.2075p per share | - | 14,475 | 14,475 |
| First interim dividend for the period ended 31 December 2011 of 2.141p per share | - | 13,682 | 13,682 |
| Second interim dividend for the period ended 31 December 2011 of 2.141p per share | - | - | 13,147 |
| Third interim dividend for the period ended 31 December 2011 of 2.141p per share | - | - | 12,786 |
| Fourth interim dividend for the period ended 31 December 2011 of 2.577p per share | 14,986 | - | - |
| First interim dividend for the year ending 31 December 2012 of 2.3175p per share | 13,269 | - | - |
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 30 June 2012 | 6 months to 31 July 2011 | 11 month period to 31 Dec 2011 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||||
| Ordinary Shares | ||||||||||||
| Earnings for the purposes of basic earnings per share being net profit/(loss) attributable to equity holders of the parent (£000) | 32,755 | 79,496 | 112,251 | 41,329 | (35,969) | 5,360 | 55,893 | (248,724) | (192,831) | |||
| Number of shares | ||||||||||||
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 570,523,019 | 632,063,810 | 627,212,088 | |||||||||
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 572,293,236 | 633,834,020 | 628,982,298 | |||||||||
The weighted average of ordinary shares is arrived at by excluding 1,770,218 (1,770,212 all other periods) ordinary shares acquired by the Trustee of the Employee Benefit Trust with funds provided by the Company.
IAS 33 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.
Employees (other than Executive Directors) are entitled to receive contributions into their own Self Invested Personal Pension ('SIPP') provided by Alliance Trust Savings Limited.
Defined Benefit Scheme
The net actuarial loss made in the period and recognised in the Consolidated Statement of Comprehensive Income was £2,103,000
(31 July 2011 net actuarial loss of £798,000 and 31 December 2011 net actuarial loss of £767,000).
Certain actuarial assumptions have been used to arrive at the retirement benefit scheme surplus of £2.6m as at 30 June 2012 (31 July 2011 surplus of £2.9m and 31 December 2011 surplus of £3.1m). These are set out below:
| 30 June 2012 % per annum | 31 July 2011 % per annum | 31 Dec 2011 % per annum | |
| Inflation - (RPI) | 3.0 | 3.7 | 3.2 |
| Inflation - (CPI) | 2.0 | 3.2 | 2.2 |
| Salary increases | - | - | - |
| Rate of discount | 4.5 | 5.5 | 4.7 |
| Allowance for pension in payment increases of RPI or 5% p.a. if less | 2.9 | 3.7 | 3.1 |
| Allowance for revaluation of deferred pensions of CPI or 5% p.a. if less | 2.0 | 3.2 | 2.2 |
9 Net Asset Value Per Ordinary Share
The calculation of the net asset value per ordinary share is based on the following:
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| Equity shareholder funds (£000) | 2,378,680 | 2,719,892 | 2,403,373 |
| Number of shares at period end - Basic | 561,205,928 | 619,336,548 | 591,530,934 |
| Number of shares at period end - Diluted | 562,976,146 | 621,106,760 | 593,301,146 |
The number of ordinary shares has been reduced by 1,770,218 (1,770,212 all other periods) ordinary shares held by the Trustee of the Employee Benefit Trust in order to arrive at the Basic figures above.
10 Segmental Reporting
Alliance Trust PLC's operating segments are strategic business units that offer different products and services. They are managed separately because of the differences in the products and services provided. They are however all complementary to the core business of investing in various asset classes to generate increasing value over the long term.
The Group's primary operating segments are the Company, Alliance Trust Savings Limited ('ATS') and Alliance Trust Investments ('ATI').
The Company is a self-managed investment company with investment trust status. ATS provides pension administration services, share dealing services and a fund supermarket. ATI is an investment management company.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the Annual Report and Accounts for the period ended 31 December 2011.
Alliance Trust PLC evaluates performance based on the profit before tax. Intersegment sales and transfers are accounted for on an arms length basis.
| £000 | 6 months to 30 June 2012 | ||||
| Revenue | Company | ATS | ATI | Total | |
| Investment gains | 69,832 | - | - | 69,832 | |
| Net interest income | 159 | 1,429 | 16 | 1,604 | |
| Non interest income | 47,336 | 5,678 | 1,139 | 54,153 | |
| --------- | -------- | -------- | -------- | ||
| Segment revenue | 117,327 | 7,107 | 1,155 | 125,589 | |
| Expenditure | |||||
| Foreign exchange gains | (9,968) | - | - | (9,968) | |
| Depreciation and amortisation | 97 | 303 | 39 | 439 | |
| Other expenses | 12,076 | 7,714 | 3,859 | 23,649 | |
| --------- | -------- | -------- | -------- | ||
| Total expenses | 2,205 | 8,017 | 3,898 | 14,120 | |
| Operating profit/(loss) before tax | 115,122 | (910) | (2,743) | 111,469 | |
| Gain on sale of SASS business | - | 398 | - | 398 | |
| Segment profit/(loss) before tax | 115,122 | (512) | (2,743) | 111,867 | |
| £000 | 6 months to 31 July 2011 | ||||
| Revenue | Company | ATS | ATI | Total | |
| Investment (losses)/gains | (31,955) | 763 | - | (31,192) | |
| Net interest income | 126 | 1,390 | 24 | 1,540 | |
| Non interest income | 55,370 | 4,659 | 1,142 | 61,171 | |
| --------- | -------- | -------- | -------- | ||
| Segment revenue | 23,541 | 6,812 | 1,166 | 31,519 | |
| Expenditure | |||||
| Foreign exchange losses | 1,632 | - | - | 1,632 | |
| Depreciation and amortisation | 208 | 724 | 7 | 939 | |
| Other expenses | 11,343 | 7,578 | 2,924 | 21,845 | |
| --------- | -------- | -------- | -------- | ||
| Total expenses | 13,183 | 8,302 | 2,931 | 24,416 | |
| Operating and Segment profit/(loss) before tax | 10,358 | (1,490) | (1,765) | 7,103 | |
| £000 | Period to 31 Dec 2011 | ||||
| Revenue | Company | ATS | ATI | Total | |
| Investment (losses)/gains | (254,824) | 763 | - | (254,061) | |
| Net interest income | 349 | 2,587 | 44 | 2,980 | |
| Non interest income | 84,768 | 8,855 | 1,728 | 95,351 | |
| --------- | -------- | -------- | -------- | ||
| Segment revenue | (169,707) | 12,205 | 1,772 | (155,730) | |
| --------- | -------- | -------- | -------- | ||
| Expenditure | |||||
| Foreign exchange gains | (1,275) | - | - | (1,275) | |
| Depreciation and amortisation | 431 | 1,244 | 64 | 1,739 | |
| Other expenses | 21,533 | 14,108 | 6,537 | 42,178 | |
| --------- | -------- | -------- | -------- | ||
| Total expenses | 20,689 | 15,352 | 6,601 | 42,642 | |
| Operating and Segment (loss) before tax | (190,396) | (3,147) | (4,829) | (198,372) | |
Reconciliation of reportable segment revenues and profit to consolidated amounts
| Revenue | 6 months to | 6 months to | 11 month period to |
| £000 | 30 June 2012 | 31 July 2011 | 31 Dec 2011 |
| Total revenues for reportable segments | 125,589 | 31,519 | (155,730) |
| Other revenues | (2,785) | (10,122) | (9,684) |
| Elimination of intersegment revenues | (771) | (963) | (4,164) |
| Elimination of movement in investment in subsidiaries | 14,931 | 15,310 | 20,337 |
| --------- | -------- | -------- | |
| Consolidated revenue | 136,964 | 35,744 | (149,241) |
| --------- | -------- | -------- |
| Expenditure | 6 months to | 6 months to | 11 month period to |
| £000 | 30 June 2012 | 31 July 2011 | 31 Dec 2011 |
| Total depreciation and amortisation | 439 | 939 | 1,739 |
| Other expenses | 21,897 | 26,723 | 39,189 |
| --------- | -------- | -------- | |
| Consolidated expenses | 22,336 | 27,662 | 40,928 |
| Profit/(Loss) | 6 months to | 6 months to | 11 month period to |
| £000 | 30 June 2012 | 31 July 2011 | 31 Dec 2011 |
| Total profit/(loss) for reportable segments | 111,867 | 7,103 | (198,372) |
| Elimination of movement in investment in subsidiaries | 2,761 | 979 | 8,203 |
| --------- | -------- | -------- | |
| Consolidated profit/(loss) before tax | 114,628 | 8,082 | (190,169) |
| --------- | -------- | -------- |
Assets and Liabilities
| £000 | As at 30 June 2012 | ||||
| Company | ATS | ATI | Total | ||
| Reportable segment assets | 3,137,068 | 353,405 | 8,177 | 3,498,650 | |
| Reportable segment liabilities | (761,851) | (334,716) | (2,981) | (1,099,548) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,375,217 | 18,689 | 5,196 | 2,399,102 | |
| Assets and Liabilities | As at 31 July 2011 | ||||
| £000 | Company | ATS | ATI | Total | |
| Reportable segment assets | 3,036,247 | 306,548 | 9,217 | 3,352,012 | |
| Reportable segment liabilities | (316,335) | (291,269) | (4,524) | (612,128) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,719,912 | 15,279 | 4,693 | 2,739,884 | |
| Assets and Liabilities | As at 31 Dec 2011 | ||||
| £000 | Company | ATS | ATI | Total | |
| Reportable segment assets | 2,676,326 | 321,181 | 4,528 | 3,002,035 | |
| Reportable segment liabilities | (276,532) | (304,054) | (2,742) | (583,328) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,399,794 | 17,127 | 1,786 | 2,418,707 | |
Reconciliation of reportable segment assets to consolidated amounts
| Assets | As at | As at | As at |
| £000 | 30 June 2012 | 31 July 2011 | 31 Dec 2011 |
| Reportable segment assets | 3,498,650 | 3,352,012 | 3,002,035 |
| Third party liabilities and other subsidiaries | 123,123 | 98,208 | 252,097 |
| --------- | -------- | -------- | |
| Consolidated assets | 3,621,773 | 3,450,220 | 3,254,132 |
Reconciliation of reportable segment liabilities to consolidated amounts
| Liabilities | As at | As at | As at |
| £000 | 30 June 2012 | 31 July 2011 | 31 Dec 2011 |
| Reportable segment liabilities | (1,099,548) | (612,128) | (583,328) |
| Third party liabilities and other subsidiaries | (143,545) | (118,200) | (267,431) |
| --------- | -------- | -------- | |
| Consolidated liabilities | (1,243,093) | (730,328) | (850,759) |
11 Financial Commitments
As at 30 June 2012 the Group and Company had financial commitments, which have not been accrued, totalling £74m (£118m at 31 July 2011 and £88m at 31 December 2011). Of this amount £74m (£118m at 31 July 2011 and £88m at 31 December 2011) 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.
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 2011 annual report and financial statements and the basis of measuring fair value is consistent with that disclosed therein.
LTIP
In the period to 30 June 2012 participating employees applied a proportion of their annual cash bonuses for the period ended 31 December 2011 to purchase 113,061 (136,368 at 31 July 2011 and 31 December 2011) Company shares at a weighted average price
of £3.73 (£3.76 at 31 July 2011 and 31 December 2011) per share. Matching awards of up to 240,131 (309,513 at 31 July 2011 and 31 December 2011) shares, and performance awards of up to 807,804 (618,083 at 31 July 2011 and 751,757 at 31 December 2011) shares were granted.
Matching awards and performance awards made during the period were valued at £327,509 (£602,204 at 31 July 2011 and at 31 December 2011) and £1,064,244 (£1,202,573 at 31 July 2011 and £1,626,000 at 31 December 2011) 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 cost of all LTIP awards was £538,000 (£821,000 at 31 July 2011 and £1,638,000 at 31 December 2011) for the Group. Per IFRS 2 the costs of matching and performance awards for each plan are expensed over the three year performance period.
These costs are adjusted if certain vesting conditions are not met, for example if a participant leaves before the end of the three year vesting period.
13 Bank Overdrafts and Loans
| £000 | As at | As at | As at |
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| Bank loans repayable within one year | 300,000 | 259,530 | 248,768 |
| --------- | -------- | -------- | |
| Analysis of borrowings by currency: | |||
| Bank loans - Sterling | 300,000 | 210,000 | 200,000 |
| Bank loans - Euro | - | 49,530 | 48,768 |
| The weighted average % interest rates payable: | |||
| Bank loans | 1.51% | 1.82% | 2.02% |
| The Directors' estimate of the fair value of the borrowings: | |||
| Bank loans | 300,000 | 259,530 | 248,768 |
14 Share Capital
| £000 | As at | As at | As at |
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| Allotted, called up and fully paid: | |||
| 562,976,146 (621,106,760 at 31 July 2011 and 593,301,146 at 31 December 2011) ordinary shares of 2.5p each | 14,075 | 15,528 | 14,833 |
Share Buy Backs
| £000 | As at | As at | As at |
| 30 June 2012 | 31 July 2011 | 31 Dec 2011 | |
| Ordinary shares of 2.5p each | |||
| Opening share capital | 14,833 | 16,527 | 16,527 |
| Share buy back | (758) | (999) | (1,694) |
| --------- | -------- | -------- | |
| Closing share capital | 14,075 | 15,528 | 14,833 |
The Interim Report and Accounts will be available on the Company's website www.alliancetrust.co.uk later today.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Alliance Trust PLC via Thomson Reuters ONE
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