Alliance Trust PLC : Half-yearly report
25 July 2014
Alliance Trust PLC
Results for 6 months to 30 June 2014
| Financial Highlights | As at 30 June 2014 | Total Return | AIC Global Sector Total Return |
| Company NAV per share | 512.0p | 0.3% | 1.6% |
| Share Price | 445.6 p | 0.4% | 3.0% |
Alliance Trust PLC: Generating value for shareholders in challenging markets
- Over the past six months, Alliance Trust delivered NAV Total Return of 0.3% and Total Shareholder Return of 0.4%. The performance of our growth-oriented equity portfolio was impacted by market rotation in favour of 'value' stocks, as well as some stock-specific underperformance, which has been actively addressed.
- The dividend for 2014, before any special dividend, is expected to be 9.834p, an increase of 3%.
- In June we announced that we had arranged £100m of long-term, fixed-rate borrowings which is expected to enhance shareholder returns over the investment cycle.
- Alliance Trust Investments reduced its operating loss by 5% during the period while increasing assets under management by 2%. We saw net inflows of £81 million from retail and institutional investors including a new corporate pension fund, reflecting our strength in fixed income and sustainable and responsible investment (SRI) management.
- Alliance Trust Savings grew assets under administration by 10% to £5.9 billion. During the period, profitability was impacted by a number of factors. These include the investment we have made in the intermediary channel, the phasing of the marketing spend, and a reduction in direct customer numbers as a result of consolidation and attrition following our recent pricing changes. We are confident that we have the right business model for the long term and believe our flat-fee pricing proposition is in the best interests of customers.
Katherine Garrett-Cox, Chief Executive of Alliance Trust PLC, said:
"We remain committed to our investment approach which is focused on finding high-quality companies with strong fundamentals. Over the past six months, equity markets have favoured 'value' stocks, as opposed to the 'growth' companies towards which our equity portfolio is more heavily weighted. We have also seen some stock-specific underperformance in our portfolio and have taken steps to address this, selling out of certain holdings and increasing our position in those where we have a higher level of conviction in the investment case.
"Alliance Trust Investments is the fifth largest manager of SRI funds in Europe and assets under management are growing as we attract both retail and institutional funds. We have made good progress in outsourcing the investment middle and back office functions which will enable us to grow this business in the future. At Alliance Trust Savings, our focus on developing our offering to intermediaries, with an enlarged sales team, has seen assets held by intermediary clients grow by 36% to £1.0bn. The number of intermediary accounts being opened has almost doubled compared to the same period in 2013.We are on track to deliver enhanced functionality in 2015 through our new platform technology provided by GBST.
"Our focus remains on generating returns for shareholders over the medium to long term through a combination of capital growth and a rising dividend. Our aim is to be widely recognised as the UK's most trusted investment and savings business and we have made steady progress in 2014. We continue to position Alliance Trust for profitable growth and are focused on delivering long-term value for our shareholders."
-ENDS-
Contact
For more information, please contact:
Conor McClafferty & Clare Dundas
RLM Finsbury
T 020 7251 3801
Evan Bruce-Gardyne
Director of Investor Relations
Alliance Trust PLC
T 01382 321169
Alliance Trust PLC Interim Report 2014
Results for 6 months to 30 June 2014
| at 30 Jun 2014 | Total Return (6 months) | AIC Global Sector Total Return (6 months) | |
| Company NAV per share | 512.0p | 0.3% | 1.6% |
| Share price | 445.6 p | 0.4% | 3.0% |
| Indicators as at 30 June 2014 | 6 months | 1 year | 3 years | 5 years |
| Total Shareholder Return (TSR) | 0.4% | 6.9% | 24.4% | 87.1% |
| Peer group rankings (TSR) | 21/35 | 29/35 | 17/32 | 17/32 |
| Net Asset Value (NAV) Total Return | 0.3% | 5.5% | 20.8% | 79.0% |
| Peer group rankings (NAV) | 20/35 | 27/35 | 19/32 | 17/32 |
| Indicators for the six months to 30 June | 2014 | 2013 |
| Company expenses | £10.3m | £10.9m |
| Alliance Trust Savings - Operating (loss)/profit for continuing operations | (£0.4m)* | £0.2m** |
| Alliance Trust Investments - Operating loss | (£1.6m) | (£1.7m) |
| Indicators as at | 30 June 2014 | 31 Dec 2013 |
| Discount to Net Asset Value | 13.0% | 12.9% |
| Alliance Trust Savings - Assets under administration | £5.9bn | £5.4bn |
| Alliance Trust Investments - Assets under management | £2.2bn | £2.2bn |
* excluding non-recurring Retail Distribution Review (RDR) marketing expenses and costs associated with outsourcing the marketing function
** excluding the revenue and expenses relating to the Full SIPP business which was sold in 2013 and non-recurring RDR marketing expenditure
Summary of developments
Over the past six months, Alliance Trust delivered NAV Total Return of 0.3% and Total Shareholder Return of 0.4%. The performance of our growth-oriented equity portfolio was impacted by market rotation in favour of 'value' stocks, as well as some stock-specific underperformance, which has been actively addressed.
The dividend for 2014, before any special dividend, is expected to be 9.834p, an increase of 3%.
In June we announced that we had arranged £100m of long-term, fixed-rate borrowings which is expected to enhance shareholder returns over the investment cycle.
Alliance Trust Investments reduced its operating loss by 5% during the period while increasing assets under management by 2%. We saw net inflows of £81 million from retail and institutional investors including a new corporate pension fund, reflecting our strength in fixed income and sustainable and responsible investment (SRI) management.
Alliance Trust Savings grew assets under administration by 10% to £5.9 billion. During the period, profitability was impacted by a number of factors. These include the investment we have made in the intermediary channel, the phasing of the marketing spend, and a reduction in direct customer numbers as a result of consolidation and attrition following our recent pricing changes. We are confident that we have the right business model for the long term and believe our flat-fee pricing proposition is in the best interests of customers.
Half year review
Within the portfolio, relative performance has been adversely affected by the strong performance of "value" stocks with low price/earnings and price/book ratios relative to "growth" stocks which are typically priced on higher multiples. As we illustrate in the attribution table, stock selection has been the major driver of this underperformance, which has affected most sectors. This is typically indicative of a sector rotation, in this case away from growth stocks which we believe will provide better long-term growth prospects, and into more value orientated companies.
Turnover of the portfolio reduced from the previous period. However, we have taken the opportunity to add to our preferred holdings on weakness and have increased our positions in stocks such as Visa and SAP. As a consequence of the reduced levels of activity, most of the key ratios are largely unchanged; the exposure to equities increased from 96.6% to 97.2%. At the same time we have continued to reduce the exposure to fixed income from 7.6% to 6.6%, by reducing our holding in the Alliance Trust Monthly Income Bond Fund.
Our top contributors to relative performance were mainly in Energy, Utilities and Telecommunications, for example Enterprise Products Partners, China Gas, Schlumberger and Telecom New Zealand.
The portfolio's utility stocks returned a creditable 19.0%, led by China Gas. However, in most other sectors, the stock selection effect was negative because the "growth" companies, in which we mainly invest, underperformed the broader market. This included Visa and SAP within Information Technology and Pfizer and Express Scripts within Health Care.
In some sectors, performance was affected by stock-specific issues, for example Barclays and BNP Paribas within Financials and Coach and Mattel within Consumer Discretionary. We reviewed the investment case for these stocks and sold them towards the end of the period.
The total return from fixed income investments was 3.1%. The Trust's holding in the Monthly Income Bond Fund, which accounted for the majority of the investment in fixed income, had a total return of 4.0%, compared to 5.3% for the iBoxx Sterling Corporate Bond 5-15 year index which is the benchmark for that fund. Our holding in the Alliance Trust Dynamic Bond Fund returned 0.9%.
We also invest in a range of other asset classes, which contributed positively to the portfolio return. Strong gains of £13m from the private equity portfolio and a £4m increase in the value of mineral rights together contributed 0.7% to the NAV return.
The level of borrowing has remained constant at £380m, and as a result net gearing is largely unchanged at 11.2%, compared to 11.6% in December 2013. In June 2014 we arranged £100m of borrowings, fixed over 15 years at 4.28%, which will be used to replace existing borrowings. This is the largest, and only unsecured, recent issue in the sector and was competitively priced. Through this transaction, which will raise the weighted cost of borrowing from around 1.8% in December 2013 to 2.26%, the Trust obtained unsecured fixed-rate long-dated Sterling-denominated financing at an attractive pricing level, and this is expected to enhance shareholder returns over the investment cycle in line with the Company's investment objective.
Company expenses were down 5.5%, to £10.3m (£10.9m) due to ongoing efficiency management.
A total of 3,885,000 shares were repurchased at a total cost of £17.5m and a weighted average discount of 13.2%. These buybacks had a positive effect of 0.1% on the NAV. We remain committed to the ongoing flexible use of buybacks, taking into account the Company's discount relative to the peer group.
Dividends
The Company's policy is that we will aim to pay a sustainably rising dividend, paying out all of each year's net revenue earnings under normal circumstances. Where our current year's earnings exceed our previously published guidance we may pay a special dividend from those earnings. We have also decided that, unless there are exceptional circumstances, we will not pay dividends out of our realised capital reserves as we believe that, in the longer term, this is not sustainable.
The Company paid an interim dividend of 2.4585p on 30 June 2014. A second interim dividend of 2.4585p will be paid on 30 September 2014 to shareholders on the register on 29 August 2014. In the absence of any unforeseen developments we expect to be able to recommend further quarterly interim dividends of 2.4585p payable on or around 31 December 2014 and on or around 31 March 2015 with a special dividend payable on or around 30 June 2015. The dividend for 2014, before any special dividend, is expected to be 9.834p, an increase of 3%.
Outlook
At the macro level, central bankers across the world continue to walk a line between stimulating growth and trying to reduce the overall level of debt in their respective economies. This will continue to have a knock-on effect on global liquidity. The continuation of the US economic recovery and expected normalisation of interest rates will play an important role in equity markets - not only in the US, but globally. If raised too fast, increasing interest rates could represent a source of volatility for equities. However, a gradual process of adjustment would be most likely supportive of equity markets. Another key factor to monitor is how the Chinese leadership will handle the credit deleveraging while trying to maintain a sufficiently high level of GDP growth. How successful they are will have far reaching implications affecting numerous countries and Western companies that are significantly exposed to the Chinese economy.
We conclude the global economy is on a path of general recovery; however, this is not yet fully self-sustaining and central banks have a critical part to play. Decisions taken by the US Federal Bank (tapering), the European Central Bank (deflation risk), the Bank of Japan (additional easing and reform) and by several emerging market central banks (dealing with weak currencies and risk of inflation) will be particularly important.
Against such a backdrop, it is clear that there is still value in equities on a relative basis, compared to other asset classes, particularly government bonds. Consequently, we will continue to search for new ideas and initiate holdings in companies with sustainable long-term prospects whilst continuing to take profits from holdings which have reached their potential. The investment we have made in our people and processes means that we are well placed to identify those opportunities and we look forward to the second half of the year with optimism.
| Contribution | |||
| Average | Rate of | to Total | |
| Contribution Analysis (%) | Weight | Return | Return |
| Equities | 97.6 | -0.5 | -0.4 |
| Fixed Income | 7.0 | 3.1 | 0.2 |
| Other Investments | 6.9 | 9.4 | 0.7 |
| Cash & Accruals | 1.8 | 0.0 | 0.2 |
| Gearing (cost of borrowing) | -13.3 | 0.8 | -0.1 |
| Total | 100.0 | 0.6 | 0.6 |
| Expenses | -0.4 | ||
| Share Buy-backs | 0.1 | ||
| NAV Total Return | 0.3 | ||
| Discount Effect | 0.1 | ||
| Share Price Total Return | 0.4 | ||
| MSCI ACWI Total Return | 3.2 |
Source: Alliance Trust and FactSet
| Alliance Trust | MSCI All Country World Index | ||||||
| Sector | Stock | Total | |||||
| Equity Portfolio | Average | Total | Average | Total | Allocation | Selection | Relative |
| Attribution (%) | Weight | Return | Weight | Return | Effect | Effect | Effect |
| Consumer Discretionary | 11.1 | -4.6 | 11.7 | -1.2 | 0.0 | -0.3 | -0.3 |
| Consumer Staples | 7.7 | 0.2 | 9.8 | 2.5 | 0.0 | -0.2 | -0.2 |
| Energy | 9.5 | 9.6 | 9.7 | 9.6 | 0.0 | 0.0 | 0.0 |
| Financials | 23.3 | -3.0 | 21.5 | 0.8 | 0.0 | -0.9 | -0.9 |
| Health Care | 14.1 | 0.9 | 10.6 | 7.7 | 0.2 | -0.9 | -0.7 |
| Industrials | 11.1 | -0.7 | 10.9 | 0.2 | 0.0 | -0.1 | -0.1 |
| Information Technology | 12.1 | -2.8 | 12.6 | 5.3 | 0.0 | -1.0 | -1.0 |
| Materials | 4.0 | 4.4 | 6.1 | 2.4 | 0.0 | 0.1 | 0.1 |
| Telecommunication Services | 3.6 | -3.5 | 3.9 | -0.9 | 0.0 | -0.1 | -0.1 |
| Utilities | 3.6 | 19.0 | 3.2 | 12.6 | 0.0 | 0.2 | 0.2 |
| Index Futures & Currency Forwards | -0.1 | 0.0 | 0.0 | -5.5 | -0.6 | 0.0 | -0.6 |
| Equities | 100.0 | -0.5 | 100.0 | 3.2 | -0.4 | -3.2 | -3.6 |
Source: Alliance Trust and FactSet
All quoted equity holdings as at 30 June 2014
| Stock | Country of | Theme | Value | % of |
| listing | £m | quoted | ||
| equities | ||||
| Visa | United States | Innovation | 73.6 | 2.9% |
| Walt Disney | United States | Innovation | 69.8 | 2.7% |
| Pfizer | United States | Global realignment | 63.9 | 2.5% |
| CVS Caremark | United States | Demographics | 61.4 | 2.4% |
| Qualcomm | United States | Innovation | 57.8 | 2.3% |
| Accenture | United States | Innovation | 56.1 | 2.2% |
| United States | Innovation | 56.0 | 2.2% | |
| Enterprise Products Partners | United States | Environment | 52.9 | 2.1% |
| Prudential | United Kingdom | Demographics | 52.7 | 2.1% |
| United Technologies | United States | Innovation | 50.1 | 2.0% |
| National Grid | United Kingdom | Income | 44.1 | 1.7% |
| Express Scripts | United States | Demographics | 42.9 | 1.7% |
| Wells Fargo | United States | Global Realignment | 42.8 | 1.7% |
| Intesa Sanpaolo | Italy | Global Realignment | 41.9 | 1.6% |
| Reckitt Benckiser | United Kingdom | Demographics | 39.7 | 1.6% |
| HSBC | United Kingdom | Global Realignment | 39.3 | 1.5% |
| Legal & General | United Kingdom | Income | 39.2 | 1.5% |
| SAP | Germany | Innovation | 39.2 | 1.5% |
| WPP | United Kingdom | Demographics | 39.1 | 1.5% |
| Amgen | United States | Demographics | 38.7 | 1.5% |
| Noble Energy | United States | Environment | 37.7 | 1.5% |
| Danaher | United States | Innovation | 36.7 | 1.4% |
| Glaxosmithkline | United Kingdom | Innovation | 36.7 | 1.4% |
| Deutsche Post | Germany | Income | 34.6 | 1.4% |
| Roche Holding | Switzerland | Innovation | 33.6 | 1.3% |
| The Toronto-Dominion Bank | Canada | Global Realignment | 33.2 | 1.3% |
| Twenty-First Century Fox | United States | Innovation | 32.5 | 1.3% |
| Friends Life | United Kingdom | Demographics | 32.5 | 1.3% |
| Blackstone | United States | Demographics | 32.3 | 1.3% |
| Continental | Germany | Environment | 31.4 | 1.2% |
| Oceaneering International | United States | Environment | 31.4 | 1.2% |
| Sanofi | France | Innovation | 30.7 | 1.2% |
| Swedbank | Sweden | Income | 30.4 | 1.2% |
| Eni | Italy | Income | 29.7 | 1.2% |
| China Gas | Hong Kong | Environment | 29.3 | 1.1% |
| Total | France | Income | 28.8 | 1.1% |
| Toyota Motor | Japan | Environment | 28.3 | 1.1% |
| Aviva | United Kingdom | Global Realignment | 28.2 | 1.1% |
| Diageo | United Kingdom | Demographics | 27.8 | 1.1% |
| Grupo Financiero Banorte | Mexico | Demographics | 27.2 | 1.1% |
| Fanuc | Japan | Demographics | 27.1 | 1.1% |
| Novo Nordisk | Denmark | Demographics | 26.9 | 1.1% |
| Samsung Electronic | South Korea | Innovation | 26.7 | 1.0% |
| AmerisourceBergen | United States | Demographics | 26.6 | 1.0% |
| Schneider Electric | France | Environment | 26.1 | 1.0% |
| Marsh & Mclennan | United States | Income | 26.0 | 1.0% |
| Praxair | United States | Environment | 25.9 | 1.0% |
| Schlumberger | United States | Environment | 25.6 | 1.0% |
| Monsanto | United States | Environment | 25.4 | 1.0% |
| Aberdeen Asset Management | United Kingdom | Demographics | 25.3 | 1.0% |
| Cadence Design Systems | United States | Innovation | 24.6 | 1.0% |
| BASF | Germany | Environment | 24.5 | 1.0% |
| Glencore | United Kingdom | Environment | 24.4 | 1.0% |
| Cummins | United States | Environment | 23.4 | 0.9% |
| Liberty Global | United States | Innovation | 22.7 | 0.9% |
| Azimut | Italy | Demographics | 22.6 | 0.9% |
| Volkswagen | Germany | Environment | 21.8 | 0.9% |
| Seadrill | Norway | Environment | 20.7 | 0.8% |
| Rogers Communications | Canada | Income | 20.6 | 0.8% |
| Henkel | Germany | Global Realignment | 20.5 | 0.8% |
| Unilever | United Kingdom | Demographics | 20.4 | 0.8% |
| Fomento Economico Mexicano | Mexico | Demographics | 20.4 | 0.8% |
| Eaton | United States | Environment | 19.9 | 0.8% |
| Standard Chartered | United Kingdom | Global Realignment | 19.6 | 0.8% |
| American Tower | United States | Income | 19.3 | 0.8% |
| Zurich Insurance | Switzerland | Income | 19.1 | 0.8% |
| Telecom New Zealand | New Zealand | Income | 18.6 | 0.7% |
| Melrose Industries | United Kingdom | Environment | 18.6 | 0.7% |
| Humana | United States | Demographics | 18.5 | 0.7% |
| Intuitive Surgical | United States | Innovation | 18.4 | 0.7% |
| Petrofac | United Kingdom | Environment | 18.1 | 0.7% |
| Bangkok Bank | Thailand | Demographics | 17.2 | 0.7% |
| Perusahaan Gas Negara | Indonesia | Environment | 17.2 | 0.7% |
| Vodafone | United Kingdom | Income | 16.2 | 0.6% |
| Wisconsin Energy | United States | Income | 16.2 | 0.6% |
| Charoen Pokphand Foods | Thailand | Demographics | 15.5 | 0.6% |
| Plum Creek Timber | United States | Income | 15.0 | 0.6% |
| Ascendas Real Estate Investment Trust | Singapore | Income | 14.3 | 0.6% |
| bpost | Belgium | Income | 13.0 | 0.5% |
| Rolls Royce | United Kingdom | Environment | 12.4 | 0.5% |
| Cerner | United States | Innovation | 11.5 | 0.5% |
| Vtech | Hong Kong | Income | 11.3 | 0.4% |
| Komercni Banka | Czech Republic | Demographics | 10.3 | 0.4% |
| Experian | United Kingdom | Demographics | 10.1 | 0.4% |
| Och-Ziff Capital Management | United States | Income | 10.1 | 0.4% |
| M1 Limited | Singapore | Income | 8.8 | 0.4% |
| Ashmore Global Opportunities | United Kingdom | Income | 8.4 | 0.3% |
| Delta Lloyd | Netherlands | Demographics | 7.2 | 0.3% |
| Total value | 2,547.2 | |||
Source: Alliance Trust
Funds as at 30 June 2014
| Fund | Country of registration | Value £m |
| Alliance Trust Global Thematic Opportunities Fund | United Kingdom | 182.0 |
| Alliance Trust Monthly Income Bond Fund | United Kingdom | 132.7 |
| Alliance Trust Dynamic Bond Fund | United Kingdom | 53.8 |
| Luxcellence - Alliance Trust Sustainable Future Pan-European Equity Fund | Luxembourg | 34.5 |
| Total value | 403.0 |
Other assets as at 30 June 2014
| Investment | Region | Value £m |
| Private Equity | United Kingdom/Europe | 122.5 |
| Subsidiaries | United Kingdom | 39.8 |
| Other | United Kingdom | 16.8 |
| Property | United Kingdom | 11.3 |
| Mineral Rights | North America | 16.6 |
| Total value | 207.0 |
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
Alliance Trust Investments
During the period we have seen assets under management rise by 2% by attracting new investment into our fund range.
Our loss reduced by 5% to £1.6m reflecting an increase in third party revenue of 14% and control of expenditure.
We have seen net inflows of £81m from both retail and institutional investors including a new corporate pension fund. This reflects our strengths in fixed income and sustainable and responsible equity management. We are continuing to see strong inflows into our Monthly Income and Dynamic Bond Funds as well as our Sustainable Future Fund range. Our European SICAV business has grown, primarily through investors in France and the Netherlands.
Of the nine funds within our range that have a three year track record, six are ranked above the median of their peer group over that period. In May we announced the launch of two new risk profiled funds to bring our Sustainable Future Fund range to nine. In June, the Sustainable Future Global Growth Fund was highly commended at the Money Observer Awards.
We are progressing with outsourcing our middle and back office functions and delivered the first phase of the project in the period. The second phase is scheduled to complete by the end of the year.
The fair value of the business remains as stated in our Annual Report and Accounts as £12.8m.
| Third Party Assets Under Management | Third Party Net Revenue | ||
| June 14 | £1.8bn | June 14 | £4.0m (six months) |
| December 13 | £1.8bn | December 13 | £7.2m (annual) |
| December 12 | £1.4bn | December 12 | £1.8m (annual) |
Alliance Trust Savings
During the period we have seen assets under administration rise by 10% to £5.9bn, and following the end of the period they have reached £6.0bn. Our focus on intermediaries, with an enlarged sales team, has seen assets held by intermediary clients grow by 36% to £1.0bn. The number of intermediary accounts being opened has almost doubled compared to the same period in 2013.
We report an operating loss, excluding non-recurring RDR marketing expenses and costs associated with outsourcing the marketing function, for the period of £0.4m. This compares to an operating profit, excluding the revenue and expenses relating to the Full SIPP business which was sold in 2013 and non-recurring RDR marketing expenditure, of £0.2m in 2013. This is mainly due to the investment we have made in the intermediary channel, the phasing of marketing spend and a reduction in direct customer numbers as a result of consolidation and attrition following our recent pricing changes.
There has been considerable change in the platform market, as the full impact of RDR for platforms came into effect on 1 April 2014. We expect customer numbers to increase attracted by our award winning service, platform experience, investment choice and flat fee structure. Following our pricing changes, we still deliver an excellent value for money proposition, especially for portfolios above £50,000.
We are on track to deliver enhanced functionality in 2015 through our new platform technology provided by GBST.
As part of our focus on simplifying the business we have reviewed our regulatory permissions. Following that review we have decided to relinquish our banking licence and move to the client money regime adopted by most of our competitors.
The fair value of the business remains as stated in our Annual Report and Accounts as £26.7m.
| Assets under Administration | Revenue | ||
| June 14 | £5.9bn | June 14 | £6.2m (six months) |
| December 13 | £5.4bn | December 13 | £10.9m (annual) |
| December 12 | £4.1bn | December 12 | £9.6m (annual) |
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
· Operational
· Legal, Regulatory and Disclosure
These risks, and the way in which they are managed, are described in more detail within the Risk section on pages 36 to 39 of the Company's Annual Report and Accounts for the year ended 31 December 2013, 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 year end.
We continue to monitor developments and the potential impact to our business of issues arising from the vote on Scottish Independence. Having established two English registered legal entities, for the subsidiary companies Alliance Trust Savings and Alliance Trust Investments, work is progressing on our plans to make these entities operational. In the event of a Yes vote, it is our intention to have implemented the legal entity operating model required to ensure that we continue to provide flexibility to our clients and customers, well ahead of the proposed Scottish Government separation timetable.
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 2013. There were no transactions with related parties during the six months ended 30 June 2014 which have a material effect on the results or the financial position of the Company or of the Group.
Going Concern Statement
The factors impacting Going Concern are set out in detail on page 51 of the Company's Report and Accounts for the year ended 31 December 2013.
As at 30 June 2014 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.
Regulatory Change
As of the 22nd July 2014 the Alternative Investment Fund Managers' Directive came into effect. The objective of the Directive is to ensure that previously unregulated collective investment activities will be subject to regulatory oversight. Although the primary target of the regulation is hedge funds it also applies to investment trusts.
Alliance Trust PLC has received approval from the FCA as a manager under the Directive. Regulatory disclosures are provided on the Company's website.
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 | |
| Chair | Chief Executive | |
| 24 July 2014 | 24 July 2014 | |
Financial Statements
Consolidated Income Statement (Unaudited)
For the period ended 30 June 2014
| 6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to 31 December 2013 (audited) | ||||||||
| £000 | Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Revenue | ||||||||||
| Income | 3 | 64,151 | - | 64,151 | 64,459 | - | 64,459 | 116,295 | - | 116,295 |
| (Loss)/Profit on fair value designated investments | - | (16,764) | (16,764) | - | 263,268 | 263,268 | - | 420,082 | 420,082 | |
| (Loss)/Profit on investment property held | - | - | - | - | (67) | (67) | - | 211 | 211 | |
| ------- | -------- | --------- | ------- | -------- | --------- | --------- | -------- | --------- | ||
| Total Revenue | 64,151 | (16,764) | 47,387 | 64,459 | 263,201 | 327,660 | 116,295 | 420,293 | 536,588 | |
| Administrative expenses | (24,478) | (1,240) | (25,718) | (21,870) | (1,443) | (23,313) | (45,373) | (1,860) | (47,233) | |
| Finance(costs)/income | 4 | (6,005) | (5,227) | (11,232) | (6,242) | 3,314 | (2,928) | (11,456) | (922) | (12,378) |
| Loss/(Gain) on disposal of other fixed assets | - | (1) | (1) | - | - | - | - | 14 | 14 | |
| Foreign exchange (losses)/gains | - | (7,091) | (7,091) | - | 3,228 | 3,228 | - | (15,189) | (15,189) | |
| ------- | -------- | --------- | ------- | -------- | --------- | ------- | --------- | --------- | ||
| Profit/(Loss) before tax | 33,668 | (30,323) | 3,345 | 36,347 | 268,300 | 304,647 | 59,466 | 402,336 | 461,802 | |
| Tax | 5 | (1,530) | - | (1,530) | (3,162) | - | (3,162) | (4,581) | (1,650) | (6,231) |
| ------- | -------- | -------- | ------- | -------- | -------- | ------- | -------- | -------- | ||
| Profit/(Loss) for the period/year | 32,138 | (30,323) | 1,815 | 33,185 | 268,300 | 301,485 | 54,885 | 400,686 | 455,571 | |
| ===== | ====== | ====== | ===== | ====== | ====== | ===== | ====== | ====== | ||
| All profit/(loss) for the period/year is attributable to equity holders of the parent. | ||||||||||
| Earnings per share from continuing operations attributable to equity holders of the parent | ||||||||||
| Basic (p per share) | 7 | 5.78 | (5.45) | 0.33 | 5.93 | 47.92 | 53.85 | 9.80 | 71.58 | 81.38 |
| Diluted (p per share) | 7 | 5.76 | (5.44) | 0.32 | 5.91 | 47.78 | 53.69 | 9.78 | 71.37 | 81.15 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)
| 6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to 31 December 2013 (audited) | ||||||||
| £000 | Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Profit/(Loss) for the period/year | 32,138 | (30,323) | 1,815 | 33,185 | 268,300 | 301,485 | 54,885 | 400,686 | 455,571 | |
| Defined benefit plan net actuarial (loss)/gain | 8 | - | (51) | (51) | - | 2,102 | 2,102 | - | (875) | (875) |
| Retirement benefit obligations deferred tax | - | - | - | - | - | - | - | 96 | 96 | |
| -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | -------- | ||
| Other comprehensive (loss)/gain | - | (51) | (51) | - | 2,102 | 2,102 | - | (779) | (779) | |
| Total comprehensive income/(loss) for the period/year | 32,138 | (30,374) | 1,764 | 33,185 | 270,402 | 303,587 | 54,885 | 399,907 | 454,792 | |
| ====== | ====== | ====== | ====== | ====== | ====== | ====== | ====== | ====== | ||
| All total comprehensive income/(loss) 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 2014
| 6 months to 30 June 2014 | 6 months to 30 June 2013 | Year to 31 December 2013 (audited) | |
| £000 | |||
| Called up share capital | |||
| At 1 January | 14,003 | 14,040 | 14,040 |
| Own shares purchased and cancelled in the period/year | (97) | (1) | (37) |
| ---------- | ---------- | ---------- | |
| At 30 June / 31 December | 13,906 | 14,039 | 14,003 |
| ---------- | ---------- | ---------- | |
| Capital reserves | |||
| At 1 January | 2,149,019 | 1,754,368 | 1,754,368 |
| (Loss)/Profit for the period/year | (30,323) | 268,300 | 400,686 |
| Defined benefit plan actuarial (loss)/gain | (51) | 2,102 | (779) |
| Own shares purchased and cancelled in the period/year | (17,485) | (214) | (6,658) |
| Share based payments | 728 | 713 | 1,402 |
| ---------- | ---------- | ---------- | |
| At 30 June / 31 December | 2,101,888 | 2,025,269 | 2,149,019 |
| ---------- | ---------- | ---------- | |
| Merger reserve | |||
| At 1 January, 30 June and 31 December | 645,335 | 645,335 | 645,335 |
| ---------- | ---------- | ---------- | |
| Capital redemption reserve | |||
| At 1 January | 4,995 | 4,958 | 4,958 |
| Own shares purchased and cancelled in the period/year | 97 | 1 | 37 |
| ---------- | ---------- | ---------- | |
| At 30 June / 31 December | 5,092 | 4,959 | 4,995 |
| ---------- | ---------- | ---------- | |
| Revenue reserve | |||
| At 1 January | 68,034 | 68,202 | 68,202 |
| Profit for the period/year | 32,138 | 33,185 | 54,885 |
| Dividends | (34,118) | (28,356) | (55,068) |
| Unclaimed dividends | 23 | 37 | 15 |
| ---------- | ---------- | ---------- | |
| At 30 June / 31 December | 66,077 | 73,068 | 68,034 |
| ---------- | ---------- | ---------- | |
| Total equity | |||
| At 1 January | 2,881,386 | 2,486,903 | 2,486,903 |
| ---------- | ---------- | ---------- | |
| At 30 June / 31 December | 2,832,298 | 2,762,670 | 2,881,386 |
| ---------- | ---------- | ---------- |
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 30 June 2014
| £000 | Note | |||
| 30 June 2014 | 30 June 2013 | 31 December 2013 | ||
| (audited) | ||||
| Non-current assets | ||||
| Investments held at fair value | 11 | 3,302,784 | 3,111,746 | 3,317,105 |
| Investment property held at fair value | 4,525 | 9,120 | 4,525 | |
| Property, plant and equipment: | ||||
| Office premises | 4,125 | 4,125 | 4,125 | |
| Other fixed assets | 607 | 483 | 390 | |
| Intangible assets | 10,138 | 7,223 | 9,124 | |
| Pension scheme surplus | 8 | 6,610 | 8,020 | 5,079 |
| Deferred tax asset | 1,015 | 989 | 1,015 | |
| ---------- | ---------- | ---------- | ||
| 3,329,804 | 3,141,706 | 3,341,363 | ||
| Current assets | ||||
| Outstanding settlements and other receivables | 143,877 | 197,586 | 37,340 | |
| Recoverable overseas tax | 1,267 | 1,151 | 985 | |
| Cash and cash equivalents | 577,299 | 519,432 | 473,055 | |
| ---------- | ---------- | ---------- | ||
| 722,443 | 718,169 | 511,380 | ||
| Total assets | 4,052,247 | 3,859,875 | 3,852,743 | |
| Current liabilities | ||||
| Outstanding settlements and other payables | (837,430) | (754,846) | (589,260) | |
| Tax payable | (141) | (141) | (141) | |
| Bank overdrafts and loans | 14 | (380,000) | (340,000) | (380,000) |
| ---------- | ---------- | ---------- | ||
| (1,217,571) | (1,094,987) | (969,401) | ||
| Total assets less current liabilities | 2,834,676 | 2,764,888 | 2,883,342 | |
| Non-current liabilities | ||||
| Deferred tax liability | (1,015) | (990) | (1,015) | |
| Amounts payable under Investment Incentive Plan | (1,217) | (935) | (831) | |
| Finance leases | (146) | (293) | (110) | |
| ---------- | ---------- | ---------- | ||
| Net assets | 2,832,298 | 2,762,670 | 2,881,386 | |
| Equity | ||||
| Share capital | 15 | 13,906 | 14,039 | 14,003 |
| Capital reserves | 2,101,888 | 2,025,269 | 2,149,019 | |
| Merger reserve | 645,335 | 645,335 | 645,335 | |
| Capital redemption reserve | 5,092 | 4,959 | 4,995 | |
| Revenue reserve | 66,077 | 73,068 | 68,034 | |
| ------------- | -------------- | -------------- | ||
| Total equity | 2,832,298 | 2,762,670 | 2,881,386 | |
| All net assets are attributable to equity holders of the parent | ||||
| Net asset value per ordinary share attributable to equity holders of the parent | ||||
| Basic (£) | 9 | 5.10 | 4.93 | 5.16 |
| Diluted (£) | 9 | 5.09 | 4.92 | 5.14 |
CONSOLIDATED CASH FLOW (unaudited)
| For the period ended 30 June 2014 | 6 months to | 6 months to | Year to |
| 30 June 2014 | 30 June 2013 | 31 December 2013 | |
| £000 | (audited) | ||
| Cash flows from operating activities | |||
| Profit before tax | 3,345 | 304,647 | 461,802 |
| Adjustments for: | |||
| Losses/(Gains) on investments | 16,764 | (263,201) | (420,293) |
| Foreign exchange losses/(gains) | 7,091 | (3,228) | 15,189 |
| Depreciation | 127 | 107 | 200 |
| Amortisation of intangibles | 1,258 | 373 | 1,289 |
| Loss on disposal / revaluation of office premises | 1 | - | - |
| Loss on disposal of intangible assets | - | - | 313 |
| Share based payment expense | 728 | 713 | 1,402 |
| Interest | 11,232 | 2,928 | 12,378 |
| Movement in pension scheme surplus | (1,582) | (1,613) | (1,553) |
| --------- | --------- | --------- | |
| Operating cash flows before movements in working capital | 38,964 | 40,726 | 70,727 |
| Increase in amounts due to depositors | 73,059 | 37,557 | 45,255 |
| Decrease in receivables | (46,667) | (18,665) | (10,227) |
| Increase in payables | 6,178 | 17,919 | 13,060 |
| --------- | --------- | --------- | |
| Net cash inflow from operating activities before income taxes | 71,534 | 77,537 | 118,815 |
| Taxes paid | (1,812) | (3,302) | (6,110) |
| --------- | --------- | --------- | |
| Net cash inflow from operating activities | 69,722 | 74,235 | 112,705 |
| Cash flows from investing activities | |||
| Proceeds on disposal at fair value of investments through profit and loss | 613,475 | 494,088 | 1,082,219 |
| Purchase of fair value through profit and loss investments | (556,335) | (593,205) | (1,253,955) |
| Foreign exchange gains/(losses) on foreign exchange contracts | - | 2,522 | (13,993) |
| Purchase of plant and equipment | (344) | (3) | (3) |
| Purchase of book of business | - | - | (8,164) |
| Net purchase of other intangible assets | (2,271) | (6,188) | (1,154) |
| --------- | --------- | --------- | |
| Net cash inflow/(outflow) from investing activities | 54,525 | (102,786) | (195,050) |
| Cash flows from financing activities | |||
| Dividends paid - equity | (34,118) | (28,356) | (55,068) |
| Unclaimed dividends | 23 | 37 | 15 |
| Purchase of own shares | (17,485) | (214) | (6,658) |
| New bank loans raised | - | 140,000 | 180,000 |
| Third party investment in subsidiary OEIC - Alliance Trust Investment Funds | 46,989 | (904) | 8,056 |
| Interest payable | (8,321) | (8,202) | (14,665) |
| --------- | --------- | --------- | |
| Net cash (outflow)/inflow from financing activities | (12,912) | 102,361 | 111,680 |
| --------- | --------- | --------- | |
| Net increase in cash and cash equivalents | 111,335 | 73,810 | 29,335 |
| Cash and cash equivalents at beginning of period/year | 473,055 | 444,916 | 444,916 |
| Effect of foreign exchange rate changes | (7,091) | 706 | (1,196) |
| --------- | --------- | --------- | |
| Cash and cash equivalents at end of period/year | 577,299 | 519,432 | 473,055 |
Notes to the Financial Statements
1 General Information
The information contained in this report for the period ended 30 June 2014 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 2013 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 currently anticipated in the forthcoming financial statements for the year ended 31 December 2014.
3 Revenue
| £000 | 6 months to | 6 months to | Year to |
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
| Deposit interest | 967 | 1,043 | 2,024 |
| Dividend income | 51,883 | 53,881 | 94,941 |
| Mineral rights income | 1,345 | 973 | 2,303 |
| Property rental income | 304 | 313 | 646 |
| Savings and pension plan charges | 5,320 | 4,679 | 9,426 |
| Other income | 4,332 | 3,570 | 6,955 |
| --------- | -------- | -------- | |
| Total revenue | 64,151 | 64,459 | 116,295 |
| --------- | -------- | -------- |
4 Finance Costs/(Income)
| 6 months to | 6 months to | Year to | |||||||
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |||||||
| £000 | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| Interest payable | |||||||||
| Payable to depositors | 4 | - | 4 | 6 | - | 6 | 9 | - | 9 |
| Bank loans and overdrafts | 1,638 | 1,814 | 3,452 | 1,476 | 1,476 | 2,952 | 3,061 | 3,137 | 6,198 |
| Net gains/(losses) attributable to third party investment in subsidiary OEIC | 4,363 | 3,413 | 7,776 | 4,760 | (4,790) | (30) | 8,386 | (2,215) | 6,171 |
| --------- | --------- | --------- | --------- | --------- | ------- | --------- | --------- | ------- | |
| Total finance costs/(income) | 6,005 | 5,227 | 11,232 | 6,242 | (3,314) | 2,928 | 11,456 | 922 | 12,378 |
| --------- | --------- | --------- | --------- | --------- | ------- | --------- | --------- | ------- | |
5 Taxation
UK Corporation Tax for the period to 30 June 2014 is charged at 21.5% (23.25% for the period to 30 June 2013) of the estimated taxable profits for the period. A reduction in the main rate of UK Corporation Tax to 21% was substantively enacted in April 2014. 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
| £000 | 6 months to | 6 months to | Year to |
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
| Fourth interim dividend for the period ended 31 December 2012 of 2.3175p per share | - | 12,973 | 12,974* |
| First interim dividend for the year ending 31 December 2013 of 2.387p per share | - | 13,368 | 13,367* |
| Second interim dividend for the year ended 31 December 2013 of 2.387p per share | - | - | 13,368 |
| Third interim dividend for the year ended 31 December 2013 of 2.387p per share | - | - | 13,344 |
| Fourth interim dividend for the year ended 31 December 2013 of 2.387p per share | 13,338 | - | - |
| First interim dividend for the year ending 31 December 2014 of 2.4585p per share | 13,658 | - | - |
| 26,996 | 26,341 | 53,053 | |
| Special dividend for the year ended 31 December 2012 of 0.36p per share | - | 2,015 | 2,015 |
| Special dividend for the year ended 31 December 2013 of 1.282p per share | 7,122 | - | - |
| 34,118 | 28,356 | 55,068 |
*31 December 2013 figures have been adjusted to reflect share buy backs 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 30 June 2014 | 6 months to 30 June 2013 | Year to 31 Dec 2013 | |||||||
| 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) | 32,138 | (30,323) | 1,815 | 33,185 | 268,300 | 301,485 | 54,885 | 400,686 | 455,571 |
| Number of shares | |||||||||
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 556,485,739 | 559,901,145 | 559,789,087 | ||||||
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 557,740,776 | 561,553,530 | 561,389,625 | ||||||
The weighted average number of ordinary shares is arrived at by excluding 1,194,316 (1,580,671 at 30 June 2013 and 1,338,233 at 31 December 2013) 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 gain made in the period and recognised in the Consolidated Statement of Comprehensive Income was £51,000 (30 June 2013 net actuarial gain of £2,102,000 and 31 December 2013 net actuarial loss of £875,000).
Certain actuarial assumptions have been used to arrive at the retirement benefit scheme surplus of £6.6m as at 30 June 2014 (30 June 2013 surplus of £8.0m and 31 December 2013 surplus of £5.1m). These are set out below:
| 30 June 2014 % per annum | 30 June 2013 % per annum | 31 Dec 2013 % per annum | |
| Inflation - (RPI) | 3.3 | 3.3 | 3.4 |
| Inflation - (CPI) | 2.4 | 2.4 | 2.5 |
| Rate of discount | 4.2 | 4.8 | 4.4 |
| Allowance for pension in payment increases of RPI (subject to a maximum increase of 5% p.a.) | 3.1 | 3.2 | 3.3 |
| Allowance for revaluation of deferred pensions of CPI (subject to a maximum increase of 5% p.a.) | 2.4 | 2.4 | 2.5 |
9 Net Asset Value Per Ordinary Share
The calculation of the net asset value per ordinary share is based on the following:
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
| Equity shareholder funds (£000) | 2,832,298 | 2,762,670 | 2,881,386 |
| Number of shares at period end - Basic | 555,014,830 | 559,948,475 | 558,755,913 |
| Number of shares at period end - Diluted | 556,209,146 | 561,529,146 | 560,094,146 |
The number of ordinary shares has been reduced by 1,194,316 (1,580,671 at 30 June 2013 and 1,338,233 at 31 December 2013) 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 has identified three operating segments as 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 Limited (ATI).
The Company is a self-managed investment company with investment trust status. ATS provides platform based savings, share dealing and pension administration services. ATI is an investment management company.
ATI earns net revenue on the capital invested by Alliance Trust PLC in the funds it manages, with such fees market referenced to that appropriate for a seed capital investor. Alliance Trust PLC includes such fees in its administration expenses. The costs of the Fixed Income and SRI investment teams are charged 100% to ATI. The costs of the Global Equities team, who also manage the equity portfolio of Alliance Trust PLC, are split between ATI and Alliance Trust PLC according to the average assets under administration during the period.
ATS bears its own direct costs.
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 2013. The Group evaluates performance based on the profit before tax. Intersegment sales and transfers are accounted for on an arm's length basis.
All operating segments operate within the United Kingdom.
| 6 months to 30 June 2014 | ||||||
| £000 Revenue | Company | ATS (continuing operations) | ATS (discontinuing operations) | ATS Total | ATI | Total |
| Investment losses | (19,701) | - | - | - | - | (19,701) |
| Net interest income | 22 | 898 | - | 898 | 26 | 946 |
| Non-interest income | 48,832 | 5,312 | - | 5,312 | 4,899 | 59,043 |
| Segment revenue | 29,153 | 6,210 | - | 6,210 | 4,925 | 40,288 |
| Expenditure | ||||||
| Foreign exchange losses | 7,091 | - | - | - | - | 7,091 |
| Depreciation and amortisation | 379 | 414 | - | 414 | 592 | 1,385 |
| Other expenses | 13,362 | 6,194 | 814 | 7,008 | 5,920 | 26,290 |
| Total expenses excluding RDR marketing and outsourcing | 20,832 | 6,608 | 814 | 7,422 | 6,512 | 34,766 |
| Non-recurring RDR marketing expense | - | 1,246 | - | 1,246 | - | 1,246 |
| Non-recurring outsourcing expense | - | 275 | - | 275 | - | 275 |
| Total expenses including RDR marketing and outsourcing | 20,832 | 8,129 | 814 | 8,943 | 6,512 | 36,287 |
| Operating profit/(loss) before tax and excluding RDR marketing and outsourcing expense | 8,321 | (398) | (814) | (1,212) | (1,587) | 5,522 |
| Operating profit/(loss) before tax and including RDR marketing and outsourcing expense | 8,321 | (1,919) | (814) | (2,733) | (1,587) | 4,001 |
| Segment profit/(loss) before tax | 8,321 | (1,919) | (814) | (2,733) | (1,587) | 4,001 |
We have not disclosed the split between ATS continuing and discontinuing operations on the face of the primary statements as the Directors do not believe this to be material in terms of the Group results.
| 6 months to 30 June 2013 | ||||||
| £000 Revenue | Company | ATS (continuing operations) | ATS (discontinuing operations) | ATS Total | ATI | Total |
| Investment gains | 273,932 | - | - | - | - | 273,932 |
| Net interest income | 67 | 883 | - | 883 | 38 | 988 |
| Non-interest income | 50,041 | 4,469 | 209 | 4,678 | 4,527 | 59,246 |
| Segment revenue | 324,040 | 5,352 | 209 | 5,561 | 4,565 | 334,166 |
| Expenditure | ||||||
| Foreign exchange gains | (3,228) | - | - | - | - | (3,228) |
| Depreciation and amortisation | 245 | 213 | - | 213 | 273 | 731 |
| Other expenses | 13,628 | 4,940 | 510 | 5,450 | 5,963 | 25,041 |
| Total expenses excluding RDR marketing | 10,645 | 5,153 | 510 | 5,663 | 6,236 | 22,544 |
| Non-recurring RDR marketing expense | - | 1,025 | - | 1,025 | - | 1,025 |
| Total expenses including RDR marketing | 10,645 | 6,178 | 510 | 6,688 | 6,236 | 23,569 |
| Operating profit/(loss) before tax and excluding RDR marketing expense | 313,395 | 199 | (301) | (102) | (1,671) | 311,622 |
| Operating profit/(loss) before tax and including RDR marketing expense | 313,395 | (826) | (301) | (1,127) | (1,671) | 310,597 |
| Gain on sale of Full SIPP business | - | - | 5,158 | 5,158 | - | 5,158 |
| Segment profit/(loss) before tax | 313,395 | (826) | 4,857 | 4,031 | (1,671) | 315,755 |
| Year to 31 Dec 2013 | ||||||
| £000 Revenue | Company | ATS (continuing operations) | ATS (discontinuing operations) | ATS Total | ATI | Total |
| Investment gains | 416,062 | - | - | - | - | 416,062 |
| Net interest income | 105 | 1,754 | - | 1,754 | 64 | 1,923 |
| Non-interest income | 89,889 | 9,176 | 252 | 9,428 | 9,088 | 108,405 |
| Segment revenue | 506,056 | 10,930 | 252 | 11,182 | 9,152 | 526,390 |
| Expenditure | ||||||
| Foreign exchange losses | 15,189 | - | - | - | - | 15,189 |
| Depreciation and amortisation | 245 | 360 | - | 360 | 806 | 1,411 |
| Other expenses | 27,450 | 10,158 | 1,495 | 11,653 | 12,561 | 51,664 |
| Total expenses excluding RDR marketing | 42,884 | 10,518 | 1,495 | 12,013 | 13,367 | 68,264 |
| Non-recurring RDR marketing expense | - | 2,047 | - | 2,047 | - | 2,047 |
| Total expenses including RDR marketing | 42,884 | 12,565 | 1,495 | 14,060 | 13,367 | 70,311 |
| Operating profit/(loss) before tax and excluding RDR marketing expense | 463,172 | 412 | (1,243) | (831) | (4,215) | 458,126 |
| Operating profit/(loss) before tax and including RDR marketing expense | 463,172 | (1,635) | (1,243) | (2,878) | (4,215) | 456,079 |
| Gain on sale of Full SIPP business | - | - | 6,668 | 6,668 | - | 6,668 |
| Segment profit/(loss) before tax | 463,172 | (1,635) | 5,425 | 3,790 | (4,215) | 462,747 |
Reconciliation of reportable segment revenue and profit to consolidated amounts
| Revenue | 6 months to | 6 months to | Year to |
| £000 | 30 June 2014 | 30 June 2013 | 31 Dec 2013 |
| Total revenue for reportable segments | 40,288 | 334,166 | 526,390 |
| Other revenues | 23,475 | 8,259 | 17,021 |
| Elimination of intersegment revenues | (1,237) | (1,099) | (3,486) |
| Elimination of movement in investment in subsidiaries | (15,139) | (13,666) | (3,337) |
| --------- | -------- | -------- | |
| Consolidated revenue | 47,387 | 327,660 | 536,588 |
| --------- | -------- | -------- | |
| Expenditure | |||
| Total depreciation and amortisation | 1,385 | 731 | 1,489 |
| Other expenses | 42,657 | 22,282 | 73,297 |
| --------- | -------- | -------- | |
| Consolidated expenses | 44,042 | 23,013 | 74,786 |
| Profit | |||
| Total profit for reportable segments | 4,001 | 315,755 | 462,747 |
| Elimination of movement in investment in subsidiaries | (656) | (11,108) | (945) |
| --------- | -------- | -------- | |
| Consolidated profit before tax | 3,345 | 304,647 | 461,802 |
Assets and Liabilities
| £000 | As at 30 June 2014 | ||||
| Company | ATS | ATI | Total | ||
| Reportable segment assets | 3,349,226 | 488,019 | 26,853 | 3,864,098 | |
| Reportable segment liabilities | (507,423) | (468,034) | (12,018) | (987,475) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,841,803 | 19,985 | 14,835 | 2,876,623 | |
| Assets and Liabilities | As at 30 June 2013 | ||||
| £000 | Company | ATS | ATI | Total | |
| Reportable segment assets | 3,252,360 | 407,136 | 29,000 | 3,688,496 | |
| Reportable segment liabilities | (477,178) | (384,338) | (14,015) | (875,531) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,775,182 | 22,798 | 14,985 | 2,812,965 | |
| Assets and Liabilities | As at 31 Dec 2013 | ||||
| £000 | Company | ATS | ATI | Total | |
| Reportable segment assets | 3,277,833 | 414,303 | 28,740 | 3,720,876 | |
| Reportable segment liabilities | (391,679) | (391,726) | (12,434) | (795,839) | |
| --------- | -------- | -------- | -------- | ||
| Total net assets | 2,886,154 | 22,577 | 16,306 | 2,925,037 | |
Reconciliation of reportable segment assets to consolidated amounts
| Assets | As at | As at | As at |
| £000 | 30 June 2014 | 30 June 2013 | 31 Dec 2013 |
| Reportable segment assets | 3,864,098 | 3,688,496 | 3,720,876 |
| Third party assets and other subsidiaries | 188,149 | 171,379 | 131,867 |
| --------- | -------- | -------- | |
| Consolidated assets | 4,052,247 | 3,859,875 | 3,852,743 |
Reconciliation of reportable segment liabilities to consolidated amounts
| Liabilities | As at | As at | As at |
| £000 | 30 June 2014 | 30 June 2013 | 31 Dec 2013 |
| Reportable segment liabilities | (987,475) | (875,531) | (795,839) |
| Third party liabilities and amounts due to third party investors in subsidiary OEIC | (232,474) | (221,674) | (175,518) |
| --------- | -------- | -------- | |
| Consolidated liabilities (includes current and non current liabilities) | (1,219,949) | (1,097,205) | (971,357) |
11 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 exclude the Investment Property.
The tables 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 2014. All fair value measurements disclosed are recurring fair value measurements.
Group valuation hierarchy fair value through profit and loss
| As at 30 June 2014 | ||||
| £000 | Level 1 | Level 2 | Level 3 | Total |
| Listed investments | 3,165,563 | - | - | 3,165,563 |
| Credit default swaps | - | (1,386) | - | (1,386) |
| Interest rate swaps | - | (80) | - | (80) |
| Foreign exchange contracts | - | (454) | - | (454) |
| Unlisted investments | ||||
| Private equity | - | - | 122,526 | 122,526 |
| Mineral rights | - | - | 16,615 | 16,615 |
| 3,165,563 | (1,920) | 139,141 | 3,302,784 | |
| As at 30 June 2013 | ||||
| Listed investments | 2,978,894 | - | - | 2,978,894 |
| Credit default swaps | - | 1,053 | - | 1,053 |
| Interest rate swaps | - | 108 | - | 108 |
| Foreign exchange contracts | - | - | - | - |
| Unlisted investments | ||||
| Private equity | - | - | 122,216 | 122,216 |
| Mineral rights | - | - | 9,475 | 9,475 |
| 2,978,894 | 1,161 | 131,691 | 3,111,746 | |
| As at 31 December 2013 | ||||
| Listed investments | 3,188,951 | - | - | 3,188,951 |
| Credit default swaps | - | (7,371) | - | (7,371) |
| Interest rate swaps | - | (164) | - | (164) |
| Foreign exchange contracts | - | (2,357) | - | (2,357) |
| Unlisted investments | ||||
| Private equity | - | - | 124,854 | 124,854 |
| Mineral rights | - | - | 13,192 | 13,192 |
| 3,188,951 | (9,892) | 138,046 | 3,317,105 | |
There have been no transfers during the period/year between Levels 1 and 2.
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.
The following valuation techniques are relevant to the Level 2 instruments detailed above;
The fair value of credit default swaps are calculated as a function of the principal and the accrual. The principal is calculated as the present value of the future cash flows that result from the difference between the coupon of the contract and the current spread at which the contract is trading. The accrual is calculated as the coupon multiplied by the day convention, which is further multiplied by the notional value of the contract.
The fair value of interest rate swaps are calculated as the present value of the estimated future cash flows based on changes in observable yield curves
Fair Value Assets in Level 3
Level 3 valuations are reviewed at least annually by the Valuation Committee who are assigned responsibility by the Board of Alliance Trust PLC. The Valuation Committee considers the appropriateness of the valuation models, inputs, using the various valuation methods in accordance with the Group's valuation policy. The 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.
| £000 | Group | ||
| Jun 14 | Jun 13 | Dec 13 | |
| Balance at 1January | 138,046 | 117,362 | 117,362 |
| Net gain from financial instruments at fair value through profit or loss | 17,984 | 1,469 | 10,724 |
| Purchases at cost | 3,920 | 13,226 | 21,265 |
| Sales proceeds | (22,815) | (840) | (8,527) |
| Realised gain on sale | 2,006 | 474 | (2,778) |
| Balance at 30 June / 31 December | 139,141 | 131,691 | 138,046 |
There have been no transfers during the period/year between Level 2 and 3. No interrelationships between unobservable inputs used in the above valuations of Level 3 investments have been identified.
The following valuation techniques are relevant to the Level 3 instruments detailed above;
Private equity, both fund-to-fund and direct investment, are included under Level 3 and is 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 funds investment manager's fair value at the last reported period rolled forward for any cash flows. 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
· Industry valuation benchmarks
Mineral rights are carried at fair value and are valued in the Group's accounts at £16.6m (£9.5m at 30 June 2013, £13.2m at 31 December 2013) 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 respective input variables for mineral rights would impact the valuation disclosed for the relevant Level 3 assets. 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). For Private Equity investments, 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 table below details how an increase or decrease in the input variables would impact the valuation disclosed for the relevant Level 3 assets.
| £000 | Fair Value | Valuation | Unobservable | Input | Input | Valuation |
| Description | at June 2014 | Technique | Inputs | Sensitivity +/- | Technique valuation +/- | |
| Mineral rights | 16,615 | Oklahoma Tax Commission Multiples and Lierle US | Revenue multiple - gas | 7 | 1 | 1,169/(1,169) |
| Price report (for non producing properties) | Revenue multiple - oil | 4 | 1 | 1,006/(1,006) | ||
| Revenue multiple - | 4 | 1 | 486/(486) | |||
| products/condensate | ||||||
| AV. Bonus multiple | 1.2 | 0.5 | 1,029/(1,029) | |||
| 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 Mineral rights, an increase in the revenue multiple and average bonus multiple would lead to an increase in the estimated value.
Investment in subsidiary companies
Investments in subsidiary companies (Level 3) are valued in the Company's accounts only at £155.9m (£150.6m at 30 June 2013 and £150.5m at 31 December 2013) being the Directors' estimate of their fair value, using the guidelines and methodologies on valuation published by the International Private Equity and Venture Capital Association. This includes Alliance Trust Savings Limited at £26.7m (£24.6m at 30 June 2013 and £26.7m at 31 December 2013), Alliance Trust Investments Limited at £12.8m (£10.1m at 30 June 2013 and £12.8m at 31 December 2013) and Alliance Trust Finance Limited £16.8m (£17.8m at 30 June 2013 and £16.8m at 31 December 2013). 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 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:
· Alliance Trust Savings - This is valued as a trading business. A discounted cash flow, revenue multiple and an earnings before interest, tax depreciation and amortisation multiple approach have been adopted.
· Alliance Trust Investments - This is valued based on third party funds only. Given the stage of development of Alliance Trust Investments it is valued as a book of business rather than a trading business. Both a discounted cashflow and revenue multiple valuation approach have been adopted.
· Alliance Trust Finance - This is predominantly valued using the value of cash held in this entity.
The multiples applied in valuing our subsidiaries are derived from comparable companies sourced from market data.
12 Financial Commitments
As at 30 June 2014 the Group and Company had financial commitments, which have not been accrued, totaling £24m (£52m at 30 June 2013 and £29m at 31 December 2013). Of this amount £24m (£52m at 30 June 2013 and £29m at 31 December 2013) 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.
13 Share Based Payments
The group operates two share based payment schemes. Full details of these schemes (LTIP and AESOP) are disclosed in the December 2013 annual report and financial statements and the basis of measuring fair value is consistent with that disclosed therein.
Long Term Incentive Plan ('LTIP')
In the period to 30 June 2014 participating employees applied a proportion of their annual cash bonuses for the period ended 31 December 2013 to purchase 108,014 (106,557 at 30 June 2013 and 31 December 2013) Company shares at a weighted average price of £4.55 (£4.34 at 30 June 2013 and 31 December 2013) per share. Matching awards of up to 296,695 (213,264 at 30 June 2013 and 31 December 2013) shares, and performance awards of up to 705,417 (728,314 at 30 June 2013 and 31 December 2013) shares were granted.
Matching awards and performance awards made during the period were valued at £499,000 (£356,000 at 30 June 2013 and at 31 December 2013) and £1,192,000 (£1,216,000 at 30 June 2013 and at 31 December 2013) 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 £728,000 (£713,000 at 30 June 2013 and £1,402,000 at 31 December 2013) for the Group. In accordance with 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.
14 Bank Overdraft and Loans
| £000 | As at | As at | As at |
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
| Bank loans repayable within one year | 380,000 | 340,000 | 380,000 |
| --------- | -------- | -------- | |
| Analysis of borrowings by currency: | |||
| Bank loans - Sterling | 380,000 | 340,000 | 380,000 |
| The weighted average % interest rates payable: | |||
| Bank loans | 1.61% | 1.80% | 1.81% |
| The Directors' estimate of the fair value of the borrowings: | |||
| Bank loans | 380,000 | 340,000 | 380,000 |
On 18 June 2014 Alliance Trust PLC announced a £100m private placement of senior unsecured notes at a fixed coupon rate of 4.28% p.a. for a 15 year period through to July 2029. The notes are scheduled to fund on 31 July 2014 and will be used to repay existing debt.
15 Share Capital
| £000 | As at | As at | As at |
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
| Allotted, called up and fully paid: 556,209,146 (561,529,146 at 30 June 2013 and 560,094,146 at 31 December 2013) ordinary shares of 2.5p each | 13,906 | 14,039 | 14,003 |
Share Buy Backs
| £000 | As at | As at | As at |
| 30 June 2014 | 30 June 2013 | 31 Dec 2013 | |
| Ordinary shares of 2.5p each | |||
| Opening share capital | 14,003 | 14,040 | 14,040 |
| Share buy back | (97) | (1) | (37) |
| -------- | --------- | -------- | |
| Closing share capital | 13,906 | 14,039 | 14,003 |
The Interim Report and Accounts will be available on the Company's website www.alliancetrust.co.uk later today.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Alliance Trust PLC via Globenewswire
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