Alliance Trust’s real growth strategy gathers pace

Alliance Trust PLC, has announced that its net asset value rose 39% to £2.8bn in the last financial year to 31 January 2007, following the successful merger with the Second Alliance Trust that created the UK’s largest generalist investment trust company. This simpler corporate structure has enabled the international investment and financial services group to take advantage of market opportunities as it expands its asset management and financial services.

Total return for the year was made up of a £147.6m net capital gain on the company’s assets as well as net revenue of £67.9m. As world stock markets appeared to enter a more uncertain phase, the company decided to preserve capital by reducing exposure to quoted equities and built a 7% cash position. This cash position has subsequently allowed the company to take advantage of a fall in stock markets and other opportunities in the first quarter of the current year.

Chief Executive Alan Harden said, “In a historic year for Alliance Trust, we have completed a successful merger and taken meaningful steps towards building a rounded group that is able to deliver real growth for shareholders through different economic cycles. We have made progress towards enhancing and preserving returns by spreading our corporate capital over several asset classes where we have, or are developing, expertise. We have strengthened our equities team, grown our property portfolio, launched a third-party asset management business, acquired a new private equity subsidiary and made the investment dealing service of our financial service subsidiary available online.”

“While the timing of our decision to protect capital by reducing exposure to quoted equities proved to be early, falling markets since the end of the year have given us opportunities to acquire stock. We remain cautious about the outlook for global stock markets and believe our strategy to deliver real growth by balancing our portfolio across well-selected opportunities in several asset classes and our subsidiaries is the correct approach for the medium and long term. I was particularly pleased to see a higher-than-expected 25% jump in revenue from our financial services and pensions subsidiary, Alliance Trust Savings, which we expect to contribute significantly to the group in coming years.”

Head of Equities Grant Lindsay said, “Conditions for world stock markets soured slightly during the first half of the year with a sharp correction in May and early June. We acted to preserve capital, raising cash, and our equity returns were dampened in the second half of our financial year. Even though markets recovered quickly we still anticipate a genuine shift in investor attitudes and tolerance of risk in the coming year, with signs that the global economy may slow. We continue to see good individual opportunities within global equity markets for careful but decisive stockpicking and the performance of our UK Small Cap and Asia-Pacific (ex-Japan) portfolios are examples of how that approach is delivering outperformance.”