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Alliance Trust comes out of turbulence on top to join FTSE 100

ALLIANCE Trust is set to join the elite FTSE 100 index tomorrow, after emerging from recent market turbulence relatively unscathed.

Alan Harden, chief executive of Dundee's largest listed company since 2004, said he would celebrate the "morale boosting" promotion tomorrow night.

"Over the last four years a huge amount of work has gone into building a sustainable performance and a sustainable company," Harden said yesterday.

"This is showing that against other quoted companies we're notching up the rankings."

The FTSE 100 is the index of the largest 100 UK-headquartered, publicly owned companies, measured by market capitalisation. It is reviewed every three months. However, yesterday FTSE – the organisation that compiles the index – confirmed that Alliance Trust would be promoted from a "reserve list" before the next review, because Kelda, owner of Yorkshire Water, saw its 3 billion takeover completed this week.

Alliance Trust, Britain's largest generalist investment trust, was formed when several trusts merged in 1888. It has been on the verge of joining the top index since it merged with the Second Alliance Trust in 2006.

The company has been criticised by financial analysts for a range of reasons, from its failure to buy back shares to its passive investment strategy and its reliance on equities.

Its shares have traded as low as a 17 per cent discount to its net asset value, (NAV), one of the largest discounts among Britain's investment trusts. .

Harden said entry into the FTSE 100 would increase the company's visibility to investors, while recent improvements would push shares to a level that "better reflect our company's real value".

He declined to name that "real value", saying: "It's very hard for me to say what it should be but you get a sense of what it shouldn't be," he said.

"I find it interesting that it is simply accepted that the shares should trade at a discount (to NAV] when you get so much for your money … We're not just a pool of assets, we've got a strong management and a couple of businesses which offer real growth potential."

Harden said the company was planning to increase its range of services though its new savings business for customer wealth management.

He added that a highly defensive strategy over the past 18 months had left it with sufficient cash to "exploit interesting opportunities". In particular its private equity business, launched last year, is looking for quality companies that want to replace debt with equity, to protect them from credit markets troubles.

Alliance Trust's promotion underlines turbulence in the markets. It has a market cap of 2.3 billion, while at the last FTSE 100 reshuffle the threshold for entry was about 3bn. Budget airline EasyJet, clothing group Burberry and coal power station Drax, which were also put on the most recent FTSE 100 reserve list with Alliance Trust, have all since seen their market cap fall below 2bn.

 
 
 

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