Alliance Trust loses £500m on collapse of stock markets

Published on Monday 20 April 2009 21:35

ALLIANCE Trust, the Dundee-based investment house, yesterday revealed the full effects of the global economic crisis as writedowns on its assets passed half a billion pounds last year.

The FTSE 100 company, which can trace its roots back to 1888, booked a pre-tax loss of 524 million despite enjoying a rise in income to 117.3m, up from 102.2m a year earlier, fuelled by the low value of sterling. Net assets fell from 2.7bn to 2.1bn.

Total investor return fell 19.5 per cent year-on-year due to a move from equities to cash when the credit crisis was at its height. This still outperformed broader markets which fell 30 to 40 per cent in the same period.

Alliance maintained an increase in dividends for shareholders, at 8p, including a special 0.5p payout based on higher levels of income.

At the same time as it released its results for the year to the end of January, the company announced David Deards, its finance director for the past six years, would be stepping down without a replacement in the frame.

Alliance chief executive Katherine Garrett-Cox hailed the group's "very credible performance" in "pretty treacherous markets".

Despite the hefty write-downs, the company outperformed several indices and rose to the top quartile of investment trusts. According to Alliance, total shareholder return for the year ranked 11th in a peer group of 42 of similar global growth and income trusts. Last year its position was 25th out of 38.

The report also highlighted the performance of the group's equity portfolios – an indicator of the group's stock-picking prowess – against other regional benchmarks. Alliance said it outperformed indices in North America by 17.8 per cent, Europe by 11.3 per cent, UK mid-caps by 11.2 per cent and UK large companies by 4.2 per cent.

Garrett-Cox said: "The fact we moved up the rankings very convincingly to the top quartile is really quite remarkable, but the other parts of the piece that we are very proud of is the regional equity portfolio. Ultimately that really is the driver of the company."

In the report to the stock market, Alliance chairman Lesley Knox described how Garrett-Cox acted "quickly and decisively" since she took over as chief executive in 2008. Formerly the group's chief investment officer, Garrett-Cox now holds both roles.

By last autumn, the group's share of assets in cash or near-cash investments, such as bonds, peaked at 21 per cent. In December, Garrett-Cox said the firm started buying equities in an effort to benefit from an upturn in stock markets.

Garrett-Cox said by the beginning of this year, Alliance had the "firepower" to invest in equities and may look to fuel its buying power further with debt.

"We have kept pace with the major market indices since the start of our financial year," she said. "We have actually outperformed, which we wouldn't have done had we kept a very high cash rating."

Garrett-Cox seeking 'wider skills' as Deards departs

ALLIANCE Trust is to wave goodbye to its finance director of six years, David Deards.

Yesterday, the group said Deards, 48, was "stepping down" from his role as of 30 April and that recruitment for a new finance director was underway.

Alliance chief executive Katherine Garrett-Cox told The Scotsman that it was "an appropriate time for him to move on".

She said Deards' successor would have a "broader range of skills" in an effort to keep the group's management lean.

"This gives us a great opportunity to identify somebody who we can bring from the outside with a slightly broader range of skills and capabilities," explained Garrett-Cox.

"I am doing two jobs as chief executive officer and CIO (chief investment officer]. I think looking for a finance director who can stretch across operational parts of the company would be really helpful. What I am not interested in doing is creating a massive corporate bureaucracy," she added.

Following Deards' departure, Garrett-Cox will be the sole executive director of the Alliance Trust.

The search for an interim finance director, who will act while the search for the "right person" continues, is "pretty far down the line", confirmed Garrett-Cox.

Alliance's chairman Lesley Knox added: "I would like to thank David for his contribution to Alliance Trust over the past six years. We wish him all the very best in his future career."