Katherine Garrett-Cox 'sees off' Laxey's challenge on share buy-back

ALLIANCE Trust yesterday deflected a challenge from activist investor Laxey Partners but admitted shareholders had signalled they wanted it to "up the pace" on improving its performance.

Chief executive Katherine Garrett-Cox said the 2.5 billion trust had taken on board investor concerns raised during weeks of protest and that it had "sharpened our focus".

The increasingly hostile and high-profile dispute attracted unprecedented numbers of private investors - more than 250 - to the AGM near the trust's headquarters in Dundee.

About one in three shareholders who voted supported Laxey's proposals over the policy on buying back shares to reduce the trust's discount to net asset value (NAV).

Garrett-Cox said the distraction in terms of management time spent on the issue had been "unhelpful".

Speaking after the meeting, she said: "The vote absolutely endorses what we are doing as a company but the message is that people want us to pick up the pace."

She urged investors to "judge us by our actions rather than our words" and pointed out that the company's NAV had hit a three-year high in recent days.

Although the trust's board denied it had changed tack in the face of Laxey's attack, Colin Kingsnorth of the hedge fund welcomed what he saw as "significant concessions" and the increase seen in share buy-backs.

"They have committed to getting the discount down and the management really has a big year ahead of it now in terms of delivering. If they don't perform, the major shareholders will look for change," he warned.

Although Laxey had previously talked of calling an EGM, it said it has no current plans to do so.

The dispute centred around Alliance's policy on buying back shares. Laxey argued for a formal discount-control mechanism - where the trust would agree to buy back shares whenever its discount widened beyond 10 per cent rather than the board's flexible buy-back policy.

The trust has recently been buying back significant levels of shares, a total of 14.8 million since February, and its discount to NAV which stood at 17.1 per cent at the end of the financial year has since narrowed to 15.2 per cent.

Chairman Lesley Knox, who announced she will step down before the next AGM, said she had been heartened by the "overwhelming support" from private investors over the Laxey calls.

Of the actions of activist investors, she said : "These people play a game; that's what they do for a living."

Analyst Christopher Brown of JP Morgan said the focus should now shift to NAV performance which the company has argued will be the fundamental reason for the discount to narrow.

"There is still plenty of scope for improvement.And if performance does not improve and/or the discount widens, there is likely to be a fresh bout of shareholder activism." He said he was giving the company the benefit of the doubt "given the many positive changes" that Garrett-Cox has instigated and believed that improved performance will narrow the discount over time.