Alliance Trust plc (LON:ATST) said it has had two years of “considerable” change following a long-running dispute with US activist investor Elliott Capital Management, which demanded the fund improve its performance.
On the back of these changes, the company raised its ordinary dividend for the 50th year in a row with a 16.4% increase to 12.77p as it reported growth in full year net asset value and pre-tax profits.
NAV rose to 667.5p in the year ended 31 December from 559.0p a year earlier with the discount to NAV falling to 4.4% from 8.1%.
The total return on NAV edged up to 21.5% in 2016 from 5.4% in 2015, as growth in industrial and IT stocks offset a reversal of strong gains in health care and a slump in the financial portfolio.
Total shareholder return for 2016 was 26.4%, compared to 10.7% in 2015.
Alliance said shares rebounded in February after a turbulent start to the year over worries of a Chinese hard landing and a slowdown in the US industrial sector.
“Despite some significant shocks to financial markets, such as Brexit, markets continued to make progress, driven by increasing signs of self-sustaining global growth and continued monetary laxity,” the company said.
Profit before tax rose to £641mln from £146mln as the group reduced its ongoing charges ratio, a measure of recurring expenses.
"The last two years have seen considerable change for Alliance Trust and we are very appreciative of the strength of support shareholders have shown,” said chairman Robert Smith.
Among the alterations it has made recently, the company decided to sell its position in Italian bank Intesa Sanpaolo, which it blamed for the underperformance in its financial portfolio. Investor concerns around the bank’s non-performing loans in Italy and political uncertainty led to large declines in the share prices of Italian financials.
Elliott dispute..
The full year results come a month after buying back shares from its largest shareholder, Elliott, to end an ongoing battle.
Alliance said it has completed the repurchase of Elliott’s 95.5mln shares at a 4.75% discount below NAV for about £620mln The agreement has provided a 1% uplift to NAV, the fund said.
Elliott has made a series of hostile demands over the years.
In April 2015 it demanded a review of the pay of then-chief executive Katherine Garrett-Cox, whose salary had doubled in five years to £1.4mln.
Alliance ousted Garrett-Cox last year after agreeing to appoint two of three independent directors nominated by Elliott.
In December, Alliance began a structural upheaval following a strategic review after Elliott had demanded the group find a new business model that improved its results.
Following the review, the company appointed Willis Towers Watson as its new investment manager after selling its in-house investment management arm to Liontrust Asset Management PLC.
Alliance was forced to defend its appointment of Willis last month following questions over whether it reflected a conflict of interest over its role in the strategic review of the business. The fund said Willis Towers Watson was limited to a "clearly defined role as an investment consultant", advising on investment options available to the group.
“The clear focus of the board and Willis Towers Watson (WTW), the new investment manager, is to generate a real return for shareholders through a combination of capital growth and rising dividends,” Smith said in the full year results statement today.