Alliance Witan PLC - Final Results
Alliance Witan PLC (‘the Company’)
LEI: 213800SZZD4E2IOZ9W55
7 March 2025
A landmark year
Annual results for the year ended 31 December
2024
Highlights
- 2024 was a landmark year for the Company, which was promoted to
the FTSE 100 after the combination with Witan Investment Trust Plc
(‘Witan’).
- The Company’s share price was 1,244 pence (£12.44) as of 31
December 2024, representing a Share Price Total Return1
of 14.3%.
- The Company’s Net Asset Value Total Return1 of
13.3%, while strongly positive, trailed our benchmark index, the
MSCI All Country World Index (‘MSCI ACWI’), which returned
19.6%.
- The Company’s average discount narrowed to 4.7% from 5.4% at
the end of 2023, which compared favourably with the average
discount for the Association of Investment Company’s Global Sector
of 7.9%.
- A fourth interim dividend 6.73p per share was declared on 28
January 2025, bringing the total dividend for the year ended 31
December 2024 to 26.70p per share. This is a 6% increase on the
previous year, the 58th consecutive annual increase.
Dean Buckley, Chair of Alliance Witan,
commented:
“The Company delivered strong outright gains for shareholders in
2024, although in common with most active global equity strategies,
we underperformed our benchmark index, MSCI ACWI, where performance
was concentrated in a handful of the largest US companies. Even so,
the Company’s longer-term performance remains competitive, and
demand for our shares was healthy last year, with the Company's
discount narrowing, bucking the industry trend towards widening
discounts. We also increased our dividend for the 58th
consecutive year.
“Thanks to the support of both sets of shareholders, we achieved
a historic combination with Witan, which places the Company in a
strong position to realise economies of scale and offer better
liquidity for our shares. With solid performance and a refreshed
brand, supported by a marketing campaign that will continue in
2025, the Board is confident that the Company is well placed to
continue delivering attractive returns for shareholders”.
About Alliance Witan PLC
Alliance Witan aims to be a core investment that beats inflation
over the long term through a combination of capital growth and
rising dividend. The Company invests in global equities across a
wide range of different sectors and industries to achieve its
objective. Alliance Witan’s portfolio uses a distinctive
multi-manager approach. We blend the top stock selections of some
of the world’s best active managers into a single diversified
portfolio designed to outperform the market while carefully
managing risk. Alliance Witan is an AIC Dividend Hero with 58
consecutive years of rising dividends.
https://www.alliancewitan.com
For more information, please contact:
| For
more information, please contact: |
Mark Atkinson
Senior Director
Client Management, Wealth & Retail |
|
Sarah
Gibbons-Cook
Director |
| Willis Towers
Watson |
|
Quill PR |
| Tel: 07918
724303 |
|
Tel: 07702
412680 |
|
mark.atkinson@wtwco.com |
|
AllianceWitan@quillpr.com |
1. Alternative Performance Measure. Share Price Total Return is
the return to shareholders through share price capital returns and
dividends paid by the Company and re-invested. Net Asset Value
(NAV) Total Return is a measure of the performance of the Company’s
NAV over a specified time period. It combines any change in the NAV
and dividends paid.
Financial highlights as at 31 December
2024
|
Net Assets |
Net Asset Value (‘NAV’) per Share |
|
£5.2bn |
1,304.9p |
|
(2023: £3.3bn) |
(2023: 1,175.1p) |
|
|
|
|
NAV Total Return1 |
Share Price |
|
+13.3% |
1,244.0p |
|
(2023: +21.6%) |
(2023: 1,112.0p) |
|
|
|
|
Share Price Total
Return1 |
Discount to NAV1 |
|
+14.3% |
-4.7% |
|
(2023: +20.2%) |
(2023: -5.4%) |
|
|
|
|
Earnings per Share (Revenue) |
Total Dividend per Share |
|
17.3p |
26.7p |
|
(2023: 18.6p) |
(2023: 25.2p) |
1. Alternative Performance Measure – see page
116 of the Annual Report for further information.
Notes:
NAV per Share including income with debt at fair value.
NAV Total Return based on NAV including income with debt at fair
value and after all costs.
Source: Morningstar and Juniper Partners Limited (‘Juniper’).
Chair’s Statement
- Landmark combination with
Witan
- Another strong year for
equities
- 58th consecutive annual dividend
increase
- Discount narrower than the AIC
Global Sector average
- Named by the AIC as a top 20 best
performing investment trust over ten years1
2024 was a landmark year for your Company. I
would like to begin by thanking you for your support for the
combination of Alliance Trust and Witan to form Alliance Witan and
by welcoming all shareholders who have joined us as a result. This
was a pivotal moment in our history, achieving economies of scale
and elevating the Company to the FTSE 100. Now, as one of the
industry’s leaders, this status will provide better liquidity for
our shares and, with good long term investment performance and a
strong brand, help us attract new investors. We made a number of
commitments to investors as part of the proposals, for example in
respect of dividends and costs, and you will see as you read
through the Annual Report how we have achieved each of these.
As I mentioned in the Interim Report for the six
months ended 30 June 2024, there has been no change to the
Company’s investment strategy, just a larger pool of assets for our
Investment Manager, WTW, to manage with the same professionalism
that it has brought to the job since April 2017.
1.
https://www.theaic.co.uk/aic/news/press-releases/top-20-best-performing-investment-trusts-for-your-isa
Investment Performance
It was another good year for global equity
markets, and your Company delivered strong absolute returns. NAV
Total Return was 13.3% and, due to a narrowing of the discount,
Share Price Total Return was 14.3%. However, we lagged our
benchmark index, the MSCI All Country World Index (‘MSCI ACWI’ or
‘Index’), which returned 19.6%. We also marginally underperformed
our peers in the AIC Global Sector, which is disappointing, but we
were slightly ahead of the much wider, more representative
Morningstar peer group of open and closed-ended global equity
funds.
Simply put, our relative performance in 2024
suffered from not having enough exposure to the small number of
very large companies that dominated market returns, especially in
the US.
The narrowness of returns from global equity
markets has been a common problem for all active managers in recent
years, and we take comfort from the fact that, despite this
persistent headwind, we are ahead of the Index and have
significantly outperformed both peer groups over three years. You
can read more about the contributors/detractors to the Company’s
investment performance during 2024 in the Investment Manager’s
Report on page 9 of the Annual Report.
Dividend increased for the
58th consecutive
year
The Board declared a fourth interim dividend of
6.73p per share on 28 January 2025, resulting in a full year
dividend of 26.70p, an increase of 6.0% on the prior year. This
fulfils the promise we made at the time of the combination of
Alliance Trust and Witan to increase dividends for the legacy
shareholders of both companies. 2024’s increase marks the 58th
consecutive annual increase, which is one of the longest track
records in the investment trust industry. Dividends are well
supported by revenue and reserves, and the Board is confident
annual dividend increases can continue well into the future. Due to
our steady approach, the Company has received a ‘Dividend Hero’
investment company award from the Association of Investment
Companies (‘AIC’).
Narrowing discount
Many investment trusts continued to trade on
large discounts to NAV throughout 2024, with the industry average
widening to 14.7% from 12.7%.1 I am pleased to report
that your Company fared better than most, with its average discount
falling to 4.7% from 5.4% over the year. This compared favourably
with the average discount for the AIC Global Sector of 7.9%.
Your Board remains committed to the maintenance
of a stable discount. We will continue to use share buybacks as
appropriate and invest in promotional activity to widen our
shareholder base, to support the management of the discount. During
2024, the Company bought back 4.7 million shares (1.2% of shares in
issue2), versus 8.6 million repurchased in 2023. The
shares bought back during the year were placed in Treasury. This
level of buybacks was significantly below that of our peers, in a
year in which industry-wide buybacks hit a record level of £7.5
billion3. The shares held in Treasury can be reissued by
the Company at a premium to estimated NAV when there is market
demand.
Board changes
Following the completion of the combination of
Alliance Trust with Witan, we welcomed four new Non-Executive
Directors to the Board: Andrew Ross, Rachel Beagles, Shauna Bevan
and Jack Perry, all of whom were former directors of Witan.
Clare Dobie, having served for almost nine
years, is retiring as a Director at the conclusion of this year’s
Annual General Meeting (‘AGM’), as is Jack Perry, reducing the size
of the Board to eight members.
On behalf of the Board, I would like to thank
Clare and Jack for their contributions.
Annual General Meeting
The Board looks forward to being able to meet
shareholders again at this year’s AGM, which will be held at the
Apex City Quay Hotel in Dundee on 1 May 2025. For those
shareholders who are not able to attend in person, we will be live
streaming the event. As well as the formal business of the meeting,
there will be an investor forum afterwards featuring two of our
Stock Pickers, Jennison and EdgePoint, as well as members of WTW’s
investment team. There will be another in-person investor forum in
London in the autumn. In addition, shareholders can engage with the
Company and its Stock Pickers via online presentations during the
year. Further details of how to attend all these events can be
found on the website.
The Board would strongly encourage shareholders
to use the opportunity to have their say and use their vote at the
AGM. Further information on the arrangements for the AGM, including
information on how to vote either directly through the Registrar or
though different platforms, is on pages 134 and 135 of the Annual
Report.
Keep up-to-date
In these unusual times, the website will provide
timely updates to shareholders. Therefore, I would encourage you to
visit the website which contains a vast amount of information on
investment performance, details of shareholder meetings and
investor forums, monthly factsheets, quarterly newsletters, and
Stock Picker updates, as well as the Annual and Interim
Reports.
As always, the Board welcomes communication from
shareholders and I can be contacted through Juniper Partners
(‘Juniper’), the Company Secretary at
investor@alliancewitan.com.
Outlook
Since the start of President Trump’s second term
of office in January, tariffs have created uncertainty about the
outlook for equities. Diplomatic tensions over efforts to end the
war in Ukraine and conflict in Gaza have also raised geopolitical
risks. Furthermore, European bond markets are adjusting to the
prospect of increased borrowing to fund higher levels of defence
and infrastructure spending.
While there is a risk that heightened levels of
uncertainty will impact on business and consumer confidence, global
growth and corporate earnings forecasts are currently healthy,
giving some grounds for cautious optimism, about further gains for
shareholders, especially if there is a broadening out of market
leadership.
While the Index is highly concentrated, your
portfolio has broader exposure to many good businesses that have
not yet received the market recognition our Stock Pickers believe
they deserve.
The portfolio will not always outperform the
market in every discrete period, but we believe it will continue to
add significant value for shareholders in the long run.
I look forward to meeting as many of you as
possible at the AGM in Dundee or the next investor forum in
London.
1. Weighted average discount (excluding 3i
Group). Source: Winterflood.
2. Percentage based on the Company’s issued share capital
(excluding shares held in Treasury) as at 1 January 2025.
3. Source: AIC and Morningstar.
Dean Buckley
Chair
6 March 2025
Combination with Witan
The most significant development during the year
under review was the combination of the Company with Witan.
Background
Following a comprehensive review of management
arrangements, the Witan Board concluded that a combination with the
Company was in the best interests of Witan’s shareholders. Amongst
other things this allowed them continued exposure to a successful
multi-manager approach.
The combination was undertaken by way of a
scheme of reconstruction and members’ voluntary liquidation of
Witan. The scheme required the approval of both the Company and
Witan’s shareholders and took effect on 10 October 2024. It
resulted in the Company acquiring approximately £1,539 million of
net assets from Witan in consideration for the issue of new
ordinary shares to Witan shareholders. The name of the Company
became Alliance Witan and the stock exchange ticker ALW.
Outcome
The combination was expected to result in
substantial benefits for all shareholders and future investors. The
outcomes of the key elements of the proposals include:
- Greater profile and FTSE
100 inclusion: the Company has assets of over £5 billion
and is now a FTSE 100 Index constituent.
- Lower management
fees: WTW agreed a new management fee structure; this
resulted in an even more competitive blended fee rate for all
shareholders.
- Lower ongoing
charges: the new management fee structure and economies of
scale have reduced ongoing charges to 0.56% (net of the management
fee waiver).
- No cost to either
companies’ shareholders: the costs of the transaction were
carefully managed, including the fee waiver from WTW, to ensure
that the transaction was completed at no cost to all
shareholders.
- Attractive and progressive
dividend policy: the third and fourth interim dividend
payments of 2024 were increased to ensure that they were
commensurate with Witan’s first interim dividend. It is expected
that the dividend will continue to increase in the current year so
that shareholders continue to see progression in their income.
Portfolio Transition
- The Company received assets
including cash and equities from Witan and the Witan loan notes
were novated to the Company. Details are provided in note 13 to the
Financial Statements.
- BlackRock Investment Management
(UK) Limited managed the portfolio transition. Direct costs of the
portfolio transition and Manager changes were less than 0.04% of
the Net Asset Value of the enlarged portfolio.
Investment Manager’s Report
Market backdrop: equities untroubled by
politics
For the second year running, global equities
delivered strong returns in 2024, with economics trumping politics.
Despite a record number of elections, conflicts in the Middle East
and Ukraine reaching new heights, and a scary moment in Japan when
the Nikkei Index of the top 225 blue-chip shares plunged 12% in a
day at the beginning of August, investors focused on resilient
global growth, falling inflation and interest rates, and healthy
corporate profitability.
Hence, our benchmark index, the MSCI ACWI,
returned 19.6% in 2024 following a return of 15.3% in 2023. Since
1987, the Index has returned an average of 8.4% per
annum1, so returns of this magnitude in two consecutive
years are rare. The ebullient mood of equity investors was
reflected in a surge in the prices of less established assets, such
as cryptocurrency, with Bitcoin reaching all-time highs of over
$100,000. Peanut the Squirrel Coin, a cryptocurrency named after
the eponymous pet that New York environmental authorities seized
and euthanised on 30 October 2024, at one point commanded a market
cap of $1.7 billion.
However, regional equity market performance was
mixed. US markets once again led the way, with the S&P 500
delivering a 27% return when measured in British pounds. Chinese
equities rallied briefly following government stimulus, but
concerns over the country’s property market and trade tensions
persisted. Together with a strong US dollar, these worries led to
more subdued returns from emerging markets, which rose about 9%. In
Japan, August’s technically driven decline proved temporary, and
the Nikkei resumed its ascent to close the year at a record high,
although the yen’s depreciation reduced returns for UK-based
investors when converted into British pounds. The UK and European
markets were more muted, with the FTSE All Share Index and the MSCI
Europe ex UK Index returning 9.5% and 1.9% respectively.
Gains driven by US tech
giants
Giant US technology related stocks were the
standout performers, fuelled by investor excitement about
generative artificial intelligence (‘AI’) and, from November
onwards, hopes that Donald Trump’s victory in the presidential
election would weaken regulatory scrutiny. The share prices of the
so called “Magnificent Seven” – Apple, Amazon, Alphabet, Meta,
Microsoft, NVIDIA and Tesla – increased by 60% on average and were
responsible for 43% of MSCI ACWI’s gains. This was less than 2023
when they contributed 53%, but still a huge number emphasising the
extreme concentration of index returns in a small number of
companies.
Even so, from mid-year onwards, returns were no
longer quite as skewed to the performance of a handful of shares.
Although NVIDIA and Tesla returned a massive 176% and 65%
respectively, giant tech was not the only game in town. Financial
stocks returned 26.5%, and returns from the consumer discretionary,
industrial and utility sectors were also well into double figures,
pointing to the potential broadening out of market returns as
stock-specific drivers came to the fore.
1.
https://www.msci.com/documents/10199/8d97d244-4685-4200-a24c-3e2942e3adeb
Portfolio performance: strong absolute
gains but lagged benchmark index
Our portfolio’s NAV Total Return was a robust
13.3% but, as with most active managers, it lagged the Company’s
benchmark index. The portfolio does, however, remain ahead of the
Index over three years (28.0% vs 26.8%), albeit behind over five
years (64.7% vs 70.8%). Disappointing though it was not to beat the
MSCI ACWI in 2024, we were not alone. AJ Bell calculated that, to
the end of November, just 18% of active global equity funds
outperformed their passive peers, largely due to their inability to
match high Index weightings in the “Magnificent Seven”. The sheer
size of these companies in the Index is mind boggling. NVIDIA,
Microsoft and Apple, for example, represent 13% of the MSCI ACWI as
at 31 December 2024 and, together, are bigger than the entire stock
markets of several sizeable countries.
The skew of the Index towards mega-cap companies
has been a challenge, to varying degrees, since the start of our
multi-manager strategy in April 2017. As a broadly diversified
strategy, with capital spread between 8-12 Managers, all with
different approaches to investing, our portfolio naturally has a
structural bias away from stocks that on rare occasions represent
such a large proportion of our global benchmark. While we have some
exposure to most of the “Magnificent Seven”, it would require a lot
of the Managers to choose them as one of their best ideas for us to
be at Index weight, never mind be overweight.
The Index may have been hard to beat in recent
years, but market concentration poses significant risks for passive
strategies. At the end of 2024, the Index on average allocated
around 150 times as much capital to each of Apple, NVIDIA and
Microsoft as it did to the average stock, akin to us placing about
95% of the portfolio in one manager’s hands and 0.5% each in the
other ten.
We do not believe this is the right way to
manage risk for shareholders, bearing in mind that index trackers
are not investing lots of money in these companies because they are
good businesses trading at good valuations, but because they are
very big. If US large-cap stocks continue to dominate, tracker
funds may continue to outperform active funds. But if sentiment on
the technology sector turns sour, passive funds with big stakes
will be hit much harder.
Not owning enough NVIDIA was
painful
The strong outperformance of our portfolio
versus our benchmark in 2023 continued into the first quarter of
2024, when the biggest contribution came from not owning, at that
time, poorly performing Tesla and Apple. But thereafter stock
selection became more challenging, particularly within the
“Magnificent Seven”. Although we benefitted from owning Amazon and
Microsoft, we moved from an overweight to an underweight position
in NVIDIA in the first quarter after its extraordinary
outperformance, which then made it our biggest single detractor
last year as that outperformance continued. Having helped us in the
first quarter, the lack of exposure to Tesla and Apple, which both
recovered strongly as the year progressed, counted against us from
then on. Overall, our positions in the “Magnificent Seven”
accounted for a third of the portfolio’s underperformance versus
the Index in 2024.
The remainder of the portfolio’s
underperformance came from a combination of being underweight in
large-cap stocks in general and stock specific issues elsewhere, in
some cases due to partial reversals of performance in 2023. For
example, stock selection in financials detracted in large part due
to our relative lack of exposure to strongly performing US banks
such as JP Morgan and Goldman Sachs. In the consumer discretionary
sector, the share price of UK-based drinks company Diageo, owned by
Veritas Asset Management (‘Veritas’) and Metropolis Capital
(‘Metropolis’), continued to suffer from a post-Covid cyclical
downturn, falling 8.5%, although both Managers believe the company
will eventually recover lost ground when structural trends reassert
themselves. Novo Nordisk, the Danish weight loss drugs company, was
another notable detractor, as its shares fell 14% after
disappointing test results. Our Stock Pickers see this as a
temporary decline in a growing market in which Novo Nordisk has a
leading position. Hence, it was one of our biggest purchases in
2024 (see table below).
Indeed, our Stock Pickers express a high degree
of confidence in the latent value of many of their holdings. By far
the most important long run ingredient underpinning share price
performance is strong fundamentals, such as market-leading products
or services, solid profit margins, plentiful cashflow and strong
management.
Top 10 purchases and sales
|
Top 10 purchases |
Value £m |
|
Top 10 sales |
Value £m |
|
UnitedHealth Group |
50.2 |
|
Alphabet |
84.3 |
|
Novo Nordisk |
48.8 |
|
NVIDIA |
71.3 |
|
Synopsys |
47.5 |
|
Fiserv |
39.0 |
|
Microsoft |
45.0 |
|
Aena |
37.9 |
|
Netflix |
41.5 |
|
Ebara |
36.1 |
|
Philip Morris |
41.4 |
|
TotalEnergies |
35.0 |
|
Enbridge |
39.4 |
|
PayPal |
33.8 |
|
AT&T |
39.0 |
|
Bureau Veritas |
33.4 |
| American Electric
Power |
37.3 |
|
KKR |
33.2 |
|
Eli Lilly |
36.6 |
|
Taiwan Semiconductor |
32.2 |
Source: Juniper.
The purchases and sales are calculated by taking the net value of
all transactions (buy and sells) for each holding held within the
portfolio over the period. The tables exclude any non-equity
holdings such as ETFs and any transfers from the combination with
Witan.
Even so, in the short run, market sentiment can
have a larger impact on share prices than fundamentals. When we
break down the portfolio performance against the Index into
fundamentals and sentiment, the portfolio’s strong absolute
performance has been mainly as a result of company fundamentals,
whereas the Index’s absolute performance has been more driven by
market sentiment.
A full breakdown of the contributors to our
Total Return in 2024 is shown in the following table.
Contribution analysis
|
Contribution to Return in 2024 |
% |
|
Benchmark Total Return |
19.6 |
|
Asset Allocation |
-1.1 |
|
Stock Selection |
-5.3 |
|
Gearing and Cash |
0.6 |
|
Investment Manager Impact |
-5.8 |
|
Portfolio Total Return |
13.8 |
|
Share Buybacks |
0.1 |
|
Fees/Expenses |
-0.6 |
|
Taxation |
-0.1 |
|
Change in Fair Value of Debt |
0.4 |
|
Timing Differences |
-0.2 |
|
NAV Total Return including Income, Debt at Fair
Value |
13.3 |
|
Change in Discount |
1.0 |
|
Share Price Total Return |
14.3 |
Source: Performance and attribution data sourced
from WTW, Juniper, MSCI Inc, FactSet and Morningstar as at 31
December 2024. Percentages may not add due to rounding.
In the table below, we also list the top five
contributors and detractors to portfolio performance during the
year relative to the portfolio’s benchmark.
Sands, Vulcan and Lyrical were the top
performers
As we would expect from such a diverse line up,
performance among our Managers was mixed. This is by design, as we
do not want the portfolio to be biased towards any one approach of
investing, which might make returns vulnerable to a sudden switch
from one style to another. This happened in 2022 when growth stocks
began to suffer significantly as central banks raised interest
rates to combat inflation. Sands Capital (‘Sands’), Vulcan Value
Partners (‘Vulcan’), and Lyrical Asset Management (‘Lyrical’) were
the top performers last year. Sands and Vulcan both benefitted from
owning tech giants. Sands held NVIDIA while Vulcan held Amazon, but
Sands’ largest contributor to relative performance was Axon
Enterprise, an industrial business which makes tasers, body cameras
and other software products. Its share price surged by 134% last
year.
Top five stock contributors to performance
|
Stock |
Sector |
Country |
Average Active Weight (%) |
Total Return in Sterling (%) |
Attribution Effect Relative to Benchmark (%) |
|
Amazon |
Consumer Discretionary |
United States |
1.0 |
47.0 |
0.2 |
|
Axon Enterprise |
Industrials |
United States |
0.2 |
134.2 |
0.2 |
|
Salesforce |
Information Technology |
United States |
0.4 |
29.8 |
0.2 |
|
NRG Energy |
Utilities |
United States |
0.4 |
80.6 |
0.2 |
|
Nestle |
Consumer Staples |
Switzerland |
-0.4 |
-25.9 |
0.2 |
Bottom five stock detractors to performance
|
Stock |
Sector |
Country |
Average Active Weight (%) |
Total Return in Sterling (%) |
Attribution Effect Relative to Benchmark (%) |
|
NVIDIA |
Information Technology |
United States |
-1.8 |
176.1 |
-1.2 |
|
Broadcom |
Information Technology |
United States |
-0.5 |
113.4 |
-0.6 |
|
Novo Nordisk |
Health Care |
Denmark |
0.8 |
-14.0 |
-0.6 |
|
Tesla |
Consumer Discretionary |
United States |
-0.8 |
65.4 |
-0.6 |
|
Apple |
Information Technology |
United States |
-3.9 |
32.8 |
-0.4 |
Source: WTW.
The tables above illustrate the top five contributors and
detractors to returns relative to benchmark in 2024. It aims to
explain at a stock level which companies drove relative returns.
For example, the Alliance Witan portfolio was underweight relative
to benchmark in NVIDIA, Broadcom, Tesla and Apple. These stocks had
very strong returns, which hurt our portfolio’s relative
performance. Conversely, not having an exposure to Nestle helped
our relative performance given the stock was held in the benchmark
and was down over the year. Our overweight position in Amazon, Axon
Enterprise, Salesforce and NRG Energy contributed positively to
relative returns given their strong performance. The average active
weight is the arithmetic simple average weight of the stock in the
portfolio minus the arithmetic simple average weight of the stock
in the benchmark over the period.
Vulcan’s largest contributor to our performance
was KKR, the US-based private equity group, which returned 82%,
prompting Vulcan to take profits. Its holding in Salesforce also
did well, rising nearly 30%.
Lyrical, a deep-value style investor, benefitted
from owning several less talked-about US-based companies, which all
rebounded from cheap valuations. These included NRG Energy,
Ameriprise Financials and eBay.
Of our Managers, the most notable laggard was
Sustainable Growth Advisors (‘SGA’), which was disappointing given
its focus on large cap growth stocks which, as a group, had the
strongest price momentum. SGA suffered from holding Novo Nordisk,
and two of its other positions, ICON and Synopsys also stood out as
detractors. The recent poor performance of SGA follows a long
period of outperformance, so returns since we appointed SGA remain
strong. Value Managers Metropolis and ARGA Investment Management
(‘ARGA’), the latter replacing Jupiter Asset Management (‘Jupiter’)
in April, also struggled in the recent market environment, which
has generally favoured growth managers.
Portfolio changes: two new Managers
added after combination with Witan
As well as adding ARGA for Jupiter in the first
half of the year, following Ben Whitmore’s decision to leave
Jupiter to set up his own business, there were two further changes
to the Manager line-up during the integration of Witan’s portfolio.
Altogether, this contributed to an unusually high level of turnover
of 98.5% of the portfolio in 2024. Both Alliance Trust and Witan
already had GQG Partners (‘GQG’) and Veritas in common, which meant
that there were some in-specie transfers of stocks. Additionally,
the combination of Alliance and Witan presented us with an
opportunity to introduce Jennison Associates (‘Jennison’) to the
portfolio at a low cost.
Based in the US, Jennison specialises in
investing in innovative, fast-growing businesses. It had been one
of Witan’s most successful managers and blending it with our other
Managers increased the diversity of holdings in growth companies.
We also took the opportunity to replace Black Creek Investment
Management (‘Black Creek’) with EdgePoint Investment Group
(‘EdgePoint’), while we were using a transition manager to keep
costs down to a minimum.
This change was prompted by succession planning
at Black Creek. We had been monitoring Black Creek for some time
due to the departure of a senior team member for health reasons and
the uncertainty surrounding the timing of founder Bill Kanko’s
retirement. With a similar investment style to Black Creek,
EdgePoint seeks to buy good, undervalued businesses and hold them
until the market fully realises their potential.
Through the combination, we inherited a small
number of investment trust and private equity fund holdings,
representing less than 3% of the combined portfolio. These are
specialist funds with portfolios focused on, among other things,
early-stage life sciences, valuable intellectual property,
innovative internet platforms and renewable infrastructure assets.
Collective investments such as these are not normally part of our
investment strategy. However, they are all trading at prices we
believe are well below their intrinsic value, so rather than sell
them at a loss, we will hold them until we can achieve attractive
values.
Beyond that, the combination did not lead to any
change in our investment approach. We retain high conviction in our
line-up of Managers and their ability to pick winning stocks,
although we keep them under constant review for any red flags and
have access to a deep bench of talented replacements should these
be needed.
Gearing: remaining cautious
Our gross gearing stood at 8.4% at the end of
2024 (4.9% net of underlying Manager and central cash), slightly
above the level of 7.1% at the start of the year, reflecting the
improving outlook for equities as the year progressed. However,
given the strong performance from equity markets, it is still
towards the lower end of the typical range of 7.5 to 12.5%.
Market outlook: multiple risks warrant
diversification
As 2025 began, the mood among investors was
upbeat, with many hoping President Trump’s promises of deregulation
and tax cuts would be supportive of equity markets. If returns can
spread beyond a narrow group of highly valued US mega-cap
technology stocks, it could provide firmer foundations for another
good year for shares. The strong start to the year for European
equities certainly offered hope for geographical
diversification.
However, on-off tariffs and geopolitical
tensions loom large, creating considerable uncertainty. This was
reflected in an increase in equity market volatility in
February.
In the first 2 months of 2025, the benchmark
index rose by 2.2% suggesting that investors were still willing to
look through some of the risks while forecast global growth and
corporate earnings remain healthy. But confidence is fragile and,
with valuations in the US still close to a record high despite
February’s pullback, the market is vulnerable to setbacks.
In this environment, we believe bottom-up stock
picking, based on company fundamentals, should be a more reliable
way to add value for shareholders in the long term than making
bold, top-down market calls. So, we will continue to position the
portfolio to maintain balanced regional, sector and style
exposures, that are similar to the Index weightings by periodically
adjusting Manager allocations. This should provide stability and
reduce risk, while we rely on our Managers to add value by seeking
out the best companies in each market segment.
While retaining some exposure to US mega-cap
tech stocks that may continue delivering attractive returns, our
portfolio is not reliant on them. It also contains many stocks that
have remained in the shadows but have been performing well
operationally and have excellent prospects not yet reflected in
their share prices.
Hidden gems: stock picks with high
potential
We asked our eleven Stock Pickers
for examples of strong but underappreciated companies in the
portfolio
Lyrical highlighted five of its
US holdings that have underperformed the S&P 500 Index since
the start of 2024 but, at the same time, have grown their forecast
earnings per share by more than the Index. These are healthcare
providers Cigna and HCA,
WEX and Global Payments, which
both provide business-to-business payment technology, and
Gen Digital, which is a leading provider of cyber
security and identity protection.
“Interestingly, even on this list there is
inconsistency by the market,” says Lyrical. “Cigna has the worst
stock performance, but the second-best earnings per share (‘EPS’)
growth. Gen Digital has the slowest EPS growth in the group, but
the best performance”.
ARGA cited
Accor, the global hotel business, which has
transitioned to an “asset light” business model by selling most of
its hotels, while maintaining the lucrative franchise and
management agreements attached to these properties. While
Sands Capital sees potential in the share prices
of Sika, a maintenance and building refurbishment
specialist.
“Investment results have been weak despite solid
fundamental results,” says Sands. “We believe that investors have
focused on slower than historical organic growth, caused by several
factors, including the real estate crisis in China, slowdown in
electric vehicle production, and a pause in green building
incentives.”
Sands Capital also mentioned
Roper Technologies, a diversified industrial
technology company, and Keyence, a leading
designer of high-end factory automation based in Japan, as
attractive businesses with share price appreciation potential.
Vulcan highlighted
CoStar Group, an information provider to the
commercial and residential real estate industries, and
Everest Group, a global insurance and reinsurance
business, while GQG mentioned the UK-based
pharmaceutical company AstraZeneca, the
Brazil-based oil and gas company Petrobras,
Bank Mandiri in Indonesia, and the Indian tobacco
company ITC.
SGA backed
Danaher, the US industrial group,
Intuit, which provides do-it-yourself accounting
software for small businesses, and HDFC Bank in
India. Jennison highlighted
Reddit, the online social media platform.
“Reddit is targeting 49% growth in the third
quarter of 2024 and consensus is at 41% in Q4, but then market
estimates are fading down to around 20% in 2025, which we think is
overly conservative and creates an opportunity for investment
today.”
Veritas’s nominations for
underappreciated businesses were Amadeus, the
Spanish software company focusing on air travel, The Cooper
Companies, which makes contact lenses, and Thermo
Fisher Scientific, the world’s largest scientific
equipment provider.
Japan specialist Dalton’s best
stocks included Bandai Namco, a multinational that
publishes video games and makes toys, Shimano, the
bicycle equipment manufacturer, and Rinnai, one of
the global leaders in water heaters. Metropolis
highlighted Andritz, the Austrian headquartered
business supplying industrial equipment to the pulp and paper,
metals and hydropower industries, Crown Holdings,
which makes aluminium drinks cans, and Admiral,
the UK insurer.
Finally, EdgePoint, the newest
addition to our Manager line-up, pointed to
Dayforce, a global human resources software
company, Nippon Paints Holdings in Japan,
Franco-Nevada, a gold-focused royalty company in
Canada, and Qualcomm, which invented significant
pieces of the underlying technology required for mobile phones.
“The market looks at Qualcomm as a handset
supplier and the stock moves in relation to expected handset sales
over the following quarters,” says EdgePoint. “We consider Qualcomm
to be one of the world’s leading designers of energy-efficient
processors at a point in time when demand for energy-efficient
processing is growing rapidly across a wide range of industries.
Some of the major opportunities for Qualcomm over the next 5 years
include artificial intelligence, automobiles, personal computers
and smartphones.”
Altogether, these fundamentally strong
businesses combine with others to create a robust, multi-manager
portfolio that offers attractive long-term growth with lower risk
than a single manager strategy, and therefore a more comfortable
ride through the ups and downs of the market. Such companies may
have remained below the radar in 2024, when investors became giddy
with the stellar returns from the US technology shares, but we look
forward to their attributes receiving the recognition from the
market that they deserve.
Craig Baker, Stuart Gray, Mark
Davis
Willis Towers Watson
Investment Manager
The securities referred to above represent the
views of the underlying managers and are not stock
recommendations.
Summary of Portfolio
As at 31 December 2024
A full list of the Company’s Investment Portfolio can be found
on the Company’s website, www.alliancewitan.com
Top 20 holdings
|
Name |
£m |
% |
|
Microsoft |
236.3 |
4.3 |
| Amazon |
197.4 |
3.6 |
| Visa |
156.2 |
2.8 |
| UnitedHealth
Group |
116.4 |
2.1 |
| Alphabet |
107.7 |
1.9 |
| Diageo |
92.4 |
1.7 |
| Meta |
88.6 |
1.6 |
| NVIDIA |
82.7 |
1.5 |
| Aon |
75.1 |
1.4 |
| Novo Nordisk |
73.1 |
1.3 |
| Netflix |
70.9 |
1.3 |
| Mastercard |
70.7 |
1.3 |
| Eli Lilly |
69.9 |
1.3 |
| Salesforce |
61.5 |
1.1 |
| HDFC Bank |
58.2 |
1.1 |
| Safran |
53.3 |
1.0 |
| Taiwan
Semiconductor |
49.9 |
0.9 |
| Petrobras |
48.1 |
0.9 |
| State Street |
48.0 |
0.9 |
| Philip
Morris |
47.6 |
0.9 |
The 20 largest stock positions, given as a percentage of the
total assets. Each Stock Picker selects up to 20 stocks.*
Top 20 holdings 32.9%
Top 10 holdings 22.2%
* Apart from GQG Partners, which also manages a dedicated
emerging markets mandate with up to 60 stocks.
Dividend
We have paid our shareholders a rising dividend
for 58 consecutive years. Providing that level of reliability is
something of which we are extremely proud. We carefully manage the
Company’s dividend. For instance, should there be a year in which
income is unexpectedly high, we may retain some of that income to
help fund future dividends. Due to our steady approach, the Company
has received a ‘Dividend Hero’ investment company award from the
Association of Investment Companies (‘AIC’).
Our dividend policy
Subject to market conditions and the Company’s
performance, financial position and outlook, the Board will seek to
pay a dividend that increases year on year. The Company expects to
pay four interim dividends per year, on or around the last day of
June, September, December and March, and will not, generally, pay a
final dividend for a particular financial year.
While shareholders are not asked to approve a
final dividend, given the timing of the payment of the quarterly
payments, each year they are given the opportunity to share their
views when they are asked to approve the Company’s Dividend
Policy.
Fourth interim dividend
As previously announced, a fourth interim
dividend of 6.73p per ordinary share will be paid on 31 March 2025
to those shareholders who were on the register at close of business
on 28 February 2025.
Increased dividend
The Company has increased its total dividend for
the year ended 31 December 2024 to 26.7p per ordinary share (2023:
25.2p), a 6.0% increase on the previous year.
|
Dividend |
2024 (p) |
2023 (p) |
% increase |
|
1st Interim |
6.62 |
6.18 |
7.1 |
|
2nd Interim |
6.62 |
6.34 |
4.4 |
|
3rd Interim |
6.73 |
6.34 |
6.2 |
|
4th Interim |
6.73 |
6.34 |
6.2 |
Reserves
It is the Board’s intention to utilise
distributable reserves as well as portfolio income to fund dividend
payments. Further details of the dividend payments for the year to
31 December 2024 and information on distributable reserves can be
found in notes 7 and 2(b)(x) of the Financial Statements,
respectively.
Ongoing Charges and
Discount
Ongoing
charges1
The Company’s ongoing charges ratio (‘OCR’)
decreased to 0.56% (including the impact of the investment
management fee waiver) (2023: 0.62%). Total administrative expenses
were £3.9m (2023: £2.9m) and investment management expenses were
£18.4m (2023: £16.3m). Further details of the Company’s expenses
are provided in note 4 of the Financial Statements on page 90 of
the Annual Report. The Company’s costs remain competitive for an
actively managed multi-manager global equity strategy.
Maintaining a stable
discount1
One of the Company’s strategic objectives is to
maintain a stable share price discount to NAV. The Company has the
authority to buy back its own shares in the market if the discount
is widening and to hold these shares in Treasury.
During the year under review, the Company’s
share price traded at an average discount of 4.7% (2023: 6.0%). As
at 31 December 2024, the Company’s share price discount was 4.7%
(2023: 5.4%). The average discount (unweighted) for the AIC Global
Sector was 7.9%.
Share issuance and buybacks
As a result of the combination with Witan,
120,949,382 new ordinary shares were issued for assets valued at
£1.5bn implying an effective issue price of £12.7459246 per
share.
The Company bought back 1.2%* (2023: 3.0%) of
its issued share capital during the year, purchasing 4,722,000
shares which were placed in Treasury. The total cost of the share
buybacks was £57.0m (2023: £86.6m). The weighted average discount
of shares bought back in the year was 5.7%. Share buybacks
contributed a total of 0.1% to the Company’s NAV performance in the
year.
1. Alternative Performance Measure – see page
116 of the Annual Report for details.
* Percentage based on the Company’s issued share capital (excluding
shares held in Treasury) as at 31 December 2024.
What We Do
How WTW manages the
portfolio
WTW as Investment Manager has overall
responsibility for managing the Company’s portfolio. It is the
Investment Manager’s job to select a diverse team of expert Stock
Pickers, each of whom invest in a customised selection of 10-20 of
their ‘best ideas’. WTW then allocates capital to them, relative to
the risks the Stock Picker represents. For example, small-cap
stocks are typically more risky than large-cap stocks, so on
average a small-cap specialist would tend to receive less capital
than a Stock Picker who focuses on large-cap stocks. However, the
allocations do not remain static; WTW keeps them under constant
review and varies them over time according to market conditions,
with the goal of keeping our exposures to different parts of global
stocks markets well balanced.
Stock Pickers are encouraged to ignore the
benchmark and only buy a small number of stocks in which they have
strong conviction, while WTW manages risk through the Stock Picker
allocations. On their own, each of the Stock Picker’s
high-conviction mandates has the potential to perform well. This is
supported by WTW’s experience of managing high-conviction
portfolios and academic evidence1. But concentrated
selections of stocks can be volatile and risky, so WTW mitigates
these dangers by blending Stock Pickers with complementary
investment approaches or styles, which can be expected to perform
differently in different market conditions. This smooths out the
peaks and troughs of performance associated with concentrated
single-manager strategies.
Several of the Stock Pickers in the current
portfolio have been with the Investment Manager since inception of
the multi-manager strategy, though it does actively monitor and
rearrange the line-up where necessary.
WTW invests a lot of time and effort on
identifying skilled Stock Pickers for the Company’s portfolio,
undertaking extensive qualitative and quantitative analysis. This
due diligence process focuses on:
- The investment processes, resources
and decision-making that make up the Stock Picker’s competitive
advantage;
- The culture and alignment of the
organisation that leads to sustainability of that competitive
advantage;
- Their approach to responsible
investment. WTW aims to appoint Stock Pickers who actively engage
with the companies in which they invest and have an effective
voting policy. When necessary, they challenge the Stock Pickers and
guide them towards better practices; and
- The operational infrastructure that
minimises risk from a compliance, regulatory and operational
perspective.
1. Sebastian & Attaluri, Conviction in
Equity Investing, The Journal of Portfolio Management, Summer
2014.
The Investment Manager’s views are formed over
extended periods from multiple interactions with the Managers,
including regular meetings. They look beyond past performance
numbers to try to understand the ‘competitive edge’. This involves
examining and interrogating processes for selecting stocks,
adherence to this process through different market conditions, team
dynamics, training and experience. Performance track records are
just a single data point, and, without the context of the
additional information, they are unlikely to persuade WTW that a
Stock Picker is skilled.
Once selected, the Investment Manager tends to
form long-term partnerships with the Stock Pickers, generally only
taking them out of the portfolio if something fundamental changes,
such as the departure of a key individual from the business or a
change in business strategy or fortunes. With highly active,
concentrated portfolios, periods of short-term underperformance are
to be expected and are not a reason to doubt a Stock Picker if they
are adhering to their philosophy and process. WTW does, however,
keep a constant eye out for talent and may bring new Managers into
the portfolio at the expense of an incumbent if they are a better
fit.
Responsible investment
WTW believes that Environmental, Social and
Governance (‘ESG’) factors have the potential to impact financial
risk and return. As long-term investors, WTW aims to incorporate
these factors into its investment process.
As stewards of the Company’s assets, WTW seeks
to integrate responsible investment into its process for managing
the portfolio. ESG factors can influence returns, so these risk
factors are taken into account in WTW’s investment processes,
including assessing how Managers evaluate ESG risk in their
decisions over what stocks to purchase. Climate change poses
potential significant risks to investment returns from many
companies, which is why both WTW and the Company have stated an
intention to manage the assets with a goal of achieving Net Zero
greenhouse gas emissions from the portfolio by 2050, with an
interim intention of reducing portfolio emissions by approximately
50% by 2030, relative to 2019.
In 2024, we saw an increase in the portfolio’s
weighted average carbon intensity (which measures carbon emissions
as a proportion of revenue) from 71.9tCO2e/$M sales to 117.
9tCO2e/$M sales. Over the year, some higher-emitting stocks came
into the portfolio including, industrial company Alaska Air and
materials company Alcoa Ord, and our allocation to the
higher-emitting Utilities sector went up slightly with purchases of
companies such as Southern Ord and American Electric Power. We are
monitoring our progress against our Net Zero goal, and our Managers
and EOS at Federated Hermes (‘EOS’) continue to engage with the
companies in the portfolio on climate related issues.
Progress towards Net Zero will not be linear.
Emissions from the portfolio are dependent on holdings, which can
change from year to year as WTW’s Stock Pickers seek value for
investors. If companies are perceived as being at higher financial
risk by being slow to adapt to a Net Zero world, we expect to use
stewardship, such as voting and engagement, to encourage positive
changes to business practices. WTW believes this is preferable to
excluding companies from the portfolio, since exclusion merely
passes the responsibility of ownership to other investors who may
be less scrupulous about adherence to ESG standards or
regulation.
As well as engaging with companies on climate
change, WTW’s Stock Pickers, together with stewardship provider
EOS, focused on a wide range of other issues last year.
Overall, EOS engaged with 97 companies in the
portfolio on 515 issues and objectives throughout the year. Key
areas of engagement included board effectiveness, climate change,
human and labour rights and human capital, biodiversity, digital
rights and AI. Of these engagements, the environmental category
accounted for 29% of the total number of engagements, with 63% of
environmental engagements relating to climate change. Meanwhile the
Stock Pickers cast votes at 3,346 resolutions in 2024. Of these
resolutions, they voted against company management on 386 and
abstained from voting on 38 occasions.
How We Manage Our Risks
In order to monitor and manage risks facing the
Company, the Board maintains and regularly reviews a risk register
and heat map. The risk register details all principal and emerging
risks thought to face the Company at any given time. The principal
risks facing the Company, as determined by the Board, are
Investment, Operational and Legal and Regulatory
Non-Compliance.
As part of its review process, the Board
considers input on the principal and emerging risks facing the
Company from its key service providers WTW and Juniper. Any risks
and their associated risk ratings are then discussed, and the risk
register and heat map updated accordingly, with additional measures
put in place to monitor, manage and mitigate risks as required.
During the period the Board carefully reviewed the risks associated
with the implementation of the combination and the post transaction
integration risks.
Principal risks
The principal risks facing the Company, how they
have changed during the year and how the Board aims to monitor and
manage these risks are detailed below.
|
Risk and potential impact |
Risk rating |
How we monitor and manage the risk
|
|
Market risk: loss on the portfolio in absolute
terms, caused by economic and political events, interest rate
movements and fluctuation in foreign exchange rates. |
Increased due to geopolitical and macro-economic uncertainty |
- The Board sets investment guidelines and the Investment Manager
selects Stock Pickers and styles to provide diversification within
the portfolio.
- The Board receives regular updates from the Investment Manager
and monitors adverse movements and impacts on the portfolio.
- An explanation of the different components of market risk and
how they are individually managed is contained in note 18 to the
Financial Statements.
|
|
Investment performance: relative underperformance
makes the Company an unattractive investment proposition. |
Stable |
- The Company’s investment performance against its investment
objective, relevant benchmark and closed and open ended peer group
are reviewed and challenged where appropriate by the Board at every
Board meeting.
- The Board receives regular reporting from the Investment
Manager to allow it to review the approach to ESG and climate risk
factors embedded within the investment process from the Company’s
perspective.
|
|
Strategy and market rating: demand for the
Company’s shares decreases due to changes in demand for the
Company’s strategy or secular changes in investor demand. |
Stable |
- The Board regularly reviews the share register and receives
feedback from the Investment Manager and broker on all marketing
and investor relations and shareholder meetings, to keep informed
of investor sentiment and how the Company is perceived in the
market.
- The Board monitors the Company’s share price discount and,
working with the broker undertakes periodic share buybacks as
appropriate to meet its strategic objective of maintaining a stable
discount.
- The proposed combination with Witan and the benefits to ongoing
investors in terms of scale and investor proposition were reviewed
and thoroughly considered to ensure the enlarged Company would be
an attractive proposition for both current and prospective
shareholders.
|
|
Capital structure and financial risk:
inappropriate capital or gearing structure may result in losses for
the Company. |
Stable |
- The Board receives regular updates on the capital structure of
the Company including share capital, borrowings, structure of
reserves, compliance with ongoing covenants and shareholder
authorities, to allow ongoing monitoring of the appropriate
structure.
- The Board reviews and manages the borrowing limits under which
the Investment Manager operates. As part of the Witan combination,
additional borrowing was novated to the Company. These additional
facilities provide an increased blend of interest rates and
maturity dates.
- Shareholder authority is sought annually in relation to share
issuance and buybacks to facilitate ongoing management of the share
capital.
|
Operational
|
All of the Company’s operations are outsourced to third party
service providers. Any failure in the operational controls of the
Company’s service providers could result in financial, legal or
regulatory and reputational damage for the Company.
Operational risks include cyber security, IT systems failure,
inadequacy of oversight and control, climate risk and ineffective
disaster recovery planning. |
Stable |
- The Board monitors the services provided by the key services
suppliers and formally reviews the performance of each on an annual
basis, including the review of audited internal control reports
where appropriate. No material issues were raised as part of the
evaluation process in 2024.
- Cyber security continues to be a key focus for the Board.
Reports on the cyber security, IT testing environment and disaster
recovery testing of each key service provider are reviewed by the
Board annually.
- Any breaches in controls which have resulted in errors or
incidents are required to be immediately notified to the Board
along with proposed remediation actions.
|
Legal and regulatory
|
|
Failure to adhere to all legal and regulatory requirements could
lead to financial and legal penalties, reputational damage and
potential loss of investment trust status. |
Stable |
- The Board has contracted with its key service suppliers,
including the Investment Manager and Juniper, in relation to its
ongoing legal and regulatory compliance. The Board receives
quarterly reports from each supplier to monitor ongoing compliance.
The Company has complied with all legal and regulatory requirements
in 2024.
- Any breaches in controls which have resulted in errors or
incidents are required to be immediately notified to the Board,
along with proposed remediation actions.
- The review of the Annual Report by the independent auditors
provides additional assurance that the Company has met all legal
and regulatory requirements in respect of those disclosures.
|
Emerging risks
Emerging risks are typified by having a high
degree of uncertainty and may result from sudden events, new
potential trends or changing specific risks where the impact and
probable effect is hard to assess. As the assessment becomes
clearer, the risk may be added to the risk matrix of ‘known’
risks.
The Board is currently monitoring a number of
emerging risks: geopolitical tension continues to be an emerging
risk for the Company due to ongoing conflicts across the world.
Along with increased populism and nationalism, these risks may
impact individual economies and global markets. Although covered in
the operational risk section above, the Board recognises the
increased risk that cybercrime and the misuse of AI poses to the
Company.
Geopolitical events such as the conflicts in the
Middle East region, coupled with the potential breakdown of post
war alliances and potential new trade tariffs and changes to US
economic and international policies introduced by President Trump,
could bring uncertainty and fragility to capital markets in 2025,
including persistent or reacceleration of inflationary
pressures.
Stakeholder Engagement – Section 172
Statement
The Directors have a number of obligations
including those under section 172 of the Companies Act 2006. These
obligations relate to how the Board takes account of various
factors in making its decisions – including the impact of its
decisions on key stakeholders. The Board is focused on the
Company’s performance and its responsibilities to stakeholders,
corporate culture and diversity, as well as its contributions to
wider society, and it takes account of stakeholder interests when
making decisions on behalf of the Company.
As an externally-managed investment trust, the
Board considers the Company’s key stakeholders to be existing and
potential new shareholders and its service providers.
Full details on the primary ways in which the
Board engaged with the Company’s key stakeholders can be found on
pages 30 to 35 of the Annual Report.
Dean Buckley
Chair
6 March 2025
Viability and Going Concern
Statements
Viability Statement
The Board has assessed the prospects and
viability of the Company beyond the 12 months required by the Going
Concern accounting provisions.
The Board considered the current position of the
Company and its prospects, strategy and planning process as well as
its principal and emerging risks in the current, medium and long
term, as set out on pages 27 to 29 of the Annual Report. After the
year-end but prior to approval of these Accounts, the Board
reviewed its performance against its strategic objectives and its
management of the principal and emerging risks facing the
Company.
The Board received regular updates on
performance and other factors that could impact on the viability of
the Company.
The Board has concluded that there is a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due for at least
the next five years; the Board expects this position to continue
over many more years to come. The Company’s Investment Objective,
which was approved by shareholders in April 2019, is to deliver a
real return over the long term, through a combination of capital
growth and a rising dividend, and the Board regards the Company’s
shares as a long-term investment. The Board believes that a period
of five years is considered a reasonable period for investment in
equities and is appropriate for the composition of the Company’s
portfolio.
In arriving at this conclusion, the Board
considered:
- Financial
strength: As at 31 December 2024 the Company had total
assets of £5.6bn, with net gearing of 4.9% and gross gearing of
8.4%. At the year-end the Company had £182.7m of cash or cash
equivalents.
- Investment: The
portfolio is invested in listed equities across the globe. The
portfolio is structured for long-term performance; the Board
considers five years as being an appropriate period over which to
measure performance.
- Liquidity: The
Company is closed-ended, which means that there is no requirement
to realise investments to allow shareholders to sell their shares.
The Directors consider this structure supports the long-term
viability and sustainability of the Company, and have assumed that
shareholders will continue to be attracted to the closed-ended
structure due to its liquidity benefit. During the year, WTW
carried out a liquidity analysis and stress test which indicated
that around 93% of the Company’s portfolio could be sold within a
single day and a further 6% within 10 days, without materially
influencing market pricing. WTW performs liquidity analysis and
stress testing on the Company’s portfolio of investments on an
ongoing basis under both current and stressed conditions. WTW
remains comfortable with the liquidity of the portfolio under both
of these market conditions. The Board would not expect this
position to materially alter in the future.
- Dividends: The
Company has significant accumulated distributable reserves which
together with investment income can be used to support payment of
the Company’s dividend. The Board regularly reviews revenue
forecasts and considers the long-term sustainability of dividends
under a variety of different scenarios. The Company has sufficient
funds to meet its Dividend Policy commitments.
- Reserves: The
Company has large reserves (at 31 December 2024 it had £3.7bn of
distributable reserves and £1.5bn of other reserves).
- Discount: The
Company has no fixed discount control policy. The Company will
continue to buy back shares when the Board considers it
appropriate, to take advantage of any significant widening of the
discount and to produce NAV accretion for shareholders.
- Significant Risks:
The Company has a risk and control framework which includes a
number of triggers which, if breached, would alert the Board to any
potential adverse scenarios. The Board has developed and reviewed
various scenarios based on potentially adverse events as set out in
note 18 on pages 100 to 107 of the Annual Report.
- Borrowing: In
consideration of the combination with Witan, the Company’s
borrowing facilities were reviewed to ensure they remained
appropriate. The Company’s available bank borrowing facilities were
consequently increased by £50m; and £155m of fixed rate loan notes
were novated from Witan as part of the combination. The Company’s
weighted average borrowings costs have reduced by 0.3%. All
borrowings are secured by floating charges over the assets of the
Company. The Company comfortably meets its banking covenants.
- Security: The
Company retains title to all assets held by the Custodian which are
subject to further safeguards imposed on the Depositary.
- Operations:
Throughout the year under review, the Company’s key service
providers continued to operate in line with service level
agreements with no significant errors or breaches having been
recorded.
Going Concern Statement
In view of the conclusions drawn in the
foregoing Viability Statements, which considered the resources of
the Company over the next 12 months and beyond, the Directors
believe that the Company has adequate financial resources to
continue in existence for at least the period to 31 March 2026.
Therefore, the Directors believe that it is appropriate to continue
to adopt the Going Concern basis in preparing the financial
statements.
Directors’ Responsibilities
The Directors are responsible for preparing the
Annual Report and the Financial Statements in accordance with
UK-adopted international accounting standards and applicable law
and regulations.
Company law requires the Directors to prepare
Financial Statements for each financial year. Under that law the
Directors are required to prepare the Financial Statements in
accordance with UK-adopted international accounting standards.
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss for that period.
In preparing these Financial Statements, the
Directors are required to:
- Select suitable accounting policies
and then apply them consistently;
- Make judgements and accounting
estimates that are reasonable and prudent;
- State whether they have been
prepared in accordance with UK-adopted International Accounting
Standards, subject to any material departures disclosed and
explained in the Financial Statements;
- Prepare the Financial Statements on
the Going Concern basis unless it is inappropriate to presume that
the Company will continue in business; and
- Prepare a Directors’ Report, a
Strategic Report and Directors’ Remuneration Report which comply
with the requirements of the Companies Act 2006.
The Directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Company’s transactions, and disclose with reasonable accuracy
at any time the financial position of the Company and enable them
to ensure that the Financial Statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors are responsible for ensuring that the Annual Report and
Financial Statements, taken as a whole, are fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.
Website publication
The Directors are responsible for ensuring the
Annual Report and the Financial Statements are made available on a
website. Financial Statements are published on the Company’s
website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of Financial
Statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website is the
responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the Financial Statements
contained therein.
Report of Directors and Responsibility
Statement
The Report of the Directors on pages 36 to 69 of
the Annual Report (other than pages 61 to 63 which form part of the
Strategic Report) of the Annual Report and Accounts has been
approved by the Board. The Directors have chosen to include
information relating to future development of the Company and
relationships with suppliers, customers and others, and their
impact on the Board’s decisions on pages 30 to 35 of the Annual
Report.
Each of the Directors, who are listed on pages
37 to 40 of the Annual Report, confirm to the best of their
knowledge that:
- The Financial Statements, prepared
in accordance with the applicable set of UK adopted International
Accounting Standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company;
- The Annual Report includes a fair
view of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties that the Company faces; and
- In the opinion of the Board, the
Annual Report and Financial Statements taken as a whole, are fair,
balanced and understandable and provides the information necessary
to assess the Company’s position, performance, business model and
strategy.
On behalf of the Board
|
Dean Buckley |
|
Chair |
|
6 March 2025 |
|
Statement of Comprehensive Income for the year ended 31
December 2024 |
|
|
Year to 31 December 2024 |
Year to 31 December 2023 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£000 |
|
|
|
|
|
|
|
Income |
72,463 |
354 |
72,817 |
69,591 |
1,678 |
71,269 |
| Gains on
investments held at fair value through profit or loss |
- |
449,551 |
449,551 |
- |
578,715 |
578,715 |
| Losses on
derivatives |
- |
(206) |
(206) |
- |
- |
- |
|
Gains/(losses) on fair value of debt |
- |
16,708 |
16,708 |
- |
(11,371) |
(11,371) |
|
Total |
72,463 |
466,407 |
538,870 |
69,591 |
569,022 |
638,613 |
|
Investment management fees |
(5,381) |
(13,058) |
(18,439) |
(5,074) |
(11,228) |
(16,302) |
| Administrative
expenses |
(3,661) |
(281) |
(3,942) |
(2,558) |
(344) |
(2,902) |
| Finance
costs |
(3,221) |
(9,662) |
(12,883) |
(2,380) |
(7,141) |
(9,521) |
| Foreign
exchange losses |
- |
(1,010) |
(1,010) |
- |
(3,737) |
(3,737) |
|
Profit before tax |
60,200 |
442,396 |
502,596 |
59,579 |
546,572 |
606,151 |
|
Taxation |
(6,545) |
(5,348) |
(11,893) |
(6,231) |
(251) |
(6,482) |
|
Profit for the year |
53,655 |
437,048 |
490,703 |
53,348 |
546,321 |
599,669 |
All profit for the year is attributable to equity holders. |
|
|
|
|
|
|
|
|
|
|
| Earnings per
share (pence per share) |
17.30 |
140.95 |
158.25 |
18.55 |
189.98 |
208.53 |
All revenue and capital items in the above
statement derive from continuing operations.
The ‘Total’ column of this statement is the
profit and loss account of the Company and the ‘Revenue’ and
‘Capital’ columns represent supplementary information prepared
under guidance issued by the Association of Investment Companies.
The Company does not have any other comprehensive income and hence
profit for the year, as disclosed above, is the same as the
Company’s total comprehensive income.
|
Statement of Changes in Equity for the year ended 31
December 2024 |
| |
|
|
|
Distributable reserves |
|
|
£000 |
Share
capital |
Share premium account |
Capital redemption reserve |
Realised capital reserve |
Unrealised capital reserve |
Revenue reserve |
Total distributable reserves |
Total equity |
| |
|
|
|
|
|
|
|
|
| At 1 January
2023 |
7,314 |
- |
11,684 |
2,669,933 |
103,754 |
102,334 |
2,876,021 |
2,895,019 |
| Total
comprehensive income: |
|
|
|
|
|
|
|
|
| Profit for the
year |
- |
- |
- |
75,430 |
470,891 |
53,348 |
599,669 |
599,669 |
|
Transactions with owners, recorded directly to
equity: |
|
|
|
|
|
|
|
|
| Ordinary
dividends paid |
- |
- |
- |
- |
- |
(71,378) |
(71,378) |
(71,378) |
| Unclaimed
dividends returned |
- |
- |
- |
- |
- |
14 |
14 |
14 |
| Own shares
purchased |
(208) |
- |
208 |
(86,636) |
- |
- |
(86,636) |
(86,636) |
|
Balance at 31 December 2023 |
7,106 |
- |
11,892 |
2,658,727 |
574,645 |
84,318 |
3,317,690 |
3,336,688 |
Total comprehensive income: |
|
|
|
|
|
|
|
|
| Profit for the
year |
- |
- |
- |
458,122 |
(21,074) |
53,655 |
490,703 |
490,703 |
|
Transactions with owners, recorded directly to
equity: |
|
|
|
|
|
|
|
|
| Issue of ordinary
shares in respect of the combination with Witan |
3,024 |
1,535,877 |
- |
- |
- |
- |
- |
1,538,901 |
| Costs in relation
to the combination |
- |
(4,947) |
- |
- |
- |
- |
- |
(4,947) |
| Ordinary
dividends paid |
- |
- |
- |
- |
- |
(82,414) |
(82,414) |
(82,414) |
| Unclaimed
dividends returned |
- |
- |
- |
- |
- |
9 |
9 |
9 |
| Own shares
purchased |
- |
- |
- |
(56,987) |
- |
- |
(56,987) |
(56,987) |
|
Balance at 31 December 2024 |
10,130 |
1,530,930 |
11,892 |
3,059,862 |
553,571 |
55,568 |
3,669,001 |
5,221,953 |
The £553.6m (2023: £574.6m) of unrealised capital reserve
arising on the revaluation of investments is subject to fair value
movements and may not be readily realisable at short notice, as
such it may not be entirely distributable. The unrealised capital
reserve includes unrealised gains on borrowings of £22.8m (2023:
£5.5m) and gains on unquoted investments of £3.5m (2023: £nil)
which are not distributable.
|
Balance Sheet as at 31 December 2024 |
|
|
2024 |
2023 |
|
£000 |
|
|
|
Non-current
assets |
|
|
| Investments
held at fair value through profit or loss |
5,402,381 |
3,482,329 |
|
|
5,402,381 |
3,482,329 |
|
Current assets |
|
|
| Outstanding
settlements and other receivables |
11,282 |
9,321 |
| Cash and cash
equivalents |
182,725 |
84,974 |
|
|
194,007 |
94,295 |
|
Total assets |
5,596,388 |
3,576,624 |
|
Current liabilities |
|
|
| Outstanding
settlements and other payables |
(13,057) |
(9,792) |
| Bank
loans |
(45,245) |
- |
|
|
(58,302) |
(9,792) |
|
|
|
|
|
Total assets less current liabilities |
5,538,086 |
3,566,832 |
|
|
|
|
|
Non-current liabilities |
|
|
| Fixed rate
loan notes held at fair value |
(299,276) |
(215,144) |
| Bank
loans |
(15,000) |
(15,000) |
| Deferred tax
provision |
(1,857) |
- |
|
|
(316,133) |
(230,144) |
|
Net assets |
5,221,953 |
3,336,688 |
|
|
|
|
|
Equity |
|
|
| Share
capital |
10,130 |
7,106 |
| Share premium
account |
1,530,930 |
- |
| Capital
redemption reserve |
11,892 |
11,892 |
| Capital
reserve |
3,613,433 |
3,233,372 |
|
Revenue reserve |
55,568 |
84,318 |
|
Total equity |
5,221,953 |
3,336,688 |
|
All net assets are attributable to equity holders. |
|
|
| Net
asset value per ordinary share attributable to equity holders
(£) |
£13.05 |
£11.75 |
The Financial Statements were approved by the Board of Directors
and authorised for issue on 6 March 2025.
They were signed on its behalf by:
Jo Dixon
Chair of the Audit and Risk Committee
|
Cash Flow Statement for the year ended 31 December
2024 |
|
|
2024 |
2023 |
|
£000 |
|
|
|
Cash flows from operating activities |
|
|
| Profit before
tax |
502,596 |
606,151 |
| |
|
|
| Adjustments
for: |
|
|
| Gains on
investments |
(449,551) |
(578,715) |
| Losses on
derivatives |
206 |
- |
| (Gains)/losses
on fair value of debt |
(16,708) |
11,371 |
| Foreign
exchange losses |
1,010 |
3,737 |
| Finance
costs |
12,883 |
9,521 |
|
Operating cash flows before movements in working capital |
50,436 |
52,065 |
|
(Increase)/decrease in receivables |
(2,274) |
1,599 |
|
Decrease in payables |
(43) |
(36) |
|
Net cash inflow from operating activities before tax |
48,119 |
53,628 |
|
Taxes paid |
(10,701) |
(6,654) |
|
Net cash inflow from operating activities |
37,418 |
46,974 |
| |
|
|
| Cash
flows from investing activities |
|
|
| Proceeds on
disposal of investments |
4,697,547 |
1,600,165 |
| Purchases of
investments |
(4,702,449) |
(1,489,643) |
|
Settlement of derivative financial instruments |
(206) |
- |
|
Net cash (outflow)/inflow from investing activities |
(5,108) |
110,522 |
|
Net cash inflow before financing |
32,310 |
157,496 |
|
|
|
|
| Cash
flows from financing activities |
|
|
| Dividends paid
- equity |
(82,414) |
(71,378) |
| Unclaimed
dividends returned |
9 |
14 |
| Net cash
acquired following the combination with Witan |
177,581 |
- |
| Costs paid in
relation to the combination with Witan |
(4,947) |
- |
| Purchase of own
shares |
(56,987) |
(88,060) |
| Repayment of
bank debt |
(59,000) |
(63,500) |
| Drawdown of
bank debt |
104,874 |
15,000 |
| Issue of loan
notes |
- |
60,632 |
|
Finance costs paid |
(12,033) |
(10,357) |
|
Net cash inflow/(outflow) from financing activities |
67,083 |
(157,649) |
| |
|
|
| Net
increase/(decrease) in cash and cash equivalents |
99,393 |
(153) |
| Cash and cash
equivalents at the start of the year |
84,974 |
88,864 |
|
Effect of foreign exchange rate changes |
(1,642) |
(3,737) |
|
Cash and cash equivalents at end of the year |
182,725 |
84,974 |
The financial information set out above does not
constitute the Company's statutory Financial Statements for the
years ended 31 December 2024 or 2023, but is derived from those
Financial Statements. Statutory accounts for 2023 have been
delivered to the Registrar of Companies and those for 2024 will be
delivered following the Company's Annual General Meeting. The
auditors have reported on those accounts; their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) Companies Act 2006.
The same accounting policies, presentations and
methods of computation are followed in these Financial Statements
as were applied in the Company’s last annual audited Financial
Statements, other than those stated in the Annual Report.
Basis of accounting
The Financial Statements have been prepared in accordance with
UK-adopted international accounting standards (‘IASs’).
The Financial Statements have been prepared on the historical
cost basis, except that investments and fixed rate notes are stated
at fair value through the profit and loss. The Association of
Investment Companies (‘AIC’) issued a Statement of Recommended
Practice: Financial Statements of Investment Companies (‘AIC SORP’)
in July 2022. The Directors have sought to prepare the Financial
Statements in accordance with the AIC SORP where the
recommendations are consistent with International Financial
Reporting Standards (‘IFRS’). The Company qualifies as an
investment entity.
1.
Income
|
|
|
| An analysis of
the Company’s revenue is as follows: |
|
|
|
|
|
|
|
£000 |
2024 |
2023 |
|
Revenue: |
|
|
|
Income from investments |
|
|
| Listed
dividends – UK |
10,125 |
12,836 |
| Listed
dividends - Overseas |
60,838 |
55,761 |
|
|
70,963 |
68,597 |
| Other
income |
|
|
| Bank
interest |
1,475 |
987 |
|
Other income |
25 |
7 |
|
|
1,500 |
994 |
|
Total allocated to revenue |
72,463 |
69,591 |
|
|
|
|
|
Capital: |
|
|
|
Income from investments |
|
|
|
Listed dividends – UK |
23 |
- |
|
Listed dividends – Overseas |
331 |
1,678 |
|
Total allocated to capital |
354 |
1,678 |
|
Total income |
72,817 |
71,269 |
2.
Dividends
|
|
|
|
Dividends paid during the year |
|
|
|
|
|
|
|
£000 |
2024 |
2023 |
|
2022 fourth interim dividend 6.00p per share |
- |
17,498 |
| 2023 first
interim dividend 6.18p per share |
- |
17,849 |
| 2023 second
interim dividend 6.34p per share |
- |
18,028 |
| 2023 third
interim dividend 6.34p per share |
- |
18,003 |
| 2023 fourth
interim dividend 6.34p per share |
18,003 |
- |
| 2024 first
interim dividend 6.62p per share |
18,799 |
- |
| 2024 second
interim dividend 6.62p per share |
18,676 |
- |
|
2024 third interim dividend 6.73p per share |
26,936 |
- |
|
|
82,414 |
71,378 |
|
|
|
|
Dividends payable for the year
We also set out below the total dividend payable in respect of the
financial year, which is the basis on which the requirements of
Section 1158/1159 of the Corporation Tax Act 2010 are
considered. |
|
£000 |
2024 |
2023 |
|
2023 first interim dividend 6.18p per share |
- |
17,849 |
| 2023 second
interim dividend 6.34p per share |
- |
18,028 |
| 2023 third
interim dividend 6.34p per share |
- |
18,003 |
| 2023 fourth
interim dividend 6.34p per share |
- |
18,003 |
| 2024 first
interim dividend 6.62p per share |
18,799 |
- |
| 2024 second
interim dividend 6.62p per share |
18,676 |
- |
| 2024 third
interim dividend 6.73p per share |
26,936 |
- |
|
2024 fourth interim dividend 6.73p per share, payable 31 March
2025 |
26,933 |
- |
|
|
91,344 |
71,883 |
|
3. Earnings per share |
|
The calculation of earnings per share is based on the following
data: |
|
|
|
|
2024 |
2023 |
|
£000 |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Ordinary shares |
|
|
|
|
|
|
| Earnings for the
purpose of earnings per share being net profit attributable to
equity holders |
53,655 |
437,048 |
490,703 |
53,348 |
546,321 |
599,669 |
| |
|
|
|
|
|
|
| Number
of shares |
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue during
the year |
|
310,079,630 |
|
287,573,436 |
The Company has no securities in issue that
could dilute the return per ordinary share. Therefore the basic and
diluted earnings per ordinary share are the same.
|
4. Related party transactions |
There are amounts of £1,222 (2023: £1,222) and
£34,225 (2023: £34,225) owed to AT2006 and The Second Alliance
Trust Limited, respectively, at year-end.
There are no other related parties other than
those noted below.
Transactions with key management
personnel
Details of the Non-Executive Directors are
disclosed on pages 37 to 40 of the Annual Report.
For the purpose of IAS 24 ‘Related Party
Disclosures’, key management personnel comprised the Non-Executive
Directors of the Company.
Details of remuneration are disclosed in the
Remuneration Report on pages 55 to 60 of the Annual Report.
|
£000 |
2024 |
2023 |
|
Total emoluments |
337 |
350 |
| |
|
|
ANNUAL REPORT
The Annual Report will be available in due course on the
Company's website www.alliancewitan.com. It will also be made
available to the public at the Company's registered office, River
Court, 5 West Victoria Dock Road, Dundee DD1 3JT and at the offices
of the Company's Registrar, Computershare Investor Services PLC,
Edinburgh House, 4 North St Andrew Street, Edinburgh EH2 1HJ after
publication.
In addition to the full Annual Report,
up-to-date performance data, details of new initiatives and other
information about the Company can be found on the Company's
website.
ANNUAL GENERAL MEETING
This year’s AGM will be held on 1 May 2025 at
11.00 a.m. at the Apex City Quay Hotel & Spa, 1 West Victoria
Dock Road, Dundee DD1 3JP.
The Board remains committed to maintaining a
physical AGM, with shareholders and Directors present in person.
However, the AGM will also be streamed live to shareholders. A web
link will be provided for those shareholders wishing to join the
AGM via the live stream. Information on how to obtain the link will
be published on the Company’s website in due course.
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