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Alliance Trust writes off goodwill on Stocktrade deal

09
2018
March

Alliance Trust writes off goodwill on Stocktrade deal – Alliance Trust has published its results for the year ended 31 December 2017. These show an improvement in its performance as its equity portfolio outperformed its MSCI ACWI benchmark over the year by 4.2%. This helped drive an NAV total return of 18.5% versus a return of 13.8% from the benchmark. A small narrowing of the discount pushed the return to shareholders to 19.2%. Dividends totalled 13.16p, 3% more than in 2016. [QD comment: the other major factor at work in pushing up the NAV were the massive share buy backs that Alliance Trust undertook during the year – these added 1.4% to the NAV as the fund bought back shares at a discount]

Willis Towers Watson were overseeing the portfolio with effect from 1 April 2017. About 2% of the outperformance over the year was delivered by the previous managers and 2.2% by WTW. The ongoing charges ratio is creeping up under the new arrangements (0.54% for 2017 and a forecast 0.65% for 2018).

The disposal of Alliance Trust’s stake in Liontrust Asset Management netted a £10m profit but this was more than offset by a writedown in the value of Alliance Trust Savings. Following a year of poor financial performance [despite growth in AUM, clients and number of trades], the directors reduced the fair value of ATS by £23.5m to £38.0m. They say that ATS has had a challenging year, incurring significant costs to resolve customer service issues following the integration of the Stocktrade operations in Dundee. In 2017, ATS generated an operating loss of £6.1m before exceptional expenses. ATS has written down the value of its intangible assets, related to the Stocktrade business, which has resulted in an exceptional charge of £13.2m. After this charge, ATS’s loss for the year was £19.3m.

Of their other assets, they are investigating the sale of ATST’s mineral rights, their stakes in funds managed by Liontrust and the private equity portfolio. All of these made a contribution to NAV growth in 2017.

[QD comment: In terms of the drivers of the outperformance by the equity portfolio post the shift to WTW, we are in the dark really. The statement attributes the 2.2% outperformance -0.4% to asset allocation (not getting the geographic split right) and 2.6% to stock selection. It then dices and slices the numbers a different way and says that investing in the right sectors added 0.4% to the value of the fund and the contribution from stock selection was 1.8%. However, there is no indication of which of the underlying managers did well or badly and why.]

ATST : Alliance Trust writes off goodwill on Stocktrade deal

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