RNS Number:5574H
Second Alliance Trust PLC
17 February 2003
INTERIM REPORT OF THE SECOND ALLIANCE TRUST PLC
FOR THE HALF YEAR ENDED 31 JANUARY 2003
(UNAUDITED)
Number of Issued Stock Units
Ordinary stock units of 25p 19,200,000
4.5% Cum. Pref. Stock 800,000
4.5% Debenture Stock 1956 or After 482,183
This interim report will be posted to stockholders of The Second Alliance Trust
PLC on Monday, 24 February 2003 and will also be made available to the public at
the Company's registered office, Meadow House, 64 Reform Street, Dundee DD1 1TJ
and at the offices of the Company's paying agents, Computershare Investor
Services PLC, Owen House, 8 Bankhead Crossway North, Edinburgh EH11 4BR.
This interim report was approved by the Board on 17 February 2003. It brings
stockholders up to date about the performance of the Second Alliance Trust over
the six months to 31 January 2003, the environment in which we have been
operating, and how we see the outlook.
The figures we report are unaudited. The last audited figures are in the annual
report for the year to 31 July 2002 which was sent to stockholders in September
2002.
FINANCIAL HIGHLIGHTS
Income Change
31 January 2003 12 months
interim dividend (1) 24.0p +2.1%
gross dividend yield (2) 3.7% +37%
Capital Change
31 January 2003 6 Months
net asset value 2107p -12.7%
stock price 1845p -12.2%
FTSE Actuaries All-Share Index 1722 -16.0%
Savings business Change
31 January 2003 12 Months
net inflows during year (3) #136m +11.0%
total investor numbers 35,335 +4.6%
total valuation #857m -18.8%
Second Alliance holding (4) 22.6% +14.6%
(1) Amount payable 1 April 2003 per ordinary stock unit.
Ex-dividend 5 March 2003.
(2) Annual dividend (including tax credit) expressed as a % of stock price at 31 January.
(3) Receipts of cash and securities less withdrawals during year.
(4) % of capital of the Second Alliance Trust held for individual investors by Alliance Trust Savings
Limited.
RESULTS FOR THE HALF YEAR
Income and dividend
The Board has decided to increase the interim dividend, payable on 1 April 2003,
by 2.1% to 24.0p per ordinary stock unit and expects to be able to recommend not
less than a maintained final dividend payable in October.
Income levels have been constrained by falling interest rates and the lower
Dollar as well as general economic difficulties. In this environment it is
pleasing to note the greater importance being placed on dividends by companies
and the moves in the US to reduce the taxation bias against them.
Pension deficits are causing serious concern everywhere and we decided to top up
our own fund by #109,000 at the end of January.
Capital
The last six months was one of the most turbulent periods experienced in capital
markets, with the UK showing a 16% decline as measured by the FTSE All-Share
Index. The fall in our net asset value to #405m was contained at 12.7%, helped
by our cash and fixed interest holdings and our diversified portfolio overseas,
not least in the US. The S&P 500 index fell only 6.1%, although Dollar weakness
increased its Sterling-adjusted decline to 10.8%.
December saw the Company's stock re-admitted to the FTSE indices, as predicted
last autumn. The experience of being ejected in 2001 only to be re-admitted in
2002 has, we believe, demonstrated the shortcomings of the index criteria and
the need for change.
Savings Business
Alliance Trust Savings (ATS) completed another successful year in January
despite the depressed UK savings market. The net inflow of #136m helped to stem
the effects on the total valuation of the year's 31% fall in UK equity markets,
as did larger holdings of cash and bonds by investors. Investment in the
Company's stock increased and, through the lower stock price, helped to
accelerate the growth in the ATS holding to 22.6% of the issued capital. All
products contributed to the growth, with particularly strong performance coming
from PEP transfers and pension receipts.
In December, ATS introduced two simple contribution pension products in
conjunction with Witan and City of London Investment Trusts. These are designed
to attract first time pension savers and to provide an easy introduction to
personal pensions as an effective means of making provision for old age.
INVESTMENT REPORT
Economic and market background
Although the recent recession suffered by the US economy is estimated to have
been the mildest since World War 2, recovery has been slowed by the events of
September 11 and, in the last year, by the impact of numerous corporate
scandals. Monetary and fiscal policy have again been visibly mobilised to
counter the deflationary pressures emanating from over-capacity and the
intensely competitive developing countries, notably China. Confidence has been
further hit, in recent months, by increased threats of terrorism and growing
geopolitical tensions, which have now spread from the Middle East to Asia.
With this background, equity markets have almost halved from their peaks over
the last 3 years. In the last six months, the UK market has been hit
particularly hard by forced selling, despite the UK economy having been one of
the more resilient and having scope for further monetary stimulus and consumer
spending. Risk aversion has increased generally, causing US bond yields to fall
to a 40 year low, and the gold price to climb over 30% in the last year.
Geographical distribution of assets
UK 49%
USA 22%
Europe 10%
Japan 4%
Rest of World 7%
Cash & Fixed Interest 8%
Investment activity
During the last six months we have remained ungeared and have built up our cash
and fixed interest holdings to 8% of the portfolio. We made net sales of just
over #5m, reducing our exposure to the US, Europe and Japan. In the UK we
invested a net #4m and we also continued to increase our investment in China,
based on the fact that China is now a major source of demand. Consumers have
also become more active in the dynamic Pacific region, where we have also
increased investment other than in Japan where conditions continue to
deteriorate.
Outlook
The world continues to look for economic growth to be driven by the US, where
aggressive fiscal and monetary stimuli have been put in place. The combination
of tax cuts and low interest rates should begin to boost general activity once
the geopolitical situation is resolved, but the US Dollar could come under
further pressure as both budget and current account deficits swell. This would
perhaps allow other central banks to ease their policy further, as it is vital
that authorities in Europe remain committed to stimulating growth and to
avoiding the sort of deflationary spiral which has troubled Japan for the last
10 years.
Although equity valuations have fallen to more reasonable levels, as investors
continue to scale back their expectations, the problem of increased risk
aversion is likely to remain for some time. There is a danger, therefore, that
equity market returns could remain subdued through much of this year. In this
environment good stock selection becomes even more important. Our style is to
invest cautiously in companies with good management, strong cash flows, and the
prospect of reasonable dividend growth. Risks are reduced through
diversification across companies, sectors and markets, but we remain primarily
invested in equities where we feel that there is scope for profit growth,
sometimes from cost cutting, but also from potential economic recovery later in
the year.
FINANCIAL STATEMENTS (unaudited)
returns #000 6 months to 6 months to year to
31 January 2003 31 January 2002 31 July 2002
revenue return
dividends and interest 6,095 6,277 14,561
other income 3 - 1
total income 6,098 6,277 14,562
expenses (535) (519) (1,142)
additional pension contribution (109) - -
net return before interest payable and taxation 5,454 5,758 13,420
interest payable (13) (12) (24)
return before taxation 5,441 5,746 13,396
taxation (432) (511) (1,189)
revenue after taxation 5,009 5,235 12,207
dividend on preference stock - non-equity (18) (18) (36)
revenue return attributable to ordinary 4,991 5,217 12,171
stockholders
revenue return per ordinary stock unit 25.99p 27.17p 63.39p
capital return
realised losses on investments (8,535) (6,267) (5,099)
decrease in unrealised appreciation (50,669) (28,015) (126,598)
foreign exchange gains(losses) 249 (234) (355)
capital return attributable to ordinary (58,955) (34,516) (132,052)
stockholders
capital return per ordinary stock unit (307.05p) (179.77p) (687.77p)
total return
total return attributable to ordinary stockholders (53,964) (29,299) (119,881)
total return per ordinary stock unit (281.06p) (152.60p) (624.38p)
summarised balance sheet #000 31 January 2003 31 January 2002 31 July 2002
investments at valuation 385,208 539,200 449,475
net current assets 20,625 22,630 15,313
total assets less current liabilities 405,833 561,830 464,788
long term liabilities and prior charges (1,282) (1,282) (1,282)
ordinary stockholders' funds 404,551 560,548 463,506
net asset value per ordinary stock unit #21.07 #29.20 #24.14
cashflow statement #000 6 months to 6 months to year to
31 January 2003 31 January 2002 31 July 2002
net cash inflow from operating activities 5,665 5,584 13,097
servicing of finance (31) (30) (60)
taxation paid (446) (353) (1,000)
investment purchases settled (16,608) (25,475) (58,636)
investment sales settled 21,541 25,420 50,458
equity dividends paid (7,200) (7,200) (11,712)
increase(decrease) in cash 2,921 (2,054) (7,853)
Notes to Financial Statements
1 These results should not be taken as a guide to the full year and do not constitute the statutory
accounts.
2 The revenue return statement is the profit and loss account of the Company.
3 The accounting policies are consistent with those applied in the preparation of the annual statutory
accounts. In the interim statements, net current assets are stated after the provision of #4,608,000
(#4,512,000) for payment of the interim dividend and #383,000 (#705,000) being the balance of
revenue attributable to ordinary stockholders.
4 The figures for 31 July 2002 are extracted from the full accounts which have been filed with the
registrar of companies and which contain an unqualified report from the auditor.
Dividend
Interim dividend of 24.0p per ordinary stock unit.
The interim dividend on the Company's ordinary stock and half year dividends on
its preference stock are payable on Tuesday, 1 April 2003 to holders on the
register on 7 March 2003 and the ex dividend date is 5 March 2003.
The press release summarising these interim results follows and questions should
be addressed to Mr. Gavin Suggett or Mr. Alan Young (Tel. 01382 201700).
Press Release
INTERIM REPORT FOR THE HALF YEAR ENDED 31 JANUARY 2003
(UNAUDITED)
The Second Alliance Trust PLC today (Monday, 17 February 2003) announced its
interim results for the half year to 31 January 2003.
* Dividend increased by 2.1%. Stock now yields 3.7% gross
* Overseas investment limits fall in valuation to 12.7%
* Company rejoined FTSE indices in December
* Continued growth in Savings operation - especially pensions and PEPs
Commenting on the results, Gavin Suggett, Chief Executive, said:
"This is the third year of the bear market and I think some valuable lessons
are now more widely understood. Borrowing can seriously damage your health,
diversification is essential for risk reduction and security of income is
all important. These policies were out of fashion three years ago but are
now much more appreciated as is evidenced by the growth in our Savings
business."
Alan Young, Investment Director, added:
"Our investments are not and have not been immune from the falls in markets,
but we have avoided the worst as is shown by outperforming the FTSE
All-Share Index by 3.3%. This has largely been because of our geographical
diversification, good stock picking and lack of gearing. The markets are now
providing opportunities which we are able to take because we have cash. We
are gradually and cautiously selecting stocks which we think have upside and
the ability to deliver dividends in the future."
Ends 17 February 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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