REG - Scot.American Inv. - Baillie Gifford SAINTS Final Results
13/02/2025 07:00
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RNS Number : 9263W Scottish American Investment Co PLC 13 February 2025
RNS Announcement
The Scottish American Investment Company P.L.C.
Legal Entity Identifier: 549300NF03XVC5IFB447
Regulated Information Classification: Additional regulated information
required to be disclosed under the applicable laws and regulations.
The following is the results announcement for the year to 31 December 2024
which was approved by the Board on 12 February 2025.
Results for the year to 31 December 2024
• SAINTS' objective is to deliver real dividend growth by
increasing capital and growing income
• The Board is recommending a final dividend which will take
the total dividends for the year to 14.875p per share, an increase of 5.5%
over the previous year.
• The increase in the dividend is 3% ahead of inflation over
the year, and is supported by earnings per share growth of 7.5% over the year
• SAINTS' dividend has also grown at 3% per year ahead of
inflation since 1938, the last time the dividend was cut more than eight
decades ago
• Whilst operational performance at SAINTS' holdings has
been encouraging, SAINTS' emphasis on dependable earnings and dividend growth
over the long term has been out of favour in a year in which market
concentration, and very strong returns from certain low yielding and large
technology related stocks and from cyclical companies such as banks, have been
significant features
• Over the year SAINTS' NAV total return* (borrowings at
fair value) of 6.1% has significantly lagged the market's return† of 19.8%,
and the share price total return of -4.2% has been adversely affected by a
widening discount
• However, SAINTS' capital continues to grow, and during the
year SAINTS' NAV per share reached a record level
• SAINTS' NAV total return over the last ten tears has been
8.6% per annum, which compares with the Global Equity Income sector's return
of 4.7% per annum over the same period
• The Board continues to have confidence in the Company's
investment strategy, but takes the widening of the discount seriously and has
embarked on a share buyback programme
* See Glossary of Terms and Alternative Performance Measures at
the end of this announcement.
† As measured by the total return of the FTSE All-World Index
(in sterling terms).
Source: Morningstar/LSEG/Baillie Gifford and relevant underlying index
providers.
12 February 2025
SAINTS' objective is to deliver real dividend growth by increasing capital and
growing income. Its policy is to invest mainly in equity markets, but other
investments may be held from time to time including bonds, property and other
asset classes.
The Company is managed by Baillie Gifford, the Edinburgh based fund management
group with around £231 billion under management and advice as at 12 February
2025.
Past performance is not a guide to future performance. SAINTS is a listed UK
company. As a result, the value of its shares and any income from those shares
is not guaranteed and could go down as well as up. You may not get back the
amount you invested. As SAINTS invests in overseas securities, changes in the
rates of exchange may also cause the value of your investment (and any income
it may pay) to go down or up. You can find up to date performance information
about SAINTS on the SAINTS' page of the Managers' website saints-it.com.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
For further information please contact:
James Dow and Ross Mathison, Managers, The Scottish American Investment
Company P.L.C.
Tel: 0131 275 2000
James Budden, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Director, Four Communications
Tel: 0203 920 0555 or 07872 495396
Chairman's statement
SAINTS' objective is to deliver real dividend growth by increasing capital and
growing income. The Board is recommending a final dividend which will bring
the total dividends for the year to 14.875p per share, an increase of 5.5%
over the previous year. The Company continues to meet its objective of growing
dividends ahead of inflation over the long term, and the recommended dividend
will also extend the Company's record of raising its dividend to fifty one
consecutive years.
However, despite encouraging income growth and SAINTS' Net Asset Value
reaching record levels during 2024, total returns have not kept up with the
market and a growing discount has compounded the underperformance of the share
price. The Board takes the widening of the discount seriously and embarked on
a programme of share buy backs in 2024.
The Board notes the increased focus on the role of investment trusts and their
boards. It is entirely appropriate for shareholders to focus on both long term
performance and the relationship between share prices and NAV, which can
present both a risk and an opportunity. Independent directors are there to act
in the best interests of all shareholders, independent of the preferences of
incumbent or potential managers, and to consider whether their trust's
investment objectives remain relevant and are being met. All of SAINTS'
Directors are independent.
It is the Board's belief that in the case of SAINTS the demand for an income
which grows ahead of inflation remains at the core of its shareholders'
requirements, and it considers that SAINTS is well placed reliably to deliver
on this objective in the future as it has done in the past. The Board
regularly reviews and continues to have confidence in the Company's underlying
investment strategy and in its managers, whilst maintaining a sharp focus on
the operational performance of the Company's holdings and on the robustness
and suitability of the managers' investment process. The Board also recognises
the importance of Baillie Gifford's scale, resources and stability as a
partnership, and the close alignment of the Company's and Baillie Gifford's
focus on the long term.
Overview
2024 has seen further remarkable progress from investment markets, led by a
small number of very large companies in the US, which have dominated both
earnings growth and market performance. Markets have also been supported by a
generally benign economic backdrop, with the prospect of continuing economic
growth, in the US in particular, and moderating interest rates.
When the biggest companies in the world index perform strongly and are
concentrated in the technology sector, and when the most cyclical companies
also perform well, life is challenging for portfolios with a focus on high
quality and predictably cash generative businesses. Last year's pattern of
performance is unusual, despite the fact that it is a continuation of a phase
which began in 2023. And, as last year, the companies which have dominated the
market are a handful of very large and generally low yielding technology
companies in the US.
This is not a backdrop which has favoured the total return performance of your
Company. SAINTS' emphasis on steady earnings growth and dependability has led
to continued strong operational performance and helped revenues to grow ahead
of inflation, but NAV performance, though positive, has been disappointing
relative to the market. There are two principal reasons that SAINTS' NAV
performance has lagged. First, our emphasis on income, and on dependability
and reliability, has led us to avoid many AI related stocks and also many
cyclical stocks and sectors which have performed well this year as markets
have become more optimistic. In contrast, the market has come to the view
that, amidst the uncertainty and strategic ambiguity of the new U.S.
Presidency, those technology companies which are currently delivering strong
growth are the place to be invested. Secondly, SAINTS also invests in asset
classes other than equities, principally property and bonds, which bring
advantages in terms of diversification and income resilience but have not kept
up with equities in a period of high interest rates. However, there are signs
that the domestic property market has turned the corner with capital values
rising in the second half of the year.
In this context, it is worth emphasising that the Board remains committed to
delivering a dividend which increases ahead of inflation over time, and which
is supported by revenues and revenue growth. The nature of the Manager's
approach to investing in equities flows from this, as does SAINTS' investments
in other asset classes including property. The Board remains confident in this
approach, and we also believe that the property allocation in particular is
well fitted to supporting SAINTS' objectives. Our investment in property
remains modest at just over 9 per cent of our asset value but, because of the
higher yield available and the nature of many of the leases, provides
substantial support to SAINTS' current dividend, as well as an element of
income growth. In particular, the high proportion of properties which have
fixed rent increases or rent increases which are contractually linked to
inflation, together with the quality of the tenants and an average lease
length of over fifteen years, provide considerable comfort. We understand that
some shareholders would prefer to have an all equity portfolio, but believe
that others appreciate the helpful impact on SAINTS' revenues, the lack of
exchange rate risk and the good long term record of our property managers,
OLIM.
Against a backdrop of widening of discounts across the investment trust
sector, SAINTS' share price has not kept pace with its NAV over the year. To
help support SAINTS' share price, the Board has selectively bought back shares
at levels which have also enhanced NAV. Factors affecting the discount and
demand for the Company's shares are likely to have included both performance
and the availability of alternative investments such as gilts with higher
yields or trusts with higher, manufactured dividends. The Board is confident
that the advantages of SAINTS' approach will again come to the fore in other
market environments when falling capital values are likely to lead either to a
reduction in manufactured dividends based on net asset value or a need to sell
more assets at lower prices to maintain or grow distributions. SAINTS has
traded at a premium for most of the last decade, during which time it issued
many more shares than it has so far bought back, and the Board remains
confident that the discount is cyclical rather than structural.
Ultimately though, it is the underlying growth and the growth prospects of
SAINTS' holdings which will be of most importance in returning SAINTS' shares
to the premium at which they have typically stood in recent years. And here
the Managers' Review (on pages 15 to 23) tells a positive story. The Managers
will continue to focus on the encouraging operational progress of SAINTS'
holdings, and to emphasise dependability and reliability as well as growth
potential. This approach has stood the test of time, and both the Board and
the managers remain confident that it will enable SAINTS to continue to
deliver on its objectives in the future.
Given the long-term nature of the Company's objectives, it is worth
emphasising both SAINTS' successful record of raising its dividend ahead of
inflation over the long term, and the strong total returns it has delivered.
In particular, the Board and the Managers are pleased that 2024 marked the
fifty first successive year of dividend growth for SAINTS' shareholders.
Dividend and Inflation
The Board recommends a final dividend of 4.175p which will take the full year
dividend to 14.875p per share, 5.5% higher than the 2023 dividend of 14.10p.
This year's increase is 3% ahead of the annual rate of inflation of 2.5% as
measured by CPI over 2024.
It remains the Company's objective to deliver real dividend growth over the
long term. Since 1938, when SAINTS last reduced its dividend, the Company has
delivered dividends that have not only been resilient through thick and thin,
but have also grown by more than 3% a year ahead of inflation. And since the
end of 2003, when the Board of SAINTS appointed Baillie Gifford as managers,
the Company has continued this track record of resilient dividend growth: over
this period the growth in SAINTS' dividend has also beaten inflation by 3% a
year.
Revenues
Earnings per share grew to 14.50p over the year, an increase of some 7.6% over
the year, and investment income has risen to £32.4m. Operational performance
of the holdings has been generally encouraging, and currency movements have
also been helpful.
Equity income has risen by some 11%, helped by generally strong growth in
ordinary dividends, a more normal level of special dividends (following a drop
in special dividends last year) and an increased allocation to infrastructure
equities.
Property income has risen significantly, reflecting the welcome addition of
the M23 Pease Pottage motorway service area to the portfolio (which was
mentioned in my statement last year but which was not completed until after
the 2023 year end), as well as other transactions and further rental
increases. Bond income, on the other hand has fallen, as the bulk of SAINTS'
bonds were sold to fund the additions to property.
Both managers (Baillie Gifford and, for the Company's property investments,
OLIM) continue to focus on supporting the dependability and the future growth
of the Company's dividend in line with its objective.
Total Return Performance
SAINTS' NAV return was positive over the year, and the net asset value total
return (capital and income with borrowings at fair) was 6.1%. However, for the
reasons summarised above, SAINTS' returns fell short of those from global
equities (as measured by the total of return of the FTSE All-World Index in
sterling terms) which returned 19.8% over 2024. In addition, as also mentioned
above, SAINTS' share price return has, in common with investment trusts
generally, been affected by a broadening of discounts, and the share price
return was -4.2%. SAINTS' performance over the year is discussed in more
detail in the Managers' review.
The Managers and your Board have a long-term perspective and we would
therefore encourage shareholders to assess your Company's performance over the
long term. Over the last ten years SAINTS has delivered a NAV return of 8.6%
per annum, which is strong in absolute terms.
In addition, SAINTS' NAV total return remains well ahead of its sector's
return of 4.7% per annum over ten years and, despite the recent broadening of
the discount, SAINTS' share price total return also remains ahead of the
sector over ten years.
However, due to recent underperformance, SAINTS' NAV return is now behind that
of the market as measured by the Company's benchmark which has returned 9.6%
pa over the last ten years. Furthermore, the broadening of the discount has
meant that SAINTS' share price total return is further behind at 7.2% pa.
Whilst these figures are disappointing in relative terms, it is worth bearing
two things in mind. Firstly, SAINTS has an income approach, both in terms of
its primary objective and the way its assets are deployed to meet that
objective. And secondly, we are viewing these figures after a highly unusual
period in markets. Over the last ten years, we believe that SAINTS' equities
have performed well given SAINTS' income approach, and SAINTS' other principal
allocation to property has also performed creditably.
The principal contributors to and detractors from performance and the changes
to the equity, property and bond investments are explained in more detail in
the Managers' review.
Borrowings
In recent years SAINTS' long term borrowings have been refinanced and modestly
increased at advantageous interest rates. The cost of these borrowings is just
under 3% per annum.
The book value of the total borrowings is £94.7m which, at the year end, was
equivalent to approximately 9.9% of shareholders' funds. The estimated market
or fair value of the borrowings was £62.1m, a decrease from the previous
year's value of £68.2m.
Environmental, Social and Governance (ESG)
The Board of SAINTS recognises the importance of considering Environmental,
Social and Governance (ESG) factors when making investments, and in acting as
a responsible steward of capital. We consider that Board oversight of such
matters is an important part of our responsibility to shareholders, and
SAINTS' ESG Policy is available to view on the Company's website
(saints-it.com).
The Board has been strongly supportive of Baillie Gifford's approach and of
their constructive engagement with the companies you own, and with potential
holdings, in relation to important challenges including climate change. The
Board is also supportive of OLIM's approach in relation to property, and in
particular of its consideration of environmental factors including climate
change in assessing the suitability of SAINTS' investments. I would encourage
shareholders to read SAINTS' annual Stewardship Report which can also be
accessed on the Company's website (saints-it.com).
Issuance and buybacks
Over the year the Company has bought back 1,665,185 shares (representing 0.93%
of the shares in issue at the start of the year) at a cost of some £8.5m. All
buybacks have taken place at a significant discount to the Company's NAV, and
so each buyback has increased the NAV per share of the Company. The Board is
monitoring closely evidence of the effect which buybacks have on the share
price and discount. No shares were issued during the year.
The Board and the Managers
In April 2023, it was announced that Bronwyn Curtis would not be seeking
re-election to the Board in 2024, and Ms Curtis stood down at the conclusion
of last year's AGM. At the Board's request, Dame Mariot Leslie took over as
the Senior Independent Director following Bronwyn's retirement.
The Board, assisted by external consultants, conducted a recruitment exercise
during 2023, following which Padmesh Shukla joined the Board in February 2024
and his appointment was ratified by shareholders at the AGM in April 2024.
Padmesh is the Chief Investment Officer of the Transport For London ('TFL')
Pension Fund, and has over 25 years of investment experience, including 12
years in his current role at TFL. He was formerly head of Climate Change
Financing at the London Development Agency, and prior to that he had worked at
the World Bank, as a Researcher at Harvard and in real estate. He is currently
a member of the Church of England Pensions Investment Committee.
I have indicated that I do not intend to stand for re-election as a Director
at the AGM in 2026. It is the Board's intention to recruit a new Director over
the course of 2025, with a view to that Director becoming the chairperson of
SAINTS at the conclusion of the AGM in April 2026.
As previously announced, Toby Ross stepped back from his role as joint manager
of SAINTS in February with the thanks of the Board. The Board looks forward to
continuing to work with James Dow as manager and Ross Mathison as deputy
manager.
Outlook
Despite, and indeed partly because of, the very strong performance of equity
markets the risks to investors are clearly apparent. With the election
of President Trump, the markets are already assuming fewer interest rate cuts
and bond yields have risen. Governments, in particular in the UK and EU, will
be under pressure to consolidate further the public finances. And
protectionism will almost certainly increase.
The Board recognises the risks these developments pose for a company like
SAINTS which is focused on delivering income from global equities. But we take
considerable comfort from the fact that global refers primarily to having the
global opportunity set which SAINTS has enjoyed for well over a century,
rather than being a one way bet on global trade. Opportunities will continue
to arise, not least as the benefits of technological progress spread beyond
the Tech giants. In particular, the Board and your managers remain alert to
both opportunities and risks arising from the accelerated adoption of
Artificial Intelligence, many of which will be in the broader economy and
market. And if higher interest rates force governments to tackle the
proliferation of government debt, to reduce regulation and to promote economic
growth, that may well be good for performance over the long term. In this
environment, having an actively managed portfolio which invests only in those
stocks which are believed to provide a lasting opportunity, and which seeks to
avoid those which are overvalued or under threat remains doubly important.
As a Board, we believe a long-term approach based on investing globally for
sustainable growth is the best route to achieving SAINTS' aim of growing the
dividend ahead of inflation over time. As we look ahead, we also take
considerable comfort from the nature of SAINTS' investments, and from the
managers' emphasis on quality, on dependability and on growth far out into the
future. We are encouraged that, as is outlined further in the Managers'
review, Baillie Gifford have continued to find new and attractive
opportunities, and we also believe that both the quality and duration of
SAINTS' property portfolio have been enhanced over the past year.
SAINTS has been working for individual investors for 150 years. It is built to
help shareholders' income keep pace with inflation, as well as providing
capital growth. And it is built for resilience.
AGM
The AGM will be held at 11.30am on Tuesday 8 April 2025 at Baillie Gifford's
offices at Calton Square, 1 Greenside Row, Edinburgh. The meeting will
be followed by a presentation from the managers. Shareholders are cordially
invited to attend the meeting and presentation, and this year those who are
unable to attend in person will be able to view proceedings by remote video
link. Details of joining the AGM remotely can be obtained by contacting the
Company's Managers at enquiries@bailliegifford.com who will be able to provide
you with details and instructions for doing so. Please note you will not be
able to vote and you will not be counted as part of the quorum but you will
have the opportunity to watch the managers' presentation.
I would remind shareholders that they are able to submit proxy voting forms
before the applicable deadline and also to direct any questions or comments
for the Board in advance of the meeting through the Company's Managers, either
by emailing enquiries@bailliegifford.com or calling 0800 917 2113 (Baillie
Gifford may record your call).
The Board welcomes recent moves by platforms to facilitate shareholder
participation and encourages shareholders to cast their votes. The Association
of Investment Companies' guidance on how to vote through various investment
platforms can be found on its website at: How to vote your shares | The AIC
Finally, my fellow Directors and I send you all our very best wishes for the
year ahead.
Lord Macpherson of Earl's Court
Chairman
12 February 2025
For a definition of terms see glossary of terms and alternative performance
measures at the end of this announcement
Source: LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
Managers' review
How to summarise SAINTS' performance in 2024? In a word: "mixed".
On the positive side of the ledger, growth in earnings across the Company's
portfolio was strong. The backbone is our investment in equities, where
dividend growth was robust. Income from the property, infrastructure and bond
portfolios was also solid. Together, these investments drove growth in the
Company's earnings per share, lifting it 7.6% above the prior year. This
strong result underpinned another inflation-beating increase in SAINTS'
dividend to shareholders.
We are proud of the fact that since 1938, when the Company last reduced its
dividend, and indeed since the end of 2003, when Baillie Gifford was appointed
by the Board as managers, SAINTS' portfolio has delivered dividend growth to
shareholders that, on average, has beaten UK inflation by 3% per year. With
the Consumer Price Index (CPI) ending 2024 at a rate of 2.5%, and SAINTS'
dividend growing by 5.5%, the Company once again delivered real growth in
income. Meanwhile the net asset value (NAV) of the Company rose to a new high.
On the negative side of the ledger, the NAV growth of the Company lagged
global equity markets, as measured by the FTSE All-World, by some way. Worse,
the share price did not follow the NAV, as the discount widened over the
course of 2024, finishing the year at 10.6%.
In our commentary below, we examine each of these highs and lows in more
detail. By shedding light on the good and the bad, our hope is that
shareholders will understand why we say we remain confident, despite a "mixed"
year, that SAINTS' portfolio will keep delivering on the Company's core
proposition: an income that grows faster than inflation, with resilience
across cycles, and real capital growth over the long-term.
Below, we start by examining the underlying health of income growth in the
portfolio. Then we explain the relative performance versus wider markets.
We reflect briefly on the discount. And conclude with why we, as managers,
have personally been buying more shares in SAINTS.
Equity portfolio
Let's start by looking at the underlying health of the investments in SAINTS'
equity portfolio.
Each year we analyse the financial results reported by every one of SAINTS'
holdings. We clean up these numbers for any distortions (such as one-off gains
in profit that should not be considered part of a company's ongoing earnings)
and we stack these results against the figures from prior years. This gives us
an over-arching picture of how each company in the portfolio is performing,
and where the strengths and weaknesses lie.
Our 'north-star' is 10% compounding: we are looking for companies which can
deliver 10% annual growth in earnings and dividends, and keep doing so for
long periods of time. Inevitably not all the companies in which we invest will
meet our expectations, so in practice we expect this approach to deliver a
result that is a little lower: perhaps 6-9% growth. But over time this level
of growth would deliver excellent results to SAINTS' shareholders: for
context, equity markets worldwide have achieved around 5% earnings growth over
the past three decades. Meanwhile inflation in the UK has averaged around 3%.
A portfolio that delivers anywhere close to 10% should handily beat both.
The chart below shows the dividend growth of every company in the equity
portfolio. We have taken each company's latest announced dividend rate, and
combined these with the figures from prior years to calculate a five-year
compound growth rate. Growth in our equity income in 2024 was 10%, but we
prefer to look at the five-year rate of dividend growth because individual
years taken on their own, for example the pandemic year of 2020, can be
misleading of the underlying picture. A five-year view provides a clearer
picture of the long-term health of the investments.
http://www.rns-pdf.londonstockexchange.com/rns/9263W_1-2025-2-12.pdf (http://www.rns-pdf.londonstockexchange.com/rns/9263W_1-2025-2-12.pdf)
Source: Baillie Gifford
The main conclusion we draw from this chart is that SAINTS' equity portfolio
is in good fettle. The current holdings have, on average, delivered 10% annual
dividend growth over the past five years. This is true both on an
income-weighted and equal-weighted basis, and provides an encouraging
illustration of the growth characteristics of the portfolio.
To be clear, the current portfolio is not exactly the same as the portfolio
five years ago: although 70% of it was held, 30% of it is new in the past five
years. During that time we have exited some slower growing holdings, which we
mistakenly hoped would do better, and invested in more promising ones. But the
north-star remains 10%, with the expectation that even if we keep getting a
few wrong, we should still deliver inflation-beating income growth to SAINTS'
shareholders. We'll pick up on this later when we unpack the 2024 result,
which was 7.6% total earnings per share growth.
Looking at the individual holdings, there is clearly a range of results around
the average. In the strongest cases, some of SAINTS' investments have
delivered dividend growth well north of 10%. Examples include video game
publisher Netease (over 30% average dividend growth per year) and
pharmaceutical maker Novo Nordisk (17% growth per year). In weaker cases, we
have seen dividend growth from some holdings nearer to the mid-single-digits
than 10%, such as Coca-Cola (4%) and Nestle (4%).
It is noticeable that several of the fastest growing dividends in the
portfolio have come from our investments in Chinese companies: such as Anta
Sports, Midea, Man Wah, and the aforementioned Netease. Whereas at the lower
end of the chart we find a number of businesses that manufacture consumer
staples: firms like Procter & Gamble and Nestle.
The slower growing dividends are always a prompt for us to consider whether we
can achieve faster growth from other companies. But to an extent the range in
dividend growth reflects a conscious tradeoff. Alongside growth, we look for
rock-solid dividend resilience. SAINTS has not cut its dividend for many
decades, and that resilience starts with each underlying investment.
Companies at the lower end of the chart typically have ultra-resilient
dividends. For example, we are highly confident that Coca-Cola will continue
raising its dividend every year, even if the growth rate is only modestly
above inflation. By comparison, the fastest dividend growers in the portfolio,
such as Netease, tend to have more dividend volatility from year to year.
Often these companies have payout-ratio based dividend policies, rather than
progressive, meaning their dividend can go up and down in any given year
depending on the strength of earnings. If we judge this volatility to be
uncorrelated with the rest of the portfolio, we can tolerate this (within
reason) in return for exceptional long-term growth.
Bear in mind that all of these dividend growth rates are in each company's
reporting currency. We view this as a positive over the long-term, given that
Sterling has a long track record of depreciation against overseas currencies,
lifting the growth rate in Sterling a little higher.
Of course, a company's past performance is no guarantee that it will perform
well in the future. As managers it is our responsibility to prod every
investment regularly, and evaluate whether the prospects of each company
remain promising. Occasionally we will analyse a holding and foresee its
future taking a decided turn for the worse. Such was the case last year with
Kering, the luxury goods maker, where dividend growth had averaged 14% per
year for the prior five years, and we had more than doubled shareholders money
since our initial investment, but which we removed from the portfolio after a
review of its prospects led us to conclude that the next five years were
likely to be considerably weaker (more on this in the Transactions section
below).
So, the portfolio of names listed in the chart should not be regarded as
static. We are constantly testing every holding, and typically we will upgrade
4 or 5 names in any given year in pursuit of stronger long-term growth.
Looking forward from here, the results compiled in this chart are very
encouraging. They show the portfolio is in good health. On average, the
dividends of the current portfolio are growing by 10% a year. This puts SAINTS
in a strong position to deliver on its objectives for shareholders.
Property, infrastructure and bonds
Regular readers will know that SAINTS takes full advantage of one of the
benefits of being an investment trust: the ability to borrow prudently at
attractive rates, and invest the proceeds for returns that beat the cost of
borrowing. The Company's long-term borrowings total £95m, with a fixed cost
that averages a whisker below 3%. We invest this nominal liability
predominantly in real assets, with yields above 3% and an expectation their
income will grow over time. This generates additional income and returns for
shareholders, beyond the equity portfolio.
Against a challenging backdrop of rising interest rates, the property
portfolio had a good year, with a total return of over 8%. More details of the
investments are provided below but the highlights include long leases (the
weighted average unexpired lease length is 16 years) and strong links to
inflation. In total 72% of the rental income is linked to RPI or CPI, with
another 16% on fixed increases, and another 12% with upward-only rent reviews.
The property portfolio is managed by a specialist manager, OLIM, who have a
long and impressive track record of investing on behalf of SAINTS. They have
astutely avoided the weak parts of the property market in the past few years,
such as offices, and focused intently on inflation-linked leases with good
tenants that include the likes of ALDI, Tesco and Premier Inn. The portfolio
remains fully let. The manager anticipates that average annual rental growth
over the next five years will average 3-4%.
The infrastructure portfolio also continues to deliver solid income growth.
Again, these are investments in real assets. They are also liquid assets,
because we have chosen to invest in infrastructure through equities: for
example, the equity of the Italian electrical grid operator Terna, and the
equity of the tollroad operator Jiangsu Expressway, which controls many of the
major roads around Shanghai. In the short-term, these equities will go up and
down with the stock market, but in the long-term (which is of far more concern
to SAINTS) we expect their returns to be driven primarily by the returns from
their underlying infrastructure assets. In 2024, we saw share prices of
several of these investments fall, as stock markets re-priced the future path
of interest rates around the world. But their income growth remained solid,
with Terna raising its dividend by 6.6% and the largest holding, Greencoat UK
Wind, raising its dividend by double-digits.
The bond portfolio is a very small part of SAINTS' assets, representing less
than 1% of the total. It is invested opportunistically in government bonds
where we see attractive yields and low default risk. The largest investment is
an inflation-linked sovereign bond issued by Brazil, paying an attractive
yield of around 7%, where in our view there is very low risk of default.
SAINTS borrows prudently. Just as we stress-test every dividend in the equity
portfolio, so we stress-test the Company's ability to service its debt.
The £95m of borrowings represents gearing of less than 10% (on a debt to
total assets basis). We remain confident the portfolio of assets which is
funded out of these borrowings should beat the cost of the borrowing, and as
such is a good use of the investment trust structure.
Revenue and dividend growth
As the property manager found attractive opportunities for investment in 2024,
we funded these new purchases from sales of bonds, which had higher yields. In
the long-term we believe this shift from bonds into property will strengthen
SAINTS' dividend growth, but in the short-term it reduced the amount of income
earned in 2024. This is why the growth in equity income, at 10%, was reduced a
little to growth in total income of 7.6%. In some years, the Board chooses to
grow the dividend to shareholders a little slower or faster than the Company's
income, depending on what is most appropriate for the long-term. This year,
the Board has chosen to grow the dividend by 5.5%.
We are very conscious that in the past few years, SAINTS' dividend growth has
not been strong in every year. A variety of factors have combined to produce
this result, including moderate dividend growth from some companies during the
Pandemic period, changes made to the equity and property portfolios in pursuit
of better long-term growth, and a rising UK corporate tax rate. If we take the
past three years, SAINTS' dividend has grown by 9%, 2%, and 5.5% respectively,
meaning an average growth rate of 5.5% over the period.
Looking forward, we will keep our sights set on 10% in the equity portfolio,
and, even allowing for some investments which fall below our expectations, we
hope this will still deliver equity income growth in the high-single-digit
range. The non-equity investments are more likely to grow in line with
inflation, say 3%. But this should still produce overall income and dividend
growth well ahead of inflation. If UK CPI averages, say, 3%, we would hope
that SAINTS could deliver dividend growth of 6%, extending the Company's
long-track record of beating inflation by 3%. Thanks to the wonder of
compounding, were this result to be achieved, a shareholder could expect, in
nominal terms, to see their income rise by more than 30% over a five year
period.
There are multiple ways to achieve income from equities. Some income managers
do it by selling capital, others by focusing on yield. Our firm belief is
that, over the long-term, income that is backed by natural dividend growth,
the SAINTS' approach, is a compelling way to deliver a resilient, progressive
income that grows. This approach has been tested over many decades, and we
hope this gives reassurance to shareholders, particularly at a time when the
world is looking increasingly volatile.
Relative performance
While the income growth from SAINTS' portfolio was robust last year, the
relative NAV performance of the portfolio was weak. The return delivered by
the equity portfolio was 6.1%, and SAINTS' overall NAV total return
(borrowings at fair value) was 6.1% after fees. Last year the US stock market
rocketed to record highs, with the S&P500 (a broad‑based index of
US-listed companies) rising by around 25%. This is heady stuff, one of the
best years ever recorded for US equities. SAINTS' benchmark is a global one,
the FTSE All-World, but it is dominated by the US market: the US accounts for
almost 70% of the index.
SAINTS has a lower proportion of its assets invested in the US. Within the
equity portfolio, for example, we have about 43% of capital invested in US
companies. This is still a large proportion, being by some margin our single
largest geography. But it is considerably lower than the index. This is not by
accident, but a deliberate choice, rooted in a number of reasons which relate
to the dependable achievement of SAINTS' investment objectives.
The starting point is that we expect SAINTS' dividend growth in the long-term
to be driven by the earnings growth of its underlying investments. We
therefore seek companies with strong prospects for earnings growth, regardless
of the country where they are listed. There are approximately 6,000 companies
available to us globally, of which circa. 2,000 are US-listed. If
opportunities were spread evenly throughout the world then, all else being
equal, one might expect about a third of the portfolio to be listed in the US.
Secondly, US companies typically have lower dividend payout ratios than
elsewhere: the payout ratio across the S&P500 has typically averaged
30‑40% of earnings, whereas in countries such as the UK and Germany this
figure has been 40-50%. In addition, US stocks have also been priced more
richly, meaning higher price-to-earnings (PE) multiples. The combination of a
lower payout ratio with a higher PE means that investors receive drastically
less income per pound invested in US companies. Towards the end of 2024, the
S&P500 yielded only 1.28%. For comparison a European market like Germany's
DAX yielded 2.87%: more than double the income.
Finally, US corporate dividends bring a concentration of risk: both regulatory
risk (for example rates of withholding tax) and the currency risk of US
dollars against Sterling.
Putting together all of the above, we believe it would be unwise and perhaps
even irresponsible for SAINTS to invest an index-like 70% of capital solely in
the US market. The result would be significantly lower income, with
significantly higher risks, while missing out on many good companies which fit
better with SAINTS' objectives elsewhere in the world. The flipside of all
this though is that in years like 2024, when the US market is rocketing, and
other markets such as Europe and Asia are rising less strongly, the NAV
performance of SAINTS will inevitably lag its benchmark.
This was one part of SAINTS' under-performance of the FTSE All-World in 2024.
But there was a second major factor. This was the specific type of investments
that SAINTS owns. Share prices of many of SAINTS' investments, companies such
as Watsco, Analog Devices and Procter & Gamble, lagged the wider US
market. These resilient long-term compounders, which we favour for SAINTS'
income and capital growth objectives, were deeply out of favour within the US
stock market last year. The best-performing US stocks were cyclicals such as
banks, which benefited from a reversal of expectations from a "hard" to a
"soft" landing in the US economy, and so-called "Big Tech" stocks, where
investors poured capital into names such as Nvidia, the AI chipmaker.
These types of company are usually a poor fit for SAINTS' objectives. They
tend to be highly cyclical dividend payers, if they pay a dividend at all. For
example, at Nvidia, as we noted in this year's interim report, there is a
significant risk of a sharp downcycle in earnings if customers find ways to
pursue gains in AI through optimisation, rather than ever-more hardware. This
cyclicality and the lack of a meaningful dividend makes Nvidia unsuitable as
an investment for SAINTS, and recent newsflow has done nothing to alter our
view on its suitability.
Or to take another example of the type of US company which fared well last
year, we can observe the rise of Tesla, the carmaker. Again, this is both a
cyclical company and a member of the "Magnificent Seven" technology stocks,
and its share price appreciated rapidly last year. But again, it is a
volatile, capital-intensive business model, and it does not pay a dividend.
Shares in these kinds of company fared well in 2024, while the likes of
Procter & Gamble, with its 134 years of consecutive dividends, and highly
resilient earnings growth, under-performed the wider US market.
Our intention is to continue focusing squarely on SAINTS' objectives for the
long-term. There are many great US companies that we can invest in, names
which are a strong fit with our goal of inflation-beating income growth with
resilience. Indeed, there are 20 such US names already in the equity
portfolio, including the likes of Microsoft and Apple (both top ten positions)
as well as lesser known names such as Fastenal the industrial distribution
company, and Cognex the factory automation company.
We continue to scour the US market for new ideas, last year completing several
research trips across the States that yielded exciting new holdings such as
CME Group (more on this in the Transactions section). We do not plan to chase
short-term momentum in the stock market, and we will continue to avoid deeply
cyclical companies with high technology risk or low dividend payout ratios. We
do not plan to allow SAINTS' country and currency risk at the portfolio level
to come anywhere close to the benchmark's 70% US exposure.
Finally, we should acknowledge that some of SAINTS' holdings have disappointed
for stock specific reasons. This is typically the case in an actively managed
portfolio, as our analysis is not always correct, active management includes
an assessment of outcomes which we believe are probable but know are not
certain, and progress is not always smooth. This year for example the share
price of B3, the Brazilian Stock exchange, has been adversely affected by
sentiment towards Brazil, and Novo Nordisk has seen mixed results from some
trials for its weight loss treatments. In both cases we continue to have
confidence in the long-term prospects for growth. In other cases, as
illustrated in the transactions section below, we have sold the shares where
we believe that long term prospects have deteriorated.
SAINTS' style and structural-bias has been painful in terms of relative NAV
performance over the past year in particular, and this in turn has adversely
affected SAINTS' long-term numbers. But we neither aim to, nor expect to,
outperform the market in every annual period, although interestingly SAINTS
has outperformed in eight of the last ten calendar years. Looking forward we
are encouraged by the operational (as opposed to share price) performance of
your holdings, and remain convinced that a balanced portfolio of 10%
compounders, split roughly evenly between the US, Europe and the rest of the
world, is the most surefire way to achieve SAINTS' objectives.
Discount to NAV
Over the course of 2024, the gap between SAINTS' share price and its NAV per
share widened. From a starting point of 0.8%, the discount ended the year at
10.6%. The accompanying chart puts this discount in some historical
perspective. It shows the gap between SAINTS' share price and NAV over the
past 30 years. During that time there have been three noticeable periods where
the shares have traded at a discount to NAV: the late 1990s to early 2000s; a
brief dip around 2014-15; and a more recent period starting in 2022.
http://www.rns-pdf.londonstockexchange.com/rns/9263W_2-2025-2-12.pdf (http://www.rns-pdf.londonstockexchange.com/rns/9263W_2-2025-2-12.pdf)
Source: Morningstar/LSEG and relevant underlying index providers. See
disclaimer at the end of this announcement.
Just as the Board of SAINTS, which is highly engaged and active, takes great
interest in the existence of a discount in the share price, so we as managers
of the Company pay great attention to it too. A discount hovering around 10%
effectively means that sellers are prepared to dispose of their shares for
only 90 pence in the pound, or flipped another way, buyers are only prepared
to buy shares at 90 pence in the pound. Whenever a discount appears, the
question it begs is always the same: is it signalling something fundamentally
wrong with the company, or is it a symptom of some wider malaise in the stock
market?
If the former, we as managers need to swallow our pride and think hard about
what the problem might be… and whether it can be fixed.
When SAINTS traded at a discount in the late 1990s, we can see with the
benefit of hindsight that the root cause was a loss of confidence in the
portfolio of investments at that time. The Company responded by buying back
shares aggressively, but this had the knock-on effect of raising the gearing
of the balance sheet, which in turn made the shares less attractive and pushed
the discount ever-wider. This ultimately led the Board to replace the manager
at the end of 2003. Over the subsequent eight years the portfolio was
improved, and trust in the Company's portfolio restored, leading the discount
to close.
In 2014/15, the discount was more a function of a sector malaise. At the time,
expectations for UK interest rates were rising markedly. This had a knock-on
impact on the perceived attractiveness of equities in the short-term. That
impact was felt across the investment trust sector, and SAINTS was no
different to many others in the Global Equity Income sector, as its shares
moved from a premium to a discount. Sentiment to the sector later improved and
SAINTS, again like the wider sector, moved back to a premium.
In 2024, we do not yet have the benefit of hindsight. What we can observe is
that SAINTS is not alone in trading on a discount. Far from it: the vast
majority of investment trusts are currently trading at a discount, as the
chart below shows. This suggests a market-wide malaise rather than something
SAINTS-specific. For example, it may be that investment trust buyers, who are
often quite sophisticated investors, are simply passing verdict on the current
level of market valuations of trust portfolios. Perhaps buyers are sceptical
that interest rates will fall quite as rapidly as current valuations may imply
and are demanding a margin of safety to invest in trusts. Another way of
looking at this is to say that with UK gilt yields sitting at levels between 4
and 5%, the risk-reward of buying shares in an investment trust is not, for
some, sufficiently compelling at the moment.
Our personal view, speaking both as managers and as shareholders in the
Company, starts with the observation that the underlying portfolio is robust
(as outlined in the first section of this report). The valuation of the assets
appears to us relatively reasonable, particularly given that the average
SAINTS' equity holding is not trading at anything like the valuation multiples
we currently observe in some parts of the wider stock market. The portfolio is
also highly liquid, and marked-to-market daily, as it consists mostly of
listed equities. Only the property portfolio could be considered less liquid,
but this represents only 9% of total assets, and it is independently valued
every six months. Meanwhile the gearing of the Company remains low, and the
less liquid assets are broadly funded by attractively priced long term debt.
So, our view is that it is likely that SAINTS' discount is to a large extent a
reflection of sentiment in the wider investment trust sector, rather than
something Company-specific. It can also be argued that trusts which focus on
income are particularly vulnerable to higher gilt yields. History suggests
this is likely to pass with time, perhaps if inflation moderates or gilt
yields fall. In the meantime, we as managers believe that SAINTS' discount
represents an unusual opportunity to invest at a price below NAV. We have been
adding to our own holdings over the past several months.
http://www.rns-pdf.londonstockexchange.com/rns/9263W_3-2025-2-12.pdf (http://www.rns-pdf.londonstockexchange.com/rns/9263W_3-2025-2-12.pdf)
Source: Winterflood
* Alternative performance measure - see glossary of terms and alternative
performance measures at the end of this announcement.
Transactions
We continually seek ways to upgrade SAINTS' investments: this is central to
the job of active managers on behalf of shareholders. In 2024 we carried out a
number of transactions which we believe strengthened the prospects of the
Company in the years ahead.
In the equity portfolio, we divested from Sonic Healthcare, the lab testing
company, after a number of years of pedestrian dividend growth (for instance:
just 2% in 2024). We re-assessed its future prospects and concluded that,
although the resilience of the dividend remained high, there were various
structural headwinds in its markets (notably a lack of pricing power) that
made an acceleration in its earnings and dividends unlikely. At Dolby
Laboratories, another divestment, it was a similar story: several years of
lacklustre earnings growth which we believe are most likely caused by
structural headwinds, particularly in pricing. Both companies have been
investments for about a decade, and the returns from both have been fine, and
their dividends have been extremely resilient. But we believe we can do better
for shareholders elsewhere.
At Kering, the luxury goods company, SAINTS has enjoyed several years of
strong earnings and dividends growth since we invested in 2016. But lately the
company seems to have gone off-track, losing key talent and pursuing a new
strategy which, based on our experience, has a low probability of working:
moving away from what is authentic to its brands while at the same time
pushing up prices. Typically, this results in old customers leaving faster
than new ones arrive, and we strongly suspect there will be a number of
painful years ahead (and most likely a reduction in the dividend).
At Hargreaves Lansdown, the investment platform, our hand was forced by a bid
from a private equity buyer which was backed by other shareholders. At
pharmaceutical maker GlaxoSmithKline, another divestment in 2024, the decision
was solely ours. Our investment case had been predicated on better commercial
management of the company's portfolio, and a rebuilt pipeline under visionary
new leaders appointed to the R&D team. The first part of the investment
case worked, and the shares rose during our ownership, but the second part
failed to come to fruition. We decided to move on in favour of higher
conviction growth investments elsewhere.
We made three new purchases during the year. The first was Epiroc, a leader in
drilling equipment used in mines and construction. This company is unusually
well-managed: it comes from the same stable of firms that produced our
successful investment in Atlas Copco, the Swedish engineering powerhouse. At
Epiroc we see many of the same qualities, and we expect many years of solid
profit and dividend growth. This should be underpinned by the company's
constant innovation, combined with several supportive trends we see in its
end-markets: such as increasing use of automated drilling for safety reasons,
and increasing use of software to deliver better analysis of how to drill. The
company aims to pay a resilient dividend across cycles.
CME Group was another attractive new investment during the year. This company
is dominant in the exchange of derivatives in US markets: most notably
interest rate futures, but also a long list of energy, metal and agricultural
commodities encompassing everything from oil to copper to corn. It does not
take positions on these commodities, rather it operates the pre-eminent
marketplace in the US where buyers can find sellers, through its matching
platform, Globex. In the years ahead we expect growth in CME's revenues to be
driven by ever-rising trading volumes, as its customers, such as banks, try to
manage ever-more complex financial risks. It is constantly innovating new
products, and there is good potential for it to grow its customer bases
internationally. The margins and cashflow from the business are strong, which
it pays out in an attractive level of dividends. Last year the shares were
weak, as some investors worried about the impact of falling interest rates,
and a new competitor launching in the US. But our analysis suggests the rate
worry is misplaced, and the new player is unlikely to have significant
success, and we took this as an opportunity to invest.
Paychex was a third new investment. This is a payroll processing company
serving thousands of small businesses in the US. Every time employees get
paid, companies need to navigate a labyrinth of state and federal rules to
ensure the correct deductions, taxes, and so on are made. This is the core of
Paychex software, saving employers dozens of hours of time for the cost of a
few dollars a month. An attraction is the additional products that can be sold
on the back of this software: such as health insurance, recruitment tools, and
a host of other tasks connected to managing people. We foresee Paychex selling
every more products to ever more businesses in the years ahead, growing its
earnings and its dividend, which have a tremendous track record of
compounding.
Within the property portfolio, there were new purchases of a motorway service
station south of London, and an industrial warehouse in the south of England.
Both are exactly the sort of long-leased, inflation-linked property which the
manager seeks. In the bond portfolio there were divestments to fund these
property investments. In the infrastructure portfolio there were no major
transactions.
Conclusion
To go back to the start: SAINTS' performance in 2024 was mixed. The highlights
were the strong growth in earnings delivered by the Company's investments,
driven by an equity portfolio that is in fine form, with its dividends growing
on average by 10%. Income from property and the other asset classes was also
robust. This underpinned another inflation-beating increase in SAINTS'
dividend to shareholders: the 51st consecutive increase. The NAV of the
Company also rose to a new high.
As we have also examined, the relative performance of the NAV lagged global
equity markets last year. This was due primarily to the more balanced approach
that SAINTS takes to investing, and in particular our focus on companies with
resilient earnings and income growth. These were not the type of companies
that saw the strongest rises in share prices in 2024. The discount between the
NAV and SAINTS' share price widened last year, which we believe is symptomatic
of the wider investment trust sector.
We look forward with great optimism to the years ahead. We will stay true to
SAINTS' objective of delivering a resilient income that grows ahead of
inflation, while also aiming to grow capital value. Our analysis of the
investment portfolio suggests it is well-placed for this task. We continue to
find exciting new ideas around the world, the likes of Epiroc, CME and
Paychex: names that make SAINTS' prospects ever-stronger. We remain resolutely
aligned with shareholders, investing alongside them as owners of SAINTS'
shares.
James Dow
Ross Mathison
Baillie Gifford & Co
12 February 2025
For a definition of terms see glossary of terms and alternative performance
measures at the end of this announcement.
Source: LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
List of investments
As at 31 December 2024
Name Business 2024 2024
Value % of total
£'000 assets
Global equities
Microsoft Computer software 41,555 4.0
Fastenal Distribution and sales of industrial supplies 35,809 3.4
Apple Consumer technology 35,132 3.4
Procter & Gamble Household product manufacturer 32,529 3.1
Taiwan Semiconductor Manufacturing Semiconductor manufacturer 32,491 3.1
Partners Group Asset management 30,639 2.9
Deutsche Boerse Securities exchange owner/operator 28,293 2.7
Schneider Electric Electrical power products 25,490 2.4
Novo Nordisk Pharmaceutical company 24,342 2.3
Atlas Copco Engineering 23,810 2.3
Watsco Distributes air conditioning, heating and refrigeration equipment 23,471 2.3
Wolters Kluwer Information services and solutions provider 23,314 2.2
Coca Cola Beverage company 22,349 2.1
Anta Sports Sportswear manufacturer and retailer 21,205 2.0
Pepsico Snack and beverage company 21,037 2.0
CME Derivatives Exchange operator 20,732 2.0
Analog Devices Integrated circuits 19,420 1.9
Midea Group Appliance manufacturer 19,366 1.9
Experian Credit scoring and marketing services 18,949 1.8
Admiral Car insurance 18,799 1.8
McDonald's Fast food restaurants 17,858 1.7
Roche Pharmaceuticals and diagnostics 17,456 1.7
Carsales.com Online marketplace for classified car advertisements 16,136 1.5
United Parcel Service Courier services 15,575 1.5
United Overseas Bank Commercial banking 15,448 1.5
L'Oréal Cosmetics 15,003 1.4
Epiroc Mining and infrastructure equipment provider 14,713 1.4
SAP Business software developer 14,095 1.4
Cisco Systems Data networking equipment 13,718 1.3
Arthur J Gallagher Insurance broker 13,470 1.3
USS Second-hand car auctioneer 13,013 1.2
Home Depot Home improvement retailer 12,847 1.2
Nestlé Food producer 12,771 1.2
T. Rowe Price Fund manager 11,808 1.1
B3 S.A. Securities exchange owner/operator 11,386 1.1
Intuit Software 11,059 1.1
Texas Instruments Semiconductor supplier 10,976 1.0
Coloplast Manufacturer of medical products 10,687 1.0
NetEase Online gaming company 10,487 1.0
Hong Kong Exchanges and Clearing Securities exchange owner/operator 10,357 1.0
Amadeus IT Group Technology provider for the travel industry 10,279 1.0
Starbucks Coffee retailer 10,144 1.0
Edenred Voucher programme outsourcer 9,898 0.9
AVI Staple foods manufacturer 9,698 0.9
Albemarle Producer of speciality and fine chemicals 9,658 0.9
Valmet Manufacturer of pulp and paper machinery 9,487 0.9
Diageo International drinks company 9,056 0.9
Kuehne + Nagel Worldwide freight forwarder 8,801 0.8
Man Wah Sofa designer and manufacturer 7,362 0.7
Pernod Ricard Global spirits manufacturer 6,218 0.6
Cognex Industrial automation 6,042 0.6
Eurofins Laboratory testing provider 5,410 0.5
Paychex HR, payroll and benefits outsourcer 5,088 0.5
Medtronic Medical devices company 4,485 0.4
TCI Producer of health-food products 4,323 0.4
Fevertree Drinks Producer of premium mixer drinks 3,701 0.4
Total global equities 907,245 86.6
Infrastructure equities
Greencoat UK Wind UK wind farms 10,869 1.0
Terna Electricity grid operator 6,203 0.6
BBGI Global Infrastructure PFI/PPP fund 5,219 0.5
Jiangsu Expressway Tollroad operator 3,897 0.4
Assura Primary healthcare property group 3,020 0.3
Exelon Grid and utility operator 834 0.1
Total Infrastructure equities 30,042 2.9
Direct Property See table on page below 95,450 9.1
Bonds
Euro denominated Ivory Coast 6.625% 2048 1,462 0.1
US dollar denominated Dominican Republic 5.875% 30/01/2060 1,366 0.1
US dollar denominated Mexico 5.75% 12/10/2110 1,409 0.2
Brazilian real denominated Brazil CPI Linked 15/05/2045 2,145 0.2
Dominican peso denominated Dominican Republic 9.75% 06/06/2026 720 0.1
Indonesian rupiah denominated Indonesia 9% 15/03/2029 1,993 0.2
Indonesian rupiah denominated Indonesia 7.375% 15/05/2048 1,963 0.2
Total Bonds 11,058 1.1
Total Investments 1,043,795 99.7
Net Liquid Assets 3,640 0.3
Total Assets (before deduction of borrowings) 1,047,435 100.0
Property portfolio
Location Type Tenant 2024 2024 2024 2023
EPC # Value % of total Value
Rating £'000 assets £'000
Biggleswade* Warehouse Sherwin-Williams UK Limited - - 5,700
Crawley(†) Motorway Services Moto Hospitality Limited B 19,700 1.9 -
RPI-inked annual increase (uncapped till May 2025, then collar 2% cap 4%)
Denbigh Supermarket Aldi Stores Limited B 4,800 0.5 4,800
Fixed-increases 5-yearly (2.5% compounded)
Earley Public House Spirit Pub Company (Managed) Limited (Greene King plc) C 2,500 0.2 2,600
5-yearly open market review
Gosport Supermarket Aldi Stores Limited A 5,550 0.5 5,550
RPI-linked collar 1% cap 2.75%
Holyhead Hotel Premier Inn Hotels Limited A 6,500 0.6 6,550
CPI-linked with 4% cap
New Romney Holiday Village Park Resorts Limited C 19,250 1.8 19,250
RPI-linked collar 3% cap 7% p.a. + turnover-related top up 5-yearly
Otford Public House Spirit Pub Company (Managed) Limited (Greene King plc) C 1,700 0.2 1,700
5-yearly open market review
Ringwood Hotel Premier Inn Hotels Limited B 8,350 0.8 8,650
CPI-linked with 4% cap
Southend-on-Sea Warehouse Booker Limited C 8,500 0.8 7,900
Fixed increases 5-yearly (2.5% compounded)
Taunton Bowling Alley Mitchells & Butlers Retail (No.2) Limited (sublet to Hollywood Bowl Group A 3,900 0.4 3,650
plc)
RPI-linked until 2024, then 5-yearly open market
Witney(†) Industrial James Donaldson Group Limited A 14,700 1.4 -
RPI-linked collar 2% cap 4%
95,450 9.1 66,350
* Sold during the year.
† Purchased during the year.
# See glossary of terms and alternative performance measures at the end of
this announcement.
Performance attribution
For the year to 31 December 2024
Portfolio breakdown Average allocation Average allocation Total return † Total return
SAINTS benchmark * SAINTS benchmark *†
% % % %
Global equities 95.1 99.9 6.1 19.8
Infrastructure equities 3.1 0.1 (2.8)
Bonds 1.7 (4.1)
Direct property 9.4 8.3
Cash at bank 0.5 -
Borrowings at book value (9.8) 3.0
Portfolio total return (borrowings at book value) 5.9
Other items(#) (0.3)
Fund total return (borrowings at book value) 5.6
Adjustment for change in fair value of borrowings 0.5
Fund total return (borrowings at fair value) 6.1
* The Company's benchmark is the FTSE All-World Index (in sterling terms).
† Alternative performance measure - see glossary of terms and
alternative performance measures at the end of this announcement.
# Includes Baillie Gifford and OLIM Property Limited management fees.
Source: Baillie Gifford / LSEG and relevant underlying index providers. See
disclaimer at the end of this announcement.
Past performance is not a guide to future performance.
Income statement
For the year ended 31 December 2024 (with comparatives as at 31 December 2023)
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - securities - 28,654 28,654 - 91,351 91,351
Gains/(losses) on investments - property - 1,887 1,887 - (6,054) (6,054)
Currency (losses)/gains - (26) (26) - 32 32
Income 32,387 - 32,387 30,078 - 30,078
Management fees (1,091) (3,271) (4,362) (1,031) (3,094) (4,125)
Other administrative expenses (1,349) - (1,349) (1,268) - (1,268)
Net return before finance costs and taxation 29,947 27,244 57,191 27,779 82,235 110,014
Finance costs of borrowings (711) (2,134) (2,845) (711) (2,134) (2,845)
Net return on ordinary 29,236 25,110 54,346 27,068 80,101 107,169
activities before taxation
Tax on ordinary activities (3,414) 940 (2,474) (3,108) 977 (2,131)
Net return on ordinary 25,822 26,050 51,872 23,960 81,078 105,038
activities after taxation
Net return per ordinary share 14.50p 14.62p 29.12p 13.48p 45.63p 59.11p
The total column of the Income statement represents the profit and loss
account of the Company. The supplementary revenue and capital columns are
prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in this statement derive from continuing
operations.
A Statement of comprehensive income is not required as there is no other
comprehensive income.
The accompanying notes below are an integral part of the Financial Statements.
Balance sheet
As at 31 December 2024 (with comparatives as at 31 December 2023
2024 2024 2023 2023
£'000 £'000 £'000 £'000
Non-current assets
Investments - securities 948,345 955,460
Investments - property 95,450 66,350
1,043,795 1,021,810
Current assets
Debtors 4,474 3,549
Cash and cash equivalents 2,818 7,340
7,292 10,889
Creditors
Amounts falling due within one year (3,652) (2,787)
Net current assets 3,640 8,102
Total assets less current liabilities 1,047,435 1,029,912
Creditors
Amounts falling due after more than one year (94,742) (94,728)
Net assets 952,693 935,184
Capital and reserves
Share capital 44,579 44,579
Share premium account 186,100 186,100
Capital redemption reserve 22,781 22,781
Capital reserve 682,413 664,892
Revenue reserve 16,820 16,832
Shareholders' funds 952,693 935,184
Net asset value per ordinary share* 539.3p 524.5p
The accompanying notes below are an integral part of the Financial Statements.
* See glossary of terms and alternative performance measures at the end of
this announcement.
Statement of changes in equity
For the year ended 31 December 2024
Share Share Capital Capital Revenue Shareholders'
capital premium redemption Reserve* reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 January 2024 44,579 186,100 22,781 664,892 16,832 935,184
Shares bought back into treasury - - - (8,529) - (8,529)
Net return on ordinary activities after taxation - - - 26,050 25,822 51,872
Dividends paid in the year (note 5) - - - - (25,834) (25,834)
Shareholders' funds at 31 December 2024 44,579 186,100 22,781 682,413 16,820 952,693
For the year ended 31 December 2023
Share Share Capital Capital Revenue Shareholders'
capital premium redemption Reserve* reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 January 2023 44,188 178,189 22,781 583,814 17,702 846,674
Shares issued 391 7,911 - - - 8,302
Net return on ordinary activities after taxation - - - 81,078 23,960 105,038
Dividends paid in the year (note 5) - - - - (24,830) (24,830)
Shareholders' funds at 31 December 2023 44,579 186,100 22,781 664,892 16,832 935,184
*- The capital reserve as at 31 December 2024 includes unrealised investment
holding gains of £31,084,000 (31 December 2023 - gains of £339,191,000).
The accompanying notes below are an integral part of the Financial Statements.
Cash flow statement
For the year ended 31 December 2024 (with comparatives as at 31 December 2023)
2024 2024 2023 2023
£'000 £'000 £'000 £'000
Net return on ordinary activities before taxation 54,346 107,169
Adjustments to reconcile company profit before tax to net cash flow from
operating activities
Net (gains)/losses on investments - securities (28,654) (91,351)
Net (gains)/losses on investments - property (1,887) 6,054
Currency losses/(gains) 26 (32)
Finance costs of borrowings 2,845 2,845
Other capital movements
Changes in debtors (1,001) (340)
Change in creditors 620 204
Other non-cash changes 63 62
Taxation
Overseas withholding tax (2,398) (2,126)
Cash from operations 23,960 22,485
Interest paid (2,845) (2,845)
Net cash inflow from operating activities 21,115 19,640
Cash flows from investing activities
Acquisitions of investments - securities (128,263) (109,728)
Acquisitions of investments - property (32,867) (15,057)
Disposals of investments - securities 163,969 115,394
Disposals of investments - property 5,654 9,403
Net cash inflow from investing activities 8,493 12
Cash flows from financing activities
Equity dividends (25,834) (24,830)
Shares issued - 8,302
Shares bought back (8,270) -
Net cash outflow from financing activities (34,104) (16,528)
(Decrease)/increase in cash and cash equivalents (4,496) 3,124
Exchange movements (26) 32
Cash and cash equivalents at start of year 7,340 4,184
Cash and cash equivalents at end of year 2,818 7,340
The accompanying notes below are an integral part of the Financial Statements.
Notes to the Financial Statements
1. Basis of accounting
The Financial Statements for the year to 31 December 2024
have been prepared in accordance with FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and on the basis of the
accounting policies set out in the Annual Report and Financial Statements for
the year ended 31 December 2024.
2. Income
2024 2023
£'000 £'000
Income from investments
UK dividends 2,402 2,400
UK interest - 174
Overseas dividends 23,168 20,602
Overseas interest 1,058 2,270
26,628 25,446
Other income
Deposit interest 180 151
Rental income 5,542 4,451
Other income 37 30
5759 4,632
Total income 32,387 30,078
Total income comprises:
Dividends from financial assets classified at fair value through profit or 25,570 23,002
loss
Interest from financial assets designated at fair value through profit or loss 1,058 2,444
Interest from financial assets not at fair value through profit or loss 180 151
Other income not from financial assets 5,579 4,481
32,387 30,078
3. Investment Managers
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford
& Co, has been appointed as the Company's Alternative Investment Fund
Manager ('AIFM') and Company Secretary. Baillie Gifford & Co Limited has
delegated investment management services to Baillie Gifford & Co. Dealing
activity and transaction reporting have been further sub-delegated to Baillie
Gifford Overseas Limited and Baillie Gifford Asia (Hong Kong) Limited. The
management of the property portfolio has been delegated to OLIM Property
Limited.
The Investment Management Agreement between the AIFM and
the Company sets out the matters over which the Managers have authority in
accordance with the policies and directions of, and subject to restrictions
imposed by, the Board. The Investment Management Agreement is terminable on
not less than six months' notice. Compensation fees would only be payable in
respect of the notice period if termination were to occur within a shorter
notice period. The annual management fee is 0.45% of the first £500 million
of total assets and 0.35% of the remaining total assets, total assets being
the value of all assets held (excluding the property portfolio) less all
liabilities, other than any liability in the form of debt intended for
investment purposes, calculated on a quarterly basis. The Board is of the view
that calculating the fee with reference to performance would be unlikely to
exert a positive influence on performance.
The Property Management Agreement sets out the matters over
which OLIM Property Limited has discretion and those matters which require
Board approval. The Property Management Agreement is terminable on three
months' notice. The annual fee is 0.5% of the value of the property portfolio,
subject to a minimum quarterly fee of £6,250.
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 973 2,918 3,891 938 2,814 3,752
Property management fee 118 353 471 93 280 373
1,091 3,271 4,362 1,031 3,094 4,125
4. Net return per ordinary share
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
Net return per ordinary share 14.50p 14.62p 29.12p 13.48p 45.63p 59.11p
Revenue return per ordinary share is based on the net
revenue on ordinary activities after taxation of £25,822,000
(2023 - £23,960,000) and on 178,117,932 (2023 - 177,707,094) ordinary
shares of 25p, being the weighted average number of ordinary shares in issue
during the year.
Capital return per ordinary share is based on the net
capital gain for the financial year of £26,050,000 (2023 - net capital gain
of £81,078,000), and on 178,117,932 (2023 - 177,707,094) ordinary shares,
being the weighted average number of ordinary shares in issue during the year.
There are no dilutive or potentially dilutive shares in
issue.
5. Ordinary dividends
2024 2023 2024 2023
£'000 £'000
Amounts recognised as distributions in the year:
Previous year's final (paid 11 April 2024) 3.80p 3.67p 6,776 6,487
First interim (paid 20 June 2024) 3.45p 3.30p 6,152 5,861
Second interim (paid 19 September 2024) 3.55p 3.45p 6,330 6,152
Third interim (paid 12 December 2024) 3.70p 3.55p 6,576 6,330
14.50p 13.97p 25,834 24,830
We also set out below the total dividends paid and proposed
in respect of the financial year, which is the basis on which the requirements
of section 1159 of the Corporation Tax Act 2010 are considered. The revenue
available for distribution out of current year profits by way of dividend for
the year is £25,822,000 (2023 - £23,960,000).
2024 2023 2024 2023
£'000 £'000
Dividends paid and payable in respect of the year:
First interim (paid 20 June 2024) 3.45p 3.30p 6,152 5,861
Second interim (paid 19 September 2024) 3.55p 3.45p 6,330 6,152
Third interim (paid 12 December 2024) 3.70p 3.55p 6,576 6,330
Current year's proposed final dividend (payable 11 April 2025) 4.175p 3.80p 7,375 6,776
14.875p 14.10p 26,433 25,119
6. Creditors - amounts falling due after more than one year
2024 2023
£'000 £'000
£15m Series C 2.23% 25 June 2036 14,941 14,936
£40m Series A 3.12% 11 April 2045 39,901 39,897
£40m Series B 3.12% 11 April 2049 39,900 39,895
94,742 94,728
The main covenants for the loan notes which are tested
monthly are that net tangible assets shall not fall below £120,000,000 and
gross borrowings shall not exceed 40% of the Company's adjusted assets.
7. Share capital
2024 2024 2023 2023
Number £'000 Number £'000
Allotted, called up and fully paid ordinary shares of 25p each 176,650,758 44,163 178,315,943 44,579
Treasury shares of 25p each 1,665,185 416 - -
178,315,943 44,579 178,315,943 44,579
The Company's shareholder authority permits it to hold shares bought back in
treasury. Such treasury shares may be subsequently either sold for cash at a
premium to net asset value per ordinary share or cancelled. At 31 December
2024, the Company had authority to buy back 25,064,374 ordinary shares. During
the year to 31 December 2024, no ordinary shares were bought back for
cancellation (2023 - no ordinary shares) and 1,665,185 (2023 - none) ordinary
shares were bought back into treasury at a cost of £8,529,000 (2023 - no
shares were bought back). Under the provisions of the Company's Articles of
Association, share buy-backs are funded from the capital reserve.
The Company has authority to allot shares under section 551 of the Companies
Act 2006. During the year, no shares were issued (2023 - 1,565,000 shares were
issued at a premium to net asset value raising proceeds of £8,302,000).
8. During the year, transaction costs on purchases and sales
amounted to £1,773,000 (2023- £985,000) and £200,000 (2023 -£189,000)
respectively.
9. Analysis of change in net debt
1 January Cash flows Exchange Other 31 December
2024 £'000 movement non-cash 2024
£'000 £'000 changes £'000
£'000
Cash and cash equivalents 7,340 (4,496) (26) - 2,818
Loan notes due in more than one year (94,728) - - (14) (94,742)
(87,388) (4,496) (26) (14) (91,924)
1 January Cash flows Exchange Other 31 December
2023 £'000 movement non-cash 2023
£'000 £'000 changes £'000
£'000
Cash and cash equivalents 4,184 3,124 32 - 7,340
Loan notes due in more than one year (94,714) - - (14) (94,728)
(90,530) 3,124 32 (14) (87,388)
10. The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2024 or 2023 but
is derived from those accounts. Statutory accounts for 2023 have been
delivered to the registrar of companies, and those for 2024 will be delivered
in due course. The auditor has reported on those accounts; their reports were
(i) unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
11. The Report and Accounts will be available on the SAINTS page of the
Managers' website saints-it.com (https://saints-it.com/) (‡) on or around 27
February 2024.
Glossary of terms and alternative performance measures ('APM')
An alternative performance measure is a financial measure of historical or
future financial performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable financial reporting
framework.
Total assets
This is the Company's definition of Adjusted Total Assets, being the total
value of all assets held less all liabilities (other than liabilities in the
form of borrowings).
Net Asset Value ('NAV')
Also described as shareholders' funds, net asset value is the value of total
assets less liabilities (including borrowings). Net asset value can be
calculated on the basis of borrowings stated at book value and fair value. An
explanation of each basis is provided below. The net asset value per share is
calculated by dividing this amount by the number of ordinary shares in issue
excluding any shares held in treasury.
Net Asset Value (borrowings at book value)
Borrowings are valued at adjusted net issue proceeds. Book value approximates
amortised cost.
Net Asset Value (borrowings at fair value) (APM)
Borrowings are valued at an estimate of their market worth. This indicates the
cost to the Company of repaying its borrowings under current market
conditions. It is a widely reported measure across the investment trust
industry.
31 December 2024 31 December 2023
Shareholders' funds (borrowings at book value) £952,693,000 £935,184,000
Add: book value of borrowings £94,742,000 £94,728,000
Less: fair value of borrowings (£62,053,000) (£68,155,000)
Shareholders' funds (borrowings at fair value) £985,382,000 £961,757,000
Shares in issue at year end 176,650,758 178,315,943
Net asset value per ordinary share (borrowings at fair value) 557.8p 539.4p
Premium/(discount) (APM)
As stockmarkets and share prices vary, an investment trust's share price is
rarely the same as its NAV. When the share price is lower than the NAV per
share it is said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is
usually expressed as a percentage of the NAV per share. If the share price is
higher than the NAV per share, this situation is called a premium.
2024 2024 2023 2023
NAV (book) NAV (fair) NAV (book) NAV (fair)
Closing NAV per share 539.3p 557.8p 524.5p 539.4p
Closing share price 498.5p 498.5p 535.0p 535.0p
Premium/(discount) (7.6%) (10.6%) 2.0% (0.8%)
Ongoing charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average net asset value (with borrowings at fair value). The
ongoing charges have been calculated on the basis prescribed by the
Association of Investment Companies.
A reconciliation from the expenses detailed in the Income statement above is
provided below.
31 December 2024 31 December 2023
Investment management fee £4,362,000 £4,125,000
Other administrative expenses £1,349,000 £1,268,000
Total expenses (a) £5,711,000 £5,393,000
Average daily cum-income net asset value (with borrowings at fair value) (b) £991,710,000 £928,722,000
Ongoing charges (a) ÷ (b) (expressed as a percentage) 0.58% 0.58%
Total return (APM)
The total return is the return to shareholders after reinvesting the net
dividend on the date that the share price goes ex-dividend.
2024 2024 2024 2023 2023 2023
NAV NAV Share NAV NAV Share
(book) (fair) price (book) (fair) price
Opening NAV per share/share price (a) 524.5p 539.4p 535.0p 479.0p 495.5p 508.0p
Closing NAV per share/share price (b) 539.3p 557.8p 498.5p 524.5p 539.4p 535.0p
Dividend adjustment factor* (c) 1.026922 1.026106 1.028650 1.027628 1.026683 1.027273
Adjusted closing NAV per share/ (d) = (b) x (c) 553.8p 572.4p 512.8p 539.0p 553.8p 549.6p
share price
Total return (d) ÷ (a) -1 5.6% 6.1% (4.2%) 12.5% 11.8% 8.2%
* The dividend adjustment factor is calculated on the assumption that the
dividends paid out by the Company are reinvested into the shares of the
Company at the cum income NAV/share price at the ex-dividend date.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an
investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders' assets is called
'gearing'. If the Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the value of
the Company's assets falls, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely impact performance in
falling markets.
Potential gearing is the Company's borrowings expressed as a percentage of
shareholders' funds.
31 December 2024 31 December 2023
Borrowings at book value £94,742,000 £94,728,000
Shareholders' funds £952,693,000 £935,184,000
Potential gearing 10% 10%
Equity gearing is the Company's borrowings adjusted for cash, bonds and
property expressed as a percentage of shareholders' funds.
31 December 2024 31 December 2023
Borrowings at book value £94,742,000 £94,728,000
Less: cash and cash equivalents (£2,818,000) (£7,340,000)
Less: bond investments (£11,058,000) (£37,866,000)
Less: direct property investments (£95,450,000) (£66,350,000)
Adjusted borrowings (£14,584,000) (£16,828,000)
Shareholders' funds (£952,693,000) £935,184,000
Equity gearing (2%) (2%)
Sustainable Finance Disclosure Regulation ('SFDR')
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As SAINTS is marketed in the EU by the AIFM,
Baillie Gifford & Co Limited, via the National Private Placement Regime
('NPPR') the following disclosures have been provided to comply with the
high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's ESG Principles and Guidelines
as its policy on integration of sustainability risks in investment decisions.
Baillie Gifford & Co believes that a company cannot be financially
sustainable in the long run if its approach to business is fundamentally out
of line with changing societal expectations. It defines 'sustainability' as a
deliberately broad concept which encapsulates a company's purpose, values,
business model, culture, and operating practices.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build up an in-depth
knowledge of an individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors (environmental, social
and/or governance matters) which it believes will positively or negatively
influence the financial returns of an investment. The likely impact on the
return of the portfolio from a potential or actual material decline in the
value of investment due to the occurrence of an environmental, social or
governance event or condition will vary and will depend on several factors
including but not limited to the type, extent, complexity and duration of an
event or condition, prevailing market conditions and existence of any
mitigating factors.
Whilst consideration is given to sustainability matters, there are no
restrictions on the investment universe of the Company, unless otherwise
stated within in its Investment Objective & Policy. Baillie Gifford &
Co can invest in any companies it believes could create beneficial long-term
returns for investors. However, this might result in investments being made in
companies that ultimately cause a negative outcome for the environment or
society.
The underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities established under the EU
Taxonomy Regulation.
More detail on the Investment Managers' approach to sustainability can be
found in the ESG Principles and Guidelines document, available publicly on the
Baillie Gifford website bailliegifford.com.
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Automatic Exchange of Information
In order to fulfil its legal obligations under UK tax legislation relating to
the automatic exchange of information, The Scottish American Investment
Company P.L.C. is required to collect and report certain information about
certain shareholders.
The legislation requires investment trust companies to provide personal
information to HMRC on certain investors who purchase shares in investment
trusts. Accordingly, The Scottish American Investment Company P.L.C. will have
to provide information annually to the local tax authority on the tax
residencies of a number of non-UK based certificated shareholders and
corporate entities.
Shareholders, excluding those whose shares are held in CREST, who come on to
the share register will be sent a certification form for the purposes of
collecting this information.
For further information, please see HMRC's Quick Guide: Automatic Exchange of
Information - information for account holders
gov.uk/guidance/automatic-exchange-of-information-account-holders.
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Managers' website (or any other website) is incorporated into, or forms part
of, this announcement.
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