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