Alliance Trust Share News (ATST)

(ShareCast News) - Managers at Alliance Trust face a familiar set of battle lines this year after investment trust RIT Capital's informal approach, write the Financial Times' Lex column.That investment trust, chaired by Jacob Rothschild, may yet follow up with a formal bid for its Scottish peer.While mergers between investment companies often came down to spreading a fixed cost base over a bigger folio, Lex noted this was not the case this time around.Alliance and RIT each have over £2bn in assets and are viable as standalones, but the column pointed to the different way in which they were run.Some of RIT's investment management was outsourced, while Alliance managed funds in-house."The latter also has a savings business, which offers pensions and savings pruducts plus share dealing to the public," observed Lex.Established-in-1986 Alliance was valued at £54m at end-2015 and has only made profits sporadically in recent years, despite having consumed £93m of investment over 30 years."If Alliance had invested £3.1m in an index tracker in each of those 30 years instead, it could have made about £290m before costs," writes the column.It also pointed to last year's spat with a US activist investor, to whom it pledged to lift assets under administration at the savings unit to £45bn, from £6bn, within five years.Whether achieved either organically or acquisitively it would require heady investment.Either way, there was no guarantee of success, opined Lex."The skills involved in running a fund distribution business are very different required to those required to run funds," the column said."Alliance's new mangers were already engaged in a strategic review of the group's structure."They should sell the savings business -- with or without Lord Rothschild's intervention."Meantime, The Telegraph's Questor column points out that Hill & Smith stands to be a beneficiary in the government's infrastructure spending spree.It slapped a 'Hold' opinion on the shares.The column said that UK's public-sector infrastructure pipeline was worth about £48bn a year by last summer, this ranging from pound power stations to pothole prevention.It contended that while many large schemes were struggling to find traction, much was being done on the roads.The bulk of Hill & Smith's business came from designing manufacturing and installing roads and other utilities such as drainage pipes and security fencing.About 80% of the Solihull-based outfit's revenues were sourced from UK and US."Since the firm declared in 2009 that it would benefit from the USA's stimulus spending, annual revenues have increased 11pc to £467.5m and underlying profits by 36pc to £53m -- although an acquisition write-off this year took the profit down to £33.2m," said Questor.The company was also advancing into new markets, particularly in supplying parts for power grids, to offset the global slowdown in industrial activity.The column also noted that the market was still not pricing in the potential of a lucrative acquisition, pointing to Hill & Smith's full-year cash flow of £35.7m and modest use of its new £210m debt facility to date."The firm is worth a look after showing it can stay in gear even when the rest of the economy slows," Questor concluded.