F&C sees assets drop £2.5bn and reduces dividend

F&C Asset Management has seen assets under management decline by £2.5 billion to £95.3 billion in the first six months of the year, registering a loss of £19.5 million after tax as it incurred a number of costs relating to redundancies, legal action and the acquisition of Thames River Capital.

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by Daniel Grote on Aug 26, 2010 at 08:55

F&C sees assets drop £2.5bn and reduces dividend

F&C Asset Management has seen assets under management decline by £2.5 billion to £95.3 billion in the first six months of the year, registering a loss of £19.5 million after tax as it incurred a number of costs relating to redundancies, legal action and the acquisition of Thames River Capital.

F&C blamed the fall in the euro against sterling for the drop in assets, saying that it accounted for a £4.9 billion reduction in funds under management.

Its £19.5 million loss compares to a £8.7 million loss over the same period last year, but follows a strong second half of 2009, which led to F&C recording a £18.7 million profit for the year.

F&C has reduced its interim dividend from 2p to 1p, arguing that this would help it to strengthen its capital position by reducing debt.

The business paid £7.9 million in corporate advisory fees as part of its acquisition of Thames River Capital, and incurred £1.4 million in redundancy and related staff costs as a result of a cost saving drive.

It spent £3.3 million in legal and advisory costs related to its dispute with Francois Barthelemy and Anthony Culligan, founder members of F&C Partners. It has provided for £2.4 million in relation to the legal action.

F&C chief executive Alain Grisay (pictured) said that the group was seeing an improvement in fund flows.

'Our three key strategic priorities are to accelerate revenue growth, manage the cost base to create greater flexibility and to strengthen our capital position through the progressive reduction of debt funded in part through a reduced dividend,' he said.

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7 comments so far. Why not have your say?

This fund management company has cut its dividend substantially three times in as many years. Yet fund management is amongst the most cash-generative of businesses. The explanation: its record on retaining assets under management has been dismal for many years (a predecessor company, Ivory &Sime, was once the largest fund manager in the UK!). Despite several cost reduction programmes, it has failed to generate more than token profits. It is 66%-reliant on low-margin fixed- income AUM, mainly from some longstanding insurance company clients, whose long-term loyalty cannot be relied on. Now that the dividend yield has been cut to c.4%, the main reason for holding F&C Asset Management shares has to be the hope of a takeover premium - let's hope that Edward Bramson can stir things up.

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Mmm. The F&C chief executive Mr Alain Grisay collects million-pound remuneration, according to The Times on April 9, 2010:-

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7092526.ece

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The sooner this underperforming dog is put down the better . Sherborne are you listening ?

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The piece focuses on the staturory profit/loss which is clouded by non-cash items (amortization) and also exceptionals such as deal fees for the Thames River acquistion.

Since 1 January this year accounting convention requires that such deal fees go through the income statement - this wouldnt have happened in the past, it would have be rolled up in the capital value of the deal.

Of course fund managers and analysts ignore this statutory stuff - only journalists seem to major on it.

Investors focus on clean / underlying figures. F&C just reported a rise in H1 underlying operating profit (from £19m to £26m), a rise in operating margin (from 18% to 24%) and increased underlying EPS (from 1p to 4p).

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Last message, should have read underlying EPS increased from 1p to 1.4p (not 4p) !

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F&C's annual report shows that underlying EPS (their definition, which excludes amortisation and all exceptional items) has declined in each of the past five years: 15.9p, 12.8p,10.4p, 7.8p and 4.6p in 2005-2009 respectively. In 2010 they might reach 3.0p, after 1.4p in the first half. They aim to cover the dividend 1.5 times, which suggests a maximum 2.0p total dividend for 2010. Without a bull market, or a takeover, this is a dull prospect for F&C's shareholders to contemplate.

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Anonymous 1 needed this 'off the record'

Aug 28, 2010 at 00:25

The policy in the annual report is states "at least" 150% cover. Consensus estimates are around 6 pence for underlying EPS.

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