F&C revenues up 28pc but costs higher

F&C Asset Management has posted rising sales and fee income for the first half of the year but disappointed analysts with weaker than expected underlying profits.

Assets under management rose to £108bn from £105.8bn at the end of December as it attracted a net £0.8bn of new inflows excluding ongoing outflows from its insurance business.

Chief executive Alain Grisay said the fund manager had made “good progress” and the second half of the year was expected to be better.

“More of our products have performance fees that typically crystallise at year end and in addition we expect to see the first cost benefits emerge from the recent outsourcing of our investment operations,” he said in a statement.

But several analysts warned that its growing expense base following the acquisition of Thames River Capital could pose problems and put it under review for a downgrade ahead of the outcome of its strategy review that has taken up most of the year.

F&C said its pre-tax profit for the half year was £22.6m, 54.8 per cent higher than in the same period in 2010, while net revenues increased 28 per cent to £137m from £106.8m in 2010.

Peel Hunt analyst Stuart Duncan said the results “were below expectations through a combination of lower revenues and higher operating expenses than our forecasts assumed” and he was likely to revise his forecasts downwards.

Numis analyst David McCann said the underlying profits were about ten to 15 per cent light of his and analysts’ consensus expectations, largely due to the higher Thames River staff costs.

“It appears that these will be a recurring item at current revenue share rates for the foreseeable future,” he said.

F&C launched a review of its strategy in the spring after shareholders voted out its former chairman Nick MacAndrew and brought in Edward Bramson, head of activist investor Sherborne Investors, to chair the board.

The results of Bramson’s review are expected in October, F&C said.