The fund manager loses over £7bn of assets, but maintains its chunky dividend.
F&C Asset Management (LSE: FCAM) released its 2011 results today, providing more proof that last year was a tough one for asset managers. Despite a mixed performance, its shares have their attractions and, in particular, a decent, well-covered dividend.
£7.2 billion departs
In the year to 31 December 2011, F&C saw £7.2 billion of net outflows from its funds, driven largely by outflows from strategic partners in Portugal and Ireland. However, gross sales to institutions were strong, with £4.6 billion won in 2011 and another £1.2 billion won but not added by the year-end.
As a result of fund flows into and out of F&C, its assets under management -- a key performance indicator for fund managers -- slipped by more than 5% to just over £100 billion.
Despite this top-line drop, F&C's net revenue leapt by 10% to £267 million, but underlying operating profit dipped £2 million to £65 million. Alas, F&C's operating margin -- another key indicator of financial strength -- dipped from 27.6% to 24.4%.
With underlying profit after tax dropping slightly to just over £28 million, F&C's earnings per share dropped to 5.5p from 5.7p. Nevertheless, it held its final dividend at 2p, for a full-year dividend of 3p.
Another plus is the reduction in F&C's net debt, which fell from nearly £96 million to below £78 million, a drop of almost 19%. This was helped by F&C's ongoing strategic review and cost-reduction programme, which is ahead of plan and should lower costs by £33.2 million by the end of this year.
A mixed bag of results
As I write, F&C's shares have fallen 3.5p to 69.5p, which values the FTSE 250 firm at £370 million. Clearly, investors were disappointed with these mixed results, with funds under management, operating margin and profit falling, but underlying earnings holding up reasonably well, the dividend held and net debt reduced.
Then again, F&C is undergoing a process of accelerated change, with five new directors joining the board in 2011 and chief executive Alain Grisay leaving in May after six years at the helm.
Also, given intense investor demand for the relative safe haven of bonds, F&C's focus on fixed-income funds could well pay off in future. In addition, its fund performances have been above-average, which should attract further inflows.
A decent dividend
Thanks to its cost-cutting programme, F&C expects improved earnings per share and dividend cover from 2013 onwards. Right now, its shares trade on a forward price-to-earnings ratio of 9.2 and offer a prospective dividend yield of 4.8%, covered a healthy 2.4 times.
These are undemanding fundamentals for a business geared towards recovering financial markets. Hence, I would suggest investors add F&C to their watch lists. If its share price goes any lower, then it will move closer towards becoming an outright buy.
> Get the latest on investing and the markets, direct from the desk of David Kuo. You'll also receive a special free report on '10 Steps To Making A Million' if you join The Motley Fool Collective today.
More from Cliff D'Arcy: