More on Amvescap
Amvescap
Amvescap, Europe’s largest listed fund manager operating profits were flat in 2004. There is growing speculation that the company is likely to become a target for a takeover bid.
Amvescap is a large global investment manager (brands include AIM, INVESCO, and Atlantic Trust). Wealth management is the largest business, generating around 48% of operating profits followed by AIM (roughly 40% of operating profits) and Invesco (12%).The company is listed in London but its management is based in Atlanta.
Amevscap reported that operating profits profit before tax, goodwill amortisation and exceptional items for the year were £269.8m compared to £270.3m last year. Operating profits for the quarter were £65.1m against £65.2m in the third quarter of 2004.
Exceptional charges of £249.7m, almost entirely relating to settlement and related costs of the US regulatory investigation resulted in a pre tax loss of £137.6m compared to a profit £36.3m last year.
While the amount expensed as an exceptional charge appears to be the total of the fine (of US$376.7m) imposed on its subsidiary Invesco Funds Group, Amvescap does not indicate if this is the final payment. As part of the settlement reached earlier in the year the company agreed to make other unspecified “settlement related payments” required by the state of Colorado. Amvescap also agreed to reduce its management fees on the AIM/Invesco funds by $15m per year for the next five years.
The company admitted that the investigation of allegations of market timing held back its American business “for much of the year” and while total funds under management increased by 3% to $382.1bn this was largely due to market gains of US$26bn and acquisitions of £6.1bn. The company still managed to lose another US$7.6bn of client funds in the final quarter and a total of US$19.5bn during the year.
Some of the other companies being investigated (such as Alliance Capital Management) appear to have recovered (Alliance has reported a net fund inflow of US$2bn in the quarter) which makes Amvescap’s poor performance this quarter more worrying. The company is putting up as brave a face as possible but the long list of miscellaneous prizes awarded by the press and details of advertising campaigns included with the results does have an air of desperation about it. Amvescap has long struggled to generate cash; operating cash flows have declined every year since 2000, along with profits. Dividend payouts however have increased every year (excepting the cut this year to 7.5p from 11.5p last year) sending dividend cover from a healthy 3.1× in 1999 to zero in 2002; a level at which it has remained since then.
The stock trades at 360p on a prospective PE of 16.4×, at the upper end of the sector range and may offer further speculative gains in the event of a takeover bid or a change in management. The yield is 2.8%.
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