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F&C reports  £19.5m loss after tax

F&C has reported a £19.5m loss after tax for the first six months of 2010.

The fall compares to a loss of £8.7m in the first half of last year, while the group has also reported a £2.5bn fall in assets under management to £95.3bn. F&C has attributed the fall to a drop in the value of the Euro against Sterling, which it says reduced its AUM by £4.9bn.

The group has also cut its interim dividend from 2p to 1p a share. It says this decision will enable the group to free up cash to reduce net debt over the medium term.

F&C says the £19.5m loss was due to a number of factors such as redundancies and the acquisition of boutique investment house Thames River.

The group says the exceptional net costs total £11.1m. These principally comprised corporate advisory fees of £9.8 million – £7.9m of which were in relation to the imminent acquisition of Thames River – and expenses of £3.3 million relating to the put option claim by the minority interest partners in F&C Partners LLP.  The group has so far put £2.4m in relation to the legal action, which came about after the founder members of F&C Partners sought to use put options to sell their majority stake.

The group says £1.4m of staff related redundancies and other staff related costs were incurred in the first six months of 2010 as a result of a cost saving exercise across the business.

F&C chief executive Alan Grisay says: “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. By focusing on these priorities we will ensure the business remains robust under the various scenarios that could emerge as the long-term contracts with our insurance partners come to the end of their exclusivity periods in the years ahead and we look to extend those relationships.
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“The acquisition of Thames River Capital, to be completed imminently, is a core component of our plan. Thames River is already performing well as a standalone business, with £381 million of net sales year-to-date, and we believe that as part of the F&C group there will be considerable cross-selling opportunities. Thames River will enhance both our product and distribution capabilities, enabling us to accelerate the shift in our growth profile.”

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  1. The statutory reported profit figure is clouded by non cash items such as amortization of management contracts (from historical acquisitions), as well as exceptionals such as transaction fees on the Thames River deal. Under new accounting conventions from the start of this year transaction fees must go through the income statement.

    Analysts and fund managers ignore statutory figures and focus on underlying / clean profits. Read any of the analyst notes out this morning.

    On this basis F&C reported an underlying operating profit of £26 million, sharply up from £19 million in H1 last year. Underlying EPS rose from 1.0p to 1.4p.

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