F&C Asset Management Plc (FCAM), which runs the U.K.’s oldest investment trust, will almost triple cost reduction plans and cut jobs as part of a strategic review under Executive Chairman Edward Bramson.
F&C will cut 33.2 million pounds ($53 million), or 4.7 pence a share, of costs by 2013, up from the 12 million pounds, or 1.7 pence a share, previously announced, the London-based fund manager said in a statement. The stock climbed 8.9 percent to 67.9 pence at 8:29 a.m. in London trading, the biggest rise since August 2010.
“The shares are clearly going to be up when they’ve identified a level of cost savings that will contribute meaningfully to earnings per share,” said Sarah Ing, a London- based analyst at Singer Capital Markets Ltd., whose “fairly valued” rating is under review. “The cost savings will come from the back office functions and won’t cut into the flesh of the business.”
Bramson, founder of activist shareholder Sherborne Investors LLC, replaced Nick MacAndrew as chairman of F&C in February and after criticizing the company’s costs, levels of debt and recent acquisitions. F&C has lost money in each year but two since 2004 and analysts are forecasting an 19.3 million- loss this year, according to data compiled by Bloomberg.
The job cuts will mostly be in the firm’s back office with “limited” impact on investment teams, the company said. The firm had 898 full-time employees on March 1, according to its 2010 annual report.
The one-off spend this year to achieve the cost savings will be 14.6 million pounds, the company said, with 10.7 million pounds related to redundancy payments. The savings will be used to strengthen the firm’s ability to pay dividends and pay off debt, it said.
F&C’s strategy “is consistent with our objective to deliver attractive long-term returns to shareholders with lower than average volatility,” Bramson said in the statement. Bramson is seeking to move F&C back to its roots as a manager of assets belonging to institutions such as insurance companies. That part of the business, which manages 80 percent of the group’s assets, has “competitive scale” and has low variable costs, F&C said in the statement.
Under Chief Executive Officer Alain Grisay, who will step down in May next year to be replaced by Bramson, F&C tried to move away from managing institutional money because of the low fees it generated. Grisay bought hedge fund Thames River Capital LLC in 2010 because of its higher fees, an acquisition that helped the firm’s debt to double from 2006.
Foreign Exchange Loss
Bramson will review “growth strategies” at F&C’s retail, investment trust and Thames River units and announce plans for the divisions in the first half of next year, F&C said.
F&C’s assets under management dropped to 103.2 billion pounds at Sept. 30 from 108 billion pounds at the end of June after clients pulled 900 million pounds and the company took a 2.7 billion-pound foreign exchange loss.
Today’s statement is the first time Bramson has spoken about his strategy since taking control earlier this year. Sherborne first bought a stake in F&C in August 2010 and now has an 18.6 percent stake, according to data compiled by Bloomberg.
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