AAM to slash further £20m from costs – and won't rule out job cuts

Published on Monday 1 December 2008 23:36

ABERDEEN Asset Management yesterday refused to rule out job cuts as it unveiled plans to slash a further £20 million from its costs.

AAM, one of Scotland's biggest asset management firms with more than 110 billion of funds under its control, said continuing tough trading conditions threatened profitability, although it narrowly increased its full-year profit before tax to 95.1m, compared with 94.3m the previous year.

In July, the company, headed by chief executive and co-founder Martin Gilbert, outlined plans to cut its cost base by 57m, and added to that a further 20m yesterday.

AAM's finance director, Bill Rattray, would not be drawn on the effect this would have on jobs, saying plans around the cost cuts were "sensitive". He said any job losses would probably come from "natural wastage" while the company also expects to find savings from businesses it acquired during the year.

The largest cut in headcount at AAM so far has been about 200 jobs outsourced in its property arm. The company is also not replacing staff who leave.

Rattray said: "Yes there has been a reduction in headcount but there has not necessarily been job losses in the way you typically describe it. What happens when you make acquisitions is you take an initial view of what costs savings are possible, then you constantly refine that as the business beds in.

"That is an element of the 20m savings."

AAM's latest figures cover the year ending 30 September, just before the turbulence affecting markets in October and early November.

Rattray admitted: "The way the markets developed during the course of October and early November will have a negative impact on assets and revenues."

Nevertheless, analysts were impressed with the group's net inflows representing new business. Royal Bank of Scotland said the 1bn net inflows reflected "continued strong demand for the group's products" against net inflows worth 8.7bn last year. The rise in inflows was despite a nearly 50 per cent rise in outflows, which were particularly strong in the group's weakened US fixed-income business.

Assets under management rose 17 per cent on last year, up to 111.1bn from 95.3bn. This was boosted by assets worth 16bn following its three acquisitions in the past year, including the 16m acquisition of US-based equity asset management business Nationwide Financial Services, the 87.7m acquisition of German property fund DEGI and the 98m acquisition of Goodman Property Investors.

Shares in the company yesterday dipped 2p, or 2.2 per cent, to 88p having earlier hit a low of 81p amid a wider market sell-off, while UK fund managers in particular suffered as a result of the financial crisis.

Rival fund manager New Star Asset Management yesterday faced a run on its shares after authorities refused to let it delist while it held emergency talks with its backers. New Star shares plummeted 43 per cent.

Analysts at Numis yesterday said AAM benefited from having a "largely institutional investor base and lengthy lock-up periods in its property business".

Rattray added: "We are to some extent sheltered from some of these more dramatic flows because we are an institutional house."

AAM chairman Charles Irby yesterday said he was to stand down at the company's annual general meeting in January after nine years, with former Perpetual deputy chairman Roger Cornick set to take over the role.

&#149 Dundee-based Alliance Trust has made 20 staff redundant, the first time in the company's 100-year history it has had to resort to compulsory redundancies. The firm said the slim-down followed a business review and reflected current difficult conditions in the stock market.