AAM's profits down to £40.7m

Published on Monday 2 December 2002 00:00

ABERDEEN Asset Management (AAM), the firm at the centre of the scandal over split capital investment trusts, today revealed a 15 per cent drop in full-year profits.

The Aberdeen-based firm, headed by chief executive Martin Gilbert, posted a pre-tax profit of 40.7 million for the year to the end of September, compared with 48.2m for the previous year.

But turnover rose to 193.3m, up from 182.1m a year ago, despite the general downturn in the stock markets. Assets under management fell to 23.7 billion from 25.8bn.

Chairman Charles Irby said: "During the course of the year, following Abbey National’s acquisition of Scottish Provident, 8.9bn of funds managed on behalf of Scottish Provident were transferred out.

"2.3bn of the reduction resulted from market movements, debt repayments by split capital closed-end funds reduced assets by 800m and net new business flows added 900m, leaving assets under management totalling 23.7bn at year end."

AAM shares gained 21 per cent last week on expectations the results would bring news of a sale of the property division.

But Friday’s close of 60.5p is still more than 85 per cent below January’s 416p and 92 per cent down on the record high of 700p in January 2001.

While some argue AAM shares are undervalued, most brokers are maintaining a high-risk rating due to the potentially huge legal liabilities that may stem from the split cap crisis.

AAM is the largest player in the split cap sector and is understood to be one of the firms under investigation by the Financial Services Authority over the 12 billion scandal. Four of its 19 trusts have collapsed. Separately, the poor performing Aberdeen Fund of Investment Trusts will be formally wound up this week.

JP Morgan Fleming Asset Management, one of the largest investment trust managers with 21 trusts, is planning to use the split cap scandal as a springboard for consolidation of the UK investment trust business. It claims that potentially 150 trusts, out of 374, could be wound up or merged with other, bigger trusts.

The Association of Investment Trust Companies, the industry’s trade body, admitted earlier this year that "many shareholders would benefit" if more trusts agreed mergers.