Buoyant MAM shrugs off Warburg split

Mercury Asset Management yesterday shrugged off the effects of its separation last year from SG Warburg, with a 25.9 per cent increase in pre-tax profits to pounds 140.4m.

After a sharp slowdown in the rate at which it acquired new business in the first half of the year to pounds 800m, the fund management group acquired pounds 2.5bn of net new business in the second half, taking its total to pounds 81bn.

The first-half slowdown was widely seen in the City as due to the disruption caused by MAM's separation from Warburg after the merchant bank was taken over by Swiss Bank Corporation.

Hugh Stevenson, chairman of MAM, said: "I hope these results show that we are very capable of standing on our own."

The City was delighted both by the profits, which were above the top of the forecast range, and by an even sharper rise in the dividend for the full year, which was up from 26p to 35p a share, an increase of 34.6 per cent.

This excludes a special 40p dividend last August as part of the separation from Warburg. Earnings per share rose 23 per cent to 43.1p.

The dividend cover has dropped from 1.72p to 1.54p, reflecting MAM's cash-rich state. Mr Stevenson said: "If you have a lot of cash in your balance sheet one of the things you can do is bring down your dividend cover."

There has been speculation in the City about whether MAM will forge a link with a bigger group. Mr Stevenson said: "The important thing for us was to show to the rest of the world that MAM was an independent company that was quite capable of doing well for customers and shareholders." MAM shares rose 38p to 956p.

The operating cost of running MAM rose nearly pounds 18m, partly because of higher provisions for staff bonuses linked to the rising profits.

But this increase in costs is partly because of the consolidation of an Australian subsidiary in which MAM bought the 50 per cent it did not already own, and the company gave no indication of the scale of the bonuses.

Funds under management increased 27.6 per cent to pounds 81bn, of which pounds 3.3bn was net new funds, pounds 1.5bn the inclusion of the Australian funds and the rest the increase in the value of funds under management as markets have risen.