Gartmore shares knocked as profits slip

Rumours that Banque Indosuez was ready to sell its 75 per cent stake in Gartmore were being played down yesterday as the UK's fourth-biggest fund manager unveiled disappointing results.

Shares in Gartmore fell back 7p to 211p, having leapt from around 173p in the last six weeks on suggestions of a sale by the French bank, part of the Suez group, which is facing a number of difficulties at home.

Sources close to Gartmore pointed out that the speculation had been around for some time and had never led anywhere.Banque Indosuez had always been supportive and there was no obvious reason why it would want to exchange an earning asset for cash.

Paul Myners, Gartmore's executive chairman, refused to comment, but dismissed the idea of further industry consolidation.

"I don't think it's an industry where the conventional approach to rationalisation works, ie I don't think bigger necessarily means better," he said. Mr Myners compared Gartmore to an industrial business, "a factory which has output to sell".

He said the key was enhanced distribution, which they were building up through investments in operations in America, Japan, Canada and Europe.

He was speaking as the group announced a dip in profits from pounds 17.4m to pounds 16.2m for the six months to June. The interim dividend is held at 1.75p, despite a fall in earnings per share to 5.2p from 5.6p.

Gartmore said unit trust sales had slumped from pounds 62m to pounds 38m. Although that result had been better than the industry as a whole, it had restrained revenues, which were marginally ahead at pounds 42.6m in the half year.

The other major drag on profits was operating expenses, which jumped from pounds 26m to pounds 28.2m as the group invested in new staff and systems. Mr Myners said around half the increase was due to investment in the UK business, with the rest due to initiatives abroad.

Investment Column, page 18