Amvescap forced to make public memo sent in error

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AAmvescap, the fund management group, was yesterday forced to publish a secret boardroom memo showing that it was falling short of internal financial targets, after it was accidentally emailed out with the company's results.

Amvescap, the fund management group, was yesterday forced to publish a secret boardroom memo showing that it was falling short of internal financial targets, after it was accidentally emailed out with the company's results.

There were wild fluctuations in the Amvescap share price as dealers acted on the sensitive figures, which the FTSE 100 company said was a "work in progress" and "not to be relied upon". Within two hours, the document was posted on the company's website to ensure that all investors had equal access to the information.

The memo shows that Amvescap executives had been told that the group was now expected to make just $559.7m operating profit in 2004, almost 6 per cent below its target.

It also shows that its AIM unit in the US is now expecting to lose a net $7.1bn of business, compared with a budgeted $4.3bn outflow, as the market timing scandal which has engulfed the company makes winning new business more difficult. One analyst who received the document said: "It not only showed that their latest forecasts are some way below budget but that their budget is some way below the market's forecasts."

The memo also revealed that Amvescap has pencilled in a $300m exceptional item in some of its forecasts, prompting speculation this could be the amount it believes it may have to pay in a settlement with US regulators over market timing abuses.

Three months into the financial year, the company's internal forecast is for annual earnings per share of 22.4p, against a budget target of 24.2p and a market consensus estimate of 27.8p. The volume of trading in Amvescap shares was the highest in more than a decade, and the stock fell 8 per cent before recovering to close off 17.5p at 386p, making it the worst FTSE 100 performer.

Charles Brady, the executive chairman, apologised to investors and analysts in a conference call to discuss the first-quarter results. "I regret that some people have received some working papers, but I would stress that this was a work in progress, an internal document, and it is not to be relied on," he said.

The company said a clerical error had led to a presentation to the executive management being attached to the results email, rather than an investor presentation. About 50 fund managers and analysts had received the email and the mistake was uncovered when one investor rang Amvescap's broker. A spokesman said the company had to put it out to all investors because it could not be sure some investors had not seen it.

One investment banker described how compliance officers had banned him from talking to investors or the trading desk after it became clear he was sitting on confidential documents. "We effectively had inside information for two hours, so we took legal counsel and I had to stay incommunicado."

Yesterday's document also shows how the company has reduced its headcount more quickly than budgeted, as it struggles to cut costs and rebuild profitability after the bear market. It raises the intriguing question of where the extra costs have arisen that will push operating profits and earnings per share below target.

Its release came after Amvescap posted profits, before tax and goodwill, up 48 per cent in the first quarter of 2004. However, there was disappointment it has not made progress on the settlement of an investigation by the New York attorney general over the market timing abuse scandal. Mr Brady said he expected a settlement by the end of June but admitted the uncertainty had damaged sales and was a factor in the $1.5bn net outflow of funds

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