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The market's sniffy reaction to yet another year of 20 per cent- plus earnings growth from Mercury Asset Management might seemchurlish. Having seen the shares rise from under pounds 9 last August to well over pounds 14, however, it would have been a flawless set of figures indeed not to have given the market an excuse to grab a bit of profit.

The 69.5p fall in the price to 1372p reflected less the headline profit figure, up 22 per cent to pounds 171.3m, than the rather clumsy hidden warning from chairman Hugh Stevenson that the good times could not be expected to roll for ever. It would have been rather harsh if the company had been punished for simply stating the obvious, but there were other worries tucked away in the figures.

Biggest of those was a 29 per cent jump in operating costs to pounds 220m, which for the first time represented a bigger rise than the 28 per cent increase in turnover from continuing activities. There were one-offs, such as the consolidation of the Australian subsidiary for the first time, but by far the largest part of the rise was accounted for by bonuses. The departure of senior fund manager John Richards this week underscored the difficulty of holding onto talented staff even if they are highly paid.

The cost base aside, there was plenty in MAM's figures to please. New business, the life blood of a fund manager, continued to flood in at an impressive lick, with the pounds 3.3bn attracted in the second half of the year matching the figure for the whole of the previous year. Overseas, MAM's Japanese operation looks promising, with the liberalisation of that previously closed market leading to 20 new pension fund accounts signed up.

On the basis of forecast profits of around pounds 190m, the shares trade on a prospective price/earnings ratio of 19. A forward dividend yield of almost 5 per cent provides some support, but after their strong run the shares are probably high enough for now.