Modernising costs hit M&G results

A big investment in modernising systems has depressed profits at M&G, the investment management group, in a year when a majority of its funds underperformed. Underlying profits before tax for the year to 30 September were flat at pounds 61m, but fell to pounds 52m after exceptional costs.

The group, however, stuck to its policy of sustained dividend payments with a 6 per cent rise in the final payment to 18p.

More than half of M&G's dozens of funds are now in the bottom half of the investment performance rankings, as the company said the UK stockmarket did not suit its investment approach, especially in small and medium sized firms and special situations.

The results were distorted by pounds 18.8m exceptional costs, of which nearly pounds 15m related to a rationalisation and modernisation of the group's business processing systems. The overall programme is expected to last nearly three years and cost pounds 20m.

"This has been a year in which we have invested for the future, we are convinced the industry has excellent long-term prospects," said David Morgan, group managing director.

Net assets per share, an indication of the financial strength of the group, increased by 12 per cent to 241p.

Most of the 17 per cent increase in funds under management to pounds 13.8bn was due to asset appreciation. Revenue was up slightly to pounds 78m, driven largely by fees on funds under management. Adminstration expenses rose because of the need to bring investment salaries into line with market levels.