Aberdeen prepares to slash dividend

James Mawson,Jason Niss
Sunday 01 December 2002 01:00

Aberdeen Asset Management, the fund manager at the centre of the row over split capital trusts, is to cut its dividend tomorrow in an attempt to preserve cash.

The troubled fund manager's chief executive, Martin Gilbert, will be able to announce a profit of £40m for the year to 30 September, down nearly 20 per cent. With that he is likely to cut the final dividend sharply from the 5.75p it paid last year.

The group has debts of £240m and needs to conserve cash to avoid breaching its covenants. However, plans to sell its property side through either a flotation or a trade sale should deal with the cash problem.

Aberdeen is the largest player in the split capital trust area. Many splits have gone bust or have had to be restructured in recent months, leading to accusations of mis-selling and collusion between fund managers.

The scandal may hasten a shake-up of the £50bn investment trust sector.

JP Morgan Fleming Asset Management, one of the largest investment trust managers with 21 trusts, is working on plans to force consolidation within the industry.

Craig Clelan, vice-president of specialist pooled funds at JP Morgan Fleming, said there were potentially 150 trusts, out of a total of 374 in the industry, that could be wound up or merged with other, bigger trusts. Mr Clelan added that he believed the boards of these trusts, in many cases acting in their own self-interest, were blocking reform.

The industry trade body, the Association of Investment Trust Companies, has accepted the need for consolidation. In February Daniel Godfrey, director-general of the AITC, said: "The industry and many shareholders would benefit if we were to see more agreed mergers."

Aberdeen is also believed to be in favour of amalgamating some trusts.

The AITC and the super-regulator, the Financial Services Authority, are looking at concerns within the industry about the role of directors. The AITC is to finish its consultation about corporate governance recommendations this month.

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