Investment Column: Bramson's review casts a cloud over F&C

Lamprell; IP Group

Edited,Nikhil Kumar
Wednesday 04 May 2011 00:00

Our view: Hold

Share price: 78.8p (-0.75p)

It's been a rocky few months for shareholders and clients of F&C Asset Management. In February, the activist investor Sherborne won its long and fractious battle to oust F&C's previous chairman, Nick MacAndrew, and install Sherborne's founder, Edward Bramson, to head the board.

So it is to F&C's credit that it was able to overcome the loss of a few institutional mandates to announce an increase in assets under management in yesterday's trading statement. Net inflows, excluding insurance funds, were £195m in the first three months of the year, with gross new institutional business at £1.1bn.

The pipeline of mandates won but not funded increased to £1.7bn from £1.5bn the previous quarter.

What's more, the group boosted sales of more profitable offshore open-ended funds, improving the mix of its revenues. But, of course, F&C's own turbulence wasn't the only factor that could have discouraged investors.

The first quarter featured the Japan earthquake and fears over European sovereign debt that took the edge off many investors' appetite for risk.

Overall, it was a creditable performance that showed F&C maintaining the momentum it picked up last year as it started attracting net inflows of funds after years of outflows.

Mr Bramson may well have got his timing right in staging his boardroom coup just as the company was showing signs of life. However, he has imposed a review of F&C's strategy without giving much detail on what is actually under review.

Small shareholders gave Mr Bramson a rough ride at yesterday's annual general meeting and managed to extract a few morsels of information. He has already had one-on-one meetings with more than 100 people across the business and the review should be over by the end of the summer, he revealed.

In terms of valuation, F&C trades on a price-earnings ratio of about 10 times Peel Hunt's forecasts for 2011, a discount to the wider sector.

Given the the firm's continued growth during its tricky period it might be tempting to buy in. However, we think Mr Bramson's review leaves uncertainty hanging over the stock.


Our view: Buy

Share price: 362.8p (-8.4p)

The oil and gas services group Lamprell provided evidence of the recovery in its end markets yesterday when it announced it had secured rig upgrade and refurbishment contracts worth about $57m (£35m) in the first four months of the year.

As Evolution Securities soon highlighted, rig refurbishment – the company's "bread and butter" – usually boasts higher margins than new-build projects, which should please investors.

Moreover, the run-rate implied by the contract awards fits in with Evolution's forecasts for a strong performance from all units in 2012.

The bears might highlight that Lamprell has been trading higher in recent months. After falling back at the end of last year, it has been climbing steadily since late February, so much so that it is now more than 20 per cent ahead of where it was at the end of that month.

But we think the rally is well deserved and, given the news on contracts, is likely to persist for now.

IP Group

Our view: Hold

Share price: 50.25p (-1.62p)

IP looks to create value by helping universities to commercialise their best ideas. Although its share price fell back after it issued an interim management statement yesterday, the company met analyst expectations, with the fair value of its investments rising from £110m at the end of the year to £115.4m last week, mainly down to a financing at Oxford Nanopore Technologies.

The group's cash pile has fallen from £21.5m to £18m over the same period following further investments.

Its chief executive Alan Aubrey said the first four months of the year had IP's portfolio companies announce a number of "significant findings and commercial developments".

But as Numis analyst Charles Weston pointed out, much of the news in the release was already known, though the update on the European approval for one of Revolymer's key products was new.

The results suggest everything is moving along smoothly, yet the shares are up almost 80 per cent since October and this strength suggests the stock may tread water for a while.

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