AGF Management Sees Lower Profit as Higher Overhead Expenses Erode Margins: AGF Management Profit Slips, Misses Forecasts

Article excerpt

TORONTO - AGF Management Ltd. (TSX:AGF.B) reported a 30 per cent decline in fourth quarter profit as the value of its portfolio shrank over stock market uncertainty, a trend it doesn't expect to stabilize any time soon.

The Toronto-based mutual fund company's shares sank 5.5 per cent or 93 cents to $15.96 Wednesday on the Toronto Stock Exchange after it said higher expenses and lower investment returns hit the bottom line.

"It will continue to be a challenging market, but we're not going to make any excuses for our performance, we can and will do better," Blake Goldring, chairman and CEO of AGF said on a conference call with investors Wednesday.

AGF reported net income for the three months ended Nov. 30 dropped to $21.9 million from $30.9 million, or 23 cents per share compared to 34 cents per share a year earlier.

Earnings per share missed analysts estimates by about seven cents.

"Volatility in the second half of 2011 shook investor confidence and investors pulled money from equity funds and moved into money markets and cash, onto the sidelines," Goldring said.

The downward trend in the stock market not only hurts the value of AGF's investments, but when investors pull their money out, it reduces revenue earned on fees that would be paid by its clients.

A lower interest rate and lower loan balances also hit the company's net interest income, which fell about 11 per cent from the quarter a year before.

AGF's overall revenue grew to $157.8 million from $155.9 million.

But it also booked one-time costs associated with the integration of Acuity Funds Ltd. acquired last year and saw an increase in net redemptions in its retail business.

Goldring said global financial challenges, such as debt crises in Europe and the United States, continue to rock stock markets but added that he is seeing signs of a recovery on North American markets as risk tolerance improves along with a rosier employment picture and housing outlook. …

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