EDINBURGH investment house Ivory & Sime can look ahead with confidence after a 39% rise in funds under management to a record #4300m in the year to end-April. The full benefit of this #1200m increase should be reflected in profits for this financial year.
Although funds were boosted by last year's acquisitions of Clan Asset Management and Baronsmead, managing director Colin Hook attributed about two-thirds of the increase to investment performance and clients' decisions to put up more money. Ivory & Sime's strategy of focusing on better margin business appears to be paying dividends.
Ivory & Sime shares, which have climbed steadily from 230p in the last few months, yesterday added another 3p to 273p in the wake of the results. The picture is very different from that a year ago, when the shares tumbled 5% to 199p after the investment house announced a 4.2% fall in profits.
Annual pre-tax profits rose 10% to #6.53m this time round on the back of a strong second-half performance.
Ivory & Sime is increasing its total dividend by a greater-than-expected 10% to 8.25p, with a final payout of 5.75p.
About half-a-dozen clients put up more money, two or three entrusting Ivory & Sime with substantial sums.
Mr Hook said: ``That obviously, from our point of view, is quite an encouraging feature. It is rather like a vote of confidence.''
These new funds came from the UK, Continental Europe and the US, and were mainly channelled into Ivory & Sime's discretionary pension and overseas funds, which are managed separately from the core investment trusts.
The investment house now plans to concentrate on strengthening its private client and US operations. More money will be spent on marketing. It also plans to expand its investment trust business, which accounts for about half of the group.
Ivory & Sime - which recently launched the only trust dedicated to the Alternative Investment Market through its new Baronsmead development capital operation - is looking to fill other gaps in its investment trust portfolio with launches.
Where rival investment trusts' shares stand at a substantial discount, it will consider bids.
Meanwhile, it believes its flagship British Assets Trust and the sister Investors Capital Trust have turned the corner.
But one analyst yesterday took issue with this view and with some of his peers, venturing that Ivory & Sime was vulnerable to the predatory attentions of Edinburgh Fund Managers.
Ivory & Sime lost out to arch-rival Edinburgh in the battle to acquire Dunedin Fund Managers earlier this year. It ultimately bid about #20m less than Edinburgh for Dunedin, which was hit by bitter management clashes and a string of key resignations last year.
Mr Hook said: ``We were obviously slightly disappointed but by no means despondent. For us, there were rather more important highlights in the year.''
The fact that the price went substantially higher meant Edinburgh had identified greater value, which was ``perfectly understandable,'' said Mr Hook.
Ivory & Sime's next year-end will fall either in the run-up to or in the wake of a General Election.
Although admitting the investment house could not be certain of what would happen to the UK stock market around election time, Mr Hook said: ``We believe there are grounds for looking forward with some optimism.''
He attributed the recent rise in Ivory & Sime's share price to increasing City expectations in the run-up to yesterday's results.
He claimed there were a number of institutional buyers of the stock but few sellers. Analysts yesterday moved to upgrade their current year profit forecasts to about #7.3m pre-tax, ahead of a briefing from Ivory & Sime in London today.
On a prospective price-earnings multiple of about 18, close to the highly-rated Perpetual, a fair amount of further recovery in Ivory & Sime's fortunes is probably priced in. Most analysts seem to consider this justified.
Turnover from existing operations fell from #16.0m to #14.7m. But overall revenues were up, with acquisitions contributing #2.63m of turnover.
FACT FILE
Final 1996 1995
Turnover #17.3m #16.0m
Pre-tax profit #6.53m #5.93m
EPS 13.71p 12.95p
Dividend 8.25p 7.50p
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