Not for release, publication or distribution in whole or in part in or into the United States, Australia, Canada or Japan.
New Star Asset Management Group PLC
Trading update
New Star Asset Management Group PLC ("New Star") today issues the following trading update in advance of publication on 20 March 2007 of its preliminary results for the year ended 31 December 2007.
Trading conditions for New Star in the second half of 2007 were mixed. New Star's European mutual funds and some of its UK mutual funds were badly positioned for the combination of the credit squeeze and high natural resource prices experienced in the second half of 2007. As a consequence, the majority of New Star's UK and European equity mutual funds significantly underperformed their peers. In addition, New Star suffered from the sharp downturn in the UK commercial property market. By contrast, New Star's US institutional performance was significantly ahead of its benchmark and a number of its specialist funds, fund of funds and hedge fund products performed well.
As a consequence of outflows of assets in the second half and market movements, the Group's assets under management decreased to £23.1 billion at 31 December 2007, down 6.5% from £24.7 billion at 30 June 2007.
Assets under management
At 31 December 2006
£ billionAt 30 June 2007
£ billion At 31 December 2007
£ billion Increase/decrease
over the year
UK mutual funds
9.7
11.1
10.6
9.3%
International mutual funds
1.1
2.0
1.0
(9.1%)
Institutional
8.1
9.0
8.7
7.4%
Alternative assets
1.2
1.5
1.6
33.3%
Other
1.0
1.1
1.2
20.0%
Total
21.1
24.7
23.1
9.5%
Net outflows of assets in the second half year were £0.5 billion compared to inflows of £2.3 billion in the first half. These included net inflows into UK mutual funds of £331 million and net outflows from international mutual funds of £838 million.
New incentive scheme
During 2008 it is anticipated that a new employee incentive scheme will be introduced. This is primarily intended to replace the lock-in applicable to shares owned by employees that expires during 2009.
Outlook
Notwithstanding the difficult second half, operating profits* for 2007 will be in line with expectations.
We are not optimistic about the outlook for 2008. As a result both of depressed market conditions and the poor relative investment performance of some of our principal products in 2007, there may be further net outflows of assets, at least during the first half of 2008. As a consequence, operating profits* are expected to be significantly lower in 2008 than in 2007.
Given the current uncertainties faced by New Star and the desire to maintain its financial position, the Board has decided to reduce the 2007 dividend from the level of 9p per share forecast in April 2007. Accordingly, the Board anticipates paying a final dividend for the year ended 31 December 2007 of 1p per share, making a total dividend for the year of 5p per share.
*Profit before taxation, interest, exceptional items and amortisation of intangibles.
Commenting today, John Duffield, chairman of New Star, said:
"We have a number of issues to address in the current year. We are committed to doing whatever is necessary to address the problems we have experienced with investment performance in certain of our products."
Enquiries:
Citigate Dewe Rogerson
Anthony Carlisle (office) 020 7638 9571
(mobile) 07973 611 888
This announcement is not for publication or distribution to persons in the United States of America, its territories or possessions or to any US person (within the meaning of Regulation S of the US Securities Act of 1933, as amended). Neither this announcement nor any copy of it may be taken or transmitted into Australia, Canada or Japan or to Canadian persons or to any securities analyst or other person in any of those jurisdictions. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian or Japanese securities law. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about and observe any such restrictions.
Forward-looking statements
This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and businesses of New Star Asset Management Group PLC. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast.
