Press Release: GAM Holding AG 2015 underlying pre-tax profit CHF 197.8 million

01.03.16 07:00
Dow Jones Newswires

Press Release: GAM Holding AG 2015 underlying pre-tax profit CHF 197.8 million

GAM Holding AG / GAM Holding AG 2015 underlying pre-tax profit CHF 197.8
million . Processed and transmitted by NASDAQ OMX Corporate Solutions.
The issuer is solely responsible for the content of this announcement.

-- Underlying pre-tax profit of CHF 197.8 million, down 9%

-- IFRS net profit of CHF 138.3 million, down 18% after a reorganisation
charge and other non-recurring and acquisition-related items

-- Diluted underlying earnings per share of CHF 0.98 (CHF 1.06 in 2014)

-- Net fee and commission income down 1% to CHF 600.6 million, of which net
performance fees up 26% to CHF 82.8 million

-- Expenses down 1% to CHF 403.5 million, with both personnel and general
expenses lower

-- Group assets under management of CHF 119.0 billion as at 31 December 2015
(CHF 123.2 billion as at 31 December 2014)

-- Investment management with CHF 0.3 billion net inflows; assets under
management down 5% to CHF 72.3 billion, reflecting negative market and
foreign exchange movements

-- Private labelling with CHF 2.7 billion net inflows; assets under
management down 1% to CHF 46.7 billion, reflecting sale of the Cayman

-- Proposed dividend of CHF 0.65 per share, unchanged from previous year

-- Larry Hatheway and Tim Dana to join the Group Management Board, subject
to customary regulatory approval; Andrew Hanges to step down from the
Group Management Board

Group CEO Alexander S. Friedman said: "One year ago we set out our
strategic agenda for the coming years. Since then we have focused on
disciplined execution, addressing three critical areas: our brand, our
operating model and our growth strategy. While the transition is not yet
complete, we have made good progress, even against a challenging market

The work we undertook in 2015 is not yet fully visible in our financial
results. This is not a surprise - we always knew our plans would take a
few years to be realised in their entirety. The transition we embarked
on is proceeding on schedule and will give GAM a solid foundation for
future profitable growth. Even in difficult times, our business is
resilient and well positioned to take advantage of the opportunities we
see in our industry over the coming years. Following the strategic steps
initiated in 2015, we are focused on executing against our plans, and we
have a number of exciting product launches in the pipeline.

2016 has begun with renewed turbulence in the financial markets.
Diverging monetary policy against the backdrop of weak global growth
along with concerns over the economic slowdown in China and the
trajectory of oil prices are keeping markets volatile. Furthermore,
worries about broader financial stress at a time when central banks and
regulators may be limited in their tools to respond are affecting
investor sentiment and flows. Investing will, no doubt, be challenging.
As high-conviction active asset managers with a strong range of absolute
return strategies, the environment ahead should provide opportunities
for us to outperform, but we will not be immune to negative market

2015 Group results

Net fee and commission income fell 1% to CHF 600.6 million. The 5%
decline in the net management fees and commissions to CHF 517.8 million
(mainly as a result of a decline in the management fee margin in
investment management to 64.6 basis points driven by the mix of net
flows across products and client segments) was largely offset by a 26%
increase in net performance fees to CHF 82.8 million.

Net other income, which includes net interest income, the impact of
foreign exchange movements, gains and losses on seed capital investments
and hedging as well as fund-related fees and service charges, fell to
CHF 0.7 million from CHF 14.7 million. Losses from foreign exchange
movements (compared with gains in the previous year), lower net gains on
seed capital and negative interest on the Group's Swiss franc cash
deposits contributed to this decline.

Personnel expenses decreased 1% to CHF 290.0 million, with declines in
both fixed and variable compensation. The compensation ratio remained
largely unchanged at 48.3% (48.2% in 2014), demonstrating the alignment
between revenues and compensation structures.

General expenses decreased 1% to CHF 104.9 million, reflecting the
firm's cost discipline and a decline in IT costs.

The underlying pre-tax profit decreased 9% to CHF 197.8 million. While
costs were managed tightly and variable compensation reduced, the
decrease in net fee and commission income and net other income could not
be entirely offset by an equivalent reduction in expenses.

The underlying effective tax rate increased to 19.9% from 18.2%,
reflecting a shift in the geographic split of the Group's earnings.
Diluted underlying earnings per share were 8% lower at CHF 0.98,
benefiting from the reduction in the number of shares outstanding
through the Group's share buy-back programme.

The IFRS net profit of CHF 138.3 million, all attributable to the
shareholders of GAM Holding AG, was 18% lower than in 2014 as a result
of non-recurring and acquisition-related items. Non-recurring items led
to a net charge of CHF 6.2 million and included a net charge of CHF 9.5
million for the reorganisation of the business (mainly redundancy
payments over the course of 2016 net of a pension fund curtailment
credit) and CHF 1.2 million in deal and integration costs for corporate
transactions. These were partly offset by the CHF 4.5 million gain on
the sale of the Cayman fund administration business. Net charges for
acquisition-related items amounted to CHF 13.9 million and included an
adjustment to deferred consideration liabilities and the amortisation of
client relationships from previous acquisitions.

Investment management assets and flows

Assets under management movements (CHF bn)

Opening AuM Closing AuM
Capability 1 Jan 2015 Net flows Market/FX Acquisition 31 Dec 2015
Absolute return 22.2 2.1 -1.2 - 23.1
Fixed income 19.5 0.4 -1.8 0.5 18.6
Equity 13.8 -0.5 0.1 - 13.4
Alternatives 7.7 -1.6 -0.8 - 5.3
Multi asset 12.9 -0.1 -0.9 - 11.9
Total 76.1 0.3 -4.6 0.5 72.3

In investment management, assets declined by CHF 3.8 billion to CHF 72.3
billion. Net inflows of CHF 0.3 billion and assets of CHF 0.5 billion
acquired with the real estate debt business of Renshaw Bay were offset
by the negative impact from markets (CHF 2.4 billion) and foreign
exchange movements (CHF 2.2 billion, reflecting the strengthening of the
Swiss franc).

Net flows by capability

Investors added net CHF 2.1 billion to absolute return strategies in
2015. The unconstrained/absolute return bond strategy saw redemptions
from financial intermediaries following weak performance in the second
half of 2014 and 2015, but continued to win substantial inflows from
institutional investors thanks to its ten-year track record of capital
protection across market cycles. The JB Absolute Return Europe fund,
which takes long and short positions in equities and equity-related
securities of European companies, attracted strong inflows, as did the
GAM Star Global Rates fund.

In fixed income, the GAM Star Credit Opportunities fund, which
predominantly invests in investment grade debt or high-quality issuers,
attracted solid inflows, as did specialised products such as the GAM
Star MBS Total Return and GAM Star Cat Bond funds. These were moderated
by outflows in emerging market strategies, driven by investor sentiment.
Net inflows into fixed income strategies totalled CHF 0.4 billion in

The largest inflows into equity strategies came from the JB Japan fund
as strong performance helped drive client demand. The GAM Star
Continental European fund also saw solid inflows, while GAM Star China
posted outflows amid negative investor sentiment despite outperformance
versus benchmark. GAM Star US All Cap Equity, managed externally, also
saw outflows following a prolonged period of weak performance. Net
outflows from equity strategies totalled CHF 0.5 billion in 2015.

Overall net outflows in multi asset products were CHF 0.1 billion for
the year. Good net inflows into institutional relative return products
and mandates as well as risk rated solutions for financial advisers were
more than offset by redemptions in private client advisory and mandates
stemming from GAM's previous affiliation with UBS and Julius Baer as
well as in lower-margin institutional mandates.

Net outflows from alternatives amounted to CHF 1.6 billion, mainly
reflecting withdrawals from alternative risk premia mandates,
traditional funds of hedge funds and the JB Physical Gold Fund.

Net flows by client segment

Net inflows from institutional investors amounted to CHF 1.3 billion in
2015 as strong inflows in the first half of the year were partly offset
by redemptions and the loss of two alternative risk premia mandates in
the second half. Net outflows from private clients of CHF 1.1 billion
were mainly related to GAM's previous captive channels. Financial
intermediaries contributed CHF 0.1 billion to net inflows for the year
as redemptions in the fourth quarter almost offset solid inflows in the
first nine months.

Private labelling assets and flows

Assets under management movements (CHF bn)

Opening AuM Closing AuM
Fund domicile 1 Jan 2015 Net flows Market/FX Disposal 31 Dec 2015
Switzerland 35.4 -3.6 -0.4 - 31.4

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