ANNUAL REPORT AND FINANCIAL STATEMENTS 2011 | 03
Welcome from the Chairman
2011 was a significant year for F&C with changes in the composition of the Board and important progress made in developing its strategy. A review of business flows, investment performance and operational developments, is provided in the Chief Executive’s Report.
Five new Directors joined the Board, three as a result of the changes which arose from the Extraordinary General Meeting in February 2011, which was covered in last year’s Annual Report, and the subsequent appointment of two additional Directors. In the second half of 2011, Keith Jones and Keith Percy were appointed as Independent Non-Executive Directors. Both Mr Jones and Mr Percy bring considerable industry expertise to the Board as former chief executive officers of major asset management firms. Additional information on the recently appointed and incumbent Directors is included on page 22.
The Board has been conducting a comprehensive review of strategy during the year. As I wrote in last year’s report, F&C has a great many strengths, including a strong brand, competitive investment performance across a range of products and high quality professionals, but these have not been reflected in its financial performance in recent years. The goal of the review is therefore to enhance shareholder value.
In setting the parameters for the revised strategy the Board agreed three key objectives:
• Generate above-average shareholder returns with below-average volatility
• Achieve competitive scale in areas of strategic focus
• Create a stable environment for long-term growth
The first phase of this work completed in October and focused on addressing certain corporate issues, as well as the growth strategy for our institutional business. In particular, we announced steps to improve profitability through an additional £21.2 million expense reduction programme over and above the £12.0 million target set-out at the start of the year from the operational outsourcing project and related restructuring. These combined £33.2 million cost reductions, which will substantially be achieved by the end of this year and fully achieved during 2013, will enhance underlying earnings and the level of dividend
cover and provide the Group with the ability to accelerate the retirement of its long-term debt. Improving the Group’s financial position will better enable F&C to implement its revenue growth plans, with consistent investment in the resources required to support growth.
Our revised institutional strategy is to focus on those areas where F&C has existing scale and marketable track records in products that meet the needs of insurance companies and pension schemes. Both of these large client groups are increasingly focused on immunising liabilities, with fixed income as the core asset class in their portfolios. F&C has significant scale in fixed income, good performance track records and has gathered strong consultant support for its expertise in Liability Driven Investment.
The second phase of the strategic review, which will cover the growth strategies for our retail, wholesale, investment trust and real-estate businesses, is ongoing. We expect to conclude this work in May.
Results and Dividend
The underlying profit after tax was £28.4 million compared to £28.8 million in 2010. This represents underlying earnings per share of 5.5 pence for 2011 (2010: 5.7 pence).
On a statutory reporting basis, which includes exceptional and non-cash items, the Group made a profit after tax of £2.6 million, compared to a loss after tax of £13.4 million in 2010. This represents a basic loss per share of 0.1 pence compared to a loss of 3.3 pence in 2010.
The Board is recommending an unchanged final dividend of 2.0 pence per share, payable on 25 May 2012 to shareholders on the register at 30 March 2012. This brings full-year dividends to 3.0 pence per share (2010: 3.0 pence per share).
Retirement of Alain Grisay
In October 2011 the Group announced that Alain Grisay would be retiring in the latter part of 2012 and would therefore step down as Chief Executive and from the Board at the conclusion of the Annual General Meeting in May. As part of a gradual and orderly handover of responsibilities, I have temporarily taken on the position of Executive Chairman. This is an interim measure while the Group completes its strategic review and implements the related actions. The Board
2011 was a significant year for F&C with changes in the composition of the Board and important progress made in developing its strategy.
Edward Bramson Executive Chairman
15 March 2012
expects that the roles of Chairman and Chief Executive will be separated again by the time of the 2013 Annual General Meeting.
As a result of the handover, and to ensure accountability for delivery of goals for each business line, we have clarified senior management responsibilities. Richard Wilson is now head of our Investment and Institutional Business and Charlie Porter is head of our Retail and Wholesale Business (which incorporates investment trusts). Responsibility for F&C REIT, our real-estate business, and F&C Portugal remains unchanged.
On behalf of the Board and management team, I would like to thank Alain Grisay for the huge contribution he has made to F&C over many years, the last six of which he has served as Chief Executive. His notable achievements include successfully leading F&C through a period of ownership uncertainty to an independent stock market listing and the acquisitions of Thames River and REIT Asset Management. Alain leaves F&C with our very best wishes for the future.
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