New Star to cut back on glitz

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The ubiquitous adverts that made some of New Star’s best fund managers household names may become a thing of the past.

John Duffield, chairman, said on Friday that he was cutting his advertising budget in half after the group unveiled a 70 per cent drop in first-half profits.

Shares in New Star fell 14.5 per cent as Mr Duffield said the first half had been “difficult” amid “the toughest stock market conditions for more than five years”.

He said: “We do not expect conditions to improve significantly in the immediate future.”

The group, which Mr Duffield founded in 2000 after he left rival fund manager Jupiter, has become one of the UK’s best-known managers of retail funds, largely on the back of high-profile advertising campaigns. On Friday, Mr Duffield said he had initiated a tough programme to slash costs, including marketing.

This follows sustained outflows of just more than £1bn from funds causing New Star’s assets under management to fall to £19.8bn in June from a peak of £25bn the year before. The group said assets had fallen further to £19.1bn this week as investors continued to flee volatile markets.

The rate of outflows from international retail funds has slowed, but outflows from UK funds have increased, New Star said, echoing figures from the UK’s Investment Management Association showing a net outflow of £491m from retail funds in July.

New Star’s net revenues were down 16 per cent to £72.8m in the first half.

Pre-tax profits fell from £34.9m last year to £10.3m in June. Earnings per share fell from 9.23p to 3.5p. Mr Duffield said borrowings had been cut to about £236m and free cash flow would be spent reducing debt further. The interim dividend would fall to 1p, down from 4p last June.

The shares, which have fallen steadily from just more than 420p a year ago, fell 17.75p on Friday to 104.25p, offsetting a 15 per cent rise the day before.

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