UPDATE 1-Fund manager AGF profit below estimates, hurt by redemptions

Wed Jan 29, 2014 11:10am EST
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(Adds restructuring charge, dividend, analyst comment, share price)

By Andrea Hopkins

TORONTO Jan 29 (Reuters) - AGF Management Ltd reported a smaller-than-expected fourth-quarter profit on Wednesday, sending its shares lower in early trade, as the redemption of a single legacy account helped trim assets under management by 12.1 percent.

The Canadian fund manager, one of the nation's largest independents, said net income from continuing operations was C$7.1 million ($6.4 million), or 8 Canadian cents per share, in the period ended Nov. 30, compared with C$13.0 million, or 14 Canadian cents per share, a year earlier.

The results included C$3.6 million in restructuring charges. Excluding the charge, core earnings were 11 Canadian cents a share, compared with 16 cents a share in the year-ago quarter.

Analysts had expected profit of 12 Canadian cents per share, according to Thomson Reuters I/B/E/S, and the earnings miss sent the firm's shares down 6 percent to C$11.64 in mid-morning trade on the Toronto Stock Exchange.

While the profit was lower than estimated, Barclays analyst John Aiken said he was focusing on the sustainability of the dividend, which was unchanged at 27 Canadian cents a share in the quarter.

"We continue to believe that AGF's dividend is undervalued and its 8.7 percent yield is quite compelling, given very little reason for AGF to make a cut," Aiken said in a research note. He added that AGF's free cash flow was C$26 million in the quarter, above its C$24 million dividend payment.

Concern that AGF might have to cut its dividend has faded as the industry comes out of the long slump that followed the 2008 financial crisis.   Continued...