UPDATE 1-Fund manager AGF profit below estimates; signs of improvement

Wed Sep 25, 2013 11:25am EDT

By Andrea Hopkins

TORONTO, Sept 25 (Reuters) - AGF Management Ltd notched a smaller-than-expected third-quarter profit on Wednesday, but its stock was little changed on signs the worst may be over for the Canadian fund manager after its recent struggles.

Toronto-based AGF said net income from continuing operations was C$10.1 million ($9.8 million), or 11 Canadian cents per share, compared with a loss of C$19.3 million, or 20 Canadian cents per share, a year earlier.

Analysts had expected profit of 13 Canadian cents per share, according to Thomson Reuters I/B/E/S.

The company took a one-time charge in the year-ago quarter. Excluding that, the adjusted year-ago profit was 11 Canadian cents a share, matching the recent quarter.

While assets under management fell 11.7 percent to C$36.4 billion, high net worth assets under management - a coveted market segment - rose 9 percent to C$3.7 billion from the same period in 2012.

Retail redemptions, which have plagued the mutual fund industry for the last five years as investors flee volatility in the financial market, eased in the quarter, down 15.8 percent from the second quarter and 11.2 percent lower than a year earlier, AGF said.

Gross sales also suggested an improving investment climate, up 36.2 percent from 2012 levels.

AGF shares were little changed following the results, rising 1 Canadian cent to C$12.39 in Toronto.

"Despite the fact the headline looked weak relative to expectations, the underlying operating fundamentals are actually improving ... and on balance, I think the results were good," said Shubha Khan, an analyst at National Bank Financial.

The company held the dividend steady at 27 Canadian cents per share in the quarter, and said it had repurchased C$9.8 million in shares in the three months ended Aug. 31.

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.

AGF Chief Executive Blake Goldring said in a statement the company remained focused on strategic priorities.

"With C$360.0 million in cash, our balance sheet remains strong. We remain well positioned to take advantage of the improving economic climate and demand for global mandates," Goldring said.

Earlier in September, Goldring told Reuters he is always looking to grow and hopes to acquire sales teams and assets from weaker rivals as the industry regains momentum.

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