Legg Mason reports 8.5 percent profit increase for quarter

Baltimore money manager posts $69 million in net income

May 03, 2011|By Hanah Cho, The Baltimore Sun

As Legg Mason Inc. reported Tuesday an 8.5 percent increase in quarterly profit, the Baltimore money manager said it doubled its quarterly dividend to 8 cents per share from a year ago to reflect the company's more solid financial position.

But shares lost $1.97, or 5.3 percent, to close Tuesday at $35.13.

Legg posted a net income of $69 million, or 45 cents per share, for the three months ending March 31. That's compared with a profit of $63.6 million, or 39 cents per share, in the corresponding period last year. The company's fiscal year runs from April 1 to March 31.

"The story is the progress we've made in fiscal year 2011 is formidable across all key metrics, one of which is generating earnings and cash, and the board thought, given our improved level of earnings, it was appropriate to increase the dividend commensurate with that," Legg Chairman and Chief Executive Officer Mark R. Fetting said in an interview.

For the past several years, Legg has been working to turn around its lackluster financial performance and reverse the tide of clients pulling billions of dollars from its mutual funds and other investments.

Part of that effort includes cost-saving measures announced a year ago, resulting in job cuts that will affect 350 employees, most of them in Owings Mills and Baltimore. Those efforts are expected to save the company up to $150 million by March 2012, meeting previously announced expectations, Fetting said Tuesday.

About 250 workers will be let go in July, with the rest to be laid off by January, the company said. When the job cuts are complete, Legg will close its Owings Mills office and about 100 employees there will move to the company's Harbor East headquarters.

Client outflows — the exit of investors' money that exceeds what they put in — continued in the fiscal fourth quarter but slowed to $8.7 billion, down from $16.7 billion in the previous quarter.

Clients pulled $6.7 billion from Legg's fixed-income funds, but it was the lowest amount of bond outflows since December 2007, the company said.

Investors took out $1.3 billion and $700 million from equity and money-market funds.

Fetting said clients invested more money than they took out in March, a positive trend. But, he said, "it's too soon to say it's a long-term trend."

"There's more work to be done to achieve that, which we're focused on," he added.

Stock market increases boosted Legg's assets under management, a key industry measure, to $677.6 billion, compared with $671.8 billion at the end of December.

Assets, however, were down 1 percent from $684 billion in the fiscal year-end last year.

Douglas Sipkin, an analyst at Ticonderoga Securities, wrote in a research note that the "flow story is getting better" and that restructuring efforts are improving earnings.

"But the revenue power of the company remains lackluster driven by [assets under management], which is actually down 1 percent year over year," Sipkin wrote.

Revenue for the quarter rose to $713.4 million, up from $671.4 million in the same period last year. But revenue was down from the previous quarter.

For the fiscal year, total revenue rose to $2.8 billion, up from $2.6 billion in the previous year.

Legg posted a fiscal-year net income of $253.9 million, or $1.63 per share, up from $204.4 million, or $1.32 per share, last year.

hanah.cho@baltsun.com

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