Fund manager Analyst Investment Management swung sharply into the red in the half-year to 31st May 2010 as the termination of a key investment management agreement dealt a sharp blow to its performance. Turnover for the half year plunged by 73% to £20,496 as its important contract to manage the CF Analyst UK Fund was terminated. A 17% reduction in administrative expenses over the period to £40,372 wasn’t enough to overturn the decline in revenues and so the business recorded losses per share of 0.46p versus earnings of 0.16p in the corresponding previous period.

The group’s balance sheet continued to be in a healthy position at the half-year end with net cash of £0.43 million and tangible net assets of £0.44 million.

Operating highlights over the period included the appointment of two new investment managers who helped the group bring in £8.4 million in new funds, resulting in the group having £8.75 million in funds under management as at 31st May 2010. Should ongoing negotiations with several investors prove successful the business expects a similar inflow of funds to be secured. However, we should highlight that there have been sour developments during the period as well with the group parting company with two managers, one of whom is pursuing an unfair dismissal claim. In addition, the business disclosed that it had reported the termination of its investment agreement to the Financial Services Authority. Analyst Investment Management expects to disclose further details of the dispute soon.

The prevailing mid-price of 7.5p capitalises the company at £0.55 million. A key consideration for future trading will be the firm’s ability to boost its assets under management which will enable increased management fees to be earned and possibly performance linked payments to be generated. The company has stated that there is no more room for cost cuts and so any investment in the group is a straightforward play on its ability to attract more funds. Until we receive evidence of operational progress being made we would prefer to avoid the shares.