Janus Capital Group Inc.’s first- quarter preliminary earnings dropped 90 percent and fell short of analysts’ estimates as stock-market declines reduced clients’ assets and company fees for managing investments.
Net income declined to $2.7 million, or 2 cents a share, from $37.4 million, or 23 cents, a year earlier, the Denver-based company said in a statement today. The result didn’t include the effect of goodwill and intangible asset impairment charges totaling $900 million to $1 billion.
“They have been aggressive in terms of cutting people and expenses, but it’s not going to be a pretty quarter,” D.J. Neiman, an analyst with William Blair & Co. in Chicago, said about Janus in an interview before results were released. Neiman, who doesn’t own Janus stock, expected the company to earn 9 cents a share. He rates the company “market perform.”
World stock markets plunged 45 percent in the past year, lowering fees earned by money managers. Stock funds accounted for 91 percent of Janus’s assets as of Dec. 31. Rival companies Invesco Ltd. in Atlanta, Baltimore-based T. Rowe Price Group Inc. and New York’s BlackRock Inc. reported lower net income in the first quarter.
The impairment charges would reduce earnings by $5.74 to $6.37 a share. The writedowns are related to the buyout of Stillwell Financial Inc., Janus’s founder, in 2001. Final results will be released in a regulatory filing before May 11.
The average profit estimate for Janus of 14 analysts surveyed by Bloomberg was 6 cents a share.
Expense Reduction Revenue declined 39 percent to $170.3 million, in line with the drop in investment-management fees. Expenses fell 29 percent to $135.9 million because of a 32 percent reduction in employee compensation. Janus said in the fourth quarter it would cut 115 jobs, or 9 percent of staff.
Janus’s credit rating was lowered to junk by Standard & Poor’s in February after assets the company manages for investors fell 40 percent in 2008. Janus was downgraded to BB+, the first level below investment grade, from BBB-.
Janus announced results before the start of regular U.S. trading. It rose 24 cents, or 2.8 percent, to $8.79 yesterday in New York Stock Market composite trading. The stock has declined 64 percent in the past year, compared with the 42 percent drop by the 15-company Standard & Poor’s Supercomposite Asset Management & Custody Banks Index.
