GAM Holding AG's shares fell sharply Dec. 13 after it issued a profit warning and announced plans to restructure its business.
The Swiss asset manager's shares were trading at roughly 24% lower around 12 p.m. Zurich time after it said it plans to consolidate its investment teams in London, Zurich and New York, as well as its European equities team through 2019. The company also plans to return to offering global strategic bond offerings, to streamline its operations and support functions and to review and reprioritize its projects.
The plan is expected to lead to a decline of at least CHF40 million in fixed staff costs and general expenses by 2019-end. It would also entail a 10% reduction in the group's workforce, including job cuts in its portfolio management teams, subject to regulatory and legal approvals.
GAM also said it expects full-year 2018 IFRS net losses of approximately CHF925 million, mainly driven by an CHF885 million expected goodwill impairment charge, a CHF62 million expected impairment charge in the second half over Cantab Capital Partners' investment management and client contracts and a one-off CHF30 million charge in relation to its restructuring.
The company noted that the impairments would not affect its tangible equity or cash position.
The group's AUM have already fallen to CHF139.1 billion as of Nov. 30 from CHF146.1 billion as of Sept. 30. In the in-between period, net outflows totaled CHF4.2 billion in investment management.
Additionally, the company will not pay dividends in respect of 2018 and review its dividend policy for 2019 onward to target a minimum payout ratio of 50% of its underlying net profit.
"We have taken the difficult decision to propose the suspension of the 2018 dividend in order to accelerate the pace of our capital rebuild program," Chairman Hugh Scott-Barrett said.
The number of GAM's board members would also be reduced to seven from nine. Larry Hatheway and Tim Dana are stepping down from the board by 2018-end, but would retain their respective positions of group head of GAM Investment Solutions and group head of corporate development, and would still be part of the group's senior management team.