K2 Asset Management: Profit drops 85%

K2 Asset Management Limited (ASX: KAM) today reported a fall in profits by 85% to $2.1m. Not surprisingly, the share price got hammered, falling by 7.7%, and few hours of trading left in the day. The share price has fallen off the cliff by 54% in the last 12 months. (Maybe naming your company after a mountain is not such a good idea?)

Not surprisingly, the company won’t be paying a dividend this half (and its unlikely to pay one for the full year to June 2012 in my opinion). Net tangible assets per share has fallen from 11 cents to 4 cents.

Like other funds management companies, Platinum Asset Management Limited (ASX: PTM), Perpetual Limited (ASX: PPT), Treasury Group Limited (ASX: TRG), and BT Investment Management Limited (ASX: BTT), K2 has been hit by falling markets, with performance fees virtually zero compared to $25m in the prior corresponding period. Revenues fell to $7.2m in 2011 from $32.8m in the 1st half of 2010.

Unfortunately for K2, they still have to pay employees, rent and other administration costs whether they make a profit or not.

Only a solid climb (pun intended!) in the markets can bring K2 any respite.

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 Motley Fool contributor Mike King heaves a sigh of relief because he doesn’t own shares in K2 Asset Management. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool’s disclosure policy.


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