Legg Mason Profit Rises

The fourth quarter shows a 50% continuing operations gain.
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Legg Mason (LM) - Get Report posted a 50% rise in continuing operations profit for its fourth quarter, the first full quarter following its acquisition of the Citigroup (C) - Get Report Asset Management unit.

The Baltimore-based asset manager made $152 million, or $1.09 a share, from continuing operations in the quarter ended March 31, up from the year-ago $86 million, or 80 cents a share. Revenue rose 53% from a year ago to $1.05 billion.

Cash income from operations was $1.35 a share, the company said. Analysts surveyed by Thomson Financial were looking for a $1.25-a-share profit on sales of $1.01 billion.

"We have made meaningful progress during the last three months in integrating the former CAM businesses -- assets, employees and systems -- into Legg Mason, and have begun the task of rationalizing the former CAM product line into one that reflects Legg Mason's longstanding focus on providing institutional quality investment products and client service," said CEO Chip Mason. "Our timetable to complete this integration appears to be on target with little if any slippage."

The operating income margin for the quarter decreased to 23% from 33%, primarily due to an increase in fund revenues resulting from the CAM and Permal acquisitions. A substantial portion of such revenue is passed through to third parties as distribution and servicing expense. During the quarter, the company also incurred $13.1 million in transaction-related compensation expense, including certain retention costs, which reduced diluted earnings per share by a nickel a share. The company said it expects that the completion of headcount reductions in the June 2006 quarter under the restructuring plan associated with the integration of CAM will generate meaningful aggregate quarterly savings.

At March 31, assets under management aggregated $867.6 billion, compared with $374.5 billion a year ago and $850.8 billion as of Dec. 31. The $16.8 billion increase in the last three months was attributable primarily to positive market returns. Net client inflows for the quarter were $1.6 billion, which reflects continuing net positive client cash flows of long-term assets at legacy managers and Permal, and approximately $11 billion of net outflows of liquidity assets.