The full picture of Cofunds set-up costs, first-year losses and scale of the problems it faces were ...
The full picture of Cofunds set-up costs, first-year losses and scale of the problems it faces were revealed in financial statements published last week.
The statements posted at Companies House in London reveals Cofunds posted pre-tax losses of just over £32m in the year ended 31 December 2001 and warns of more to follow.
The parent companies of Cofunds, Prudential, Commerzbank, Zurich and Gartmore's parent Nationwide Financial Services, have undertaken to continue backing the business but auditors PriceWaterhouseCoopers acknowledge there is continued 'fundamental uncertainty' about the viability of the business.
The directors' comment in the financial statements reads: 'The directors draw your attention to the losses incurred during the year which, as anticipated, have continued to occur beyond the accounting date.
'The ultimate parent shareholders have subscribed to an additional £46.7m of funding by way of equity capital to the Cofunds Group since the accounting date, and furthermore the directors have received assurances from shareholders of the ultimate parent of the company of their present intention to provide funding to enable Cofunds Limited to continue in business as a going concern.'
The losses in 2001 equate to a total loss on ordinary activities of £25m, after tax, up from a £13m loss in 2000. The business was founded in March 2000 and acquired M&G's fund administration business for an undisclosed sum in 2001.
Cofunds generated a turnover of £641,000 over the course of 2001, compared to operating expenses of £33.4m, contributing to an operating loss of £32.7m.
Clive Boothman, chief executive of Cofunds, said as the statements cover the group's first full-year of operations these include start-up costs, which, now completed, have reduced 2002 operating costs significantly.
Boothman said Cofunds' cash burn rate is declining on a monthly basis as the gap between costs and revenues narrows. The Cofunds revenue stream consists of a 0.25% charge on funds under management, taken from the managers' annual management fee.
The group told Investment Week in August it needed to reach £6bn in assets under management to achieve profitability, when at the time it had just over £500m in assets.
Based on the 0.25% charge, with £6bn under management Cofunds would generate income of £15m. This is less than half its stated operating expenses for 2001.
Costs have already been reduced this year, with the workforce cut back by some 52 staff. The group still has around 200 employees and a wage bill in 2001 of £3.6m.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till