Perpetual has reported an underlying profit after tax of $67.0 million for the six months ended 31 December 2022, representing a fall of 15 per cent on the same period a year earlier.
In its first financial results since the acquisition of Pendal was finalised, Perpetual attributed the drop in profit to the decline in average equity markets and net fund outflows, an increased level of investment in growth areas across the business, and inflationary pressures.
Operating revenue increased by 1 per cent to $388.3 million. Net profit after tax (NPAT), including significant items relating to transaction costs for the Pendal acquisition, dropped by 55 per cent to $26.8 million.
Perpetual’s total assets under management (AUM) increased by 4 per cent to $93.7 billion, driven by strong investment performance and a rebound in equity markets.
“Our first half financial performance was solid in the context of a challenging period for asset managers globally,” commented Perpetual chief executive officer and managing director Rob Adams.
“The group’s underlying profit result for the period reflects the varying level of equity market exposure within our business divisions. Underpinned by strong execution, our unique combination of businesses is providing earnings resilience and enabling investment in our growth programs.”
The underlying profit before tax (UPBT) for Perpetual Private was down 8 per cent to $22.1 million, driven by lower average equity markets and continued investment in business growth. The division had $17.9 billion in funds under advice, down from $19.0 billion at the end of 1H22.
“Perpetual Private (PP) saw continued client growth as client contact and marketing events returned to pre-COVID-19 levels,” said Mr Adams.
“PP delivered positive net flows for the 19th consecutive half, while the strong performance of the Fordham business partially offset the impact of lower average equity markets on market-related revenue.”
Perpetual Asset Management Australia (PAMA) delivered an UPBT of $23.4 million for the half, 11 per cent lower than the first half of the previous financial year, primarily driven by lower average equity markets.
PAMA’s AUM sat at $22.1 billion at the end of 2022, down from $25.6 billion at the end of 2021, while average AUM was $22 billion during the half compared to $25.2 billion in 1H22.
“While the market environment impacted overall AUM in PAMA compared with 1H22, our investment teams continued to deliver excellent investment performance for our clients, with 92 per cent of funds outperforming their benchmark over three years,” said Mr Adams.
Meanwhile, Perpetual Asset Management International (PAMI) recorded a UPBT of $12.7 million for the half, driven by lower average equity markets, net outflows and continued investment in distribution.
This division’s AUM was $71.6 billion at 31 December, down from $77.2 billion a year earlier, while average AUM was 6 per cent lower to $71.1 billion.
“In the context of difficult global equity markets relative to the same period in FY22, PAMI continued to execute on our long-term strategy to grow our global asset management business,” said Mr Adams.
Perpetual Corporate Trust’s UPBT was up 12 per cent to $41.7 million, with a 15 per cent increase in funds under administration to $1.14 trillion.
Regarding the acquisition of Pendal, Perpetual noted that the combined group had $202 billion in AUM as at the end of 2022 with “a global footprint, a diverse portfolio of asset classes, and built upon a model which leverages the advantages of a boutique backed by institutional grade infrastructure”.
“Our global leadership team and dedicated integration office has been in place since day one post-completion and is fully focused on implementing an operating model that will ensure seamless client continuity and sensible, informed rationalisation across resources, product, and cost efficiencies to unlock synergies and drive long-term growth,” said Mr Adams.
Perpetual also reaffirmed its target to achieve $60 million in pre-tax synergies by the end of January 2025 and said that it expects to realise approximately half of this target in the first 12 months of ownership.
Integration costs are expected to be $110 million, most of which will be incurred over the next 18 months.
The firm’s board has determined to pay a partially franked (40 per cent) dividend of 55 cents per share for the second quarter, bringing total dividends for the half to 90 cents per share.
The second quarter dividend represents a payout ratio of 80 per cent of UPAT and is paid from the combined earnings of Perpetual and Pendal for the quarter.
“While the macroeconomic and geopolitical conditions continue to pose challenges for the global financial services industry, the outlook for Perpetual remains positive,” said Mr Adams.
“As a larger, more diversified business, we now have significant scale, particularly in global distribution and ESG investing, and a truly global presence, which will enable us to better navigate the challenges in our chosen markets and drive our future growth.”
According to Mr Adams, Perpetual has started the second half well following the completion of the Pendal acquisition, with “growing positive momentum” across all of its divisions.
“Our new executive team are fully focused on delivering the expected benefits of the newly combined group and we are excited about the future growth opportunities those benefits will present to our clients, our people, and our shareholders,” he concluded.
