Perpetual profit sunk by $1.5bn outflows

The financial services provider posted a net profit after tax of $51.6 million for the six months leading up to December (1H20), down by 14 per cent year on year.
Perpetual’s operating revenue was flat, at $253.5 million for the half year – it had risen by $1.2 million.

The main drivers of revenue, the value of FUM in the Investments business and funds under advice (FUA) in Perpetual Private, were both pulled up as their primary influence, the level of the Australian equity market, rose.

At the end of the half, Perpetual Investments’ FUM and Private’s FUA were 66 per cent and 58 per cent exposed to equities, respectively.

But the group’s revenue was dragged by lower levels of FUM, with net outflows of $1.5 billion within Perpetual Investments, while it earned lower performance fees. There was $2.6 billion in outflows from equities and other, offset by $1.1 billion coming in for cash and fixed income.

The company noted that the bulk of the outflows came from the institutional and intermediary channels pulling out of Australian equities. In total, there was $2.5 billion in outflows from Aussie equities.

Perpetual Investments closed the half on $26.3 billion in FUM.

Performance fees in the first half generated $0.5 million, plummeting by 62 per cent from the year before and 74 per cent lower than the prior half.

Perpetual chief executive and managing director Rob Adams said that during the first half, regulatory, macro and geopolitical influences rocked the financial services industry, impacting the asset management and advice segments.

Revenue for the investment business had fallen by 11 per cent to $94.5 million for the half, while EBITDA was down 18 per cent to $42.3 million. The segment’s profit before tax was $37.2 million, a fifth lower than it had been a year before.

Mr Adams remains optimistic, however, pointing to the group’s recent $54 million acquisition of a US ESG specialist.

With the purchase, the company is looking to expand its business to the states, having hired Henderson’s US distribution head to lead its American build-out.

This has followed Perpetual’s new global head of distribution, Adam Quaife, commencing with the group in December.

“Our acquisition of Trillium Asset Management will enable us to meet the evolving expectations of our stakeholders as the ESG revolution continues with demand for investors providing both positive returns and positive long-term ESG impact,” Mr Adams said.

The advice and trustee service provider Perpetual Private generated a profit before tax of $17.4 million, down by 23 per cent while its EBITDA dropped by 9 per cent to $26.4 million.

Its closing FUA, however, at $15.2 billion was 11 per cent higher than the year before. It had seen $100 million in net inflows over the half.

Perpetual had completed its acquisition of Melbourne risk advisory specialist Priority Life during the half, growing its adviser numbers in the Private segment by 24 per cent.

“Perpetual Private has delivered 13 consecutive halves of positive flows, along with continued client growth within the high-net-worth segment despite the dislocation in the broader advice industry,” Mr Adams said.

Meanwhile, the Corporate Trust business had the strongest improvement, with its profit before tax rising by 23.5 per cent to $27.5 million and its EBITDA rocketing by 27 per cent to $33.7 million. Its revenue for the half was 13 per cent higher than the year before at $60.8 million.

Total expenses in the half had also risen by 4 per cent year on year to $173.8 million, comprising further remediation and increased investment in strategic initiatives.

The dividend for shareholders, fully franked, was $1.05 per share, down by 16 per cent.