Perpetual profit crashes, advice revenue drops

Perpetual recorded a net profit after tax of $29.2 million for the first half of the year, close to half (43 per cent less) of the $51.6 million it produced in 1H20. The company had felt the effects of $2.5 billion in net outflows from its Australian asset management business, continuing on from $1.1 billion flowing out in the prior half. 

Group earnings before interest, tax depreciation and amortisation (EBITDA) had also fallen by 46 per cent to $24 million for the first half.

Perpetual’s underlying profit after tax (UPAT) came to $52.6 million, an 11 per cent drop on the prior corresponding period. But the result was also a 33 per cent rise from the previous half, driven by the various segments and the acquisitions of US groups Barrow Hanley and Trillium.

Perpetual’s newly formed international asset management business, which included the freshly bought US companies, fuelled a 10 per cent rise in the group’s operating revenue during the first half, to $280.6 million. 

Perpetual chief executive and managing director Rob Adams commented the group has made progress in its strategy, which included expanding its reach in the US. The company is betting on the momentum of the ESG market to boost its flows over time, as it has integrated ESG specialist Trillium. 

“Our two newly formed asset management divisions, Perpetual Asset Management Australia and Perpetual Asset Management International delivered improved investment performance, materially benefitting form the current shift towards value stocks that began in late 2020,” Mr Adams said. 

“Improved performance across both Perpetual and Barrow Hanley’s equities teams augurs well for improvement in our net flows into the future, further aided by the build-out of our US distribution and recently reshaped Australian distribution team.”

The Australian asset management segment produced $79.1 million in revenue during the half, down by 16 per cent year-on-year, while the new international business generated $38.3 million.

Perpetual Asset Management Australia also copped its UPAT being halved year-on-year, to $18.3 million. 

The Australian segment closed the half-year with $22.7 billion in assets under management, while the international segment held $66.5 billion, after $700 million in net ouflows.

Although “net flows for the half were disappointing”, the CEO expressed optimism for the second half. 

“While uncertainty persists in the global economy due to COVID-19, investor confidence is improving and market conditions have recently accelerated a shift to both value investing and the ever-increasing focus on ESG factors from asset owners across channels and geographies,” Mr Adams said.

“Each of our operating divisions are well-placed to deliver for our clients through investment in new products and innovative solutions while driving performance from our existing capabilities.”

The advisory division, Perpetual Private, saw its revenue slip by 5 per cent to $89.2 million, while its EBITDA descended by 14 per cent, to $23 million. The segment’s UPAT had also deteriorated by 19 per cent to $15.3 million.

Lower equity markets and fiduciary income fees had contributed to the result, although it was partly offset by positive net flows of $400 million.

Meanwhile corporate trustee, custodian and digital solution provider Perpetual Corporate Trust produced a positive result, with its underlying profit rising by 7 per cent to $31.2 million, while its earnings also increased by 7 per cent to $36.3 million.

The board declared a fully franked interim dividend of 84 cents per share, representing a payout ratio of 90 per cent.