Perpetual delivers lift in FUA amid ‘more challenging market environment’

In its full-year results released to the ASX on Thursday, Perpetual reported a 10 per cent increase in underlying net profit after tax (UPAT) for the 2023 financial year to $163.2 million.

Statutory net profit after tax (NPAT) was 42 per cent lower than the previous financial year at $59 million. The firm said this was mostly due to transaction and integration costs related to its acquisition of Pendal which was completed in January.

Operating revenue rose by 32 per cent to $1.01 billion, reflecting the contribution of Pendal as well as growth in Perpetual’s corporate trust and wealth management businesses.

Within its asset management business, the firm reported a 29 per cent lift in underlying profit before tax (UPBT) to $132.7 million, mostly driven by contributions from J O Hambro Capital Management, Pendal Regnan, and TSW which it acquired as part of the Pendal transaction.

Additionally, revenue in the division was up 55 per cent on the previous financial year to $600.4 million. But Perpetual managing director and chief executive officer Rob Adams described the outcomes for the asset management business as “disappointing” in a statement accompanying the firm’s results.

“Volatile global equity markets and cautious investor sentiment towards equities resulted in disappointing results in revenue and underlying profit in our asset management business,” he said.

“However, this was partially offset by the strength of our diversified business with continued growth in our corporate trust and wealth management businesses, both of which benefited from their exposure to non-equity market linked revenues.”

Total AUM reached $212.1 billion, up from $90.4 billion a year earlier. When excluding Pendal’s opening AUM of $110.2 billion, AUM was up $11.5 billion on the back of strong investment performance, positive market movements, and positive foreign exchange rates movements.

This was partially offset by $8.1 billion of net outflows suffered during the 2023 financial year, which Perpetual attributed to a variety of factors including fund-specific underperformance and asset allocation shifts from equities to fixed income.

“Looking forward, with our strong relative investment performance, combined with our materially improved global distribution coverage, we remain confident of unlocking growth from our differentiated portfolio of boutique asset managers over time,” said Mr Adams.

“Whilst our net outflows for FY23 were disappointing, we continue to be encouraged by the trajectory of flows across several capabilities, including Barrow Hanley which improved its overall flow profile on the back of demand for its global and emerging markets strategies combined with a moderation in US equities outflows.”

The UPBT of the corporate trust business rose by 12 per cent to $81.6 million. Funds under administration lifted by 6 per cent to $1.16 trillion.

Meanwhile, Perpetual’s wealth management business delivered a UPBT of $47.0 million, up by 6 per cent, alongside a 6 per cent increase in funds under advice to $18.5 billion.

Mr Adams noted that the division had experienced a strong rebound in non-market linked revenues, with Fordham and the Priority Life business delivering double-digit revenue growth.

“Despite the more challenging market environment, we have been able to increase our funds under advice through both organic growth and the strong contributions from our acquired businesses,” he said.

The Perpetual chief also indicated that “strong progress” had been made in the integration of Pendal. As of the end of FY23, the firm had realised $29 million of the $80 million in run rate synergies targeted by January 2025 and expects to achieve at least $40 million by next January.

A final dividend of $0.65 per share was declared, resulting in a total dividend for the full year of $1.55 per share and representing a payout ratio of 78 per cent of UPAT for FY23.

Refreshed strategy

Additionally, Perpetual has unveiled a “refreshed strategy” focused on unlocking the growth potential across its businesses while simplifying the way the firm operates.

Subsequently, changes have been made to the firm’s group executive team along with a simplification to its asset management structure and leadership.

Perpetual’s current regional asset management businesses have come together to form one global division that will be led by the newly created role of chief executive, asset management. This role will be assumed by Mr Adams alongside his existing role of CEO.

Graham Kitchen, who serves as chairman of Trillium and Perpetual corporate entities in the UK, has temporarily assumed the role of global head of investment strategy as the firm searches for a permanent candidate. The role will have oversight of Perpetual’s global investment capability.

Amanda Gillespie will continue to lead asset management in Australia and Adam Quaife will continue to lead global distribution, with both moving from the group executive committee to become members of the global asset management leadership team.

The changes have also impacted Perpetual’s regional chief executive roles for Europe and UK (EUKA) and the Americas, leading to the departure of Alexandra Altinger and David Lane.

“The changes we are making enable us to have an improved focus on our global asset management business and successful execution of strategy, while creating a simplified Perpetual Group leadership structure focused on driving future growth across all our businesses,” Mr Adams said.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.