‘Larger than anticipated’ outflows see Perpetual lose $472m

Perpetual has announced a statutory loss after tax of $472.2 million for the full year ended June.

In an ASX announcement on Thursday, it confirmed the $547 million pre-tax impairment due to net outflows, which it flagged earlier this week, weighed on results.

This included net outflows of $8 billion from J O Hambro’s UK Dynamic and Global and International Select strategies and $3 billion from TSW’s International Equities strategy.

In the full-year results, underlying profit after tax (UPAT) was $206.1 million, up 26 per cent on the prior corresponding period, while operating revenue rose to $1.3 billion, up 32 per cent on FY22–23.

The board also announced a final dividend of $0.53 per share, 50 per cent franked.

According to outgoing Perpetual chief executive Rob Adams, who is set to hand over the reins to Bernard Reilly in September, the positive impact of the incorporation of Pendal into the asset management business was largely overshadowed by outflows.

“In asset management, while we have seen some of the positive impact of the incorporation of Pendal Group into our business, our performance in FY24 was impacted by larger-than-anticipated net outflows, which was clearly disappointing,” Adams said.

However, supported by improvement in equity markets and robust investment performance across many of Perpetual’s boutique teams, the firm’s asset management unit saw total assets under management rise to $215 billion over the year.

Asset management revenue was $887.6 million, marking a 48 per cent increase on the prior corresponding period.

Some 66 per cent of strategies outperformed benchmark over the three-year period to 30 June 2024, Adams said.

“Solid” client interest in global and emerging market and fixed income strategies at Barrow Hanley also saw net inflows of $3.4 billion into those capabilities.

“In Australia, we saw positive momentum in net flows, driven by Perpetual’s Australian credit and fixed income capabilities and improving net flows in Australian Equities. Pendal was impacted by small institutional client losses and a super fund client merger,” Adams said.

He flagged $3 billion in new institutional client wins expected to fund this quarter and additional wins across various equity strategies and boutiques expected to fund in the first two quarters of the new financial year.

Looking at wealth management, the CEO described “strong organic growth”, particularly in its accounting practice Fordham and in non-market revenue.

Wealth management delivered underlying profit before tax (UPBT) of $54 million, up 15 per cent, driven by continued growth across all business segments, ongoing contributions from financial planning boutique Jacaranda in the pre-retiree segment and a strong performance from Fordham.

The corporate trust reported UPBT of $85 million, up 4 per cent, while funds under administration were around $1.2 trillion, also up 4 per cent.

Update on KKR transaction

Perpetual confirmed estimated net cash proceeds from the transaction of its wealth management business and corporate trust are expected to be in the range of $8.38 to $9.82 per share.

A transition services agreement that will be in place with KKR following completion is expected to cover a material portion of stranded costs over an 18-month period (with two six-month extensions available) from completion.

Estimated stranded costs from the transaction are expected to be approximately $75 million per annum, before tax.

Approximately $50 million per annum of these costs will be covered by the agreement.

It also announced “orderly changes” to the board in anticipation of completing the transaction, with chairman Tony D’Aloisio set to depart in early 2025. He has served as chairman since 2017.

Following D’Aloisio’s retirement from the board, Gregory Cooper, who was named deputy chairman in May 2024, will assume the role of chairman.

Independent non-executive directors Ian Hammond and Nancy Fox AM will also retire at the annual general meeting in October, in accordance with Perpetual’s board rotation policy.