Perpetual profit crashes following KKR deal falling through

In its results for the first six months to 31 December, the firm said its net profit after tax (NPAT) was $12 million compared to $34.5 million in the first half of FY2023–24.

The firm said the statutory results were impacted by a $25.5 million impairment in asset management as well as one-off costs associated with the KKR scheme and simplification program.

Announced in May 2024, the KKR deal was set to see the private equity giant acquire Perpetual’s wealth management and corporate trust business. However, the deal collapsed earlier this month over tax concerns, with fears it wouldn’t serve shareholders’ best interests. While no break fee was triggered, KKR has left the door open to pursue further damages.

In progressing the strategic review and separation program, Perpetual said on Thursday it had incurred transaction and separation costs of $42.6 million during the 2024 calendar year.

Nevertheless, the firm is committed to progressing its business separation and simplification program, it noted.

Speaking during a result’s webinar on Thursday morning, Reilly said: “While this is not where I expected to be, we have a course of action ahead which I believe is the right course of action for shareholders.

“The board has decided to still progress the sale of the wealth management business and we will continue the program to separate the business.”

Reilly confirmed that Perpetual, over the past few years, had several parties express interest in its wealth business, but it was not able to engage in these due to its obligations to KKR.

“There is significant interest in the business,” he said on Thursday. “It’s a high-quality business, one of the leading wealth businesses in Australia.

“We’re not going to go for the fastest transaction, we’re going to go for the best.”

Results in focus

Revenue in the asset management division was $455 million, up 4 per cent, and total assets under management were $230 billion. It said it saw $3.4 billion in net outflows in global, international and US equity strategies which were “greater than anticipated” but offset by net inflows into Pendal and Perpetual.

Strategic priorities going forward for asset management are to confirm the future operating model, rightsize the cost base, reset the distribution strategy and stabilise JO Hambro.

Wealth management funds under advice were $20.6 billion, up 8 per cent from a year ago, driven by positive equity markets. Perpetual said the firm is still progressing with the separation and proposed sale of the wealth management division despite the termination of the KKR deal.

Its simplification program is on track to deliver cost reductions of $70–80 million by FY26–27 via a simplified, focused asset management business and leaner central functions. So far, it has delivered $10 million in annualised cost reductions in the first half of FY24–25 with $30 million savings forecast for the full financial year.

On the results, Reilly added: “Despite some challenges, our three high-quality businesses have delivered solid growth during the half with opportunity for future organic growth across a number of segments.

“My conviction in the quality, performance and growth opportunities across all of our businesses has only increased since I joined Perpetual. I am confident in our strategic direction and believe that focused execution of the business separation, our revised simplification program and the refreshed operating model for asset management will deliver value for shareholders.”

The board determined to pay an interim dividend of $0.61 unfranked.