Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Normalized NPAT increased to $59 million, showing significant growth compared to the prior period.
- Normalized EPS saw a strong rise, and the interim dividend increased by 60% to $0.08 per share, fully franked.
- FUM grew from $12.3 billion to $16.5 billion post-acquisition of Merricks Capital and Argyle.
- Strong revenue of $148.5 million, driven by nearly $60 million in performance fees.
- The company has a diversified and scalable platform with a growing investment team and capabilities.
Negative Points
- The integration of recent acquisitions like Merricks Capital and Argyle is still in early stages, posing potential integration risks.
- The timing of institutional mandates being awarded is uncertain and could be lumpy.
- Management fee margin saw a decline from 110 basis points to 104 basis points before the inclusion of Merricks and Argyle.
- Employee benefits expense was high at $46 million for the half, including both fixed and discretionary bonus costs.
- The company has a significant amount of intangible assets ($371 million), which could pose risks if the value of these assets declines.
Q & A Highlights
Q: Can you provide any thoughts on how the Board came to the $0.08 dividend?
A: The Board committed to paying a minimum of 50% of normalized profit after tax post the merger with VGI. With strong organic cash generation, a robust balance sheet, and excess franking credits, we increased the interim dividend by 60%. This leaves room for the Board to reconsider the final dividend in the second half of the year. - Brendan O'Connor, CEO
Q: Are you still confident about the net flow outlook over the next couple of years?
A: Yes, we remain confident. The timing of institutional mandates may be lumpy, but our focus is on prosecuting these opportunities well. There is no diminished confidence in maintaining positive net flows. - Brendan O'Connor, CEO
Q: Do you have capacity for further transactions later this year?
A: Yes, the prospect of further acquisitions remains real. We will take a disciplined approach to ensure any transaction is accretive to RPL shareholders. We are well-prepared for further acquisitions while integrating current ones. - Brendan O'Connor, CEO
Q: What can we expect the average management fee to be once you've got full allocation from Merricks?
A: Excluding Merricks, the management fee margin should rebound to around 110 basis points. With Merricks, the overall fee take will be accretive to RPL's management fee margin going forward. - Brendan O'Connor, CEO
Q: What was the contribution of the $3 million to $4 million of expense savings in the first half?
A: We realized around $1.5 million to $2 million in the first half and are on track to achieve the additional $1.5 million to $2 million in the second half. - Brendan O'Connor, CEO
Q: How far are the VG1 funds from reaching high watermark?
A: VG1 is roughly 10% away from high watermarks, and RG8 is about 2% to 3% away. We expect to see performance fee generating capability over the next 12 months. - Brendan O'Connor, CEO
Q: Can you provide a breakdown of the components of other income across the half?
A: Other income of $28.4 million includes contributions from the Small Companies Fund, Australian Long Short Fund, VG1, RG8, and Taurus Funds Management. About $12 million of this is realized from seed investments and cash distributions. - Ian Cameron, CFO
Q: How is the integration of Merricks Capital tracking?
A: The integration is progressing well. Adrian Redlich is now leading Regal's income strategies. The team has moved into new offices, allowing for better collaboration. No new product initiatives to announce at this stage. - Brendan O'Connor, CEO
Q: Can you talk about the facilities and logistics integration?
A: We have secured Level 46 of the Gateway Building in Sydney, allowing us to co-locate all Sydney staff by mid-next year. This will rationalize leases and provide cultural benefits. - Brendan O'Connor, CEO
Q: Can you discuss the product pipeline beyond Merricks?
A: We are launching a Cayman version of the Partners Fund next month, which is getting significant interest from offshore allocators. The Partners Fund has shown strong returns and provides access to Regal's best strategies. - Brendan O'Connor, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
