Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Perpetual Ltd (ASX:PPT, Financial) reported an underlying profit after tax of $206.1 million, up from $163.2 million last year.
- The integration of Pendal Group has progressed faster than expected, delivering over $80 million in annualized expense synergies ahead of the original target.
- Revenue increased to $1,335 billion, a 32% rise driven by the full-year contribution from Pendal and growth in corporate trust and wealth management.
- The company has launched new higher-margin products, including the Perpetual Strategic Capital Fund and the Regnan Global Mobility Logistics Fund.
- Perpetual Ltd (ASX:PPT) has a strong balance sheet with $221.3 million in cash and a gearing ratio of 28.2%, within the group's risk tolerance.
Negative Points
- The asset management division experienced greater-than-expected net outflows, leading to a significant item of $547 million and a statutory loss of $472.2 million for the year.
- Diluted earnings per share on UPAT decreased by 9% due to a higher average weighted number of shares following the Pendal acquisition.
- Net outflows of $18.4 billion were reported across the year, primarily from Hambro and TSW.
- The effective tax rate increased to 27.3%, up from 25.5% in the previous year, due to non-deductible expenses from the Pendal acquisition.
- The company faces uncertainty regarding the tax implications of the scheme of arrangement with KKR, which could impact net cash proceeds.
Q & A Highlights
Q: Can you provide an update on the ATO ruling and its expected timeline?
A: (Christopher Green, CFO) We are engaging productively with the tax office, which is aware of our timetable. We have provided a range today based on current engagement and advisor input. We will update the market as soon as we have more information.
Q: Were there any further earnout releases in the second half of the year?
A: (Christopher Green, CFO) No, there were no particularly meaningful earnout releases in the second half. The group result remained strong due to more investment income.
Q: What are your flow expectations for J O Hambro and TSW businesses in the near term?
A: (Robert Adams, CEO) We have seen a moderation of outflows and some bright signs. Hambro has improved performance in its global select strategy, and TSW has seen interest in new capabilities like its emerging market strategy.
Q: Can you provide an update on the US intermediary channel?
A: (Robert Adams, CEO) The unification of our mutual fund platforms has taken longer than expected but is now complete. Our US intermediary team is now taking key capabilities to market, and we are hopeful for opportunities.
Q: Can you clarify the cost savings from the simplification program?
A: (Christopher Green, CFO) The $7.5 million to $10 million in FY25 is on top of the Pendal synergies. The benefits will start to accrue in the second half, with full run-rate benefits from July 1.
Q: What is the plan for stranded group costs post-transaction?
A: (Christopher Green, CFO) We aim to remove most of the $50 million in stranded costs during the TSA period and have a cost program to take out an additional $25 million to $35 million.
Q: What is the contingency plan if the scheme with KKR does not proceed?
A: (Robert Adams, CEO) Our focus is on delivering the transaction, but we have contingency plans. We have been moving towards operational independence for our businesses and will continue to ensure value is recognized.
Q: How much of the $220 million cash on the balance sheet will stay with the asset management business?
A: (Christopher Green, CFO) The cash is largely attributable to the asset management business and will stay put. We aim to start the business with a strong balance sheet.
Q: Can you explain the net debt adjustments in the cash proceeds estimate?
A: (Christopher Green, CFO) The adjustments include customary net debt adjustments, working capital assumptions, and a capital contribution to ensure the asset management business starts with a strong balance sheet.
Q: What are the expected margins in the asset management business?
A: (Robert Adams, CEO) Margins have been stable due to the loss of large, low-margin mandates and success in higher-margin intermediary channels in Australia.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
