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Pendal says ‘not immune’ to rising geopolitical tensions and inflation-induced recessions

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The independent global investment manager has released its full-year results.

Pendal has reported a 17 per cent improvement in its underlying profit after tax to $194.2 million for the financial year ending 30 September.

The firm’s statutory net profit after tax fell 32 per cent to $112.8 million, which it said was primarily due to seed investment gains in 2021 which reversed as equity markets declined.

Operating revenue increased by 8 per cent to $629.7 million, reflecting the first full-year contribution from Thompson, Siegel and Walmsley (TSW), which Pendal acquired in 2021, while the firm’s operating margin increased one percentage point to 36 per cent.

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“The 2022 financial results reflected Pendal management team’s ability to respond swiftly to changing market conditions and to take tight control of costs. Also, our acquisition of TSW has delivered both financially and through improved diversification,” said Pendal chairman Deborah Page.

“Nevertheless, Pendal was not immune from the effects of rising geopolitical tensions and potential inflation-induced recessions during the year. Subsequently, investors remained cautious, cutting asset values and fund inflows worldwide.”

As flagged by Pendal last month, funds under management fell to $104.5 billion at the end of September, down 25 per cent on the prior year due to the impacts of a significantly weaker market environment and net outflows of $14.0 billion which adversely affected all regions.

The results come a day after Perpetual rejected an indicative takeover offer from a private equity consortium and reaffirmed its commitment to acquiring Pendal.

Perpetual entered into a binding scheme implementation deed with Pendal in August under which it intends to acquire 100 per cent of shares in the investment manager. 

The scheme consideration comprises one Perpetual share for every 7.5 Pendal shares plus $1.976 cash for every Pendal share, adjusted downwards for the financial FY22 dividend paid by Pendal. The firm declared a dividend of 3.5¢ per share in its full-year results.

“The proposed acquisition by Perpetual is expected to position the business to accelerate growth. Our shareholders can continue to benefit through the scrip component of the scheme consideration,” said Ms Page.

“While challenging trading conditions remains, we strongly believe that combining two of Australia’s largest ASX-listed asset managers makes strategic and financial sense.”

The takeover offer for Perpetual from a consortium comprising of BPEA Private Equity Fund VIII and Regal Partners Limited is conditional on the takeover of Pendal not proceeding.

The consortium said that it believes its offer to acquire 100 per cent of Perpetual’s shares on issue for $30.00 cash per share provides Perpetual and its shareholders with an outcome that is superior to the acquisition of Pendal.

“The terms of the proposed acquisition by Perpetual of Pendal were agreed some time ago and are not reflective of current market conditions and valuations of asset managers which have deteriorated since that time,” Regal Partners said in a statement.

“An acquisition of Pendal by Perpetual today would be at a lower value were it to reflect the movement in market conditions and valuations since the time of that agreement.”

Last month, IBISWorld industry analyst Disha Jeswanth suggested that Perpetual’s proposed acquisition of Pendal involves ‘significant’ risks.

Pendal says ‘not immune’ to rising geopolitical tensions and inflation-induced recessions

The independent global investment manager has released its full-year results.

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Jon Bragg

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.

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