Pinnacle Investment Management said in a filing to the ASX on Thursday that it is cautiously optimistic about the second half of fiscal 2024. However, the company indicated that various events during the initial half of the fiscal year had collectively exerted a “broadly offsetting impact” on overall profitability.
Among these are the combined effects of a $3.4 million OpenInvest writedown, after the wealth platform undertook a funding round in which Pinnacle did not participate. Following this funding round, the current valuation of Pinnacle’s investment in OpenInvest is $240,000.
Also hurting Pinnacle’s bottom line are lower principal investments (PI) returns net of interest expense, planned higher employee costs, and other “short-term factors”.
“It is too early in the process of finalisation of half-year results to have any certainty of their outcome and it would therefore be imprudent at this time to comment in any detail on the likely net result,” Pinnacle added.
The firm is expected to discuss the complete picture of its half-year results with investors on 2 February.
Pinnacle did, however, disclose that it has entered the second half of the year “fully resourced” and with the capability to take advantage of any improvement in market conditions.
“We also expect that opening FUM as at 1 January 2024 will be higher than the average during 1H FY24 and this will contribute to the ‘skew’ in our results, which tends to see profitability higher in the second half of the financial year than the first, likely being quite pronounced again this financial year,” the firm said.
Pinnacle also shared on Thursday that nine affiliates have crystallised performance fees for the six months ended 31 December, totalling some $41.9 million at 100 per cent gross in aggregate. The firm’s net share of these performance fees is in the order of $12.3 million.
“Within the affiliates, there are now 25 diverse strategies with the potential to produce significant performance fees each year, and 18 of those had the potential to crystallise in the first half,” Pinnacle said, adding that of those, 13 strategies delivered this half-year.
“In the second half, all 25 strategies have the potential to crystallise performance fees,” Pinnacle said.
Moreover, the firm shared that PI totalled approximately $136 million as at 31 December 2023, compared to $164 million at 31 December a year earlier. It is expected that the return on PI, prior to interest expense, for 1H FY24 will be in the order of positive $3.7 million (1H FY23 $3.8 million).
Pinnacle’s share price ended up some 2.5 per cent on Thursday following the ASX filing.
