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Perpetual shares rally on revenue boost

Nicki Bourlioufas  |  23 Feb 2017Text size  Decrease  Increase  |  

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Wealth manager Perpetual (ASX: PPT) has delivered solid first-half results, with statutory net profit after tax rising 2 per cent from a year earlier to $66 million, while revenue jumped 5 per cent to $252.4 million.

Investors welcomed the result by pushing shares in the company to a fresh year-high level on Thursday afternoon.

Perpetual's operating revenue rose 5 per cent to $252.4 million for the six months to 31 December 2016, while total expenses also rose 5 per cent to $160. 7 million.

The funds management arm, Perpetual Investments, posted a pre-tax profit increase of 3 per cent to $58.8 million, primarily due to stronger equity markets. Perpetual's funds management business accounts for around 64 per cent of the company's pre-tax profit.

Perpetual Private's profit before tax was $18.7 million, which was 9 per cent higher than a year earlier. This increase was driven by higher markets, investment outperformance, net inflows, and growth in new high net worth clients.

Perpetual's chief executive officer and managing director Geoff Lloyd said the company's strength and diversity had allowed the business to deliver a solid result for the first half and increase returns to shareholders.

"We continue to lead in our core businesses of Australian equities asset management, professional financial advice to high net worth clients, as well as debt markets and managed funds services," Lloyd said.

"We are pleased with progress on our new multi-asset offer, which has recently garnered a number of important asset consultant and researcher upgrades.

"In Perpetual Private, we are growing in our targeted high net worth segments, and Perpetual Corporate Trust's credentials in data and analytics have provided a platform to diversify into new and growing markets."

Perpetual said it had struck seven new retail distribution arrangements for its funds management business while also initiating four new funds, with more incubations to follow.

But at the same time, full-time employee numbers had dropped, down to 155 from 171 a year earlier, helping to keep expenses down in the funds management arm.

The company's Perpetual Private strategy remains on track to achieve growth in high net worth clients.

"Investment management for private clients and not-for-profits continues to perform well with net inflows of $200 million and our managed accounts service passing through $2 billion of funds under management during the half," said Lloyd.

"Our accountancy business Fordham continues to grow and is now a leading referral source of clients who are also seeking comprehensive financial advice."

But Lloyd said markets remaining challenging.

"We believe the external environment will remain challenging, globally and locally, with political and social change continuing to give rise to new pressures and opportunities for financial services providers and partners," he said.

Perpetual will pay a fully franked interim dividend of $1.30 per share, up 4 per cent on the $1.25 paid in the first half a year ago.

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Nicki Bourlioufas is a Morningstar contributor. This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind. Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of Morningstar as a result of using different assumptions and criteria.

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