Narrow-moat fund manager Perpetual (ASX: PPT) reported statutory net profit of $140.2 million for fiscal 2018, up 2 per cent on last year.

Management also announced a final dividend of 140 cents a share for the second half, lifting the full-year dividend to $2.75 a share.

"In a challenging year for the financial advice industry, our strategy and differentiated approach have underpinned record inflows and 10 consecutive halves of positive net flows," says Perpetual's interim CEO, Chris Green.

calculator scrutiny fund names article Perpetual

Perpetual's balance sheet remains in good shape, says Gunasekera

He alludes to the fall-out from the Kenneth Hayne-led royal commission, which severely dented sentiment toward major banks and their in-house wealth management businesses.

Responding to management's suggestion this could swing in favour of the non-aligned fund manager, Morningstar equity analyst, Chanaka Gunasekera says: "it's hard to tell at the moment, when we really don't know what is going to come out in the final report".

The royal commission's final recommendations are due in February next year, along with results from the Productivity Commission inquiry into financial services.

Perpetual's investments division saw $2.5 billion of net outflows during the year, increasing from $900 million in outflows for fiscal 2017. These were largely driven by institutional redemptions from Perpetual's Australian equity funds, which comprise about 70 per cent of this business segment.

These were offset by its private wealth and corporate trust divisions, "which are doing well," says Gunasekera.

Perpetual Private's profit before tax was $46.1 million, 14 per cent higher than fiscal 2017.
Perpetual Corporate Trust's profit before tax was $42.6 million for the year ended 30 June, up 16 per cent over the same period last year.

Gunasekera anticipated the flat result overall, but anticipates further declines in Perpetual's investment division into fiscal 2019.

"Our view [is] that it's core investment division is suffering from the structural issues of industry super funds moving more asset management in-house, and a trend to more passive investment styles," he said last month, in response to Perpetual's fourth-quarter funds under management announcement.

Last month's result led to a slight reduction in fair value to $43.90 a share, from $45.50 previously.

Gunasekera says the company's balance sheet remains in good shape, with only 11 per cent gearing and a consistently low level of corporate debt.

He also notes Perpetual has maintained its 90 per cent dividend payout ratio and increased its dividend 4 per cent on last year, exceeding his expectations.

Perpetual's share price was trading at $46.03 at market close Thursday.

 

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Glenn Freeman is senior editor, Morningstar Australia

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