Perpetual boss Rob Adams must stem fund outflow

Incoming Perpetual boss Rob Adams will step into a business that is under pressure to stem the tide of outflows.

Perpetual CEO Rob Adams.

Incoming Perpetual boss Rob Adams will next month step into a business that is under mounting pressure to stem the tide of outflows at a time of increased regulatory uncertainty for the wealth industry.

Perpetual yesterday posted a meagre 2 per cent lift in net profit for the 12 months to June 30, to $140.2 million, as growth in new business in its advice and trustee services units was offset by net outflows in its flagship division.

Perpetual Investments saw outflows pick up pace in the second half, dragging funds under management down 2 per cent to $30.8 billion. Net outflows of $2.5bn for the year were mainly due to the institutional side pulling money out, but the master trust and retail segments also experienced net outflows, on a smaller scale. Outflows in the institutional channels were primarily in Australian equities and partially offset by inflows into cash and fixed income.

In a warning to investors, Perpetual said the outflows “represent future pressure on revenue”. The wealth manager earns most of its revenue from fees charged on assets under management, advice or administration. Operating revenue rose 4 per cent to $533.7m in the 2018 financial year.

The money bleeding out of its funds also contributed to the “below plan” outcome for the year, Perpetual said. Management had been targeting a net profit of $143m but fell short by $2.8bn.

Perpetual’s funds under management $ bn

Interim CEO Chris Green admitted market conditions had been challenging for Perpetual Investments, but said it was investing for the future. “We have expanded into new products with the launch of our Ethical SRI Credit Fund, and our Global Share Fund received a ‘recommended’ rating from Lonsec,” he said.

The rating upgrade would assist future flows. “We’re also happy with the performance in the global fund, so overall we remain committed to that strategy. The phrase we use is ‘good things take time to build’ and we put the global strategy into that. The activity is all building momentum in that business. Would we like more FUM? Yes we would, and the rating will help that.”

Mr Green said he had been watching the Hayne royal commission closely to identify opportunities for the business.

The results were the first reported by Perpetual since former CEO Geoff Lloyd departed in June. Mr Lloyd, who stepped down after five years in the top job and was recently tapped to head up NAB’s wealth business, MLC, is credited with staging a turnaround at Perpetual that saw its share price rocket 91 per cent while he was in charge. Mr Adams, meanwhile, will take on the CEO role as the industry is in a state of flux and the share price has dropped 15 per cent in the past six months.

While Perpetual Investments came under pressure, its wealth advice business and trustee business delivered double-digital profit growth.

Perpetual Private grew profit before tax 14 per cent to $46.1m, as funds under administration rose 5 per cent to $14.1bn. Perpetual Corporate Trust posted profit growth of 16 per cent to $42.6m.

This helped push Perpetual’s shares 3.5 per cent higher yesterday to $46.03 at the close.