Perpetual profit falls on Pendal takeover costs as CEO Rob Adams takes on more work

Perpetual CEO Rob Adams will take on more work as the funds manager struggles to deliver on its $2.5bn Pendal takeover promises as profit drops.

Funds management firm Perpetual has reported a 42 per cent drop in annual profit, due to costs associated with its $2.5bn takeover of rival Pendal Group, and saddled its boss with more work.

Net profit fell to $59m for the year ended June 30 from $101.2m a year earlier. However, underlying profit rose 10 per cent to $163.2m as operating revenue soared 32 per cent to $1.01bn. That was just shy of the $1.03bn predicted by the market.

The company will pay a final dividend of 65c a share, 40 per cent franked, taking the total for the year to $1.55 a share.

Perpetual, like many of its active rivals, is struggling to attract new dollars and retain existing investors because of a growing trend towards lower-cost and often better-performing index funds.

The Pendal takeover, which was completed in January, was sold as a way of achieving scale but so far the company has experienced worse than expected funds outflows, reporting a drop of $5.1bn in July even as 79 per cent of its funds outperformed their benchmarks on a three-year basis.

While chief executive Rob Adams must be feeling the pressure to prove the benefits of the Pendal takeover, his board has just expanded his remit under a new restructure announced on Thursday, which will see him with a dual role as CEO of asset management, without an increase in pay.

Instead of three regional divisions, there will now be one global head of investment strategy who will report to Mr Adams and not have a role on the executive committee, with Amanda Gillespie and Adam Quaife also no longer part of an executive team that will be four people smaller.

“The changes we are making enable us to have an improved focus on our global asset management business and successful execution of strategy, while creating a simplified Perpetual Group leadership structure focused on driving future growth across all our businesses,” said Mr Adams in a statement.

J O Hambro boss Alexandra Altinger will leave the company.

Last month, Perpetual announced FUM net outflows of $2.3bn for J O Hambro, $0.3bn for Barrow Hanley, $1.2bn for Pendal, $0.4bn for Perpetual, $0.1bn for Trillium, and $0.9bn at TSW.

For the year ended June 30, Perpetual reported a 29 per cent increase in underlying profit at its asset management division of $132.7m because of the purchase of Pendal units such as J O Hambro, Pendal Regnan and TSW.

The corporate trust division’s underlying profit rose 12 per cent to $81.6m on growth across all three of its business lines.

Its wealth management unit (formerly Perpetual Private) saw a 6 per cent rise in underlying profit to $47m, driven by a strong performance from Fordham and its specialist risk advisory business, Priority Life.

Perpetual shares fell 2.3 per cent to $24.34 during trade on Thursday.