Impax: solid FY24 results, triggers to reignite growth becoming visible
After a tough two years for sustainable funds, active funds, and for Impax, there are pending triggers for a return to net inflows.
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My Equity Development research note was published earlier this week covering Impax Asset Management’s FY24 results. Video summary and executive summary below.
Video Summary
Executive Summary
AUM was down a touch by 0.5% in FY24 (1 Oct 23 - 30 Sep 24) to £37.2bn. Net outflows totalled £5.8bn, largely offset by a positive investment performance of +£5.3bn and a contribution of +£0.3bn from the acquisition of fixed-income specialist Absalon Capital Management in Q4.
With average AUM also slightly down, revenue fell 4.7% to £170.1m. Adjusted operating costs were firmly under control and decreased by 2% from £120.3m to £117.4m, helped also by Impax’s incentive-based remuneration model. Adjusted operating profit fell 9.3% to £52.7m, a still-solid operating margin of 31.0% (FY23: 32.6%) and slightly higher than forecast (£52.2m).
Impax generated £49.2m of cash from operations (FY23: £36.7m) with a strong balance sheet and robust cash reserves of £90.8m (FY23: £87.7m), despite paying £36m in dividends. It has no debt. The full-year dividend is unchanged at 27.6p, a yield of 8.6% on the prior closing share price.
Triggers for a jump in flows
Over the last two years or so, since the end of the bull market in late-21/early-22 (which saw Impax scale at a rapid rate), Impax’s AUM has been mostly range-bound with swings up and down, sometimes driven by market movements, sometimes by large inflows or outflows. A combination of factors drove these moves, as illustrated in the chart below.
Looking forward, we think an upwards breakout of this range will likely be driven by:
Interest rate falls (increasing demand for equities, and especially smaller cap equities - the bulk of Impax’s portfolios),
A resurgence of US industrials (significant to Impax) under a Trump presidency,
Renewed interest in active management, as clients recognise the risks of over-concentration in mag-7 stocks, and the opportunities outside of the mag-7 for quality stock-pickers, and
Renewed interest in sustainable investing as managers who jumped on the ‘ESG bandwagon’ fall by the wayside, leaving the highest-credibility managers to thrive.
Full research note available here. You can also watch watch management’s presentation to investors here.
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Disclosure: At the time of writing, Paul Bryant was a shareholder of Impax Asset Management and covered Impax as an analyst on behalf of Equity Development Limited. Read Equity Development’s research on Impax here. And please read this link for the terms and conditions of reading Equity Development’s research.