Perpetual Limited (ASX: PPT) shares fell more than 3% this morning following the release of the company’s FY19 results. Here’s what you need to know.
About Perpetual
Perpetual is a diversified financial services company that has been operating for more than 130 years. Perpetual has three business units: Perpetual Investments, Perpetual Private and Perpetual Corporate Trust.
The Numbers
Perpetual reported revenue of $514.1 million, down 4% from FY18, and a net profit after tax (NPAT) of $115.9 million, down 17%. NPAT was impacted by lower performance fees, net outflows and increased investment.
Perpetual Investments was the worst-performing segment with profit before tax (PBT) of $79.9 million, down 29% from FY18. Perpetual Private PBT declined by 11% to $41.2 million, while Perpetual Corporate Trust PBT was up 12% to $47.7 million.
Perpetual CEO and Managing Director Rob Adams said the acquisition of RFi Analytics was key to the Corporate Trust result.
“The acquisition of the RFi Analytics business in December last year was a key driver for the increase in our Debt Market Services revenue, providing further growth in our data management capabilities,” he said.
Dividends
Perpetual declared a final dividend of $1.25 per share to make a full-year, fully-franked dividend of $2.50 per share, down 9% from FY18. This full-year dividend represents a 100% payout ratio.
Analyst Estimates
Bloomberg NPAT estimates were $121.57 million versus the reported result of $115.9 million. While Perpetual fell short on NPAT estimates, the $1.25 final dividend was higher than the estimate of $1.199 per share.
What Is Restricting Growth?
Perpetual Investments funds under management (FUM) fell during FY19 from $30.8 billion to $27.1 billion, a decline of around 12%. According to Perpetual, this reflects a shift of larger superannuation funds to managing investments internally and changing asset allocation.
This net outflow offset elevated markets during the year. Perpetual also adopts a value investing style, and during FY19 growth shares once again outperformed value shares.
Are Perpetual Shares A Buy?
The reported FY19 results highlight some of the key risks for Perpetual moving forward. Perpetual Investments is the company’s largest segment so a trend toward institutional outflows may continue to hurt performance. With market valuations above historical norms, the value investing method it adopts may also limit outperformance.
Perpetual is a strong business but for now, I’d rather invest in one of the businesses mentioned below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
