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Pendal Group share price crashes 13% lower on weak half year result

The worst performer on the S&P/ASX 200 index on Thursday has been the Pendal Group Ltd (ASX: PDL) share price.

The asset manager’s shares are currently down 12% to $8.13, but were as much as 13% lower at one stage today.

Why has the Pendal Group share price been hammered?

This morning Pendal Group, formerly known as BT Investment Management, released its interim result. As you might have guessed from the share price decline, its result was very disappointing.

According to the release, in the first half Pendal Group posted a cash net profit after tax of $84.5 million, down 26% on the prior corresponding period. Cash earnings per share came in at 26.6 cents, which was down 27% on the first half of FY 2018.

Management blamed the poor result on significantly lower performance fees, which fell a massive 91% to $4.4 million. During the period global markets were volatile and declined sharply in the December quarter before rebounding in the March quarter.

One small positive, though, was that its funds under management (FUM) closed at $100.9 billion, up 2% on the prior corresponding period.

Pendal Group’s chief executive officer, Emilio Gonzalez, explained that trading conditions had been difficult, but appeared pleased with its FUM performance.

He said: “Although the start of our financial year coincided with one of the most difficult periods for markets since the global financial crisis, our business attracted strong institutional flows into our Australian equities, cash and fixed interest strategies. This helped maintain our FUM during this period where we saw outflows in our European and Asian equities.”

Looking ahead, Mr Gonzalez appeared optimistic on the company’s prospects.

Adding: “Despite the more difficult trading conditions, our strong balance sheet with no debt and good cash flow means the company is in a firm position to take advantage of opportunities to expand our capabilities and global presence, in line with our focused strategy around growth and diversification. We remain focused on expanding our investment and distribution capabilities, maintaining a disciplined approach to managing capacity and providing ongoing support to our investment talent through our investment-led culture and business model.”

Should you buy the dip?

I thought this was a very disappointing result and I can’t say I’m surprised to see its shares sold off today.

And while its shares do look good value now, especially considering its plan to pay a 20 cents per share interim dividend, I think there are better options elsewhere in the industry such as Magellan Financial Group Ltd (ASX: MFG) or Macquarie Group Ltd (ASX: MQG).

As a result, I would class Pendal as a hold.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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