The Clime Investment Management Limited (ASX: CIW) share price has jumped as much as 41.18% today on the back of a material acquisition.
Clime is an integrated wealth management business. Founded in 1996, its operations encompass private wealth advice, investment management, self-managed super fund administration, and share research and valuation. The company also offers a number of unlisted funds, along with the Clime Capital Ltd (ASX: CAM) listed investment company.
Before we dig into the announcement, it's important to note that Clime Investment Management sits at the smaller end of the ASX. At the time of writing, Clime has a market capitalisation of $31 million, with shares changing hands at 55.5 cents per share – up 30.59% for the day.
What did Clime Investment Management announce?
This morning, Clime released an announcement and associated investor presentation regarding recent trading conditions, a completed institutional placement and an acquisition.
With this, the company announced it has successfully completed a $4.5 million placement at an issue price of 46 cents per share. This issue price represents an 8.2% premium to Clime's last closing price of 42.5 cents.
The placement was undertaken to fund the acquisition of a series of businesses from SC Australian Holdings. Clime has agreed to acquire all of the issued share capital of each of Madison Financial Group, AdviceNet, WealthPortal and Proactive Portfolios – together, the MFG Entities – for $4.4 million.
The MFG Entities provide licensing, compliance, technology and support to around 100 financial advisory firms. The entities have around $3 billion in funds under advice and total gross annual revenue of approximately $34 million.
Clime expects to complete the acquisition in mid to late June.
Trading update
Along with the acquisition and associated placement, Clime also shed some light on its recent business performance.
The company stated that all segments were performing well prior to COVID-19. While the evaluation of the impact of the pandemic is in progress, the effects have been cushioned through the lowering of variable expenses and government support.
Quantifying these effects, Clime revealed gross funds under management (FUM) declined from $1,097 million on 14 February 2020 to a low of $874 million. Gross FUM as at 29 May 2020 was $969 million.
The company noted that its ordinary operating result (revenue less expenses) and net group result are positive. However, both results are below budget due to COVID-19. Net group result takes into account the ordinary operating result plus the impact of balance sheet investments and performance fees generated.
Clime expects these results to improve with the inclusion of JobKeeper and ATO benefits. Additionally, it has seen improving return on mark-to-market balance sheet investments to 29 May.
As at 29 May 2020, the company had $4 million cash and $6 million in liquid investments on its balance sheet.
