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Pacific Current (ASX:PAC) share price down despite FUM growth of 24%

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The Pacific Current Group Ltd (ASX:PAC) share price is down 5% after announcing its FY21 half-year result.

Pacific is a business that invests in fund managers around the world.

Pacific Current FY21 half-year highlights

The business announced that its funds under management (FUM) was $112.8 billion, which was an increase of 23.9%, adjusting for the November sale of Seizert. The non-Australian dollar denominated FUM saw a 40% increase between June to December. Pacific Current reported widespread growth, led by its investment in GQG.

Management fees grew by 10% whilst operating expenses declined by 24%.

Underlying net profit after tax (NPAT) attributable to shareholders for the half-year was $11.6 million, down 13.4% compared to the prior corresponding period. Lower performance fees and the appreciation of the Australian dollar against the US dollar impacted the result. Had the exchange rate stayed the same, underlying net profit before tax would have been $0.9 million higher.

The profitability decline was driven by a decrease in performance fees from Carlisle Management and Victory Park Capital (VPC), as well as lower commission revenue.

It reported a statutory profit after tax of $11.6 million, compared to a loss of $8.9 million in the prior corresponding period. The reported loss last year was due to impairment expenses, primarily at Seizert (which has since been sold) and VPC.

The Pacific Current Chair Tony Robinson said:

PAC’s portfolio has weathered a difficult year in fine shape. While there was a decline in performance fees, I am encouraged by the growth in management fee revenues, particularly in a period where it has been difficult for boutiques to market to new clients.

Recent Pacific Current share price movements

Over the past year the Pacific Current share price is down by more than 10%. Over the last month it has fallen 11%. 

Pacific Current dividend

The board declared a $0.10 fully franked dividend per share. This dividend represents a 44% dividend payout ratio.

Its guidance for the full year dividend payout ratio remains 60% to 80% and the board expects the payout ratio to be no less than the prior year.

New investment

During the period it announced an agreement to purchase a stake in Astarte, a London-based investment manager focused on private markets real asset strategies.

Outlook

Pacific Current’s managing director, CEO and chief investment officer, Paul Greenwood said:

As you look at these results you will see that more of PAC’s earnings are coming from management fees, which are more repeatable than performance fees or commission revenues. This means that the organic profitability of the business continues to grow nicely, and we expect this to continue.

The reduction in performance fees was partially reflective of the market environment, but also a function of timing, where some performance fees are expected to be recognised in the second half as opposed to a year ago when they fell in to the first half.

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Motley Fool contributor Tristan Harrison owns shares of PACCURRENT FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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