Tough crowd: Why isn't this impressing Pinnacle (ASX:PNI) shareholders?

The investment management firm has released its first-half results…

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Key points

  • The Pinnacle share price is currently in the red despite launching 6% higher this morning
  • The movement followed the release of the investment management firm's results for the first half
  • Within them, it boasted a 32% profit increase and a 50% dividend boost

The Pinnacle Investment Management Group Ltd (ASX: PNI) share price opened in the green after the company released its results for the first half of financial year 2022 (FY22) after close yesterday.

Early morning trade saw its stock reaching $12.45 – representing a gain of 6%.

However, it quickly slumped. At the time of writing, the Pinnacle share price is $11.51, 1.96% lower than its previous close.

Pinnacle share price slips on 32% profit boost and 50% dividend growth

The Pinnacle share price is struggling today after the release of the company's latest results. Highlights include:

  • $40.1 million of profit – up 32% on the first half of FY21;
  • Earnings per share (EPS) came to 17.5 cents – up 23%;
  • Funds under management increased 5% to $93.6 billion; and
  • Fully franked 17.5 cent dividend.

Over the 6 months ended 31 December, Pinnacle brought in a net profit after tax of $40.1 million, translating to EPS of 21.5 cents, or 21 cents fully diluted.

That's compared to the first half of FY21's EPS, which came to 17.5 cents or 16.7 cents fully diluted.

Additionally, its retail net inflows came to $2.9 billion during the half-year. That's the largest they've been over a six-month period.

The investment management firm's affiliates also generated $6.4 million of performance fees over the period. The prior comparable half brought $11 million of performance fees.

The company declared a fully franked interim dividend of 17.5 cents to be paid on 18 March. That's 50% more than FY21's 11.7 cents interim dividend and represents an 83% payout ratio.

The company's 16 affiliates saw their aggregate funds under management (FUM) grow by 5% – or $4.2 billion – to $93.6 billion over the period. That's 43% higher than it was on 31 December 2020.

If excluding the $3.9 billion outflow of the Omega 'passive' mandate on very modest fees during August, its FUM increased $8.1 billion, or 9%, during the half.

Further, if excluding the $1.1 billion Five V Capital FUM, Pinnacle's aggregate affiliates' FUM increased $7 billion, or 8%.

Its aggregate retail FUM came to $23.8 billion on 31 December – an increase of $3.5 billion, or 17%, over the six months.

Pinnacle's total net outflows for the half-year were $1.7 billion. Excluding the Omega outflow, it recorded $2.2 billion of net inflows.

It held $176.4 million of cash and principal investments at 31 December, as well as a $100 million fully drawn debt facility deployed in liquid funds managed by its affiliates.

What else happened in the first half?

The Pinnacle share price was put in the freezer in November as the company prepared to announce its acquisition of a 25% interest in Five V Capital.

To pay for the purchase, the investment management firm underwent a $105 million placement.

The company's stock slumped 5% when trading was resumed following the capital raise.

Additionally, Pinnacle made a joint decision to close the Reminiscent Capital business last half.

The value of its $1.8 million holding was written down and treated as an impairment expense, dropping Pinnacle's net profit after tax to $40.1 million.

What did management say?

Within today's release, the company provided a directors' report. It stated:

Whilst we experienced institutional net outflows, we believe these reflect short-term factors including rebalancing, with the rate of gross inflows broadly consistent with the prior comparative half year — the institutional sales pipeline remains robust.

We have continually reminded investors that net institutional flows are 'lumpy' and volatile over reasonably short periods of time, and this was particularly evident during this half-year period…

Recent actual and anticipated changes in macroeconomic and geopolitical conditions have resulted in some increased turbulence and volatility in investment markets. Whilst not immune to such conditions, over the past few years we have increased the diversity of both asset classes under management and sources of revenue … with the objective of building enhanced resilience throughout the full cycle.

What's next?

Those interested in the Pinnacle share price might want to keep an eye out for expansion activities as the fund manager looks to take advantage of offshore opportunities to "evolve into a global multi-affiliate".

It also noted that times of volatility and turbulence have previously brought opportunities to "judicious and patient" shareholders and investors.

Pinnacle share price snapshot

The new year hasn't been good to the Pinnacle share price so far. The investment management firm's stock has tumbled 26% since the end of 2021.

Though, it is 43% higher than it was this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended PINNACLE FPO. The Motley Fool Australia owns and has recommended PINNACLE FPO. 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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