The Pendal Group Ltd (ASX: PDL) share price slipped 0.22% lower on Friday after the company posted its full-year report for FY22.
After spending most of today's trading session in the red, shares in the global investment company closed at $4.51.
The report comes a day after financial services company Perpetual Limited (ASX: PPT) reiterated that it would continue its plans to acquire Pendal. Perpetual made the announcement yesterday after itself rejecting a bid from a potential suitor to acquire 100% of its shares, saying the offer would have "materially" undervalued the company.
Let's cover the highlights of what Pendal reported today.
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What did Pendal report?
- Fee revenue up 8% year over year (yoy) to $629.7 million
- Statutory net profit after tax (NPAT) down 32% yoy to $112.8 million
- Operating expenses up 7% yoy to $403.2 million
- Average funds under management (FUM) up 15% to $124.3 billion
The company announced a fully franked final dividend of 3.5 cents per share along with the results. The dividend has a payment date of 15 December and a record date of 2 December. Its expiry date is 1 December.
In the report, Pendal Group CEO Nick Good described FY22 as being against a "backdrop of significant challenges that are buffeting the asset management sector".
The company chalked up the losses in Pendal's NPAT to a decline in the global equity markets, which reversed its seed capital gains observed in the previous financial year.
Good cited geopolitical tensions and inflation concerns as having "[cut] asset values and funds inflows worldwide".
He also noted deteriorating investor sentiment in the second half of this year, prompting Pendal to implement strong cost management practices to guard against further losses.
What else did Pendal report?
The report notes that while its average FUM was 15% higher in FY22, total FUM declined 25 per cent to $104.5 billion. Fund net outflows of $14 billion and weaker markets were said to have contributed to this.
Pendal added that Perpetual's acquisition of its business was "on track," the company having entered into a scheme implementation deed with its suitor.
The deal will see Perpetual acquire 100% of Pendal's shares. The consideration offered is "one Perpetual share for every 7.5 Pendal shares plus $1.976 cash", which is to be adjusted downwards for any final FY22 dividend paid by Pendal.
A scheme booklet will be posted to shareholders later this month. Pendal shareholders will be given the chance to vote on the acquisition sometime in December.
The Pendal board has recommended its shareholders vote in favour of the scheme.
What did management say?
Good described this year as "tough for markets and global investor confidence alike" He added:
Against this backdrop, however, Pendal produced a solid 2022 financial result. We were able to achieve this by responding to changing market conditions and taking tight control of costs. Our acquisition of TSW has delivered in line with expectations both financially and through improved diversification.
In parallel, we have continued to invest in the growing distribution in Continental Europe, deepening our ESG/RI capabilities and streamlining our operating infrastructure. Over time we expect to see a return on these investments.
Good continued:
The proposed acquisition by Perpetual is expected to accelerate growth of the business and our shareholders can continue to benefit through the scrip component of the scheme consideration.
What's next?
Shareholders were told in Pendal's analyst presentation that it would focus on "managing costs and optimising short-term results while ensuring we remain ready to take advantage of a market upturn".
Some tactics of how Pendal plans to achieve this include maintaining its current book of clients and upgrading its digital marketing initiatives.
It also intends to expand its regional client base in Europe via its existing distribution presence.
Pendal share price snapshot
The Pendal share price is down around 19% year to date. That's underperforming the S&P/ASX 200 Index (ASX: XJO) by a wide margin, as it's only down 7.42% over the same period.
The company's market capitalisation is $1.73 billion based on the current share price.
