Perpetual Limited (ASX: PPT) sold off almost 3% this morning, following the release of their FY19 results. Revenue declined 4% this year which, alongside an increase in expenses, drove profits down 17% on the previous year. The company made a full year net profit of $115.9m, which came alongside a modest dividend cut. The revenue change was impacted by some net outflows in their investments division, in addition to lower performance fees. Growth in data services revenue helped offset the decline in Perpetual Investments which occurred on the back of lower management and performance fees.
Perpetual continued to suffer this year, as growth outperforms value across global markets (Credit: Perpetual)
Perpetual did however announce slightly more upbeat guidance for FY20, as the management believes that a lot of their investments in improving the business will pay off. The company is launching a professional services model, in addition to adding 11 advisors in the first half of FY20, under their Perpetual Private brand. This will help the company to grow over FY20 and would complement Perpetual’s strong pipeline of M&A opportunities. The company also has an existing strategy around digital, which it aims to expand over the coming few months.
The stock trades on a PE of 12.15 which is lower than the index, implying the market is not pricing high expectations into the company’s stock. This gives an investor a margin of safety under a slightly negative scenario where growth remains low but positive and recent initiatives don’t achieve as much growth as expected. They also aim to add new investment opportunities and develop a stronger global market focus, which has become increasingly attractive to Australian investors. This is because US markets have consistently outpaced ours since the GFC. The company is also introducing a cost reduction initiative, which is expected to deliver $18-23m in annualised cost savings once fully implemented.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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