Hugely impressive H1 despite market fall in Q2

H1-22 results highlight just how impressive Impax’s progress over the last year has been, given that sharp equity market falls resulted in an 8.1% drop in AUM over Q2 alone.

AUM was up 27% year-on-year (31 Mar 21: £30.0bn), revenue 46% (£88.6m v £60.6m in H1-21), adjusted operating profit 64% (£34.0m v £20.7m), and net cash 88% (£72.0m v £38.3m). Impax maintained positive net inflows of +£2.5bn over the half-year (and importantly, +£0.5bn during the turbulent Q2), sourced from a diverse range of clients, geographies, and channels.

Over the short-term, continuing equity market weakness, particularly in ‘sustainable economy’ and ‘growth-oriented’ stocks which are common in Impax’s strategies (the FTSE Environmental Opportunities All-Share Index was down 16.1% between 1 Jan 22 and 29 Apr 22) has pegged back our FY22 growth forecasts slightly. We now expect AUM to grow by around 9% y-o-y to £40.5bn on 30 Sep 22, and revenue to grow by 26% to around £180m.

However, we believe that for the sustainable investing market generally, and for Impax specifically, the medium-longer term growth outlook remains bullish. At a market level, even during the turmoil of (calender) Q1-22, flows into sustainable funds remained positive. According to Morningstar, the European sustainable fund market (81% of global sustainable fund assets) attracted US$78bn of net inflows while conventional funds saw US$21bn of net outflows. Moves to reduce dependency on Russian fossil fuels will almost certainly accelerate the shift to renewable energy. Additionally, a growing backlash against greenwashing will favour the most credible sustainable investment managers such as Impax.

We have reduced our core value slightly from 1260p to 1225p, primarily because of the slightly reduced AUM and revenue outlook for the full FY22 year. However, even our reduced value remains over 65% above the current share price.