Tough H1, but shares detached from fundamentals
Given previous updates, the impact of challenges faced in H1 is no surprise. AUM fell 32% to £25.3bn, with half of the fall due to two cancelled (low margin) St James’s Place (SJP) mandates. Revenue fell 11% y-o-y to £76.5m, adjusted operating profit dropped 21% to £20.5m, and investors can expect a fall in full-year dividend.However, Impax is hardly the disaster implied by its share price decline: down 31% over six months and by 68% over 12 months – leaving its shares on a forward PE of just 8.5 for a business with £65m of net cash and no debt. Indeed, a £10m share buyback has been announced by Impax.
Impax is currently on the wrong side of a common narrative - that sustainable investing is dead. While the ‘ESG bandwagon’ may be dying, the global sustainable fund market has not shrunk, and remains vast at over US$3trn in assets with ample evidence of demand for credible offerings.
The group has shown impressive nimbleness to keep its financials strong. It has cut over 30 roles (10% of headcount), reducing run-rate annual costs by c. £11m. Its adjusted operating margin of 27% is only slightly below the sector median and should recover rapidly with AUM growth.
We make only small changes to forecasts and our DCF value stays at 400p/share, more than twice the share price.
Impax Asset Management Group is an investment firm, providing listed and private equity strategies primarily to institutional clients. As of Sep 30 2017, Co. has total assets under management and advice of £7.30 billion.
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