Job cuts help Perpetual boost profits
AN AGGRESSIVE cost-cutting drive coupled with the global sharemarket rally have improved Perpetual's bottom line, with profits rising to $27.3 million in the latest half.
After announcing it would cut hundreds of jobs last year as part of a move to rationalise the business, Perpetual said on Thursday it had cut costs more deeply than it expected during the past six months.
Amid heavy job-shedding in the financial services industry, Perpetual said it had reduced staff numbers by 450 since the middle of last year.
The cost-cutting program, which has also involved cuts to directors' pay, has delivered pre-tax savings of $31 million, compared with guidance of $7 million to $10 million.
The drive to pare back expenses and a lift in global equity markets helped increase earnings to $27.3 million in the December half, almost 29 per cent higher than the same half of 2011.
The less volatile measure of underlying profit rose slightly to $35.1 million from $34.3 million. However, the fund manager has yet to experience a major rise in inflows in its funds under management - a key influence on long-term profitability.
Despite markets improving, chief executive Geoff Lloyd said the company had not seen a major inflow of funds into the sector.
"Total market flows excluding cash went into positive territory in the September 2012 quarter for the first time after a full year of negative net flows but it may take a prolonged period of market stability to fully rebuild investor sentiment and create a sustained recovery in flows," Mr Lloyd said.
He signalled there was more cost-cutting to come, saying the company was six months into a two-year plan.
The fund manager will pay a fully franked dividend of 50¢ a share, in line with last year's payment.
Investors welcomed the lift in earnings, raising Perpetual shares by 4 per cent, or $1.66, to $41.12.
An analyst at CommSec, Ross Curran, said the extent of the cost-cutting had surprised the markets, which helped drive the share price gain.
"It was a very good result in terms of cost containment," Mr Curran said. "Growth from here will depend on markets, but certainly they have the performance to justify higher inflows in the future."