Perpetual reaps reward for taking tough line on costs
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 saying it would cut hundreds of jobs last year in a move to rationalise the business, Perpetual said on Thursday it had cut more deeply than it expected in the past six months.
Amid heavy job shedding in financial services, Perpetual said it had cut staff numbers by 450 since the middle of last year.
The cost-cutting program, which also involved cuts to directors' pay, delivered pre-tax savings of $31 million, compared with guidance of $7 million to $10 million.
The drive and a lift in global equity markets helped drive earnings to $27.3 million in the December half, almost 29 per cent higher than the same half last year.
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 big rise in inflows in funds under management - a key influence on long-term profitability.
"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," the chief executive, Geoff Lloyd, said. "But it may take a prolonged period of market stability to fully rebuild investor sentiment and create a sustained recovery in flows."
He said Perpetual was six months into a two-year cost cutting plan.
The fund manager will pay a fully-franked dividend of 50¢ a share, in line with last year's payment.
Investors welcomed the rise in earnings, lifting 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 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."