Perpetual: Interim result 2013

Cost-cutting and a stabilisation of fund flows were behind a strong interim result at Perpetual, with underlying profit after tax rising 2% to $35.1m, despite a 3% fall in revenue. After significant items, net profit rose 19% to $27.3m. A fully franked interim dividend of 50 cents will be paid (ex date 6 March).

The main highlight of the result is that the company’s ‘Transformation 2015’ restructuring project has already produced $31m in pre-tax annual cost savings, compared to guidance given at the 2012 full-year result of $7m-$10m for this point in time.

The company now expects $40m of savings to be bagged by the end of the current financial year, with a further $10m in 2014 to make a total of $50m.

Fund flows stabilise

Fund outflows continued in the half, although they did at least stabilise, with a net $1.2bn outflow in the half compared to $1.1bn in the six months to June 2012 and $3.0bn in the six months to December 2011. And the improvement has carried over into the second half, with the company reporting net inflows in both January and February.

Overall funds under management increased to $24.3bn at December 2012, compared to $22.6m and $22.9m six and 12 months earlier, respectively, due to the rise in equity markets.

We have to put our hands up with Perpetual and admit that we’ve got it wrong. After backing it from as high as $55.70 on 7 Feb 08 (Long Term Buy – $55.70), we recommended it at various prices down to $20.74 on 4 Nov 11 (Buy – $20.74), before we blinked and recommended selling on 24 Feb 12 (Sell – $24.43).

With hindsight we probably didn’t give enough weight to the potential impact of a strong market recovery, although that’s easy to say after the market’s jumped 16% in a year. Much of the renewed optimism is now priced into the stock, though, so we continue to recommend that you AVOID it.