Treasury Group: Result 2012

Treasury Group’s 2012 results had already been well flagged—see Treasury: A tale of two managers from 20 Jul 12 (Hold – $4.32)—so there were few surprises in yesterday’s announcement.

Underlying net profit fell 17% to $8.1m, while Treasury’s share of underlying net profits of its funds management investments fell 11% to $12.5m. From underlying earnings per share of 35.1 cents, a fully franked final dividend of 20 cents was declared, as expected (ex date 30 Aug).

Investors Mutual (IML), RARE and Celeste all achieved net fund inflows during the year. Treasury’s managing director Andrew McGill again confirmed that the turnaround of IML was on track, with its funds outperforming and the manager winning its first institutional mandate for many years. This bodes well for the profitability of IML—and therefore Treasury—in 2013.

McGill was less forthcoming about Orion but, as we said on 20 Jul 12, fund performance has deteriorated and outflows occurred last financial year. One can only hope that this is just the swings and roundabouts of fund performance and that Orion does not implode like IML threatened several years ago.

On the conference call, Treasury managing director Andrew McGill admitted his ill-advised target to double earnings per share by 2014—see 17 Nov 11 (Hold – $3.88)—was now unlikely to be met. At least with IML on the mend, there’s a good chance Treasury’s profit might improve in 2013, although that depends on Orion holding up.

Consolidation in boutique funds management seems likely, as McGill admitted that Treasury was interested in pursuing mergers and acquisitions. While troubled stockbroking company Wilson HTM recently failed to sell its Pinnacle boutique funds management business, a deal between the two companies remains possible.

Treasury’s share price is almost unchanged since 20 Jul 12 (Hold – $4.32) and, consistent with that review, there’s enough reason to HOLD.