A strong January saw a 4.9% recovery in a single month to £12.12bn. That is unquestionably encouraging, but perhaps still leaves Impax with too much ground to make up in the next eight months to achieve our £14.5bn AUM forecast. We have therefore trimmed the latter to £14.0bn, and total fee income, operating profit and EPS now reflect the recent volatile market conditions.

Impax provides quarterly breakdowns of underlying AUM movements by division and net inflows vs. investment performance. January’s outperformance is therefore only a headline figure, but there was more visibility for the Q119 (Oct-Dec 2018). 

In Q1, the UK funds were up £0.54bn, ahead of forecast, but their performance was offset by a £0.23bn net withdrawal reported by the Group’s US operation. Market movement, FX and performance knocked another £1.32bn off the total. Some £0.56bn of the £0.96bn aggregate AUM decline in Q1 was recovered in January. 

To put that in context, end January 2019 AUM at £12.12bn was c 3.2% below the last year-end and despite one strong month, our prior FY19e projection looks demanding with just two-thirds of the current year remaining. A revised £14bn full year AUM forecast takes a more pragmatic view of what is attainable from here. We have also reduced FY20e AUM from £16.5bn to £15.7bn, based on similar net inflows to UK funds and neutral contributions from the US division and overall investment performance.

A more volatile investment environment has not changed our view on the fundamental strengths of Impax’s unique proposition. The latter remains intact and we believe current measures (PER, yield, EV/NOPAT) materially undervalue the business’s potential for total shareholder returns or its growing appeal to an acquisitive Fund Management major as ‘best in class’ in an increasingly important segment.