After three years of super-charged growth in assets under management (AUM) – from £2.8bn to £11.0bn at the end of March 2018 – there are few signs of any slowdown. Impax grew AUM by c £1bn in the first half, all organic and has already added another £0.8bn in the first two months of H2.
A possible concern is how choppier investment markets may affect fund performance and Impax reported a £0.16m negative market-related movement in listed fund valuation in H118 (H217: positive £0.3m). However, that has been reversed since the period end; £0.6bn of the £0.8bn AUM growth in April/May related to market gains. Over the medium term some volatility is inevitable, but Impax has consistently outperformed key benchmarks which should help maintain growth momentum.
The Pax acquisition (now Impax Asset Management LLC) completed in January was the main event in H1. The group expects to see material benefits from reciprocal cross sales over the next two to three years. Short-term synergies may be derived from shared research and investment strategies, and integration of back/middle offices. Two independent investment teams already share research and analytical information.
AUM hit our previous full year forecast just eight months into FY18. We’ve pushed it up to £12.4bn (£12bn listed equity) which assumes another £0.7bn net inward investment into listed equity funds and neutral fund market performance during the remaining four months of this year. Impax closed its latest private equity fund (NEF3) at €357m in May, while the success of NEF2 (initial fund size €333m) contributed £3.2m (net of bonus and tax) in carried interest payments in May 2018, post the year end.
The interim dividend was better than forecast at 1.1p/share (H117: 0.7p), and the carried interest from NEF 2 funded a 2.6p/share special dividend. Excluding that, the shares currently yield 2.1%, rising to a twice-covered 2.6% in FY 2019. Our AUM projection puts EV/AUM at 2.1% by the current year end. In addition to AUM growth, key valuation messages pivot on integration of the acquired US operation, the success of efforts to cross-sell respective product portfolios into existing client bases, and the impact of operational synergies and improved scale on margins.