Impax Asset Management

www.impaxam.com TICKER: IPX     EXCHANGE: AIM

Impax is a market leading and multi award winning manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally.

LATEST REPORTS

 
Still motoring ahead
Published: Jun 15 2018

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. 
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 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. 
We continue to see Impax as ideally placed to benefit from a fast-evolving landscape for investment managers, progressively dividing between larger passive investors and specialist boutiques. 
NB the recent full interview with CEO Ian Simm can be accessed from the note pdf
 
Interview with CEO post results
Published: Jun 11 2018

CEO Ian Simm discusses the recent interim results and exciting outlook for Impax AM. 
 
Making one plus one equal three
Published: Mar 15 2018

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally. Aggregate AUM at end January 2018 was £11.225bn.  
We have updated and added FY19e forecasts post completion of Impax’s acquisition of US-based Pax World Management LLC. In addition to greater scale reflected in the £11.225bn end January AUM, that extended Impax’s product portfolio, marketing reach and client base.  We expect an immediate boost to adjusted EPS net of (a) the cost of servicing new debt secured to finance the acquisition and (b) an issue of 2.66m new shares at 170p. 
Margins should progressively benefit from increased scale and a broader, more diversified AUM base. We estimate that as at end January 2018, Pax, since renamed Impax Asset Management LLC (IAM LLC), represented c 32% of the enlarged group’s AUM and generated just under 40% of its ongoing run-rate revenue. We have, however, assumed no benefit from cost savings or synergies, as neither was part of the rationale for the acquisition; but see potential for efficiency gains. 
Potential EPS enhancement is better than we initially projected. Fewer consideration shares were issued and FY18 PER is 17x vs 20x at announcement. The acquisition terms were assisted by favourable GBP/USD, although this is a sensitivity for Impax’s enlarged USD revenue base included in our forecasts. Current forecast end FY18 EV is 1.79% of AUM (£11.225bn at end January), falling to 1.68% based on our end FY18 AUM estimate. 
Dividend growth is well covered by forecast EPS/cash generation. Projected FY18 cover is 3.2x vs 2.2x (FY17), net of cost of servicing new debt and scheduled amortisation. We assume 25% dividend growth for this year and FY19e, below the 38% increase in FY17. That is deliberately conservative.
Revenues may be affected by stock market volatility, but AUM growth momentum and the impending closure of the latest Private Equity fund drive fee income short term. Beyond that, we regard the combination as a potential sea change in group prospects, as Impax leverages its experience as an institutional fund manager to drive its acquired US institutional operation and offer new products to its existing client base.
 
Delivering a sustainable future
Published: Dec 04 2017

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally. 
The Group has just reported outstanding FY17 results and a positive start to FY18.  Momentum is being driven by organic growth and the proposed combination with US-based Pax World Management LLC, set to complete in Q1 2018. The underlying outlook remains compelling: record 61% growth in assets under management or advice (AUM) in FY17 included c £2.1bn of net inflows and £0.65bn from fund performance. Total year-end AUM was £7.3bn (FY16: £4.5bn), or £10.3bn including Pax.
Strong growth in fee income and operating margins - revenue and adjusted operating profit (excluding non-recurring items) up 55% and 121% respectively - followed further outperformance by Impax’s principal listed equity strategies (each has outperformed the global benchmark over one, three and five years) and a positive start by the new renewable energy private equity fund. Net inflows well spread by geographic source, confirm that Impax’s  direct marketing and distribution partners have traction in key markets across the USA and Europe.  
We expect the addition of Pax to enhance EPS from FY19.  Impax’s recent share price performance means that the share based consideration should be priced above the 110p we’d assumed, so would be less dilutive. Impax’s valuation still appears undemanding relative to prospects: well supported by AUM growth, fee income and cash generation; underpinned by further potential from a broadened offer / distribution and cross sale opportunities.
NB you can see last week’s  presentation by the CEO, Ian Simm, on the results and outlook at this address: 
 https://www.youtube.com/watch?v=nWyYelOf9bo
 
Investor Forum November 2017
Published: Nov 30 2017

Ian Simm, CEO, runs through the Group's FY results presentation
 
Impax Asset Management Webinar
Published: Oct 23 2017

Ian Simm, CEO, and Charlie Ridge, CFO, run through Impax's proposed plans for their acquisition of Pax World Management LLC.
 
A genuinely transformational acquisition
Published: Sep 28 2017

Impax looks to have secured an acquisition which delivers key components of its longer term strategic growth plan in one fell swoop, while minimising execution risk, and enhancing EPS and dividend cover. 
It has agreed to acquire 100% of US based Pax World Management LLC for US$52.5m initially, plus up to US$37.5m in contingent payments payable in 2021, subject to performance. This combines complementary businesses with aligned strategies and business cultures, and a successful partnership for over a decade on the design and management of the US$511m Pax Global Environmental Markets (GEM) Fund. 
The acquisition extends Impax’s profile as a specialist manager in a rapidly growing niche. Scale benefits are predicated on enlarged product range, coverage, strategies, client base and marketing reach, rather than cost savings or rationalisation. It plans to run the investment teams independently (with some exchange of ideas for best practice) and progressively build collaboration, and more rapidly integrate some support functions. 
Impax has agreed a keen purchase price based on underlying revenue/EBITDA run rate, below its valuation just prior to the announcement, without assumed benefits from cost savings or synergies. On that basis Pax will enhance EPS in the first full year, by above our forecast if Impax’s higher share price holds as it will result in less dilution, and the acquired entity continues to perform in a vibrant market.
A further benefit lies in the longer-term potential delivery of a step-change in AUM growth rates and profitability. The existing partnership helps make Pax a known quantity with a similar business culture, complementary products, services and market profile. We still expect progressive distributions despite the use of cash/debt towards this transaction, with potential for strong positive cash generation to compensate. 
Despite strong gains, Impax shares still seem attractively priced relative to prospects. 

ARCHIVE

2017
No trumping AUM growth
Published: Jun 12 2017

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally.
With the addition of £500m to AUM, Impax closed another strong month. That brought total AUM to £6.5bn, c 8% growth in May, and recent momentum (from £4.2bn at end Sep 2016) suggests that efforts to build the scale and profile of Group funds and investment expertise in target markets have gained traction. We have again pushed up our FY17e revenues and earnings forecasts to reflect higher projected fees on the back of a revised AUM target of £7.0bn by end September,
We don’t regard President Trump’s decision to withdraw the US from the Paris Climate Agreement as a significant impediment to Group ambitions, while management anticipates relatively superficial effects on both investment returns and potential demand for renewables. Existing regulatory mechanisms will continue to provide growth drivers for environmental solutions, supported by the economic benefit of reduced energy use and associated CO2 emissions.
All other countries remain firmly on board and many US states have since confirmed their individual intentions to fulfil their country’s commitment. Indeed there is still broad consensus regarding the need to maintain investment in renewables and other initiatives to improve water and air quality. Environmental market demand is increasingly based on economics, not subsidies: so, as the cost of renewables falls, they have become increasingly competitive alternatives to natural gas and coal-fired energy without subsidies.  
Earnings driven by strong momentum
Published: May 16 2017

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally.   

Impressive first half earnings were 23% up on the second half of FY’16 (100% ahead of H1’16). That reflects six consecutive quarters of strong growth in assets under management and advisory (AUM). Total net inflow was a record £870m in the first half, equivalent to a 27% increase in AUM to £5.7bn by end March, while another very good month pushed that above £6.0bn by end April. The interim figure included $1bn for North America, an important medium term milestone.

We have upgraded both our FY17, and FY18 AUM forecasts, as Impax has already hit our previous target with five months remaining. Furthermore, the outlook remains positive since the robust performance by all group investment strategies underpin its profile as a leading global investor in environmental markets. It continues to attract attention from institutional investors in the UK, Continental Europe and the US.

The drivers which helped AUM double over the last two years remain intact. The financial model is cash generative, benefits from a declining cost ratio/improving operating margin. That will finance seed investment in new funds, possibly acquisitions, but also increases in dividends and the pay-out ratio, which we regard as relatively conservative, despite the latest, 40% increase in the interim distribution.

Impax’s team culture means no dependence on ‘star’ fund managers (whose departure might result in loss of assets) and its core investment focus is in strong demand from investors. Yet its stock-market value is just 2.2% of AUM that are themselves growing rapidly.

View the Results Webinar
Published: May 12 2017

You can now hear Ian Simm, Chief Executive, and Charlie Ridge, Chief Financial Officer, present the interim results for the six months to 31 March 2017 on behalf of Impax Asset Management Group plc.
To view simply click on the video below.
Upgrades post strong Q2 AUM growth
Published: Apr 11 2017

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally. 
An impressive first half saw total assets under discretionary and advisory management (AUM) hit a new £5.7bn peak at end March 2017. As that’s already above our existing full-year target with six months still to go, we have upgraded FY17e AUM to £6.0bn and £6.8bn by end FY18.
We still see those as relatively conservative vs 27% first half growth i.e. c 5% net new inflows in H2, c 2% from investment performance, and reductions in scale of the group’s older private equity funds as they exit investments.  We assume limited contribution from the latest PE renewable infrastructure fund in its initial funding phase, but anticipate another upgrade later in the year as fund raising is completed.
Growth in gross AUM, respectively 12.4% and 12.9% in each of the first two quarters reflects momentum behind key drivers for Impax’s listed investments. We interpret this as evidence of the group’s growing profile as a prime source of expertise in an area of increasing importance to global investors, and traction in key markets. 
The first two quarters saw net inflows to listed equity funds equivalent to 8.3% and 9.3% across Q1 and Q2, and respectively +2.0% and +5.6% investment performance. The impact on fee income is reflected in our higher revenue and earnings forecasts.
Despite a strong recent run which puts the shares on a more demanding rating we see our FY17e AUM target as conservative as it assumes £0.27m of listed equity net inflows in H2 vs £0.78m in H1 and nothing from private equity. Indeed, given scope for continued AUM accumulation, strong fund performance in its chosen space and potential for high margin private equity growth to result in further upgrades, the valuation remains attractive vs short term prospects.
Strong Q1: AUM and profit upgrades
Published: Jan 16 2017

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally. 
We have revised our fee income and profit forecasts to reflect recent momentum behind growth in assets under discretionary/advisory management (AUM) which hit a new peak of £5.06bn at the end of 2016 (FY16: £4.8bn). A 12% increase over the quarter puts Impax well on track to achieve our existing £5.4bn end September 2017 AUM forecast. 
AUM is a key valuation metric and recent periods have seen impressive growth from £3.1bn (Q1 16) to £5.1bn (Q1 17). We expect further progress out to the end of FY18, but would still be comfortable with some volatility in a net measure i.e. which includes client withdrawals. The group has two older private equity funds which are effectively in wind-down, where profitable exits/client distributions would be regarded as positive.
The group reported record inflows into its listed equity funds during the quarter, driven by Continental European and North American clients, and confirming that the momentum achieved in the second half of FY16 has been maintained this year. Our projections puts the shares on an 11.7x FY17 EV/NOPAT multiple, and EV/AUM (Q1) of 1.2%, backed by a well-covered 4.1% dividend yield.
2016
View the Results Webinar
Published: Dec 14 2016

You can now hear Ian Simm, Chief Executive, and Charlie Ridge, Chief Financial Officer, present the recently announced record results for year ended 30 September 2016 on behalf of Impax Asset Management Group plc.
To view simply click on the video below.
Environmental trends drive proposition
Published: Dec 09 2016

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally.
The shares have performed well since our initiation note (28 Nov) on the back of good results, a successful first close for its latest private equity fund, and AUM rising further to £4.9bn
Results for FY to Sept 2016 showed significant growth in AUM, strong fund performance and inflows from new and existing clients / geographical markets. It reported 59% y o-y growth in AUM to £4.5bn in the year. That will generate parallel increases in fee income revenue and an inherently scalable, operationally geared business model push up EPS and net cash.
Growth in AUM incorporated record £496m net inflows reflecting strong growth in its North American business and expansion of product offerings for UK clients. The outlook is supported by an ‘encouraging’ mandate pipeline. Revenue was £21.1m (FY15: £19.7m), with a £23.7m full year run rate by the year-end, reflecting H2 AUM growth. Pre-tax profit 2% up y-o-y at £5.2m reflected prior year one-offs, relatively faster growth in operating earnings to £4.2m (FY15: £3.1m) illustrates operational gearing and scalability. The 2.1p/share full year dividend (final 1.6p/share, up 33%) is comfortably covered by 3.62p EPS (FY15: 3.13p).
One might expect Impax’s strong positioning and strategy support arguments for a premium rating, but on our new forecasts the rating is currently below sector peers at 9.0x FY16/17 EV/NOPAT and 0.92% EV/AUM, backed by a prospective yield of over 5%. The group has a stated commitment to progressive dividends and considerable alignment of the interests of employees and external shareholders.
NB  Impax Management Team will present at a webinar next Monday 12th at 1pmRegister here

Impax Asset Management Group plc - Equity Development Investor Forum, November 2016
Published: Dec 02 2016

Ian Simm, Chief Executive, describes how Impax is well positioned for future growth.
Environmental leadership driving growth
Published: Nov 28 2016

Impax is a market leading manager of both listed and private equity funds, which invest in ways that take advantage of more environmentally sustainable corporate and economic growth globally. Aggregate AUM at end September 2016 was £4.5bn. 
Investment decisions are based on proprietary and rigorous investment process, designed to take advantage of trends being driven by better resource efficiency and solutions to environmental problems. Long-term drivers remain compelling, and the group’s funds are diversified geographically and by environmental market sector. 
Significant FY16 AUM growth reflects benign equity markets as a whole but encouragingly for Impax we particularly note: (a) fund outperformance vs global benchmarks and (b) net fund inflows of £0.5bn during the last financial year.
Intriguingly, these encouraging growth prospects do not appear reflected in the historical valuation of Impax shares vs other quoted specialist fund management groups. Based upon consensus forecasts, the current rating is 8.1 x EV/NOPAT (EV c 1%. of AUM) with a 3.7% yield (2015-16), covered 1.5 times.
On 1st December the group will release results for the year ended 30 September 2016. This will not only bring an up to date report on financial and corporate progress, but also an insight as to how the company sees its own outlook. On 30th November Ian Simm, CEO, will present at the ED Investor Forum.  
2012
Substantial long term potential
Published: Jun 01 2012

Impax is an AIM listed specialist asset manager focused on environmental investing. It manages just under £2bn, made up of its own label and segregated funds alongside white label funds, and also two dedicated private equity funds. 
Impax has a proven franchise among both investors and consultants; it is clearly very well positioned strategically. It has enjoyed strong growth in assets under management and has a good track record of investment performance. 
While short term headwinds exist in the form of volatile equity markets and weak investor sentiment which were reflected in the first half of the year, we expect substantial growth in AUM in the longer term when markets recover and the focus returns to the fundamentals.