Surging AUM boosts revenue, profit & dividend

AUM reached £30.0bn on 31 Mar 21, up 49% over H1 (£20.2bn on 30 Sep 2020). Net inflows were particularly impressive at £6.8bn (full-year FY20 inflows: £3.5bn). Compared to a 15-strong UK-listed peer group, this was by far the highest net inflow rate (as a % of opening AUM) : 34% for Impax, next highest 9%, peer group median 2%.

On top of this, Impax achieved strong investment returns of £3.0bn in H1 (12% of average AUM: 2nd highest in peer group, median return 9%). Post-results, AUM continued to grow strongly, reaching £32.2bn on 30 Apr 21.

The surge in AUM has been the main driver of strong revenue and profit growth, and operating cash generation. H1 revenue was £60.6m, up 47% y-o-y (H1 20: £41.2m). Adjusted operating profit jumped 97% to £20.7m (H1 20: £10.5m) and adjusted diluted eps 87% to 11.8p (H1 20: 6.3p). Adjusted operating margin increased to 34% (H1 20: 25%; FY 20: 27%), providing ample evidence that operational leverage is kicking in as AUM grows.

Our growth outlook for Impax remains very positive, and we note that the sustainable investing market tailwind continues unabated. In Europe, flows into sustainable funds in Q1 21 (calendar year) reached a record EUR120bn, 18% up on Q4 20 and 52% of full-year 2020 flows (EUR233bn). Q1 sustainable flows made up 51% of overall European fund flows with sustainable fund assets now making up 12% of European assets. We see this momentum holding up in light of COP26 (UN Climate Change Conference in Nov 21) and other favourable market developments.

With Impax exceeding our previous growth forecasts by some margin, and with evidence of operating leverage kicking in, we have increased our fundamental valuation to 1205p / share.