Given previous updates, the impact of challenges faced in H1 is no surprise. AUM fell 32% to £25.3bn, with half of the fall due to two cancelled (low margin) St James’s Place (SJP) mandates. Revenue fell 11% y-o-y to £76.5m, adjusted operating profit dropped 21% to £20.5m, and investors can expect a fall in full-year dividend.
However, Impax is hardly the disaster implied by its share price decline: down 31% over six months and by 68% over 12 months – leaving its shares on a forward PE of just 8.5 for a business with £65m of net cash and no debt. Indeed, a £10m share buyback has been announced by Impax.
Impax is currently on the wrong side of a common narrative - that sustainable investing is dead. While the ‘ESG bandwagon’ may be dying, the global sustainable fund market has not shrunk, and remains vast at over US$3trn in assets with ample evidence of demand for credible offerings.
The group has shown impressive nimbleness to keep its financials strong. It has cut over 30 roles (10% of headcount), reducing run-rate annual costs by c. £11m. Its adjusted operating margin of 27% is only slightly below the sector median and should recover rapidly with AUM growth.
We make only small changes to forecasts and our DCF value stays at 400p/share, more than twice the share price.
