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Shares of global asset manager Perpetual Ltd (ASX:PPT) have come under pressure on Monday, dropping 2.68% to AU$20.33 per share. The decline follows the company’s announcement of a significant non-cash impairment charge related to its stakes in two of its key investment management subsidiaries. This development has spooked investors, extending the downward trend in Perpetual’s share price, which has now fallen nearly 8% over the past month.
Impairment Charge Shakes Investor Confidence
Perpetual revealed on Monday that it expects to recognize an impairment charge of approximately AU$547 million pre-tax in its upcoming FY24 full-year results, scheduled to be reported on Thursday, 29 August. This substantial charge is tied to net outflows that the company experienced during FY24, particularly in investment strategies managed by its subsidiaries, J O Hambro Capital Management (JOHCM) and Thompson, Siegel & Walmsley LLC (TSW).
The outflows from these two entities were significant, with J O Hambro seeing AU$8 billion in net outflows and TSW facing AU$4 billion. As a result of these outflows, Perpetual has tested and reassessed the value of its stakes in these subsidiaries, leading to a AU$417 million write-down for J O Hambro and an AU$130 million write-down for TSW.
While the impairment is non-cash, meaning it won’t require an actual outlay of funds, it will nonetheless be applied against Perpetual’s reported earnings for FY24. This adjustment is expected to reduce the company’s earnings by a similar amount, which has understandably unsettled investors.
Market Reaction and Share Performance
The market’s reaction to this news has been swift and negative. Investors have pushed Perpetual shares lower in response, reflecting concerns about the company’s financial health and future profitability. The impairment charge has added to the existing challenges faced by Perpetual, which has struggled in recent months.
Year to date, Perpetual shares have fallen by over 20%, significantly underperforming the broader market, which has been on an upward trajectory. This decline has wiped out substantial value for shareholders and brought the company’s 12-month losses to 8%.
The market’s harsh treatment of Perpetual comes despite some positive aspects of the company’s performance. In the company’s Q4 FY24 business update, CEO Rob Adams highlighted that 66% of Perpetual’s investment strategies had outperformed over a three-year basis. However, this has not been enough to assuage investor concerns, particularly in light of the substantial impairment charge and the broader challenges facing the company.
Looking Ahead: Earnings Report Looms
With Perpetual’s full-year FY24 earnings report just days away, investors are likely to remain cautious. The impairment charge will undoubtedly weigh heavily on the company’s financial results, and the market will be closely watching for any additional insights or guidance that may be provided.
For now, Perpetual’s share price remains under pressure, and the company faces the daunting task of rebuilding investor confidence in the wake of these recent developments. How the company addresses its challenges and navigates the difficult market environment will be crucial for its future performance and share price recovery.
