Impax Asset Management Group plc Half-year Report (0835B)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Impax Asset Management Group Plc	LSE:IPX	London	Ordinary Share	GB0004905260	ORD 1P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.50	0.11%	461.00	461.50	464.00	469.00	450.00	450.00	361,056	16:35:13

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Investment Advice	178.64M	39.22M	0.3057	15.18	595.42M

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RNS Number : 0835B

Impax Asset Management Group plc

31 May 2023

Impax Asset Management Group plc

Interim results to 31 March 2023

London, 31 May 2023 - Impax Asset Management Group plc ('Impax' or the 'Company'), the specialist investor focused on a more sustainable global economy, today announces interim results for the six months to 31 March 2023 (the 'Period').

H1 Business highlights

-- Positive net inflows of GBP1.1 billion during the Period, well diversified by channel and geography. Additional contribution to AUM of GBP 3.3 billion from market movements, investment performance and the impact of foreign exchange effects

   --      Continued long-term outperformance of major strategies versus respective benchmarks

-- Expanded international footprint and direct distribution capabilities, including opening a new office in Tokyo, Japan

-- Expanded product base, including launching an actively managed listed equities fund investing in sustainable infrastructure

H1 Financial highlights

   --      AUM GBP40.1 billion as at 31 March 2023 (H1 2022: GBP38.0 billion; H2 2022 GBP35.7 billion) 
   --      Revenue of GBP88.0 million (H1 2022: GBP88.6 million; H2 2022: GBP86.8 million)

-- Adjusted operating profit of GBP27.3 million (H1 2022: GBP34.0 million; H2 2022 GBP33.4 million)

   --      Shareholders' equity at Period end GBP119.7 million (H2 2022: GBP112.3 million) 
   --      Adjusted diluted earnings per share of 17.2 pence (H1 2022: 21.1 pence; H2 2022 21.0 pence)

-- Interim dividend per share of 4.7 pence (H1 2022: 4.7 pence; FY 2022, Total dividend 27.6 pence)

Ian Simm, Chief Executive commented:

"Impax has delivered a solid first half to its financial year, despite challenging macroeconomic conditions. During the Period, our AUM rose by 12% to reach GBP40.1 billion, driven by positive net flows of GBP 1.1 billion. By 30 April 2023, our AUM had fallen slightly to GBP39.4 billion.

"Thanks to positive net flows and rising equities markets, our revenue grew compared to the second half of 2022, while adjusted operating profit fell, reflecting our investment in people and systems to support our growth strategy and to increase our operational resilience. We continue to carefully manage our costs in line with external market conditions and at the end of the Period, our run-rate adjusted operating margin was 31.8%, only slightly lower than the equivalent figure at the start of the Period (32.6%).

"Impax's specialist approach positions us well to benefit particularly from supportive policy and regulatory drivers, including the Inflation Reduction Act in the US and equivalent measures in Europe and Asia. Asset owners and advisers continue to be attracted to the investment opportunities arising from the transition to a more sustainable economy and, notwithstanding the current backdrop of weak market sentiment, our pipeline of new business remains healthy."

The presentation for shareholders and analysts will be available to view on the Company's website later this morning: https://www.impaxam.com/investor-relations/reports-and-presentations

Enquiries:

 
 Impax Asset Management Group 
  plc 
  Ian Simm, Chief Executive 
  Paul French, Head of Corporate 
  Communications                       +44 (0)20 3912 3000 
 Montfort Communications 
  Gay Collins 
  Jack Roddan                          +44 (0)77 9862 6282 
  impax@montfort.london                +44 (0)78 2567 0695 
 Peel Hunt LLP, Nominated Adviser 
  and Joint Broker 
  Paul Shackleton or John Welch        +44 (0)20 7418 8900 
 
  Berenberg, Joint Broker 
  Gillian Martin                       +44 (0)20 3207 7800

LEI number: 213800AJDNW4S2B7E680

About Impax

Founded in 1998, Impax is a specialist asset manager, with approximately GBP39.4 billion as of 30 April 2023 in both listed and private markets strategies, investing in the opportunities arising from the transition to a more sustainable global economy.

Impax believes that capital markets will be shaped profoundly by global sustainability challenges, including climate change, pollution and essential investments in human capital, infrastructure and resource efficiency. These trends will drive growth for well-positioned companies and create risks for those unable or unwilling to adapt.

The company seeks to invest in higher quality companies with strong business models that demonstrate sound management of risk. Impax offers a well-rounded suite of investment solutions spanning multiple asset classes seeking superior risk-adjusted returns over the medium to long term.

Impax has approximately 290 employees across its offices in the United Kingdom, the United States, Ireland, Hong Kong and Japan, making it one of the investment management sector's largest investment teams dedicated to sustainable development.

www.impaxam.com

Chief Executive's Report

Business Update

Impax delivered a solid first half to its financial year, which includes the six months to 31 March 2023 ("the Period"). Despite challenging macroeconomic and inflationary conditions, we reported positive net flows, benefiting from rising equities markets and the relative outperformance by our major investment strategies.

During the Period, Impax's assets under management and advice ("AUM") rose by 12.4% to reach GBP40.1 billion. This was driven by positive net flows of GBP1.1 billion, and GBP3.3 billion from market movements, investment performance and the impact of foreign exchange movements. By 30 April 2023, our AUM had fallen slightly to GBP39.4 billion.

While all asset managers currently face a complex operating environment, our performance demonstrates the robust nature of the Company and how Impax's specialist approach enables us to benefit from supportive secular, policy and regulatory drivers. Some significant mandate wins during the Period also highlight how asset owners and their advisers continue to be attracted to the investable opportunities arising from the transition to a more sustainable economy and, notwithstanding the current backdrop of weak market sentiment, our pipeline of new business remains healthy.

Markets

During the six months of the Period, global equities posted modest gains. Corporate revenues broadly remained strong, but earnings were under pressure as higher costs impacted companies' margins. Economic data meanwhile was mixed with indicators in the US and Europe signalling contraction.

Investors' attention continued to be focused on inflation, interest rates and the potential impact on the real economy. Market sentiment swung between optimism that the rate cycle would soon peak and concern that central banks would continue to raise rates too far as they attempt to combat inflation.

Meanwhile, policy support continues to provide tailwinds for investors focused on the transition to a more sustainable economy. The US' Inflation Reduction Act, the EU's Green Deal Industrial Plan, and similar climate-related measures in China and India, have already attracted capital flows into many areas of the economy in which Impax invests. This includes opportunities around renewables, transformation of the grid, and electric vehicles.

Investment Performance

Impax offers actively managed Listed Equities strategies that use our Environmental Markets taxonomies and the Impax Sustainability Lens, as well as strategies in Fixed Income and Private Markets.

For the six-month Period, all of our thematic Environmental Markets strategies outperformed their benchmarks. Two out of three of our Sustainability Lens equities strategies outperformed their benchmarks, including Global Opportunities, our largest strategy, which outperformed the MSCI All Country World Index by 4.5%.

Meanwhile, in Fixed Income, the Core Bond strategy and the High Yield strategy both performed broadly in line with their benchmarks.

Longer term, eight out of our ten largest strategies, accounting for 90.4% of our AUM, have continued to outperform their benchmarks over five years, with seven out of ten outperforming over three years.

AUM movement for the Period

 
                                           Listed     Fixed    Private    Total 
                                         equities    income    markets     firm 
                                             GBPm      GBPm       GBPm     GBPm 
-------------------------------------  ----------  --------  ---------  ------- 
 Total AUM at 30 September 2022            33,801     1,354        521   35,676 
 Net flows                                  1,089        11         23    1,123 
 Market movement, FX and performance        3,376      (61)          1    3,316 
-------------------------------------  ----------  --------  ---------  ------- 
 Total AUM at 31 March 2023                38,266     1,304        545   40,115 
-------------------------------------  ----------  --------  ---------  -------

Client Service and Business Development

We continued to expand our international footprint, focusing on strengthening our own direct distribution capabilities, especially in Europe, and consolidating our partner relationships, particularly in the US and Asia-Pacific. We also made good progress in developing and launching new products and building our brand.

In March we opened a new office in Japan, following our selection by the Tokyo Metropolitan Government to receive a Green Finance Subsidy. We have served Japanese clients since 2008 and were pleased to win a significant segregated mandate from a Japanese pension fund during the Period.

In the US, we also announced that the Pax World mutual fund range would be renamed under the Impax brand, becoming the Impax Funds, effective 31 December 2022. We have increased the availability of the Impax Funds on several of the largest wealth management platforms. For US institutions, we intend to make these Funds available for larger defined contribution plans, with the launch of two sub-trusts of a collective investment trust ("CIT") later this year.

In the UK and European Union, we continued to see a shift towards our own direct distribution channels. Overall, the proportion of revenues from the BNP Paribas Asset Management range of SICAV mutual funds fell to 29%, compared to 32% in March 2022.

Inflows during the Period were directed particularly into our Sustainability Lens equities strategies, with the US Large Cap strategy seeing net inflows of GBP751 million. This included a Japanese pension fund mandate and the launch of a sub-advisory mandate with ABN AMRO. Global Opportunities saw net inflows of GBP708 million, including subscriptions through our distribution relationships with St. James's Place in the UK and Formuepleje in Denmark.

Of our thematic Environmental Markets equities strategies, Climate and Sustainable Food received the greatest investor interest and saw net inflows of GBP211 million and GBP77 million respectively.

Our Ireland-based UCITS fund range grew by 2.7% to GBP2.0 billion, despite net outflows of GBP117 million. Impax Environmental Markets plc saw its total net assets increase by 6.8% during the Period. In the US, the Impax Funds' (formerly Pax World funds) AUM grew by 14.5% to US$8.2 billion, despite net outflows of US$194 million.

Within Private Markets, our team successfully exited two Spanish solar PV investments through our third fund. The fourth fund has been fundraising while progressing its investment programme, with eight projects closed and EUR107.5 million invested by the Period end. In April, the fourth fund also held the third close of its fundraising, taking total capital commitments to EUR300.3 million by 30 April 2023.

As part of our new product development, we launched an actively managed, listed equities UCITS fund investing in Sustainable Infrastructure in November.

We are currently developing a new listed equities product targeted at Social themes, with a launch planned for the second half of the calendar year and are exploring a number of opportunities in fixed income.

All our funds marketed into Europe for which an Impax entity acts as the sponsor and management company, are classified as either Article 8 or 9 under the EU's Sustainable Finance Disclosure Regulation ("SFDR"). We believe that this regulation, along with its equivalents in the US and UK, will be positive for our business.

Meanwhile, we continue to invest in our brand and enhance the client experience beyond the pursuit of financial returns. This includes activity relating to stewardship, policy advocacy, environmental & social impact, and insights, including current research with Imperial College, London on biodiversity and with the University of Oxford on physical climate risk. Informed by our 25-year history focusing on this area, we believe this increases our and our clients' understanding of investable opportunities and enables us to better manage risk.

After the Period end, we were pleased to be one of eight asset managers to categorised as a "Leader" by Morningstar for our incorporation of ESG factors into our investment process. Morningstar evaluated 94 companies globally for its report.

Corporate services

Through our recent growth we have been selectively investing in systems, infrastructure, risk and compliance capabilities to increase our operational resilience and procedures as the business expands.

During the Period we moved our customer relationship management system to Salesforce, in order to establish a scalable platform for client relations. We have also extended our data management capabilities and automated some processes within the middle office.

To support our expanding business, we continued to hire during the Period, albeit at a slower rate than in the recent past. By the end of the Period, our number of employees had risen by 6% to 289.(1)

   1.    Full-time equivalent.

While we continue to invest in our people and systems to support our growth strategy and increase our resilience, we are carefully managing our costs in line with external market conditions.

Performance for Environmental Markets strategies (1, 2, 3)

 
                                           Cumulative returns (%), GBP, gross 
                                                         of fees 
-------------------------  ----------  ----------------------------------------- 
                                  AUM         6M         1YR       3YR       5YR 
 Leaders                     GBP7.8bn       13.9         5.9      70.2      73.4 
 Water                       GBP6.2bn       13.1         5.6      78.9      86.8 
 Specialists                 GBP3.6bn        7.5       (1.3)      78.3      76.6 
 Climate                     GBP3.1bn        6.4       (2.7)      67.7      75.2 
 Sustainable Food            GBP1.5bn        9.7         0.9      51.5      43.8 
 MSCI ACWI                                   6.3       (1.4)      54.0      58.6 
 Asian Environmental         GBP1.5bn        7.7       (1.1)      50.9      45.6 
 MSCI Asia Pac Composite                     5.9       (2.4)      27.5      18.5

Performance for Sustainability Lens Listed Equities strategies(1,2)

 
                                        Cumulative returns (%), GBP, gross 
                                                      of fees 
                               AUM          6M        1YR      3YR        5YR 
----------------------  ----------  ----------  ---------  -------  --------- 
 Global Opportunities     GBP9.0bn        10.8        4.2     60.8       88.7 
 MSCI ACWI                                 6.3      (1.4)     54.0       58.6 
 US Large Cap             GBP2.0bn         3.1      (3.0)     72.9      107.9 
 S&P 500                                   4.4      (1.7)     67.3       92.8 
 US Small Cap             GBP0.5bn         1.7      (1.4)     73.0       51.4 
 Russell 2000                            (1.5)      (5.9)     62.7       42.8

Performance for Sustainability Lens Fixed Income strategies(1,3)

 
                                             Cumulative returns (%), GBP, gross 
                                                           of fees 
                              AUM         6M           1YR     3YR         5YR 
---------------------------  ----------  -----------  ------  ----------  -------- 
 High Yield Bond              GBP0.6bn    (2.7)        1.6     13.7        32.6 
 ICE BofA US Cash Pay High 
  Yield Constrained (BB-B)                (2.5)        3.3     17.1        33.1 
 Core Bond                    GBP0.7bn    (5.3)        1.8     (5.7)       20.6 
 Bloomberg US Aggregate                   (5.3)        1.4     (7.8)       18.7

1. AUM (GBP as at 31 March 2023). The strategy returns are calculated including the dividends re-invested, net of withholding taxes, gross of management fee, and are represented in sterling.

2. MSCI AC AP Composite is a custom-made benchmark made up of 80% MSCI AC Asia Pacific ex-Japan and 20% MSCI Japan rebalanced daily. MSCI indices are total net return (net dividend re-invested).

3. MCSI indices are total net return (net dividend re-invested). S&P, Russell, ICE BofA, and Bloomberg indices are all total gross return.

Financial results for the period

Revenue for the six months to 31 March 2023 increased to GBP88.0 million compared to the second half of 2022 (H1 2022: GBP88.6 million, H2 2022: GBP86.8 million). This was driven by both positive net flows across the business of GBP1.1 billion along with positive market movements. At the end of the Period the weighted average run rate revenue margin was 45 basis points (30 September 2022: 46 basis points) on the GBP40.1 billion of AUM.

Adjusted operating costs for the Period increased to GBP60.6 million (H1 2022: GBP54.7 million, H2 2022: GBP53.3 million), reflecting our continued investment in people, technology and operational resilience to support our growth ambitions while being mindful of the current broader market conditions. IFRS operating costs of GBP63.1 million (H1 2022: GBP56.7 million, H2 GBP53.5 million) includes GBP2.5 million, (H1 2022: GBP2.0 million, H2 GBP0.2 million) of charges that do not reflect the operating performance of the Group which have been removed for adjusted measures. A reconciliation of adjusted to IFRS measures is provided in Note 3.

Adjusted operating profit for the Period was GBP27.3 million (H1 2022: GBP34.0 million, H2 2022: GBP33.4 million). The decrease from H2 2022 is a result of the investment in our growth discussed above offset in part by the growth in revenue. As a result, operating profit margin reduced to 31% (H1 2022: 38%, H2 2022: 39%). Run rate adjusted operating margin at the end of the Period remained a robust 31.8% (H2 2022: 32.6%). Run rate annualised adjusted operating profit was GBP58.0 million at the end of the Period (H1 2022: GBP65.2 million, H2 2022: GBP54.3 million).

Adjusted profit before tax of GBP28.2 million (H1 2022: GBP34.0 million2, H2 2022: GBP34.4 million) and adjusted diluted earnings per share of 17.2 pence (H1 2022: 21.1 pence, H2 2022: 21.0 pence) include net finance income of GBP0.9 million (H1 2022: GBP0.0 million, H2 2022 GBP0.9 million).

IFRS profit before tax of GBP21.4 million (H1 2022: GBP32.7 million, H2 2022: GBP39.9 million) and IFRS diluted earnings per share of 12.8 pence (H1 2022: 20.1 pence, H2 2022: 24.6 pence) reflect the increased operating costs and foreign exchange losses of GBP4.9 million recognised in the Period, most of which is attributable to the unrealised foreign exchange losses on the retranslation of intercompany loans and other assets held in foreign currencies.

Financial Highlights For H1 2023 Versus H1 2022 and H2 2022

 
                                         H1 2023    H1 2022     H2 2022 
-------------------------------------  ---------  ---------  ---------- 
 Revenue                                GBP88.0m   GBP88.6m    GBP86.8m 
 Adjusted operating costs               GBP60.6m   GBP54.7m    GBP53.3m 
 Adjusted operating profit              GBP27.3m   GBP34.0m    GBP33.4m 
 Adjusted diluted earnings per share       17.2p      21.1p       21.0p 
 Adjusted profit before tax             GBP28.2m   GBP34.0m    GBP34.4m 
 IFRS profit before tax                 GBP21.4m   GBP32.7m    GBP39.9m 
 IFRS diluted earnings per share           12.8p      20.1p       24.6p

TAX

The effective tax rate has increased due to an increase in the main corporation tax rate in the UK from 19% to 25% from 1 April 2023. As such, a blended rate of 22% has been applied for the Period (2022: 19%).

Financial resources

The Company continues to be a strongly cash generative business with high levels of cash and no debt. Our cash reserves were GBP61.8 million at the Period end (H1 2022: GBP67.4 million). We continue to hold seed investments and to invest in our private equity funds, and these investments were in total valued at GBP10.1 million at the Period end (H1 2022: GBP6.2 million).

Dividends

A final dividend for 2022 of 22.9 pence per share was paid in March 2023, following approval at the Annual General Meeting. This took the total dividend paid for 2022 to 27.6 pence per share. As described above, despite uncertain

markets, the business performed well over the Period, while we continued to invest to support our growth ambitions. Reflecting this, while being mindful of the uncertain market conditions, we are pleased to announce an interim dividend of 4.7 pence (2022: 4.7 pence per share). This dividend per share will be paid on 21 July 2023 to ordinary shareholders on the shareholder register at the close of business on 16 June 2023. The Company operates a dividend reinvestment plan ("DRIP"). The final date for receipt of elections under the DRIP will be 30 June 2023. For further information and to register and elect for this facility, please visit www.signalshares.com and search for information related to the Company.

Share management

The Board will consider purchasing the Company's shares from time to time after due consideration of alternative uses of the Company's cash resources. Share purchases are usually made by the Group's Employee Benefit Trust ("EBT") (subject to the trustees' discretion), using funding provided by the Company.

During the Period, the EBT purchased 1.4 million of ordinary shares at a weighted average price of GBP7.13 per share. The EBT holds shares for Restricted Share awards until they vest or to satisfy share option exercises.

At the Period end the EBT held a total of 3.6 million shares, 2.8 million of which were held for Restricted Share awards leaving up to 0.8 million available for option exercises and future share awards. At the end of the Period, there were 2.0 million options outstanding, none of which were exercisable.

Outlook

Although the macroeconomic backdrop remains challenging, the easing of inflationary pressures, due to lower energy prices and the lessening of supply chain disruptions is expected to bring some relief for businesses in the near term.

Market volatility is likely to persist so long as inflation remains elevated and until there is greater certainty that the interest rate cycle has peaked.

Against this backdrop, we believe that high-quality companies with structural growth drivers benefiting from the transition to a more sustainable economy continue to present attractive investment opportunities.

Areas of investment interest include the beneficiaries of increased spending on drug discovery and testing, companies providing access to finance and businesses enabling the rise of the sharing and circular economy.

Meanwhile, recent policy moves such as the Inflation Reduction Act in the US and equivalent measures in Europe and Asia mean that companies in sustainable infrastructure, renewable energy and resource efficiency are well positioned to benefit, as policymakers continue to prioritise energy security and fulfil their net-zero commitments.

Despite these policy tailwinds, the operating environment in the US has been complicated recently by the move by some Republican politicians to campaign against "ESG investing", branding asset managers' focus on environmental, social and governance issues as "woke".

Our experience to date is that this criticism is largely limited to states in which Impax is not active and that our focus on economic transition and mainstream fundamentals rather than "ESG" has wide appeal.

Later this year, we will celebrate 25 years of our founding and a quarter-century of investing in the transition to a more sustainable economy. Our understanding of the opportunities and risks associated with the major sectoral transformations that are underway across the economy continue to attract asset owners and their advisers globally.

Our performance during the Period demonstrates the resilience and strength of our diversified business model. Our authenticity and heritage and our commitment to delivering an outstanding service to our clients, continue to make us well-placed to continue to provide long-term value for all our stakeholders.

Ian Simm

Chief Executive

30 May 2023

Condensed Consolidated Income Statement