Impax Asset Management (IPX) 

AUM was up by £2.2bn or 6% over H1-24, reaching £39.6bn on 31 Mar 24 (30 Sep 23: £37.4bn). This was a top-third growth rate among a London-listed peer group (page 2). While sustainable investing flows around the world have been subdued, we are seeing some early signs of a return to stronger flows (page 4). And encouragingly, Impax has announced the successful close of its fourth private markets infrastructure fund, raising €459m, its largest raise to date. 

H1-24 revenue of £86.2m was down 2% y-o-y from £88.0m in H1-23 on lower average AUM levels and an unchanged average fee margin of 45bps. However, an AUM recovery during the period saw run-rate revenue increase from £169.0m on 30 Sep 23 to £177.1m.

Adjusted operating costs* increased a touch over H2-23 from £59.7m to £60.3m and were in fact below the £60.6m of H1-23, indicating that cost increases are dropping off as previously guided by Impax. We remind readers that over FY23 adjusted operating costs increased by 11% mostly due to a period of increasing staffing levels to ensure the business was equipped to support further growth, and further investments in systems, infrastructure, risk, and compliance were made. 

Adjusted operating profit fell 5% from £27.3m to £25.8m, and adjusted operating margin fell to 30.0% from 31.1% in H1-23. We expect this margin to be around the 30% mark for FY24 and then ratchet up to the high-30s or even 40% over the medium term as the business adds AUM and benefits from operating leverage following its recent investments in capacity. 

Impax has a net cash position of £65m, no debt, and a regulatory capital surplus of £60.7m (H1- 23: £59.8m). This surplus can be used to pursue organic or acquisitive growth opportunities, buy shares for the employee benefit trust (to avoid dilution from share awards), and the like. 

Still appears materially undervalued 

Taking a slightly cautious view on net flows and market movements for the remainder of FY24, we have adjusted our AUM and revenue forecasts marginally downwards. But we have also decreased our cost forecasts, on lower-than-expected operating costs. Our longer-term forecasts are therefore virtually unchanged, and our fundamental valuation remains 800p per share, c 60% above the share price. We also see Impax’s PER of 16.5 as an undemanding rating.

Read or download the full report here....