Cost increases hit Impax

Impax Asset Management (IPX) suffered the wrath of the market as the sustainable investing asset manager's interim results showed further rises in costs at the point when revenues are static. The predictable result was a big fall in the company’s reported pre-tax profits, which was enough to prompt investors to mark the shares down by 10 per cent on results day. This highlights the anxieties over whether the company’s emphasis on environmental, social and corporate governance (ESG) investing has lost traction due to greenwashing scandals in the wider asset management industry, as well as increasing political attacks on ESG in the US.

Assets under management increased over the half from £35.7bn to £40.1bn, helped by net inflows of £1.1bn, although management noted that this had fallen back after the period end. IFRS costs, which include items such as intangibles amortisation, increased by 12.5 per cent to £63.1mn while revenues stayed flat. There was also a noticeable rise in receivables – invoices issued but not yet paid – of £4.5mn, or more than 11 per cent.

Ian Simm, chief executive of Impax, said: “From our perspective, we have to ensure that our clients are supported, which can mean spikes in short-term costs before the next stage of growth in the business.” He also emphasised that Impax isn't really an early-stage investor – its investments are already cash generative, for instance – but that the company tended to be associated with momentum strategies which are market-sentiment driven.  

Long-term shareholders have made healthy profits over the past five years, but at a forward price/earnings ratio of 17 times Berenberg’s forecasts, the valuation looks full. Hold.

Last IC view: Hold, 735p, 1 Jun 2022