Dear Shareholder

I am pleased to report that Perpetual has achieved a solid result in FY16 despite challenging conditions. Statutory net profit after tax (NPAT) of $132 million is up 8% on FY15, and our dividend payment increased by 6% over the same period. This means shareholders receive a fully franked final dividend of 130 cents per share, taking fully franked dividends for the year to 255 cents per share.

Achieving these positive results in a volatile market is testament to the disciplined execution of our strategy – indeed the greater diversity of our revenue streams that underpin this result are a key part of that strategy. 

We’ve diversified and invested in the business, while remaining true to our underlying values – values which have stood the test of time. The success of Perpetual’s Industrial Share Fund – turning 50 this year – validates our disciplined approach to value investment. In that fund, as in all our others, we continue to avoid investments that don’t pass our value and quality filters.

A particular highlight for me over the past year was seeing a great result from our investment in and commitment to the native title segment. Perpetual has been named Trustee-in-Waiting for the Noongar Boodja Trust, the largest and most comprehensive agreement to settle Aboriginal interests over land in Australia’s history. It’s an opportunity that’s been welcomed across the business – as we wrote in our tender letter:

‘We recognise the opportunity acting as Trustee gives us. To learn more of the Noongar culture every day. Patiently, respectfully, in country, listening to Noongar Elders, representatives and others talk about their history and their future, their connection to country. That, to us, is what partnership means.’

The year that was

Looking back at the year that was, we measure ourselves on the outcomes we have delivered for our shareholders, our clients and our people. Not only have we issued our largest dividend to shareholders in five years, we have also achieved our highest profitability, client advocacy and employee engagement scores over that period. I think this is an outstanding result.

Perpetual is a more diversified business than ever before, and this provides significant scope to succeed in a changing market. I’m confident we have positioned the business well with a strong balance sheet and the agility to capitalise on future opportunities – whether they’re in new investment products, data services, the digital space, native title, philanthropy or financial planning services for private clients and professionals. 

Perpetual Investments

Perpetual Investments delivered a solid result despite the effect of market volatility over the year. The results it achieved flowed from disciplined investing, tight cost control and long-term outperformance of the funds. 

Our Australian equities team proved particularly strong in the extensions from our core equity strategy. To take one example, the Perpetual SHARE-PLUS Long-Short Fund exceeded $1 billion in funds under management this year. With arguably the most highly regarded Australian equities capability in Australia, we are well positioned to capitalise on the growing pool of superannuation assets.

We are pleased with the performance of our Diversified Real Return and Global Share Fund, both achieving top quartile performance over five years, and with our Pure Credit Alpha Fund delivering rolling three year outperformance. As envisaged in our Lead & Grow strategy, our proven value investing philosophy and increasing diversity across our multi-asset, global equities, and credit and fixed income capabilities has allowed us to bring more relevant solutions to our clients and maintain good revenue margins. 

Perpetual Private

Our target for Perpetual Private has always been clear – we want it to be Australia’s premier high net worth advice business. We took more steps in that direction this year with further moves in our targeted segmentation strategy – for example in the medical segment where the acquisition of Fintuition and its education arm, The Private Practice, really bolstered our offer. 

We added six new partners to our Fordham accounting business, which has a strategy to grow up the Eastern seaboard and saw revenue grow strongly. The results of these moves – and the hard work of our people – can be seen in Perpetual Private’s six consecutive halves of positive net flows and the welcoming of more than 100 new clients this year.

Perpetual Corporate Trust 

This year we saw Perpetual Corporate Trust again deliver a very strong and sustainable performance. Perpetual Corporate Trust is continuing to diversify the business – there’s now a good balance of income between Fund Services and Trust Services. 

Within those areas, we have seen Managed Funds grow strongly via the managed investment trust (MIT) structure – as a result of record inbound capital flows and the continuing attractiveness of commercial property and infrastructure in Australia. There is an opportunity for us to lock down a sustainable annuity revenue stream from that business. 

In Trust Services the big driver was the higher margin residential mortgage-backed security (RMBS) business – we saw compound annual growth of 7% in the mortgage market. The ABS (asset-backed securities) business was boosted by auto and consumer financing. 

In the Trust Services business, we are also seeing the fruits of genuine innovation. Data services is a new growth area that is underpinned by our trusted position as the repository of vast amounts of mortgage data but realised through the latest digital data analytics technologies. We are only beginning to scratch the surface as to the ways in which we can package this service to meet the varied needs of our clients. 

Big steps forward, a long way to go…

At Perpetual, we start work every day with some great advantages – a long, rich heritage, a strong brand, a proven value proposition for our clients and a great team of people. 

In this, the first year of our Lead & Grow strategy, we’ve tried to build on those strengths, to shape a business our clients and partners can rely on in good times – and when times are tough. 

This year has seen greater volatility and therefore greater uncertainty for our clients. It has tested our business model, but we’re really proud of the service we’ve delivered for clients and the returns we’ve delivered for shareholders. 

Our strategy is deeply understood across our company – and that clarity and focus, along with our values of integrity, partnership and excellence, give me great confidence in the next steps on that strategic path and in what we can deliver for clients, shareholders and our people as a result. 

GEOFF LLOYD
Chief Executive Officer and Managing Director