Perpetual Disappoints With Another Profit Downgrade
The Age
Wednesday May 28, 2008
PERPETUAL has again disappointed the market, announcing its fourth profit downgrade this financial year and highlighting its vulnerability to turmoil in credit and share markets.
The fund manager yesterday said it expected profit of between $130 million and $140 million for the 2008 financial year, shy of market expectations of $150 million and the $145.3 million it made last year. Its total funds under management were 17% lower this April than in June last year, at $32.6 billion, lowering the base from which the company collects its performance fees. The main reasons for the downgrade were falling asset prices and investors pulling their money from the fund, deterred by the market's volatility, the company said. Perpetual's share price fell more than 4% in response to the news, from $51.45 to $49.26. It has now fallen more than 10% since early last week. In a sign of the difficulties facing the fund manager, Perpetual chairman Robert Savage said the downgrade assumed no further declines in the sharemarket. "It is important to note that Perpetual's capacity to deliver on this result is premised on the All Ordinaries Index remaining at its current level. Any sizeable movements in the market between now and the end of the 2008 financial year will ultimately have a bearing on our performance," Mr Savage said in a letter to shareholders. But many analysts are less optimistic. Morgan Stanley chief market strategist Gerard Minack said the sharemarket was likely to dip over the next six months, and the key question was, how far. "This is going to be a two-stage bear market. We've had the first stage, which has been centred on finance, and the second one will be more related to economic growth," Mr Minack said. The news from Perpetual follows three successive profit downgrades relating to its Exact Market Cash Fund, which had incurred $26.2 million in losses for the year to the end of April.Despite the profit downgrade, Mr Savage said the company was optimistic in the longer term, based on high forecast growth in superannuation funds available for investment. Perpetual's closing share price of $49.26 was near its lowest in two months, and well short of the peaks above $80 that it reached in August.
© 2008 The Age
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