A former darling of the Aim junior share market has issued a profit warning after being sacked by Britain’s biggest wealth manager, St James’s Place.
Impax Asset Management, which specialises in sustainably-badged investments, warned that profits would be below consensus this year and revealed that clients including SJP had pulled a net £7.7 billion from the firm in the March quarter.
Disappointing investment performance reduced assets under management (AUM) by another £990 million, leading to the total figure tumbling by more than a quarter to £25.3 billion in the last three months.
Shares in Impax were marked 30p, or 20 per cent, lower to 121p, valuing the firm at £140 million. Four years ago, at the height of investor enthusiasm for green investment, the firm was valued at £1.5 billion, making it one of the most valuable companies on London’s junior market.
Ian Simm, founder and chief executive of Impax Asset Management Group, described it as a “challenging quarter”. The lost SJP mandate shrank assets by £5.1 billion, while “a small number” of other institutional clients closed their accounts.
“Market conditions in the second half of the year [to 30 September] remain highly uncertain. Given the fall in our AUM and the impact on global markets of an escalating trade war, we anticipate that full year profits will be below market expectations.”
Impax originally announced the lost SJP mandate in December, sending its shares falling 25 per cent on the day to 246p. They have halved again since then amid a souring of sentiment on green investment.
Impax invests in a variety of sustainably-tinged investments in renewable energy, waste management, agriculture and electrification products. It is best known in the UK for its management of Impax Environmental Markets (IEM), a £700 million investment trust and FTSE 250 constituent.
Simm said escalating global trade tensions were adding to the firm’s difficulties. “People are running for the hills and moving into [safe haven investments like] money market funds and fixed income.”
But he said the firm’s investment approach usually did comparatively well in volatile markets. “We generally outperform in torrid times,” he said.
Impax has been reducing costs in the face of client outflows, cutting staff numbers from 320 to 290.
Analysts cut their forecasts for pre-tax profits at Impax this year from £42 million to £34 million. Forecasts for the dividend were unchanged at 28p. Impax had cash of £90.8 million as at September 31.
Analysts at Investec said: “Whilst negative net flows were in line with our expectations, negative impacts from performance, market movement and foreign exchange were more pronounced and, given the likely escalation of trade wars, we do not expect the environment to become any more supportive in the near-term.”
SJP moved the sustainable mandate, which had been managed by Impax since 1999, because it wanted it to invest in a broader range of assets. The investment style was used by 177,000 SJP clients. It was switched to Schroders in January.
Simm personally owns 7.5 per cent of Impax and bought more shares in February. “We’re here for the long-term,” he said. “We’ll weather the storm.”
IEM recently reaffirmed its commitment to sticking with Impax as its manager. The trust is one of more than 20 being targeted by Saba, the activist investment firm run by Boaz Weinstein. Saba has accumulated a 7.5 per cent stake, mainly through derivatives known as total return swaps. It has not made any demands of IEM so far. A vote on whether to continue the trust is due in May.
