Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Pinnacle Investment Management Group Ltd (ASX:PNI) reported a significant increase in net profit after tax, up 151% to $75.7 million compared to the previous year.
• Earnings per share rose by 140%, reflecting strong financial performance.
• The company achieved a 15.7% increase in funds under management, reaching $155.4 billion by the end of December 2024.
• Strong performance fees were realized, particularly from the Hyperion affiliate, contributing $36.4 million after tax.
• Pinnacle's international expansion shows promise, with $45 billion of funds under management from clients in over 40 countries outside Australia.

Negative Points

• Despite strong market conditions, fundraising for active public equities managers remains challenging.
• The company's financials are complex, with some affiliates still in the investment phase, impacting immediate profitability.
• There is a noted lag in retail equity inflows, which have not yet matched the market's upward trends.
• The Pinnacle parent company reported a loss when adjusting for fair value gains, indicating potential challenges in core operations.
• Concerns were raised about the private credit market, with specific attention to metrics and potential issues within the funds.

Q & A Highlights

• Warning! GuruFocus has detected 8 Warning Signs with ASX:PNI.

Q: Can you provide more details on the retail equity flows and what gives you confidence that they will increase? A: (Kyle McIntyre, Head of Retail) We've seen an uptick in equity flows recently, particularly in the last eight weeks, which we expect to continue. We have compelling top quartile performers like Hyperion and Plato, and we're rolling out new strategies like Life Cycle. If market conditions remain favorable, we anticipate increased retail flows into equities.

Q: What is the outlook for affiliate earnings, excluding performance fees and investments? A: (Dan Long, CFO) Affiliate profits were steady this half, with some affiliates like Antipodes and Maple Brown Abbott undergoing integration, which incurred costs. We expect improvements in the second half as these costs decrease and new initiatives like Life Cycle gain traction.

Q: Can you discuss the acquisition pipeline and any changes in opportunities, especially internationally? A: (Ian McCowan, Managing Director) Our international reputation is growing, leading to more opportunities. We're expanding distribution in the UK and Europe, and while there are more opportunities than ever, we maintain high standards and proceed carefully. We raised additional capital to support future acquisitions.

Q: What is the starting point for fee margins as we head into the second half and FY26? A: (Dan Long, CFO) Fee margins are slightly up from the previous year, supported by higher retail and international funds. While we don't target specific margins, we expect revenue growth to continue, driven by these higher-fee segments.

Q: How should we think about the Pinnacle parent profit, especially with the fair value gains adjustment? A: (Dan Long, CFO) The Pinnacle parent is primarily an enabler for affiliate growth, and we don't target specific profit outcomes. However, we expect higher revenue growth in the medium term, which may lead to increased profits over time.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.