Platinum Asset Management Limited (ASX:PTM) late yesterday reported a net profit from ordinary activities after tax of $192.6 million. on revenues of $333.5m for the 2016-17 financial year. These figures are down 3.2% and 3.6% respectively on the 2015-16 figures.
Net profit attributable to members was $186m, also down on last year's to the tune of 7.4%.
The reason for the difference in net profit from ordinary activities and net profit attributable to members, management says, is due to the deconsolidation of its Irish UCITS Fund from the consolidated entity.
Average funds under management (FUM) for the year fell 9.6% to $23.4 billion despite delivering strong absolute and relative returns for its clients throughout the year. Management explains that this reduction in FUM was due to an historical under-performance by its various managed funds hence making it more difficult to attract new money.
Fee revenue was therefore down 7.5% to $312.5m leading to the 7.4% reduction in net profit attributable to members referred to above.
It's going to be important for Platinum that the recent good returns it's achieving for its clients is maintained. Clients can be fickle and, despite an excellent long-term record — the Platinum International Fund for example has delivered investors a 12.7% per annum return since 1995 – it's the short-term results that are just as important.
In this regard, 2016-17 has been a good year with, for example, the Platinum Unhedged Fund returning over 16% above the index it's benchmarked against, and it's hoped that returns similar to this across its suite of funds will be recognised and attract new new money to the business.
1 July 2017 is also the beginning of a lower fee regime for the company. Back in April, it was announced that the base fee of the Platinum funds would be lowered to 1.1% (previously 1.54%) but coming with a 15% outperformance fee.
It's unknown at this early stage how this will affect overall fee income. Whether the hoped-for increase in FUM will more than offset the fee reductions remains to be seen, but if its recent strong investment performance continues, then Platinum will be well placed with shareholders to benefit from higher dividends and a higher share price 12 months from now.
Platinum's final dividend was 15 cents per share fully franked and will be paid on 22 September 2017 for investors who hold shares on or before 29 August 2017. At the current price of $5.40 this provides income-seeking investors with a healthy 5.5% yield.
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