Impax Asset Management Regulatory News (IPX)

Impax Asset Management Group plc

Results for the year ended 30 September 2015

London, 3 December 2015 - Impax Asset Management Group plc ("Impax" or the "Company"), the AIM quoted investment manager focused on environmental markets and related resource efficiency sectors, today reports final audited results for the year ending 30 September 2015 (the "Period").

Business update

· Net inflows of £77 million for the year

· Investing for continued growth

· Strong listed equities performance and progress with product development

· Fund raising for renewable power infrastructure and sustainable property funds on track

Financial performance

· Assets under management and advice ("AUM") at year end: £2.8 billion (2014: £2.8 billion), rising to £3.0 billion by 31 October 2015

· Revenue: £19.7 million (2014: £20.4 million)

· Operating Earnings1 : £3.1 million (2014: £5.3 million)

· Profit before tax: £5.1 million (2014: £3.5 million)

· Shareholders' equity £25.9 million (2014: £24.9 million)

Dividend and special dividend

· Proposed final dividend of 1.2 pence per share (2014: 1.1 pence), augmenting the interim dividend of 0.4 pence per share (2014: 0.3 pence per share)

· Board recommending a special dividend of 0.5 pence per share

Keith Falconer, Chairman, commented:

"In addition to an increased dividend for the year, the Board is pleased to recommend a special dividend of 0.5 pence per share reflecting the Company's healthy cash flow generation and strong prospects.

Investors are showing strong interest in climate change, and the COP21 talks currently underway in Paris should be a further strong catalyst for the markets where Impax focuses its investments."

Ian Simm, Chief Executive said:

Impax is one of the leading investment management brands targeting environmental and resource efficiency markets. We are making strong progress at building our product range and our relationships with investors around the world. I believe that the Company is well-positioned to deliver future value for shareholders."

1 Revenue less operating cost, excluding credits/charges related to legacy long-term incentive schemes

Enquiries:

Ian Simm Tel: + 44 (0) 20 7434 1122 (switchboard)

Chief Executive

Impax Asset Management Group plc

www.impaxam.com

Anne Gilding Tel: +44 (0) 20 7434 1122 (switchboard)

Head of Brand & Communications Tel: +44 (0) 20 7432 2602 (direct)

Impax Asset Management Group plc Tel: +44 (0) 7881 249612 (mobile)

www.impaxam.com Email: a.gilding@impaxam.com

Guy Wiehahn Tel: +44 (0) 20 7418 8893Nominated AdviserPeel Hunt LLP

Chairman's statement

During the twelve months ending 30 September 2015 ("the Period"), equity market strength was followed by significant market volatility which created difficult conditions for investment managers. The worst of the financial crisis appears to be well behind us but investors now have two overarching concerns: the rate of economic growth over the medium term, particularly in developing markets, and the timing of the expected rise in interest rates in the US and UK.

In spite of recent headwinds, we are seeing sustained, high investor interest in the resource efficiency and environmental markets where Impax Asset Management focuses its investments. The drivers of these markets have never been more compelling, and we are seeing strong market growth in many areas. In particular, a positive outcome from the UN-sponsored global climate negotiations in Paris should be an effective catalyst for many of the sectors in which we invest.

During the Period, assets under discretionary and advisory management ("AUM") rose 2.5 per cent from £2.75 billion to £2.82 billion, inclusive of net inflows of £77 million, and notwithstanding the effect of a sharp market correction in September. During the first month of the new financial year we received £67 million of net inflows, and, as at 31 October 2015, AUM had increased to £3.01 billion.

Over the year, we have made good progress across the business, with strong performance from our listed equity strategies and the further development of our renewable energy infrastructure strategy where we commenced distribution to investors from our second fund and are implementing plans to raise new monies. The sustainable property business that we acquired in 2014 has advanced steadily over the Period and our efforts to mobilise additional capital are progressing.

Results for the year

Revenue over the Period was £19.7 million (2014: £20.4 million) and profit before tax ("PBT") was £5.1 million (2014: £3.5 million). PBT benefitted from a £1.2m reserve release due to the Company reaching agreement with HMRC in respect of the previously reported uncertainty around the taxation of historical share-based incentive schemes.

Operating earnings1 for the Period were £3.1 million (2014: £5.3 million) and the associated operating margin was 15.8 per cent (2014: 26.1 per cent).

During the Period, we continued to implement a plan to scale up the business, incurring the cost of the additional team members and distribution resources to raise new monies in our real assets and listed equities businesses. At the same time, revenue from our private equity business declined in line with expectations as our second fund reached the end of its investment period. Following these developments, our private equity business is well positioned for future expansion.

The Board regards the most relevant measure of the year's earnings to be diluted earnings per share ("EPS"). On this basis, EPS was 3.13 pence (2014: 2.76 pence).

By the end of the Period, shareholders' equity had increased to £25.9 million (2014: £24.9 million) and cash reserves held by operating entities of the Group were £19.3 million (2014: £17.2 million). The Company remained debt free during the Period.

Operating cash flow for the Period was £3.8 million (2014: £6.0 million).

Proposed dividend for the Period

The Company is committed to a progressive dividend policy as a demonstration of commitment to increasing shareholder value. Following the payment of an interim dividend of 0.4 pence per share, the Board recommends a final dividend of 1.2 pence per share. If this is approved by shareholders, the aggregated dividend payment for the full year would be 1.6 pence per share, which would represent a 14 per cent increase over the dividend for the previous year (2014: 1.4 pence).

In addition, in light of the Company's healthy cash flow generation and strong prospects, the Board recommends a special dividend of 0.5 pence per share. In making this recommendation the Board is also cognisant of the removal of the potential liability to HMRC which has enabled the £1.2 million reserve release, and believes it is appropriate to distribute a portion of this to shareholders. The dividend proposals will be submitted for formal approval by shareholders at the Annual General Meeting on 3 March 2016. If approved, the dividend will be paid on or around 11 March 2016. The record date for the payment of the proposed dividend will be 12 February 2016 and the ex-dividend date will be 11 February 2016. 

Board

In July we announced that Mark White had stepped down from the Board in order to pursue other opportunities. Over the past seven years, Mark's experience and insights have been invaluable, and I would like to thank him for his dedication and significant contribution to steering Impax's successful development.

In July we also announced the appointment of Sally Bridgeland and Lindsey Brace Martinez as Non-Executive Directors. Sally has worked in the UK pensions sector for nearly thirty years and has a deep knowledge of governance, risk analysis, assessment and strategic planning. Lindsey brings extensive experience in investment advisory across a wide range of asset classes including natural resources and in sustainability strategies. Her knowledge of the US market will be invaluable as we continue to develop our business in the region.

Share management

The Board intends to continue to buy back the Company's shares from time to time after due consideration of attractive alternative uses of the Company's cash resources. Shares purchased may be used to satisfy employee share-based award obligations, thus reducing the requirement to issue new shares.

During the Period the Company spent £1.2 million buying back 2.2 million of its own shares.

Awards

This year Impax was awarded the Socially Responsible Investment Award by the Financial Times Pension and Investment Provider Awards ("PIPA"), and was also named Best Environmental Fund Manager, and Best Specialist Fund Management Group by Investment Week.

Prospects

Looking ahead to 2016, economic weakness and market volatility appear set to continue and present further challenges for investors. The consequence of an escalation in the conflicts in the Middle East could also have a considerable impact on market confidence. Against this backdrop, Impax is well positioned to benefit from the rapidly developing interest in environmental and resource efficiency markets, and we continue to develop both our suite of products and our distribution and client service infrastructure. The Board believes that the Company will continue to scale its business model and build further shareholder value.

J Keith R Falconer

2 December 2015

Chief Executive's report

The Period has been one of robust investment performance and progress for Impax across both our listed equity and real asset strategies. Environmental and resource efficiency markets continue to deliver compelling returns as drivers strengthen and new catalysts for growth emerge.

With a highly attractive opportunity to build the firm, profits and cash flow in the Period have been impacted by two factors linked to Impax's growth plans. Fees from our second private equity fund dropped as expected at the end of its investment period in March 2015, and we increased our focus on selling the fund's assets. These events are necessary components of our pitch to investors to raise additional capital and build this division. At the same time, we have modestly increased our headcount in order to support our offering to new clients, in both listed equities and real assets.

Market developments

Environmental markets continue their rapid expansion, driven by intensifying urbanisation, water scarcity, food and energy security concerns and the growing recognition of the serious impact of climate change.

At the time of writing, the United Nations Inter-governmental Climate Change Conference is underway in Paris and, with emissions reduction pledges from the largest economic blocs there is mounting optimism for a successful outcome. In June, Pope Francis's Encyclical on Climate Change dominated the headlines, and in September Mark Carney, the Governor of the Bank of England, issued another warning to investors about the potential for climate change to have a severe impact on long-term investments.

Faced with increased risk linked to climate change, many investors are reviewing their asset allocation, and there is a resurgence of interest in the markets in which we invest. The fossil fuel divestment movement continues to gain momentum with some 450 major institutions holding investments valued at US$2.6 trillion committing to divest their coal, oil and gas holdings.

The oil price has remained depressed over the Period and we expect this to continue over the medium-term. A low oil price has on balance proved positive for resource efficiency and environmental markets, particularly those with high transportation and/or logistics costs. Lower oil prices have also allowed governments of developing countries to reduce their spending on fuel subsidies and, in some cases, increase taxes on fossil fuels.

In the water sector, projects to desalinate sea water and recharge aquifers are being developed in response to severe drought, with California suffering its worst water shortages in forty years. The best way to access this growth opportunity is by investing in companies that supply specialist hardware and also in consultancies that advise these businesses.

The recent Volkswagen scandal highlighted the tightening regulatory framework for lower vehicle emissions and the quest to make vehicles cleaner and more efficient. This is leading to numerous investment opportunities in the supply chain for companies focused on fuel efficiency, and testing vehicles in "real world"conditions. 

While many investors have turned more negative on the medium-term prospects for China, we remain optimistic for the prospects for environmental markets there. Earlier this year, China published its Water Pollution Action Plan and announced a US$330 billion spend on improving the country's scarce and polluted water supplies. China was in the headlines again in June when it outlined the country's plans to reduce future carbon emissions, and next year it will publish its 13th Five Year Plan, setting out the government's targets and draft spending commitments up to the end of 2021. We expect further major investment in a wide range of pollution control and environmental improvements, providing a positive catalyst for many companies in our investment universe.

Assets under management and fund flows

During the Period, we received net inflows of £171 million from BNP Paribas, our third party distributor in Europe, and £31 million from Pax World in the US. However, following a change to its investment focus, the US private bank client that had hired us in 2013 decided to close its account, where assets had peaked (in November 2014) at US$208 million. There were small outflows from our Impax label listed funds and the value in sterling of our private equity funds fell slightly, predominantly due to foreign exchange effects.

As shown in Figure 1, the net inflows for the Period were £77 million.

Figure 1. Assets under management and advice and fund flows

Investment updates

Listed Equity

All our listed equity strategies follow a high conviction, bottom-up, stock-picking approach. Our three strategies with AUM above US$1 billion, Leaders, Specialists and Water, all outperformed the MSCI All Countries World Index ("ACWI") over the Period. They have also all beaten the ACWI over three years, while Leaders and Water have reported higher returns than the ACWI over five years.

Private Equity

Our private equity business has made sound progress. We are well advanced with the planned realisation of operating assets for our second fund, Impax New Energy Investors II ("NEF II" or "Fund 2"). After the Period end we announced an agreement to sell a portfolio of 206 MW wind assets in France and Germany to ERG Renew, the renewable energy subsidiary of the Italian multi-energy company ERG Group. The sale, which is part of our planned realisation of Fund 2's assets, demonstrates the success of our investment strategy of consolidating European renewable energy assets into portfolios with critical mass for sale to long term owners. This summer we also announced the refinancing of our Polish onshore wind assets and agreed the sale of a 14 MW French windfarm to Swiss utility BKW. As assets in the Fund are sold, there has been a commensurate reduction in our management fee.

We have agreements in principle on the sale of three assets in our first private equity fund ("NEF I"), and the arbitration, which we commenced in 2011 with a group of investors against the Spanish Government on past retroactive tariff changes, has continued to progress.

Our plans to launch a third private equity infrastructure fund are now well advanced. The European Investment Bank ("EIB") has announced its proposed allocation of €50 million as a cornerstone investor, and we recently appointed BNP Paribas Investment Partners to act as the fund's placement agent.

Sustainable Property

We are excited by the opportunities to create value by improving the energy efficiency of commercial property in the UK where demand is increasingly driven by tightening regulation and interest from "knowledge industry" and public sector tenants.

Following the addition of a sustainable property business last year, our team has made good progress towards the letting and sale of the remaining asset in the portfolio, a prime office and retail space in the heart of Manchester's business district which has been refitted to high sustainability and energy efficiency standards. Plans for a second fund are on track with the appointment of an Advisory Board and engagement of EY's Real Estate Corporate Finance team as placement agent.

Distribution

With clear evidence of the success of our investment approach across multiple geographies, we are seeing unprecedented investor interest in resource efficiency and environmental markets in both institutional and wholesale channels. Investors are particularly interested in ensuring that the companies they invest in have robust governance structures, and many are considering higher exposure to environmental and resource efficiency markets as a way of hedging environmental risks such as climate change.

This year we strengthened our distribution capability in the UK and this has led to enhanced engagement with UK investors and prospects. We are currently finalising a proposal to launch our (listed equity) Leaders strategy within our existing Irish UCITS umbrella structure. This strategy was established in March 2008 and now has over £500 million of assets from Continental European and US investors.

Our principal European distribution partner, BNP Paribas, continues to generate robust flows into our Leaders, Specialists and Water strategies, principally from Continental European investors.

In 2012 we acquired an experienced Food & Agriculture team and launched our Food & Agriculture strategy later that year. Since inception, the strategy has significantly outperformed its comparator peer group and by January 2016 will have a three year track record. In April BNP Paribas launched a sustainable food fund based on this strategy: early investor interest is most encouraging and the fund had assets of €62 million at the Period end.

Our North American mandate pipeline is also strong, with a number of new prospects including large public plans, endowments and foundations. We have benefitted from net flows into the Pax World Global Environmental Markets fund (which follows our Leaders strategy), including investments by new institutional clients. After the Period end we secured our first Canadian distribution client which is planning to launch a mutual fund based on our Leaders strategy in January 2016.

As we reported in the Interims, in January we seeded a global equity strategy comprising high quality companies providing solutions to global sustainability challenges. We are already seeing considerable client interest in this strategy and believe that over the medium term it will become an important product in our suite of listed equity vehicles.

People

At the end of the Period our headcount was 67 full time equivalent staff compared to 61 at the same time last year. We believe we are fully staffed in most areas but may recruit to service new business in due course.

Outlook

Economic growth is set to be slower and patchier over the coming year and equity markets are likely to remain volatile. Nevertheless, earnings delivery of environmental markets companies continues to be strong and valuations remain attractive relative to global equities.

As described in detail above, to make the most of Impax's opportunities, we are aiming to build our capabilities and marketing outreach while keeping a close eye on the associated impact on short-term profits and cash flow. We remain one of the leading investment management brands targeting environmental and resource efficiency markets, and believe that the Company is well-positioned to deliver future value for shareholders.

Ian R Simm

2 December 2015

NOTES