Over the next three years, Australian investment group Perpetual will embark on a transformation strategy that will significantly simplify its corporate structure, refocus its operational activities and capture new opportunities for growth. The Company will be reshaped as a large independent boutique wealth manager that will best leverage its leading position in Australia’s financial services market place.
“We needed to take an honest look at our business and it was clear our operating model was not sustainable and our operational structure not optimal,” said CEO and managing director Geoff Lloyd. “It is now time to shed that complexity and refocus on our core strengths.”
Perpetual has been under pressure from the market – and under renewed threat of another approach from private equity – because it was seen to be carrying a far fatter cost structure than its peers while experiencing a steady shrinkage in its funds under management.
CEO and managing director Geoff Lloyd’s strategy is predominantly, and understandably, prioritising the cost cutting in a program that will initially shrink and simplify the group before it starts placing greater emphasis on growth strategies from 2014.
As he said, Perpetual’s operating model and structure were neither sustainable nor optimal after 10 years of expansion that hasn’t delivered and which has added costs, complexity and duplication in areas that aren’t core to its funds management, wealth management and corporate trust businesses. He said Perpetual has 11 distinct businesses today; after the program it will have fewer businesses and he will have only six direct reports.
Five years ago Perpetual was managing almost $38 billion. Today it has $22.9 billion of funds under management.
The funds management business, Perpetual Investments, is focusing on an incremental growth strategy at this stage, adding products, expanding its distribution and extending a fledgling relationship with Wellington Management that it struck last year when it handed over its international equities business to the giant Boston-based group.
Perpetual also has a potentially very good but under-developed business in its private wealth division and a solid corporate trust business, both of which will benefit from an increased focus and lower cost base.
While it will disfigure this year’s earnings – after-tax costs from the program of $25 million to $28 million will reduce statutory profit to between $22 million and $29 million.
Perpetual. Read full Media Release here.
Business Spectator. Read full article here.