Impax Asset Management : Interim results to 31 March 2021

Impax Asset Management Group plc

Interim results 31 March 2021

London, 27 May 2021 - Impax Asset Management Group plc ("Impax" or the "Company"), the specialist investor focused on the transition to a more sustainable global economy, today announces interim results for the six months to 31 March 2021 (the "Period").

H1 Business highlights

• Diversified growth across channels and geographies, with record net inflows of £6.8 billion, lifting AUM to £30.0 billion
• Continued strong investment performance, particularly in thematic Environmental Markets strategies
• Acquisition of Pax World Management LLC finalised, positioning North American business for further expansion
• Extension of secular trend of rising investment into the transition to a more sustainable economy
• After Period end, AUM increased further to £32.2 billion by 30 April 2021

H1 Financial highlights

• AUM increased to £30.0 billion (H1 2020: £14.4bn)
• Revenue increased to £60.6 million (H1 2020: £41.2m)
• Adjusted operating profit increased to £20.7 million (H1 2020: £10.5m)
• Profit before tax of £14.4 million (H1 2020: £8.0m)
• Shareholders' equity increased to £81.0 million (H1 2020 £63.2m)
• Adjusted earnings per share increased to 11.8 pence (H1 2020: 6.3p)
• Interim dividend per share increased to 3.6 pence (H1 2020: 1.8p)

Ian Simm, Chief Executive, commented:

"Impax has made further excellent progress during the first half of its financial year. Notwithstanding the challenges imposed by the COVID-19 pandemic, the business has continued to grow, with assets under management and advice ("AUM") increasing by almost 50%, including £6.8 billion of net inflows.

"Amid rising interest in the transition to a more sustainable economy, our long track record and broad-based distribution capabilities and relationships have helped us to stand out from the crowd as we secured major new mandates, while also increasing significantly our business with many existing clients.

"Over the next few years we expect the companies in which we invest to continue to prosper as markets for clean energy, resource efficiency and low-carbon technologies expand rapidly. Against this background, Impax is well positioned for further success."

The presentation for shareholders and analysts will be available to view on the Company's website from 7:30am this morning: https://www.impaxam.com/investor-relations/reports-and-presentations

Enquiries:

Impax Asset Management Group plc

Ian Simm, Chief Executive[phone] (switchboard)

Paul French, Corporate Communications Director

Montfort Communications
Gay Collins	[phone]
Louis Supple	[phone]
[e-mail]
Peel Hunt LLP, Nominated Adviser
James Britton or Rishi Shah	[phone]

About Impax

Founded in 1998, Impax is a specialist asset manager, with approximately £32.2bn / US$44.5bn as of 30 April 2021 in both listed and private markets strategies, investing in the opportunities arising from the transition to a more sustainable global economy.

Impax believes that capital markets will be shaped profoundly by global sustainability challenges, including climate change, pollution and essential investments in human capital, infrastructure and resource efficiency. These trends will drive growth for well-positioned companies and create risks for those unable or unwilling to adapt.

The company seeks to invest in higher quality companies with strong business models that demonstrate sound management of risk. Impax offers a well-rounded suite of investment solutions spanning multiple asset classes seeking superior risk-adjusted returns over the medium to long term.

Impax has c. 190 employees across six offices in the United Kingdom, the United States, Ireland and Hong Kong, making it one of the investment management sector's largest investment teams dedicated to sustainable development.

www.impaxam.com

LEI number: 213800AJDNW4S2B7E680

Chief Executive's Report

Business Update

Impax enjoyed a very strong first half to its financial year, which spans the six months to 31 March 2021 ("the Period"). Continuing the trend of recent years, there was clear evidence that asset owners globally are increasingly attracted to Impax's investment philosophy focused on the transition to a more sustainable economy. Amid rising interest in "ESG" themes, our authenticity and broad-based distribution capabilities and relationships have helped us to stand out from the crowd, and we secured major new mandates, while also expanding significantly our business with many existing clients.

Notwithstanding the challenges imposed by the COVID-19 pandemic, the business enjoyed exceptional growth during the Period, during which we increased our assets under management and advice ("AUM") by almost 50%, with our AUM reaching £30 billion for the first time. This was driven by £6.8 billion of net flows over the Period and assisted by rising markets.

Markets

In November 2020, global equity markets surged as clinical trials showed high levels of efficacy from several COVID-19 vaccines. This trend continued throughout the Period and reflected earnings upgrades across much of the economy as businesses glimpsed a potential exit from months of protracted lockdowns.

Over the Period our investee companies were largely able to demonstrate resilience and were able to ride out the economic impacts of lockdowns and similar restrictions. Many companies leading the transition to a sustainable economy benefitted from policy decisions made in response to the pandemic, as governments stated their intention to "build back better", including in the context of the climate emergency. A new US administration helped to accelerate a succession of announcements by corporates and policymakers in anticipation of the COP26 climate summit, culminating in President Biden's green infrastructure-focussed "American Jobs Plan", announced in March.

With vaccines raising hopes of post-pandemic stability, there was however a broad rotation into value stocks, with hospitality, transport and energy performing strongly from early 2021. Having fallen heavily in early 2020, by the end of the Period Brent crude was trading back at levels in line with the end of 2019. The reopening of major economies also saw bond yields rise, which benefitted financial services stocks. Meanwhile, although COVID-19 "third waves" were hitting many countries around the world, inflation forecasts began to tick upwards, particularly in those markets where consumers began returning to shops and restaurants in person.

Investment performance

Against this backdrop, our thematic Environmental Markets strategies performed well over the Period, with our Specialists strategy outperforming the MSCI All Country World Index ("ACWI") by 11.9%. Our Water and Sustainable Food strategies outperformed the ACWI by 4.2% and 3.5% respectively, and the Asian Environmental strategy (formerly the "Asia-Pacific strategy") returned 14.6%, in comparison to the MSCI Asia Composite Index, which returned 13.4%. The Leaders strategy was broadly in line with the ACWI, beating the benchmark by 0.6%.

Amongst our Sustainability Lens strategies, the Pax Large Cap Fund ranked in the top decile of peers for the Period, while our unconstrained equities strategy, Global Opportunities, lagged the MSCI ACWI by 2.8%. Global Opportunities has a bias towards high-quality and low-debt holdings, which have not benefitted as fully from the cyclical rotation to value in recent months.

Overall, our five largest strategies have been ahead of their global indices (MSCI) over the last three years, and significantly ahead over five years.

Meanwhile, in fixed income, the Core Bond strategy performed in line with its benchmark, while the High Yield strategy underperformed its benchmark by 0.8%.

Our Private Equity/Infrastructure team continues to invest the capital of Impax New Energy Investors III ("NEF III"). The Fund made two successful exits, including the Netherlands' largest operational PV plant, and has a development pipeline across France, Germany, Spain and Norway. We expect the Fund to be fully committed by the end of 2021 and are looking to raise additional capital within this area.

Client service and business development

Inflows over the Period were directed in particular into the thematic Environmental Markets listed equity strategies (65% of net inflows) with strong investor interest in our Asian Environmental strategy, and into Global Opportunities (30% of net inflows), which reached total assets of £4.6 billion by 31 March 2021.

The asset growth was well diversified across our distribution partner and direct sales channels and reflected client demand in Europe, Asia-Pacific, and North America.

In the UK, we extended our relationship with wealth manager St James's Place with a second mandate for our Global Opportunities strategy and we also won a new segregated account based on the same strategy. Meanwhile our Environmental Markets investment trust, which is now a member of the FTSE 250 index, continued to attract considerable inflows and currently exceeds £1 billion in AUM.

We focused on building out our team in Dublin, which post-Brexit is now established as a strategic centre, and the aggregate AUM of our Ireland-domiciled UCITS funds hit £1.5 billion.

In Continental Europe, Scandinavia was particularly active, and we enjoyed material inflows from existing investors both via intermediaries and our distribution partners.

In October, we developed further our relationship with BNP Paribas Asset Management by signing a new distribution agreement on very similar terms to the Memorandum of Understanding that has been in place since 2007. This continues to be an important strategic relationship across Europe and Asia, and during the Period led to a significant new mandate based on our Leaders strategy for Nomura in Japan.

AUM movement for the Period	Listed equities	Fixed income	Private markets	Total firm
	£m	£m	£m	£m
Total AUM at 30 September 2020	18,865	947	371	20,183
Net flows	6,673	137	-	6,811
Market movements, FX and performance	3,098	(70)	(23)	3,005
Total AUM at 31 March 2021	28,636	1,015	348	29,999

In Australia, one of the country's largest superannuation funds awarded Impax a AU$240m segregated mandate

• the first institutional client for our Climate strategy that we launched in 2018. In the lead-up to COP26 we continue to see strong investor interest in this global equities strategy, which focuses on investing in companies providing solutions to the challenges linked to climate change.

After the end of the Period we announced a new distribution agreement with Fidante Partners Limited for it to be Impax's exclusive distribution partner in Australia and New Zealand. Part of Challenger Limited (ASX:CGF), Fidante Partners focuses on partnering with specialist asset managers and we believe is well-positioned to support Impax's future growth aspirations among institutional and wholesale investors in this market.

In North America, we completed the integration of our New Hampshire-based team, who joined us in 2018 following the acquisition of Pax World Management LLC. As agreed in the terms of the acquisition announced on 18 September 2017, we acquired the remaining 16.7% of the business held by management in cash and Impax shares for a total consideration, net of loans, of US$3.0 million. In addition, contingent consideration payments of US$270,000 were made in cash to the previous shareholders and management as relevant assets under management of the Pax World funds reached an average of US$5.5 billion over the final six months of the 2020 calendar year, growing to US$6.6 billion at 31 December 2020, up from US$4.9 billion in January 2018.

Combining the two businesses has already underpinned significant growth for the Group, with continued momentum during the Period. We are positioning for further expansion in North America by adding to our research resources, extending our distribution and client service capabilities, and further strengthening our support teams.

By the end of the Period, the Pax World funds' AUM exceeded US$7 billion. Increased flows reflected success through intermediaries, including with Charles Schwab, Morgan Stanley, and Bank of America Merrill Lynch. Meanwhile, for institutional investors we created a US-based vehicle for our Global Opportunities strategy, which went live with investments from two foundations. In Canada we also secured a significant sub-advisory mandate for the same strategy for FÉRIQUE Fund Management, a mutual fund serving engineers and their families.

FINANCIAL RESULTS FOR THE PERIOD

Revenue for the six months to 31 March 2021 was £60.6 million (H1 2020: £41.2 million, H2 2020: £46.3 million) driven by the exceptionally strong inflows across the business and to a lesser extent by market gains. At the end of the Period the weighted average run rate revenue margin was 47 basis points (30 September 2020: 48 basis points) on our £30.0 billion of AUM.

Adjusted operating costs for the Period were £39.8 million (H1 2020: £30.7 million, H2 2020: £33.5 million),

primarily reflecting increases in personnel costs. IFRS operating costs includes £4.3 million, (H1 2020: £2.1

million, H2 2020: £3.5 million) of charges that do not reflect the operating performance of the Group which have been removed for adjusted measures. A reconciliation of adjusted to IFRS measures is provided in Note 3.

Adjusted operating profit almost doubled versus H1 2020 to £ 20.7 million (H1 2020: £10.5 million, H2 2020: £12.7 million) as a result of the growth in revenue. Run rate annualised and adjusted operating profit also grew strongly to £51.7 million at the end of the Period. This resulted in the adjusted operating profit margin increasing to 34% (H1 2020: 25%, H2 2020: 28%).

Adjusted profit before tax of £18.7 million (H1 2020: £10.0 million, H2 2020: £12.2 million) includes interest charges and other non-operating charges (primarily foreign exchange on inter-group loans) which totalled £2.0 million (H1 2020: £0.4 million, H2 2020: £0.6 million). IFRS profit before tax for the Period was £14.4 million (H1 2020: £8.0 million, H2 2020: £8.6 million). The tax charge benefitted from a release of deferred tax liabilities related to private equity income.

Adjusted earnings per share for the Period were 11.8 pence (H1 2020: 6.3 pence, H2 2020: 8.2 pence). IFRS

earnings per share were 10.9 pence (H1 2020: 4.8 pence, H2 2020: 5.7 pence).

FINANCIAL RESOURCES

The Company continues to be a strongly cash-generative business with high levels of cash and no debt. Our cash reserves were £34.4 million at the Period end (H1 2020: £19.9 million). We retain access to a US$13 million revolving credit facility which is currently unutilised. We continue to hold seed investments and to invest in our private equity funds; these investments were in total valued at £6.5 million at the Period end.

DIVIDENDS

A final dividend for our financial year 2020 of 6.8 pence per share was paid in March 2021, following approval at the Annual General Meeting. This took the total dividend paid for 2020 to 8.6 pence per share. To reflect further Impax's strong performance, we are pleased to announce a 100% increase in the interim dividend to 3.6 pence per share (2020: 1.8 pence per share). This dividend will be paid on 16 July 2021 to Ordinary Shareholders on the shareholder register at the close of business on 11 June 2021. The Company operates a dividend reinvestment plan ("DRIP"). The final date for receipt of elections under the DRIP will be 25 June 2021. For further information and to register and elect for this facility, please visit www.signalshares.com and search for information related to the Company.

From this year, shareholders will no longer be sent a paper proxy form but will instead be encouraged to vote electronically via www.signalshares.com or via CREST.

SHARE MANAGEMENT

During the Period the Company issued 2.0 million new ordinary shares to the Group's Employee Benefit Trust ("EBT"). The EBT holds shares for Restricted Share awards until they vest or will use them to settle option exercises. The Company also issued a further 181,467 shares to part fund the acquisition of the remaining interest in Pax World Management LLC.

The Board will consider purchasing the Company's shares from time to time after due consideration of alternative uses of the Company's cash resources. Share purchases are usually made by the EBT (subject to the trustees' discretion), using funding provided by the Company. The EBT did not purchase any shares during the Period.

At the Period end the EBT held a total of 4.2 million shares, 3.4 million of which were held for Restricted Share awards leaving up to 0.8 million available for option exercises and future share awards. There were 2.6 million options outstanding at the Period end, of which 1.0 million were exercisable.

Outlook

While the pathway out of the pandemic remains uncertain, we expect that the continued roll-out of vaccines will lead in the near-term to a sharp recovery in global GDP growth and corporate earnings. Accommodative monetary policy and the impact of post-pandemic fiscal stimulus packages should lead to improved business confidence, a fall in unemployment numbers, and higher consumer confidence.

Over the next few years we expect the companies that we invest in to continue to benefit from the secular trend of expanding investment into the transition to a more sustainable economy. Meanwhile, the lead-up to COP26 will raise the volume of the debate over how best to measure and report climate risk and the most appropriate way for economies to reach their ambitious "net-zero" targets.