Impax Asset Management : results for the year ended 30 September 2018

Impax Asset Management Group plc Results for the year ended 30 September 2018

Gathering momentum and successful US integration contribute to 'landmark year' and significant growth for Impax

London 6 December 2018 - Impax Asset Management Group plc ("Impax" or the "Company"), the specialist investor focused on a more sustainable global economy, today announces final audited results for the year ending 30 September 2018 (the "Period").

Business highlights

• • Assets under management ("AUM") increased 72% to £12.5 billion

• • Continued long-term out-performance of investment strategies relative to environmental indices

• • Net inflows of £1.46 billion, predominantly from clients in continental Europe and North America

• • Celebrating 20 years of success as pioneers of investing in the transition to a more sustainable economy

• • Integration of Pax World Management LLC ("Impax NH") progressing well

Financial highlights

• • Revenue: increased 101% to £65.7 million (2017: £32.7 million)

• • Adjusted operating profit: increased 114% to £20.0 million (2017: £9.3 million)

• • Profit before tax: increased 150% to £14.6 million (2017: £5.9 million)

• • Shareholders' equity: increased 48% to £52.6 million (2017: £35.6 million)

• • Proposed final dividend of 3.0 pence per share, resulting total dividend for the year of 6.7 pence per share inclusive of interim dividend of 1.1 pence per share and special dividend of 2.6 pence per share (2017: 2.9 pence per share)

Keith Falconer, Chairman, commented: "2018 was a landmark year for Impax, and I'm very pleased to report strong progress against all of our key performance indicators. Our assets under management have significantly expanded as we've attracted high levels of inflows and successfully integrated Pax World Management LLC."

Ian Simm, Chief Executive, added: "2018 has been a particularly exciting year for Impax. The Company has grown considerably, establishing Impax as one of the largest global investment managers focused on investing in the transition to a more sustainable economy. During the Period assets under management increased significantly to reach £12.5 billion.

"Positive net inflows have underpinned our expansion as asset owners around the world increasingly seek investment exposure to Impax's area of expertise. This momentum opens up new opportunities that we are ideally positioned to benefit from. The solid foundations we've laid down over the last twenty years should support significant further growth for the Company"

Enquiries:

Ian Simm, Chief Executive [phone] (switchboard)

Karen Wagg, Head of Communications [phone] /[e-mail]

Nominated Adviser, Peel Hunt LLP [phone]

Guy Wiehahn, Rishi Shah

Montfort Communications [phone]

Gay Collins, Toto Reissland-Burghart, Louis Supple

LEI number: 213800AJDNW4S2B7E680

CHAIRMAN'S INTRODUCTION

During the 12 months to 30 September 2018 (the "Period"), Impax continued to see strong flows into its Listed Equity strategies from clients around the world. Our pipeline for new mandates is also very encouraging and we expect to receive allocations from both existing and new clients in the coming months.

The acquisition of Impax Asset Management LLC, which completed in January 2018, cements Impax's position as a leading asset manager focused on the transition to a more sustainable global economy. We now have an almost equal footprint in the US and Europe both in terms of staff numbers and assets under management ("AUM"). Combining the two companies extends our view of investment opportunities and enhances our ability to offer exciting career opportunities to our staff.

We are confident of continuing strong growth and delivering shareholder value through exploiting new opportunities in the transition to a more sustainable global economy and building further on the solid foundations laid down over many years.

J Keith R Falconer

5 December 2018

CHIEF EXECUTIVE'S REPORT

I'm pleased to report another period of strong growth, underpinned by significant net inflows. Asset owners around the world are increasingly seeking investment exposure to the sustainable economy, and Impax continues to build an encouraging mandate pipeline.

STRONG GROWTH IN 2018 2018 has been a particularly exciting year for Impax, and the Company has grown considerably. Notably, we completed the acquisition of Pax World Management LLC ("Impax NH") which significantly enhanced our presence in the US, and which we believe makes Impax one of the largest investment managers globally, focused on the transition to a more sustainable economy.

During the twelve months ending 30 September 2018 (the "Period"), Impax's assets under discretionary and advisory management ("AUM") increased by 72 per cent to reach £12.5 billion. For the third consecutive year we have achieved a significant increase against all our key performance indicators ("KPIs").

At 30 November 2018, AUM were £12.2 billion, reflecting the fall in equity markets in October. However, our funds have performed well over the last two months and we have continued to see new inflows from investors.

CELEBRATING 20 YEARS AND MAJOR MILESTONES

Since our inception in 1998 we have established a global brand and pioneered investing in the transition to a more sustainable global economy, with the objective to deliver superior, long-term investment returns. We see many compelling investment opportunities arising from disruptions through technology innovation and falling costs, regulation to incorporate the costs of social and environmental factors in business models and, not least, shifts in consumer preferences for more transparent, authentic and healthier products. Our expertise has given us insights across large swathes of private sector activity and our long performance record and large, specialist investment team have proved attractive for asset owners seeking exposure to these rapidly growing markets. Over the Period we took on a significant number of new client accounts.

Our investment thesis has evolved from a focus in the late 1990s on micro/small cap "Environmental Technology" stocks to, by 2007, a broader review of all sizes of company across "Environmental Markets", and then progressing to "Resource Efficiency", spanning the energy, water, waste and sustainable food industries from 2012. We placehigh importance on investing to develop our research and thought leadership collaborations to help leverage our "early mover" position in these markets.

As the global economy shifts to become more sustainable, the set of related investment opportunities is expanding rapidly; in 2015 we launched our Global Opportunities strategy to provide our clients with access to this broader investment universe. This strategy has now achieved an impressive three year track record and has already attracted significant interest from clients.

Drivers and opportunities

The long-term drivers of the transition to a more sustainable global economy, namely the expanding global population, rising living standards, natural resource constraints and climate change continue to underpin our investment approach.

Climate change is likely to be one of the most serious risks to the long-term value of investment portfolios. The five warmest years on record have all occurred in this decade1 and the oceans also appear to be warming at an alarming rate. In 2018 we witnessed many more severe weather events around the world, with devastating forest fires in California and Australia, while the 2017-18 hurricane season was one of most catastrophic on record.

It is estimated that three billion people currently live in regions where water is scarce, a figure that is projected to rise to five billion by 20502. There is an urgent need to conserve, treat and recycle limited and increasingly polluted water supplies. Meanwhile, we face a global public health crisis posed by obesity and diabetes.

Air pollution also continues to dominate headlines, both in Asia and much closer to home, where many of the UK's cities now regularly report levels of pollution that are damaging to human health. Furthermore, in the last quarter of 2017, the acclaimed BBC documentary Blue Planet 2, brought the shocking levels of plastic pollution in the oceans to the public's attention.

The demand for products and services that are providing solutions to the challenges of climate change, pollution and public health issues is growing rapidly. Impax aims to provide investors with access to the best companies that are positioned to benefit from these global shifts.

1 National Oceanic & Atmospheric Administration

2United Nations

OUR DEDICATED TEAM

Our success is attributable to the expertise and dedication of our staff. We have one of the most experienced, specialist, global teams in the sector. We believe in the importance of long-term incentives for our employees and will continue to encourage significant share ownership through the use of employee share schemes. In January, we were delighted to welcome our former distribution partners in Portsmouth, New Hampshire, as our new colleagues at Impax NH.

We have always aimed to sustain an excellent working environment based on effective engagement, so we were proud to be one of only three asset managers to be awarded the prestigious accolade of "Best Company To Work For In Investment 2018" by Investment Week.

Our growth and US expansion will further enhance our ability to offer exciting career opportunities for our staff.

FUND FLOWS AND DISTRIBUTION

As set out in Figure 2 below, we continued to see strong net inflows from investors around the world into our investment strategies. During the Period we received £1.5 billion in net new client allocations. In January 2018 the Global Opportunities strategy reached an important milestone of a strong three-year performance record, and consequent interest from several institutional investment consultants.

FIGURE 2: AUM and fund flows

AUM movement 12 months to 30 September 2018	Impax Asset Management Ltd Impax Asset Management AIFM Ltd (Impax LN)		Impax Asset Management LLC (Impax NH)	Reconcilliation 2 £m	Total firm £m
	Thematic equity funds £m	Real asset funds1 £m	Fixed income, smart beta, US equity funds £m
Total AUM at 30 September 2017	6,788	473	-	-	7,261
Impax LLC acquisition	-	-	3,474	(459)	3,015
Net flows	1,721	(27)	(118)	(117)	1,459
Market movement, FX and performance	515	4	288	(27)	781
Total AUM at 30 September 2018	9,024	450	3,644	(603)	12,515

• 1 Real Asset comprise Private Equity and Property funds

2

Avoidance of double count on Pax Global Environmental Markets Fund and Pax Global Opportunities Fund

In June, we launched a new US mutual fund on the Pax World Funds platform based on this strategy; and the following month, St James's Place, a leading UK wealth manager, announced that it would switch its existing ethical fund to the Global Opportunities strategy. We have also recently launched a segregated mandate based on Global Opportunities for an Australian pension fund.

In the UK we have seen renewed interest from investors in our Irish UCITS fund platform, with material growth in both our Asia and Leaders strategies. The growth of this Leaders Fund has enabled us to redeem the seed capital we allocated at launch less than three years ago. Towards the end of the Period, the share price of our UK investment trust, Impax Environmental Markets plc, returned to a premium to net asset value reflecting increasing demand from private wealth managers and retail investors. We continue to see strong flows into the funds we manage in Continental Europe for BNP Paribas Asset Management, particularly the Water strategy which had net inflows of over £740 million during the year and at Period end reported an AUM of some £3.3 billion. We have also taken on the sub-management of the Parvest Green Tigers fund, a BNP Paribas Asset Management sponsored SICAV targeting Asian environmental markets. In September, Impax was awarded a new mandate based on the Leaders strategy to advise on Better World, a new fund established by Absalon Capital in Denmark.

In North America we received significant inflows from the institutional channel and our white label relationships in Canada. However, the Pax World Funds range saw slightly negative net flows in spite of strong inflows into the Pax Global Environmental Markets Fund and the Pax Ellevate Global Women's Leadership Fund.

INVESTMENT PERFORMANCE

Listed Equity

We continue to build on the strong, long-term investment performance in the Impax Listed Equity division. Over three and five years our major strategies have out-performed their global benchmark, the MSCI All Country World Index ("ACWI"). During the Period our listed equity strategies delivered strong performance versus their environmental benchmarks but lagged the ACWI. Our stock selections generally proved successful and relative underperformance (versus ACWI) was mainly attributable to the sectors that are not part of our investment universe; for example, IT and consumer discretionary stocks were particularly strong, as were traditional energy companies as the oil price rose.

Our Global Opportunities strategy, with its exposure to a number of strongly performing sectors including IT, healthcare and some financials, returned 20.4%1 over the Period, outperforming the ACWI which was up by 12.9%2. Since launching in December 2014, this strategy has generated returns of 75.6%1 (ACWI: 62.1%2).

During the Period, performance of the Pax World Funds, the mutual fund strategies managed by Impax NH, was mixed. For example, the Pax Large Cap Fund and Pax Ellevate Global Women's Leadership Fund outperformed their respective benchmarks, while the Small Cap and Mid Cap funds underperformed.

Real Assets

Our private equity infrastructure business focused on renewable energy continues to produce attractive returns for investors.

The planned wind down of our second fund, Impax New Energy Investors II ("NEF II") has progressed well. During the Period we sold this fund's operating assets in Ireland and Italy, as well as a development business in France, generating €109 million. We plan to sell the remaining portfolio assets over the next year and wind up the fund.

With a successful track record for NEF II and an attractive investment case over the coming decade, we concluded the fund raising for Impax New Energy Investors III ("NEF III"), which held its final close on 31 May 2018 with total assets of €357 million (£313 million). This fund is implementing the same value-added strategy as NEF II. We have already committed over €140 million to new wind projects in France and Germany and hydro power in Norway, and are reviewing a strong pipeline of interesting opportunities.

• 1 As at 30 September 2018, cumulative gross returns in sterling

• 2 As at 30 September 2018, cumulative total net return in sterling (net dividend reinvested)

DELIVERING A PARTNERSHIP BEYOND INVESTMENT RETURNS

Impax's investment philosophy leads us to focus on opportunities emerging over the medium to long-term, particularly those whose asset prices do not yet reflect their potential.

Increasingly, our clients are acknowledging the value of our work in engagement, impact reporting and thought leadership. This year we also have increased our funding for a small number of closely aligned environmental charities as we have seen how valuable this involvement can be, for both staff development opportunities and engagement.

DEVELOPMENTS AFFECTING THE INVESTMENT MANAGEMENT SECTOR

We are preparing for the Senior Managers & Certification Regime ("SM&CR"), which will apply to Impax from 9 December 2019. We believe that our governance arrangements are well positioned and will only require modest enhancement.

In order to prepare for the Brexit scenarios that appear plausible at the time of writing, we are in advanced discussions with the Central Bank of Ireland to establish a locally-regulated, Irish subsidiary, through which some of our EU business may be routed. Post Brexit we estimate that less than 10% of our AUM would be re-contracted through this subsidiary; we believe that the operational impact of Brexit on the business would be manageable and that the financial impact, including foreign exchange exposure, would be immaterial.

OUTLOOK

Impax is well-positioned to continue to deliver long-term value to clients and shareholders. In the shorter-term we expect a somewhat softer global economy and steadily rising interest rates in many regions, a situation that may impact global equity markets. Over 20 years we have managed capital through two major downturns; we believe that many of our clients are taking a long-term view when investing with us, and we therefore expect our business to be resilient as asset allocators respond to new information about shorter-term trends.

Since Impax's inception in 1998, the transition to a more sustainable global economy has accelerated as demand for products and services that address the consequences of a more crowded planet has expanded dramatically. With over 20 years of experience, there is now compelling evidence that our investment philosophy can enhance the discovery of attractive investments. Against this backdrop, we are confident that Impax can continue to deliver excellent results for all our stakeholders over decades to come.

Ian R Simm

5 December 2018