Chairman’s Letter

Dear Shareholder,

One year ago, when composing this letter and reflecting on the sheer volume and pace of the changes the world faced in 2020, I commented that being able to respond to market changes and deploy creative solutions is what Pendal does best. Well, 2021 has certainly given us a chance to test that belief. Once again, a rapid convergence of events has resulted in a year of accelerated change around the globe. However, Pendal has emerged from the financial year confidently, having successfully executed on our key growth-oriented initiatives.

Our performance over the last year gives us confidence the company is well positioned heading into FY22. It has been a year of significant strategic achievements, providing a strong foundation for future growth.

Overview of the 2021 Financial Year: managing change

Change is a constant and it is incumbent upon companies to plan for, and be prepared to actively and successfully, manage change in the best interests of the company, its people, clients, and shareholders.

Change is multifaceted and is not confined to financial metrics. The way we work. Societal attitudes. Stakeholder expectations. These are all evolving, and companies must evolve too. Coupled with change itself is the rate of change. Everything moves faster, facilitated by increasing sophistication in communications. The choice is clear: manage and anticipate change — indeed, embrace it — or be left behind. 

At Pendal there was much change during the 2021 Financial Year, both external and internal. We instituted a new five-year strategy, announced in November 2020 and after 11 years in the role, long-term Group CEO, Emilio Gonzalez, stepped down in March 2021. The Board executed its long-term succession plan, seamlessly transitioning to Nick Good, who was CEO of the Pendal US business. In May 2021, we made a compelling and strategic acquisition to facilitate growth opportunities, particularly in the US market. The external environment has persisted in being challenging, as the COVID‑19 pandemic evolved during its second year. It continues to affect people and businesses around the world and in different timeframes, with varying levels of severity.

However, our team at Pendal has continued to meet this challenge by adapting to new ways of engaging with our clients and our global workforce. In particular, our investment management teams have been actively engaging with clients, so they are in no doubt that we are being proactive in the management of their investments.   

That Pendal has come through these last challenging years is proof of the resilience of our people, the robustness of our business model, and the diversification within our business. 

That’s not to say our business has not been impacted. Ours is a business of people – of relationships. We sell no product apart from the intellectual capital of our investment leaders.  Our currency is trust – between our clients and our people. We are a global company with our leadership and investment teams spread across four continents. Our inability to meet in person with our clients and colleagues has undoubtedly had an impact. While we have by necessity become increasingly digitised in the way we conduct business, we consider that personal interaction is important in fully assessing client needs and in generating solutions for them. These days will return.

Managing change well in this environment has also required significant extra time and input from your Board and I would like to thank all Directors for their commitment. Long meetings via Zoom at irregular hours are not desirable by any measure, although necessary to navigate through these times. We all look forward to getting back to our pre-pandemic schedule when international travel is back on the agenda.  

The macroeconomic environment and geo‑political environments have also seen significant change. While we have observed global equity markets rebound, we have also seen a corresponding shift in policy frameworks as governments grapple with the market impact of the COVID‑19 pandemic.  

As to government policy, we follow events closely. We are a global business with people plugged into the world’s major financial centres. Pendal is able to draw upon their insights derived from being ‘on the ground.’ The resulting ‘whole’ is greater than the ‘sum of the parts.’ We have a truly global perspective.

Financial results

Statutory Net Profit After Tax (Statutory NPAT) increased by 42 per cent to $164.7 million, compared to the previous corresponding period (pcp), reflecting a step-change in FUM from the acquisition of Thompson, Siegel & Walmsley (TSW), strong investment performance and positive mark-to-market and currency contributions. Underlying Profit After Tax (UPAT) was up 25 per cent to $165.3 million, compared to pcp, as a result of a substantial uplift in annuity income from base management fees and a four-fold increase in performance fees to $57.5 million. 

Underlying earnings per share increased by 17 per cent to 48.2 cents per share. 

The Board declared a final dividend of 24 cents per share (cps) which brings the total dividend for Financial Year 2021 (FY21) to 41 cps, up 11 per cent compared to FY20.

The strong results for the year demonstrate the continued successful execution of our strategy for growth and the strength of our diversified business model.

Total Shareholder Return, since listing in December 2007 to 30 September 2021, is 247.8 per cent, compared to the 99.9 per cent return of the Standard and Poor’s ASX200 Accumulation Index over the same period.

Managing change: succession planning

Along with navigating external change, 2021 has also been a year for managing internal changes at Pendal, all of which, I’m pleased to say, were anticipated and well managed and speak to Pendal’s strategy and growth aspirations. 

Managing a CEO transition is one of the most important things a Board has to do alongside promoting stability, stewarding strategy and supporting a CEO. The Board has worked over a number of years to have a robust CEO succession plan; one which would ensure a smooth transition and business continuity. This remains an ongoing process throughout the organisation.

In March 2021, our Group CEO, Emilio Gonzalez, stepped down. I’d like to take this opportunity to thank Emilio for his leadership, contribution, and commitment for over 11 years. Through a mixture of vision and disciplined execution, he oversaw the transformation of Pendal from an Australian only fund manager into a global asset management business. Emilio led from the front with passion and sound judgement. Under Emilio’s leadership the business underwent a step-change in FUM, scale, distribution, product offerings to clients, and importantly, shareholder returns.

Nick Good, previously our regional CEO in the US, was appointed Group CEO. The biggest future potential for the Group is in the US and with Nick based in Boston, Pendal will be well-positioned and equipped as it transforms its business to take advantage of future growth opportunities. Nick’s undeniable suitability and smooth entry into this role is testament to the company’s thoughtful and well-prepared approach to succession. Pleasingly, succession came from within the company.

Managing change for long-term growth: the strategic acquisition of TSW

Managing significant change in the operating environment and the world generally over the last two years has been necessary. But we have continued to execute our long-term strategy. It is pleasing the company is delivering on the strategic imperatives laid out a year ago, including, most notably, further diversification of our business through our acquisition of 100 per cent of US-based investment management company TSW. The acquisition price represented 7.6x 1H21 EBITDA (annualised, excluding synergies) and is expected to be double-digit EPS accretive in the first full-year post completion. 

The acquisition of TSW is strategic and expands our successful diversified business model in the largest equity market in the world. It delivers both scale and diversification benefits across investment capabilities, asset classes and channels.

The Board believes that the acquisition will strengthen the diversity of earnings and accelerate growth and shareholder returns. 

This acquisition creates immediate value, doubles our addressable market in the US and delivers a step change in Pendal Group’s diversification, scale and client offering, and importantly, expands our global distribution capabilities. 

TSW is a highly regarded value-oriented investment manager, with a track record of strong investment performance. That it is such a natural strategic and cultural fit with Pendal is no accident. Our internal M&A process is as thorough as it is discerning. While there are growth objectives we endeavour to meet, we will never pursue growth for the sake of growth. Our acquisition of TSW illustrates the rigour we put into the search for true cultural alignment but also complementarity.

As complementary businesses, with almost no overlap of investment strategies, together we will be better placed to take advantage of the many growth opportunities inherent in the US market.

Managing risk: capital management and investing in the future

The $413 million purchase consideration was funded with a combination of equity and debt. Equity was raised through a fully underwritten Placement and, to enable retail shareholder participation, a Share Purchase Plan (SPP).  

The capital raising included a Placement component to expeditiously deliver the funds necessary to undertake the transaction with pricing certainty and a SPP component to provide eligible shareholders with the opportunity to participate at a price at least as advantageous as large institutions, as Pendal welcomes and encourages the involvement of its eligible shareholders on the Pendal register. 

In May, we executed a $190 million fully underwritten Institutional Placement of approximately 27.9 million new fully paid ordinary shares to institutional investors, which represented approximately 8.6 per cent of issued capital. The Placement was significantly oversubscribed with strong support from institutional investors, including both existing and new shareholders. 

The SPP received total applications of approximately $218 million from eligible retail shareholders. An overall scale back of 13 per cent was applied, resulting in a total equity raising from the SPP of $190 million, the same amount as in the Institutional Placement, and at the same issue price of $6.80 per share. 

We were pleased that Pendal shareholders, retail and institutional, demonstrated their support for this compelling and strategic acquisition through their strong participation in the capital raisings.

The total equity raising was $380 million, reducing the debt and balance sheet funding required to complete the transaction to $57 million, providing additional balance sheet strength and capacity for Pendal to accelerate growth opportunities.

Managing change: corporate governance

Another important aspect of change for forward looking companies is formal external Board review, and of course, long-term Board renewal.

This year we have undertaken our three yearly external Board review of our corporate governance procedures. This regular assessment, which is an integral element of our business strategy, considers the Board’s access to accurate and timely information necessary to govern properly; structural and process issues associated with oversight of a global company; leadership and company culture; Board composition and succession planning, and maintenance of a Board dynamic of intellectualism and robust discussion and debate. The review has concluded and the Board is considering the recommendations for implementation.

At Pendal, we take an active approach to Board renewal to support the evolution and transformation of the company and our commitment to act and make changes that are in the best interests of our valued shareholders.    

Andrew Fay will this year retire from the Pendal Board at the conclusion of the 2021 Annual General Meeting, after 10 years of service. Andrew has been Chair of the Remuneration and Nominations Committee since May 2018 and prior to that was Chair of the Audit and Risk Committee from 2014 to 2016. Andrew joined the Board in October 2011; in the same month our acquisition of J O Hambro Capital Management was completed. As a former fund manager with an extensive range of skills and experience in financial and risk management, capital markets, executive remuneration frameworks, strategy and governance, Andrew made a meaningful and significant contribution to the Pendal Group during this very important period of transformation and growth. We thank him for his stewardship and service.

The Board renewal process is ongoing and includes recruiting a replacement for Andrew. 


During this year, we have achieved much in executing our long-term strategy, achieving further diversification of our business to reduce risk, support resilience and to position the company for sustainable, long-term growth.

I would like to thank the management team and all of our employees for their personal contribution during what has been another difficult year, and for continuing to step up for our clients, and support the company’s long-term prosperity. 

I would also like to acknowledge and thank my Board colleagues for the significant extra time they have contributed to Pendal this year, guiding and contributing to the management of the significant corporate activity the company had executed and the continuing challenges of external environment.   

Finally, I would like to acknowledge you, our valued shareholders, for your support. While there are many stakeholders, ultimately Pendal belongs to you. 

James EvansChairman

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