Platinum’s Turnaround Costs Mount Amid Fund Outflows—Is the L1 Merger the Only Way Forward?
Platinum Asset Management reported a sharp 86% drop in profit for FY25, driven by a 39% decline in funds under management amid sustained outflows and investment challenges. The company announced a transformative merger with L1 Capital, aiming to create a $16.5 billion asset manager.
- FY25 profit after tax down 86% to $6.3 million
- Funds under management fell 39% to $7.9 billion
- Turnaround program incurred $42.5 million in costs
- No final dividend declared for 2025
- Proposed merger with L1 Capital to create $16.5 billion combined FUM
A Challenging Year for Platinum Asset Management
Platinum Asset Management Limited (ASX, PTM) has revealed a difficult financial year ending 30 June 2025, with total revenue declining 23.8% to AUD 140.9 million and statutory profit after tax plunging 86.1% to just AUD 6.3 million. This steep fall was primarily driven by a 39% drop in funds under management (FUM) to AUD 7.9 billion, reflecting significant net outflows of AUD 5.6 billion and subdued relative investment performance across its flagship funds.
Despite these headwinds, the company maintained disciplined cost control, reducing adjusted expenses by 22% to AUD 70.9 million and preserving adjusted EBIT margins at a respectable 44%, down only slightly from 48% the prior year. However, the bottom line was heavily impacted by a $42.5 million turnaround program charge, including a non-cash $31.2 million accelerated share-based payment expense related to cancelled incentive grants.
Operational and Strategic Reset Underway
The year saw Platinum intensify its turnaround efforts under CEO Jeff Peters, appointed in January 2024. The company focused on cost reduction, product rationalisation, and resetting remuneration frameworks. It also launched the GW&K Global Small Cap Fund as part of diversifying its product suite. Nevertheless, the firm faced disruption from unsolicited takeover approaches and media speculation, which, combined with ongoing investment underperformance, led to the loss of a major institutional mandate and further outflows.
Management fees fell 28% to AUD 125.8 million, reflecting the lower average FUM of AUD 10.8 billion, down from AUD 15.3 billion the previous year. Performance fees remained negligible. The company paid a special fully franked dividend of 20 cents per share in December 2024 but has decided not to pay a final dividend for 2025, reflecting the challenging earnings environment.
Merger with L1 Capital, A New Chapter
Post-year-end, Platinum announced a proposed merger with L1 Capital (First Maven Pty Ltd), which, if approved by shareholders, will create a combined entity managing approximately AUD 16.5 billion in funds. Under the terms, L1 Capital shareholders will own 74% of the merged company, with existing Platinum shareholders holding 26%. The merger aims to accelerate Platinum’s turnaround by combining complementary investment capabilities, expanding product offerings, and capturing up to AUD 35 million in synergies over 18 months.
The merger is expected to enhance profitability, with illustrative run-rate revenues of about AUD 231 million and expenses around AUD 134 million, positioning the combined firm for growth and operational efficiency. Shareholder approval will be sought at an Extraordinary General Meeting on 22 September 2025, with completion anticipated by early October.
Governance and Leadership Changes
The year also saw significant board and executive changes. Two new non-executive directors joined, including Rachel Grimes AM, who chairs the Nomination and Remuneration Committee. James Simpson, a Platinum founder, transitioned to an executive role to support investment team changes. If the merger proceeds, further board reshaping is planned, including the appointment of L1 Capital nominees and the resignation of some current directors.
Remuneration frameworks were overhauled to better align with shareholder interests and company performance. The CEO’s total remuneration opportunity was reduced by around 16%, with a greater emphasis on short-term incentives linked to profit and strategic milestones. Despite the tough year, the leadership team received retention and special work fee awards recognizing their efforts during the intense turnaround and merger activity.
Outlook
While FY25 was marked by financial and operational challenges, Platinum’s management and board view the merger with L1 Capital as a pivotal step to restore growth and shareholder value. The combined entity’s broader product suite, enhanced investment culture, and scale are expected to improve competitive positioning. Investors will be watching closely as the merger vote approaches and integration plans unfold.
Bottom Line?
Platinum’s FY25 results underscore the urgency of its turnaround, with the L1 Capital merger poised to redefine its future trajectory.
Questions in the middle?
- Will the merger with L1 Capital gain shareholder approval and regulatory clearance?
- How will the combined entity address ongoing investment performance challenges?
- What are the integration risks and expected timeline for realising merger synergies?