IAM Reports Stable Revenue and 31% Growth in Bond FuA Amid Debt Retirement

Steady Revenue Performance in a Seasonal Quarter

Income Asset Management (ASX:IAM) reported operating revenue of $4.0 million for the second quarter of fiscal 2025, maintaining a consistent level compared to the previous quarter. This stability is notable given the inclusion of December, a traditionally slower month for the asset management sector. The company’s ability to sustain revenue during this period underscores resilience in its core business operations.

Robust Growth in Funds Under Administration and Client Base

IAM’s bond and loan funds under administration (FuA) surged 31% year-on-year to $2.2 billion, reflecting strong market activity and client engagement. Total AuA reached $3.9 billion, comprising $2.2 billion in bond/loan FuA and $1.7 billion in cash AuA. Client accounts expanded by 38% to 2,405, signaling successful client acquisition strategies and growing market confidence. If this growth trajectory continues, IAM could approach nearly $3 billion in bond/loan FuA and over 3,300 clients by the end of calendar 2025, although these figures remain observational rather than formal forecasts.

Debt Retirement and Cost Management Initiatives

During the quarter, IAM retired a $10 million debt facility, a strategic move that will reduce annual interest expenses by approximately $1.2 million. This debt retirement strengthens the balance sheet and enhances financial flexibility. The company is also undertaking a cost reduction exercise aimed at improving operating efficiency. Despite reporting an EBITDA loss of $581,000 for Q2 FY2025, IAM expects to return to profitability once the transition to Perpetual (PCT) as custodian and administrator is complete and cost synergies are realised.

Transition to New Custodian and Revenue Opportunities

The transition to PCT is progressing smoothly, with all loan assets transferred by December and bond assets scheduled for transfer by late January. This transition is expected to enable IAM to earn recurring revenue of approximately $1 million per annum from custodial holdings starting in Q4 FY2025, based on an anticipated margin of 5-7 basis points. The move to PCT is a critical step in streamlining operations and enhancing client reporting and payment processes.

Cash Flow and Funding Position

IAM closed the quarter with $6.5 million in cash and an additional $1.4 million in bond holdings, which if liquidated, would increase cash reserves to $7.9 million. The company’s net cash used in operating activities was $3.3 million, influenced by bond purchases and timing of revenue recognition. With total available funding of $11.5 million, IAM estimates it has approximately 3.5 quarters of funding available, a figure that would extend to 12 quarters if bond holdings were converted to cash and revenue timing normalized. This funding runway provides a buffer as IAM implements its operational improvements.

Outlook and Market Positioning

The Debt Capital Markets pipeline for the second half of FY2025 appears robust, with significant mandated and pre-mandate transactions in place. IAM’s recent placements, including $341 million in public new issues and various private credit loans, demonstrate active market participation. The company’s strategic focus on expanding FuA and client accounts, combined with operational efficiencies and debt reduction, positions it well to capitalise on market opportunities in the coming quarters.