Clime enacts urgent corrective actions after shareholder backlash

Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results as it announces corrective actions to return the firm to profitability.

At its annual general meeting (AGM) on 22 November, chair John Abernethy and managing director Michael Baragwanath discussed the firm’s financial results and future outlook.

In August, the firm announced its financial results for financial year 2024 and reported a statutory loss of $3.8 million amid a “challenging period”. This followed a $1.9 million loss in the previous financial year. 

Clime’s FY24 result included an operating loss of $1.6 million, non-cash amortisation, and depreciation charges of $1.36 million and non-cash asset impairment expense of $0.85 million.

Speaking at the AGM, Abernethy said: “Clearly the results were unsatisfactory and required corrective actions.”

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This included the sale of Madison to Infocus as Clime believed Madison was unable to achieve scale and its complexity was detracting from Clime’s funds management business.

“During calendar 2023 it became increasingly clear to the board that Madison was not a scalable operation, its complexity and inherent risk was detracting from CIW’s core funds management business. Importantly, it was losing money and consuming an excessive amount of management time,” he said. 

“In the September quarter 2023, your company lost about $500k, necessitating a cost out program, but one was undertaken, at that time, without a clear strategy of returning the company to profit.

“Following the sale of Madison, we return to the core offering that had grown our business – these are bespoke portfolios for clients and value creation for investors through our range of products.”

The group now directly advises clients with $1 billion in funds under advice and management and described the collaboration with Infocus as a strategic partnership. It is keen for the private client advisory part of the business to grow nationally and for advice clients to directly connect with the fund management team.

The firm recently registered a new AFSL called Clime Advice with eight advisers who were previously at Madison, according to Wealth Data. 

As well as the Madison exit, shareholders called for changes to the board and all three of its non-executive directors announced they would be resigning last month. In their place, the firm appointed Will Riggall and Henry Davis to the board.

Now that Madison has been divested, Abernethy said Clime is on a path to return “to a steady state basis”. The below savings will allow Clime to reinvest $1 million per annum in frontline and client services staff to bolster its offering in Clime Private Wealth.

It is seeking to:

• Reduce operating losses of $500,000 per annum (direct Madison losses).
• Reduce executive overheads by approximately $1.3 million per annum (which include lower director fees).
• Reduce inefficient external services by approximately $500,000 per annum.

He said: “Our strategy is to grow the company by directly engaging with self-directed investors and institutions. Advice is an important secondary service designed to deepen client relationship. We aim to deliver a seamless, comprehensive offer with differentiated products.”

Baragwanath said the firm is open to new strategic partnerships and acquisitions, having enacted a deal with Teaminvest Private Group (TIP) in December 2023.

“In my personal view, the market is ripe for strategic partnerships and acquisitions and Clime is well-positioned to benefit from this opportunity. Our broad range of offerings allow us to deliver real benefits to strategic partners quickly. That same team has the capacity to digest acquisition should they be supported by our shareholders,” Baragwanath said. 

“Moreover, we’re enhancing our distribution capabilities, channelling savings into bolstering our key accounts and investment specialist teams. Distribution is a contact sport, and we are playing to win.”