Embattled IOOF lifts interim profit, vows to restore trust

Under-fire IOOF’s shares spiked after it boosted profit, vowed to “restore trust” and committed to buying ANZ’s pensions arm.

IOOF’s on-leave boss Chris Kelaher pictured leaving the banking royal commission hearings last August. Pic: AAP

Under-fire wealth group IOOF has posted markedly higher interim profits, as it vowed to “restore trust” and committed to buying ANZ Bank’s pensions and investments division.

IOOF’s statutory profit surged to $135.4 million for the six months ended December 31, compared to $45.2 million in the year earlier period. Underlying profit from continuing operations edged up 5 per cent to $99.9 million.

IOOF’s shares rallied 16.41 per cent to $6.17, touching levels not seen in about two and a half months. The stock is, however, still well off its 12-month highs of $10.95 seen in March last year.

“We have delivered a solid financial result in a difficult first-half year, and we’re well aware of the challenge ahead to restore trust,” acting chief executive Renato Mota said.

“The royal commission has identified some serious failings within our industry and given us cause for reflection and a catalyst for change.”

IOOF’s first-half revenue climbed 22 per cent. Net platform inflows amounted to $688 million during the period, while funds under management and advice rose 10 per cent to $137.8 billion.

But the company remains in the crosshairs of regulators.

IOOF CEO Chris Kelaher and chairman George Venardos are on leave while the group and three other executives fight legal action by the Australian Prudential Regulation Authority alleging they are not fit to run a superannuation company.

IOOF – which also had licence conditions imposed on it by the banking regulator – warned it expects to incur $20 million to $30 million in compliance and regulatory costs, starting immediately and into fiscal 2020.

The ASX statement reiterated IOOF’s commitment to buying ANZ’s pensions and investments business, which requires the approval of a trustee board.

“The ability to structure the economic completion of the P&I (pensions and investments) business demonstrates a commitment by both parties to the transaction,” Mr Mota said. “We are in constant and open dialogue with ANZ and are confident that clients’ best interests will be served by the transition to IOOF.”

Last year, IOOF completed the acquisition of ANZ’s financial planner dealer groups.

IOOF declared a fully franked dividend of 25.5 cents a share, down from 27 cents a share a year earlier.

Macquarie analysts said while the result came in below expectations IOOF was taking important steps to bolster governance and compliance.

“Encouragingly, IOOF have announced/confirmed a variety of measures to rebuild confidence,” they said.

“However, with royal commission recommendations, the overhang of management continuity, uncertainty over completion of the ANZ wealth management acquisition and the potential for increased remediation expenses, we would expect the stock to continue to trade at a discount to historical multiples in the near term.”