IOOF tips market volatility to hit results

Wealth manager flags underlying net profit to decline when it releases results on August 31.

Wealth manager IOOF flags underlying net profit to decline when it releases results on August 31. Picture: Hollie Adams/The Australian

IOOF expects to report a 33 per cent decline in full-year profit, mainly due to market volatility related to the COVID-19 pandemic.

The wealth manager, which will release its 2020 result on August 31, updated the market on Thursday, flagging an underlying net profit of $123m-$125m from continuing operations, down from $184.9m previously.

The decline was attributed to a 10.4 per cent fall in the All Ordinaries Index from June last year, which directly affected funds under management and administration (FUMA) and revenue.

Fund flows also took a hit from client concern and uncertainty about the macroeconomic environment, and there were “substantial” outflows due to the early access to super scheme, particularly in the pensions and investments (P&I) business.

IOOF expects a $25m contribution in underlying net profit from P&I for the five-month period of IOOF ownership. The contribution was adversely impacted by market volatility.

Group FUMA increased by $6.7bn, or 3.4 per cent, to $202.3bn for the quarter to June 30.

Chief executive Renato Mota said the $200bn FUMA milestone reflected IOOF’s increased scale and the benefits of diversification.

“The transformative acquisition of the P&I business contributes to our business model resilience and will be important as we look to a post-COVID-19 recovery and supporting long-term growth in FUMA and earnings,” Mr Mota said.

“The recent recovery in equity markets has been the main contributor to the $6.7bn uplift in FUMA, and pleasingly we have continued to attract strong flows into our platforms.

“That said, the impacts of the COVID-19 pandemic are continuing.

“Our advisers are seeing first-hand client concern and uncertainty around macroeconomic conditions — the pandemic is causing disruption and considerable distress to many Australians.”

While the review of IOOF’s advice remediation provisions was unaudited, the company said it was not expected to change a lot from $223m, including costs.