Insignia to rebuild after halting dividends amid loss

CEO Scott Hartley says the wealth manager will prioritise strengthening its balance sheet, with no final dividend to be paid.

Insignia Financial CEO Scott Hartley. Picture: Arsineh Houspian

Insignia Financial has sought to reassure shareholders spooked by its move to pause dividends, with chief executive Scott Hartley saying it would allow the wealth manager to protect its balance sheet and give it strategic flexibility for the future.

Insignia on Thursday posted a loss of $185.3m as higher remediation payouts and transformation and separation costs hit its bottom line. Underlying profit after tax, which strips out one-off items, jumped nearly 14 per cent to $216.6m.

But investors latched on to Insignia’s decision to pause dividends, quickly selling out of the stock and pushing it down 13 per cent to $2.54 by afternoon trade.

“I understand that the pausing of dividends — and it is a pause — is disappointing to some investors, but it’s only to be prudent around the balance sheet. The underlying businesses has performed well, it will continue to perform well in the coming year, and there’s further opportunity for cost reductions,” Mr Hartely said in an interview.

He was unable to give any indication on when dividends might be reinstated, saying the company was working through its refresh strategy and wanted to “keep our powder dry”.

“We are doing a strategy refresh at the moment. We will be presenting that to market later this year ahead of our annual general meeting, and we will presenting our vision for the company for 2030 and strategies that will drive us towards that vision. Some of those strategies require reinvestment for the future.

The refresh and investment in the business would be “broadbased” across all parts of the business, he said.

The full-year loss, down from a $51m net profit in the prior year, was due to $257.7m of transformation and separation costs and $243m in remediation costs and penalties. The prior year also had a $43m benefit from the sale of Australian Executor Trustees.

“As an organisation, we have delivered on our fiscal 2024 priorities, which have further simplified our business and reduced costs. We remain on-track and committed to delivering our 2024–2026 commitments and, in addition, accelerating our cost optimisation program and reviewing our Master Trust end state operating model,” Mr Hartley said.

The wealth manager said it would provide an update on its capital management strategy at an investor day later this year, adding there was no change to its long-term dividend target of paying 60-90 per cent of underlying net profit after tax.

Group net revenue rose 1 per cent in the year to $1.4bn, driven by growth in net revenue across platforms, advice and corporate and underpinned by higher average funds under management and administration, as well as divestment gains.

Operating expenses, meanwhile, fell 2.3 per cent from $1.01bn, which Insignia said reflected the benefits of its cost savings offsetting growth and investment in cyber and governance capability.

Its advice and product remediation programs paid out $70m to its advice clients and $75m to product remediation clients in the year, with Insignia also lifting provisions for both remediation programs.