IOOF Full Year Result: IFL profit & funds under management trending in the right direction

CommSec

Financial investment firm IOOF Holdings Limited (IFL) posted a stronger than expected second half profit for the 2017 financial year. Underlying profit increased by 13% over the half, but over the full year it was down just over 1%.

The company has been on the acquisition trail over the last half and has made some large changes to its cost structure to improve its balance sheet and set up for the future.

IOOF say a 10% lift in Funds Under Management (FUM) over the year came from both organic and new client growth. Group gross margin lifted over the second half of FY17 but fell year on year to 0.48% from 0.51%. The fall was largely due to lower margins from its new business growth and divestments from the 2016 year. Platform and advice flows of $4.2 billion was up 131% year on year which was helped by the stronger equities market.

IFL has spent a lot of time and cash on the implementation and roll out of its new ClientFirst efficiency program. It has helped cut costs as well as cut staff numbers to lower its office footprint. Net financing costs were stable over the year.

IOOF’s financial advice and distribution arm saw its net operating revenue increase by 0.1% to $261.8 million but its underlying Profit after Tax fall by 2.7%, as it signed on new advisors and the roll out of its IOOF Advice Academy which helps lift advisor knowledge to help benefit clients. Platform management and administration revenues fell 2.6% over the year and underlying profit fell 2.2%. IFL’s net operating revenue decrease was driven primarily by lower pricing tiers for one of its broking businesses in Bridges. IOOF completed its consideration of its flagship platform in June 2016.

Investment management net operating revenue fell 0.4%, this unit now only accounts for 19% of all underlying profit since the completion of the sale of two boutique businesses to Henderson Group at the end of 2015 which has allowed IOOF to concentrate on its core advice and superannuation businesses. Revenue from IOOF’s Trustee services unit increased by 3.9%, in line with higher client numbers and lower operating costs. This helped the division post an 11.6% gain in underlying profit to $6.7 million.

IOOF said “continued cost control and focus on platform operating margin efficiency will help keep its balance sheet strong and to enable the company to focus on acquisitions.”

IOOF will pay a second half dividend to shareholders of $0.27 payable on 1 September 2017.

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