Legacy of collapsed property empire forces down DKN half-year profit.
A $3 million payout to Westpoint investors has wiped out two-thirds of DKN's half-year earnings.
The listed financial advice buying group reported a modest net profit of $1.6 million for the six months to 31 December 2007 yesterday after disclosing a $2 million discontinued operations loss.
It was a 26 per cent drop on the previous corresponding period.
DKN gave $3 million and QBE shelled out $5.75 million to creditors of DKN's former dealer group Deakin Financial Services last year to compensate them for investment losses when Westpoint collapsed.
Discounting the one-off expense, the company's $3.6 million net profit for continued operations increased of 66 per cent on the previous corresponding period.
Following its $120 million acquisition of Zurich-owned dealer Lonsdale Financial Group and its portfolio administration service, Wrap Account, the group's funds under administration (FUA) rose by 210 per cent to $9 billion from $2.9 million in the preceding period.
Sluggish equity markets hampered FUA during the second half of 2007 and DKN downgraded its profit guidance for the second half of 2008 from $6.3 million to $5.9 million over fears of sustained market fluctuations.
It buffeted last year's market fall with earnings per share (EPS) growth of seven per cent and the projected result equates to a basic EPS of 4.1 cents.
It expects fund flows during the financial year to remain static.
"We anticipate maintaining total FUA of $9 billion by June 30, 2008, despite the current market volatility," DKN chief executive Phil Butterworth said.
"It is important to recognise that although cycles come and go, people still need to invest and they still need advice, perhaps even more so in volatile markets," Butterworth said.
DKN expects a fully franked dividend of one cent per share for the period and said this will rise to at least 3.5 cents by the year's end to December 2008.
Zurich owns 31 per cent of the company while Australian Wealth Management owns 18 per cent. Net debt levels were $7 million
DKN shares rose 10 per cent yesterday yesterday to $1.10.
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