IOOF’s aspirations to dominate Australian wealth management have taken a short-term hit as acquisition costs drag down its statutory net profit for the first half.
IOOF's statutory net profit after tax for the half-year to 31 December 2017 was $45.2 million, down 39 per cent on the prior corresponding period.
The result is largely down to costs relating to the acquisition of ANZ's OnePath pension and investments (P&I) business, which was announced to the market in October 2017 and is expected to settle in October 2018.
IOOF's share price was down 2.33 per cent late Friday afternoon to $10.25 as investors reacted to the fall in statutory net profit.
Speaking to analysts on Friday, IOOF managing director Chris Kelaher was keen to emphasise the additional funds under administration (FUA) that would be bolted onto the business when the ANZ transaction settles.
The existing IOOF wealth management business has $37 billion in FUA, while the ANZ P&I business will add approximately $46.6 billion, Mr Kelaher said.
IOOF, which currently has a market capitalisation of $3.4 billion, will be more than doubling its FUA for a transaction that is costing it (at last count) $975 million, he said.
"It's truly transformational – very exciting and a great opportunity for us. A confirmation that we are in many respects the leading pure wealth manager in Australia," Mr Kelaher said.
Asked whether he saw bank dealer groups as being fertile ground for future growth, Mr Kelaher said "most definitely".
"In many respects this is the perfect window for us. In the next two or three years, as different institutions reflect on whether they want to continue in the advice space or rather just focus on one line of product, we're focusing on the advice space," he said.
So one of the positive themes that's come out of the ANZ transaction is the recognition that this is the area that we specialise in."
The only risk for IOOF, Mr Kelaher said, is that the company "bites off too much" – noting that any future acquisition would be "modular" in nature.
IOOF chief financial officer David Coulter explained, "You'd be unlikely to see us pay for a dealer group in isolation of other business modules that run off of it.
"The preferred mode by which we'd be attractive to advisers is through conventional recruitment or the Meritum model, where we attract large number of advisers from a single dealer group given the attractiveness of our offer overall – rather than paying for dealer groups as part of M&A."
IOOF's underlying net profit after tax (excluding acquisition costs) was $94.8 million, up 19 per cent. The company's directors declared an interim fully franked dividend of 27 cents per share, up 4 per cent.
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