The share price of financial services provider IOOF Holdings Limited (ASX: IFL) has rallied over 1% today, bucking the slump in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) after the company reported an 18% surge in underlying profit.
Here are the highlights from the interim results:
- Underlying net profit after tax jumped 18% to $95.4 million
- Underlying earnings per share increased 11% to 31.8 cents per share (cps)
- A fully franked interim dividend of 28.5 cps, up 14% has been declared. Payment is due on April 7
- The integration of Shadforth is tracking well with IOOF noting $11.3 million in pre-tax synergies had been realised, taking the total synergies expected by financial year (FY) 2016 to in excess of $30 million
What now for IOOF?
Having posted a strong set of interim numbers, IOOF's outlook for the future looks healthy.
The group achieved net fund inflows of $932 million across its Advice, Platform and Investment Management divisions during the six months to December 31.
The balance sheet is in great shape with net debt declining from $74 million in the prior corresponding period to just $29 million at balance date.
IOOF's investment management business has been simplified with the sale of the Perennial boutiques to Henderson Group plc (ASX: HGG). This reduces the group's exposure to the more volatile nature of institutional fund flows and arguably makes the recurring earnings easier for investors to predict.
While the potential acquisition of Hub24 Ltd (ASX: HUB) was unsuccessful, management noted that the environment for mergers and acquisitions is attractive. Its scale and balance sheet should see IOOF remain at the forefront of industry consolidation.
Based on analysts' forecasts, IOOF's current share price looks attractive when compared to other financial service sector peers such as BT Investment Management Ltd (ASX: BTT) and AMP Limited (ASX: AMP).
