Largest Independent in Wealth Management, with a Sound Record

IOOF is a vertically integrated wealth manager. In the ASX-200 Index, it ranks fourth in wholesale funds management, sixth in retail superannuation and retail discretionary investment and seventh in master funds: overall it is the largest independent player outside AMP and the ‘four pillars’ (corporate potential?).

IOOF benefits from secular growth in compulsory superannuation contributions and favourable demographic trends. It is conservatively funded, with no net debt. Stockmarket performance influences net inflows and funds under management, directly impacting revenues and making the share price volatile.

IOOF has grown strongly by successful merger, acquisition, integration and rationalisation of platforms. Given the growth of superannuation, a flight to quality and its experience as a consolidator, we expect double digit growth to continue.

The acquisition of DKN was completed last October, adding to IFL's distribution strength. Management has flagged more efficiency and IT gains.

In another record year ended June 2011, net profit was $99.5 million (normalised $111.5 million, up 15%) with EPS up 14% to 48.4¢. Operating cash flows were a strong $144.1m, leaving IFL with cash of $152m, effectively debt free.

Funds under management and administration were $76 billion, growth of 6% compared with system at 2%. The 43¢ franked dividend gives a 7.1% historic yield.

All these positives are of course subject to the impact of market conditions on the value of funds under management and on trading activities. Since mid 2011, weak markets and a flight from risk in the face of European troubles has had an adverse impact on those operating in the funds management sector - and their share prices, as evident in IFL's case. 1H12 results may be relatively weak and guidance restrained.

Despite this caution, we see IFL as well placed to continue growth and high yield.

Half-year Performance & Estimates - IFL

Year-end June	1H12A	FY12A	1H13A	FY13A	1H14A	FY14E	FY15E
Sales, $m	324.7	56.7	326.6	675.0	411.3	431.0	462.0
EBITDA, $m	65.9	208.0	86.2	186.1	90.8	173.3	196.4
EBIT, $m	50.4	176.7	70.1	158.0	74.6	166.1	181.0
Report NPAT, $m	46.1	96.8	40.3	109.5	39.3
Adj. NPAT, $m					39.3	121.6	135.3
Reported EPS, ¢	20.00	41.00	17.00	47.00	16.00
Adjusted EPS, ¢					16.00	52.15	58.40
EPS %FY/Growth	49%		36%	15%	-6%	11%	12%
Dividend, ¢	19.0	37.0	19.5	42.0	22.5	47.25	52.00
Franking, %	100%	100%	100%	100%	100%	100%	100%
EBITDA Margin	0	3.67	26%	28%	22%	40.2%	42.5%
NPAT Margin	0	1.7	12%	16%	10%	28.2%	29.3%
ROE, %	0	12%	5%	14%	5%
EBIT/Interest	0.0	-31.5	-88.7	-195.7	1,493
Net Debt / Equity	0	-0.07	0.01	0.01	0.04
CashFlow/Sh, ¢	12.4	44.4	10.2	34.7	26.0	52.9	61.8
Y/E Shares, m	232.1	232.1	232.0	231.3	232.1

Notes

Data sourced from IRESS Market Technology Limited. EPS Growth compared with the pcp is shown in most columns except the first half years which show their percentage of full year EPS. In a handful of cases, unadjusted share splits, or changes between positive and negative values, may give strange changes in ratios.

Recent News Highlights

As at 19/02/2012 : see details at www.ioof.com.au   (new window? Shift+Click)

15/02/2012     Increased BBG holding to 11.36%

11/01/2012     further raises holding in BBG from 9.0% to 10.2%

23/11/2011     Chairman`s and MD's Addresses at AGM

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