A decision by wealth manager IOOF to give shareholders a surprise 7 cents a share special dividend yesterday raised eyebrows and helped send the shares down 6.9% to $4.84.
The special payout was in addition to the ordinary dividend of 12 cents a share – making a total for the year of 19 cents and came despite a 67% slump in statutory net profit to $28.6 million.
Most of that fall was due to a provision of $182.7 million for customer remediation and program costs of $40.4 million.
IOOF increased its customer compensation costs from guidance of just $10 million in December last year to $235 million.
Some investors said the special payout seems to be an attempt by the company to keep shareholders happy while lifting its customer remediation costs (most of which are linked to the disclosures may at the Hayne Royal Commission and before).
IOOF said the higher remediation and other costs followed an external advice review “and, as a result, had provisioned for $182.7 million in remediation costs, inclusive of interest, as well as $40.4 million in program costs. In addition, IOOF announced that it had expensed $12.1 million in product remediation in FY19.”
IOOF made a big point yesterday about how its underlying performance was solid in the year with profit from continuing operations up 5.2% to $184.9 million.
IOOF revealed last month its funds under management increased by almost 19% to $149.5 billion in fiscal 2018-19, as it continued to grow via acquisitions and increase its focus on financial advice.
IOOF CEO, Renato Mota, said in Monday’s release: “In one of the most challenging years for our company and for the industry, we have focused on the imperatives of stabilising the business, with a view to delivering better outcomes for our clients and our shareholders.
“In saying that, our earnings have been robust in a low-growth environment, with underlying net profit after tax (UNPAT) up 3.4% to $198 million, compared to the prior year. Total funds under management, administration, and advice (FUMA) increased by 19% to $149.5 billion, as at 30 June 2019, with a $16.1 billion contribution in FUMA from the ex ANZ Advice Licensees.
“The strength and diversity of our business saw us continue to attract flows in a challenging environment with our platforms gaining $1.4 billion in net flows, in an environment where flows for the retail industry have contracted. We also attracted $520 million in net inflows through the advice channel.
“Significantly, we have met all of the APRA licence conditions that were required by 30 June 2019,” Mr Mota pointed out yesterday.
