Shares in annuities specialist Challenger plunged more than 14% yesterday after investors gave the half year results the thumbs down.
The shares ended the day at $6.15 as they copped the brunt of some savage selling.
At one stage they hit a low of $6.095, which was a fall of more than 16%.
The reaction ended a little run up in the shares from the early December as the wider market improved but the weak data in the report ended that little bout of enthusiasm.
The fall came despite the company reporting a statutory profit of $223 million for the December half of 2020, steady on the $220 million profit for the December, 2019 half.
Challenger said the result was driven by funds under management net inflows of $6.4 billion, group assets under management growth of 13% to $96 billion and a 12% rise in annuities sales.
That sounded all well and good but digging a little deeper and net profit before tax fell 30% to $196 million and the 9.5 cents a share interim dividend was 8 cents down on the 17.5 cents a share interim for 2019-20. Costs also rose
Challenger chief executive Richard Howes said the company was on track to report profit within guidance – between $390 million and $440 million.
“Our funds management business is the fourth largest and fastest-growing active manager in the country,” he said.
“Challenger enters the second half of the 2021 financial year in good shape, having withstood industry and COVID-19 related disruption of recent years.“
Challenger’s recent acquisition of a bank and deepening relationships with its independent financial advisers were also critical to the group’s success, Mr Howes said.
But in the outlook, the company said it expected a second half improvement (which it should because the pandemic and lockdowns hit the June, 2020 half year performance.
“Challenger expects normalised net profit before tax in FY21 in the range of $390 million to $440 million. Earnings are expected to be weighted to the second half reflecting the gradual deployment of Life’s excess cash and liquid investments over the year,” the company said.
That was another sore point with investors because the target range is down sharply from the $507 million reported for 2019-20.
That, the slide in interim normalised profit before tax and the sharp cut to the dividend all told investors that Challenger’s results were not what they seemed to be at first glance, hence the slide in the share price.
