The Challenger Ltd (ASX: CGF) share price will be one to watch this morning following the release of the annuities company’s full year results.
How did Challenger perform in FY 2019?
For the 12 months ended June 30, Challenger recorded revenue of $2,372.6 million and net profit after tax of $307.8 million. This was an 8.3% increase and 4.6% decline, respectively, on the prior corresponding period.
Normalised net profit before tax came in at $548 million, which was an increase of $1 million on FY 2018’s result. This means the company has achieved the updated guidance given in June for the bottom end of its $545 million to $565 million guidance range.
Another metric that the company provided guidance for was its normalised cost to income ratio. In FY 2019 the company achieved a ratio of 32.6%, which was at the mid to upper end of its 30% to 34% guidance range.
A final dividend of 18 cents per share was declared. This brought its full year dividend to a fully franked 35.5 cents per share, which was flat on FY 2018’s dividend. This final dividend will be paid to eligible shareholders on September 25 2019.
What were the drivers of the result?
Management advised that the company’s performance was impacted by a challenging operating environment driven by the disruption in the financial advice industry.
Challenger Life earnings remained steady for the year with book growth offset by a lower margin.
Whereas its Funds Management business was impacted by lower performance fees which offset strong underlying earnings. The business recorded a $1 million decline in net income to $150 million, but was up $14 million excluding performance fees.
Average funds under management (FUM) increased 6% to $77.5 billion. This was driven largely by both its Fidante Partners business which saw its FUM increase 5% to $58.6 billion and Challenger Investment Partners (CIP) which increased its FUM by 8% to $18.9 billion.
However, it could have been much better had Fidante Partners not experienced net outflows of $3.6 billion during FY 2019. This was due largely to a significant redemption by a profit-for-member fund client of $3.9 billion, which was made predominantly due to the internalisation of their investment management capability.
Challenger revealed that challenging operating conditions are expected to persist in FY 2020 and reiterated the guidance it provided with its investor day update.
It expects normalised net profit before tax in the range of $500 million to $550 million, which at worst implies a year on year decline of 8.75% and at best implies a 0.3% increase.
It also confirmed that it continues to expect its normalised cost to income ratio to be above the 30% to 34% target range in FY 2020 due to Distribution, Product and Marketing (DPM) initiatives. Its return on equity target continues to be the RBA cash rate plus a 14% margin.
And finally, the company reiterated its plan to maintain its 35.5 cents per share dividend in FY 2020 despite the potential fall in profits.
Looking for even more dividend options? Then don't miss out on these buy-rated dividend shares that could solve your income needs.
With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.
Hint: These are 3 shares you’ve probably never come across before.
They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”
We think these 3 shares offer solid growth prospects over the next 12 months. Each of these three companies boasts fully franked yields and could be a great fit for your diversified portfolio. You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."
Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!
The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.
- NEW: Free report names top 3 ASX dividend shares to buy for 2019
- Top analysts name their top 3 ASX blue chip shares for 2019
- Richest man alive issues dire warning
- 3 quality dividend shares to boost your income
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019