IOOF Holdings’ Take Over Of ANZ’s Wealth Business Is Still In Doldrums

IOOF Holdings Limited (ASX: IFL) announced on 2 October 2018 that purchase of Australia and New Zealand Banking Group Limited’s (ANZ) OnePath pension and investments business is expected to be completed by the end of March next year. However, according to the recent news it is speculated that the trustee board of ANZ’s super funds may not see the deal as being in members’ best interests, and therefore could stop the transaction.

In August, when IOOF Holdings appeared at the royal commission, the questions were raised whether IOOF is the suitable entity to take over ANZ’s wealth business. It has been argued that IOOF Holdings had given more preference to its own interests than to the interests of the members of the ANZ. The Australian Prudential Regulation Authority is also concerned about IOOF Investment Management Limited’s governance and Structure. Although the full transfer of business is expected to end in March 2019, the deal is still having some question marks.  

On the financial front, the revenue of the company increased from $907.52 million in FY 2017 to $919.14 million in FY 2018. However, due to increased expenses the total profit of the company decreased from $119. 85 million in FY 2017 to $93.63 million. Due to improved market conditions of new issue and traded volumes the other revenues of the company increased by $3.9 million. The earning per share of the company is reduced from 38.7 cents in FY 2017 to 26.4 cents in FY 2018.  The net cash provided by the operating activities increased from $179.28 million in FY 2017 to $215.87 million in FY 2018.  The cash and cash equivalent decreased from $208.2 million in FY 2017 to of $121.4 million in FY 2018. The overall debt to equity ratio of the company was zero in FY 2018 due to issue of new capital to fund the planned ANZ wealth management acquisition and repayment of debt. Meanwhile, the share price has declined by 18.73 percent in the past six months from $9.930 to $8.070 as of October 3, 2018 and traded close to PE level of 30.570x. Further, the stock traded at a 31.7 percent discount to 12-month high of $11.940 against the 4.4% premium to 12-month low of $7.815. IFL’s share traded at $8.160 with a market capitalization of $ 2.83 billion as on 4 October 2018 (AEST 2:20 PM).

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