Two years ago financial services group IOOF Holdings was fighting to save its reputation, while investors watched its share price plummet. Today the company is performing well and is back in favour with analysts and investors.
Listed investment company Aberdeen Leaders has added IOOF Holdings to its portfolio, citing an attractive valuation, good cost focus and exposure to rising superannuation flows.
Aberdeen Leaders is a $74 million fund that invests in S&P/ASX 200 companies. Over the year to the end of July the fund produced a net return of 4.2 per cent, compared with growth of 7.3 per cent growth in the index.
Over three years the fund has return an average of 5.7 per cent a year, compared with 5.1 per cent a year for the index.
IOOF reported an underlying net profit of $169.4 million for the year to June. Earnings in the June half were $90 million – an increase of 13 per cent over the December half and well ahead of analysts’ consensus forecasts.
Fund inflow of $4.6 billion was up 156 per cent year-on-year. Of that amount, $976 came from the 33 new advisers who joined IOOF during the year.
The company cut costs by $12.6 million – an 8 per cent reduction.
During the year IOOF acquired National Australia Trustees, giving it greater scale and specialist trustee capabilities.
According to UBS, IOOF’s better than expected result was driven by lower costs. In particular, its IT spending fell after the completion of a platform rationalisation.
Macquarie Securities said the positives in the result included higher operating margins on the group’s platform, a high dividend payout and a strong balance sheet that will allow the group to pursue acquisitions,
IOOF’s share price fell heavily in 2015, following allegations of widespread misconduct within the organisation. From a peak of $10.38 in May 2015, the stock fell 25 per cent before bottoming at $7.80 in February the following year. It has since climbed back to its current level of around $10.80.
According to a newspaper report, a whistleblower accused executives in the organisation of a range of misconduct, including insider trading, unit pricing errors and mishandling distributions.
An independent review by PwC later that year reported on improvements in the company’s incident management and breach reporting procedures, as well as a restructure of its research department.
PwC made a number of recommendations, relating to the establishment uniform standards and procedures throughout the group.