Financial services business IOOF (ASX: IFL) has announced a mixed fourth quarter of Q4.
FY20 fourth quarter
The main positive of the update was its funds under management and administration (FUMA) growth.
Total FUMA grew by 3.4%, or $6.7 billion, to $202.3 billion over the June 2020 quarter.
However, three of its four divisions reported net outflows of funds. The 3.4% growth was mostly due to positive market movement.
Financial advice net outflows was $93 million, portfolio & estate administration net inflows was $398 million excluding early release of super, investment management saw a net outflow of $51 million and pensions & investments (P&I) saw a $183 million net outflow excluding early release of super.
In terms of super early release, it has paid a total of $743 million with $573 million for the P&I business and $170 million from the rest of IOOF.
FY20 update
The company is working through its remediation provisions. The IOOF business doesn’t expect much change from the $223 million provision, including costs. However, provisions relating to the ex-ANZ (ASX: ANZ) advice licensees is expected to increase by $80 million, though this will be offset by an increase owed by ANZ to IOOF. ANZ is responsible for client remediation proposals up to October 2022.
COVID-19 is causing a lot of uncertainty for IOOF. Based on preliminary numbers, IOOF is expected underlying net profit after tax (UNPAT) of between $128 million to $130 million for FY20 and UNPAT from continuing operations in range of $123 million to $125 million.
For the 5-month period of ownership, IOOF is expecting an UNPAT profit contribution of $25 million from P&I.
Summary
IOOF has done well to grow its FUMA during this difficult period. However, I’m not sure about the long term earnings outlook for the company. It may be a decent dividend share over the coming years after COVID-19, but there are more reliable dividend shares out there in my opinion.
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