IOOF’s Lower 1H20 Results an Anomaly, with P&I Business Expected to Drive Future Earnings Growth

Narrow-moat IOOF Holding’s fair value estimate remains AUD 7.30 per share despite the steep drop in underlying net profit after tax, or UNPAT, in the first half of fiscal 2020. The fall was mainly due to lower interest received as part of the agreement to acquire the Australia & New Zealand Bank’s Pension and Investment, or P&I business. P&I was acquired on Jan. 31, 2020, and we expect this business to drive strong future underlying UNPAT growth of about 8% per year to fiscal 2024. P&I materially increases IOOF’s scale, with its platform and administration business now the fifth-largest in Australia and its advisor network the second-largest. P&I also increases the IOOF’s reach into the employer superannuation market, which benefits from younger employee members still in accumulation phase.