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Challenger Releases Record Half-Year Result

Challenger Releases Record Half-Year Result
Feb 16, 2016 By Simon Herrmann Tags: CGF

The diversified financial services company Challenger Limited (ASX:CGF) posted an 18% rise in normalised profit after tax for the 1H16 period.

Statutory NPAT was up 80% to $234 million, which includes $30 million of positive 'investment experience' and significant one-off items of $22 million, boosted by the sale of Kapstream Capital in July 2015. The underlying profit increased 18% to $182 million for the half year ended December 2015.

Challenger improved its cost to income ratio by 60 basis points to 33.8%, which is attributed to the successful ongoing cost discipline measures.

Chief Executive Officer Brian Benari elucidated the results: “These are strong results with double digit revenue growth in every key financial metric which influences shareholder value This has been supported by AUM growth, margin expansion and an improved cost to income ratio.”

Annuities Expanded 12%

Challenger Life expanded its Assets under Management to $13.1 billion as at 31 December 2015. Moreover, the segment’s margin broadened 10 bps to deliver a 14% increase in cash operating earnings (COE) and a 15% rise in earnings before interest and tax (EBIT). Total Life net flows logged $347 million, representing 3.6% total book growth.

Funds Management Income up 20%

Average Funds under Management expanded 4% on the previous comparable period to $54.8 million. However, the average FUM rose 15% if the Kapstream sale impact is not included.

The segment’s net income rose 20% to $67 million, which is ascribed to the revenue contributed from Dixon Capital (acquired in July 2015), and income from new third-party agreements for Challenger Investment Partners. 

Dividend up 10%

Challenger’s board declared an interim dividend of 16 cents per share, up 10% and fully-franked compared with a 70% franked dividend during the previous year.


Challenger reiterated its Life cash operating earnings guidance of $585 million to $595 million for FY16 as the company continues to target an overall normalised Return on Equity of 18% before-tax.

The upbeat announcement sent CGF up 9% upon opening as at 10:07 AM (AEDT).

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Simon Herrmann Author: Simon Herrmann Feb 16, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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