The way the accounts have been struck makes it nigh on impossible to know what is really going on in terms of underlying performance, so we'll just have to take their word for it when they talk of Underlying NPAT (UNPAT) of $198m and provide some relevant numbers that relate to the ANZ transaction, which is having the effect of muddying the waters in this result.
By my reckoning, if I strip out the impacts relating to the ANZ business from indicative UNPAT of $198m, (i.e., the $50m interest offset by the $16m of after-tax loss of ANZ ALs), it results in Adjusted UNPAT of $164m.
And then, to get a feel for half-yearly performance, deriving half-year UNPAT figures - adjusted for the ANZ effect - looks something like the following:
UNPAT Figures Quoted By Management:
DH17: $94.6m
JH18: $96.8m
DH18: $100.1m (+6% vs pcp)
JH19: 97.9m (+1% vs pcp)
Which doesn't look that bad, at face value.
But then we need, for each half-year of FY2019, to deduct:
1. the interest received from the ANZ bond ($20m in DH18 and $30m in JH19, totalling $50m for the full year FY2019),
2. Earnings from discontinued businesses ($8m in DH18 and $5m in JH19, totalling $13m for the full year FY2019, and
3. add back ANZ AL's losses ($5m in DH18 and $11m in JH19, so $16m for the full-year):
Ergo, I think the core IFL business was down by around 21% in FY2019, and, viewed in half-yearly terms, down 18% in the first half and 24% in the second-half.
If that was where the story ended, then one could say, well, annualising the most recent half-year result should provide some kind of an earnings base from which to value the company, so say 2 x $74m =~$150m.
(This assumes no contribution from the ANZ Wealth business, for the sake of conservative-ness... although I'm no longer sure that "conservative-ness" is something that can be used to delineate IFL's earnings, these days.).
So, ordinarily, one could quite reasonably and legitimately say that, under stready-state conditions,the core IFL business is a 13x or 14x P/E kind of business, so:
Equity Value = 13x or 14x $150m NPAT
= $1.9bn to $2.1bn
= $5.50/share to $5.90/share.
(Plus whatever the ANZ business ultimately ends up being worth depending on how much of it they end up owning, and that is an entire different discussion all on its own. But it warrants noting that I'm excluding some $40m of UNPAT from my valuation calculations, which is how much the ANZ Wealth business is earning, based on annualised JH19 performance.... and that would be worth an extra $1.50 to $1.60/share)
And that would all be fine and reasonable and could usually provide a sufficient level of conviction to formulate a clear investment decision.
Which is where I thought I'd be after this result which, after all the sturm und drang of the past 12 months.
Trouble is that, instead of having a clearer picture in my mind's eye of what IFL will look like in 1, 2 , 3 and more years hence, I'm still none the wiser, because what I learnt from today's announcement and presentation is that the company is basically now embarking on a total re-invention of its financial advice business.
Which means it will be at least another 12 months before the market gets to see what the "new, improved" IFL looks like (My sense it is going to be far less capital-light than it has been to date).
Little wonder the stock got sold off today, given the impatient animal which is the market.
(The other thing about this result that perplexed me was the dividend that was declared: 12c of it was based off the statutory figure, but then it was topped up with a 7cps special dividend component to reflect the "economic performance of the business".)
IFL Price at posting:
$4.84 Sentiment: Hold Disclosure: Held
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