Ann: FUMAS for period ended 31 December 2017, page-5

"forecast growth looks good at first glance but...
2016/06 EPS was 66.8c, 2019 commsec forecast 62.6c
so if your frame of reference is 2016 eps, no growth for the next three years. Not so flash. Outlook post 2019 is probably quite good though with efficiencies drawn from the acquisition of the ANZ wealth management business. I still hold, as I believe SP appreciation will be significant."

@Cheapy,

I think it is important to not take published figures simply at face value, but the understand what is truly behind those figures.

For example, that 66.8c EPS figure you quoted for FY2016, I suspect that is the figure derived from the statutory profit reported in that year. But you may recall that that was the year that IFL divested its interests in the Perennial Funds Management business, on which it booked a $59m profit.

If you exclude that one-off profit, the underlying EPS was 58cps, so that's really the figure that you need to use when comparing with whatever forecasts you are using.

That translates into about 10% EPS growth between FY2016 and FY2019. And very little of that was due to acquisitions, of which there have been no major ones in recent years.

Now 10% growth over three years might not sound too flash, but remember that the company is still growing its earnings despite the significant fee compression [*] being experienced across the industry, which is testimony to the disciplined manner in which the business is managed.

[*] Ironically, with IOOF having one of the lowest cost-to-income ratios in the industry, industry-wide fee compression plays directly into IOOF's strategy of disciplined industry consolidator, because it greatly moderates the expectations of the vendors of the businesses that IOOF is seeking to acquire.


PS. The acquisition of ANZ's wealth business, once consummated, will be a very big deal for IOOF's EPS. Some rough modelling I've done suggests EPS will reach 75cps by FY2020, the first full-year of IOOF ownership, and will be 80cps on a pro forma basis after synergies are extracted. None of those figures include incremental earnings from fund inflows to IFL's core businesses, nor do they include the impacts of market movements. Of course, there will be the dilution effect of the recent capital raising on this year's EPS.