Challenger misses expectations

WEALTH manager Challenger Financial has reported a sharp slide in profit as higher expenses and a hike in finance costs more than wiped out a modest rise in revenue.

Shares in the group tumbled yesterday after it posted a net profit for the year to June of $323 million, down 19 per cent.

The result missed the expectations of analysts, who were broadly expecting a tally of $402.4 million, overshadowing the company’s claim to have met a forecast given earlier this year.

Challenger shares plunged 6.9 per cent, or 86c, yesterday to $11.59 in the wake of the revelation, wiping more than $500 million from the company’s market value.

The group’s preferred measure of “normalised” pre-tax profit, an underlying earnings measurement, was $547 million. That result was up 8 per cent from the previous year but at the lower end of the Sydney group’s forecast range, of $545 million to $565 million.

Normalised profit, which strips out investment returns and other volatile items, was a record $406 million after tax.

While that figure was up 6 per cent from the previous year, it was below analysts’ average estimate of $432 million.

Chief executive Brian Benari highlighted strong flows into both Challenger’s annuities and funds management business. He said the most pleasing aspect of those flows was an increase into longerduration (life or 20-year) annuity products. The group will pay a final dividend of 18c, up 0.5c from a year ago.