Why the IOOF Holdings Limited share price is climbing higher today

Credit: Pictures of Money

The share price of financial services provider IOOF Holdings Limited (ASX: IFL) has rallied over 1% today, bucking the slump in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) after the company reported an 18% surge in underlying profit.

Here are the highlights from the interim results:

  • Underlying net profit after tax jumped 18% to $95.4 million
  • Underlying earnings per share increased 11% to 31.8 cents per share (cps)
  • A fully franked interim dividend of 28.5 cps, up 14% has been declared. Payment is due on April 7
  • The integration of Shadforth is tracking well with IOOF noting $11.3 million in pre-tax synergies had been realised, taking the total synergies expected by financial year (FY) 2016 to in excess of $30 million

What now for IOOF?

Having posted a strong set of interim numbers, IOOF’s outlook for the future looks healthy.

The group achieved net fund inflows of $932 million across its Advice, Platform and Investment Management divisions during the six months to December 31.

The balance sheet is in great shape with net debt declining from $74 million in the prior corresponding period to just $29 million at balance date.

IOOF’s investment management business has been simplified with the sale of the Perennial boutiques to Henderson Group plc (ASX: HGG). This reduces the group’s exposure to the more volatile nature of institutional fund flows and arguably makes the recurring earnings easier for investors to predict.

While the potential acquisition of Hub24 Ltd (ASX: HUB) was unsuccessful, management noted that the environment for mergers and acquisitions is attractive. Its scale and balance sheet should see IOOF remain at the forefront of industry consolidation.

Based on analysts’ forecasts, IOOF’s current share price looks attractive when compared to other financial service sector peers such as BT Investment Management Ltd (ASX: BTT) and AMP Limited (ASX: AMP).

Why These 3 Blue Chip Shares Look Set to Soar in 2016

Discover The Motley Fool's top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the very real prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

HOT OFF THE PRESSES: My #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.