Record low interest rates will continue to drive Australians into the equities market in search of yield and heighten the demands for share investments in the coming financial year, according to wealth management group IOOF Holdings.
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Chief executive Chris Kelaher said investors remained hungry for income-producing assets and would continue to seek out listed companies with strong yield components to beef up their portfolio returns this new financial year.
"Given historically low interest rates, equity markets are attractive," Mr Kelaher said, noting investors were finding that 2 to 3 per cent yields on cash investments were not enough for sustainable income. "You really need to be diversified."
The comments came after IOOF posted a 27 per cent jump in net profit to $101 million, with underlying net profit beating analyst forecasts on the back of record net fund inflows.
Underlying net profit after tax for the year rose 13 per cent to a record $123 million, slightly beating analysts' forecast of $121 million.
IOOF raked in $1.4 billion in investors' funds into its flagship platforms during the year, which led a 10 per cent boost in funds under management to $95.9 billion. This is the first time IOOF's net fund inflows have surpassed $1 billion.
IOOF shares closed 0.7 per cent higher at $8.95 on Friday. The share price has risen 5 per cent in the past 12 months, compared with the 11 per cent gains of the benchmark S&P/ASX200 Index.
The group's funds under management generated shareholder revenue of $740 million which improved 8 per cent from last year. Its life statutory revenue fell 9 per cent from last year to $77 million. Announcing a fully-franked final dividend of 25¢, Mr Kelaher said the results show IOOF's growth strategy was on track.
IOOF, which has traditionally been a serial acquirer of financial services businesses, bought financial advice group SFG Australia in May. The acquisition beefed up IOOF's fund coffers by $13.8 billion, and will improve the group's earnings next year, Mr Kelaher added.
He said the company would continue to keep its doors open to potential acquisitions but the priority for IOOF was to ensure the integration of SFG into its business ran smoothly.
Baillieu Holst research analyst Nicolas Burgess said IOOF will face "a period of introspection" as it beds down the SFG acquisition. "With results in line with our forecasts on a pre-tax basis, IOOF remains the best-yielding wealth management play in our universe," he said in a research note to clients.
Morningstar's equity analyst Nathan Zaia said IOOF had beaten platform fee pressures in its performance.
"We knew there were moving parts but they were able to deliver on the bottom line," he said.
Aberdeen Asset Management, which invests in IOOF, said the profit numbers met investor expectations.
"There was nothing contentious. They were very good results with good cost controls in place,"Aberdeen head of Australian equities, Mark Daniels, said. "IOOF has provided a pleasing dividend yield."
