Investors in Challenger Ltd slowly cooled to the company’s 2018-19 result yesterday which while meeting revised guidance in June (the second downgrade in five months) saw no change in what looks like a slow outlook.
A very different market reaction today to Challenger’s confirmation of a weak net profit of just $6.1 million in the December half, compared to the January 23 downgrade and reworked guidance when they plunged 17%.
Well, that was an unexpected shock for Challenger Ltd, the annuities and fund management group whose shares were well and truly punished yesterday after it revealed that first-half earnings had been almost wiped out by the volatile stock markets in November and December.
FY19 net profit was below expectations and at the bottom of the target range of $545-565m, Morgans notes. Overall, the broker considers the result underpins confidence that the earnings profile has largely been re-based.
Credit Suisse has concluded that ongoing weak sales is a more severe earnings headwind for the company, compared with annuity spreads. The company has also guided to FY20, which implies -7-12% downgrades to forecasts.