Challenger goodwill write-off hurts profit
Challenger Financial Services Group has reported a net loss of $235.45 million for 2003/04 - the result of $280 million goodwill write down.
The group says the decision “assumes a more conservative perspective of the group’s broad business plans, even though more favourable outcomes may eventually result”.
The group, which was incorporated on November 6, 2003, reported a net profit of $97 million before the discounting of goodwill.
Earnings per share before goodwill were 3.7 cents, although challenger said this became a 7.8 cent loss after the write down.
The Challenger Life division reported overall pre-tax profit of $124 million on a statutory basis, with annuity sales of $545 million for the year.
During the year, its life division sold 12 non-core properties for $160 million and announced its intention to sell its overseas property holdings.
The wholesale finance division reported that equity and fixed funds under management more than doubled in 2004 and added that the outlook for next year is favourable.
Funds under management in the Howard Mortgage Trust rose by 21 per cent to $3.1 billion.
Challenger says it will not pay a dividend this year but is aiming to pay one from retained earnings in 2004/05.
The group also announced that it will be asking shareholders to approve a five into one share consolidation at its annual general meeting in November.
“The company believes the consolidation to be in the best interest of shareholders, as it is likely to increase the nominal value of Challenger shares to levels more commonly expected for companies of Challenger's size,” it says.
The group is also aiming to grow its existing businesses by enhancing shareholder value and managing capital and costs more effectively. This includes a “company wide commitment to improve the cost to revenue ratio and achieve an 18 per cent return on the historic cost of net assets benchmark in each of the company’s three core businesses within the next three years”.
"It is anticipated that Challenger Wholesale Finance will achieve this benchmark in the 2005 financial year," the group says.
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