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  • Australian fund manager Challenger (CGF) has delivered a mixed bag of results in its FY21 half-yearly report
  • While Challenger’s assets under management swelled 13 per cent over the period, its profits took a 14 per cent hit as the pandemic ransacked global markets
  • The ASX-lister looked to bolster its portfolio with $3 billion in defensive assets to mitigate market volatility, which it plans to return to higher-yielding investments over the course of the year
  • The company remains bullish in maintaining its profit guidance for the second half of the year, with investors set to receive a 9.5 cents fully-franked interim dividend as Challenger flags a more stable economic and market outlook
  • Challenger shares have slipped 12.9 per cent following the announcements, trading at $6.29 each

Australian fund manager Challenger (CGF) has delivered a mixed bag of results in its FY21 half-yearly report.

Group performance

Assets under management proved to be a leading metric for the company, growing 13 per cent to $96.1 billion, from $18.3 billion over the period, which it attributed to its retail and institutional sales teams and “investor focussed” business model.

However, in response to a COVID-19 ransacked market, Challenger looked to shift its portfolio to a more defensive position in order to hold higher levels of liquidity.

The result was a drop in net profits before and after tax, shedding 14 per cent to 196 million and 10 per cent to $137 million, respectively, in comparison to the second half of FY20.

Challenger remains bullish looking towards the second half of the year, however, anticipating a normalised net profit before tax between $390 million to $440
million, which it says will be skewed towards the second half as it sheds the excess cash and liquid investments taken on during the pandemic.

The ASX-lister is also dishing out an interim fully franked 2021 dividend of 9.5 cents per share after halting the payment for FY20 in the wake of an uncertain economic and market outlook.

The dividend represents a payout ratio of 46.6 per cent, which sits within the scope of Challenger’s dividend payout ratio guidance range of 45 per cent to 50 per cent.

Challenger Life

Earnings before interest and tax for the company’s retirement income and insurance product, Challenger Life, came in at $193 million, marking a 33 per cent decrease on the prior corresponding period.

Sales were stronger through the half, swelling 10 per cent on the prior corresponding period. domestic annuity sales also were up 11 per cent, which Challenger attributes to “new institutional client opportunities and a stabilisation in the adviser market.”

The product held over $3 billion of cash and liquid investments at July 1, 2020, which Challenger says will be reallocated into higher yielding investments over
the course of FY21.

Funds management

Net income for Challenger’s funds management was up 5 per cent to $81 million, with net flows for the half year coming in at $6.4 billion, which the company says reflects “strong contributions” from retail and institutional clients.

Challenger shares have slipped 12.9 per cent following the announcements, trading at $6.29 each at 12:25 pm AEDT.

CGF by the numbers
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