Challenger share price rises 10% following 2019 full-year results

Here are some of the key things you need to know about the 2019 results that saw investors bid Challenger’s share price as much as 10% higher today.

Challenger (ASX: CGF) Source: Bloomberg

Challenger Ltd (ASX: CGF) saw its share price soar as much as 10% higher today, following the release of its 2019 full-year results.

The investment firm, known for their provision of annuities across Australia, saw its stock drop off a cliff in January, after reporting a 97% decline in 1H19 net profits after tax.

Though the 10% pop we witnessed today may suggest that demand for Challenger’s stock is returning, the company’s share price still remains a long way from its January highs.

Challenger FY19 financials in review

After a horror first-half, Challenger Ltd has posted solid results for the 2019 financial year.

Overall, the company reported that total assets under management had increased 1% year-over-year, to A$81.8 billion.

Maybe of most interest to investors however, is Challenger’s much-improved full-year statutory net profits after tax.

Here, the wealth manager reported profits of A$308 million – down A$15 million from the year prior, but significantly above the dour profits reported in the first-half.

Speaking of these FY19 results, Challenger’s Managing Director and CEO, Richard Howes argued that:

‘While significant disruption has clearly impacted our results in 2019, our outcomes demonstrate the strength of the franchise we've built.'

The FY20 outlook at a glance

Challenger Ltd maintains that it is well capitalised, resilient and in a good position to realise further growth.

Speaking of the future, Challenger’s CEO said:

'In 2020, our investment of up to $15 million in new distribution, product and marketing initiatives builds on the strong foundations of our business to drive the next phase of growth.'

Such investments, continues Challenger’s CEO, is aligned with the broader 'goal to make annuities a mainstream option in retirement.'

Contributing to this outlook, Challenger thinks there remains a number of positive tailwinds that will contribute to this future growth, including: the favourable nature of Australia’s super system and the country’s fast aging population.

Bullish activity around the stock today, suggests that investors – at least for now – seem to potentially appreciate the long-term rewards, more so than the short-term risks implied by Challenger's business model.

Challenger share price in perspective

Mind you, even with the positive momentum we witnessed this morning, Challenger (ASX: CGF) has still seen its share price hammered 24% year-to-date.

Challenger, like the big four banks, could not escape the wide-reaching impact of the Hayne Royal Commission when it revealed its 2019 results today.

The question thus now remains, what future impact, if any, will Challenger feel in the years ahead from the Hayne inquiry?

Analysts at least, seem unsure how to answer such a question.

According to the Wall Street Journal the average analyst consensus for Challenger Ltd remains a hold – with three analysts still rating the stock a buy.


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