Challenger shares falling today
Stock
Challenger (CGF) $7.07 as at 13/06/2019
Event
Investment name Challenger has slumped today as the company talks down the FY19 result, and even lowers expectations of a big FY20. Shares are off around 8% today, taking the 12 month fall to well over 40%.
The company is hosting an Investor Day, normally reserved for talking up performance however Challenger’s came with a guidance revision of “the lower end of previous guidance” for normalized net profit of $545m to $565m. The company also started talking down FY20 before the end of the current financial year which really concerned investors today.
The downgrade relates in part to poor investment returns across the business. Just last week the Funds Management chief was moved on, an ominous sign ahead of an investor day. While the shift to selling more annuity products has created a longer term earnings model, it has also forced Challenger to change its investment mix, moving down the risk curve in more conservative but less lucrative investments.
The forecast for next year was based on lower equity returns, product and marketing, lower rates and a lower return on equity. Challenger are now targeting an ROE of RBA + 14%, down from a flat 18% target which Challenger had fallen short of over the past few years.
Challenger (CGF) Chart
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Challenger Limited (CGF) Chart[/caption]
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