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ASX 200 (XJO) up 0.3%, IOOF wants to acquire MLC

The ASX 200 (ASX: XJO) is up 0.3% at lunch, reversing some of the decline of Friday.

IOOF Holdings Limited (ASX: IFL)

IOOF announced acquisition plans as well as its FY20 result.

Acquisition

IOOF has announced that it’s going to acquire National Australia Bank Ltd’s (ASX: NAB) wealth management division called MLC, for $1.44 billion.

IOOF will be buying MLC’s financial advice (excluding the Meritum, Apogee and Garvan brands), MLC’s platforms and the asset management business.

This deal represents 7.4x ‘pro forma’ underlying net profit after tax (for the 12 months to September 2020) including the full year targeted synergies/cost reductions. Without the synergies, the valuation is 16.2x. The calculated synergies are predicted to be $150 million per annum by the third full year of ownership.

If the acquisition goes ahead, MLC will become the biggest retail wealth manager by funds under management, administration and advice (FUMA) with $510 billion, the biggest advice business by the number advisers with 1,884 advisers and the second biggest superannuation provider by funds under administration with $173 billion.

IOOF is going to fund this in a number of different ways.

It’s going to do a capital raising. It will be for a total of $1.04 billion, consisting of a $452 million underwritten institutional capital raising as well as an accelerated non-renounceable entitlement offer for $588 million.

The raising will be done at a price of $3.50 per new share, being a 22.5% discount to the dividend adjusted last closing share price of $4.515.

It will also use $250 million of incremental senior debt, $200 million in a subordinated loan note issued to NAB and $40 million of existing IOOF cash.

FY20 result

Underlying net profit was down 34.9% to $128.8 million. Statutory profit rose 414.6% to $124 million.

The result was tough despite total FUMA rising to $202.3 billion, up from $138.5 million last year.

The IOOF board decided to declare a final dividend of 11.5 cents per share, down 28% from the prior half dividend of 16 cents. The business will reassess the dividend after completing the MLC acquisition.

Sezzle Inc (ASX: SZL) sinks

The Sezzle share price is down almost 8% after the buy now, pay later business announced its FY20 half year result.

Sezzle saw underlying merchant sales (UMS) grew 338% to US$307.4 million and total income grew by 384% to US$20.8 million with merchant fees being 84% of total income.

The net transaction margin (NTM) was US$5.1 million in the first half of FY20, representing a margin of 1.7%, compared to a negative US$0.2 million in the first half of FY19 (which was a margin of negative 0.3%).

At 30 June 2020, active consumers grew by 243% year on year to 1.5 million and active merchants rose by 219% year on year to 16,100.

In July 2020 active consumers rose 7.1% month on month to 1.6 million and active merchants grew by 9.3% month on month to 17,600.

Temple & Webster Group Ltd (ASX: TPW)

Management said there have been no change to the FY20 result since the update released a month ago.

As a reminder, the company reported FY20 revenue grew 74% to $176.3 million (with Q4 revenue up 130%). EBITDA grew by 467% to $8.5 million (click here to learn what EBITDA means). It reported a net profit after tax (NPAT) of $13.9 million, which included an income tax benefit of $5.9 million.

The company said that it has started the 2021 financial year strongly with year on year revenue growth of 161% to 27 August 2020.

Temple & Webster said that growth was consistent across July and August with both months trading up more than 160% on the prior corresponding period.

The ‘contribution margin’ was above 15%. This meant that the EBITDA generated over the two months is expected to be around $6 million.

At 27 August 2020 it had $81 million of cash and no debt.

Other reports

There have been plenty of other reports released today which the team at Rask Media have covered.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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