Business SummaryIOOF Holdings Limited (IFL) is an Australian financial service provider. IFLoffers financial products and portfolio administration services includinginvestments, superannuation, immediate and deferred annuities, andinvestment trusts, in addition to financial planning and advisory, stockbroking,estate planning and administration, and trustee services.

Financial advice and distribution services: IFL advises retail clientinvestment strategies, wealth protection and accumulation, stockbroking andretirement planning via the company network of financial advisers andstockbrokers. Brands include Bridges, Wealth Managers, Consultum,Lonsdale, Ord Minnett, Western Pacific Financial Advisers, Plan B and MyAdviser.

Platform management and administration: IFL provides platforms toclients, employers and financial advisers to manage a range ofsuperannuation and investment options including managed funds and directshares. Brands include IOOF Pursuit, IOOF Employer Super, The PortfolioService, and AustChoice.

Investment management products: IFL offers a range of investmentproducts that are designed to suit any investors needs. The array includesmulti-manager funds, Australian or international shares, and other investmentproducts. Products include IOOF MultiMix, IOOF WealthBuilder, Perennialand QuantPlus.

Trustee services: IFL provides estate planning and corporate trust serviceswhich are offered by Australian Executor Trustees, a specialist provider ofpersonal trusts and offers a range of trust structures. Services includemanaged investment schemes, trustee or security trustee for securitizationand structured finance transactions, and trustee for note and other debtissues. The AET Superannuation provides the Private Super Fund - a smallAPRA fund; and the AET SMSF - a self-managed super fund establishmentand administration service.

Latest ResearchMore Questions...

IFL released a disappointing quarterly report that has raised a range ofissues not properly addressed in the update. Below we provide a list of ourkey three concerns:

- The recently acquired ANZ’s P&I’s earnings in the first five months sincethe acquisition completed appears to show a big deterioration in earnings,even after taking into account the COVID impact. We suspect the margindecline is more rapid than the company has previously indicated.

- IFL’s guidance range for its FY20 UNPAT result of between $123m -$125m

lacks key information as to how it arrived there. Specifically, how much oftheir target synergies is included in this figure and what one-off’s havebeen excluded (i.e. we weren’t provided with a reported NPAT guidancefigure); and

- We see the comments around balance sheet strength as misleading. IFLnoted

that if it had included the annualised ANZ P&I contribution, its net-debt toEBITDA ratio is estimated to be 1.3x. It is misleading because it hasn’t

GICS - Div. Financials

IOOF Holdings Limited

ASX Code: IFL Price: $4.48 12 Mth Target Price: $4.20 Rating: Sell

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

4 August 2020$1,573m351.1m$8.45$2.72

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Sell$4.20-6.2%3.2%-3.1%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 184.9 124.2 129.0 124.2Profit (norm)* $m 184.9 124.2 129.0 124.2

EPS* ¢ 52.7 35.4 36.7 35.4EPS Growth % -10.4 -32.8 3.9 -3.7P/E* x 8.5 12.7 12.2 12.7P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 44.5 21.0 10.0 15.0Yield % 9.9 4.7 2.2 3.3Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

accounted for its remediation program ($223m) and its integration costs(~$80m remaining) in this calculation. IFL is now sitting at the top end of itsnet-debt / EBITDA target ratio

range of 1.0 – 1.3x.

For more information see research 31 Jul 2020.

GICS - Div. Financials

IOOF Holdings Limited

ASX Code: IFL Price: $4.48 12 Mth Target Price: $4.20 Rating: Sell

Important Disclaimer - This may affect your legal rights: Because this document has been prepared without consideration of any specific client's financial situation, particular needs and investmentobjectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement withBell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell PotterSecurities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document.This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. This is generalinvestment advice only and does not constitute advice to any person.Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in thiscommission. Bell Potter Securities and its associates may hold shares in the companies recommended.

Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

4 August 2020$1,573m351.1m$8.45$2.72

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Sell$4.20-6.2%3.2%-3.1%

Investment FundamentalsFYE 30 Jun 2019A 2020F 2021F 2022F

Profit $m 184.9 124.2 129.0 124.2Profit (norm)* $m 184.9 124.2 129.0 124.2

EPS* ¢ 52.7 35.4 36.7 35.4EPS Growth % -10.4 -32.8 3.9 -3.7P/E* x 8.5 12.7 12.2 12.7P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 44.5 21.0 10.0 15.0Yield % 9.9 4.7 2.2 3.3Franking % 100.0 100.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Bell Potter estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2015A 2016A 2017A 2018A 2019A

Sales Revenue 925 888 874 902 974Total Revenue ex. Int. 1,000 966 903 972 1,047EBITDA 253 321 219 289 212Depreciation & Amort. -46 -49 -48 -48 -47Goodwill Amortisation -- -- -- -- --EBIT 206 272 171 242 165Net Interest -4 -2 -2 7 65Profit Before Tax 202 270 169 249 230Income Tax -65 -66 -60 -63 5Outside Equity Int. -2 -3 -4 -5 -5Profit after Tax 135 260 105 180 306Significant Items after Tax 3 -63 11 -92 -278Reported Profit after Tax 138 197 116 88 29Preferred Dividends -- -- -- -- --

Cash Flow ($M)2015A 2016A 2017A 2018A 2019A

Receipts from Customers 1,038 1,005 967 958 1,211Funds from Operations 247 247 242 288 221Net Operating Cashflow 186 169 179 216 172Capex -12 -9 -12 -11 -30Acquisitions & Investments -44 -5 -1 -428 -811Sale of Invest. & Subsid. 10 -- 7 5 450Net Investing Cashflow -47 42 8 -443 -415Proceeds from Issues 5 0 -- 539 --Dividends Paid -155 -174 -160 -180 -191Net Financing Cashflow -93 -182 -163 140 229Net Increase Cash 46 28 24 -87 -13Cash at Beginning 110 151 187 208 126Exchange Rate Adjust. -0 0 0 -0 0Cash at End 151 187 208 121 97

Ratios and Substantial Shareholders2015A 2016A 2017A 2018A 2019A

Profitability RatiosEBITDA Margin % 27.33 36.20 25.07 32.07 21.75EBIT Margin % 22.31 30.64 19.58 26.79 16.94Net Profit Margin % 14.60 22.65 12.04 20.00 23.67Return on Equity % 9.92 14.46 7.79 10.00 13.97Return on Assets % 5.06 7.54 4.01 5.83 6.48

Debt/Safety RatiosNet Debt/Equity % 4.18 1.43 0.09 -6.50 20.21Interest Cover x 49.11 113.48 69.11 -33.16 -2.53

Top 5 Substantial ShareholdersLegg Mason Asset Management Limited 9.6%Sumitomo Mitsui Trust Holdings Inc 8.5%Bruce W Neill 7.0%Vanguard Group 5.0%

Balance Sheet ($M)2015A 2016A 2017A 2018A 2019A

Cash & Equivalent 151 187 208 121 97Receivables 96 102 117 100 205Inventories -- -- -- -- --Other Current Assets 23 58 51 481 1,783Current Assets 279 347 376 702 2,137Prop. Plant & Equipment 22 22 21 19 36Intangibles 1,537 1,472 1,396 1,349 1,302Other Non-Current Assets 31 58 51 481 1,948Non-Current Assets 2,525 2,396 2,375 2,428 1,568Total Assets 2,803 2,743 2,751 3,131 3,705Interest Bearing Debt 208 207 209 4 432Other Liabilities 1,223 1,136 1,181 1,315 1,616Total Liabilities 1,431 1,343 1,391 1,318 2,048Net Assets 1,372 1,400 1,360 1,813 1,657Share Capital 1,438 1,436 1,434 1,967 1,963Reserves -9 11 13 19 25Retained Earnings -66 -58 -97 -184 -339Outside Equity Int. 10 9 10 10 8Total Shareholders Equity 1,372 1,400 1,360 1,813 1,657

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Adrianna Bisogni

Directors

Mr Allan Griffiths(Non-Executive Director,Non-Executive Chairman)Ms Elizabeth Flynn(Non-Executive Director)Ms Michelle Ann Somerville(Non-Executive Director)Mr John Selak(Non-Executive Director)Mr Robert Andrew Bloore(Non-Executive Director)Mr Renato Mota(Group General Manager - WealthManagement,Chief Executive Officer,Managing Director)

To access further Research or for information regarding our recommendations and ratings please seewww.bellpotter.com.au

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