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Challenger expects Hayne pain to linger

Greta Stonehouse
Challenger Limited has reported a drop of 4.6 per cent in full-year net profit from last year

Challenger Limited says disruption will continue to rattle the financial advice sector in the coming year as investors take their money elsewhere in the wake of the financial services royal commission.

The retirement-focused investment manager said uncertainty and a loss of trust in the wealth industry had blighted its full-year result, with domestic annuity sales dropping and advisor churn increasing amid compliance and remediation concerns.

Chief financial officer Andrew Tobin said the business had put in a steady performance despite the challenges facing the industry, and insisted the need for financial advisors remained strong, particularly in the retirement sector.

"(It's an) increasingly complex environment.... retirees are navigating a myriad of rules," Mr Tobin said on Tuesday.

"We recognise that managing all this, while pursuing specific financial goals is difficult."

Challenger's full-year profit fell by 4.6 per cent to $307.8 million for the year to June 30, with the firm anticipating ongoing headwinds from structural and regulatory changes - as well as falling interest rates.

The company lifted revenue 8.3 per cent to $2.37 billion for the year and reported underlying earnings growth within its funds management portfolio, but Australian annuity sales dipped four per cent.

Challenger's preferred guidance metric - normalised net profit before tax - was $548 million, scraping in at the lower end of a downgraded $545 million to $565 million guidance range offered in January.

The FY20 figure is expected to come in between a reduced range of $500 million and $550 million.

"While FY19 performance has been impacted by disruption across the Australian wealth industry, the business is in good shape to navigate the current operating environment and well positioned to capture opportunities as they emerge," the company said in an announcement.

Challenger shares jumped nearly 10 per cent to $7.21 following the release of its results on Tuesday, and were still 7.0 per cent higher at $6.955 by 1218 AEST.

The company held its final dividend at a fully-franked 18.0 cents per share and said it expects to to replicate its total payout of 35.5 cents per share in FY20, subject to market conditions and capital allocation priorities.

CHALLENGER'S FY19 RESULTS

* Revenue up 8.3pct to $2.37b

* Profit down 4.6pct to $307.8m

* Fully-franked final dividend unchanged, at 18.0 cents