Investors Dump Suncorp Shares After Subpar Profits

Shares in Suncorp Group Ltd [ASX:SUN] have dropped 6.31% today after a huge market sell-off.

What are investors heading for the hills?

Suncorp posted its full-year profits today and the numbers didn’t quite hit the mark. The company’s net profit was $1,075 million, up 3.6% from last year. But crucially, didn’t quite reach the forecast five per cent.

Strong growth in the Australian insurance market — up 30% — wasn’t enough to offset overall poor performance. Suncorp’s banking and New Zealand businesses both underperformed, largely accounting for the dismal figures.

A silver lining?

There is some good news for investors. Shareholders will receive 40 cents per share from their dividend. Bringing the total payout for the year to 73 cents, a 7.3% increase. It puts the payout ratio at the upper end of the spectrum, representing 81.9% of Suncorp’s earnings.

Management is also committed to maintaining this high payout ratio in 2018. So at least investors have some reason to smile.

As for the company’s future, management is positive it can make amends. Chairman Ziggy Switkowsky said,

The group remains well capitalised and has a diversified earnings base that continues to provide a strong foundation to create value for our customers, shareholders, employees and communities.’

Unfortunately for Suncorp, executive sentiment isn’t going to turnaround the company. The market will be looking for better numbers when the next round of reporting comes in.


Ryan Clarkson-Ledward
Junior Analyst, Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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