Challenger Financial Services Group Ltd, the Australian fund manager backed by billionaire James Packer, replaced its chief executive officer after posting the first loss in five years as the value of investments declined.
Chief executive officer Mike Tilley, who joined Sydney-based Challenger in 2004, will be replaced by deputy Dominic Stevens, the company said in a statement.
Tilley’s departure follows those of Babcock & Brown Ltd CEO Phil Green and National Australia Bank Ltd’s John Stewart as the global credit crisis hurt their businesses.
Challenger, among the worst performing Australian financial stocks this year, joins fund managers Perpetual Ltd and Platinum Asset Management Ltd in reporting declining earnings.
“The number of departures suggests that it’s gone beyond a company specific issue and is now a symptom of the broader global crisis that’s impacting companies’ bottom lines across the board,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about US$108 billion.
“The last time we had so many departures was around 2001 following the technology boom,” Oliver said.
Profit excluding investment writedowns rose 20 percent to A$218 million (US$188 million) in the 12 months ended June 30, Challenger said in a statement yesterday. That beat the A$212 million median estimate of 11 analysts surveyed by Bloomberg.
Challenger shares rose 7.6 percent to A$2.43 as of 11:17am in Sydney yesterday, paring their loss this year to 52 percent.
The company’s net loss of A$44.2 million for the year compared with net income of A$255 million a year earlier as declining financial markets cut investments.
The Australian benchmark S&P/ASX 200 Index is down 21 percent this year, heading for an annual slide following a five-year rally.
Challenger’s earnings from managed funds dropped 23 percent in the period, while funds under management slid 19 percent to A$14.9 billion.
“We believe that the current difficult market conditions will continue to affect the sector for some time to come,” Stevens, who joined the company in 2003, said in a statement.
“We remain confident in our pursuit of generating double-digit earnings-per-share growth in the long term,” he said.
Outgoing chief executive Tilley said a year ago he expected the company to continue to deliver earnings growth of more than 10 percent “in the long term.”
Challenger, 20 percent-owned by Packer’s Consolidated Press Holdings, sold its financial planning business in June to AXA Asia Pacific Holdings Ltd for A$150 million in cash. AXA is a unit of Europe’s second-biggest insurer.
“It’s clearly been difficult for people in the funds management space because the markets have been so tough,” said Rob Patterson, managing director of Adelaide-based Argo Investments Ltd, which looks after approximately US$3.8 billion in assets. “There may be some sort of generational change happening here.”
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