Navigator Global’s shares zoomed up over 10% after the investment group posted 155% growth in statutory net profit for the half year ended 31 December 2018 compared to the previous corresponding period. It translates a bottom line growth of US$41.425 million, converting the loss of US$26.763 million in 1H FY18 to the profit of US$14.662 million in 1H FY19.
However, there has been a significant drop in asset manger’s primary revenue source as the Management Fee rate has been reduced to 0.67% to be line with the increasing proportion of its Customized Solution as a percentage of total AUM which was 62% in HY2019. This is in comparison to the average annual Management Fee of 0.73% in FY2018 and Customized Solution of 59% of total AUM in FY2018.
Notwithstanding the change in rate, Navigator flagged 45% growth in Management Fees Revenue to US$54.8 million on the back of additional revenue driven by AUM from recently acquired $5.4 billion of assets under management in a transaction with Mesirow Advanced Strategies (MAS), a division of US-based Mesirow Financial (Mesirow). However, Group’s AUM reduced by $2.0 billion over the six months to 31 December 2018 due to a combination of investment losses and faster than anticipated redemptions from the transitioned MAS assets which stood at $3.9 billion at period end.
1H FY19 Net Fee Revenue of the company inclined by 41% to US$53.276 despite a sharp decline in performance fee income of the company which crashed 91% to US$0.2 million in H1 FY19 compared to H1 FY18’s US$2.4 million. The company explained that a decline in performance fees was not unexpected given the impact on investment performance from the particularly severe downturn and volatility across global asset classes experienced over the December 2018 quarter.
EBITDA of the group was recorded at the highest level for six months, posting a 25% rise to US$20.125 million in H1 FY19. However, EBITDA margin slightly declined to settle at 37% in the first half of Fiscal 2019 compared to 40% in the same period last year.
The Investment Group declared an interim dividend of USD 8 cents per share for the half year ended 31 December 2018 compared to USD 7 cents in 1H FY18. The payment date for this interim dividend has been fixed to 8 March 2019 with the record date of 21 February 2019.
Looking forward, Navigator Global Investment Limited (ASX: NGI) expects to see a reduction of approximately 10% in its management fees for H2 FY19 due to the decline reported in Asset Under Management during H1 FY19. Also, EBITDA is expected to fall by approximately 20% on US$20.125 million EBITDA achieved in the first half of Fiscal 2019. This reflects the additional expenses scheduled to be incurred in respect to the integration of the MAS assets which is anticipated to be broadly completed early in FY 2020.
However, the company stood optimistic on new mandate opportunities with the expectation to still see some redemptions from MAS transitioned assets over the short-term, although at lower levels than experienced for H1 2019.
After moving as high as 10% in early trade, NGI settled at $3.235 on 14 February 2018 that represents a positive intra-day change of 8.557%.
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