Magellan Financial Group Reports Positive Set of Numbers for FY20, Adjusted NPAT Up 20%

Summary

• Magellan Financial Group registered a 26 per cent increase in average funds under management, while adjusted net profit after tax grew by 20 per cent for FY20.
• Total dividends up by 16 per cent to 214.9cps including a 122.0cps dividend declared for the six-month period to 30 June.
• Strong balance sheet enabling the company to continue investments in the business, with net tangible assets of AUD 925.4 million as at end-June.
• Magellan Financial plans to make MFG Core Series and Magellan Sustainable Fund available by end-2020.

Magellan Financial Group (ASX:MFG), a Sydney-based ASX-listed, specialist funds management business, registered a strong year for the period ended 30 June 2020 amid the challenging market conditions. Adjusted after-tax net profit improved by 20 per cent year-on-year to AUD 438.3 million.

Average funds under management (FUM) grew by 26 per cent over the same period a year ago to AUD 95.5 billion. Average funds under management growth resulted in a 25 per cent rise in management and services fees to AUD 591.6 million and a 20 per cent gain in adjusted net profit after tax to AUD 438.3 million.

For the six-month period to 30 June 2020, the Board declared a dividend of 122.0 cents per share (cps) (franked at 75 per cent), comprising a final dividend of 91.6 cps and a performance fee dividend of 30.4cps, scheduled for payment on 26 August 2020. Total dividend for FY2020 grew by 16 per cent to 214.9 cents per share.

Magellan CEO Brett Cairns highlighted that the company’s strong investment performance amid the pandemic has shown the significance of its investment processes as well as focus on safeguarding investors' capital.

As at 30 June 2020, Magellan boasts a robust financial position with net tangible assets of AUD 925.4 million. The company has always emphasised on the significance of maintaining a strong balance sheet as it is in the best interests of clients and shareholders, especially during the current challenging times.

The strong financial position allowed Magellan to continue investing in the business as well as restructuring its Global Equities retail funds.

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Business Resilience and Diversification. The company has been pursuing a strategy for revenue stream diversification.

• Infrastructure business’ ongoing growth - AUD 15.9 billion of FUM
• Direct retail strategy: roll out of Active ETFs in 2015 – 42k individual unitholders and AUD 2.6 billion of FUM
• Acquisition of Airlie in 2018: AUD 7.0 billion of FUM
• Closed-ended LITs - AUD 3.2 billion of FUM and ongoing partnership approach,
• Restructure of Global Equities retail funds,
• Launch of MFG Core Series for retail investors and sustainable strategies
• Plans to roll out retirement income product.

Magellan To Launch MFG Core Series and Magellan Sustainable Fund

MFG also announced the development of the MFG Core Series - a series of investment strategies that will support the company's investment philosophy and proprietary research to provide investors more diversified portfolios of prominent companies at a lower cost.

Mr Cairns stated that the series extends the successful approach applied by the company’s institutional Core Infrastructure Fund. It was being developed for several years and mandates for the previous ten years.

It will build diversified portfolios of high-quality companies. The Core series will be provided at a management fee of 0.5 per cent per annum. The company believes that is an attractive price for investors who want to get exposure to MFG's research and investment expertise but might not be looking for the full actively managed portfolio services.

Magellan Sustainable Fund is planned to make the company’s Global Sustainable strategy available to retail investors by end-2020.

Magellan plans to make the MFG Core Series and Magellan Sustainable Fund accessible to investors via exchange quoted open-ended funds by the end of 2020.

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Retirement Income Update: Despite delays due to the ongoing pandemic, MFG is continuously advancing towards the launch of a retirement income product and recently received a necessary private binding tax ruling from the Australian Taxation Office. MFG intends to roll out the retirement income product in the Australia market after securing all the necessary approvals.

Restructure Partnership Benefits

• All unitholders will receive benefits under the Magellan Global Fund (MGF) partnership.
• Subject to how the restructuring will be implemented, MFG intends for capital raising and bonus options issue in MGF- AUD 1-for-AUD 4 offer to all unitholders to subscribe for Closed Class Units and get more Closed Class Units worth 7.5 per cent of subscriptions value.
• MFG to fund through existing fund resources and a corporate debt facility.

COVID 19 Update: Since March 2020, the team has been working from home, and the company did not undertake any layoffs or salary cut or reduction in hours. There has been no deferral of FY20 variable bonus payments. The strong balance sheet allowed the company to focus on business without any distraction.

Stock Performance - On 13 August 2020 (AEST 02:13 PM), MFG was trading upward by 0.789 per cent to AUD 63.910. The company has a market cap of AUD 11.56 billion and an annual dividend yield of 3.39 per cent. The stock has delivered a return of 5.98 per cent in the last one year.

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