Analysts unimpressed with Magellan as fee margins fall
Make us a preferred source
Make us a preferred source on Google
More news: Jarden analysts said Magellan's NPAT result was slightly better than expected and was "mostly driven" by a higher share of profits from its associates in investment bank Barrenjoey and financial services group Finclear.
Jarden have a 'neutral' rating on the stock and maintained a price target of $9.50 a share, well below the $10.48 shares were trading at mid-morning on Thursday.
Magellan shares were up 9.07% by 11.21am AEST.
What they said: "While adjusted NPAT was 4% ahead of consensus, largely driven by continued improvement in associate profits coupled with stability in the average FUM, we note average fee margins deteriorated again in 2H24," the analysts wrote.
"While higher-than-anticipated FY25E cost guidance relative to both [Jarden's estimates and] consensus [estimates] also represents a headwind to earnings per share, assessing the drivers of the increase vs FY24 (i.e. investment in the distribution team for Vinva partnership vs cost creep) is key."
Magellan shares rise as it slows outflows, grows profit
The news: Magellan Financial Group says its funds under management has started to stabilise after "a challenging few years", announcing a 2% jump in its adjusted net profit after tax and announcing a new strategic partnership.
The numbers: Announcing its earnings on Thursday, Magellan revealed it finished the financial year with $36.8 billion in FUM, down 25% on the previous year.
After a couple of years of strong outflows, Magellan said funds were beginning to stabilise. Outflows were slowing and the company recorded its first positive quarter of institutional client money in two years, adding $600 million in Q4 after losing $3.5 billion in the three previous periods.
Magellan recorded $177.9 million in adjust NPAT, up 2% on the previous year. Diluted earnings per share jumped to 98.2 cents. Magellan cut the final dividend to 65.1 cents per share, down 25% on last year.
Performance fees also climbed to $19.2 million, the highest level since FY21.
Magellan also revealed it had acquired a 29.5% stake in Vinva Investment Management, a privately-owned global investment firm, for $138.5 million cash. The arrangement allows it to exclusively distribute its products and investment strategies, with the exception of Australian institutional clients.
Magellan shares were up 7.22% to $10.40 by 10.32am AEST and over the last 12 months has risen 8.46%.
The context: Magellan executive chair Andrew Formica said the focus on the business was now on strategic growth, pointing to its new partnership with Vinva, which manages $22 billion in funds, with a predominately Australian client book. It specialises in active long and short equity strategies across Australian and global markets.
Formica has been appointed as a non-executive director of Vinva. Magellan meanwhile said deputy chair Hamish McLennan would not stand for re-election.
Formica stressed the resilience of the business in the result "following a challenging few years" and said it had addressed "several legacy issues" to stabilise the business.
What they said: "These include successfully implementing transitional leadership arrangements, resolving the Employee Share Purchase Plan loans for our staff and introducing a new remuneration framework, as well as converting the Magellan Global Fund Closed Class into the Open Class," Formica said.
The source: ASX announcement
