Magellan Financial Group (MGF) posted a 14% rise in full-year net profit to $198.4 million on higher management and performance fees, but shareholders will get a lower final payout compared with a year earlier.
The full year profit was a sharp slow down from the 41% surge seen in the December half year when the company reported a net profit of $109.3 million (up from $77.4 million for the last half of 2014 calendar year).
The global fund manager will pay a final dividend of 38 cents a share, down from the 44.8 cents a share paid for the final half of 2014-15.
But thanks to the sharp increase in the interim payout to 51.3 cents a share from 37.1 cents, shareholders will receive a higher full year payout of 89.3 cents a share (74.9 cents for 2014-15).
Investors liked the news though and chased the shares more than 7% higher to where they closed at $25.96, up 7.3%.
CEO Hamish Douglass said in a statement yesterday “We are particularly pleased with the deepening penetration of our Global Equities and Global Listed Infrastructure strategies with retail Australian investors, advisers and brokers,” he said.
"Our institutional business remains strong with total institutional funds under management of $28.4 billion from more than 110 clients. We experienced net institutional inflows of $1.8 billion during the year and we are pleased with the quality and depth of our pipeline of potential new institutional business across our strategies,” he said.
In financial year 2016, the Magellan Global Fund lost 0.1% of its value, after fees.
Its three and five-year track record is a more flattering 13.1% and 19 % average annual return. Magellan maintained its share positions in Lloyds Bank and Tesco in the UK, despite the instability generated by the June 23 Brexit vote. Other big global investments include Alphabet (Google), Microsoft, Apple and Visa.
The company said in its annual report that revenues increased by 23% to $315.3 million "driven by a 24% increase in total management and performance fee revenues as a result of a 27% increase in average funds under management over the period due to strong net inflows and investment performance.”
"Average funds under management benefited from the lower average Australian dollar over the period. Overall the funds management business operated efficiently with a cost to income ratio (excluding performance fees) of 26.7% in 2016 compared with 24.8% in 2015.”
At June 30, Magellan had funds under management of $40.5 billion, split between global equities (83%) and infrastructure equities (17%).
"This compares with funds under management of $36.4 billion at 30 June 2015. The increase in funds under management was driven by net inflows of $4.1 billion, investment performance of $0.8 billion less cash distributions (net of reinvestment) of approximately $0.8 billion,”directors said.
Expenses increased by 36% to $71.5 million. The increase in expenses included: a 35% increase in employee expense over the prior corresponding period to $42.0 million. This is in line with the guidance provided with the interim results in February.
"The increase was due to the cost of new employees hired during the year, the full year cost of hires made in 2014/15 and increased remuneration."
Looking to the new financial year, the company said “we are planning to invest further in people and capability.”
"Whilst we have largely completed the build out of the Investment team we are planning to make additional hires in many areas of the business including in Distribution (both in Australia and the United States), Compliance, Trading, Finance, Operations and Administration.
"We are also planning to establish a public policy institute based in Australia and we plan to hire a team of 3 people in 2016/17 (including an Executive Director to head the institute).
"We expect Group employee expenses to increase by approximately 15-18% in the 2016/17 financial year which reflects the annualised cost of employees hired in 2015/16, remuneration increases and planned hires,” the company said.
