Magellan Financial Group: Interim result 2017
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At its latest interim results presentation, Magellan Financial Group chief executive Hamish Douglass was eager to talk up its new ‘low carbon' strategies, but investors were much more concerned with current performance.
Although Magellan's average funds under management rose 10% to $42.9bn in the six months to December 31, total revenue was down 16% to $154m as the recent underperformance in the company's funds led to a 92% fall in performance fees.
| Six months to Dec | 2016 | 2015 | /(–) (%) |
|---|---|---|---|
| Total funds ($bn) | 43 | 39 | 10 |
| Revenue ($m) | 154 | 182 | (16) |
| Expenses ($m) | 40 | 39 | 3 |
| Net profit ($m) | 87 | 109 | (20) |
| EPS (c) | 53.1 | 68.1 | (22) |
| DPS (c) | 38.4 | 51.3 | (25) |
The company was quick to point out that performance fees fluctuate from period to period and that outside of performance fees the company has been doing well, with underlying profit before tax and performance fees up 9% to $110m.
Indeed, it appears there is still evidence that Magellan's funds remain a popular choice for investors, with the company reporting retail and institutional inflows of $1.2bn and $1.8bn respectively.
With existing funds getting closer to reaching capacity (which management views as A$53bn for global equities and A$20bn limit for global listed infrastructure), Magellan is looking to take advantage of what it believes is a market of institutional investors worried about carbon exposure.
Douglass believes this has the capacity to become a trillion-dollar market, with a theoretical capacity limit of A$40bn for Magellan. It's starting off with three new funds – a Global Low Carbon fund, a US Low Carbon fund and an International (non-US) Low Carbon fund.
The stock fell falling around 5% following the results, but it still trades on a price-earnings ratio of more than 20. HOLD.
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