The Magellan Financial Group Ltd (ASX: MFG) share price is up more than 9% after reporting its FY24 result and an investment.
Magellan is a fund manager offering investment strategies based on global shares, Australian shares and infrastructure shares.
Magellan FY24 result
Here are some of the main highlights from the 12 months to 30 June 2024:
- Average funds under management (FUM) declined 25% to $36.8 billion
- Management and service fees down 22% to $257.9 million
- Funds management business operating expenses down 16% to $102.4 million
- Performance fees up 67% to $19.2 million
- Adjusted net profit after tax (NPAT) up 2% to $177.9 million
- Statutory net profit up 31% to $238.8 million
- Ordinary and final dividend down 30% to $0.58 per share
- Annual performance fee dividend of $0.071 per share, up 69%
Magellan noted that net flows of client funds have “continued to stabilise in both retail and institutional channels” and it has secured “significant client wins”.
A key reason for the improvement in the adjusted NPAT was its associates (investments) making a net profit of $11 million, a significant improvement on the $11.5 million loss in FY23. Barrenjoey, an investment bank, made a net profit of $34.7 million after revenue growth of 40% and intends to start paying dividends.
Magellan said it has addressed a number of issues including “implementing transitional leadership arrangements, resolving the employee share purchase plan loans”, introducing a new remuneration framework, and converted Magellan Global Fund closed class into open class.
The business finished FY24 with $36.6 billion of FUM and this grew to $38.4 billion as at 31 July 2024. Growth could be a catalyst for the Magellan share price.
Vinva partnership
Magellan has acquired a long-term minority equity stake in Vinva Holdings Limited for $138.5 million.
Vinva was described by Magellan as a high quality, well regarded manager with significant capacity and strong performance. It had approximately $22 billion of assets under management at July 2024. It’s “highly profitable and will contribute after-tax profits to Magellan immediately”.
Viva has “significant growth potential across existing and new product globally”. It offers both ASX and global share market strategies which have a record of outperformance over the short-term and long-term.
Outlook for the Magellan share price
The funds management believes it’s well-positioned for growth following stabilisation of FUM flows. Magellan said it has a highly-regarded distribution function with opportunities to expand capabilities further.
It pointed to a range of strategic growth opportunities on the horizon, both locally and globally. It’s working on diversifying its revenue.
If the company can return to regular FUM inflows, deliver good investment returns and diversify its business, then the Magellan share price could be a turnaround opportunity, though today’s market reaction is already taking some of the possible recovery into account.
It’s not an ASX share I’m looking to buy myself, but it could be an interesting one to watch. There are other ASX dividend shares that could be more reliable picks.
