Magellan Financial Group posts a modest fall in full-year profit

Hamish Douglass’ Magellan has posted a slight fall in profit, as performance fees tanked and dividend income took a hit.

Magellan chief executive Hamish Douglass.

A sharp drop in performance fees, as well as lower dividend income, has led to Hamish Douglass’ Magellan Financial Group booking a slight fall in profit for the full year.

Net profit fell 1 per cent to $196.2 million in the year through June 30, as a 55 per cent drop in performance fees, as well as lower dividend and distribution income weighed on the fund manager’s result.

Meanwhile, management and services fee revenue rose 16 per cent in the year to $307.2m.

Average funds under management increased 16 per cent to $45.7 billion, reflecting net inflows of $4bn and “solid investment performance,” the fund manager said. Net retail inflows came to $1.7bn, down from $2.3bn a year earlier.

“Magellan had a successful year,” Magellan chief executive Hamish Douglass said. “We reported a very modest decrease in profit after tax to $196.2m which reflects lower performance fees and lower dividend and distribution income on the group’s holdings in Magellan Funds and other investments. Performance fees and distribution income received can fluctuate materially from period to period.”

The fund manager also said today it had recently informed existing and prospective institutional clients of its intention to close global equities strategies managed by Hamish Douglass to new investors by December 31, 2017.

Underlying profit for the year grew 10 per cent to $234.6m, while revenue rose less than expected, to $338.3m.

The fund manager announced a final dividend of 47c per share, bringing the full-year dividend to 85.6c.

Magellan (MFG) yesterday announced it will undertake an IPO for a new listed investment trust later this year.

The Magellan Global Trust will invest in 15-35 high-quality global companies and its investment mandate will be flexible to enable it to hold up to 50 per cent of the portfolio in cash. It is also intended to manage the currency exposure, the fund manager said.

“We believe the Magellan Global Trust will be an attractive investment vehicle for retail investors. The Trust offers a focused global equities portfolio managed by Magellan and a target cash distribution yield of 4 per cent,” Mr Douglass said today.

At 11.24am (AEST), Magellan Financial shares were 2.8 per cent lower at $27.08.