Magellan profit slides, Rahmani named CEO

Magellan’s shares are down 10pc as investors weigh margin compression and lower management fees, but the firm talks up its partnerships.

Magellan Financial Group incoming CEO Sophia Rahmani and chairman Andrew Formica. Picture: Supplied

Magellan Financial has teased the prospect of higher dividends as it looks to reap the benefits of its strategic partnerships.

ASX-listed Magellan on Thursday told shareholders new chief financial officer Dean McGuire, who steps into the role on March 3, would review the firm’s dividend policy as part of a broader capital management review. It follows Magellan pocketing a $4m maiden dividend from investment bank Barrenjoey and expectations of coming distributions from quant fund Vinva Investment Management.

“We do have a very healthy return of capital through our dividend policy. We will be looking to our strategic partners — Barrenjoey paid a maiden dividend just recently, and we clearly expect distribution from Vinva, given the profitability of that business — (so we will) look at how our dividend policy incorporates the growth and the strength of those strategic partnerships,” Mr Formica said.

“At the moment, (the dividend policy) is obviously only focused on the fund management business here. The important part is around how we will look to continue to reward and return capital to shareholders through our ongoing profitability and results,” he said.

Magellan has a 36 per cent stake in Barrenjoey and a 29 per cent holding in Vinva. It also holds a 16 per cent interest in trading technology company FinClear.

Mr Formica was speaking after handing down Magellan’s first-half result which showed a 10 per cent slide in net profit, with management fees under pressure from lower margins.

For the six months through December 31, Magellan posted net profit of $94m and adjusted net profit of $84m, above analyst expectations. But margin compression and a 7 per cent slide in management fees spooked investors, sparking a sell-off in the stock, with Magellan’s share price tumbling 10 per cent to $9.10.

Steady assets under management, at $38.6bn, provided some relief for shareholders.

Revenue rose 5 per cent to $178m.

Magellan on Thursday also confirmed Sophia Rahmani as its new chief executive, nine months after she joined the investment company as boss of its asset management subsidiary.

Ms Rahmani takes on the CEO position on March 3, with Mr Formica stepping back into the non-executive chairman role. The company had previously flagged Ms Rahmani would move into the top job following a transitional leadership arrangement. She joined the company last May, coming from boutique fund manager Maple-Brown Abbott.

Ms Rahmani said the latest financial results showed Magellan was “through the worst” of its challenges.

“Outflows from global are slowing, we’re seeing inflows in other parts of our business, and we’ve got some real growth engines inside the business, and we’re looking for more,” she told The Australian.

Mr Formica said the business was “light years” from where it was 18 months ago.

“The first half of fiscal 2025 has seen marked progress towards stabilisation as well as significant strategic developments that position Magellan Financial well for future growth,” Mr Formica said.

“The last six months have seen Magellan continue to foster strong client relationships and innovate its product offering. Our distribution platform remains a competitive strength, and we have bolstered our global capacity with our presence in North America and now the UK, covering EMEA,” he added.

Magellan has suffered numerous exits from its executive ranks in recent years, including the controversial departure of co-founder and former chief investment officer Hamish Douglass, former CEO David George, former CFO Kirsten Morton and, most recently, long-term head of investments Gerald Stack, who will finish up in July.

“We’ve got a really strong executive team who are hungry and looking to execute well and build and grow our business,” Ms Rahmani said.

The company declared an interim dividend of 26.4c, down from the 29.4 per cent paid out a year prior.