Magellan shares up as profit surprises

MAGELLAN Financial shares jumped more than 18 per cent after massively beating market expectations for its interim profit and dividend.

The company also flagged a bonus issue of options to shareholders and even a share buyback.

The global fund manager reported a net profit after tax for the six months through December of $251.6m, up 24 per cent on last year.

Operating profit rose 16 per cent to $248.1m, exceeding Visible Alpha’s consensus estimate by 9.1 per cent. And an interim dividend of 110.1c a share was declared, versus a consensus estimate of 109c.

The shares soared $3.38, or 18.4 per cent, to close at $21.70, its best day in two years.

Magellan announced plans for a 1 for 8 bonus issue of options to shareholders with an exercise price of $35 per option and a five-year term exercisable at any time until expiry.

It is also intends to progress with an issuance of about 10 million unlisted options to be issued to Magellan staff and the board is also weighing an on-market share buyback.

“It’s absolutely a (staff) retention tool, which shareholders will be able to participate in,” said Magellan Chair Hamish Mclennan.

He said the $35 level strike price was chosen because “we felt there was enough stretch from where we are at.”

Magellan’s share price hit a record high of $74.91 in February 2020 as the Covid-19 pandemic hit. It lost as much as 78 per cent of its value in the next two years, hitting a seven-year low of $16.14.

It comes after a troubled period for the firm, including the loss of its biggest investment mandate, St James Place, a sustained period of sub-par returns during the post-covid bull market, and more recently the decision by CEO and founder Hamish Douglass to take a medical leave of absence.

“Interim CEO Kirsten Morton is doing an outstanding job,” Mr Mclennan said.

Core business operations are “stable and operating very effectively and profitably” and the addition of co-founder Chris Mackay to senior management “adds further depth”.