The Sydney-based fund manager has entered a trading halt as it looks to raise $275 million to fund new growth opportunities.
On Tuesday (13 August), Magellan Financial Group posted a net profit after tax (NPAT) of $364.2 million for the year to 30 June, up 35 per cent.
Average FUM increased 28 per cent over the year to $75.8 billion, while total dividends for the year are up 38 per cent to 185.2 cents per share.
“It has been a successful year for Magellan,” chief executive Brett Cairns said.
“Strong investment performance has led to a 28 per cent increase in average funds under management and as at 30 June 2019, Magellan managed $86.7 billion on behalf of our clients. Strong growth in average funds under management led to a 22 per cent increase in management and services fees to $472.5 million and a 35% increase in adjusted net profit after tax to $364.2 million.”
Institutional share placement
Magellan also announced that it is undertaking a fully underwritten institutional placement to raise $275 million. The placement will comprise an issue of 4.98 million new Magellan ordinary shares at a price of $55.20 per share. The new shares to be issued represent approximately 2.7 per cent of Magellan’s expanded issued capital.
Magellan founder and chairman Hamish Douglass said the $275 million placement will strengthen the group’s balance sheet and provide it with significant flexibility to continue to invest in growth opportunities.
“Every dollar we pay upfront to people investing additional capital into ASX-listed funds like the Magellan Global Trust or the Magellan High Conviction Trust has resulted in materially more than two dollars of shareholder value to date,” he said.
“We have only scratched the tip of an iceberg on the potential of our partnership thinking and I would envisage us making more investments in the future.”
New investment trust launched
Magellan also announced the initial public offering of the Magellan High Conviction Trust, an ASX-listed investment trust that will invest in Magellan’s eight to 12 best ideas and will replicate a proven investment strategy that has returned 16.6 per cent per annum net of fees since inception on 1 July 2013 to 31 July 2019.
Magellan is not appointing a broker syndicate and is not paying any fees or commissions to brokers or advisers to handle the raising.
Mr Douglass said the company is addressing potential concerns regarding conflicted remuneration by proceeding without appointing a broker syndicate or paying any fees or commissions to any brokers or advisers to handle the offer.
“Instead, Magellan is offering directly to investors who subscribe for units in the offer the right to receive additional units worth either 7.5 per cent or 2.5 per cent of their allotment depending if they subscribe under the priority offer or wholesale/general public offer,” he explained.
“The full cost of the additional units and costs of the offer will be borne by Magellan. We hope that investors will find the offer attractive,” he said.
“We believe the unique offer structure is a win-win outcome for investors that participate in the raising and for Magellan shareholders.”
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