Magellan share price shakes off 60% profit slump and marches higher

Magellan shares are in the green after the company reported it's delivering on its five-year target of $100 billion in funds under management by 2027.

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Key points

  • The Magellan share price is in the green following its half-year results
  • The ASX 200 fund manager reported a 60% year on year drop in NPAT and a 52% decline in FUM
  • Magellan sees opportunities from the challenging market conditions and volatility it expects in the year ahead

The Magellan Financial Group Ltd (ASX: MFG) share price is in the green on Thursday. 

Shares in the S&P/ASX 200 Index (ASX: XJO) funds manager closed yesterday trading for $9.45 and are currently swapping hands for $9.55, up 1.1%.

This comes following the release of the company's half-year results for the six months ending 31 December (1H FY23).

Read on for the highlights.

Magellan share price gains despite cratering profits

  • Adjusted revenue and other income of $209 million, down 49% from $384 million in 1H FY22
  • Adjusted net profit after tax (NPAT) of $98 million, down 60% from $319 million in the prior corresponding half-year
  • Average funds under management (FUM) $53.8 billion, decreased 52%
  • Interim dividend of 46.9 cents per share, 85% franked, down from 110.1 cents per share in 1H FY22

What else happened during the half year?

Magellan said it continued to progress with simplifying its business and organisational structure to support its long-term strategy.

The company reaffirmed its fund management operating expenses in the range of $125 million to $130 million.

Of the 10 million Magellan shares authorised for the on-market share buyback, its bought 4.2 million to date at a cost of $46.7 million.

The company also noted its Energy Transition Investment Strategy is set to launch to institutional clients this month, while it's now "well progressed" on the Airlie Small Companies Fund.

What did management say?

Commenting on the results that are seeing the Magellan share price lift today, CEO David George said:

Magellan has experienced a period of accelerated and substantial change in recent times. We now have a well-defined and actionable five-year strategy which builds upon the qualities that have made us successful, while further diversifying the business to deliver sustainable growth and revenue.

George added that over the six-month period, Magellan had taken "key first steps in delivering on our five-year target of $100 billion in funds under management by 2027".

What's next?

Looking at what could impact the Magellan share price down the road, the company expects "challenging market conditions and volatility" to continue, with higher interest rates and inflationary pressures to persist.

However, Magellan sees opportunities from these challenges, saying, "These market and economic conditions provide opportunities for active fund managers to differentiate between companies and to capitalise on value as it emerges."

Magellan share price snapshot

After a rough 2022, the Magellan share price is up 8% so far in 2023. As you can see in the chart below, shares in the ASX 200 fund manager remain down 41% over the past 12 months.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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