Magellan Financial Group Ltd · ASX:MFG
Magellan Financial — FY2020 Earnings Presentation
36 slides from Magellan Financial's earnings presentation, Aug 12, 2020
Slide 1: Magellan Financial Group Limited Full Year Results
Magellan Financial Group Limited Full Year Results For the year ended 30 June 2020
Slide 2: Introduction: Financial Year Highlights
Introduction Financial Year Highlights1 • Adjusted net profit after tax grew by 20% to $438.3 million • Strong growth: – Average funds under management up 26% to $95.5 billion – Management and services fees revenue up 25% to $591.6 million – Profit before tax and performance fees of the Funds Manage
Slide 3: FY20 Financial Results
FY20 Financial Results Kirsten Morton, Chief Financial Officer Magellan| 3
Slide 4: Magellan Financial Group Full Year Results
Magellan Financial Group Full Year Results $ million 30 June 2020 30 June 2019 % change Management and services fees 591.6 472.5 25% Performance fees 81.0 83.6 (3%) Other revenue 20.3 21.1 (4%) Adjusted revenue 692.9 577.3 20% Adjusted expenses (119.7) (104.0) 15% Adjusted net profit before tax 573.
Slide 5: Funds Management Business
Funds Management Business $ million 30 June 2020 30 June 2019 % change Revenue Management fees 587.2 467.8 26% Performance fees 81.0 83.6 (3%) Services fees 4.4 4.7 (6%) Other income 2.2 5.2 (58%) 674.8 561.3 20% Expenses Employee expense 73.8 62.8 18% Marketing expense 4.9 3.4 46% Other expense 38.
Slide 6: Expenses
Expenses • Costs associated with strategic initiatives considered as outside day-to-day operating expenses – Excluded from Funds Management business – Excluded from dividend payout • Cost to income ratio (excluding performance fees) of 19.7% during the period – Key driver of profit is not expense mo
Slide 7: Tax and Dividends
Tax and Dividends • Effective tax rate for the 12 months to 30 June 2020 is 23.1% (Offshore Banking Unit) • Dividends: – 6 month dividend of 122.0 cents per share (75% franked) comprising: o Final Dividend of 91.6 cents per share o Performance Fee Dividend of 30.4 cents per share – Pay dividends pro
Slide 8: Principal Investments
Principal Investments • Principal Investments include investments in Magellan Funds, listed shares and a small number of unlisted investments Investment ($ million) 30 June 2020 30 June 2019 Cash 1.4 4.6 Magellan Unlisted Funds1 258.3 213.4 Listed shares/funds2 137.8 125.7 Other3 7.4 3.8 Total 404.9
Slide 9: Principal Investments (cont.)
Principal Investments (cont.) • Board has set a pre-tax hurdle 10% p.a. (over business cycle) for the Principal Investments portfolio Investment Returns: Time Period Return 1 Year to 30 June 2020 6.5% 3 Years to 30 June 2020 p.a. 13.6% 5 Years to 30 June 2020 p.a. 11.4% Since Inception to 30 June 20
Slide 10: Business Overview
Business Overview Brett Cairns, Chief Executive Officer Magellan| 10
Slide 11: COVID-19 Update
COVID-19 Update • Transitioned to work-from-home operating state across the business in March 2020 • Strong balance sheet allows us to focus on our clients without distraction • No staff reductions and no reduction in hours or salaries • Variable bonus reductions balanced by payout of previously ear
Slide 12: Funds Under Management Summary
Funds Under Management Summary 30 June 2020 30 June 2019 30 June 2018 Closing FUM ($ billion) % % % Retail 26.8 28% 23.2 27% 19.2 28% Institutional 70.4 72% 63.5 73% 50.3 72% Total FUM 97.2 86.7 100% 69.5 100% Average FUM ($ billion) Retail 25.9 20.4 17.3 Institutional 69.6 55.4 41.7 Total average F
Slide 13: Investment Performance
Investment Performance For the periods to 30 June 2020 Since 1 Year 3 Years 5 Years Inception (%) (% p.a.) (% p.a.) (% p.a.)1 Magellan Global Fund 9.0 15.3 12.0 12.0 MSCI World NTR Index ($A) 4.8 10.6 9.3 6.3 Magellan Infrastructure Fund -8.9 4.3 7.7 7.6 Global Listed Infrastructure Benchmark ($A)2
Slide 14: Global Equities Downside Protection
Global Equities Downside Protection 1.2 MSCI World Net MGF Fund Value Upside performance Downside performance Event Dates Total (%)* Added (%) 1.0 Return (%) July 2007 – Sub-Prime/Bear Stearns -9.2 -1.9 7.3 March 2008 0.8 Lehman/AIG/Reserve Sept 2008 – -43.6 -30.7 12.9 0.6 Primary Feb 2009 July 2011
Slide 15: Global Infrastructure Downside Protection
Global Infrastructure Downside Protection Global Listed 5 years ending 30 June 2020, Magellan Infrastructure AUD Hedged Infrastructure Fund Benchmark1 Downside Capture 0.3 0.7 Relative to MSCI World NTR Index Upside Capture 0.6 0.6 Relative to MSCI World NTR Index As at 30 June 2020. 1. The Global L
Slide 16: FY20 FUM Flows
FY20 FUM Flows Institutional Net Inflows Retail Net Inflows1 3,500 3,500 $ Millions $ Millions 3,000 3,000 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 0 FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Total net inflows for the 12 months ended 30 June 2020: $5.7 billion 1. Includes pr
Slide 17: Funds Under Management
Funds Under Management As at 30 June 2020 ($ billion) Strategy 30 June 2019 Net Inflows Investment Performance 30 June 20201 Global Equities $64.0 $4.4 $6.4 $74.3 Global Listed Infrastructure $15.2 $1.7 -$0.9 $15.9 Australian Equities $7.5 -$0.4 -$0.1 $7.0 $86.7 $5.7 $5.4 $97.2 1. Reflects $0.7 bill
Slide 18: Well-balanced Business
Well-balanced Business Funds Under Management1 Base Fees2 28% 46% 54% 72% Retail FUM Institutional FUM Retail Fees Institutional Fees 1. FUM split is as at 30 June 2020. 2. Base Fees are Management and Services fees for the 12 months to 30 June 2020 and exclude Performance fees. Magellan| 18
Slide 19: Institutional Client Diversity
Institutional Client Diversity 1 Cumulative Total Management and Services Fees Top Institutional Clients 5 10 20 30 % 20 26 32 35 1. Management and services fees for the 12 months to 30 June 2020 for separately managed accounts and institutional investors in local and offshore vehicles. Excludes Per
Slide 20: Listed Unitholder Growth
Listed Unitholder Growth 120,000 100,000 MHH 80,000 60,000 MGG 40,000 Active 20,000 ETFs 0 Number of registered unitholders across Magellan Global Equities Fund (ASX: MGE), Magellan Global Equities Fund (Currency Hedged) (ASX:MHG), Magellan Infrastructure Fund (Currency Hedged) (ASX: MICH), Magellan
Slide 21: Active ETF Daily Unitholder Change
Active ETF Daily Unitholder Change 20-day rolling average 160 120 Welcomed, on average, 80 55 new unitholders per day in the last 12 months 40 - -40 20-day rolling average change in the number of registered unitholders across Magellan Global Equities Fund (ASX: MGE), Magellan Global Equities Fund (C
Slide 22: Magellan High Conviction Trust
Magellan High Conviction Trust • Raised $862 million in October 2019 from the IPO of Magellan High Conviction Trust (“MHH”) • Magellan funded all the costs of the offer including partnership benefits of: – Loyalty Units worth 7.5% of subscription under Priority Offer – IPO Foundation Units worth 2.5
Slide 23: Airlie Australian Share Fund
Airlie Australian Share Fund • In June 2020, Airlie Australian Share Fund commenced trading on ASX (ASX: AASF) • Brings together the features of an unlisted fund Airlie Australian Share Fund and Active ETF into a single unit in a single fund • Investors can access the fund through two different meth
Slide 24: The Journey to Today
The Journey to Today March 2015 October 2019 Pioneers Active ETFs Lists second closed- allowing investors to ended trust, Magellan access actively managed High Conviction Trust, offering partnership Today investment strategies via the stock exchange benefits Development of a dual class, single 2015
Slide 25: Restructure of Global Equities Retail Funds
Restructure of Global Equities Retail Funds • Consolidation of three Global Equities funds into a single trust with two unit classes: – Closed Class Units quoted on ASX under the ASX Listing Rules – Open Class Units quoted on ASX under the AQUA Rules and off market access • Simplifies investment pro
Slide 26: Restructure of Global Equities Retail Funds (cont'd)
Restructure of Global Equities Retail Funds (cont’d) POST IMPLEMENTATION CURRENT STRUCTURE Magellan MGG MGE Magellan Global Fund Global Fund ($2.3bn) ($1.7bn) ($15.6bn) ($11.6bn) Closed Class Open Class ($2.3bn) ($13.3bn) IF IMPLEMENTED Receive Receive Continue holding Closed Class Open Class Units
Slide 27: Restructure Partnership Benefits
Restructure Partnership Benefits • Offering all unitholders in the Magellan Global Fund partnership benefits • Subject to the implementation of the restructure, intend to undertake capital raising and bonus options issue in Magellan Global Fund: – $1-for-$4 offer to all Magellan Global Fund unithold
Slide 28: Business Resilience and Diversification
Business Resilience and Diversification • Magellan has been progressively pursuing a strategy to diversify its revenue stream: – Ongoing growth of our infrastructure business: $15.9 billion of FUM – Direct retail strategy: launch of Active ETFs in 2015 – 42,000 individual unitholders and $2.6 billio
Slide 29: Business Resilience and Diversification
Business Resilience and Diversification Approximately 28% of Magellan’s total management and services fees are contributed by: 28% – Infrastructure – Global Equities Active ETFs – non platform1 – Airlie 8% – Closed-ended funds 30-Jun-15 30-Jun-20 Future 1. Excludes an estimate of Magellan Global Equ
Slide 30: MFG Core Series
MFG Core Series • Launching a new series of investment strategies for retail investors that leverages Magellan’s investment philosophy and proprietary research • Aims to broaden Magellan’s reach to areas of the market that are more fee conscious • MFG Core Series offers investors diversified portfol
Slide 31: MFG Core Series
MFG Core Series • MFG Core Series will leverage Magellan core research strength with three investment strategies: – MFG Core International Fund – MFG Core ESG Fund – MFG Core Infrastructure Fund • Portfolios are actively constructed and are subsequently rebalanced in a systematic manner • Attractive
Slide 32: MFG Core Infrastructure Strategy
MFG Core Infrastructure Strategy Investment performance Since 1 Year 3 Years 5 Years 7 Years 10 Years Inception (%) (% p.a.) (% p.a.) (% p.a.) (% p.a.) (% p.a.) Core Infrastructure Net (A$) -1.9 5.0 9.0 10.8 13.3 12.6 Global Infrastructure Benchmark -16.2 -1.4 2.6 6.2 7.9 7.0 Core Infrastructure has
Slide 33: Other Initiatives
Other Initiatives Magellan • Intend to make Magellan’s Global Sustainable strategy available to Sustainable retail investors by the end of the year Fund • Received private binding ruling from the ATO Retirement • Continuing discussions with other regulators income • Seeking to launch once necessary
Slide 34: Q&A
Q&A Hamish Douglass, Chairman Brett Cairns, Chief Executive Officer Kirsten Morton, Chief Financial Officer Magellan| 34
Slide 35: Important Information
Important Information This presentation has been prepared by Magellan Financial Group Limited ACN 108 437 592 (‘Magellan’). This presentation contains summary information about Magellan and its related bodies corporate and is current as at 12 August 2020. While the information in this presentation h
Slide 36: www.magellangroup.com.au
www.magellangroup.com.au Phone: +61 2 9235 4888
Magellan Financial Group — FY2020 Earnings Presentation on 6ix