'Robust financial position': Magellan (ASX:MFG) share price surges 13% on half-year earnings

Why are Magellan's results exciting investors today?

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Key points
  • The Magellan share price is surging on the back of its half-year financial results 
  •  Magellan declared a 13% boost to its interim dividend at 110.1 cents per share
  • The company also revealed details of a new capital management plan 

The Magellan Financial Group Ltd (ASX: MFG) share price is surging today after the wealth manager released its half-year results.

At the time of writing, Magellan shares are swapping hands at $20.75 apiece, a 13.26% gain. In comparison, the S&P/ASX 200 Index (ASX: XJO) is falling 0.97%.

Let's take a look at what the funds manager reported today.

A wide-eyed happy woman with long brown hair and wearing a pink top holds her hands up in delight after hearing positive news

Image source: Getty Images

Magellan share price soaring

Highlights of the company's half-year (H1 FY22) results include:

  • Net profit after tax (NPAT) of $251.6 million, 24% more than the previous corresponding period (PCP) of H1 FY21
  • Adjusted NPAT surged 16% to $248.1 million
  • Adjusted revenue and other income up 15% to $384.1 million
  • Adjusted diluted earnings per share up 15% to 134.4 cents per share
  • Average funds under management up 12% to $112.7 billion.

What else happened in the half?

The company reported a 13% boost in its net tangible assets to $992.8 million. Its cash, financial, assets, and investments also increased 13% to $1,016.7 million. The company has no debt.

Magellan declared an interim dividend of 110.1 cents per share, a 13% increase on PCP. Magellan said its strong cash flows mean it can pay out 90-95% of its funds management profits. The dividend will be paid on 8 March.

Magellan believes it has "significant headroom" to continue to invest in the business. The company predicts its funds management expenses for FY22 will be between $125 to $130 million.

Management commentary

Speaking on the results boosting the Magellan share price today, interim CEO Kirsten Morton said:

Magellan has faced a number of challenges over recent months, however the group remains in a robust financial position and has delivered strong financial results for the period.

Magellan has a robust balance sheet with no debt and net tangible assets of $992.8 million, strong margins and operating cash flows which will enable us to continue to support and invest in the business.

We are focused on our core funds management business and delivering upon our investment objectives for our clients.

What's next for Magellan?

Magellan will offer a 1 for 8 bonus issue of options to shareholders as part of a 'significant' capital management plan revealed today. These options will have an exercise price of $35 each with a five-year term. A prospectus will be lodged likely in March.

Further, Magellan intends to issue $10 million unlisted options to its staff. These options will also have a $35 exercise price and a five-year term.

Magellan is also considering implementing an on-market share buyback subject to market conditions. The company is suspending its dividend reinvestment plan and has no intention to invest further via Magellan Capital Partners.

Commenting on this initiative, Magellan chairman Hamish McLennan said:

We believe the capital management initiatives announced today will be attractive to shareholders and reflect our focus on our core funds management business.

These initiatives and proposals are in line with our aim to deliver capital efficiency, solid dividends and attractive returns for shareholders.

Magellan share price summary

The Magellan share price has dived 54% in the past year. In 2022, it has fallen 2.5%.

For perspective, the benchmark ASX 200 index has returned 4.8% in the past year.

Magellan has a market capitalisation of about $3.4 billion based on today's share price.

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 Bruce Jackson.

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