This morning asset manager and investment bank Macquarie Group Ltd (ASX: MQG) handed in its financial results for the full year ending March 31 2019. Below is a summary of the results with comparisons to prior corresponding periods (pcp).
- Record full year profit of $2,982 million, up 17% on prior year
- Second half net profit of $1,672 million, up 28% on pcp and first half
- Total assets under management (AUM) of $551.3b, up 11% on pcp
- Full year dividends of $5.75 per share on earnings per share of $8.83, up 17% and 19% respectively
- Final dividend of $3.60 per share
- Return on equity 18%, up from 16.8%
- Annuity style businesses net profit contribution down 4% on FY18
- Capital-markets facing businesses net profit contribution up 76% on FY18
This is another strong report from Australia's leading global financial services business with the most telling stats being how the huge rebound in its market facing businesses (Commodities and Global Markets & Macquarie Capital) was the main driver of group profit growth.
In fact the 76% rise in net profit contribution translated into these businesses contributing 47% of total net profit from operating groups, with capital markets-facing businesses delivering an especially strong six-months ending March 31 2019.
This shows how a return to more volatile markets over the past year (consider the plunge in the final quarter of calendar 2018, followed by a record first quarter in calendar 2019) benefited its market-facing arms that essentially rely on client-facing trading activity to skim fees whether that is in the, FX, hedging, commodity, equity, debt or other asset class spaces.
While Macquarie Capital is its traditional investment banking capital markets advisory business (i.e. capital raising, IPO, deal structuring advice) that enjoyed a bumper year of work, with Macquarie's new CEO previously flagging the group's strong year.
For investors the one disappointment is the flat performance of its core asset management business with its net profit contribution down 4% as 11% growth in AUM failed to offset rising expenses and lower investment-related and other income.
Guidance
Macquarie is a complex and secretive operating entity that has guided for its FY20 profit to be "slightly down" on FY19 in news that is likely to disappoint the market but can probably be taken with a pinch of salt given the bank's new CEO Shemera Wikramanayake will not want to cough up a profit downgrade over FY20.
At $136.60 the group trades on 15.5x trailing earnings of $8.86 per share with some cautious guidance.
As such I wouldn't be in a rush to buy shares before the group's next likely trading update at its July 2019 AGM. It remains a high-quality business, but I don't expect the stock to go much higher over the short term. Over the long-term though its push into the green investment space and competitive advantages should lead to healthy total returns.
