L1 Group’s Merger Boost Masks Complex Performance Fee Structure Risks
L1 Group Limited has reported a remarkable 215% increase in statutory profit for the half-year ended 31 December 2025, following its transformative merger with Platinum Asset Management. The combined entity now manages $17.6 billion in funds and is on track to deliver significant cost synergies.
- Statutory profit after tax attributable to ordinary shareholders up 215% to $52 million
- Underlying net profit after tax rises 63% to $66.3 million
- Funds under management reach $17.6 billion post-merger
- Merger accounted for as reverse acquisition with L1 Capital as accounting acquirer
- Fully franked interim dividend of 1 cent per share declared
A New Powerhouse in Asset Management
L1 Group Limited has unveiled a striking half-year financial performance for the period ending 31 December 2025, marking a significant milestone following its merger with Platinum Asset Management Limited. The merger, completed on 1 October 2025, was structured as a reverse acquisition with L1 Capital identified as the accounting acquirer, effectively positioning L1 Group as a leading investment management firm with $17.6 billion in funds under management (FUM).
Robust Profit Growth and Operational Synergies
The group reported a statutory profit after income tax attributable to ordinary shareholders of $52 million, a 215% increase compared to the previous corresponding period. Underlying net profit after tax, which adjusts for non-recurring items and unrealised gains, rose 63% to $66.3 million. This strong profitability was driven by higher performance fees, increased realised gains on seed investments, and effective cost management.
Operating expenses declined by 14%, reflecting synergy benefits realised from the merger. The company remains on track to achieve targeted cost savings of $30 to $35 million by October 2026, underscoring the merger’s strategic value in enhancing operational efficiency.
Capital Raising and Shareholder Returns
In support of its growth ambitions, L1 Group completed a $286 million institutional placement and a $25 million share purchase plan during the half-year, both priced at $0.95 per share. These capital raising initiatives have strengthened the company’s balance sheet and supported its expanded investment platform.
The board declared a fully franked interim dividend of 1 cent per share, signalling confidence in the group’s cash flow generation and commitment to returning value to shareholders. Additionally, a dividend of $220 million was approved and paid to Z Class shareholders, who retain performance fee interests beyond a 3.5% absolute return threshold on L1 Capital’s Long Short Fund strategies.
Complexities of the Merger and Future Outlook
The merger’s accounting treatment as a reverse acquisition means that comparative figures reflect L1 Capital’s historical performance, which may require investors to adjust their analytical models. The structure involving Z Class shares adds complexity to earnings attribution, particularly regarding performance fees generated by the Long Short Fund strategies.
Looking ahead, the combined entity’s diversified investment capabilities, enhanced scale, and cost synergies position it well for sustainable growth. The management team, led by CEO Julian Russell, will be closely watched as they execute on integration plans and capitalise on the enlarged platform’s potential.
Bottom Line?
L1 Group’s merger-fueled profit surge and cost synergies set the stage for a compelling growth trajectory, but investors will watch closely for sustained fund flows and performance fee dynamics.
Questions in the middle?
- How will L1 Group manage the complexity of performance fee allocations between ordinary and Z Class shareholders?
- What are the prospects for fund inflows given the mixed net client flows post-merger?
- How quickly will the targeted $30-$35 million cost savings be realised and impact future earnings?
