TIDMEMG
RNS Number : 9950B
Man Group plc
05 November 2009
?
5 November 2009
INTERIM RESULTS FOR THE HALF YEAR ENDED 30 SEPTEMBER 2009
Financial highlights
* Funds under management at 30 September 2009 of $44.0 billion (30 June 2009:
$43.3 billion)
* Profit before tax of $302 million, 8% above the pre-close estimate after annual
fee lock-in at end of September, benefiting from strong end-of-period
performance
* Diluted earnings per share on total operations of 13.8 cents
* Strong financial position with regulatory capital surplus of over $1.6 billion,
cash balances of $2.1 billion and undrawn committed banking facilities of $2.4
billion
* Interim dividend maintained at 19.2 cents.
Operating highlights
* Sales for the period of $5.7 billion, with strong private investor sales in
Japan, Hong Kong, the Middle East, Europe and Latin America
* Significant improvement in private investor and institutional redemption rates:
quarterly institutional redemptions of $0.7 billion paid on 1 October compared
to redemptions of $1.7 billion in Q2 and $3.6 billion in Q1
* Positive investment performance across the majority of hedge fund styles, the
exception being managed futures
* Launch of regulated onshore funds across a wide range of new and existing
geographies including the UK, Continental Europe, Taiwan, Australia and Canada.
Release of daily price estimates for a range of AHL funds in the near future to
increase transparency for investors
* Significant due diligence interest from investors in Man's new
multi-manager business and managed accounts initiative
* Funds under management at end October broadly unchanged from end September.
Key financials
+------------------------------------+---------------+---------------+---------------+
| | Six months | Six months | Six months |
| | ended | ended | ended |
| | 30-Sept-09 $ | 31-March-09 | 30-Sept-08 $ |
| | | $ | |
+------------------------------------+---------------+---------------+---------------+
| Funds under management (end of | 44.0bn | 46.8bn | 67.6bn |
| period) | | | |
+------------------------------------+---------------+---------------+---------------+
| | | | |
+------------------------------------+---------------+---------------+---------------+
| Net management fee income | 245m | 316m | 569m |
+------------------------------------+---------------+---------------+---------------+
| Net performance fee income | 47m | 196m | 162m |
+------------------------------------+---------------+---------------+---------------+
| Profit before tax and | 292m | 512m | 731m |
| adjusting items | | | |
+------------------------------------+---------------+---------------+---------------+
| Adjusting items* | 10m | (391m) | (109m) |
+------------------------------------+---------------+---------------+---------------+
| Profit before tax | 302m | 121m | 622m |
+------------------------------------+---------------+---------------+---------------+
* For the six months to 30 September 2009, adjusting items include a net gain of
$34 million on sale of the residual holding in MF Global, partly offset by
redundancy and other restructuring costs.
Peter Clarke, Chief Executive, said:
"The first half result has seen lower management fees given the reduced level of
average assets under management during the period. Assets ended the period up
slightly, reflecting strong sales, reduced redemptions and improved performance
in the second quarter.
"Recent product initiatives have demonstrated significant momentum in the
business and underline the benefits of our broad investment management
franchise, wide investor base and strong competitive position.
"It has been a busy and productive period for our business. In the first half we
have launched new products; accessed new onshore regulated markets; and
announced a new initiative with Credit Suisse to broaden the global investor
reach of our managed accounts platform.
"Our financial strength provides the basis for continued investment to
capitalise on these strengths. The momentum in the business means that we are
well positioned to grow assets."
Dividend
Given overall performance for the first half of the year, strong market position
and continued capital strength, the Board has maintained the interim dividend at
19.2 cents per share. This dividend will be paid at the rate of 11.89 pence per
existing share.
Dates for the 2010 Interim Dividend
+-----------------------------------------+----------------------------------------+
| Ex dividend date | 25 November 2009 |
+-----------------------------------------+----------------------------------------+
| Record date | 27 November 2009 |
+-----------------------------------------+----------------------------------------+
| Dividend paid | 17 December 2009 |
+-----------------------------------------+----------------------------------------+
Video interviews and audio webcast
Interviews with Peter Clarke, Chief Executive, and Kevin Hayes, Finance Director
in video, audio and text are available on www.mangroupplc.com and
www.cantos.com.
There will be a live audio webcast of the results presentation at 8.45am on
www.mangroupplc.com and www.cantos.com which will also be available on demand
from later in the day.
Live Conference Call Dial in Numbers:
Rest of World Toll Access Number+ 44 (0)20 8609 1270
UK Toll Free Access Number 0800 358 1448
30 Day Replay Dial in Numbers:
Rest of World Toll Access Number+44 (0)20 8609 0289
UK Toll Free Access Number0800 358 2189
US Toll Free Access Number 1 866 676 5865
Conference Reference 275373#
Enquiries
David Browne
Head of Group Funding & External Relations
+44 20 7144 1550
David.Browne@mangroupplc.com
Miriam McKay
Head of Investor Relations
+44 20 7144 3809
Miriam.McKay@mangroupplc.com
Simon Anderson
Global Head of Communications
+44 20 7144 2121
Simon.Anderson@mangroupplc.com
Robert Clow
Senior Communications Officer
+44 20 7144 3886
Robert.Clow@mangroupplc.com
Merlin PR
Paul Downes
Paul Farrow
Toby Bates
+44 20 7653 6620
About Man
Man is a world-leading alternative investment management business. With a broad
range of funds for institutions and private investors globally, it is known for
performance, innovative product design and investor service. Man's funds under
management at 30 September 2009 were USD 44.0 billion.
The original business was founded in 1783. Today, Man Group plc is listed on the
London Stock Exchange and is a member of the FTSE 100 Index with a market
capitalisation of around GBP 5 billion.
Man Group is a member of the Dow Jones Sustainability World Index and the
FTSE4Good Index. Man also supports many awards, charities and initiatives around
the world, including sponsorship of the Man Booker literary prizes. Further
information can be found at www.mangroupplc.com.
Forward looking statements
This document contains forward-looking statements with respect to the financial
condition, results and business of Man Group plc. By their nature, forward
looking statements involve risk and uncertainty and there may be subsequent
variations to estimates. Man Group plc's actual future results may differ
materially from the results expressed or implied in these forward-looking
statements.
CHIEF EXECUTIVE'S REVIEW
After the turbulence of the last financial year, Man's business outlook improved
during the course of the first six months of financial year 2010, reflecting
better market conditions, the strength of our broad distribution franchise and
the attractions of our new investment management initiatives. Investor
priorities have evolved rapidly and we have worked hard over the period to
position the business to deliver the diversified performance, liquidity and
transparency which dominate investment decisions. Our actions to focus on the
new investor agenda reinforce our competitive strengths and position us well for
asset growth.
Funds under management: positive momentum in flows
Funds under management stood at $44.0 billion at 30 September 2009, a slight
increase from the level reported on 30 June ($43.3 billion). The key drivers
were Man's industry-leading levels of private investor sales and a considerable
improvement in private and institutional investor redemption rates between the
first and second quarters.
Private investor inflows remained strong across our global distribution network,
with good flows from Japan, Hong Kong, the Middle East, Europe and Latin America
as investors continued to focus on liquid, transparent offerings with long track
records and diversified returns. Private investor sales for the half year were a
robust $5.0 billion, a six monthly level exceeded only twice in the last five
years. Private investor redemptions reduced to $2.3 billion, trending back
towards historically lower levels.
As anticipated, institutional sales remained muted but redemptions continued to
slow considerably, falling from $3.6 billion in the first quarter to $1.7
billion in the second quarter. This marked step down in institutional
redemptions has continued, with quarterly redemptions on 1 October of $0.7
billion. Total funds under management at end October are estimated to be broadly
unchanged from the end of September.
Fund performance in line with diversification proposition
Performance across most hedge fund styles has been positive in the last six
months, and has been the major source of industry asset growth. Our
multi-manager allocations captured the benefits of these returns for our
investors, with institutional portfolios adding $0.7 billion in performance over
the period.
Private investor investment performance was driven by AHL, which continues to be
valued by investors as a source of long term diversified returns. AHL
performance was 7% negative between April and August in choppy markets poorly
suited to trend following, but investment performance turned positive as trends
emerged towards the end of the period. Notable market reversals in October were
a reminder that sentiment is fragile, with the capacity to impact trend
followers before a clear direction is established. Investor focus on
diversification of investment risk and returns has intensified after the events
of last year, as the shortcomings of a traditional mix of bonds, equities and
cash became increasingly apparent. With this in mind, the long term investment
proposition of hedge funds more generally and managed futures in particular
continues to appeal in portfolio construction. Investors continue to assess AHL
performance against the backdrop of its 20 year plus track record, low
correlation to traditional asset classes and a history of performance rebounds
as trends re-establish.
Investment performance
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| | Total return | |
| | | Annualised return |
+----------------------------+-----------------------------------+-----------------------+
| | 3 months | 6 months | 12 months | 3 years | 5 years |
| | to 30 | to 30 | to 30 | to 30 | to 30 |
| | September | September | September | September | September |
| | 2009 | 2009 | 2009 | 2009 | 2009 |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| Man AHL Diversified plc1 | 2.8% | -4.4% | 9.0% | 13.4% | 14.8% |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| Man-IP 2202 | 7.1% | -2.3% | 5.1% | 7.8% | 9.9% |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| RMF Four Seasons | 3.4% | 7.0% | -3.6% | 0.6% | 3.5% |
| Strategies3 | | | | | |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| HFRI Fund Weighted | 6.8% | 16.6% | 6.7% | 3.5% | 6.4% |
| Composite Index4 | | | | | |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| HFRI Fund of Funds | 4.4% | 9.4% | -1.2% | 0.1% | 3.4% |
| Composite Index4 | | | | | |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
| World Stocks5 | 14.4% | 32.4% | -5.6% | -7.5% | 0.9% |
+----------------------------+-----------+-----------+-----------+-----------+-----------+
1 Man AHL Diversified plc is valued weekly, but for comparative purposes the
last weekly valuation of the month has been used.
2 Man-IP 220 Ltd from 18 December 1996 to 31 December 2005 and Man-IP 220 Ltd -
USD class bonds from 1 January 2006.
3 RMF Investments Strategies - Class N: RMF Four Seasons Strategies
4 HFRI index data as published on 15 October 2009. HFRI index performance over
the past 4 months is subject to change.
5 MSCI World Index hedged to USD (price return)
First half profits in line with expectations
Man generated profits before tax of $302 million for the first half of 2010 (H2
2009: $121 million; H1 2009: $622 million). As expected, the level of net
management fee income reduced - to $245 million - reflecting lower average funds
under management. The business is on target to achieve the previously announced
fixed cost savings of $90 million by 31 March 2010, but we have also continued
to invest in areas of the business essential to future growth such as our
technology infrastructure and AHL. Net performance fees for the first half were
$47 million, materially ahead of our pre-close estimate following the annual
lock-in of performance fees from an open-ended product after a strong
performance finish to the period.
Meeting investor expectations for change
Despite the recent improvement in trading conditions, the events of last year
have created a clear expectation of change amongst investors. Well understood
and locally regulated product formats, enhanced transparency, control and
flexibility in portfolios are all playing a part in renewing investor trust and
confidence, as is focus on the capital strength and business sustainability of
well capitalised, regulated businesses that have maintained investor liquidity
through recent market turmoil. We have had an exceptionally busy first half,
building on our existing strengths and committing significant energy and
resources to executing on the changes to our business announced earlier this
year. We are now engaging with investors to realise the benefits of these
changes, reinforcing our position as an industry leader.
Capitalising on new onshore opportunities, growing existing franchises
The trend towards onshore regulated product has gathered momentum, with investor
confidence underpinned where their investment is delivered in local regulated
formats they know and trust. Man is responding to increased demand for onshore
market offerings with a range of product formats worldwide: two new AHL UCITS
funds in Europe, one designed specifically for the UK market; further onshore
Australian and Canadian products; and the first onshore fund of futures fund
under new regulations in Taiwan. The Taiwan fund was the result of a two year
period of dialogue with the regulator. It was launched through a leading onshore
asset manager partner and raised over $160 million in ten days.
Man is part of a small group of asset managers who have secured the confidence
of investors, intermediaries, regulators and others over many years. Our key
differentiators are the depth and breadth of our expertise, our track record and
resources and importantly, the relationships with banks and regulators which
enable us to raise assets onshore, as well as internationally.
As part of the drive to provide greater transparency to investors, specifically
in UCITS funds, Man will begin to release daily price estimates for a
representative selection of AHL managed futures funds in the near future.
Information will be available on the mangroupplc.com and maninvestments.com
websites.
Positioning for institutional flows
The last six months have seen a significant increase in activity, in the form of
new business proposals and follow up investor due diligence, particularly in our
new multi-manager business which has been operational since mid summer, ending
the period with $17.8 billion in funds under management. A recent positive Fitch
investment management rating focused on the benefits of our swift consolidation
of operations and the refinement of our investment management process.
An increasingly important part of our engagement with institutional investors in
particular is centred on our ability to offer a differentiated managed account
or "MAC" capability. The portion of our multi-manager assets managed in MACs has
risen from $4 billion to $6 billion in the first half.
While the term "managed account" has a number of interpretations in the market,
Man MACs are specifically tailored, separate investment vehicles. The MAC's
trading strategy generally mirrors the manager's reference fund, but the
investment mandate can be tailored to meet specific investment mandate
requirements. The operational infrastructure (custody, cash management and
valuation) is in the hands of independent third party providers. Man MACs can
deliver investors the benefits of asset control, transparency and independence
in comparison to a conventional co-mingled fund structure.
Three key factors set Man's MAC capability apart from our peers.
First, we have operated MACs for more than ten years. We construct portfolios
with MACs based on our confidence in the underlying manager, the manager's
ability to support our MAC operating model, and our understanding of how their
strategy contributes to a particular portfolio mix. This has given us extensive
operational experience of the benefits of MACs - asset control, portfolio
monitoring and risk management, and detailed investor reporting. This is
different from the flow-driven business model of other providers, where we
perceive the primary focus to be on making multiple managers available on a
common MAC infrastructure, with less depth and experience in terms of underlying
investment management application. The recently announced initiative with Credit
Suisse broadens the global reach of our managed accounts platform and is an
endorsement of our MAC approach and experience.
Second, we are independent, which means that we avoid any perception of conflict
between our managed accounts operation and, for example, in-house prime
brokerage and proprietary trading interests. This is a positive and
differentiating factor for underlying managers.
Third, we have the portfolio construction and structuring teams capable of using
MACs in tailored solutions for institutional investors and intermediaries. This
capability has been very much in evidence as we have developed our pipeline of
new business in this first half. For example, MAC-based portfolio combinations
have featured in our discussions with a range of substantial institutions and
intermediaries in Asia and Europe, and with sovereign wealth investors.
A successful business model, investing for the future
We have seen a marked increase over the first half in the intensity of investor,
intermediary and consultant engagement in the way we as an investment management
business are managed and run. Investors and intermediaries favour investment
management businesses built to last and open to examination.
Man has always scored highly in terms of governance, oversight and regulation.
Listed and lead regulated from the UK with strong working relationships with
relevant regulators across the globe, we have a long track record of operating
in the more heavily regulated private investor markets across geographies, a
track record which we have extended by being in the forefront of the development
of onshore regulated formats. We believe that these attributes will become
increasingly important in the future.
Broader regulatory trends, while still in a state of some flux, are likely to
prove a net positive for Man. We anticipate an increase in on-exchange trading,
which will broaden trading opportunities for managers like AHL. Manager
regulation will become more uniform, with increased levels of disclosure and
heightened scrutiny. For an organisation like Man with a long history of
relevant expertise, relationships and infrastructure, this represents a
levelling of the playing field, with all players now subject similar
requirements for financial and operational resources. On the product front, we
anticipate an increase in local regulated formats, which will necessitate
increased specialisation and reinforces the need for structuring capability in
accessing these new markets.
Our capital strength, together with a more diverse investor base and a higher
proportion of recurring revenue compared to industry peers, allows us to
continue to invest in our business. We have maintained our investment programme
throughout the recent downturn and focussed on areas of the business essential
to future growth such as technology infrastructure and AHL research. During
September, the Man Research Laboratory and the Oxford-Man Institute of
Quantitative Finance moved to new, larger premises in Oxford to accommodate an
increase in our research capability, which is already broadening the pool of AHL
trading ideas and reducing their time to market. On the systems side, we
upgraded AHL's multi-broker capability and continued to refine trading
efficiency. We also made substantial progress on the systems consolidation of
the multi-manager business.
We have continued to exercise financial discipline in cost management and in the
targeted use of our balance sheet to support key business lines. At the end of
the first half, we had a regulatory capital surplus of over $1.6 billion and
cash balances of $2.1 billion. Our capital resources position us strongly to
address opportunities in our industry and invest further in the business.
Dividend maintained
Given the stable overall business performance for the first half of the year,
our strong market position and continued capital strength, we have maintained
the interim dividend at 19.2 cents per share.
Outlook
As expected, the lower level of assets under management has resulted in reduced
management fee income in the period. We have responded to lower asset levels and
the rapid evolution of investor requirements by moving swiftly to reduce fixed
costs and to re-position both our business and our investment management
processes for the future of hedge fund investing. We have also continued to
invest for growth and to build on our competitive strengths in product
structuring, access to onshore markets and capital resources. The maintained
interim dividend reflects these attributes.
The outlook for returns from hedge fund investing continues to be strong, and
the diversification benefits for portfolio construction remain important to
investors worldwide.Flexible and liquid investment mandates, bespoke product
structures, and transparent investment returns are essential for major investors
and intermediaries. We have demonstrated our ability to provide investor
liquidity across our investment franchise and to access new markets and offer
new products, particularly in onshore markets, in both Europe and Asia Pacific.
We are seeing high levels of interest in managed account investment mandates in
almost every region and have recently announced an initiative with Credit Suisse
to offer this investment platform to their client base. We would expect to see
significant progress in the second half as institutions complete their due
diligence processes.
Given the strong momentum in the business, across both products and geographies,
Man is well placed for asset growth.
KEY PERFORMANCE INDICATORS
To measure our progress against our strategy we monitor six key performance
indicators (KPIs) as presented in the Annual Report 2009: growth in funds under
management; growth in revenue; growth in adjusted diluted earnings per share;
post-tax return on equity; and the excess/shortfall of the performance of the
fund products, which we manage, compared to appropriate benchmarks for private
investor products and institutional products.
Funds Under Management (FUM)
Funds under management are a key driver of the Group's results and prospects, as
FUM forms the basis on which the Group's revenue is generated. Movements in FUM
during the period are shown below:
+-----------------------------+------------+------------+----------+---------------+--------+
| | Private Investor | Institutional | 2010 |
| | | | Total |
+-----------------------------+------------------------------------+---------------+--------+
| | Guaranteed | Open-ended | Total | | |
+-----------------------------+------------+------------+----------+---------------+--------+
| | $bn | $bn | $bn | $bn | $bn |
+-----------------------------+------------+------------+----------+---------------+--------+
| Opening FUM - | 16.4 | 11.4 | 27.8 | 19.0 | 46.8 |
| 1 April 2009 | | | | | |
+-----------------------------+------------+------------+----------+---------------+--------+
| Sales | 0.9 | 2.5 | 3.4 | 0.3 | 3.7 |
+-----------------------------+------------+------------+----------+---------------+--------+
| Redemptions | (0.6) | (0.9) | (1.5) | (3.6) | (5.1) |
+-----------------------------+------------+------------+----------+---------------+--------+
| Net sales | 0.3 | 1.6 | 1.9 | (3.3) | (1.4) |
+-----------------------------+------------+------------+----------+---------------+--------+
| Investment movement | (0.9) | (0.7) | (1.6) | 0.4 | (1.2) |
+-----------------------------+------------+------------+----------+---------------+--------+
| FX | 0.5 | 0.2 | 0.7 | 0.5 | 1.2 |
+-----------------------------+------------+------------+----------+---------------+--------+
| Other | (1.5) | - | (1.5) | (0.6) | (2.1) |
+-----------------------------+------------+------------+----------+---------------+--------+
| 30 June 2009 | 14.8 | 12.5 | 27.3 | 16.0 | 43.3 |
+-----------------------------+------------+------------+----------+---------------+--------+
| Sales | 0.4 | 1.2 | 1.6 | 0.4 | 2.0 |
+-----------------------------+------------+------------+----------+---------------+--------+
| Redemptions | (0.3) | (0.5) | (0.8) | (1.7) | (2.5) |
+-----------------------------+------------+------------+----------+---------------+--------+
| Net sales | 0.1 | 0.7 | 0.8 | (1.3) | (0.5) |
+-----------------------------+------------+------------+----------+---------------+--------+
| Investment movement | 0.2 | 0.1 | 0.3 | 0.3 | 0.6 |
+-----------------------------+------------+------------+----------+---------------+--------+
| FX | 0.4 | 0.3 | 0.7 | 0.2 | 0.9 |
+-----------------------------+------------+------------+----------+---------------+--------+
| Other | - | 0.2 | 0.2 | (0.5) | (0.3) |
+-----------------------------+------------+------------+----------+---------------+--------+
| Closing FUM - 30 September | 15.5 | 13.8 | 29.3 | 14.7 | 44.0 |
| 2009 | | | | | |
+-----------------------------+------------+------------+----------+---------------+--------+
| | | | | | |
+-----------------------------+------------+------------+----------+---------------+--------+
| Growth in FUM - H1 2010 | -5% | +21% | +5% | -23% | -6% |
+-----------------------------+------------+------------+----------+---------------+--------+
Private investor FUM grew by 5% during the period driven by strong sales in
open-ended products and reduced redemption rates. Institutional FUM reduced by
23% as a result of muted sales and significant redemptions, all be it at a
reducing run rate.
Sales and redemptions
A further analysis of sales and redemptions is given below, together with
redemption rates:
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Private investor | Q2 2010 | Q1 2010 | H1 2010 | H2 2009 | H1 2009 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Sales ($bn): | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| · Guaranteed | 0.4 | 0.9 | 1.3 | 2.4 | 3.7 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| · Open-ended | 1.2 | 2.5 | 3.7 | 1.8 | 3.4 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | 1.6 | 3.4 | 5.0 | 4.2 | 7.1 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Redemptions ($bn): | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| · Guaranteed | 0.3 | 0.6 | 0.9 | 2.6 | 2.0 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| · Open-ended | 0.5 | 0.9 | 1.4 | 3.5 | 1.0 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | 0.8 | 1.5 | 2.3 | 6.1 | 3.0 |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Annualised redemptions/average FUM: | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| · Guaranteed | 7.9% | 15.4% | 11.4% | 24.2% | 13.9% |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| · Open-ended | 15.2% | 30.1% | 22.2% | 54.7% | 15.0% |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | |
+--------------------------------------------+-------------+-------------+-------------+-------------+-------------+
Overall private investor FUM had net inflows in both Q1 2010 and Q2 2010, across
both open ended and guaranteed products resulting in aggregate net inflows of
$2.7 billion for the first half.
The first half sales for the private investor show the preference by investors
and intermediaries for liquid open-ended products, particularly products with
allocations to managed futures. In the first half we launched a guaranteed
product in Australia; however based on investor preference we did not have a
global launch of the traditional IP220 products, as a result guaranteed products
sales were lower than in the comparable periods. We continued to see strong
flows from investors in the Far East, in particular Japan and Hong Kong.
Private investor redemptions for the guaranteed products have reduced and the
annualised redemption percentage has returned to the previous historical levels.
H1 2010 redemptions have reduced significantly from H2 2009, which included
redemptions and product switches from the MGS products. Redemptions in the
open-ended products will generally be more variable than guaranteed products as
they are influenced more by investors' performance expectations. Open-ended
redemptions in H2 2009 were high as a result of strong sales in previous periods
followed by strong performance from AHL in the quarter to December 2008. Since
that period redemptions have moderated.
+---------------------------------+----------+----------+----------+----------+----------+
| Institutional | Q2 2010 | Q1 2010 | H1 2010 | H2 2009 | H1 2009 |
+---------------------------------+----------+----------+----------+----------+----------+
| | | | | | |
+---------------------------------+----------+----------+----------+----------+----------+
| Sales ($bn) | 0.4 | 0.3 | 0.7 | 0.5 | 3.1 |
+---------------------------------+----------+----------+----------+----------+----------+
| Redemptions ($bn) | 1.7 | 3.6 | 5.3 | 4.9 | 3.0 |
+---------------------------------+----------+----------+----------+----------+----------+
| Annualised redemptions/ average | 44.3% | 82.3% | 63.0% | 42.8% | 20.7% |
| FUM | | | | | |
+---------------------------------+----------+----------+----------+----------+----------+
Institutional sales have remained muted as institutional allocators,
particularly in Europe, have remained out of the market. Redemptions have shown
a significant quarter on quarter decline, with the level of notified quarterly
redemptions for the December 2009 quarter at $700 million.
Investment movement
For the first quarter of the current financial year (Q1 2010), investment
movement was negative for the private investor as a result of the allocation to
managed futures having negative performance. Institutional performance was
slightly positive as markets rebounded from the previous period. In the second
quarter both private investor and institutional had positive performance. The
investment performance of our investment managers is described in the fund
performance and investment management sections in the Chief Executive's Review.
Foreign exchange impact of funds under management
Funds under management denominated in foreign currencies increased as a result
of a weaker US dollar during the period. The foreign exchange composition of FUM
is similar to that at the year-end.
Other movements
Other movements in the first half included $1.5 billion of reduced leverage as a
result of rebalancing of guaranteed products following negative AHL performance.
Institutional investor redemptions from products with structural leverage (for
example, Four Seasons 2XL) resulted in a reduction of FUM of $1.1 billion during
the period.
Revenue
Revenue from management fees reduced by 16% compared to H2 2009 as a result of a
decline in average FUM during the period of 21%. Private investor management
fees reduced by 14% and institutional management fees reduced by 31%, consistent
with the reduction in the respective average FUM during the period. Revenue
from performance fees reduced from $391 million in H2 2009 to $43 million in the
half year, primarily as a result of negative performance during the period from
AHL compared to the strong performance from AHL in the preceding period.
Earnings per share
Adjusted diluted earnings per share on total operations for the six months
decreased 41% to 13.1 cents, compared to 22.2 cents for H2 2009. Adjusting items
in the period include the gain arising on the residual interest in brokerage
assets and costs arising from the restructuring programme announced in March
2009, as discussed in the Review of Group Income Statement below. Statutory
diluted earnings per share on total operations were 13.8 cents, compared to
minus 0.7 cents for H2 2009 and 28.8 cents for H1 2009.
Return on equity (ROE)
The Group's annualised post-tax return on shareholders' equity (excluding the
gain/loss arising on the residual interest in MF Global together with the
associated equity usage) for the first six months was 10.8%, compared to 13.5%
for last year. The average shareholders' equity for the period was $3.9 billion,
compared to $4.4 billion for last year.
Excess fund product performance
The excess fund product performance KPI, introduced in 2009, measures the
investment performance, net of fees, of our flagship fund products compared to
industry benchmarks. While the products have regular redemptions dates, many
monthly, the investors generally have a medium to long term investment horizon,
particularly in the guaranteed products. The excess return is therefore
measured over a three year horizon.
Private investor products had an excess return of 3.9% over the last three years
compared to benchmark. This is based on returns for Man's flagship IP220 product
compared to a benchmark represented by 100% Stark 300 Trader Index and 60% HFRI
Fund of Funds Composite Index. Man IP220 is composed of allocations to the AHL
Diversified Programme and Man Glenwood Multi Strategy. It has additional
structural level features, such as a capital guarantee and leverage, the
intrinsic value of which is not reflected in this comparison.
Institutional products had an excess return of 1.5% over the last three years
compared to benchmark. This is based on returns for RMF Four Seasons compared to
the HFRI Fund of Funds Composite Index.
REVIEW OF GROUP INCOME STATEMENT
+-------------------------------------------+---------+---------+---------+
| | H1 2010 | H2 2009 | H1 2009 |
+-------------------------------------------+---------+---------+---------+
| | $m | $m | $m |
+-------------------------------------------+---------+---------+---------+
| | | | |
+-------------------------------------------+---------+---------+---------+
| Average FUM ($billion) | 43.2 | 54.5 | 75.7 |
+-------------------------------------------+---------+---------+---------+
| | | | |
+-------------------------------------------+---------+---------+---------+
| Revenue | | | |
| - Performances fees | 43 | 391 | 236 |
| - Management and other fees | 649 | 777 | 1,084 |
+-------------------------------------------+---------+---------+---------+
| | 692 | 1,168 | 1,320 |
+-------------------------------------------+---------+---------+---------+
| Gains/(losses) on investments and other | | | |
| financial instruments | 1 | (197) | (63) |
+-------------------------------------------+---------+---------+---------+
| Sales commissions | (146) | (207) | (204) |
+-------------------------------------------+---------+---------+---------+
| Compensation costs | | | |
| - Variable (bonus) | (84) | (88) | (162) |
| - Fixed (salaries) | (95) | (102) | (111) |
+-------------------------------------------+---------+---------+---------+
| Other costs | (104) | (144) | (131) |
+-------------------------------------------+---------+---------+---------+
| Associates | 31 | 82 | 62 |
+-------------------------------------------+---------+---------+---------+
| Net Finance (expense)/income | (3) | - | 20 |
+-------------------------------------------+---------+---------+---------+
| | | | |
+-------------------------------------------+---------+---------+---------+
| Adjusting items | 10 | (391) | (109) |
+-------------------------------------------+---------+---------+---------+
| | | | |
+-------------------------------------------+---------+---------+---------+
| Profit before tax | 302 | 121 | 622 |
+-------------------------------------------+---------+---------+---------+
| | | | |
+-------------------------------------------+---------+---------+---------+
| EPS (cents) | 13.8 | (0.7) | 28.8 |
+-------------------------------------------+---------+---------+---------+
| Adjusted EPS (cents) | 13.1 | 22.2 | 34.5 |
+-------------------------------------------+---------+---------+---------+
| Return on shareholders equity | 10.8% | (0.8%) | 21.4% |
+-------------------------------------------+---------+---------+---------+
Presentation of Comparative Periods
The income statement presented above and in the Interim Financial Statements
shows the first half of the current financial year together with both the second
half of the prior year and the first half of the prior year. Funds under
management (FUM) are the key driver of Man's economics and as FUM decreased
significantly between the first and second halves of the prior financial year,
and given that our business is not seasonal, the second half of the prior year
is considered to be a more relevant comparator for the first six months of the
current financial year and hence the following commentary uses this period as
the primary comparator.
Revenues and costs
Revenue for the six months to 30 September 2009 was $692 million, a decrease of
41% compared to revenue of $1,168 million in H2 2009. Gross management and other
fees have decreased 16% to $649 million compared to H2 2009, primarily as a
result of the average funds under management for the six months declining 21% to
$43.2 billion from $54.5 billion for the previous six months.
Gross performance fee income of $43 million compared to H2 2009: $391 million,
all of which was contributed by AHL.
Gains/(losses) on investments and other financial instruments amounted to $1
million, which includes seeding and other investment net gains of $5 million and
a gain of $30 million on the sale of exchange shares, partly offset by costs of
$34 million arising in respect of the cessation of the Group's trade credit
insurance and reinsurance business, Empyrean Re.
Included in sales commissions is $74 million relating to the amortisation of
upfront commissions ("placement fees"), compared to $129 million in H2 2009, and
$72 million relating to trail commission ("servicing fees"), compared to $78
million in H2 2009. The decrease in commission costs results from lower funds
under management.
We continue to maintain tight controls and cost flexibility in our total expense
base and in particular compensation expense. The following analysis excludes the
restructuring costs which are discussed in the Adjusted Earnings section.
Total fixed compensation costs and other costs were $199 million in the first
half (H2 2009: $246 million; H1 2009: $242 million). The decrease of $47 million
from $246 million in the second half of the prior year comprises: an adverse FX
impact of $10 million (as both sterling and the Swiss franc have strengthened
against the US dollar in H1 2010 compared to H2 2009) and savings in fixed
compensation costs of $11 million and saving in other costs of $46 million. The
full period impact of these savings will flow through in the second half and as
a result we are well placed to meet the cost savings targets (subject to foreign
currency exchange rate movements), which we have previously announced, by the
end of the current financial year.
Compensation costs amounted to $179 million, compared to $190 million in H2 2009
and $273 million in H1 2009, reflecting the decrease in discretionary employee
bonus compensation and the impact of a lower headcount.
Other costs have decreased to $104 million from $144 million in H2 2009 and from
$131 million in H1 2009, as analysed in the table below. As the table shows in
the first half of the year we have reduced our discretionary costs, in
particular around consultancy and other professional fees. The decrease in the
other category primarily relates to staff recruitment, relocation and other
personnel related costs. We have continued to invest in our technology
platforms and in AHL research.
+----------------------------------+----------------+----------------+----------------+
| Analysis of other costs | H1 2010 | H2 2009 | H1 2009 |
| | $m | $m | $m |
+----------------------------------+----------------+----------------+----------------+
| Occupancy | 21 | 22 | 20 |
+----------------------------------+----------------+----------------+----------------+
| Travel and entertainment | 7 | 10 | 11 |
+----------------------------------+----------------+----------------+----------------+
| Technology | 10 | 11 | 20 |
+----------------------------------+----------------+----------------+----------------+
| Communication | 6 | 9 | 7 |
+----------------------------------+----------------+----------------+----------------+
| Consulting and professional | 15 | 27 | 19 |
| services | | | |
+----------------------------------+----------------+----------------+----------------+
| Depreciation and amortisation | 21 | 21 | 18 |
+----------------------------------+----------------+----------------+----------------+
| Charitable donations | 2 | 5 | 5 |
+----------------------------------+----------------+----------------+----------------+
| Other | 22 | 39 | 31 |
+----------------------------------+----------------+----------------+----------------+
| Total | 104 | 144 | 131 |
+----------------------------------+----------------+----------------+----------------+
Income from associates largely relates to our investment in BlueCrest, whose
contribution to our profit consisted of $17 million of net performance fee
income and $16 million of net management and other fee income.
Net finance expense included interest expense on borrowings and other
debt of $16 million (H2 2009: $20 million), reflecting the decrease in US dollar
interest rates. Finance income was $13 million (H2 2009: $20 million), which
included interest income on cash and cash equivalents of $9 million (H2 2009:
$10 million) and other finance fees and related income of $4 million (H2 2009:
$10 million).
Group profit before tax increased 150% to $302 million, compared to $121 million
in H2 2009, mainly due to non-recurring (adjusting) items, which totalled $10
million (credit) in the period, as detailed below, compared to a charge of $391
million in H2 2009 million.
Adjusted Group profit before tax reduced by 43% to $292 million compared to $512
million in H2 2009, with adjusted pre-tax margin of 40% compared to 49% in H2
2009, reflecting reduced performance fees partly offset by reduced expenses.
The tax charge for the period amounts to $54 million compared to $125
million in H2 2009. The effective tax rate on profits before adjusting items is
19.3%, compared to 20.3% for the year ended 31 March 2009, based on the
estimated effective tax rate for the year. The effective tax rate for the period
including adjusting items is 17.9%, compared to 32.3% for the prior year. The
majority of the Group's profit continues to be earned in Switzerland and in the
UK and the current effective tax rate is consistent with this profit mix.
Adjusted earnings
Adjusted earnings refer to the Group's profit excluding those material items
which the directors consider should be presented separately on the face of the
income statement in order to aid comparability from period to period. These
adjusting items are:
+-----------------------------------------------+---------+---------+---------+
| | H1 | H2 | H1 |
| | FY2010 | FY2009 | FY2009 |
| | $m | $m | $m |
+-----------------------------------------------+---------+---------+---------+
| Gain/(loss) arising from residual interest in | 34 | (105) | - |
| brokerage assets | | | |
+-----------------------------------------------+---------+---------+---------+
| Restructuring costs - compensation | (11) | (37) | - |
+-----------------------------------------------+---------+---------+---------+
| Restructuring costs - other | (13) | - | - |
+-----------------------------------------------+---------+---------+---------+
| Accelerated amortisation of MGS sales | - | - | (107) |
| commissions | | | |
+-----------------------------------------------+---------+---------+---------+
| Gain on disposal of 50% of subsidiary | - | - | 48 |
+-----------------------------------------------+---------+---------+---------+
| Impairment of Ore Hill investments and | - | (249) | (50) |
| goodwill | | | |
+-----------------------------------------------+---------+---------+---------+
| | 10 | (391) | (109) |
+-----------------------------------------------+---------+---------+---------+
During the year ended 31 March 2009, the Group recorded a loss of $105 million
in respect of its residual investment in brokerage assets, mainly relating to an
impairment of its investment in MF Global to reflect the decrease in share price
to $4.23 at year-end. In August 2009 the Group sold its entire remaining stake
in MF Global under a Variable Forward Sale Agreement with Nomura International
plc, at a sale price of $5.95 per share, resulting in gross initial disposal
proceeds of $112 million, and an initial net gain of $34 million. Under the
Variable Forward Contract the eventual sale price is capped at $7.14 per share
with a floor at $5.35 per share.
In March 2009 the Group announced that it had implemented a plan to reduce the
cost base of the business. $37 million of one-off compensation costs associated
with this restructuring were reported as restructuring costs during H2 2009. A
further $24 million of restructuring costs have arisen in the half year to 30
September 2009, $11 million of compensation costs (redundancy costs) and $13
million of other restructuring costs, mainly in respect of vacant leasehold
premises. Of the $24 million costs in the period, $10 million relates to cash
items and $14 million to non-cash items. $7 million of the cash items had been
paid out by 30 September 2009.
Revenue margins
Gross management and other fees represent management fees earned on funds under
management and management fees from associates and joint ventures, interest on
loans to funds and other fees. Gross margins, before interest income earned from
funds, are negotiated directly with institutional investors and distributors of
the private investor products. These margins are shown in the table below as
this information is considered useful in analysing trends. Loans to funds are
made to facilitate rebalancing and investing activities. In the table below we
have shown gross margins both including and excluding interest income earned on
loans to funds. Net margins are also shown to indicate the margin after
deducting all expenses.
The gross management and other fees margin (before interest income) for private
investors was 421 bp, compared to 417 bp for H2 2009. The primary reason for the
small increase is the relative increase in FUM relating to high margin
products, for example IP 220 and AHL products, as a proportion of the total
private investor FUM. The impact of associates adds 11 bp to the overall private
investor gross margin.
The gross margin (excluding interest income) on guaranteed products is
approximately 462 bp and approximately 352 bp on open-ended products. The
margins net of sales commission costs are 338 bp and 273 bp for guaranteed and
open-ended products respectively. The difference between the two margins
primarily relates to a structuring fee earned on guaranteed products.
The gross management and other fees margin for institutional investors was 91
bp, compared to 97 bp for H2 2009. The small decrease in this margin is
primarily a result of a reduction in management fee income as some of our
larger, long-standing investors redeemed out of higher fee earning products.
The net management and other fees margin excludes net finance income, and also
the adjusting items, which are deemed to be non-recurring. The net management
fee margin for private investors is at a similar level to H2 2009 but has
declined for institutional investors to 9 bp. The primary reason relates to
fixed compensation costs and other costs decreasing to a lesser extent than the
fall in FUM. However, it is expected that as FUM and revenues increase the cost
base is likely to rise to a lesser extent resulting in an increase in the net
margin.
+--------------------------------+------+-------+-------+------+-------+-------+
| | H1 | 2009 | H2 | H1 | 2008 | 2007 |
| | 2010 | | 2009 | 2009 | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Average FUM in period ($bn) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Private investor | 27.8 | 38.4 | 32.6 | 44.2 | 39.6 | 33.5 |
+--------------------------------+------+-------+-------+------+-------+-------+
| Institutional | 15.4 | 26.7 | 21.9 | 31.5 | 29.7 | 23.7 |
+--------------------------------+------+-------+-------+------+-------+-------+
| Private investor | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Gross management and other | 593 | 1,662 | 698 | 964 | 1,771 | 1,525 |
| fees| ($m) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Interest income earned from | 8 | 50 | 17 | 33 | 74 | 78 |
| funds ($m) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Net management fee income* | 241 | 737 | 279 | 458 | 898 | 787 |
| ($m) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Gross management fee margin | 4.27 | 4.33 | 4.28 | 4.36 | 4.47 | 4.55 |
| (%) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Gross management fee margin | 4.21 | 4.20 | 4.17 | 4.21 | 4.29 | 4.31 |
| before interest income from | | | | | | |
| funds (%) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Net management fee margin | 1.73 | 1.92 | 1.71 | 2.07 | 2.27 | 2.35 |
+--------------------------------+------+-------+-------+------+-------+-------+
| Institutional | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Gross management and other | 70 | 252 | 106 | 146 | 297 | 269 |
| fees| ($m) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Net management fee income* | 7 | 128 | 57 | 71 | 157 | 147 |
| ($m) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Gross management fee margin | 0.91 | 0.94 | 0.97 | 0.93 | 1.00 | 1.14 |
| (%) | | | | | | |
+--------------------------------+------+-------+-------+------+-------+-------+
| Net management fee margin (%) | 0.09 | 0.48 | 0.52 | 0.45 | 0.53 | 0.62 |
+--------------------------------+------+-------+-------+------+-------+-------+
|Includes management and other fee income from associates
*Net management
fee income is before net finance income and excludes adjusting items
REVIEW OF GROUP BALANCE SHEET AND CASH FLOW
At 30 September 2009, equity was $4.1 billion, compared to $4.2 billion at the
year-end. The decrease in shareholders' equity during the period arose from the
payment of ordinary dividends in the period of $0.4 billion, partly offset
by the retention of earnings of $0.2 billion and other comprehensive income of
$0.1 billion in the period.
Other balance sheet movements in the six months ended 30 September 2009
include other investments in fund products, primarily relating to seeding
investments, of $760 million (up $42 million from 31 March 2009) and amounts
owed by fund products of $372 million (in line with the balance of $373 million
at 31 March 2009). The decrease in other investments to $55 million from $184
million at the end of the prior period reflects the sale of our residual stake
in MF Global and the sale of exchange shares in the period.
The Group had a net cash position of $1.5 billion at 30 September 2009, compared
to $1.7 billion at prior year-end. Cash generated from operations for the six
months was $311 million, in line with Group profit before tax. The movement in
the Group's net cash position since the year-end is primarily the result of:
cash generated from operating activities ($228 million); cash realised from
other financial assets ($153 million), resulting from the sale of the Group's
residual stake in MF Global and the remaining exchange shares; more than offset
by the payment of ordinary dividends in the period ($419 million), the payment
of upfront commissions and purchase of other investments ($160 million) and the
purchase of own shares by the ESOP trust ($59 million).
RISK MANAGEMENT
Governance and risk management are essential components of both the investment
management process for our investors and our approach to maintaining a high
quality, sustainable business for our shareholders. Our reputation is
fundamental to our business and maintaining our corporate integrity is the
responsibility of everyone at Man. Our strategy is to identify, monitor and
measure risk throughout Man and then through risk management act to mitigate
these risks within the framework of our risk appetite. We maintain sufficient
excess capital and substantial liquidity resource to give us flexibility both to
continue to finance long term growth and to operate the business effectively
under various market conditions.
The principal risks and uncertainties faced by Man are summarised in our 2009
Annual Report on pages 41-43. These risks, their quantification and our response
to them have not changed significantly from that described in our Annual Report.
Although regulatory risk was discussed in the 2009 Annual Report, following the
financial crisis last year there has been increased discussion by the various
regional regulators regarding the governance and the regulatory environment in
which we operate. Some of these discussions could result in proposals that would
make it more difficult to market alternative investment products in certain
jurisdictions to potential investors. There is also a risk that regulatory
changes could increase the capital that banks are required to hold in respect of
certain types of exposures to hedge funds. This could affect the availability
and cost of leverage provided by banks to fund products and also affect trading
in various markets in which the fund products we manage also invest.
We continue to have an active dialogue with our regulators in each of the
jurisdictions in which we operate. Our compliance and legal teams provide us
with an infrastructure for managing regulatory changes and the potential effects
on the products we manage.
There is still considerable uncertainty over the timing of any potential changes
to the regulatory regime and changes could create opportunities as well as risks
for the fund products and our business.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 as adopted by the European Union, and that
the half year review herein includes a fair view of the information required by
the Financial Services Authority's Listing Rules, including the Disclosure and
Transparency Rules 4.2.7 and 4.2.8, namely:
* an indication of important events that have occurred during the six months ended
30 September 2009 and their impact on the condensed interim financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
* material related party transactions in the six months ended 30 September 2009
and any material changes in the related party transactions described in the last
annual report.
The Directors of Man Group plc are as listed in the Annual Report for 31 March
2009 except for the following changes. Glen Moreno retired from the Board on 9
July 2009. Ruud Hendriks and Frédéric Jolly were appointed to the Board as
independent non-executive directors on 1 August 2009.
By order of the Board
Peter Clarke
Chief Executive
5 November 2009
Kevin Hayes
Finance Director
5 November 2009
INTERIM FINANCIAL STATEMENTS
Group Income Statement
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| | | Half year to | Half year | Half year |
| | Note | 30 September | to 31 March | to 30 |
| | | 2009 | 2009 | September |
| | | $m | $m | 2008 |
| | | | | $m |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| | | | | |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Revenue: | | | | |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Performance fees | | 43 | 391 | 236 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Management and other fees | | 649 | 777 | 1,084 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| | | 692 | 1,168 | 1,320 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Gains/(losses) on investments and other financial instruments | | 1 | (197) | (63) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Sales commissions | | (146) | (207) | (204) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Accelerated amortisation of MGS sales commissions | 3 | - | - | (107) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Total sales commissions | | (146) | (207) | (311) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Compensation | | (179) | (190) | (273) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Restructuring costs - compensation | 3 | (11) | (37) | - |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Total compensation costs | | (190) | (227) | (273) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Other costs | | (104) | (144) | (131) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Restructuring costs - other | 3 | (13) | - | - |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Total other costs | | (117) | (144) | (131) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Share of after tax profit of associates and joint ventures | | 31 | 82 | 62 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Gain on disposal of 50% of subsidiary | 3 | - | - | 48 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Impairment of Ore Hill investments and goodwill | 3 | - | (249) | (50) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Gain/(loss) arising from residual interest in brokerage assets | 3 | 34 | (105) | - |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Finance income | 4 | 13 | 20 | 38 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Finance expense | 4 | (16) | (20) | (18) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Profit before tax | | 302 | 121 | 622 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Taxation | 5 | (54) | (125) | (115) |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Profit/(loss) for the period | | 248 | (4) | 507 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| | | | | |
| Attributable to: | | | | |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Equity holders of the Company | | 248 | (4) | 507 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Equity minority interests | | - | - | - |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| | | 248 | (4) | 507 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| | | | | |
| Earnings per share: | 6 | | | |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Basic (cents) | | 14.1 | (0.7) | 29.2 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
| Diluted (cents) | | 13.8 | (0.7) | 28.8 |
+----------------------------------------------------------------+------+--------------+--------------+--------------+
Group Statement of Comprehensive Income
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| | | Half year to | Half year | Half year |
| | | 30 September | to 31 March | to 30 |
| | | 2009 | 2009 | September |
| | | $m | $m | 2008 |
| | | | | $m |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Profit/(loss) for the period | | 248 | (4) | 507 |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Other comprehensive income | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Available for sale investments: | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Valuation gains/(losses) taken to equity | | 43 | (107) | (143) |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Transfer to income statement on sale | | (65) | 201 | (29) |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Foreign currency translation adjustments | | 109 | (148) | (113) |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Tax on items taken directly to or transferred from equity | | 7 | 4 | (10) |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Other comprehensive income/(expense) for the period, net of | | | | |
| tax | | 94 | (50) | (295) |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Total comprehensive income/(expense) for the period | | 342 | (54) | 212 |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Attributable to: | | | | |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Equity holders of the Company | | 341 | (54) | 212 |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| Equity minority interests | | 1 | - | - |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
| | | 342 | (54) | 212 |
+-------------------------------------------------------------+--------+--------------+-------------+--------------+
Group Statement of Changes in Equity
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | Attributable to equity holders | | |
| | of the Company | | |
+-----------------------------------------------+-----------------------------------------+-------------+-------------+
| | | Revaluation | | | |
| | Share | reserves | | Minority | |
| Half year to 30 September 2009 | capital and | and | Total | interest | Total |
| | capital | retained | | | |
| | reserves | earnings | | | |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | $m | $m | $m | $m | $m |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| At 1 April 2009 | 2,608 | 1,584 | 4,192 | - | 4,192 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Comprehensive income for the period | - | 341 | 341 | 1 | 342 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Perpetual capital securities | - | (12) | (12) | - | (12) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Share-based payment | 15 | (31) | (16) | - | (16) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Dividends | - | (419) | (419) | - | (419) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| At 30 September 2009 | 2,623 | 1,463 | 4,086 | 1 | 4,087 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Half year to 31 March 2009 | | | | | |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| At 1 October 2008 | 2,583 | 1,915 | 4,498 | 1 | 4,499 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Comprehensive expense for the period | - | (54) | (54) | - | (54) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Purchase and cancellation of own shares | - | (9) | (9) | - | (9) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Close period share buy-back programme | - | (3) | (3) | - | (3) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Perpetual capital securities | - | (8) | (8) | - | (8) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Share-based payment | 2 | 28 | 30 | - | 30 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Business combinations | 23 | 6 | 29 | - | 29 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Transfer and other adjustments | - | 4 | 4 | - | 4 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Dividends | - | (295) | (295) | (1) | (296) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| At 31 March 2009 | 2,608 | 1,584 | 4,192 | - | 4,192 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Half year to 30 September 2008 | | | | | |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| At 1 April 2008 | 2,125 | 2,585 | 4,710 | 1 | 4,711 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Comprehensive income for the period | - | 212 | 212 | - | 212 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Purchase and cancellation of own shares | - | (268) | (268) | - | (268) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Perpetual capital securities issued | 300 | (15) | 285 | - | 285 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Share-based payment | 51 | (101) | (50) | - | (50) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Cancellation of B shares | 67 | (67) | - | - | - |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Business combinations | 41 | (5) | 36 | - | 36 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Transfer and other adjustments | (1) | (3) | (4) | - | (4) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| Dividends | - | (423) | (423) | - | (423) |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
| At 30 September 2008 | 2,583 | 1,915 | 4,498 | 1 | 4,499 |
+-----------------------------------------------+-------------+-------------+-------------+-------------+-------------+
Group Balance Sheet
+----------------------------------------+------+-----------+------------+------------+
| | | At 30 | At 31 | At 30 |
| | | September | March | September |
| | | 2009 | 2009 | 2008 |
+----------------------------------------+------+-----------+------------+------------+
| | Note | $m | $m | $m |
+----------------------------------------+------+-----------+------------+------------+
| ASSETS | | | | |
+----------------------------------------+------+-----------+------------+------------+
| Cash and cash equivalents | | 2,139 | 2,361 | 1,678 |
+----------------------------------------+------+-----------+------------+------------+
| Trade and other receivables | | 466 | 413 | 697 |
+----------------------------------------+------+-----------+------------+------------+
| Investments in fund products | 7 | 1,132 | 1,091 | 1,871 |
+----------------------------------------+------+-----------+------------+------------+
| Other investments | 7 | 55 | 184 | 147 |
+----------------------------------------+------+-----------+------------+------------+
| Investments in joint ventures and | | 347 | 317 | 563 |
| associates | | | | |
+----------------------------------------+------+-----------+------------+------------+
| Property, plant and equipment | | 76 | 64 | 61 |
+----------------------------------------+------+-----------+------------+------------+
| Other intangible assets | 8 | 389 | 366 | 386 |
+----------------------------------------+------+-----------+------------+------------+
| Goodwill | 8 | 795 | 774 | 798 |
+----------------------------------------+------+-----------+------------+------------+
| Total Assets | | 5,399 | 5,570 | 6,201 |
+----------------------------------------+------+-----------+------------+------------+
| LIABILITIES | | | | |
+----------------------------------------+------+-----------+------------+------------+
| Trade and other payables | | 407 | 462 | 501 |
+----------------------------------------+------+-----------+------------+------------+
| Current tax liabilities | | 231 | 246 | 215 |
+----------------------------------------+------+-----------+------------+------------+
| Borrowings | 9 | 645 | 643 | 943 |
+----------------------------------------+------+-----------+------------+------------+
| Pension obligations | | 21 | 13 | 21 |
+----------------------------------------+------+-----------+------------+------------+
| Deferred tax | | 8 | 14 | 22 |
+----------------------------------------+------+-----------+------------+------------+
| Total Liabilities | | 1,312 | 1,378 | 1,702 |
+----------------------------------------+------+-----------+------------+------------+
| NET ASSETS | | 4,087 | 4,192 | 4,499 |
+----------------------------------------+------+-----------+------------+------------+
| | | | | |
+----------------------------------------+------+-----------+------------+------------+
| EQUITY | | | | |
+----------------------------------------+------+-----------+------------+------------+
| Capital and reserves attributable to | 10 | 4,086 | 4,192 | 4,498 |
| equity holders | | | | |
+----------------------------------------+------+-----------+------------+------------+
| Equity minority interests | | 1 | - | 1 |
+----------------------------------------+------+-----------+------------+------------+
| Total Equity | | 4,087 | 4,192 | 4,499 |
+----------------------------------------+------+-----------+------------+------------+
| | | | | |
+----------------------------------------+------+-----------+------------+------------+
Group Cash Flow Statement
+----------------------------------------------+------+-----------+-----------+-----------+
| | | Half year | Half year | Half |
| | | to 30 | to 31 | year to |
| | | September | March | 30 |
| | | 2009 | 2009 | September |
| | | | | 2008 |
+----------------------------------------------+------+-----------+-----------+-----------+
| | Note | $m | $m | $m |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash flows from operating activities | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash generated from operations | 11 | 311 | 1,574 | 394 |
+----------------------------------------------+------+-----------+-----------+-----------+
| Interest paid | | (14) | (28) | (12) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Income tax paid | | (69) | (93) | (219) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash flows from operating activities | | 228 | 1,453 | 163 |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash flows from investing activities | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Acquisition of joint ventures and | | - | 5 | (250) |
| businesses, net of cash acquired | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Purchase of property, plant and equipment | | (24) | (20) | (18) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Purchase of intangible assets | | (95) | (115) | (135) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Purchase of other investments | | (41) | (153) | (19) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Purchase of additional interests in joint | | - | (10) | (7) |
| ventures | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Proceeds from sale of other investments | | 153 | 7 | 34 |
+----------------------------------------------+------+-----------+-----------+-----------+
| Interest received | | 10 | 25 | 35 |
+----------------------------------------------+------+-----------+-----------+-----------+
| Dividends received from associates and other | | 26 | 121 | 20 |
| investments | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Proceeds from sale of associate | | - | 25 | - |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash flows from investing activities | | 29 | (115) | (340) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash flows from financing activities | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Proceeds from issue of ordinary shares | | 15 | 1 | 52 |
+----------------------------------------------+------+-----------+-----------+-----------+
| Proceeds from issue of capital securities, | | - | - | 293 |
| net of issue costs | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Purchase of treasury shares | | - | (12) | (268) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Purchase of own shares by ESOP trust | | (59) | (22) | (149) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Proceeds from borrowings net of issue costs | | - | - | 550 |
+----------------------------------------------+------+-----------+-----------+-----------+
| Repayment of borrowings | | - | (308) | - |
+----------------------------------------------+------+-----------+-----------+-----------+
| Return of net proceeds from sale of | | - | - | (67) |
| Brokerage | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Dividends paid to Company shareholders | | (419) | (295) | (423) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Dividends in respect of capital securities | | (17) | (17) | (8) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Dividends paid to minority interests | | - | (1) | - |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash flows from financing activities | | (480) | (654) | (20) |
+----------------------------------------------+------+-----------+-----------+-----------+
| Net (decrease)/increase in cash and bank | | (223) | 684 | (197) |
| overdrafts | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash and bank overdrafts at the beginning of | | 2,360 | 1,676 | 1,873 |
| the period | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
| Cash and bank overdrafts at the end of the | | 2,137 | 2,360 | 1,676 |
| period | | | | |
+----------------------------------------------+------+-----------+-----------+-----------+
For the purposes of the cash flow statement, cash and cash equivalents are
included net of overdrafts repayable on demand. These overdrafts are included in
borrowings disclosed on the balance sheet. At 30 September 2009 overdrafts
repayable on demand amounted to $2 million (31 March 2009 $1 million; 30
September 2008 $2 million).
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The financial information contained herein is unaudited and does not constitute
statutory accounts as defined by Section 434 of the Companies Act 2006.
Statutory accounts for the year to 31 March 2009, which were prepared in
accordance with International Financial Reporting Standards ('IFRS') and
relevant IFRIC interpretations issued by the International Accounting Standards
Board ('IASB') and IFRIC Committee respectively and adopted by the European
Union ('EU') and upon which the auditors have given an unqualified and
unmodified report and which contained no statement under Section 237 of the
Companies Act 1985, have been delivered to the Registrar of Companies and were
posted to shareholders on 8 June 2009.
The interim financial statements for the half year to 30 September 2009 have
been prepared in accordance with IAS 34 'Interim Financial Reporting' and the
Disclosure and Transparency Rules of the Financial Services Authority.
A number of new standards and amendments to existing standards and
interpretations have been issued, some of which are mandatory for the financial
year beginning 1 April 2009, with the remaining becoming effective in future
years.
The following new standards and amendments to existing standards are effective
for the financial year ending 31 March 2010:
* IAS 1 (Revised) - 'Presentation of financial statements';
* IFRS 8 -'Operating Segments';
* IFRS 2 - 'Share-based Payment' amendment (relating to vesting conditions);
* IAS 23 (Revised) - 'Borrowing costs'; and
* IAS 32 - 'Financial Instruments: Presentation' amendment (relating to puttable
financial instruments).
As a result of the adoption of IAS 1 (Revised), the Group Statement of
Recognised Income and Expense has been replaced with the Group Statement of
Comprehensive Income, and the Group Statement of Changes in Equity is now
presented separately as a primary statement.
The accounting policies applied in these interim financial statements are
consistent with those set out and applied in the Group's Annual Report for the
year to 31 March 2009, except for the adoption of the new standards and
amendments to existing standards noted above, which have had no impact on the
measurement of the results or financial position of the Group.
2. Segmental analysis
As discussed in Note 1, during the period the Group adopted IFRS 8 - 'Operating
Segments'.
Under IFRS 8, a condition for identifying an operating segment is that it is a
component of the entity whose results are regularly reviewed by the entity's
chief operating decision-maker to make decisions about resources to be allocated
to the segment and to assess its performance ('the management approach'). The
chief operating decision-maker for the Group is considered to be the executive
directors.
From review of the information made available to, and regularly reviewed by, the
executive directors, our conclusion is that the Group's operations are in one
business segment, Investment Management, and that there are no other significant
classes of business, either individually or in aggregate.
We have considered whether management information at product type or core
investment manager level provided to the chief operating decision-maker
indicates different operating segments, but have concluded that none of these
segmental approaches, if applied uniformly, would reflect appropriately how the
Group's economic resources, and income/expense, are currently managed by the
executive directors.
3. Income statement presentation
In the interim financial statements for the half year to 30 September 2008
gains/losses of $63 million (charge) were reported within Revenue, as part of
performance fees. For consistency with the presentation applied in the Group's
Annual Report for the year to 31 March 2009, these have now been restated out of
Revenue in the comparative data for the half year to 30 September 2008, and
disclosed as a separate category on the face of the income statement.
The following material items have been presented separately on the face of the
income statement by virtue of their size or nature, in order to aid
comparability from period to period:
+------------------------------------------+------+------------+----------+-----------+
| | Note | Half year | Half | Half |
| | | to | year to | year to |
| | | 30 | 31 | 30 |
| | | September | March | September |
| | | 2009 | 2009 | 2008 |
| | | $m | $m | $m |
+------------------------------------------+------+------------+----------+-----------+
| | | | | |
+------------------------------------------+------+------------+----------+-----------+
| Gain/(loss) arising from residual | a) | 34 | (105) | - |
| interest in brokerage assets | | | | |
+------------------------------------------+------+------------+----------+-----------+
| Restructuring costs - compensation | b) | (11) | (37) | - |
+------------------------------------------+------+------------+----------+-----------+
| Restructuring costs - other | b) | (13) | - | - |
+------------------------------------------+------+------------+----------+-----------+
| Accelerated amortisation of MGS sales | c) | - | - | (107) |
| commissions | | | | |
+------------------------------------------+------+------------+----------+-----------+
| Gain on disposal of 50% of subsidiary | d) | - | - | 48 |
+------------------------------------------+------+------------+----------+-----------+
| Impairment of Ore Hill investments and | d) | - | (249) | (50) |
| goodwill | | | | |
+------------------------------------------+------+------------+----------+-----------+
| | | | | |
+------------------------------------------+------+------------+----------+-----------+
| | | 10 | (391) | (109) |
+------------------------------------------+------+------------+----------+-----------+
a) Gain/(loss) arising from residual interest in brokerage assets
In August 2009 the Group sold its remaining stake in MF Global under a Variable
Forward Sale (VFS) Agreement with Nomura International plc, at a sale price of
$5.95 per share. The VFS Agreement guarantees that Man Group will achieve a
minimum of $5.35 per share, while retaining a capped participation in future
share price appreciation over a three to four year period. The VFS provided Man
Group with gross initial disposal proceeds of $112 million, and a net gain of
$34 million. Man has derecognised its stake in MF Global on the grounds that it
no longer retains substantially all the risks and rewards of ownership of these
shares.
b) Restructuring costs
In March 2009 the Group announced that it had implemented a plan to reduce the
cost base of the business. A further $11 million of one-off compensation costs
associated with this restructuring have arisen in the half year to 30 September
2009.
During the half year to 30 September 2009, an additional $13 million of other
costs associated with this restructuring have arisen, mainly onerous contract
provisions in respect of leasehold properties.
c) Accelerated amortisation of MGS sales commissions
Details of the accelerated amortisation charge of $107 million in respect of MGS
sales commissions are given in Note 2 of the Annual Report 2009. There is no
further charge in the half year to 30 September 2009.
d) Gain on disposal of 50% of subsidiary/Impairment of Ore Hill investments
and goodwill
Details of the gain of $48 million on the disposal of 50% of a subsidiary, and
the charge of $299 million arising on impairment of Ore Hill investments and
goodwill, are given in Note 2 of the Annual Report 2009. There is no further
gain/charge in respect of these items in the half year to 30 September 2009.
4. Finance income and finance expense
+-----------------------------------------------+-----------+------------+-----------+
| | Half year | Half year | Half year |
| | to | to | to |
| | 30 | 31 | 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
| | $m | $m | $m |
+-----------------------------------------------+-----------+------------+-----------+
| Finance income: | | | |
+-----------------------------------------------+-----------+------------+-----------+
| Interest on cash deposits | 9 | 10 | 32 |
+-----------------------------------------------+-----------+------------+-----------+
| Finance fees | 1 | 2 | 4 |
+-----------------------------------------------+-----------+------------+-----------+
| Other | 3 | 8 | 2 |
+-----------------------------------------------+-----------+------------+-----------+
| | 13 | 20 | 38 |
+-----------------------------------------------+-----------+------------+-----------+
| Finance expense: | | | |
+-----------------------------------------------+-----------+------------+-----------+
| Interest payable on borrowings | (15) | (20) | (16) |
+-----------------------------------------------+-----------+------------+-----------+
| Amortisation of issue costs on | (1) | - | (2) |
| borrowings and other | | | |
+-----------------------------------------------+-----------+------------+-----------+
| | (16) | (20) | (18) |
+-----------------------------------------------+-----------+------------+-----------+
| Net finance (expense)/income | (3) | - | 20 |
+-----------------------------------------------+-----------+------------+-----------+
5. Taxation
+-----------------------------------------------+-----------+------------+-----------+
| | Half year | Half year | Half year |
| | to | to | to |
| | 30 | 31 | 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
| | $m | $m | $m |
+-----------------------------------------------+-----------+------------+-----------+
| Taxation charge for the period | | | |
+-----------------------------------------------+-----------+------------+-----------+
| UK | 36 | 119 | 71 |
+-----------------------------------------------+-----------+------------+-----------+
| Overseas | 18 | 6 | 44 |
+-----------------------------------------------+-----------+------------+-----------+
| | 54 | 125 | 115 |
+-----------------------------------------------+-----------+------------+-----------+
The tax charge for the period amounts to $54 million. The effective tax rate on
profits before tax is 17.9% (half year ended 30 September 2008 - 18.5%),
reflecting the estimated rate for the full year, adjusted for the tax effect of
the restructuring costs and disposal of MF Global shares. The majority of the
Group's profit continues to be earned in Switzerland and the UK, and the
forecast full year effective tax rate is consistent with this profit mix.
6. Earnings per share (EPS)
The calculation of basic earnings per ordinary share and diluted earnings per
ordinary share is based on a profit for the period of $236 million (half year
ended 31 March 2009: loss of $12 million; half year ended 30 September 2008:
profit of $497 million).
The calculation of basic earnings per ordinary share is based on 1,677,533,021
(half year ended 31 March 2009: 1,673,979,951; 30 September 2008: 1,701,519,998)
ordinary shares, being the weighted average number of ordinary shares in issue
during the period after excluding the shares owned by the Man Group plc employee
trusts.
For diluted EPS, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all dilutive potential ordinary shares. The
calculation of diluted earnings per ordinary share is based on 1,707,723,960
(half year ended 31 March 2009: 1,697,195,657; 30 September 2008: 1,728,212,032)
ordinary shares, calculated as shown in the following table:
+------------------------------------------------+------------+------------+------------+
| | Half year | Half year | Half year |
| | ended 30 | ended 31 | ended 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
| | Number | Number | Number |
+------------------------------------------------+------------+------------+------------+
| | (millions) | (millions) | (millions) |
+------------------------------------------------+------------+------------+------------+
| Basic weighted average number of shares | 1,677.5 | 1,674.0 | 1,701.5 |
+------------------------------------------------+------------+------------+------------+
| Dilutive potential ordinary shares | | | |
+------------------------------------------------+------------+------------+------------+
| Share awards under incentive | 29.7 | 22.9 | 12.6 |
| schemes | | | |
+------------------------------------------------+------------+------------+------------+
| Employee share options | 0.5 | 0.3 | 12.7 |
+------------------------------------------------+------------+------------+------------+
| Shares to be issued in | - | - | 1.4 |
| consideration for joint ventures | | | |
| acquired | | | |
+------------------------------------------------+------------+------------+------------+
| Dilutive weighted average number of shares | 1,707.7 | 1,697.2 | 1,728.2 |
+------------------------------------------------+------------+------------+------------+
The reconciliation of earnings per share to an adjusted EPS is given below:
+-------------------------+-------------+-------------+--------------+---------------+
| | Half year ended 30 September 2009 |
+-------------------------+----------------------------------------------------------+
| | Basic | Diluted | Basic | Diluted |
| | post-tax | post-tax | earnings per | earnings per |
| | earnings | earnings | share | share |
| | $m | $m | cents | cents |
+-------------------------+-------------+-------------+--------------+---------------+
| Earnings per share* | 236 | 236 | 14.1 | 13.8 |
+-------------------------+-------------+-------------+--------------+---------------+
| Items for which EPS has | (10) | (10) | (0.7) | (0.7) |
| been adjusted (see note | | | | |
| 3) | | | | |
+-------------------------+-------------+-------------+--------------+---------------+
| Tax on the above items | (2) | (2) | - | - |
+-------------------------+-------------+-------------+--------------+---------------+
| Adjusted Earnings per | 224 | 224 | 13.4 | 13.1 |
| share | | | | |
+-------------------------+-------------+-------------+--------------+---------------+
+-------------------------+-------------+-------------+---------------+---------------+
| | Half year ended 31 March 2009 |
+-------------------------+-----------------------------------------------------------+
| | Basic | Diluted | Basic | Diluted |
| | post-tax | post-tax | earnings per | earnings per |
| | earnings | earnings | share | share |
| | $m | $m | cents | cents |
+-------------------------+-------------+-------------+---------------+---------------+
| Loss per share* | (12) | (12) | (0.7) | (0.7) |
+-------------------------+-------------+-------------+---------------+---------------+
| Items for which EPS has | 391 | 391 | 23.4 | 23.0 |
| been adjusted (see note | | | | |
| 3) | | | | |
+-------------------------+-------------+-------------+---------------+---------------+
| Tax on the above items | (2) | (2) | (0.2) | (0.1) |
+-------------------------+-------------+-------------+---------------+---------------+
| Adjusted Earnings per | 377 | 377 | 22.5 | 22.2 |
| share | | | | |
+-------------------------+-------------+-------------+---------------+---------------+
+-------------------------+-------------+-------------+---------------+---------------+
| | Half year ended 30 September 2008 |
+-------------------------+-----------------------------------------------------------+
| | Basic | Diluted | Basic | Diluted |
| | post-tax | post-tax | earnings per | earnings per |
| | earnings | earnings | share | share |
| | $m | $m | cents | cents |
+-------------------------+-------------+-------------+---------------+---------------+
| Earnings per share* | 497 | 497 | 29.2 | 28.8 |
+-------------------------+-------------+-------------+---------------+---------------+
| Items for which EPS has | 109 | 109 | 6.4 | 6.3 |
| been adjusted (see note | | | | |
| 3) | | | | |
+-------------------------+-------------+-------------+---------------+---------------+
| Tax on the above items | (11) | (11) | (0.6) | (0.6) |
+-------------------------+-------------+-------------+---------------+---------------+
| Adjusted Earnings per | 595 | 595 | 35.0 | 34.5 |
| share | | | | |
+-------------------------+-------------+-------------+---------------+---------------+
* The difference between profit after tax and basic and diluted post-tax
earnings is the adding back of the finance expense in the period relating to the
Fixed Rate Perpetual Capital Securities (see Note 10).
7. Investments
+------------------------------------------------+-----------+------------+------------+
| | At 30 | At 31 | At 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+------------------------------------------------+-----------+------------+------------+
| | $m | $m | $m |
+------------------------------------------------+-----------+------------+------------+
| Investments in fund products | | | |
| comprise: | | | |
+------------------------------------------------+-----------+------------+------------+
| Amounts owed by fund products | 372 | 373 | 641 |
+------------------------------------------------+-----------+------------+------------+
| Other investments in fund products | 760 | 718 | 1,230 |
+------------------------------------------------+-----------+------------+------------+
| | 1,132 | 1,091 | 1,871 |
+------------------------------------------------+-----------+------------+------------+
| Other investments comprise: | | | |
+------------------------------------------------+-----------+------------+------------+
| Residual stake in MF Global | - | 94 | 97 |
+------------------------------------------------+-----------+------------+------------+
| Investment in Ore Hill DI portfolio | 49 | 52 | - |
+------------------------------------------------+-----------+------------+------------+
| Exchange shares | 5 | 28 | 34 |
+------------------------------------------------+-----------+------------+------------+
| Other equity investments | 1 | 10 | 16 |
+------------------------------------------------+-----------+------------+------------+
| | 55 | 184 | 147 |
+------------------------------------------------+-----------+------------+------------+
The Group uses fair values to measure its investments in fund products and other
investments on the balance sheet.
The fair values of investments in fund
products are derived from the reported Net Asset Values (NAVs) of each of the
fund products, which in turn are based upon the value of the underlying assets
held within each of the fund products. The valuation of the underlying assets
within each fund product is determined by external valuation service providers
(VSP) based on an agreed valuation policy and methodology. Whilst these
valuations are performed independently of the Group, the Group has established
oversight procedures and due diligence processes to ensure that the net asset
values reported by the VSP are reliable and appropriate. The Group makes
adjustments to NAVs where events or circumstances indicate that the NAVs are not
reflective of fair value.
There are certain other assets, for example
the Ore Hill DI portfolio, where the Group establishes the fair value by using
appropriate valuation techniques. In these situations the valuation techniques
used to calculate fair values include comparisons with similar financial
instruments for which observable prices exist and discounted cash flow
analysis.
Given the uncertainty and subjective nature of valuing assets
at fair value, it is possible that the outcomes within the next financial year
could be different from the assumptions used and this could therefore result in
a significant adjustment to the carrying amount of assets and liabilities
measured using fair values. This is particularly the case where the Group
establishes the fair value of assets by using appropriate valuation techniques.
8. Intangible assets
+---------------------------------+------------+-------------+-----------+------------+
| | | Other intangible assets |
+---------------------------------+------------+--------------------------------------+
| | Goodwill | Upfront | Other | Total |
| | | sales | | |
| | | commissions | | |
+---------------------------------+------------+-------------+-----------+------------+
| | $m | $m | $m | $m |
+---------------------------------+------------+-------------+-----------+------------+
| Net book value | | | | |
+---------------------------------+------------+-------------+-----------+------------+
| At 1 April 2009 | 774 | 317 | 49 | 366 |
+---------------------------------+------------+-------------+-----------+------------+
| Currency translation difference | 21 | 1 | - | 1 |
+---------------------------------+------------+-------------+-----------+------------+
| Additions | - | 81 | 14 | 95 |
+---------------------------------+------------+-------------+-----------+------------+
| Redemptions/disposals | - | (8) | (1) | (9) |
+---------------------------------+------------+-------------+-----------+------------+
| Charge for the period | - | (54) | (10) | (64) |
+---------------------------------+------------+-------------+-----------+------------+
| Net book value at 30 September | 795 | 337 | 52 | 389 |
| 2009 | | | | |
+---------------------------------+------------+-------------+-----------+------------+
| Net book value at 31 March 2009 | 774 | 317 | 49 | 366 |
+---------------------------------+------------+-------------+-----------+------------+
| Net book value at 30 September | 798 | 343 | 43 | 386 |
| 2008 | | | | |
+---------------------------------+------------+-------------+-----------+------------+
9. Borrowings
+---------------------------------------------+------------+-----------+------------+
| | At 30 | At 31 | At 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+---------------------------------------------+------------+-----------+------------+
| | $m | $m | $m |
+---------------------------------------------+------------+-----------+------------+
| Bank loans and overdrafts | 2 | 1 | 302 |
+---------------------------------------------+------------+-----------+------------+
| Fixed rate notes | 244 | 243 | 242 |
+---------------------------------------------+------------+-----------+------------+
| Floating rate notes - subordinated debt | 399 | 399 | 399 |
+---------------------------------------------+------------+-----------+------------+
| | 645 | 643 | 943 |
+---------------------------------------------+------------+-----------+------------+
On 1 August 2008 the Group issued $250 million Fixed Rate Notes under the $3
billion Euro Medium Term Note ('EMTN') Programme of Man Group plc dated 21
December 2007. The Fixed Rate Notes consist of $250 million EMTN Programme Notes
issued on 1 August 2008 and due 1 August 2013. The interest rate is 6.5% per
annum payable semi-annually in arrears up to and including the maturity date.
The subordinated floating rate notes consist of $400 million Eurobonds issued 21
September 2005 and due 22 September 2015. The notes may be redeemed in whole at
the option of the Group on any interest payment date falling on or after 22
September 2008, subject to FSA approval. The interest rate is US dollar LIBOR
plus 1.15% until 22 September 2010 and thereafter is US dollar LIBOR plus 1.65%.
Except for the $250 million Fixed Rate Notes above, all of the Group's other
borrowings are subject to floating rate charges.
The maturities of borrowings at their contractual maturity dates are as follows:
+------------------------------------------------+-----------+------------+------------+
| | At 30 | At 31 | At 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+------------------------------------------------+-----------+------------+------------+
| | $m | $m | $m |
+------------------------------------------------+-----------+------------+------------+
| Amounts falling due: | | | |
+------------------------------------------------+-----------+------------+------------+
| Less than one year | 2 | 1 | 2 |
+------------------------------------------------+-----------+------------+------------+
| Between one and two years | - | - | - |
+------------------------------------------------+-----------+------------+------------+
| Between two and five | 244 | 243 | 542 |
| years | | | |
+------------------------------------------------+-----------+------------+------------+
| More than five years | 399 | 399 | 399 |
+------------------------------------------------+-----------+------------+------------+
| | 645 | 643 | 943 |
+------------------------------------------------+-----------+------------+------------+
The maturity of the floating rate notes has been reclassified as at 30 September
2008, for consistency with the 31 March 2009 accounts, to reflect the
contractual maturity date of 22 September 2015.
The undrawn committed facilities available are:
+------------------------------------------------+-----------+------------+------------+
| | At 30 | At 31 | At 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+------------------------------------------------+-----------+------------+------------+
| | $m | $m | $m |
+------------------------------------------------+-----------+------------+------------+
| Expiring in one year or less | - | - | 230 |
+------------------------------------------------+-----------+------------+------------+
| Expiring beyond one year | 2,430 | 2,430 | 2,200 |
+------------------------------------------------+-----------+------------+------------+
| | 2,430 | 2,430 | 2,430 |
+------------------------------------------------+-----------+------------+------------+
10. Share capital and reserves
+-----------------------------------------------+------------+------------+------------+
| | At 30 | At 31 | At 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+-----------------------------------------------+------------+------------+------------+
| | $m | $m | $m |
+-----------------------------------------------+------------+------------+------------+
| Share capital | 59 | 59 | 58 |
+-----------------------------------------------+------------+------------+------------+
| Shares to be issued | - | - | 16 |
+-----------------------------------------------+------------+------------+------------+
| Perpetual subordinated capital securities | 300 | 300 | 300 |
+-----------------------------------------------+------------+------------+------------+
| Share premium account | 972 | 957 | 917 |
+-----------------------------------------------+------------+------------+------------+
| Capital redemption reserve | 1,292 | 1,292 | 1,292 |
+-----------------------------------------------+------------+------------+------------+
| Available for sale reserve | (19) | (2) | (100) |
+-----------------------------------------------+------------+------------+------------+
| Retained earnings | 1,482 | 1,586 | 2,015 |
+-----------------------------------------------+------------+------------+------------+
| | 4,086 | 4,192 | 4,498 |
+-----------------------------------------------+------------+------------+------------+
On 7 May 2008 the Group issued $300 million US$ RegS Fixed Rate Perpetual
Subordinated Capital Securities ('Capital Securities'). The Capital Securities
consist of $300 million principal issued on 7 May with a perpetual maturity date
with optional par redemption at the Group's discretion on 7 May 2013 and any
coupon date thereafter, subject to FSA consent. On any coupon date the Group may
exchange or vary the Capital Securities for Qualifying non-innovative Tier 1
Securities (e.g. perpetual non-cumulative preference shares). The interest rate
is 11% per annum quarterly in arrears and is deferrable at the discretion of the
Group. The Capital Securities have been classified as equity on the basis that
the securities are irredeemable except at the option of the Group, and coupon
payments and principal repayments can be deferred indefinitely at the option of
the Group.
11. Cash generated from operations
+-----------------------------------------------+-----------+-----------+-----------+
| | Half year | Half year | Half year |
| | | | |
| | ended 30 | ended 31 | ended 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+-----------------------------------------------+-----------+-----------+-----------+
| | $m | $m | $m |
+-----------------------------------------------+-----------+-----------+-----------+
| Profit/(loss) for the period | 248 | (4) | 507 |
+-----------------------------------------------+-----------+-----------+-----------+
| Adjustments for: | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Income tax | 54 | 125 | 115 |
+-----------------------------------------------+-----------+-----------+-----------+
| Gain on sale of subsidiary | - | - | (48) |
+-----------------------------------------------+-----------+-----------+-----------+
| Finance income | (13) | (20) | (38) |
+-----------------------------------------------+-----------+-----------+-----------+
| Finance expense | 16 | 20 | 18 |
+-----------------------------------------------+-----------+-----------+-----------+
| Share of results of | (31) | (82) | (62) |
| associates and joint ventures | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Loss on disposal of an | - | 11 | - |
| associate | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Depreciation of tangible | 11 | 13 | 9 |
| fixed assets | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Amortisation of intangible | 64 | 68 | 189 |
| fixed assets | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Share based payments | 27 | 38 | 48 |
| expense | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Fair value gains on | (31) | - | (29) |
| available for sale financial | | | |
| assets | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Impairment of Ore Hill | - | 248 | 51 |
| investments and goodwill | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| (Gain)/loss arising from | (34) | 143 | - |
| residual interest in | | | |
| brokerage assets | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Net (gains)/losses on | (17) | 65 | 31 |
| financial instruments | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Increase/(decrease) in | 18 | (5) | 3 |
| provisions | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Other non-cash movements | 14 | 70 | 22 |
+-----------------------------------------------+-----------+-----------+-----------+
| | 326 | 690 | 816 |
+-----------------------------------------------+-----------+-----------+-----------+
| Changes in working capital: | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| Decrease in receivables | 30 | 250 | 47 |
+-----------------------------------------------+-----------+-----------+-----------+
| (Increase)/decrease in other | (7) | 708 | (243) |
| financial assets | | | |
+-----------------------------------------------+-----------+-----------+-----------+
| (Decrease) in payables | (38) | (74) | (226) |
+-----------------------------------------------+-----------+-----------+-----------+
| Cash generated from | 311 | 1,574 | 394 |
| operations | | | |
+-----------------------------------------------+-----------+-----------+-----------+
12. Related party transactions
The related party transactions during the period are consistent with the
categories disclosed in the Annual Report 2009.
13. Exchange rates
The following US dollar: sterling exchange rates have been used in the
preparation of this Interim Report:
+--------------------------------------------+-------------+-------------+-------------+
| | 30 | 31 | 30 |
| | September | March | September |
| | 2009 | 2009 | 2008 |
+--------------------------------------------+-------------+-------------+-------------+
| Average exchange rate for 6 month period | 0.6262 | 0.6650 | 0.5178 |
+--------------------------------------------+-------------+-------------+-------------+
| Period-end exchange rate | 0.6247 | 0.6970 | 0.5624 |
+--------------------------------------------+-------------+-------------+-------------+
14. Contingent liabilities
On 28 February 2008, MF Global announced that it had incurred a significant
credit loss. Following this disclosure a number of plaintiffs filed class action
law suits in the US Federal Court against the Group, MF Global, certain of its
officers and directors, and certain underwriters asserting various causes of
action arising out of the US initial public offering. The consolidated class
action complaint alleged claims under certain sections of the US Securities Act
of 1933 and alleged, among other things, that the public disclosure documents
for the offering contained false and misleading statements concerning risk
management and trading risk controls at MF Global. The plaintiffs were seeking
compensatory damages, rescission and attorneys' fees and expenses. On 16 July
2009, the United States district court dismissed the case on the grounds that
the plaintiffs had failed to identify any material misrepresentations or
omissions in the disclosure documents. The district court granted the
plaintiffs leave to replead which was rejected on 11 September 2009 because the
amended complaint failed to correct the previously identified defects, and
ordered the district court case closed. The plaintiffs appealed both rulings to
the United States Court of Appeals. The scheduling of the appeal process is
currently underway. The directors believe that these rulings corroborate its
view that the Group complied with all applicable laws and regulations in
connection with the initial public offering of MF Global.
Independent review report to Man Group plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2009, which comprises the Group Income Statement, Group Statement of
Comprehensive Income, Group Statement of Changes in Equity, Group Balance Sheet
and Group Cash Flow and related notes. We have read the other information
contained in the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in Note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
The maintenance and integrity of the Man Group plc website is the responsibility
of the directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2009 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
5 November 2009
London
This information is provided by RNS
The company news service from the London Stock Exchange
END
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