TIDMEMG
RNS Number : 5356U
Man Group plc
30 July 2020
Press Release
30 July 2020
Man Group is well positioned as the recovery develops
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2020
Key points
-- Funds under management (FUM)(1) down 8% to $108.3 billion (31 December 2019: $117.7 billion)
o Negative investment performance of $5.4 billion (H1 2019:
positive $6.8 billion)
o Negative FX translation and other movements of $2.8 billion
(H1 2019: positive $0.2 billion)
o Net outflows of $1.2 billion (H1 2019: net outflows $1.1
billion)
-- Adjusted profit before tax (PBT)(1) down 40% to $94 million (H1 2019: $157 million)
o Adjusted management fee PBT(1) of $86 million (H1 2019: $83
million)
o Adjusted performance fee PBT(1) of $8 million (H1 2019: $74
million) reflecting below average performance fee revenues given
market backdrop
o Adjusted earnings per share (EPS)(1) down 37% to 5.4 cents (H1
2019: 8.6 cents) primarily due to lower performance fee profits,
partially offset by higher management fee profits and lower share
count following the share buyback programme announced in October
2019
-- Statutory PBT of $55 million (H1 2019: $110 million);
Statutory EPS of 2.6 cents (H1 2019: 5.8 cents)
-- Asset weighted outperformance versus peers(1) of 1.3% for the
six months to 30 June 2020 (H1 2019: underperformance of 1.1%)
-- Proposed interim dividend of 4.9 cents per share (H1 2019: 4.7 cents per share)
-- Strong balance sheet and liquidity position - Net financial
assets(1) of $611 million ($674 million as at 31 December 2019)
Luke Ellis, Chief Executive Officer of Man Group, said:
"The first half of 2020 was a challenging time for everyone. Our
foremost priorities were the health and wellbeing of our colleagues
and the performance of our clients' assets - and I am proud of what
we achieved on both counts. We switched seamlessly to working from
home, continued to support our clients at every step and generated
outperformance in extremely volatile markets. As anticipated,
redemptions increased in Q2, but it is pleasing to see flow
momentum normalising as we enter the second half.
"Since the onset of the pandemic, we have acted to position the
business for long-term success and our strong balance sheet has
allowed us to concentrate on our people and our clients. Investing
in our talent and technology, combined with our deep relationships
with clients, is what will drive our future growth as the recovery
develops."
1 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
Su m m ary f i nancials Page Six months Year ended Six months
ref. ended 31 December ended
2019
30 June 2020 $m 30 June 2019
$m $m
------------------------------------- ----------- ------------- ------------- -------------
Net management fee revenue(1,2) 37 358 753 375
Performance fees(3) 38 32 345 142
Sub-lease rental and lease surrender
income(4) 33 7 14 7
------------------------------------- ----------- ------------- ------------- -------------
Net revenues 397 1,112 524
------------------------------------- ----------- ------------- ------------- -------------
Compensation(4) 28,38 (199) (477) (243)
Other costs(4) 28,38 (99) (233) (115)
Net finance expense(4) 29 (5) (16) (9)
------------------------------------- ----------- ------------- ------------- -------------
A djusted prof it before tax
(1) 38 94 386 157
------------------------------------- ----------- ------------- ------------- -------------
A djusti ng items(5) 38 (39) 79 (47)
------------------------------------- ----------- ------------- ------------- -------------
S tatutory profit before tax 21 55 307 110
------------------------------------- ----------- ------------- ------------- -------------
Statutory diluted earnings per
share (EPS) 30 2.6c 18.4c 5.8c
------------------------------------- ----------- ------------- ------------- -------------
Adjusted EPS(1,6) 40 5.4c 21.1c 8.6c
------------------------------------- ----------- ------------- ------------- -------------
Adjusted management fee EPS(1,6) 40 4.9c 9.8c 4.7c
------------------------------------- ----------- ------------- ------------- -------------
Dividend per share 4.9c 9.8c 4.7c
------------------------------------- ----------- ------------- ------------- -------------
1 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
2 Includes gross management and other fees and distribution costs
3 Includes income or gains on investments and other financial
instruments and third-party share of gains relating to interests in
consolidated funds
4 Excludes adjusting items. Other costs include asset servicing costs
5 Refer to the alternative performance measures section (page 38) for further detail
6 The reconciliation of diluted statutory EPS to adjusted EPS is
included in the alternative performance measures (page 40)
Key Performance Indicators(7,
8) Six months Year ended Six months
ended 31 December ended
30 June 2020 2019 30 June 2019
------------------------------------------------- --------------- ------------- --------------
Asset weighted outperformance/(underperformance)
versus peers 1.3% (1.1)% (1.1)%
--------------------------------------------------- -------------- ------------- --------------
Relative net flows(9) 1.8% (0.4)% (0.3)%
--------------------------------------------------- -------------- ------------- --------------
Core prof it before tax $94m $384m $155m
--------------------------------------------------- -------------- ------------- --------------
Adjusted management fee EPS growth 4% (17)% (27)%
--------------------------------------------------- -------------- ------------- --------------
7 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
8 For definitions and explanations of key performance indicators refer to the 2019 Annual Report
9 As discussed in our 2019 Annual Report, this KPI has been
amended to relative net flows. Values for the periods shown compare
Man Group's net flows to industry flows of comparable strategies on
an asset-weighted basis. Please see page 84 of our 2019 Annual
Report for further discussion.
Conference call and presentation for investors and analysts
A conference call with management including an opportunity to
ask questions will commence
at 10.30am (London) on 30th July 2020. A copy of the
presentation will be available on the investor relations section of
www.man.com from 10.30am.
The conference call can be accessed at:
https://mangroup.webex.com/mangroup/onstage/g.php?MTID=e5408a8835752efac6757001f8785af3d
Event number: 163 399 0099
Event password: Ha!fYeaR2020
For those without internet access or in case of connectivity
issues please use the alternative dial-in below:
Audio conference: +44 20 3478 5289 or +44 20 7660 8149
Access code: 163 399 0099
Event password: 42039327
Please note:
* We recommend connecting to the meeting 5-10 minutes
prior to the start time
* To ask a question during the Q&A session you will
need to access the meeting via the link above
Enquiries
Alex Dee
Head of Investor Relations
+44 20 7144 1370
Georgiana Brunner
Director of Communications
+44 20 7144 1000
media@man.com
Michael Turner
Finsbury
+44 20 7251 3801
ManGroupUK@Finsbury.com
Website
www.man.com
About Man Group
Man Group is a global active investment management firm, which
runs $108.3 billion(1) of client capital in liquid and private
markets, managed by investment specialists based around the world.
Headquartered in London, the firm has 15 international offices and
operates across multiple jurisdictions. Our business has five
specialist investment engines, which represent the range of our
capabilities: Man AHL, Man Numeric, Man GLG, Man FRM and Man
GPM.
These engines house numerous investment teams, working
collaboratively within the framework of Man Group, with a high
degree of investment autonomy. Each team benefits from the strength
and resources of the firm's single operating platform, enabling
their primary focus to be seeking to generate alpha for clients.
The teams invest across a diverse range of strategies and asset
classes with highly specialised approaches, with long-only and
alternative strategies run on a discretionary and quantitative
basis in single and multi-manager formats. Our clients are at the
heart of everything we do and we engage in close dialogue with our
investors as strategic partners, to understand their particular
needs and constraints. Man Group's investment teams are empowered
and supported by our institutional infrastructure and technology,
which aims to facilitate the efficient exposure to markets and
effective collaboration across the organisation.
Through the Man Charitable Trust and the Man US Charitable
Foundation, Man Group is committed to promoting literacy and
numeracy on a global scale, and to supporting charitable causes
more broadly.
Man Group plc is listed on the London Stock Exchange under the
ticker EMG.LN and is a constituent of the FTSE 250 Index. Further
information can be found at www.man.com
For more information about Man Group's commitment to diversity
and inclusion, please visit www.man.com/diversity
For more information about Man Group's approach to responsible
investment, please visit www.man.com/responsible-investment
Forward looking statements and other important information
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.
The content of the websites referred to in this announcement is
not incorporated into and does not form part of this announcement.
Nothing in this announcement should be construed as or is intended
to be a solicitation for or an offer to provide investment advisory
services or to invest in any investment products mentioned
herein.
1 As at 30 June 2020. All investment management and advisory
services are offered through the investment "engines" of Man AHL,
Man Numeric, Man GLG, Man FRM and Man Global Private Markets
(GPM).
CHIEF EXECUTIVE OFFICER'S REVIEW
The first six months of the year have been dominated by the
impact of the COVID-19 pandemic. For the world as a whole, the
public health emergency and the governmental response have had a
huge impact on everyday life. Our priorities are safeguarding our
staff and continuing to manage our clients' assets through a very
testing physical and market environment. Global markets were also
heavily impacted by COVID-19. We saw significant declines in most
asset classes in Q1, followed by steep rallies.
We were particularly pleased to have delivered to clients the
benefits of our risk management and execution expertise in the
first quarter. These allowed us to rapidly respond as markets fell
and deliver strong outperformance for our clients in the depths of
the sell-off. By the end of the first quarter we had outperformed
our peers(1) by 2.5% on an asset weighted basis, delivered gains
for our clients invested in our absolute return strategies and
reported net inflows for the quarter. The speed of the market
recovery in the second quarter meant we gave back some of that
outperformance but still outperformed by 1.3% over the half. In the
second quarter we had net outflows following an increase in
redemptions as certain institutional clients sought cash in
response to various impacts of the COVID-19 crisis, and others made
asset allocation changes.
One of our strengths as a diversified investment manager is that
investment performance across our strategies is relatively
uncorrelated, thereby helping clients across a range of market
environments. Going into the second quarter we were bearishly
positioned in some of our alternative strategies which resulted in
some negative performance. At the same time, sharply rising asset
prices benefitted clients invested in our long-only strategies.
Funds under management decreased by 8% to $108.3 billion in the
first half, driven by the market declines resulting in negative
absolute investment performance of $5.4 billion primarily from our
long-only strategies, as non-US markets where we specialise are
still well down on the year. Net outflows totalled $1.2 billion in
the period, with FX and other moves accounting for a further $2.8
billion decline due to the US dollar strength against sterling.
Adjusted profit before tax(1) decreased by 40% to $94 million
compared with the first half of 2019, reflecting lower performance
fee profits compared with a strong corresponding period in
2019.
Investment performance(2)
The first six months of 2020 saw some of the fastest market
moves on record, both up and down, as the world reacted to the
COVID-19 crisis. During the first quarter the economic
repercussions of COVID-19 impacted financial markets negatively,
and the MSCI World Index fell by 21%. In the second quarter, the
MSCI World Index rallied 20%, ending the first half down by 5% and
down 11% excluding the US.
Against this backdrop, the absolute performance of our
strategies in aggregate was negative in the first half, resulting
in $5.4 billion of negative investment performance. Our absolute
return strategies delivered positive performance in the first
quarter, but as markets rebounded, they ended the half year down
slightly. Despite a strong performance from GLG Global EM Debt
Total Return which was up 9% in the first half, overall our total
return strategies were down 1.5%. Our systematic long-only
strategies fell 5% and our discretionary long-only strategies were
down 11% for the first half. Across long-only strategies positive
absolute performance in the second quarter partly offset weak first
quarter performance.
We ended the first half outperforming our peers on an asset
weighted basis across our strategies by 1.3%. Within alternatives,
absolute return strategies outperformed by 2.0%, total return
strategies outperformed by 6.6%, and multi-manager solutions by
1.3%. The fact that outperformance was concentrated in February and
March was reassuring to our clients. Relative underperformance of
4.5% in discretionary long-only strategies was driven by
value-biased strategies GLG Japan CoreAlpha and GLG Undervalued
Assets which have struggled in this environment.
1 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
2 Past performance is not an indication of future performance.
All returns shown are net of fees.
Impact of COVID-19
We are a diversified investment manager, investing with a global
perspective, across asset classes. With strategies ranging across
alternatives, long-only, systematic and discretionary, our growth
is a function of the quality of our activities rather than just the
direction of markets.
The safety and well-being of our staff is our highest priority.
As the COVID-19 crisis intensified, we followed government guidance
and implemented working from home globally to ensure their safety.
As well as the obvious technology solutions around video calling
and easy electronic communications, we have introduced a number of
initiatives to maintain and build on the community culture of the
firm, as well as to look after the mental health of those who find
working from home a challenge. We were able to function smoothly in
the global working from home environment despite the increased
volatility and volumes seen in markets.
Today the long-term impact of the COVID-19 crisis is unknown.
This uncertainty means we could see ongoing volatility in global
markets. Our investment in technology and our people means we have
a resilient business model across a range of market environments.
We continue to monitor the impact on the business and maintain cost
discipline. Net financial assets(1) of $611 million, including $202
million of cash, provide a strong balance sheet and liquidity
position to support and manage the business across a range of
market environments .
Business development
Man Group's business development activities have remained
healthy despite the impact of COVID-19 on broader economic
activity. Interaction with clients has remained strong even with
COVID-19 affecting our ability to meet in person. In Q2 only around
10% of client engagement was in person compared with normal levels
of about 75%. Flow momentum into our key TargetRisk strategies was
strong throughout the first half of the year and is expected to
continue in the second half. We have broadened the offering and
anticipate TargetRisk strategies to be a source of impactful growth
in the coming years.
Responsible Investment funds, with a focus on Environmental,
Social and Governance (ESG) factors, have seen growing demand
across the industry. Focus on responsible investment has continued
to grow year over year with the COVID-19 pandemic emphasising the
importance of sustainable business models to investors. Man Group
has for some years been prominent in ESG investment and we have
been a signatory of the UN-supported Principles for Responsible
Investment since 2012 via Man GLG. We view ESG analysis as a
fundamental part of investment risk management. This is now being
reflected in stronger inflows to ESG focused funds, helped by
strong recent performance.
Attracting experienced portfolio managers to Man Group and
developing new investment strategies is a core part of our
long-term growth strategy. During the first half we continued to
build our credit capabilities with the GLG Strategic Bond strategy
and the GLG High Yield Opportunities strategy attracting
significant inflows. Both strategies are managed by experienced
teams who joined Man GLG from other investment managers in the last
two years. Additionally, GLG Innovation Equity managed by another
team who joined Man Group in late 2019 was one of our strongest
performing hedge funds in H1 2020.
We were pleased to announce in April that Andrew Swan would be
joining Man Group as Head of Asia (ex-Japan) Equities. Andrew joins
Man Group from Blackrock where he was Head of Asia and Global
Emerging Market Fundamental Equities and will be managing Man GLG's
long-only Asia (ex-Japan) equity strategy which is expected to
launch in the second half. We have launched a number of new
products in the first half of the year, with a pipeline of further
launches planned for the rest of the year in both quant and
discretionary areas.
1 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
Financial review
Adjusted profit before tax(1) was $94 million compared with $157
million for the six months ended 30 June 2019 and adjusted earnings
per share(1) were 5.4 cents compared with 8.6 cents for the
comparative period.
Net revenues of $397 million, excluding adjusting items,
comprised $358 million of net management fees, $7 million of
sub-lease rental and lease surrender income and $32 million of
performance fees and gains on seed investments. Net management fees
were 5% lower than the same period last year due to a decline in
the net management fee margin from 68 basis points in the first
half of 2019 to 66 basis points for the first half of 2020. This
reduction is due to the continued product mix shift as lower margin
strategies have grown more quickly. Performance fees of $29 million
were 77% lower than in the same period last year, reflecting the
difficult market environment seen in the first half of this year.
They included $18 million of performance fees from Man AHL as well
as $11 million from Man GLG. Gains on seed investments were $3
million compared with $17 million in the first half of 2019.
Compensation costs were $199 million (H1 2019: $243 million)
which comprised $96 million of fixed compensation costs (H1 2019:
$99 million) and $103 million of variable compensation costs (H1
2019: $144m). The decrease in fixed compensation was largely due to
the strength of the US dollar versus sterling. Variable
compensation costs decreased due to lower performance fee revenues
and lower management fee revenues. Our compensation ratio was 50%
(H1 2019: 46%), at the top end of the guided range, reflecting
lower revenues in the period, particularly from performance
fees.
Other costs, including asset servicing and depreciation, were
$99 million compared with $115 million for H1 2019. This reduction
reflected reduced discretionary spend particularly on travel and
entertainment expenses following the introduction of working from
home and some FX translation benefit. Overall you can see reduced
discretionary spend has supported management fee profitability in
the first half, but we have also consciously supported and invested
in our people over this period to ensure we are appropriately
resourced through the current environment. In the long term we
continue to believe that managing the business efficiently remains
critical for success in asset management.
Net finance expense was $5 million (H1 2019: $9 million),
reflecting the benefit from calling our Tier 2 notes in September
last year and the use of cheaper financing sources.
The main sub-tenant in our primary London office is moving to
new premises and has paid us $26 million in order to surrender
their lease early, in effect bringing forward their remaining lease
payments. We have flexibility to exercise a break clause in our
other London office allowing us to bring all our London staff
together from 2021. The lease surrender also results in a non-cash
deferred rent write-off, which together with the surrender payment
results in a net accounting gain of $18 million on a statutory
basis. We have recognised $4 million of this gain in adjusted
profits in H1, effectively offsetting the foregone sub-lease rental
income in that period, with the remainder to be recognised through
2021. We expect to incur some project expenditure as we consolidate
our London offices and support a more agile working environment and
will also need to sub-let the remaining vacant space. We will
provide details in due course.
When we acquired Aalto to form Man Global Private Markets (GPM)
its valuation was premised on future growth assumptions. While the
business has grown since acquisition, it has been slower than
planned. Furthermore, the prospects of the business have weakened
as COVID-19 has led to a notably weaker economic environment. As a
result, we have seen delays in the launch of certain new products
and a reduction in their expected size, thereby negatively
impacting our previous growth assumptions. These lower growth
assumptions act as an indicator of impairment, which has led to the
impairment of our GPM goodwill by $55 million, representing the
full carrying value of the goodwill. The acquired intangibles in
GPM have not been impaired. These forecast changes also gave rise
to a decrease in the related contingent consideration creditor of
$21 million, a credit to the Group income statement. Private
markets remain a valuable diversifier for our firm and clients and
we remain focussed on growing the business over time.
1 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
The Group had operating cash net inflows of $146 million for H1
2020 (compared with net inflows of $5 million for H1 2019), with
the comparative increase reflecting higher cash flow from working
capital movements in the period due to the receipt of higher
performance fees than in the prior year, partially offset by
related compensation payables. The Group had operating cash net
inflows before working capital, interest and tax of $161 million
for the period (H1 2019: $234 million). The positive operating
cashflows reflect the strong cash generative nature of the business
despite the economic stresses seen during the period.
Capital Management
We have a robust balance sheet and liquidity position that
allows us to weather the crisis whilst continuing to invest in the
business and support our long-term growth prospects. As at 30 June
2020, we had $611 million of net financial assets(1) (31 December
2019: $674 million) including $202 million of cash (31 December
2019: $220 million).
The overall risk profile from our seeding programme continues to
be sized in accordance with a Value at Risk (VaR) limit of $75
million, with the VaR estimated to be $21 million at 30 June 2020
(31 December 2019: $24 million). In aggregate, the seed book was
$442 million at 30 June 2020 ($514 million at 31 December 2019, see
page 32 for further detail). We were pleased to make small gains on
our seed book in the first half despite the market environment,
reflecting effective risk management and strong performance from
various strategies. The seed book consists of fund and other
investments that will be redeemed as practicable, as funds are
marketed to clients. In addition, we held $45 million of total
return swap exposure at 30 June 2020.
Dividend and share repurchase
Man Group's dividend policy is to pay out at least 100% of
adjusted management fee EPS(1) in each financial year by way of
ordinary dividend. In addition, the Group expects to generate
significant capital over time, primarily from net performance fee
earnings. Available capital, after taking into account our required
capital (including liabilities for future earn-out payments) and
potential strategic opportunities, will be distributed to
shareholders over time by way of higher dividend payments and/or
share repurchases.
In line with our dividend policy the Board has declared an
interim dividend of 4.9 cents per share, being an amount equal to
the adjusted management fee EPS(1) for the six months to 30 June
2020. In October 2019, the Board announced a share repurchase
programme for up to $100 million to return capital to shareholders.
This was completed in May 2020.
We will fix and announce the US dollar to sterling dividend
currency conversion rate on 18 August 2020, in advance of
payment.
Dates for the 2020 interim dividend
Ex-dividend date 6 August 2020
Record date 7 August 2020
-----------------
Sterling conversion date 18 August 2020
-----------------
Payment date 2 September 2020
-----------------
1 For definitions and explanations of our alternative
performance measures, please refer to pages 36-40
Outlook
This is a time of elevated uncertainty for the world, and
financial markets are no exception to that. We aim to build Man
Group, so that it is well-placed to withstand difficult periods and
to thrive over time. Man Group has an exceptional set of strengths:
technology leadership; efficient operations; valuable client
relationships; innovative investment strategies; financial
resilience; and most importantly, our people and culture. Those
strengths have delivered Man Group's success in the past and will
continue to deliver success in the future, putting us in a strong
position to generate sustainable long-term value for all of our
stakeholders.
FUNDS UNDER MANAGEMENT (FUM), FLOWS AND NET MANAGEMENT FEE
MARGINS(1)
FUM movements for the six months to 30 June 2020
$bn FUM at 31 Net inflows/ Investment FX & other FUM at 30
December (outflows) performance June
2019 2020
Alternative 71.5 1.0 (1.0) (2.1) 69.4
------------------------- ------------- ------------- ----------- ----------
Absolute return 30.5 (0.3) (0.6) (0.5) 29.1
Total return 27.0 1.7 (0.4) (1.2) 27.1
Multi-manager solutions 14.0 (0.4) 0.0 (0.4) 13.2
------------------------- ------------- ------------- ----------- ----------
Long-only 46.2 (2.2) (4.4) (0.7) 38.9
------------------------- ------------- ------------- ----------- ----------
Systematic 27.5 (1.7) (2.1) (0.1) 23.6
Discretionary 18.7 (0.5) (2.3) (0.6) 15.3
------------------------- ------------- ------------- ----------- ----------
Total 117.7 (1.2) (5.4) (2.8) 108.3
---------- ------------- ------------- ----------- ----------
FUM movements for the three months to 30 June 2020
$bn FUM at 31 Net inflows/ Investment FX & other FUM at 30
March (outflows) performance June
2020 2020
Alternative 70.0 (0.6) (0.3) 0.3 69.4
------------------------- ------------- ------------- ----------- ----------
Absolute return 30.3 (0.7) (0.7) 0.2 29.1
Total return 26.7 0.1 0.0 0.3 27.1
Multi-manager solutions 13.0 0.0 0.4 (0.2) 13.2
------------------------- ------------- ------------- ----------- ----------
Long-only 34.2 (1.1) 5.6 0.2 38.9
------------------------- ------------- ------------- ----------- ----------
Systematic 20.4 (0.9) 4.0 0.1 23.6
Discretionary 13.8 (0.2) 1.6 0.1 15.3
------------------------- ------------- ------------- ----------- ----------
Total 104.2 (1.7) 5.3 0.5 108.3
---------- ------------- ------------- ----------- ----------
FUM movements for the three months to 31 March 2020
$bn FUM at 31 Net inflows/ Investment FX & other FUM at 31
December (outflows) performance March
2019 2020
Alternative 71.5 1.6 (0.7) (2.4) 70.0
------------------------- ------------- ------------- ----------- ----------
Absolute return 30.5 0.4 0.1 (0.7) 30.3
Total return 27.0 1.6 (0.4) (1.5) 26.7
Multi-manager solutions 14.0 (0.4) (0.4) (0.2) 13.0
------------------------- ------------- ------------- ----------- ----------
Long-only 46.2 (1.1) (10.0) (0.9) 34.2
------------------------- ------------- ------------- ----------- ----------
Systematic 27.5 (0.8) (6.1) (0.2) 20.4
Discretionary 18.7 (0.3) (3.9) (0.7) 13.8
------------------------- ------------- ------------- ----------- ----------
Total 117.7 0.5 (10.7) (3.3) 104.2
---------- ------------- ------------- ----------- ----------
1 For definitions and explanations of our alternative
performance measures, please refer to page 36-40.
Net management fee margins and run rate net management fee
revenues (1)
Margin for the Run rate margin at 31 December 2019 Margin for the Run rate margin at 30 June 2020 Run rate net management fees at 30 June 2020(1)
half year ended (bps) Six months ended 30 June 2020 (bps) ($m)
30 June 2019 (bps)
(bps)
Absolute
return 121 120 118 116 338
Total return 56 57 59 59 161
Multi-manager
solutions 35 27 27 26 34
Systematic 37 31 30 30 72
Discretionary 67 68 63 61 93
----------------- ------------------------------------ ------------------------------- -------------------------------- ------------------------------------------------
Total 68 65 66 64 698
----------------- ------------------------------------ ------------------------------- -------------------------------- ------------------------------------------------
1 Run rate revenue applies internal analysis of run rate margin
to 30 June 2020 FUM. It is for illustrative purposes and not a
forecast.
FUM AND MARGINS COMMENTARY
At the start of the year Man Group's FUM consisted of around 40%
long-only products and 56% of total FUM was denominated in US
dollars. The decline in FUM in the first half primarily reflects
equity market declines and FX translation effects. Overall FUM
decreased 8% to $108.3 billion, driven by negative absolute
investment performance of $5.4 billion, of which $4.4 billion was
from long-only strategies, and negative FX and other movements of
$2.8 billion. In addition, we saw $1.2 billion of net outflows as
redemptions increased in Q2 as clients responded to the COVID-19
crisis with rebalancing decisions among retail investors slightly
leading those among institutional investors. The total net
management fee margin decreased by 2 basis points compared with H1
2019.
ALTERNATIVES
Absolute return
Absolute return FUM decreased by 5% to $29.1 billion in the six
months to 30 June 2020. Net outflows of $0.3 billion were largely
driven by redemptions from Man GLG's long short strategies. These
were partially offset by net inflows into AHL Institutional
Solutions.
Negative investment performance of $0.6 billion was primarily
driven by negative performance in AHL Dimension (-7.2%) and AHL
Evolution (-3.0%), partially offset by performance in trend
following strategies AHL Alpha (+1.7%) and AHL Diversified
(+0.8%).
Man AHL earned $18 million of gross performance fees in the
period (compared with $116 million in H1 2019). The majority of the
AHL Evolution strategy's performance fees crystallise annually in
June and the performance over the previous twelve months resulted
in $6 million of performance fees. AHL Alpha and AHL Institutional
Solutions added $5 million of performance fees each. As at 30 June
2020, 43% of Man AHL's performance fee eligible FUM, or $9.3
billion, was at or above high-water mark and 17%, or $3.7 billion,
was within 5% of high-water mark.
Man GLG recorded $11 million of gross performance fees in the
first half (compared with $9 million in H1 2019), with the majority
of the fees being earned from the GLG Alpha Select strategy. As at
30 June 2020, 55% of Man GLG's performance fee eligible FUM, or
$4.4 billion, was at high-water mark and 28%, or $2.2 billion, was
within 5% of high-water mark.
The absolute return run rate net management fee margin decreased
by 4 basis points compared with the run rate at 31 December 2019.
This reflects the continued mix shift towards institutional assets
and some redemptions from higher margin strategies including ELS in
the period.
Total return
Total return FUM increased slightly in the six months to 30 June
2020 at $27.1 billion, with net inflows of $1.7 billion being
offset by negative investment performance and negative FX and other
movements of $1.2 billion driven by the US dollar strengthening
against sterling . Net inflows included $3.4 billion into AHL
TargetRisk along with the launch of a European CLO. These were
partially offset by net outflows from Alternative Risk Premia and
GLG Emerging Markets Debt Total Return.
There was negative investment performance during the period of
$0.4 billion, with Alternative Risk Premia down 7.7% and AHL
TargetRisk down 1.7%. This was partially offset by positive
investment performance of 9.3% in the GLG Emerging Markets Debt
Total Return strategy which benefited from its bearish
positioning.
The total return run rate net management fee margin increased by
2 basis points compared with the run rate at 31 December 2019 as
AHL TargetRisk grew as a proportion of the category.
Multi-manager solutions
Multi-manager solutions FUM reduced by 6% to $13.2 billion in
the six months to 30 June 2020. Net outflows of $0.4 billion were
driven by diversified fund of hedge fund strategies. There were
negative FX and other movements of $0.4 billion during the
period.
Man FRM's strategies earned no performance fees in the period
which is comparable to H1 2019.
The run rate net management fee margin in this category was down
by 1 basis point compared to 31 December 2019 due to the continued
mix shift towards lower margin infrastructure mandates and the
decline in higher diversified fund of hedge fund assets. As we have
previously indicated, we expect the multi-manager solutions margin
to continue to decline as this mix shift continues.
LONG-ONLY
Systematic
Systematic long-only FUM decreased by 14% to $23.6 billion in
the six months to 30 June 2020, driven by negative investment
performance of $2.1 billion and net outflows of $1.7 billion driven
by Numeric Global and Numeric European Core. Outflows were
partially offset by inflows into Man Numeric's fixed income
strategy.
Man Numeric earned no performance fees in the period which is
comparable to H1 2019.
The run rate net management fee margin in this category was down
by 1 basis point compared with 31 December 2019, reflecting
redemptions from higher fee mandates.
Discretionary
Discretionary long-only FUM decreased by $3.4 billion to $15.3
billion in the six months to 30 June 2020. This was driven by
negative absolute performance of $2.3 billion and negative FX and
other movements of $0.6 billion. Net outflows of $0.5 billion were
predominantly from GLG Japan CoreAlpha and Man GLG's Emerging
Markets Debt strategies. These were partially offset by inflows
into Man GLG's credit strategies and GLG Continental European
Growth.
The run rate net management fee margin in this category
decreased 7 basis points compared with 31 December 2019 driven by a
shift away from higher margin strategies particularly GLG Japan
CoreAlpha which declined from $6.6 billion at the end of 2019 to
$3.1 billion at 30 June 2020 and growth in credit strategies which
are typically lower-margin.
FUM by product category
$bn 30-Jun-19 30-Sep-19 31-Dec-19 31-Mar-20 30-Jun-20
Absolute return 29.9 30.3 30.5 30.3 29.1
---------- ---------- ---------- ---------- ----------
Man Institutional Solutions(1) 3.9 4.2 4.4 5.8 6.4
AHL Alpha 5.5 6.0 6.0 6.5 6.1
AHL Dimension 6.1 6.3 6.3 5.6 5.2
GLG Equity absolute
return 5.6 5.2 5.2 4.6 4.0
AHL Evolution 3.8 3.8 4.1 3.8 3.7
AHL Diversified 1.6 1.7 1.5 1.5 1.4
AHL other 1.8 1.7 1.7 1.4 1.2
Numeric absolute return 1.0 0.9 0.8 0.7 0.6
GLG Credit absolute
return 0.6 0.5 0.5 0.4 0.5
Total return 25.5 25.9 27.0 26.7 27.1
Alternative risk premia 11.7 12.3 13.0 10.5 10.0
AHL TargetRisk 2.5 3.2 4.4 6.0 8.1
CLOs and other GLG
total return 4.5 4.3 4.3 4.7 4.6
EM total return 4.3 3.7 2.8 3.0 1.9
GPM 2.5 2.4 2.5 2.5 2.5
---------- ---------- ---------- ----------
Multi-manager solutions 13.5 13.9 14.0 13.0 13.2
---------- ---------- ---------- ----------
Infrastructure & direct
access 6.4 6.7 6.9 6.6 6.8
Segregated 5.8 6.0 5.9 5.6 5.9
Diversified and thematic
FoHF 1.3 1.2 1.2 0.8 0.5
Systematic long-only 27.0 25.6 27.5 20.4 23.6
Global 8.7 9.5 9.2 7.2 8.7
International 8.0 7.7 9.1 6.6 7.1
Emerging markets 6.9 6.1 6.8 5.2 5.9
US 3.4 2.3 2.4 1.4 1.9
Discretionary long-only 18.4 17.0 18.7 13.8 15.3
Credit & convertibles 2.4 2.3 2.6 2.3 3.5
Europe equity ex UK 2.4 2.3 2.7 2.2 3.2
Japan equity 7.0 6.3 6.6 4.2 3.1
UK equity 3.3 3.3 3.9 2.6 2.9
EM Fixed income 2.2 2.1 2.0 1.7 1.6
Other equity 0.9 0.5 0.6 0.5 0.7
Multi Asset 0.2 0.2 0.3 0.3 0.3
Guaranteed 0.1 0.0 0.0 0.0 0.0
Total 114.4 112.7 117.7 104.2 108.3
---------- ---------- ---------- ---------- ----------
1 Man Institutional Solutions includes AHL Institutional
Solutions, GLG and Numeric strategies
FUM by investment engine
$bn 30-Jun-19 30-Sep-19 31-Dec-19 31-Mar-20 30-Jun-20
----------
AHL 29.9 31.6 33.7 35.1 36.4
---------- ---------- ---------- ---------- ----------
TargetRisk 2.5 3.2 4.4 6.0 8.1
Alpha 5.5 6.0 6.0 6.5 6.1
Institutional Solutions(1) 3.8 4.1 4.3 5.6 6.1
Dimension 6.1 6.3 6.3 5.6 5.2
Alternative risk premia 4.7 4.8 5.4 4.7 4.6
Evolution 3.8 3.8 4.1 3.8 3.7
Diversified (inc. Guaranteed) 1.7 1.7 1.5 1.5 1.4
Other 1.8 1.7 1.7 1.4 1.2
Numeric 35.0 34.0 35.9 26.9 29.6
Alternatives 8.0 8.4 8.4 6.5 6.0
---------- ---------- ---------- ---------- ----------
Alternative risk premia 7.0 7.5 7.6 5.8 5.4
Numeric absolute return 1.0 0.9 0.8 0.7 0.6
---------- ---------- ---------- ----------
Long-only 27.0 25.6 27.5 20.4 23.6
---------- ---------- ---------- ----------
Global 8.7 9.5 9.2 7.2 8.7
International 8.0 7.7 9.1 6.6 7.1
Emerging markets 6.9 6.1 6.8 5.2 5.9
US 3.4 2.3 2.4 1.4 1.9
GLG 33.5 30.8 31.6 26.7 26.6
Alternatives 15.1 13.8 12.9 12.9 11.3
---------- ---------- ---------- ---------- ----------
CLOs and other GLG
total return 4.5 4.3 4.3 4.7 4.6
Equity absolute return(2) 5.7 5.3 5.3 4.8 4.3
EM total return 4.3 3.7 2.8 3.0 1.9
Credit absolute return(2) 0.6 0.5 0.5 0.4 0.5
Long-only 18.4 17.0 18.7 13.8 15.3
Credit & convertibles 2.4 2.3 2.6 2.3 3.5
Europe equity ex UK 2.4 2.3 2.7 2.2 3.2
Japan equity 7.0 6.3 6.6 4.2 3.1
UK equity 3.3 3.3 3.9 2.6 2.9
EM Fixed income 2.2 2.1 2.0 1.7 1.6
Other equity 0.9 0.5 0.6 0.5 0.7
Multi Asset 0.2 0.2 0.3 0.3 0.3
FRM 13.5 13.9 14.0 13.0 13.2
Infrastructure & direct
access 6.4 6.7 6.9 6.6 6.8
Segregated 5.8 6.0 5.9 5.6 5.9
Diversified and thematic
FoHF 1.3 1.2 1.2 0.8 0.5
---------- ---------- ---------- ----------
GPM 2.5 2.4 2.5 2.5 2.5
---------- ---------- ---------- ----------
Total 114.4 112.7 117.7 104.2 108.3
---------- ---------- ---------- ---------- ----------
1 Institutional Solutions invests into a range of AHL strategies
including AHL Dimension, AHL Alpha and AHL Evolution
2 GLG Equity absolute return and GLG Credit absolute return
include allocations from Multi-strategy included in Man
Institutional solutions in the FUM by product category table
Investment Performance
Total Return Annualised Return
(net of fees) (net of fees)
--------------------------------------
3 months 6 months 3 years 5 years Since inception
to to to to to
30 June 30 June 30 June 30 June 30 June
2020 2020 2020 2020 2020
--------- --------- --------- --------- ----------------
Absolute return
AHL Dimension (1) -2.9% -7.2% 2.1% 2.3% 4.6%
AHL Alpha (2) -3.4% 1.7% 5.5% 3.3% 10.6%
AHL Evolution (3) -3.0% -3.0% 6.8% 6.9% 12.5%
AHL Diversified (4) -7.2% 0.8% 4.9% 1.5% 10.8%
GLG Alpha Select (5) -1.6% 2.8% 7.1% 6.3% 4.2%
GLG European Long Short (6) 3.3% 0.6% -0.4% 0.2% 6.3%
GLG Global Credit Multi Strategy (7) 12.5% 3.2% 5.7% 6.7% 11.9%
Total return
Alternative Risk Premia SP (8) -2.9% -7.7% 0.9% n/a 2.3%
GLG Global EM Debt Total Return (9) -0.7% 9.3% 1.9% n/a 3.6%
AHL TargetRisk (10) 3.3% -1.7% 11.1% 9.1% 9.5%
Multi-manager solutions
FRM Diversified II (11) 3.7% -6.5% -0.7% -1.2% 3.5%
Systematic long-only
Numeric Global Core (12) 23.2% -4.8% 3.9% 5.5% 8.9%
Relative Return 3.8% 1.0% -2.8% -1.4% 0.7%
Numeric Europe Core (EUR) (13) 18.1% -10.0% 0.9% 2.9% 8.1%
Relative Return 5.5% 2.8% 0.4% 1.6% 2.5%
Numeric Emerging Markets Core (14) 18.6% -8.5% 1.5% 4.0% 4.2%
Relative Return 0.5% 1.3% -0.4% 1.2% 2.0%
Discretionary long-only
GLG Japan Core Alpha Equity (15) 5.0% -24.3% -8.0% -4.9% 1.6%
Relative Return -6.2% -16.1% -9.2% -6.3% 0.2%
GLG Continental European Growth (16) 22.6% 10.7% 10.4% 15.7% 9.8%
Relative Return 3.8% 12.6% 6.8% 6.9% 4.3%
GLG Undervalued Assets (17) 12.1% -26.5% -4.2% 1.1% 3.7%
Relative Return 2.0% -9.0% -2.7% -1.8% 0.7%
--------------------------------------- ----- --------- --------- --------- --------- ----------------
Indices
HFRX Global Hedge Fund Index (18) 6.2% -1.1% 1.2% 0.7%
HFRI Fund of Funds Conservative Index (18) 3.9% -3.6% 1.3% 1.1%
Barclay BTOP 50 Index (19) -0.5% -2.7% 1.0% -0.8%
HFRI Equity Hedge (Total) Index (18) 13.6% -2.9% 3.1% 3.2%
HFRX EH: Equity Market Neutral Index (18) 3.0% -5.0% -3.0% -1.8%
--------------------------------------- ----- --------- --------- --------- --------- ----------------
Investment Performance (Cont'd)
1. Represented by AHL Strategies PCC Limited: Class B AHL
Dimension USD Shares from 3 July 2006 to 31 May 2014, and by AHL
Dimension (Cayman) Ltd - F USD Shares Class from 1 June 2014 until
28 February 2015 when AHL Dimension (Cayman) Ltd - A USD Shares
Class is used. Representative fees of 1.5% Management Fee and 20%
Performance Fee have been applied.
2. Represented by AHL Alpha plc from 17 October 1995 to 30
September 2012, and by AHL Strategies PCC Limited: Class Y AHL
Alpha USD Shares from 1 October 2012 to 30 September 2013. The
representative product was changed at the end of September 2012 due
to the provisioning of fund liquidation costs in October 2012 for
AHL Alpha plc, which resulted in tracking error compared with other
Alpha Programme funds. Both funds are valued weekly; however, for
comparative purposes, statistics have been calculated using the
best quality price that is available at each calendar month end,
using estimates where a final price is unavailable. Where a price,
either estimate or final is unavailable on a calendar month end,
the price on the closest date prior to the calendar month end has
been used. Both of the track records have been adjusted to reflect
the fee structure of AHL Alpha (Cayman) Limited - USD Shares. From
30 September 2013, the actual performance of AHL Alpha (Cayman)
Limited - USD Shares is displayed.
3. Represented by AHL Evolution Limited adjusted for the fee
structure (2% p.a. management fee and 20% performance fee) from
September 2005 to 31 October 2006; and by AHL Strategies PCC: Class
G AHL Evolution USD from 1 November 2006 to 30 November 2011; and
by the performance track record of AHL Investment Strategies SPC:
Class E AHL Evolution USD Notes from 1 December 2011 to 30 November
2012. From 1 December 2012, the track record of AHL (Cayman) SPC:
Class A1 Evolution USD Shares has been shown. All returns shown are
net of fees.
4. Represented by Man AHL Diversified plc from 26 March 1996 to
29 October 2012, and by Man AHL Diversified (Guernsey) USD Shares -
Class A from 30 October 2012 to date. The representative product
was changed at the end of October 2012 due to legal and/or
regulatory restrictions on Man AHL Diversified plc preventing the
product from accessing the Programme's revised target allocations.
Both funds are valued weekly; however, for comparative purposes,
statistics have been calculated using the best quality price that
is available at each calendar month end, using estimates where a
final price is unavailable. Where a price, either estimate or final
is unavailable on a calendar month end, the price on the closest
date prior to the calendar month end has been used.
5. GLG Alpha Select Alternative IL GBP
6. Represented by GLG European Long Short Fund - Class D
Restricted - EUR until 29 June 2007. From 1 July 2007 the
performance of GLG European Long Short Fund - Class D Unrestricted
is displayed.
7. Represented by GLG Market Neutral Fund - Class Z Restricted -
USD until 31 August 2007. From the 1 September 2007 Man GLG Global
Credit Multi Strategy CL IL XX USD unrestricted.
8. Represented by Man Alternative Risk Premia Class A USD.
9. Represented by Man GLG Global Emerging Markets Debt Total Return Class I USD.
10. Represented by FRM Diversified II Fund SPC - Class A USD
('the fund') until April 2018 then Class A JPY hedged to USD
thereafter. However, prior to Jan 2004, FRM has created the FRM
Diversified II pro forma using the following methodology: i) for
the period Jan 1998 to Dec 2003, by using the returns of Absolute
Alpha Fund PCC Limited - Diversified Series Share Cell ('AA
Diversified - USD') adjusted for fees and/or currency, where
applicable. For the period Jan 2004 to Feb 2004, the returns of the
fund's master portfolio have been used, adjusted for fees and/or
currency, where applicable. Post Feb 2004, the fund's actual
performance has been used, which may differ from the calculated
performance of the track record. There have been occasions where
the 12-months' performance to date of FRM Diversified II has
differed materially from that of AA Diversified. Strategy and
holdings data relates to the composition of the master
portfolio.
11. Performance relative to the MSCI World. This reference index
is intended to best represent the strategy's universe. Investors
may choose to compare returns for their accounts to different
reference indices, resulting in differences in relative return
information. Comparison to an index is for informational purposes
only, as the holdings of an account managed by Numeric will differ
from the securities which comprise the index and may have greater
volatility than the holdings of an index.
12. Performance relative to the MSCI Europe (EUR). This
reference index is intended to best represent the strategy's
universe. Investors may choose to compare returns for their
accounts to different reference indices, resulting in differences
in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed
by Numeric will differ from the securities which comprise the index
and may have greater volatility than the holdings of an index.
13. Performance relative to MSCI Emerging Markets. This
reference index is intended to best represent the strategy's
universe. Investors may choose to compare returns for their
accounts to different reference indices, resulting in differences
in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed
by Numeric will differ from the securities which comprise the index
and may have greater volatility than the holdings of an index.
14. Represented by Man GLG Japan CoreAlpha Fund - Class C
converted to JPY until 28 January 2010. From 1 February 2010 Man
GLG Japan CoreAlpha Equity Fund - Class I JPY is displayed.
Relative return shown vs TOPIX (JPY, GDTR).
15. Represented by Man GLG Continental European Growth Fund
Class C Accumulation Shares. Relative return shown vs FTSE World
Europe Ex UK (GBP, GDTR).
16. Represented by Man GLG Undervalued Assets Fund - C
Accumulation Shares. Relative return shown vs FTSE All Share (GBP,
NDTR).
17. HFRI and HFRX index performance over the past 4 months is subject to change.
18. The historic Barclay BTOP 50 Index data is subject to change.
Past or projected performance is no indication of future results.
Financial indices are used for illustrative purposes only and are
provided for the purpose of making a comparison to general market
data as a point of reference and should not be construed as a true
comparison to the strategy.
The information herein is being provided solely in connection with
this press release and is not intended to be, nor should it be construed
or used as, investment, tax or legal advice, any recommendation or
opinion regarding the appropriateness or suitability of any investment
or strategy, or an offer to sell, or a solicitation of an offer to
buy, an interest in any security, including an interest in any fund
or pool described herein.
RISK MANAGEMENT
It is a key objective of Man Group to remain a leader in risk
management and governance. As such, risk management is an essential
component of our approach, both to the management of investment
funds on behalf of investors, and the management of Man Group's
business on behalf of shareholders. Our reputation is fundamental
to our business, and maintaining our corporate integrity is the
responsibility of everyone at Man Group. Our approach is to
identify, quantify and manage risk throughout the Group, in
accordance with the Board's risk appetite. We maintain capital and
liquidity to give us strategic and tactical flexibility, both in
terms of corporate and fund management.
The principal risks faced by Man Group are set out on pages 37
to 39 of our 2019 Annual Report. These will continue to be our
principal risks for the second half of the financial year, and are:
investment underperformance risk; key person risk;
credit/counterparty risk; liquidity risk; investment book risk;
pension risk; risk of internal process failure; risk of external
process failure; information security and cybercrime security risk;
information technology risk; legal and regulatory risk; Brexit
risk; reputational risk and emerging risk. Our risk framework
operated effectively in the six months to 30 June 2020, with
systems and controls functioning as designed even though this
period included the market disruption caused by the COVID-19
pandemic and associated business continuity requirements for remote
workforce arrangements. We have not identified any new operational
risks but recognise that existing risk categories are heightened
due to stronger underlying risk drivers such as volatile markets,
increased trading volumes or an increased technology dependence.
There has been heightened vigilance around all of Man Group's risk
processes during this time, however to date Man Group's corporate
and fund entities have not been impacted by any material market or
operational risk events associated with the pandemic.
As described in our 2019 Annual Report, the UK Government has
committed to fully exiting the European Union at the end of 2020,
following a transition period. The exact nature of the final
agreement has political, regulatory, legal and tax implications for
the UK and may impact market access and general economic conditions
in the UK and other European countries. Man Group has planned for a
range of Brexit scenarios that may impact its employees, business
or its clients, including a no-deal at the end of the transition
period. At the beginning of 2019, Man Group received regulatory
approval to upgrade the regulatory permissions of its existing
Irish entity and opened a physical office in Dublin, with locally
based staff. Branches of the regulated Irish entity have been
established in various European countries. This has allowed Man
Group to remain able to service its existing European clients and
to access new business in the EU. Man Group will continue to
monitor developments closely throughout the remainder of 2020 and
will take necessary steps to ensure that any negative impact of the
future agreement on its employees, business and its clients is
minimised.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, this
condensed set of financial statements in respect of Man Group plc
for the six month period ended 30 June 2020 has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union, and that this interim report includes a fair
review of the information required by the Financial Conduct
Authority's Disclosure Guidance 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 June 2020 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 year
ending 31 December 2020; and
-- material related party transactions in the six months ended
30 June 2020 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 the year ended 31 December 2019.
By order of the board
Luke Ellis
C h i e f E xecut i ve Officer
30 July 2020
Mark Jones
Chief Financial Officer
30 July 2020
INDEPENT REVIEW REPORT TO MAN GROUP PLC
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 June 2020 which comprises the Group income
statement, the Group statement of comprehensive income, the Group
balance sheet, the Group statement of changes in equity, the Group
cash flow statement and related Notes 1 to 17. 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 Guidance and Transparency Rules of the United
Kingdom's Financial Conduct 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.
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.
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 Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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 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.
Use of our report
This report is made solely to the Company 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 Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
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
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, UK
30 July 2020
I N T ER I M F I N A NC I AL S T A T E M E N TS
Gr o u p i nco me stat e m e nt
Six months Six months
to 30 June to 30 June
$m Note 2020 2019
---------------------------------------------------- ----- ------------ ------------
Revenue:
Gross management and other
fees 2 374 395
Performance fees 2 29 125
---------------------------------------------------- ----- ------------ ------------
403 520
Income or gains on investments and other financial
instruments 24 30
Third-party share of gains relating to interests
in consolidated funds 11 (1) (12)
Sub-lease rental and lease surrender income(1) 12 21 7
Revaluation of contingent consideration 14 21 11
Gain on sale of investment in Nephila(2) - 1
Distribution costs 3 (17) (20)
Asset servicing 3 (27) (27)
Amortisation of acquired intangible assets 9 (32) (40)
Impairment of GPM goodwill 9 (55) -
Compensation 4 (199) (244)
Other costs 5 (76) (95)
Finance expense 6 (9) (25)
Finance income 6 2 4
---------------------------------------------------- ----- ------------ ------------
Profit before tax 55 110
Tax expense 7 (16) (20)
---------------------------------------------------- ----- ------------ ------------
Statutory profit for the period attributable to
owners of the Parent Company 39 90
---------------------------------------------------- ----- ------------ ------------
Earnings per share: 8
Basic (cents) 2.7 5.9
Diluted (cents) 2.6 5.8
Group statement of comprehensive income
Six months Six months
to 30 June to 30 June
$m 2020 2019
-------------------------------------------------------- ------------ ------------
Statutory profit for the period attributable to owners
of the Parent Company 39 90
Other comprehensive income/(expense):
Remeasurements of post-employment benefit obligations 1 (12)
Current tax credited on pension scheme 2 2
Deferred tax debited on pension scheme (3) -
-------------------------------------------------------- ------------ ------------
Items that will not be reclassified to profit or loss - (10)
-------------------------------------------------------- ------------ ------------
Cash flow hedges:
Valuation gains taken to equity 2 1
Transfer to Group income statement - 8
Deferred tax debited on cash flow hedge movements - (2)
Net investment hedge 1 -
Foreign currency translation (2) -
Items that may be reclassified to profit or loss 1 7
-------------------------------------------------------- ------------ ------------
Other comprehensive expense for the period (net of
tax) 1 (3)
-------------------------------------------------------- ------------ ------------
Total comprehensive income for the period attributable
to owners of the Parent Company 40 87
-------------------------------------------------------- ------------ ------------
Notes:
1 In H1 2019, sub-lease rental income was classified within
gross management and other fees. In the current period this income
has been presented separately in order to align with the
presentation in the 2019 Annual Report.
2 The Group's investment in Nephila was sold in late 2018. The
gain on sale of $1 million in H1 2019 relates to finalisation of
the closing position (an adjusting item per page 38).
Gr o u p balance sheet
Note At 30 June At 31 December
$m 2020 2019
---------------------------------------------------- ----- ----------- ---------------
Assets
Cash and cash equivalents 10 236 281
Fee and other receivables 302 426
Investments in fund products and other investments 11 667 776
Pension asset 16 16
Right-of-use lease assets 178 209
Leasehold improvements and equipment 36 40
Goodwill and acquired intangibles 9 767 854
Other intangibles 35 31
Deferred tax assets 119 120
---------------------------------------------------- ----- ----------- ---------------
Total assets 2,356 2,753
---------------------------------------------------- ----- ----------- ---------------
Liabilities
Trade and other payables 339 559
Provisions 13 7 8
Current tax liabilities 10 14
Third-party interest in consolidated funds 11 141 213
Lease liability 258 307
Deferred tax liabilities 23 28
---------------------------------------------------- ----- ----------- ---------------
Total liabilities 778 1,129
---------------------------------------------------- ----- ----------- ---------------
Net assets 1,578 1,624
---------------------------------------------------- ----- ----------- ---------------
Equity
---------------------------------------------------- ----- ----------- ---------------
Capital and reserves attributable to owners
of the Parent Company 1,578 1,624
---------------------------------------------------- ----- ----------- ---------------
Gr o u p cash fl ow s tat e ment
Six months Six months
to 30 June to 30 June
$m Note 2020 2019
---------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Statutory profit 39 90
Adjustments for non-cash items:
Income tax expense 7 16 20
Net finance expense 6 7 21
Revaluation of contingent consideration 14 (21) (11)
Gain on disposal of investment in Nephila - (1)
Depreciation of leasehold improvements and
equipment 5 7 7
Depreciation of right-of-use lease assets 5 10 10
Amortisation of acquired intangible assets 9 32 40
Impairment of GPM goodwill 9 55 -
Amortisation of other intangibles 5 6 6
Share-based payment charge 4 9 13
Fund product based payment charge 4 22 27
Unrealised foreign exchange movements on lease
liabilities and associated deferred tax (17) (1)
Other non-cash movements (4) 13
---------------------------------------------------- ----- ------------ ------------
161 234
---------------------------------------------------- ----- ------------ ------------
Changes in working capital:
Decrease/(increase) in receivables 124 (144)
Decrease in other financial assets(1) 34 12
Decrease in payables (140) (75)
---------------------------------------------------- ----- ------------ ------------
Cash generated from operations 179 27
Interest paid (2) (5)
Unwind of lease liability discount (6) (7)
Income tax paid (25) (10)
---------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities 146 5
---------------------------------------------------- ----- ------------ ------------
Cash flows from investing activities
Purchase of leasehold improvements and equipment (3) (4)
Purchase of other intangible assets (9) (7)
Payment of contingent consideration in relation to
acquisitions (2) (5)
Interest received 2 3
Proceeds from sale of Nephila - 1
Cash flows from investing activities (12) (12)
---------------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Repayments of principal lease liability (11) (10)
Purchase of own shares by the Employee Trust
and Partnerships (20) (11)
Share repurchase programme (including costs) (71) (43)
Dividends paid to Company shareholders (75) (80)
Cash flows from financing activities (177) (144)
---------------------------------------------------- ----- ------------ ------------
Net decrease in cash (43) (151)
Cash at beginning of the period 281 370
Effect of foreign exchange movements (2) (1)
---------------------------------------------------- ----- ------------ ------------
Cash at period end(2) 10 236 218
---------------------------------------------------- ----- ------------ ------------
Notes:
1 Includes $27 million of restricted net cash outflows (H1 2019:
$15 million) relating to consolidated fund entities (Note 11).
2 Includes $34 million (H1 2019: $11 million) of restricted cash
relating to consolidated fund entities (Note 11).
Group statement of changes in equity
At 30 June At 31 December
$m 2020 2019
-------------------------------------------------- ------------ -----------------------------------
Share capital and capital reserves (1,635) (1,635)
Revaluation reserves and retained earnings 3,213 3,259
-------------------------------------------------- ------------ -----------------------------------
Capital and reserves attributable to
owners of the
Parent Company 1,578 1,624
-------------------------------------------------- ------------ -----------------------------------
Share capital
and capital
reserves
Share Capital
Share premium redemption Merger Reorganisation
$m capital account reserve reserve reserve Total
--------------- -------- -------- ------------- ------------ ------------------- ------------------
At 1 January
2020 53 - - - (1,688) (1,635)
At 30 June
2020 53 - - - (1,688) (1,635)
--------------- -------- -------- ------------- ------------ ------------------- ------------------
At 1 January
2019 55 32 8 499 632 1,226
Purchase and
cancellation
of own shares (2) - 2 - - -
Scheme of
arrangement
(Note 1):
-
Cancellation
of shares in
former
holding
company (53) (32) (10) (499) (632) (1,226)
- Issue of
shares in
new holding
company 53 2,861 - - (1,688) 1,226
Capital
reduction
(Note 1) - (2,861) - - - (2,861)
--------------- -------- -------- ------------- ------------ ------------------- ------------------
At 31 December
2019 53 - - - (1,688) (1,635)
--------------- -------- -------- ------------- ------------ ------------------- ------------------
Group statement of changes in
equity (continued)
Revaluation reserves and retained
earnings
Profit Own shares Cash
and held by Cumulative flow
loss Employee Treasury translation hedge
$m account Trust Shares adjustment reserve Total
------------------------- -------- ------------- ------------ ------------------- -------- ----------
At 1 January 2020 3,322 (66) (52) 55 - 3,259
Statutory profit 39 - - - - 39
Other comprehensive
income/(expense) - - - (1) 2 1
Share-based payment
charge 9 - - - - 9
Purchase of own shares
by the Employee Trust - (20) - - - (20)
Disposal of own shares
by the Employee Trust (26) 26 - - - -
Transfer to Treasury
shares 71 - (71) - - -
Transfer from Treasury
shares (11) - 11 - - -
Dividends (75) - - - - (75)
At 30 June 2020 3,329 (60) (112) 54 2 3,213
------------------------- -------- ------------- ------------ ------------------- -------- ----------
At 1 January 2019 475 (62) (114) 54 (10) 343
Statutory profit 285 - - - - 285
Other comprehensive
income/(expense) (9) - - 1 10 2
Share-based payment
charge 28 - - - - 28
Scheme of arrangement -
capital reduction (Note
1) 2,861 - - - - 2,861
Deferred tax debited on
share based payments 1 - - - - 1
Purchase of own shares
by the Employee Trust - (11) - - - (11)
Disposal of own shares
by the Employee Trust (15) 15 - - - -
Share repurchases (100) - - - - (100)
Transfer to Treasury
shares 92 - (92) - - -
Transfer from Treasury
shares (4) (8) 12 - - -
Cancellation of Treasury
Shares (140) - 140 - - -
Disposal of Treasury
shares in respect of
Sharesave - - 2 - - 2
Dividends (152) - - - - (152)
At 31 December 2019 3,322 (66) (52) 55 - 3,259
------------------------- -------- ------------- ------------ ------------------- -------- ----------
1. Basis of p r e parati on
T he int e rim f i nanci al stat e m ents for the six months
ended 30 June 2020 have been prepa r ed in acco rdance w i th I AS
34 ' Inter im F i nanc i al R epor t i ng', as adopted by the
European Union, a nd the D isc losure Guidance and T rans par ency
R u les of the Fi nanc i al Conduct Aut ho r i t y.
The income statement and cash flow statement presentation in
these interim financial statements shows the six months ended 30
June 2020 (H1 2020) together with the six months ended 30 June 2019
(H1 2019). The balance sheet is presented as at 30 June 2020
together with comparatives as at 31 December 2019.
The fi nanc i al i n for m a t i on cont a i ned he r e in is
unaudi ted and does not const i tute accounts within the meaning of
Article 105 of C o m pan i es (Jersey) Law 1991. S tatut o ry
accounts for the year ended 31 December 2019, w h ich w e re prepa
r ed in accor dance w i th Internati onal F inanc ial Repor t i ng
S t a ndar ds (I F RS) and r e levant I FR IC int e rpretat ions
issued by the Internati onal A ccount i ng S t andards Board (I A
SB) and I FR IC C o mmittee respect i vely and adopt ed by the
European U n ion ( E U) and upon w h ich the a udi tor has g i ven
an unq ual if ied and un mod if i ed r eport, have been del i vered
to t he Jersey R eg istrar of C o mpa n ies and were post ed to sha
reho lders on 11 March 2020. The interim financial statements have
been prepared in accordance with Article 106 of the Companies
(Jersey) Law 1991.
T he account i ng po li c ies app lied in these inter im fi n
anci al stat e m ents a re cons istent w i th those app li ed in M
an 's Annual Report for the year ended 31 December 2019 (the '2019
Annual Report').
During the six months ended 30 June 2020 and the subsequent
period up to the date of approval of the interim financial
statements, the coronavirus (COVID-19) pandemic has caused
extensive disruption to businesses and economic activities
globally. The situation as impacts the Group's operating
arrangements, including its access to capital and liquidity, is
subject to ongoing review by the directors and senior management.
This includes an assessment of the Group's Medium Term Plan which
is built by aggregating the expected business performance across
the Group, with much of the impact of COVID-19 being captured at
the 30 June 2020 starting point of this analysis, and then
stressing key performance assumptions, and includes rigorous
downside scenario testing. At this time, the directors consider
that the Group's longer-term success and sustainability will not be
materially impacted by the pandemic, however will continue to
closely monitor the situation. The impact of COVID-19 on the
carrying value of the Group's goodwill and the fair value of
associated contingent consideration at 30 June 2020 are outlined in
Note 9 and Note 14 respectively.
The directors consider that the Group is well placed to manage
business and financial risks in the current economic environment
and have a reasonable expectation that the Group has sufficient
resources to continue in operation for the foreseeable future.
Accordingly, these interim financial statements continue to be
prepared on a going concern basis. Further discussion in relation
to COVID-19 is included in the Chief Executive Officer's Review on
page 6.
Man acts as the investment manager/advisor to fund entities. Man
assesses such relationships on an ongoing basis to determine
whether each fund entity is controlled by the Group and therefore
consolidated into the Group's results. Assessment of the control
characteristics for all relationships with fund entities led to the
consolidation of 15 fund entities at 30 June 2020 (31 December
2019:15), which are consolidated on a line-by-line basis. The
interests of third-parties in these funds are classified as
liabilities.
Judgemental areas and accounting estimates
The most significant area of judgement relates to whether the
Group controls certain funds through its exposure to fund products
via either direct investments, total return swaps or sale and
repurchase arrangements, and is therefore required to consolidate
them (Note 11).
Furthermore, the key assumptions concerning the future, and
other key sources of estimation uncertainty at the reporting date
that may have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next
financial year include the estimated amount of accrued
discretionary variable compensation and the valuation of goodwill
and acquired intangibles for cash generating units (CGUs) with
lower levels of headroom (Note 9). The determination of the
discretionary variable compensation accrual is an annual process
undertaken at the calendar year-end, therefore the accrual at 30
June 2020 is an estimated amount based on the financial performance
and absolute levels of performance fees of the Group in the year to
date. The goodwill assessments are primarily based on discounted
future cash flow models at 31 December 2019 as disclosed within
Note 10 of the 2019 Annual Report and, except where updates to
certain GPM CGU assumptions have been made to reflect H1 2020 and
the impact of COVID-19 (as outlined in Note 9), the directors are
confident that the assumptions in the Board's three year Medium
Term Plan (approved in February 2020) remain appropriate over the
forecast period.
Corporate reorganisation
In May 2019 the Group adjusted its corporate structure. Man
Group plc was incorporated in Jersey on 26 October 2018 and became
the new listed holding company of the Group on 28 May 2019 via a
court-approved scheme of arrangement under Part 26 of the UK
Companies Act 2006, with the former holding company being renamed
Man Group Limited. Under the scheme of arrangement, shares in the
former holding company of the Group were cancelled and the same
number of new ordinary shares were issued to the new holding
company in consideration for the allotment to shareholders of one
ordinary share of 3 3/7 US cents in the new holding company for
each ordinary share of 3 3/7 US cents they held in the former
holding company. On 28 May 2019, Man Group plc effected a reduction
of its share capital by cancelling its share premium and
recognising an equivalent increase in the profit and loss account
in reserves.
Impact of new accounting standards and interpretations
The following amendments to IFRS Standards and Interpretations
were effective for the first time in the six months to 30 June
2020. Their adoption has not had a significant impact on these
interim financial statements:
-- Amendments to IFRS 3 Business Combinations: Definition of a business;
-- Amendments to IAS 1 Presentation of Financial Statements and
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors: Definition of material;
-- Amendments to References to the Conceptual Framework in IFRS Standards; and
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7).
No standards or interpretations issued and not yet effective are
expected to have an impact on the Group's interim financial
statements.
2. Reven ue
Revenue for the six months to 30 June 2020 was $403 million,
which has decreased by 23% compared with the $520 million in H1
2019.
Gross management and other fees for the period were $374
million, compared with $395 million in H1 2019, primarily driven by
a reduction in management fee margins as the business mix has
altered over time (see page 11 for further details).
Performance fee revenue was $29 million for the six months to 30
June 2020, which is $96 million lower than H1 2019 largely driven
by weaker AHL performance fee generation in the period (see page 11
for further details).
3. D ist r i bu t i on c o s ts and asset servicing
Distribution costs are paid to external intermediaries for
marketing and investor servicing, largely in relation to retail
clients, and were $17 million for the period (H1 2019: $20
million). Distribution costs are variable with FUM and the
associated management fee revenue. Distribution costs have
decreased largely as a result of lower average FUM from
intermediaries.
A sset ser v i c ing includes custodial, valuat ion, fund
account i ng, r e g i s trar, research and administration f unct
ions performed by third-parties under contract to Man, on behalf of
the funds, and is recognised in the period in which the service is
provided. The costs of these services vary based on transaction
volumes, the number of funds, and fund NAVs.
4. C o m p e n sa ti on
Six months Six months
$m to 30 June to 30 June
2020 2019
-------------------------------------------------- ------------ ------------
Salaries 80 84
Variable cash compensation 67 97
Share-based payment charge 9 13
Fund product based payment charge 22 27
Social security costs 14 16
Pension costs 7 6
Restructuring costs (adjusting item per page 38) - 1
-------------------------------------------------- ------------ ------------
Total compensation costs 199 244
-------------------------------------------------- ------------ ------------
The decrease in salaries was due to more favourable sterling
(GBP) to US dollar (USD) achieved exchange rates (with the Group no
longer hedging fixed costs from 1 January 2020 this is represented
by the average exchange rate of 1.25 for H1 2020 versus a hedged
rate of 1.40 for H1 2019), partially offset by an increase in
average headcount. Variable compensation costs have declined due to
the reduction in management and performance fee revenues. Fund
product based payment charges have largely decreased as a result of
mark to market movements in the period in relation to previous
years' awards, with nil mitigating impact in the period as a result
of the application of hedge accounting for 2020 granted awards (see
below). The decrease in the share-based payment charge is largely
as a result of lower share grants in 2020.
For fund product deferred compensation the fair value of the
employee services received in exchange for the fund units is
recognised as an expense over the vesting period, with a
corresponding liability. The Group holds these fund investments in
order to offset any associated change in deferred compensation, and
at vesting the value of the fund investment is delivered to the
employee. Effective for awards granted from 1 January 2020, the
Group has elected to hedge account for deferred fund product
charges, whereby the offsetting gains or losses on these fund
products are matched against the corresponding compensation charge
in the Group income statement pro-rata over the vesting period.
Unmatched gains or losses are recognised through other
comprehensive income and held within the cash flow hedge reserve in
equity until they are recycled over the vesting period into the
Group income statement.
The total value of unamortised deferred compensation at 30 June
2020 was $97 million (30 June 2019: $97 million), which has a
weighted average remaining vesting period of 1.9 years (30 June
2019: 1.9 years).
5. Ot her costs
Six months
to 30 June Six months to 30 June
$m 2020 2019
---------------------------------------------------------------------------------- ------ ----------------------
Occupancy 5 7
Technology and communications 12 12
Temporary staff, recruitment, consultancy and managed services 4 10
Audit, tax, legal and other professional fees 10 12
Benefits 7 7
Travel and entertainment 2 6
Insurance 2 2
Marketing and sponsorship 1 3
Other cash costs, including irrecoverable VAT 8 6
Legal claims (adjusting item per page 38) 2 -
Restructuring costs (adjusting item per page 38) - 7
----------------------------------------------------------------------------------- ----- ----------------------
Total other costs before depreciation and amortisation 53 72
Depreciation of leasehold property and equipment, and amortisation of other
intangibles 13 13
Depreciation of ROU lease assets 10 10
Total other costs 76 95
----------------------------------------------------------------------------------- ----- ----------------------
Ot her costs be fore depreciation and amortisation were $53
million, compared with $72 million in H1 2019. The decrease is
largely due to $7 million of costs incurred in respect of the
Group's corporate reorganisation in H1 2019 (Note 1), which were
classified as an adjusting item, as well as the impact of more
favourable GBP to USD achieved exchange rates (represented by the
average exchange rate of 1.25 for H1 2020 versus a hedged rate of
1.40 for H1 2019 as outlined in Note 4).
Global travel restrictions and working from home as a result of
COVID-19 have provided some cost savings on occupancy and travel
and entertainment, with recruitment and temporary staff costs also
lower as a result of lower levels of hiring during the period.
Legal claims of $2 million relate to defence costs in respect of
the PIFSS legal claim detailed in Note 16, which are classified as
an adjusting item (page 38).
6. F i n a nce expen se and f inan ce i n co me
Six months Six months
to 30 June to 30 June
$m 2020 2019
--------------------------------------------------------------------------- ------------ ------------
Finance expense:
Interest payable on borrowings (Note 10) - (5)
Revolving credit facility costs and other (1) (1)
Unwind of lease liability discount (6) (7)
Unwind of contingent consideration discount (adjusting item per page 38) (2) (12)
--------------------------------------------------------------------------- ------------ ------------
Total finance expense (9) (25)
--------------------------------------------------------------------------- ------------ ------------
Finance income:
Interest on cash deposits 2 4
--------------------------------------------------------------------------- ------------ ------------
Total finance income 2 4
--------------------------------------------------------------------------- ------------ ------------
Interest payable on borrowings has decreased by $5 million due
to the repayment of the Group's Tier 2 notes in September 2019, in
addition to a $10 million decrease in unwind of contingent
consideration discount due to the final Numeric earn-out payment in
September 2019.
7. Tax
T he tax expense for t he period is $16 million (H1 2019: $20
million), resulting in a statutory effective tax rate of 29% (H1
2019: 18%), which has increased largely as a result of the
non-deductible GPM impairment charge. The majority of the Group's
profit is earned in the UK, Switzerland and the US. The forecast
full year effective tax rate is consistent with this p r o fit m
ix.
Accounting for tax involves a level of estimation uncertainty
given the application of tax law requires a degree of judgement,
which tax authorities may dispute. Tax liabilities are recognised
based on the best estimates of probable outcomes, with regard to
external advice where appropriate. The principal factors which may
influence our future tax rate are changes to tax regulation in the
territories in which we operate, the mix of income and expenses
earned and incurred by jurisdiction, and the timing of the
recognition of available deferred tax assets.
The Group has accumulated deferred tax assets in the US of $87
million (31 December 2019: $89 million). These deferred tax assets
comprise accumulated operating losses from existing operations,
future amortisation of goodwill and intangible assets generated
from acquisitions and other timing differences that will be
available to offset future taxable profits in the US. Given the
recent history of US taxable profits and forecast future
profitability, all of the available US deferred tax assets of $87
million are recognised on the Group balance sheet at 30 June 2020
(31 December 2019: $89 million).
Man does not currently expect to pay federal tax on any profits
it may earn in the US for several years. Accordingly, any movements
in the deferred tax asset in the period are classified as an
adjusting item (page 38).
8. E ar n i n gs per s hare ( E P S)
The calculation of basic earnings per ordinary share is based on
post-tax profit for the period of $39 million (H1 2019: $90
million), and ordinary shares of 1,468,832,877 (H1 2019:
1,519,024,639), being the weighted average number of ordinary
shares in issue during the period after excluding the shares owned
by the Man Employee Trust and Treasury Shares. For diluted EPS, the
weighted average number of ordinary shares in issue is adjusted to
assume conversion of all dilutive potential ordinary shares, being
ordinary shares of 1,490,106,884 (H1 2019: 1,540,721,116). The
decrease in the weighted average number of shares is largely driven
by the execution of share repurchases in both H2 2019 and H1
2020.
The reconciliation of basic and diluted weighted average number
of shares is provided below:
Six months to 30 June 2020 Six months to 30 June 2019
(million) (million)
-------------------------------------------- --------------------------- ---------------------------
Basic weighted average number of shares 1,468.8 1,519.0
Dilutive potential ordinary shares:
Share awards under incentive schemes 21.2 20.8
Employee share options 0.1 0.9
-------------------------------------------- --------------------------- ---------------------------
Dilutive weighted average number of shares 1,490.1 1,540.7
-------------------------------------------- --------------------------- ---------------------------
The basic and diluted earnings per share figure are provided
below. For a reconciliation of earnings per share to adjusted
earnings per share, please see the Alternative Performance Measures
section at the end of this report.
Basic and diluted post-tax Basic earnings Diluted earnings
earnings per share per share
$m cents cents
-------------------------------- ------------------------------------ --------------------- ---------------------
Earnings per share H1 2020 39 2.7 2.6
-------------------------------- ------------------------------------ --------------------- ---------------------
Earnings per share H1 2019 90 5.9 5.8
-------------------------------- ------------------------------------ --------------------- ---------------------
9. G ood w ill and ac q u ired i n t a ng i b les
Investment management
$m Goodwill agreements Distribution channels Brand names Total
------------------------ --------- ----------------------- ---------------------- -------------- --------
Net book value at 1
January 2020 641 193 15 5 854
Impairment expense (55) - - - (55)
Amortisation - (28) (2) (2) (32)
------------------------ --------- ----------------------- ---------------------- -------------- ------
Net book value at 30
June 2020 586 165 13 3 767
------------------------ --------- ----------------------- ---------------------- -------------- ------
Allocated to cash
generating units as
follows:
AHL 452 1 - - 453
GLG - 77 5 1 83
FRM - 5 - - 5
GPM - 5 8 - 13
Numeric 134 77 - 2 213
------------------------ --------- ----------------------- ---------------------- -------------- ------
Allocation of goodwill to cash generating units and calculation
of recoverable amounts
The Group has identified five cash-generating units (CGUs) for
impairment review purposes: AHL, GLG, FRM, Numeric and GPM.
Under IAS 36 'Impairment of Assets' goodwill and acquired
intangibles must be tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable, and goodwill must be tested at least annually. The
recoverable amounts of the Group's CGUs are assessed each year
using a value in use calculation.
We continually assess whether there are any indicators of
impairment by considering each of the five CGUs. Net flows were
positive for H1 2020 across AHL and GPM, and negative across FRM,
GLG and Numeric, as clients continued to adjust their portfolio
allocations during the second quarter. For each CGU we have
considered the impact of COVID-19, which has impacted net flows and
performance in the year to date for certain strategies. For AHL,
FRM, GLG and Numeric the impact of the related market moves,
largely reflected in H1 2020, has already been absorbed by the
underlying businesses with no material impact on the outlook of
these in the medium-term. For GPM, which is a more recent addition
to the business, we consider there has been a change in the
outlook. As a result of assessing changes in the business to date,
the directors are confident that the assumptions in the Board's
three year Medium Term Plan remain appropriate over the forecast
period, except as otherwise outlined for GPM below.
AHL cash-generating unit
For the six months to 30 June 2020, AHL's FUM is slightly higher
than that modelled in the value in use calculation at 31 December
2019 due to positive net flows, partially offset by slightly
negative performance in the period. We consider that there are no
indicators of impairment.
GLG cash-generating unit
For the six months to 30 June 2020, GLG's FUM is slightly lower
than that modelled in the value in use calculation at 31 December
2019 as a result of lower than forecast net flows and negative
performance overall. Management fee margins have decreased slightly
over the six months due to FUM mix. Given the level of headroom at
31 December 2019 and as the amortisation of acquired intangible
assets in the period further reduced the carrying value by $19
million, we consider that there are no indicators of
impairment.
FRM cash-generating unit
For the six months to 30 June 2020, FRM's FUM is slightly lower
than that modelled in the value in use calculation at 31 December
2019 due to lower than forecast net flows in the period, although
FRM largely performed in line with forecast. Given the level of
headroom at 31 December 2019, we consider that there are no
indicators of impairment.
Numeric cash-generating unit
For the six months to 30 June 2020, Numeric's FUM is lower than
that modelled in the value in use calculation at 31 December 2019
due to lower than forecast net flows and slightly negative
performance over the period. Given the level of headroom at 31
December 2019 and as the amortisation of acquired intangible assets
in the period further reduced the carrying value by $9 million, we
consider that there are no indicators of impairment.
GPM cash-generating unit
For the six months to 30 June 2020 GPM's FUM is slightly lower
than that modelled in the value in use calculation at 31 December
2019. In addition to slower growth than planned, we have seen
future fundraising delays as a result of COVID-19. In the context
of increased uncertainty in the near-term we have reassessed the
forecast growth of the business and have delayed the timing and
reduced the expected size of new initiatives, which acts as an
indicator of impairment. We have run the value in use assessment at
30 June 2020, which indicates an impairment of $55 million
(recognised as an adjusting item per page 38). As a result, the
carrying value of GPM goodwill has been fully impaired at 30 June
2020. The reassessment of the GPM forecasts has also led to a
decrease in the fair value of the Aalto contingent consideration
creditor, as outlined in Note 14. We remain committed to private
markets and continue to maximize opportunities to grow the
business.
10. Cas h, li qu i d ity and bo r r o w i ngs
Total liquidity resources were $702 million at 30 June 2020 (31
December 2019: $720 million) and comprised cash and cash
equivalents of $202 million (31 December 2019: $220 million), and
the undrawn committed revolving loan facility of $500 million (31
December 2019: $500 million).
Cash and cash equivalents at period end comprise $169 million
(31 December 2019: $186 million) of cash at bank and $33 million
(31 December 2019: $34 million) in short-term deposits. In
addition, $34 million (31 December 2019: $61 million) of cash and
cash equivalents held on the Group balance sheet relates to the
cash and cash equivalents held by funds which have been
consolidated into the Group at 30 June 2020 (Note 11).
The Group's previously issued Tier 2 notes were redeemed in full
in September 2019.
The $500 million committed revolving credit facility was undrawn
at 30 June 2020 (undrawn at 31 December 2019). The facility was put
in place in December 2019 as a five-year facility and includes the
option for Man to request the banks to extend the maturity date by
one year on each of the first and second anniversaries. The
participant banks have the option to accept or decline Man's
request. The facility is currently scheduled to mature in December
2024 and incorporates an ESG target-linked interest rate component.
To maintain maximum flexibility, the facility does not include
financial covenants.
The following table summarises the Group's available liquidity
at the end of the period:
At 30 June
$m 2020 At 31 December 2019
--------------------------------------------- ----------- --------------------
Cash and cash equivalents(1) 202 220
Undrawn committed revolving credit facility 500 500
--------------------------------------------- ----------- --------------------
Total liquidity 702 720
--------------------------------------------- ----------- --------------------
Note:
1 Excludes $34 million of cash held by fund entities which have
been consolidated (2019: $61 million), as outlined in Note 11.
11. Investments in fund products and other investments
At 30 June At 31 December
$m 2020 2019
---------------------------------- ----------- ---------------
Loans to fund products - 4
Investments in fund products 319 349
Other investments 3 3
Investment in consolidated funds 345 420
---------------------------------- ----------- ---------------
Total investments 667 776
---------------------------------- ----------- ---------------
Man's seeding investments are included in various Group balance
sheet line items. In summary, the total seeding investments
portfolio is made up as follows:
$m At 30 June 2020 At 31 December 2019
------------------------------------------------------- ---------------- --------------------
Investments in fund products 319 349
Less those used to hedge deferred compensation awards (107) (98)
Net investment in consolidated funds 230 259
Loans to fund products - 4
------------------------------------------------------- ---------------- --------------------
Seeding investment portfolio 442 514
------------------------------------------------------- ---------------- --------------------
Investments in fund products, excluding those which are held
against outstanding deferred compensation arrangements, relate to
seeding investments which are part of our ongoing business to build
our product breadth and to trial investment research developments
before we market the products broadly to investors.
Consolidation of investments in funds
Seed capital is invested via direct holdings in fund products or
sale and repurchase (repo) arrangements (which allow us to finance
seed investments without consuming high levels of cash).
Alternatively, Man may obtain exposure to seed investments via
total return swap (TRS) arrangements, whereby we receive the
returns on fund products in exchange for the payment of a floating
rate of interest. Regardless of whether Man is exposed to a fund
product's returns by way of a direct investment, repo or TRS, the
control considerations are the same and the fund may be deemed to
be controlled by the Group and therefore consolidated (Note 1).
Seed investments which are controlled and consolidated on a
line-by-line basis relate to 15 funds at 30 June 2020 (31 December
2019: 15) as follows:
At 30 June At 31 December
$m 2020 2019
------------------------------------------------------- ----------- ---------------
Balance Sheet
Cash and cash equivalents 34 61
Transferrable securities(1) 345 420
Fees and other receivables 2 2
Trade and other payables (10) (11)
------------------------------------------------------- ----------- ---------------
Net assets of line-by-line consolidated fund entities 371 472
Third-party interest in consolidated funds (141) (213)
------------------------------------------------------- ----------- ---------------
Net investment held by Man 230 259
------------------------------------------------------- ----------- ---------------
Six months Six months
to 30 June to 30 June
$m 2020 2019
------------------------------------------------------------------------ ------------ ------------
Income statement
Net gains on investments(2) 5 42
Management fee expenses(3) (1) (1)
Other costs (2) (1)
------------------------------------------------------------------------ ------------ ------------
Net gains of line-by-line consolidated fund entities 2 40
Third-party share of gains relating to interests in consolidated funds (1) (12)
------------------------------------------------------------------------ ------------ ------------
Gains attributable to net investment held by Man 1 28
------------------------------------------------------------------------ ------------ ------------
Notes:
1 Included within Investments in fund products.
2 Included within Income or gains on investments and other financial instruments.
3 Relates to management fees paid by the funds to Man during the
period and are eliminated within gross management and other fees in
the Group income statement.
12. Sub-lease rental and lease surrender income
Man acts as lessor in respect of certain sub-leased business
premises arrangements, which are classified as operating leases
under IFRS 16, whereby rental income is recognised on a
straight-line basis over the lease term. Sub-lease rental income
for H1 2020 was $3 million (H1 2019: $7 million). The decline in
sub-lease rental income is driven by the H1 2020 early lease
termination agreement with the principal sub-tenant of our London
office, which resulted in a gain on lease surrender of $18 million.
The surrender gain represents payment for the sub-lease rental risk
and other costs taken on by the Group as a result of this
agreement, and therefore the amount relating to future periods ($14
million) has been recognised as an adjusting item (see page 38)
which we expect to release in future periods in line with future
associated lost rental income and other costs.
13. Provisions
$m Total
------------------------- ------
At 1 January 2020 8
Unused amounts reversed (1)
------------------------- ------
At 30 June 2020 7
------------------------- ------
Provisions include dilapidations on our leased business premises
and other.
14. Fair val ue of f inancial assets/liab ilities
The fair value of financial assets and liabilities can be
analysed as follows:
At 30 June 2020
------------------------------------
$m Level 1 Level 2 Level 3 Total
---------------------------------------------------- -------- -------- -------- ------
Financial assets held at fair value:
Investments in fund products and other investments 3 175 144 322
Investment in line-by-line consolidated funds - 314 31 345
Derivative financial instruments - 4 - 4
---------------------------------------------------- -------- -------- -------- ------
3 493 175 671
---------------------------------------------------- -------- -------- -------- ------
Financial liabilities held at fair value:
Derivative financial instruments - 6 - 6
Contingent consideration - - 3 3
---------------------------------------------------- -------- -------- -------- ------
- 6 3 9
---------------------------------------------------- -------- -------- -------- ------
At 31 December 2019
------------------------------------
$m Level 1 Level 2 Level 3 Total
------------------------------------------------------------ -------- -------- -------- ------
Financial assets held at fair value:
Investments in fund products and other investments 3 180 169 352
Investment in funds relating to consolidated fund entities - 385 35 420
Derivative financial instruments - 4 - 4
------------------------------------------------------------ -------- -------- -------- ------
3 569 204 776
------------------------------------------------------------ -------- -------- -------- ------
Financial liabilities held at fair value:
Derivative financial instruments - 13 - 13
Contingent consideration - - 24 24
------------------------------------------------------------ -------- -------- -------- ------
- 13 24 37
------------------------------------------------------------ -------- -------- -------- ------
Level 1, 2 and 3 financial assets and liabilities are defined in
Note 26 of the 2019 Annual Report. During the period, there were no
significant changes in the business or economic circumstances that
affected the fair value of Man's financial assets and no
significant transfers of financial assets or liabilities held at
fair value between categories.
The basis of measuring the fair value of investments in fund
products is outlined in Note 13 of the 2019 Annual Report.
The movements in Level 3 financial assets and financial
liabilities measured at fair value are as follows:
Six months to 30 June 2020
--------------------------------------------
Financial assets Financial liabilities
at at fair value
fair value through through profit
$m profit or loss or loss
---------------------------------------------------- -------------------- ----------------------
Level 3 financial assets/liabilities
held at fair value
At 1 January 2020 204 (24)
(Charged)/credited to the Group income
statement (8) 19
Change in line-by-line consolidated
funds held (4) -
Sales or settlements (17) 2
---------------------------------------------------- -------------------- ----------------------
At 30 June 2020 175 (3)
---------------------------------------------------- -------------------- ----------------------
Total (losses)/gains for the period
included in the Group statement of comprehensive
income for assets/liabilities held at
period end (8) 19
The fair value of level 3 financial liabilities can be analysed
as follows:
Six months to 30 June
2020
$m Aalto Numeric Total
------------------------------------------ ------- --------- ------
Contingent consideration payable
At the beginning of the period: 22 2 24
Revaluation of contingent consideration (21) - (21)
Unwind of contingent consideration (Note
6) 2 - 2
Settlements - (2) (2)
At 30 June 2020 3 - 3
------------------------------------------ ------- --------- ------
The $21 million decrease in the valuation of the Aalto
contingent consideration is driven by reassessment of the forecast
growth of the GPM business, in line with the goodwill impairment
assessment in Note 9.
The Aalto contingent consideration is dependent on levels of run
rate management fees measured following one, four, six and eight
years from completion. The maximum aggregate amount payable by Man
in respect of the consideration is capped at $207 million.
The fair value of contingent consideration payable for Aalto is
based on discounted cash flow calculations, which represent the
expected future profits of each business as per the earn-out
arrangement. This is determined using a combination of inputs, such
as growth in FUM, net management fee margins and operating margins
over the next three years of the earn-out period, and by applying a
terminal growth rate over the final two years of the earn-out
period. The discount rate applied for Aalto is 15%.
The most significant inputs into the Aalto valuation at 30 June
2020 are as follows:
Aalto
-------------------------------------------- ------
Weighted average net management fee margin 0.6%
Terminal growth rate 9.1%
-------------------------------------------- ------
15. Relat ed p a rty transact i o ns
T he r e l a ted pa rty transactions dur ing t he per i od are
cons istent w i th t he cat eg o r ies d isc losed in the 2019
Annual R eport. Related parties comprise key management personnel,
associates and fund entities which Man is deemed to control. All
transactions with related parties were carried out on an arm's
length basis.
Management fees earned from fund entities in which Man holds a
controlling interest are detailed in Note 11. Contingent
consideration payable to Aalto management is detailed in Note
14.
16. Other matters
In July 2019, the Public Institution for Social Security in
Kuwait (PIFSS) served a claim against a number of parties,
including certain Man Group companies, a former employee of the Man
Group and a former third party intermediary. The subject matter of
these allegations dates back over a period of 20 years. PIFSS is
seeking compensation of $156 million (plus compound interest) and
certain other remedies which are unquantified in the claim. Man
Group disputes the allegations and considers there is no merit to
the claim (in respect of liability and quantum). We will therefore
vigorously and robustly defend the proceedings. Given the size and
complexity of this claim and as the Group deems this holds no
merit, we have classified the defence costs as an adjusting item
(page 38).
Man Group is subject to various other claims, assessments,
regulatory enquiries and investigations in the normal course of its
business. The directors do not expect such matters to have a
material adverse effect on the financial position of the Group.
17. Subsequent events
The COVID-19 global pandemic has caused extensive disruption to
businesses and economic activity. The Group continues to monitor
any impacts on the business, as outlined in Note 1, and has not
identified any material adjustments to balances included in these
interim financial statements, nor any material impacts on the
business, subsequent to the balance sheet date.
ALTERNATIVE PERFORMANCE MEASURES
We assess the performance of the Group using a variety of
alternative performance measures (APMs). We discuss the Group's
results on an 'adjusted' basis as well as a statutory basis. The
rationale for using adjusted measures is explained below.
We also explain financial performance using measures that are
not defined under IFRS and are therefore termed 'non-GAAP'
measures. These non-GAAP measures are explained below. The
alternative performance measures we use may not be directly
comparable with similarly titled measures by other companies.
Funds under management (FUM)
FUM is the assets that the Group manages for investors in fund
entities. FUM is a key indicator of our performance as an
investment manager and our ability to remain competitive and build
a sustainable business. FUM is measured based on management fee
earning capacity. Average FUM multiplied by our net management fee
margin (see below) equates to our management fee earning capacity.
FUM is shown by product groupings that have similar characteristics
(as shown on page 10 ). Management focus on the movements in FUM
split between the following categories:
Net inflows/outflows
Net inflows/outflows are a measure of our ability to attract and
retain investor capital. Net flows are calculated as sales less
redemptions. Further details are included on page 10 .
Investment performance
Investment performance is a measure of the performance of the
funds we manage for our investors. It is calculated as the fund
performance of each strategy multiplied by the FUM in that
strategy. Further details are included on page 10 .
FX and other movements
Some of the Group's FUM is denominated in currencies other than
USD. FX movements represent the impact of translating non-USD
denominated FUM into USD. Other movements principally relate to
maturities and leverage movements.
Asset weighted performance versus benchmark
The asset weighted performance relative to peers for the period
stated is calculated using the daily asset weighted average
performance relative to peers for all strategies where we have
identified and can access an appropriate peer composite. The
performance of our strategies is measured net of management fees
charged and, as applicable, performance fees charged. As at 30 June
2020 it covers 88% of the FUM of the Group and excludes
infrastructure mandates, Global Private Markets and collateralised
loan obligations.
Net management fee revenue and margins
Margins are an indication of the revenue margins negotiated with
our institutional and retail investors net of any distribution
costs paid to intermediaries and are a primary indicator of future
revenues. Net management fee revenue is defined as gross management
fee revenue less distribution costs, excluding any amounts related
to consolidated fund entities (Note 11). Net management fee margin
is calculated as net management fee revenue, divided by FUM.
Net management fee revenues and margins Six months Six months
to 30 June to 30 June
$m 2020 2019
----------------------------------------- ----------------- -------------------
$m Net margin $m Net margin
----------------------------------------- ---- ----------- ---- -----------
Absolute return 171 1.18% 171 1.21%
Total return 78 0.59% 64 0.56%
Multi-manager solutions 23 0.27% 26 0.35%
Systematic long-only 35 0.30% 48 0.37%
Discretionary long-only 51 0.63% 64 0.67%
Core net management fee revenue 358 %0.66 373 0.68%
Guaranteed - %7.37 2 6.00%
Net management fee revenue(1) 358 0.66% 375 0.68%
----------------------------------------- ---- ----------- ---- -----------
Note:
1 The amount includes $17 million (H1 2019: $20 million) of
distribution costs which have been deducted from gross management
and other fees of $375 million (H1 2019: $395 million).
Core net management fee revenue and core profit before tax
Core net management fee revenue excludes net management fee
revenue relating to guaranteed products. These have been excluded
in order to better present the core business given the roll-off of
the legacy guaranteed product FUM. Core profit before tax is
defined as core management fee profit before tax plus adjusted
performance fee profit before tax.
Run rate net management fee revenue and margins
In addition to the net management fee revenue and margins for
the period, as detailed above, we also use run rate net management
fee revenue and run rate margins as at the end of the period. These
measures give the most up to date indication of our revenue streams
at the period end date. The run rate net management fee margin is
calculated as net management fee revenue for the last quarter
divided b y the average FUM for the last quarter on a fund by fund
basis. Run rate net management fee revenue is calculated as the run
rate net management fee margin applied to the closing FUM as at the
period end.
Adjusted profit before tax and adjusted earnings per share
Adjusted profit before tax is a measure of the Group's
underlying profitability. The directors consider that in order to
assess underlying operating performance, the Group's profit period
on period is most meaningful when considered on a basis which
excludes acquisition and disposal related items (including non-cash
items such as amortisation of acquired intangible assets),
impairment of assets, costs relating to substantial restructuring
plans, unrealised foreign exchange movements on lease liabilities
and associated deferred tax and certain significant event driven
gains or losses, or allocates them to the appropriate time period,
which therefore reflects the revenues and costs that drive the
Group's cash flows and inform the base on which the Group's
variable compensation is assessed. Movements in deferred tax
relating to the recognition or consumption of deferred tax assets
in the US are similarly excluded from adjusted profit after tax in
order to best reflect cash taxes paid. The directors are consistent
in their approach to the classification of adjusting items period
to period, maintaining an appropriate symmetry between losses and
gains and the reversal of any accruals previously classified as
adjusting items.
Adjusted earnings per share (EPS) is calculated as adjusted
profit after tax divided by the weighted average diluted number of
shares.
The reconciliation of statutory profit before tax to adjusted
profit before tax, and the reconciliation of statutory diluted EPS
to the adjusted EPS measures, are shown below:
Six months Six months
to 30 June to 30 June
$m Note 2020 2019
------------------------------------------------- ----- ------------ ------------
Statutory profit before tax 55 110
Adjusting items:
Acquisition and disposal related:
Impairment of GPM goodwill 9 55 -
Amortisation of acquired intangible
assets 9 32 40
Revaluation of contingent consideration 14 (21) (11)
Unwind of contingent consideration discount 6 2 12
Gain on sale of investment in Nephila - (1)
Unrealised foreign exchange movements
on lease liabilities and associated deferred
tax (17) (1)
Lease surrender income 12 (14) -
Other costs - legal claims 5 2 -
Other costs - restructuring 5 - 7
Compensation - restructuring 4 - 1
Adjusted profit before tax 94 157
Tax on adjusted profit (14) (25)
------------------------------------------------- ----- ------------ ------------
Adjusted profit after tax 80 132
------------------------------------------------- ----- ------------ ------------
Further details on adjusting items are included within the
related notes to the interim financial statements.
Adjusted management fee and performance fee profit before
tax
Adjusted profit before tax is split between adjusted management
fee profit before tax and adjusted performance fee profit before
tax to separate out the variable performance fee related earnings
of the business from the underlying management fee earnings of the
business.
Six months Six months
to 30 June to 30 June
$m 2020 2019
--------------------------------------------------------- ------------ ------------
Gross management and other fees(1) 375 395
Sub-lease rental and lease surrender income 7 7
Less:
Distribution costs (17) (20)
Asset servicing (27) (27)
Compensation (management fee) (175) (180)
Other costs(1) (72) (88)
Net finance expense (5) (4)
--------------------------------------------------------- ------------ ------------
Adjusted management fee profit before tax 86 83
Exclude: Net management fees from guaranteed
products - (2)
--------------------------------------------------------- ------------ ------------
Core management fee profit before tax 86 81
--------------------------------------------------------- ------------ ------------
Performance fees(1) 29 125
Gains on investments and other financial instruments(1) 3 17
Less:
Compensation (performance fee) (24) (63)
Finance expense - (5)
--------------------------------------------------------- ------------ ------------
Adjusted performance fee profit before tax 8 74
--------------------------------------------------------- ------------ ------------
Core profit before tax 94 155
--------------------------------------------------------- ------------ ------------
Note:
1 Gross management and other fees and other costs exclude
amounts for line-by-line consolidated fund entities of $1 million
and $2 million respectively, with these reclassified to gains on
investments and other financial instruments, together with the
third-party share.
Core profit before tax and core management fee profit before
tax
Core management fee profit before tax is adjusted management fee
profit before tax, excluding net management fees relating to
guaranteed products which relate to our legacy business. Core
profit before tax is core management fee profit before tax plus
adjusted performance fee profit before tax, equivalent to adjusted
profit before tax excluding net management fees relating to
guaranteed products.
Adjusted tax rate
The impact of adjusting items on the Group's tax expense is
outlined below:
Six months Six months
to 30 June to 30 June
$m 2020 2019
------------------------------------------------- ------------ ------------
Statutory tax expense 16 20
Less tax credit on adjusting items:
Amortisation of acquired intangible assets 3 5
Unrealised foreign exchange movements on
lease liabilities
and associated deferred tax (3) -
US profits - deferred tax asset consumption (2) -
Tax expense on adjusted profit before tax 14 25
-------------------------------------------------- ------------ ------------
Made up of:
Tax expense on adjusted management fee profit
before tax 13 10
Tax expense on adjusted performance fee
profit before tax 1 15
-------------------------------------------------- ------------ ------------
The adjusted tax rate is the effective tax rate on adjusted
profit before tax is equal to the tax on adjusted profit divided by
adjusted profit before tax. As outlined above adjusted profit
before tax is a measure of the Group's underlying profitability.
The tax expense on adjusted profit before tax is calculated by
excluding the tax benefit/expense related to adjusting items from
the statutory tax expense, except for any tax relief recognised as
a result of available US tax assets (Note 7). Therefore the tax on
adjusted profit best reflects the cash taxes payable by the Group.
The adjusted tax rate is 15% for H1 2020 compared with 16% in H1
2019.
Certain adjusting items are included within the notes to the
interim financial statements, which can be reconciled to their
adjusted equivalents as outlined below:
Six months Six months
to 30 June to 30 June
$m Note 2020 2019
---------------------------------------------- ----- ------------ ------------
Total compensation costs 4 199 244
Adjusting items (as above) - (1)
---------------------------------------------- ----- ------------ ------------
Total compensation costs excluding adjusting
items 199 243
---------------------------------------------- ----- ------------ ------------
Made up of:
Fixed compensation (includes salaries
and associated social security costs,
and pension costs) 96 99
Variable compensation (includes variable
cash compensation, share-based payment
charge, fund product payment charge and
associated social security costs) 103 144
---------------------------------------------- ----- ------------ ------------
$m
Total other costs 5 76 95
Adjusting items (as above) (2) (7)
------------------------------------------ ---- -----
Total other costs excluding adjusting
items 74 88
------------------------------------------ ---- -----
$m
------------------------------------------ ---- -----
Total finance expense 6 9 25
Total finance income 6 (2) (4)
------------------------------------------ ---- -----
Net finance expense, including adjusting
items 7 21
Adjusting items (as above) (2) (12)
------------------------------------------ ---- -----
Net finance expense excluding adjusting
items 5 9
------------------------------------------ ---- -----
Adjusted management fee EPS
Man's dividend policy is disclosed on page 8. Dividends paid to
shareholders (or adjusted management fee EPS) are determined based
on the adjusted management fee profit before tax. Adjusted
management fee EPS is calculated using post-tax profits excluding
performance fees and adjusting items, divided by the weighted
average diluted number of shares.
The reconciliation from EPS (Note 8) to adjusted EPS is provided
below:
Six months to Six months to
30 June 2020 30 June 2019
---------------- ------------------------------------------------- -------------------------------------------------
Basic and
diluted Basic and
post-tax Basic Diluted diluted post- Basic Diluted
earnings earnings per earnings per tax earnings earnings per earnings per
$m share cents share cents $m share cents share cents
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Statutory profit
after tax 39 2.7 2.6 90 5.9 5.8
Adjusting items 39 2.7 2.7 47 3.1 3.1
Tax adjusting
items 2 0.1 0.1 (5) (0.3) (0.3)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Adjusted profit
after tax 80 5.5 5.4 132 8.7 8.6
Less adjusted
performance fee
profit (7) (0.5) (0.5) (59) (3.9) (3.9)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Adjusted
management fee
profit after
tax 73 5.0 4.9 73 4.8 4.7
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Compensation ratio
The compensation ratio measures our compensation costs relative
to our revenue. The Group's compensation ratio is generally between
40% and 50% of net revenue, depending on the mix and level of
revenue. It is calculated as total compensation divided by net
revenue.
Net financial assets/liabilities
Net financial assets/liabilities is considered a proxy for Group
capital, and is equal to the Group's cash and seed book less
borrowings, contingent consideration payable and payables under
repo arrangements, made up as follows:
$m Note At 30 June 2020 At 31 December 2019
---------------------------------- ------- ---------------- --------------------
Seeding investment portfolio 11 442 514
Cash and cash equivalents(1) 10 202 220
Contingent consideration payable 14 (3) (24)
Payables under repo arrangements (30) (36)
Net financial assets 611 674
---------------------------------- ------- ---------------- --------------------
Notes:
1 Cash and cash equivalents excludes $34 million (2019: $61
million) of cash relating to line-by-line consolidated fund
entities (Note 11).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EAPXNADXEEFA
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