Interim Results
Man Group PLC
8 November 2001
PART 1
8 November 2001
UNAUDITED INTERIM RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2001
FINANCIAL HIGHLIGHTS
* Funds under management $8.9 billion at 30 September 2001, up 33% since
year-end
* Record level of fund sales in first half, totalling $2.2 billion
* Recurring net management fee income up 56% to £49.0 million
* Net performance fee income increased to £33.5 million from £1.0 million
* Brokerage result up 27% to £18.7 million
* Underlying earnings per share up 45% to 19.8 pence
* Continuing earnings per share up 106% to 29.0 pence
* Dividend up 20% to 5.5 pence
* Joined the FTSE 100 on 24 September 2001
Half year to Half year to Year to
30 September 30 September 31 March
2001 2000 2001
--------------- ---------------- -------------
Funds under management £6.1bn £2.8bn £4.7bn
$8.9bn $4.2bn $6.7bn
---------------- ---------------- -------------
Profit before tax - £97.0m £47.5m £174.0m
continuing operations
Asset Management net £49.0m £31.5m £70.7m
management fee income+
Asset Management net £33.5m £1.0m £76.0m
performance fee income+
Brokerage+ £18.7m £14.7m £30.2m
---------------- ---------------- -------------
Diluted earnings per share *
Underlying++ 19.8p 13.7p 30.4p
Continuing operations 29.0p 14.1p 53.8p
Total operations (including 27.7p 12.0p 48.1p
discontinued operations)
---------------- ---------------- -------------
Dividends per share 5.5p 4.6p 15.5p
---------------- ---------------- --------------
Post-tax return on equity - 33.6% 26.1% 35.9%**
continuing operations
(annualised)
---------------- ---------------- -------------
Shareholders' funds £477.3m £280.9m £433.4m
+ Before goodwill amortisation
* A reconciliation of earnings per share is shown in note 7
++ Underlying earnings per share represents earnings from continuing operations
excluding net performance income from Asset Management, Sugar Australia and
goodwill amortisation
** Assumes equity raised by the share placing in January 2001 was in place for
the whole year
Stanley Fink, Chief Executive said:
'The Group has had an extremely successful first half, with record fund sales
of £1.6bn and profits more than doubled from last year. The combination of
our product structuring skills and the long-term track record of our principal
managers continues to reinforce the attractiveness of our fund products. The
strong sales momentum has continued into the second half, with our latest fund
launch in October raising a record £350m of client money. Our Brokerage
business has seen strong customer order flows in the first half and is well
placed to benefit from continued demand for futures and options products
worldwide. In summary, the Board is very confident of the outlook for the
year.'
Enquiries
Man Group 020 7285 3000
Stanley Fink
Peter Clarke
Gavin Anderson 020 7457 2345
Chris Salt
Lindsey Harrison
About the Man Group
Man Group plc is a leading global provider of alternative investment funds as
well as one of the world's largest futures brokers. The Group employs over
1,500 people in 13 countries, with key centres in London, Switzerland, New
York, Chicago, Paris and Singapore. Man Group plc was listed on the London
Stock Exchange (EMG.L) in 1994 and became a member of the FTSE 100 index on 24
September 2001.
Man Investment Products, the Asset Management division, is a world leader in
the fast growing field of alternative investment products where it has a
powerful market presence and a strategic position in providing structured
hedge fund products to the private client sector and institutional investors.
Man has a track record dating back to 1983 and its operations cover the full
spectrum of fund styles, product structuring and distribution. It has
launched more than 190 alternative investment products for private investors
and institutions.
Man Financial, the Brokerage division, is one of the world's leading providers
of brokerage services in futures and options for both institutional and
private clients, and an intermediary in the world's metals, foreign exchange
and equities markets with offices across the globe.
The Group's joint brokers are Credit Suisse First Boston (Europe) Limited and
Merrill Lynch International.
HALF YEAR REVIEW to 30 September 2001
Group strategy and overview
Our businesses have had an extremely successful first half of the year, with
profits before tax from continuing operations up 104% to £97.0 million,
diluted earnings per share on continuing operations up 106% to 29.0 pence, and
further progress in achieving our strategic objectives. In addition, on 24
September the Group became a member of the FTSE 100 index.
In our Annual Report for the year ended 31 March 2001, we stated that the
Group's key strategic and financial objectives were to:
* double the level of funds under management within three years from its
then level of £4.7 billion ($6.7 billion);
* continue to deliver significant growth in underlying earnings per
share, which excludes variable performance related income; and
* maintain high levels of return on capital through the active management
of the Group's capital base.
The progress made in the first half demonstrates that we are well on the way
to achieving or exceeding these objectives.
Funds under management continued to grow strongly in the first half and stood
at $8.9 billion (£6.1 billion) at 30 September, up 33% in the six months since
31 March. This growth has been driven by very strong sales of £1.6 billion
($2.2 billion) backed-up by good product performance. The AHL Diversified
Programme, Man-Glenwood and the related Man-IP composite structured fund
products (which are a blend of AHL, Man-Glenwood and additional complementary
alternative investment strategies) have together recorded strong returns to
investors. Their respective performance records for the six month and twelve
month periods to 30 September 2001 are shown in the table below with
comparable figures for the CSFB/Tremont Hedge Fund, S&P 500 and FTSE 100
indices.
6 months to 12 months to
30 September 2001 30 September 2001
AHL Diversified Programme* 7.8% 60.2%
Man-IP ** 7.2% 57.7%
Man-Glenwood @ 2.0% 7.3%
CSFB/Tremont Hedge Fund Index 2.2% 2.1%
S&P 500 -9.7% -26.6%
FTSE 100 -11.7% -20.0%
* AHL Diversified: represented by Athena Guaranteed Futures Limited
** Man-IP: represented by Man-IP 220 Limited
@ Man-Glenwood: represented by Man-Glenwood Multi-Strategy Fund Limited
Note: All figures are shown net of fees and commissions, where applicable. S&
P 500 and FTSE 100 figures include gross dividends reinvested into the index.
The higher level of assets under management has generated an increase in
recurring net management fee income (before goodwill amortisation), up 56% to
£49.0 million in the first half. This, together with a strong contribution
from our Brokerage business, up 27% to £18.7 million (before goodwill
amortisation), has resulted in diluted underlying earnings per share
increasing by 45% to 19.8 pence.
The Group's post tax return on equity on an annualised basis for the first
half was 33.6%, up on the 26.1% achieved in the first half of the prior year.
This measure includes the contribution from performance related income which
increased to £33.5 million pre-tax, from £1.0 million in the prior first half.
We have also continued to expand our businesses organically and through
acquisition. In Asset Management we are continuing to develop the
capabilities of Glenwood and have recruited an additional 15 professional
staff in the US. Following on from the acquisition of the US Glenwood
activities last year we have commenced an initiative in the US to establish a
private client distribution network. This is to be co-located with Glenwood
with the objective of selling composite structured product to US private
clients during our next financial year.
In Brokerage, we completed the acquisition of Ord Minnett Jardine Fleming
Futures in Australia (now called Man Financial Australia Limited) on 30 April.
In addition, on 30 June we completed the acquisition of Union Cal in the UK
which is a leading provider of CFDs (contracts for difference).
Despite the huge disruption to US financial markets caused by the tragic
events on 11 September, our New York Brokerage operations, which were based in
the World Financial Center, were rapidly able to operate their disaster
recovery process, providing order execution and processing capabilities from
the recovery site in New York or via our Chicago, London, Singapore or
Australian offices. Accordingly there was no material disruption to customer
volumes in September and overall we saw high levels of activity throughout the
first half. The Group made charitable donations totalling $1 million to
various charitable foundations and disaster funds set up following the 11
September events.
Dividend
Reflecting the strong growth in underlying earnings per share in the first
half and the Board's confidence for the year, the interim dividend is being
increased by 20% to 5.5 pence.
Outlook
The strong sales momentum seen in the first half has continued into October.
Our latest private client product launch, Man IP 220 Plus (Series 4) Limited,
raised over £350 million ($500 million) of client money, a record amount.
Funds under management at 31 October were £6.6 billion ($9.6 billion). With
continued positive performance from AHL, up 4.8% in the month of October,
virtually all of the AHL product range is at incentive fee highs.
Through the combination of our track record, product structuring skills and
the growing investor awareness of the attractions of alternative investment
products as part of a balanced portfolio, we expect continued strong demand
for our products. In our Brokerage business, strong customer order flow and
the international scale of our operations leave us strategically well placed
to benefit from the continued demand for futures and options products
worldwide.
In summary, the Board remains very confident of the outlook for the year.
Asset Management
Asset Management increased pre-tax profits, before goodwill amortisation, for
the first half by 154% to £82.5 million, of which £33.5 million was
performance related. The majority of the performance related income was
generated by our AHL products. In the first half the performance of the AHL
Diversified Programme and Man-Glenwood was 7.8% and 2.0% respectively.
Total fund sales in the first half were £1.6 billion ($2.2 billion), with 14
funds launched in the period. In April, Man-Glenwood Select Limited raised £158
million ($225 million) of client money and in June, Man IP 220 Plus
(Series 3) Limited raised £305 million ($437 million) of client money, a
record launch at the time. Man IP 220 Plus is a series of structured products
comprising investment exposure to the AHL Diversified Programme, Man-Glenwood
and a range of complementary alternatives in investment strategies. In July,
we saw a successful sales launch by our new Australian joint venture, Ord
Minnett Strategic Investments, which raised £74 million ($106 million) of
client money. Private clients accounted for 71% of first half sales. In
addition, we have seen strong institutional demand. In particular, Glenwood
has been allocated over £140 million ($200 million) from two US based pension
funds, one of which, General Motors Investment Management Company, the largest
private pension fund in the US, has appointed Glenwood as its strategic
consultant for hedge fund investments.
Our sales network continues to expand and at the end of September we had 892
intermediaries, up from 805 at 31 March 2001. We have also seen increased
sales growth from our joint venture business and an increasing number of major
financial institutions now distribute product on our behalf. Redemption rates
for the first half, while below those experienced last year, are within the
range we have experienced over the long term. We continued to see
developments in our new managers. The largest of these, Marin Capital
Partners, a convertible bond arbitrage manager to which we first allocated
money in January 1999, has now been allocated funds by us of £420 million
($617 million).
The combination of the Group's product structuring skills and the long-term
track record of our principal managers continues to reinforce the
attractiveness of our structured products. Accordingly we have been able to
achieve excellent sales whilst maintaining our premium pricing structures for
composite products.
Brokerage
Brokerage had a strong first half with pre-tax profits, before goodwill
amortisation, of £18.7 million, an increase of 27% over last first half. Most
of the growth has come from financial futures and its related new product
areas as well as foreign exchange, both of which markets experienced strong
volume growth assisted by a succession of changes in interest rates. The
financial futures teams in London and Paris have been very successful in
recruiting key producers. In addition, we have continued to widen our product
base and, through the acquisition of Union Cal, we have developed critical
mass in the fast growing market of CFDs (contracts for difference). Our
retail business has experienced lower activity levels and declining interest
income, but has sustained profitability through cost cutting and closure of
unprofitable relationships in the US, as well as acquisitions in the UK and
Australia.
We have continued to benefit from the transition of many European exchanges to
electronic trading. Further consolidation in the industry in general, as
evidenced recently by the acquisition of the IPE and LIFFE exchanges, has led
to the elimination of many smaller participants who were unable to invest
sufficient resources in new technologies. We have also been able to continue
to reduce our cost base, whilst maintaining or enhancing customer service
levels. These trends are likely to be repeated when US and other exchanges
make the transition to electronic trading.
Other financial items
There was a net cash inflow of £194.4 million in the first half before the
impact of an increase of £233.8 million in Group loans to funds managed by our
Asset Management business, which stood at £333.7 million at 30 September 2001.
Immediately following a product launch, the Group makes available loans to
many of its composite fund products with the intention of providing temporary
funding until more permanent financing structures are put in place with
external providers. The excellent level of sales in the first half has
resulted in these temporary funding arrangements being at a higher level than
last year.
The tax charge for the first half amounted to £19.4 million with an effective
tax rate for continuing operations of 20.0%, compared with 20.1% for the
previous year.
The first half exceptional costs of £3.6 million (September 2000: £6.8
million) relate to adjustments to the loss on sale of our Agricultural
Products business in March 2000. The adjustments are the net effect of claims
made under limited warranties given to the management buyout group. Bearing
in mind the cover that the Group has available to it, the net impact of these
liabilities, were they all to crystallise, would not be material.
At 30 September, shareholders' equity was up 10% since the year-end at £477.3
million, and net debt was £72.3 million, giving gearing of 15%.
The Group has $2.0 billion of total facilities. The largest of these is a $1.5
billion committed revolving credit facility, which was renewed in July 2001,
with half the facility maturing in one year and the remainder in three years.
The Group has uncommitted facilities available to it of $0.4 billion.
Stanley Fink Peter Clarke
Chief Executive Finance Director
8 November 2001
GROUP PROFIT AND LOSS ACCOUNT
Half year to 30 September 2001
Note
Continuing Discontinued
operations operations Total
£m £m £m
Net operating income 2,3 198.1 - 198.1
Operating expense (108.4) - (108.4)
Goodwill amortisation and (4.7) - (4.7)
exceptional operating expense
(113.1) - (113.1)
Group operating profit 85.0 - 85.0
Share of operating profit from 3.8 - 3.8
joint ventures and associates
Total operating profit: Group
and share of joint ventures and 88.8 - 88.8
associates
Exceptional items
Loss on sale of Agricultural 4 - (3.6) (3.6)
Products businesses
Restructuring costs 4 - - -
Net interest income 5 8.2 - 8.2
Profit/(loss) on ordinary 3 97.0 (3.6) 93.4
activities before taxation
Taxation (19.4) - (19.4)
Profit/(loss) on ordinary 77.6 (3.6) 74.0
activities after taxation
Ordinary dividends 6 (14.6)
Retained profit for the period 59.4
Earnings per share on continuing 7
operations
Basic 30.0p
Diluted 29.0p
Underlying earnings per share 7
Basic 20.5p
Diluted 19.8p
Earnings per share including 7
exceptional items
Basic 28.6p
Diluted 27.7p
Dividends per share 6 5.5p
GROUP PROFIT AND LOSS ACCOUNT continued
Half year to 30 September 2000 (Restated)
Note Continuing Discontinued
operations operations Total
£m £m £m
Net operating 2,3 116. 2 - 116.2
income
Operating expense (79.6) - (79.6)
Goodwill (0.7) - (0.7)
amortisation and
exceptional
operating expense
(80.3) - (80.3)
Group operating 35.9 - 35.9
profit
Share of 3.0 - 3.0
operating profit
from joint
ventures and
associates
Total operating
profit: Group and 38.9 - 38.9
share of joint
ventures and
associates
Exceptional items
Loss on sale of 4 - (5.2) (5.2)
Agricultural
Products
businesses
Restructuring 4 - (1.6) (1.6)
costs
Net interest 5 8.6 - 8.6
income
Profit/(loss) on 3 47.5 (6.8) 40.7
ordinary
activities before
taxation
Taxation (11.4) 1.4 (10.0)
Profit/(loss) on 36.1 (5.4) 30.7
ordinary
activities after
taxation
Ordinary 6 (11.5)
dividends
Retained profit 19.2
for the period
Earnings per 7
share on
continuing
operations
Basic 14.7p
Diluted 14.1p
Underlying 7
earnings per
share
Basic 14.3p
Diluted 13.7p
Earnings per 7
share including
exceptional items
Basic 12.4p
Diluted 12.0p
Dividends per 6 4.6p
share
GROUP PROFIT AND LOSS ACCOUNT continued
Year to 31 March 2001
Note Continuing Discontinued
operations operations Total
£m £m £m
Net 2,3 347.1 - 347.1
operating
income
Operating (187.0) - (187.0)
expense
Goodwill (4.7) - (4.7)
amortisation
and
exceptional
operating
expense
(191.7) - (191.7)
Group 155.4 - 155.4
operating
profit
Share of 6.1 - 6.1
operating
profit from
joint
ventures
and
associates
Total
operating 161.5 - 161.5
profit:
Group and
share of
joint
ventures
and
associates
Exceptional
items
Loss on 4 - (13.1) (13.1)
sale of
Agricultural
Products
businesses
Restructuring 4 - (1.9) (1.9)
costs
Net 5 12.5 - 12.5
interest
income
Profit/(loss) 3 174.0 (15.0) 159.0
on ordinary
activities
before
taxation
Taxation (35.0) 0.2 (34.8)
Profit/(loss) 139.0 (14.8) 124.2
on ordinary
activities
after
taxation
Ordinary 6 (39.5)
dividends
-------------
Retained 84.7
profit for
the period
Earnings 7
per share
on
continuing
operations
Basic 55.7p
Diluted 53.8p
Underlying 7
earnings
per share
Basic 31.4p
Diluted 30.4p
Earnings 7
per share
including
exceptional
items
Basic 49.8p
Diluted 48.1p
Dividends 6 15.5p
per share
Historical cost profits and losses are not materially different from those
shown above.
In accordance with the change made in the 2001 Annual Report to the way in
which net trading interest income and goodwill amortisation are presented in
the financial statements, the September 2000 Group profit and loss account,
Group cash flow statement and related notes have been restated. Further
details are given in Note 1.
GROUP BALANCE SHEET
At 30 September At 30 September At 31
2001 2000 March
2001
Note £m £m £m
Fixed assets
Intangible assets - 69.5 8.5 73.1
goodwill
Tangible assets 22.1 23.3 21.0
Investments
Investments in 18.1 9.6 21.1
joint ventures
Investments in 17.2 18.2 17.8
associates
Other investments 21.1 14.6 21.1
56.4 42.4 60.0
148.0 74.2 154.1
Current assets
Debtors 8 974.7 1,086.7 703.6
Securities 20.2 - 104.0
purchased under
agreements to
resell
Investments 128.3 165.8 155.1
Cash at bank and in 264.9 242.4 133.7
hand
1,388.1 1,494.9 1,096.4
Creditors: amounts 9 (738.9) (947.9) (791.3)
falling due within
one year
Net current assets 649.2 547.0 305.1
Total assets less 797.2 621.2 459.2
current liabilities
Creditors: amounts 9 (315.0) (330.5) (19.2)
falling due after
more than one year
Provisions for (4.9) (9.8) (6.6)
liabilities and
charges
Net assets 477.3 280.9 433.4
Capital and
reserves
Called up share 26.8 25.5 26.8
capital
Share premium 111.6 36.3 111.4
account
Capital reserve 1.5 1.6 1.6
Profit and loss 337.4 217.5 293.6
account
Shareholders' funds 477.3 280.9 433.4
(including
non-equity
interests)
GROUP CASH FLOW STATEMENT
Half year Half year Year
to 30 to 30 to 31
September September March
2001 2000 2001
(Restated)
Note £m £m £m
Net cash 11 (12.0) (28.2) 84.8
(outflow)/inflow from
operating activities
Dividends from joint 4.7 0.4 2.7
ventures
Dividends from 1.2 - 2.3
associates
Returns on investments 4.2 1.2 4.2
and servicing of
finance
Taxation paid (20.7) (3.9) (8.2)
Capital expenditure and (6.9) (7.6) (20.0)
financial investment
Acquisitions and 18.4 3.4 (80.7)
disposals
Equity dividends paid (28.3) (21.4) (32.9)
Net cash outflow (39.4) (56.1) (47.8)
Management of liquid 34.3 (8.1) (20.2)
resources
Financing 180.1 41.6 (75.1)
Increase/(decrease) in 175.0 (22.6) (143.1)
cash
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half year Year
to 30 to 30 to 31
September September March
2001 2000 2001
Note £m £m £m
Increase/(decrease) in 175.0 (22.6) (143.1)
cash
Cash (inflow)/outflow (180.0) (41.3) 151.7
from movement in debt
Cash (inflow)/outflow (34.3) 8.1 20.2
from movement in liquid
resources
Change in net debt (39.3) (55.8) 28.8
resulting from cash
flows
Debt disposed of with - 3.7 3.7
businesses and
subsidiaries
Currency translation 2.2 (5.2) (6.3)
difference
Movement in net debt (37.1) (57.3) 26.2
Opening net debt (35.2) (61.4) (61.4)
Closing net debt 12 (72.3) (118.7) (35.2)
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Half year Half year Year
to 30 September 2001 to 30 September to 31
2000 March
2001
£m £m £m
Profit for the period 74.0 30.7 124.2
Currency translation (15.7) 9.8 22.6
differences taken
directly to reserves
Total recognised gains 58.3 40.5 146.8
and losses relating to
the period
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Half year Half year Year
to 30 to 30 September 2000 to 31
September March
2001 2001
£m £m £m
Profit for the period 74.0 30.7 124.2
Ordinary dividends (14.6) (11.5) (39.5)
Retained earnings 59.4 19.2 84.7
Other recognised gains and (15.7) 9.8 22.6
losses relating to the
period
Issue of ordinary share 0.2 0.2 76.6
capital
Amount added back in - 1.4 1.4
respect of scrip dividends
Goodwill written off on - - (2.2)
acquisitions
Net increase in 43.9 30.6 183.1
shareholders' funds
Opening shareholders' funds 433.4 250.3 250.3
Closing shareholders' funds 477.3 280.9 433.4
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