Interim Results
Man Group plc
06 November 2003
6 November 2003
UNAUDITED INTERIM RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2003
FINANCIAL HIGHLIGHTS
Half Year Business Summary
• Fund sales in the six month period of $5.8 billion, including $1.8
billion in RMF
• Funds under management of $31.5 billion at 30 September 2003
(including $12.8 billion in RMF), up 21% from 31 March 2003
• Recurring net management fee income+ up 53% to £122.8 million
• Brokerage profits+ up 60% to £32.3 million
• Diluted underlying earnings per share(++)* up 43% to 38.7 pence
• Net performance fee income at £34.1 million, slightly down from £35.9
million
• Diluted earnings per share on total operations* up 20% to 39.3 pence
• Dividend up 25% to 11.4 pence
• Continued development in the second half:
- Man Global Strategies Diversified Ltd and Man Multi-Strategy
CHF Series 1 Ltd sales launches closed in October raising
$787 million of investor money
- Funds under management at 31 October 2003 are estimated to be
$32.5 billion
Half year to Half year to Year to
30 September 30 September 31 March
2003 2002 2003
Funds under management $31.5bn $22.1bn $26.1bn
£18.9bn £14.0bn £16.5bn
Asset Management net management fee income+ £122.8m £80.1m £181.1m
Asset Management net performance fee income+ £34.1m £35.9m £115.0m
Brokerage+ £32.3m £20.2m £48.3m
Financial Services £189.2m £136.2m £344.4m
Sugar Australia £1.3m £1.8m £3.7m
Profit before tax, goodwill amortisation and exceptional items £190.5m £138.0m £348.1m
Goodwill amortisation and exceptional items (£27.4m) (£15.0m) (£51.2m)
Profit before tax £163.1m £123.0m £296.9m
Diluted earnings per share *
Underlying(++) 38.7p 27.0p 60.7p
Total operations 39.3p 32.8p 75.8p
Dividends per share 11.4p 9.1p 23.2p
Post-tax return on equity (annualised) 25.3% 24.1% 26.9%
Equity shareholders' funds £995.5m £914.3m £970.8m
+ Before goodwill amortisation and exceptional items
(++) Underlying earnings per share represents earnings from net management fee
income in Asset Management plus Brokerage net income (it therefore excludes net
performance fee income in Asset Management, Sugar Australia,
goodwill amortisation and exceptional items)
* A reconciliation of earnings per share is shown in note 8
Stanley Fink, Chief Executive said:
'This has been a very successful first half of the year. Profits have grown
strongly. An increase of 53% in net management fee income* and a 60% increase
in Brokerage net income* (excluding exceptional items) have resulted in
underlying earnings per share** up 43%. The high level of private investor
sales achieved in the first half has continued into the second half, resulting
in estimated funds under management at 31 October of $32.5bn. With continued
strong demand for our products in both Asset Management and Brokerage, the Board
is very confident of the outlook for the year.'
* Before goodwill amortisation
** Underling earnings per share represents earnings from net management fee
income in Asset Management plus Brokerage net income (it therefore excludes net
performance fee income in Asset Management, Sugar Australia, goodwill
amortisation and exceptional items).
ANALYST PRESENTATION
The analyst presentation will take place today at 9.00am in The Auditorium,
Merrill Lynch Financial Centre, 2 King Edward Street, London EC2A 1HQ.
For those analysts unable to attend, there is a dial-in facility:
UK Dial-in number 020 8996 3920
US Dial-in number 888 339 2688
UK / US Pass Code C700110
There will be a playback facility until 6pm on Wednesday 12 November:
UK Replay number 01296 618 700
UK Pass Code 666421
US Dial-in number 888 286 8010
US Pass Code 71831555
Enquiries
Man Group plc 020 7144 1000
Stanley Fink
Peter Clarke
David Browne
Merlin Financial 020 7606 1244
Paul Downes 07900 244888
Paul Lockstone 07876 685200
Vanessa Maydon 07802 961902
Lachlan Johnston 07989 304356
ABOUT MAN
Man Group plc is a leading global provider of alternative investment products
and solutions as well as one of the world's largest futures brokers. The Group
employs over 2,500 people in 15 countries, with key centres in London,
Pfaffikon (Switzerland), Chicago, New York, Paris, Singapore and Sydney. Man
Group plc is listed on the London Stock Exchange (EMG.L) and is a constituent of
the FTSE 100 index.
Man Investments, the Asset Management division, is a global leader in the fast
growing alternative investment industry. It provides innovative products and
tailor-made solutions to private and institutional investors. Through its core
investment managers - AHL, RMF, Glenwood and Man Global Strategies - Man has
succeeded in developing leadership in hedge funds and has interests in other
asset classes. In its core hedge fund asset class, Man offers funds of hedge
funds, structured, style and single manager products. Its track record
stretches back two decades and defines the standard for excellence in an
industry whose central goal is to provide diversification away from traditional
equity and bond investments. Man has a powerful global presence and an
extensive network of distribution partners.
Man Financial, the Brokerage division, is one of the world's leading providers
of brokerage services. It acts as a broker of futures, options and other equity
derivatives for both institutional and private clients and an intermediary in
the world's metals, energy and foreign exchange markets with offices in key
financial centres. Man has consistently achieved a leading position on the
world's largest futures and options exchanges, with particular strengths in
financial futures and the energy markets.
HALF YEAR REVIEW to 30 September 2003
Group overview and strategy
The Man Group has enjoyed a very successful first half of the year both in terms
of continued strong profits growth and asset raising. Group profits before tax,
exceptional items and goodwill amortisation for the first half were up 38% to
£190.5 million, reflecting in particular a 53% increase in net management fee
income and a 60% increase in Brokerage income. Net performance fees, of £34.1
million, were slightly lower than in the first half of last year. The Group's
profit before tax on total operations was up 33% to £163.1 million. This strong
performance has driven diluted underlying earnings per share up 43% to 38.7
pence. Diluted earnings per share on total operations grew to a lesser extent,
up 20% to 39.3 pence for the first half, reflecting higher goodwill
amortisation, GNI integration costs and the slight decrease in net performance
fee income.
In Asset Management we have continued to capitalise on our established presence
and scale in the fast growing alternative investment market. Funds under
management grew 21% in the first half, to $31.5 billion as at 30 September 2003,
driven by a record level of product sales. Our strategic focus and resource
commitment to product structuring has allowed us to develop an expanding range
of products for both the private investor and institutional markets. Strong
demand for these fund products has generated record sales of $5.8 billion in the
first half. Although institutional funds under management grew 17% in the first
half, the fastest growing component of funds under management was that of our
higher margin private investor products, up 24% in the first half.
As well as developing our own wholly owned investment managers, we have
continued to make significant progress in building relationships with high
quality new managers across a range of complementary investment styles. At 30
September 2003, Man Global Strategies had agreements in place with 24 affiliated
managers, a net increase of seven since 31 March 2003. Another important source
of new manager capacity is RMF's sponsored programme, Hedge Fund Ventures, which
has now seeded seven new managers. As well as providing additional investment
management capacity, these initiatives allow us to offer multi-strategy products
through allocations to both internal and affiliated managers across a range of
styles. To accommodate continued strong asset raising, our strategy is to
accelerate this new manager programme by investing in selected high capacity
established managers with solid track records.
Following the integration of RMF last year, we have combined the institutional
sales force of both organisations to take advantage of RMF's strength in the
growing European institutional market, particularly for fund-of-hedge fund
products. This has already shown benefits in the winning of our first
institutional mandates in France and the UK. We have also broadened further the
distribution network for private investor business, and now have 1,484 active
intermediaries globally. Our private investor white label business, where we
structure and manage tailored products for the specific customer base of a
private bank or financial services firm, is becoming an increasingly important
component of sales. In North America we have signed up 47 intermediaries and are
continuing to see sales of our US registered product. Private investor sales in
North America in the first half were $207 million.
In July, we acquired the 50% of OM Strategic Investments Limited which we did
not already own. OM Strategic Investments is based in Sydney and has operated
for many years as sponsor and distributor of Man's alternative fund products
principally in the Australasian region.
In Brokerage, pre-tax profits in the first half before goodwill amortisation and
exceptional items grew strongly, up 60% on the comparable period in the prior
year. This reflects organic growth in the business (driven by high levels of
activity on exchanges and in some cases increased market share), the recruitment
of producer teams and the acquisition of GNI in November 2002. This acquisition
reflects our role as a consolidator in the futures and options markets and also
our strategy of broadening our product range, in particular by developing scale
in equity derivative products. The full integration of GNI, which has now been
completed, has provided significant cost savings, with associated first half
exceptional integration costs of £5.3 million, as anticipated at acquisition.
GNI client volumes have been maintained and even increased in the areas of
financial futures, energy and metals.
During the first half we welcomed two new members to the board. In August 2003,
Jon Aisbitt joined the Group Board as an independent non-executive Director. He
is a member of the Audit and Risk, Remuneration and Nomination Committees. He
is a chartered accountant with a long and successful career in investment
banking as an advisor to many large domestic and international companies. At
the same time, Chris Chambers, Chief Executive Officer of Man Investments since
March 2002, was appointed to the Group Board.
Dividend and share repurchase activities
Given the Group's good performance in the first half, the Board's confidence for
the full year and our strong financial condition, the interim dividend is being
increased by 25% to 11.4 pence. This will be paid on 18 December 2003 to
shareholders on the register at the close of business on 14 November 2003. The
shares will be quoted ex-dividend from 12 November 2003. The final election
date for participation in the Group's Dividend Reinvestment Plan in relation to
the interim dividend is 3.00pm on 27 November 2003. In furtherance of the
Group's policy for applying post-tax performance fees over time in the
repurchasing of shares in the market, 1.4 million shares were repurchased in the
first half at an average cost of £12.34 per share.
Financial summary
Asset Management
Asset Management increased pre-tax profits, before goodwill amortisation, for
the first half by 35% to £156.9 million. Recurring net management fee income
for the first half increased 53% to £122.8 million as a result of the growth in
funds under management. Net performance fee income at £34.1 million was
slightly down on last year.
At 30 September 2003, the split between private investor and institutional funds
under management was $16.8 billion and $14.7 billion respectively. Of the $31.5
billion funds under management, $28.7 billion relates to hedge funds, with the
remaining $2.8 billion relating to other asset classes.
The acquisition of Westport, a private equity fund of funds manager, in which a
controlling interest was acquired in April 2003, added $0.6 billion to funds
under management. However, the key feature of the increase in funds under
management during the period continues to be the strong level of sales ($5.8
billion in the first half). 13 new products were launched during the half year.
The increase in funds under management in the half year from Man's two global
launches (Man Multi-Strategy Series 5 Ltd and Man AP Unison Series 1 Ltd) was
$1.7 billion. White label sales (including OM-IP 130/140 Plus and Series 9 OM-IP
220 Ltd) accounted for $1.2 billion. Other private investor sales, mainly
relating to open-ended funds, accounted for $1.1 billion and institutional sales
$1.8 billion, almost all from RMF.
We have continued to build out our distribution platform by increasing both the
number and quality of our intermediaries. The number of intermediaries now
stands at 1,484, up 16% from 31 March 2003. These additions include a number of
well-established international financial institutions.
Investment movement in the first half was a positive $1.1 billion. Man-AHL had a
strong start to the period with good returns from currencies and bonds
particularly in May. However, these gains were partially offset by reversals in
currencies thereafter. In Man Global Strategies, performance was steady with
diversified multi-manager products, such as Man Multi-Strategy Guaranteed
Limited, generating a return of 2.6%.
Our fund of funds managers, Glenwood and RMF, both target more modest returns
but with a lower associated volatility. Man-Glenwood recorded a steady
performance in the first half. It benefited from equity-based strategies due to
the strength of equity markets but other styles were mostly flat. In RMF,
performance was good with diversified multi-manager products, such as RMF
Absolute Returns Strategies I, generating a return of 5.4%.
Performance records 6 months to 30 12 months to 30 3 years to
September 2003 September 2003 30 September 2003
(not annualised) (annualised)
AHL Diversified Programme* 7.9% 9.1% 24.5%
Man Global Strategies # 2.6% 6.7% 13.7%
Man-Glenwood @ 2.7% 5.0% 3.3%
RMF (++) 5.4% 8.9% 7.0%
HFRI Fund of Funds
Composite Index 6.2% 8.8% 3.3%
S&P 500 18.5% 24.4% -10.1%
FTSE 100 15.0% 13.4% -10.6%
Source: Man database, Standard & Poor's Micropal and Hedge Fund Research Inc.
* AHL Diversified: represented by Athena Guaranteed Futures Limited
# Man Global Strategies: represented by Man Multi-Strategy Guaranteed Limited
@ Man-Glenwood: represented by Man-Glenwood Multi-Strategy Fund Limited
(++) RMF: represented by RMF Absolute Return Strategies I, with dividends
reinvested
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.
Redemption levels in private investor products in the first half at 15.6%
(annualised) were within the 12-18% range that we have typically experienced
over the long term. Institutional redemption levels were higher than
historically, due to some switches (investors redeeming from one fund product
and reinvesting in another, which is included in both redemptions and sales) at
RMF and some outflows at Glenwood. Redemptions totalled $2.4 billion in the
period.
Foreign exchange and other movements accounted for a further $0.3 billion
increase in funds under management in the first half.
Brokerage
Brokerage had a strong first half with pre-tax profits, before goodwill
amortisation and exceptional items, of £32.3 million, an increase of 60% over
the first half of last year. This reflects a combination of further improvement
in market share, active markets in our core businesses and the benefits of
integration of the GNI business acquired in November 2002.
We have further consolidated our position as a leading execution broker on the
major global futures markets. This enabled us to benefit from the increase in
market volumes on these exchanges, particularly in financial futures, metals and
energy. Our foreign exchange team benefited from volatility in the fx markets,
whilst our securities and CFD teams experienced somewhat quieter market
conditions. Results of our retail businesses remained strong despite the
continued low interest rate environment. Recruitment for our sales teams in
Paris, London, New York and Chicago has resulted in growth in profits in all of
these offices.
The benefits of the GNI merger have flowed through to trading profits. Revenues
from the GNI businesses have been maintained whilst costs have been reduced.
The GNI integration is complete with all business units now working as
integrated teams, co-located in Man's offices in the UK and US.
Financial objectives
We have continued to deliver results in line with our long-standing key
financial objectives:
- Significant growth in underlying earnings per share.
The higher level of funds under management has generated an increase in net
management fee income (before goodwill amortisation), which is up 53% to £122.8
million for the first half. This, together with a continuing strong
contribution from our Brokerage business, has resulted in continued strong
growth in diluted underlying earnings per share, up 43% to 38.7 pence.
- High levels of return on equity.
The Group's post-tax return on equity on an annualised basis for the first half
was 25.3%, somewhat higher than the 24.1% for the comparative period. This
result has been achieved off an equity base significantly increased by the
acquisition last year of RMF.
The Board believes that long-term shareholder value will be achieved through
continued delivery of significant growth in underlying earnings per share and
the maintenance of high levels of post-tax return on equity. For this reason
these two measures continue to be the basis for the Group's financial objectives
and are also the performance criteria used for the Group's long-term incentive
schemes.
Profit and loss account
In order to analyse the performance of the Group's two principal businesses, the
table below provides a split of the Group's profit and loss account into its
components:
6 months to 30 September 2003 Asset Management Brokerage Sugar Group
Australia Total
£m £m £m £m
Fees and commissions receivable 279.3 311.8 - 591.1
Fees and commissions payable (48.2) (198.3) - (246.5)
Net trading interest income 2.2 23.9 - 26.1
Other operating income 10.2 0.9 - 11.1
Total operating income 243.5 138.3 - 381.8
Operating expenses (92.2) (111.5) (0.2) (203.9)
Operating profit 151.3 26.8 (0.2) 177.9
Associates and JVs 5.2 - 1.9 7.1
Net interest income 0.4 5.5 (0.4) 5.5
Profit before tax, goodwill and
exceptional items 156.9 32.3 1.3 190.5
Goodwill amortisation (18.9) (3.2) - (22.1)
Exceptional items - (5.3) - (5.3)
Profit before tax on total operations 138.0 23.8 1.3 163.1
Taxation (35.9)
Profit for the period 127.2
In Asset Management, fees and commissions receivable are principally management
fees, performance fees and brokerage fees. Fees and commissions payable are
mainly sales commissions. The largest component of other operating income is
profits arising on proprietary holdings in some of our funds. These profits are
included in the net performance fee income segment (as shown in note 3b). Total
operating income has increased by 41% over the first half of last year,
reflecting the strong growth in management fees derived from higher levels of
funds under management. Operating expenses have increased by 53% from £60.1
million in the comparative period. This is largely due to higher variable
employee compensation arising from the growth in income and also to investment
in people, systems and infrastructure to provide scale to Asset Management in
order to cater for continued strong growth. Net interest income includes the
small margin earned on loans to funds. Goodwill amortisation principally
relates to the RMF acquisition made in 2003 (£14.7 million) and the Glenwood
acquisition made in 2000 (£2.1 million). Both the RMF and Glenwood goodwill are
being amortised over 15 years.
In Brokerage, commissions receivable and payable arise from those businesses
where we act as agent and also from those businesses where we act as a matched
principal broker, such as foreign exchange, securities, metals and energy
trading. Net trading interest income is earned on segregated customer balances
that are held off balance sheet in accordance with UK accounting practice.
Total operating income has increased by 68% reflecting the contribution from
GNI, the continued growth in market share and the benefits of active markets.
Operating expenses have increased by 63% from £68.2 million in the first half of
last year, with the acquisition of GNI accounting for most of this increase.
Net interest income mainly arises on non-segregated cash balances and
investments. The largest component of goodwill amortisation relates to the GNI
acquisition made in 2003 (£1.9 million) and the remainder to smaller
acquisitions made previously. The GNI goodwill is being amortised over 10
years. The operating exceptional costs of £5.3 million relate to GNI
integration costs.
The tax charge for the period amounted to £35.9 million. The effective tax rate
on total operations was 22.0%, compared to 21.0% last year. The bulk of the
Group's profits continue to be earned in Switzerland and the UK and the current
effective tax rate is consistent with this profit mix.
The growth in the Group's profitability has resulted in a significant increase
in earnings per share. Full details of earnings per share are given in note 8
to the Interim financial statements.
Other financial items
The result for the first half has been achieved despite the impact of a negative
currency translation of approximately £11 million in comparison to the
comparative period, due to the weakening of the US dollar against sterling.
Most of the Group's revenues arise in US dollars since the majority of
transactions are denominated in that currency. The Group does not hedge its US
dollar earnings into sterling.
There was a net cash outflow of £129.1 million in the first half. Cash
generated from net operating profits was £192.8 million after adding back
depreciation and amortisation of £41.7 million. Working capital requirements
increased by £201.8 million. This is largely due to increased forward foreign
exchange profits in the fund entities, resulting in a need for our Brokerage
business to transfer cash into customer segregation (this is a short term
effect) and due to the high level of sales commissions paid in the first half in
Asset Management. In addition, the Company paid a dividend of £41.7 million and
invested £40.8 million in net fixed asset expenditures (including £37.3 million
of shares in the Company purchased by the employee trusts for the Group's
incentive schemes). £6.7 million was paid in relation to acquisitions.
Taxation paid in the period was £34.3 million and other items generated a cash
inflow of £3.4 million.
Loans to funds of £309.1 million were slightly lower than at 31 March 2003,
notwithstanding the high level of private investor sales in the period. This
was due to the success of our externalisation initiatives to put in place
permanent financing directly between the fund entities and external providers.
During the period, this included a seven-year $500 million collateralised fund
obligation (CFO), which was completed in August 2003, supported by Man-Glenwood
fund assets.
At 30 September 2003, shareholders' equity was up 3% since the year-end at
£995.5 million. The Group's balance sheet, as presented in sterling, is affected
by currency movements since the majority of the Group's net assets are in US
dollars. Reflecting this, the Group chooses to hold a significant amount of its
borrowings in US dollars but does not hedge its US dollar net assets into
sterling. Currency moves in the first half gave rise to a translation loss of
£52.2 million, which is included in the statement of total recognised gains and
losses for the period.
Net debt was £155.9 million, resulting in gearing of 16%. Including £34.2
million of balances with counterparties whereby commodities are bought under
financing arrangements on deferred terms, gearing is 19%. The Group has $2.8
billion of total financing facilities. This includes total banking facilities
of $2.2 billion; the largest part being a $1.75 billion committed revolving
credit facility, which was renewed in July 2003. Half the facility has an
initial maturity date of July 2004 and the remainder matures in July 2006. In
addition the Group issued, in November 2002, £400 million seven-year 3.75%
exchangeable bonds.
Outlook
In Asset Management, we believe that growing investor awareness of the benefits
of alternative investment products as part of a balanced portfolio will continue
to create strong demand for our products. Through our powerful distribution
capability, we expect to see the benefits of this demand from both private and
institutional investors. The high level of private investor sales achieved in
the first half has continued into the second half. The latest global launch,
Man Global Strategies Diversified Ltd, and the Swiss product, Man Multi-Strategy
CHF Series 1 Ltd, closed in October together raising $787 million of investor
money. As a result, funds under management at 31 October 2003 are estimated to
have risen to $32.5 billion, which includes $13.0 billion from RMF.
In Brokerage, we continue to benefit from strong demand for futures and options
products worldwide. Our position as one of the leading brokers in these markets
will allow us to continue to benefit from consolidation in the industry. The
GNI business acquired last year has now been fully integrated, bringing revenue
benefits, cost savings and an enhanced position in equity derivative products.
GROUP PROFIT AND LOSS ACCOUNT
Half year to 30 September 2003
Before goodwill Goodwill
and exceptional and exceptional
items items Total
Note £m £m £m
Net operating income 2,3 381.8 - 381.8
Operating expenses 4 (203.9) (21.5) (225.4)
Exceptional item - GNI integration costs 5 - (5.3) (5.3)
Group operating profit - continuing operations 177.9 (26.8) 151.1
Share of operating profit/(loss) from joint ventures
and associates
4 7.1 (0.6) 6.5
Total operating profit: Group and share of joint ventures and
associates 185.0 (27.4) 157.6
Net interest income 6 5.5 - 5.5
Profit on ordinary activities before taxation 3 190.5 (27.4) 163.1
Taxation (37.1) 1.2 (35.9)
Profit on ordinary activities after taxation 153.4 (26.2) 127.2
Equity minority interest - - -
Profit for the period 153.4 (26.2) 127.2
Ordinary dividends 7 (33.5)
Retained profit for the period 93.7
Earnings per share on total operations 8
Basic 43.0p
Diluted 39.3p
Earnings per share before goodwill and exceptional
items 8
Basic 51.8p
Diluted 47.0p
Underlying earnings per share 8
Basic 42.3p
Diluted 38.7p
Dividends per share 7 11.4p
Historical cost profits and losses are not materially different from those shown
above.
Half year to 30 September 2002 Year to 31 March 2003
Before goodwill Goodwill Before goodwill Goodwill
and exceptional and exceptional and exceptional and exceptional
items items items items
£m £m Total £m £m Total
£m £m
255.5 - 255.5 640.7 - 640.7
(128.5) (14.3) (142.8) (314.8) (34.8) (349.6)
- - - - (15.0) (15.0)
127.0 (14.3) 112.7 325.9 (49.8) 276.1
4.4 (0.7) 3.7 11.0 (1.4) 9.6
131.4 (15.0) 116.4 336.9 (51.2) 285.7
6.6 - 6.6 11.2 - 11.2
138.0 (15.0) 123.0 348.1 (51.2) 296.9
(27.6) 1.8 (25.8) (65.8) 3.5 (62.3)
110.4 (13.2) 97.2 282.3 (47.7) 234.6
- - - (0.1) - (0.1)
110.4 (13.2) 97.2 282.2 (47.7) 234.5
(33.3) (75.2)
63.9 159.3
33.8p 80.0p
32.8p 75.8p
38.4p 96.3p
37.2p 91.0p
27.9p 63.8p
27.0p 60.7p
9.1p 23.2p
GROUP BALANCE SHEET
At 30 September At 30 September At 31
2003 2002 March
2003
Note £m £m £m
Fixed assets
Intangible assets - goodwill 510.6 506.5 522.8
Tangible assets 43.2 26.5 41.7
Investments
Investments in joint ventures 6.8 18.0 18.2
Investments in associates 29.8 19.5 25.4
Other investments 84.2 68.8 70.1
120.8 106.3 113.7
674.6 639.3 678.2
Current assets
Debtors 9 1,694.5 933.7 1,743.3
Investments 10 1,015.5 117.0 694.1
Cash at bank and in hand 647.9 350.9 642.6
3,357.9 1,401.6 3,080.0
Creditors: amounts falling due within one year 11 (2,266.4) (913.0) (2,277.7)
Net current assets 1,091.5 488.6 802.3
Total assets less current liabilities 1,766.1 1,127.9 1,480.5
Creditors: amounts falling due after more than one
year 11
Exchangeable bonds (390.2) - (389.7)
Other (376.6) (206.9) (114.7)
(766.8) (206.9) (504.4)
Provisions for liabilities and charges (3.2) (6.2) (4.8)
Net assets 996.1 914.8 971.3
Capital and reserves
Called up share capital 30.5 31.0 30.7
Share premium account 507.9 507.9 507.9
Capital reserve 2.1 1.6 2.0
Profit and loss account 455.0 373.8 430.2
Equity shareholders' funds 995.5 914.3 970.8
Equity minority interests 0.6 0.5 0.5
996.1 914.8 971.3
GROUP CASH FLOW STATEMENT
Half year Half year Year
to 30 September to 30 September to 31
2003 2002 March
2003
Note £m £m £m
Net cash (outflow)/inflow from operating activities 13 (16.1) 90.8 318.6
Dividends from joint ventures 2.4 2.2 3.2
Dividends from associates 0.9 0.7 5.0
Returns on investments and servicing of finance 7.2 3.7 17.0
Taxation paid (34.3) (32.8) (50.6)
Capital expenditure and financial investment (40.8) (20.2) (44.2)
Acquisitions and disposals (6.7) (316.5) (291.3)
Equity dividends paid (41.7) (39.8) (67.1)
Net cash outflow (129.1) (311.9) (109.4)
Management of liquid resources (4.9) 1.8 (65.4)
Financing 154.8 282.5 369.3
Increase/(decrease) in cash 20.8 (27.6) 194.5
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half year Year
to 30 September to 30 September to 31
2003 2002 March
2003
Note £m £m £m
Increase/(decrease) in cash 20.8 (27.6) 194.5
Cash inflow from movement in debt (171.6) (104.7) (225.0)
Cash outflow/(inflow) from movement in liquid resources 4.9 (1.8) 65.4
Change in net debt resulting from cash flows (145.9) (134.1) 34.9
Debt acquired with businesses and subsidiaries - (12.7) (13.1)
Currency translation difference 5.3 10.1 3.6
Movement in net debt (140.6) (136.7) 25.4
Opening net debt (15.3) (40.7) (40.7)
Closing net debt 14 (155.9) (177.4) (15.3)
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Half year Half year Year
to 30 September to 30 to 31
2003 September March
2002 2003
£m £m £m
Profit for the period 127.2 97.2 234.5
Currency translation differences taken directly to reserves (52.2) (73.0) (82.2)
Total recognised gains and losses relating to the period 75.0 24.2 152.3
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
Half year Half year Year
to 30 to 30 to 31
September September 2002 March
2003 2003
£m £m £m
Profit for the period 127.2 97.2 234.5
Ordinary dividends (33.5) (33.3) (75.2)
Retained earnings 93.7 63.9 159.3
Other recognised gains and losses relating to the period (52.2) (73.0) (82.2)
Issue of ordinary share capital - 400.7 400.8
Purchase and cancellation of own shares (16.8) (8.8) (38.5)
Adjustment to goodwill written off on acquisitions - - (0.1)
Net increase in shareholders' funds 24.7 382.8 439.3
Opening shareholders' funds 970.8 531.5 531.5
Closing shareholders' funds 995.5 914.3 970.8
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited financial statements for the half year to 30 September 2003 have
been prepared in accordance with UK generally accepted accounting principles.
The accounting policies applied are those set out in the Group's Annual Report
for the year to 31 March 2003.
In accordance with the change in presentation made in the 2003 Annual Report,
the presentation of the comparative figures for September 2002 has been changed
in the net operating income note to the Interim financial statements (note 2).
Income relating to Brokerage's matched principal business and redemption profits
in Asset Management has been transferred from other operating income to
commissions receivable. There is no change to the total net operating income
figure. The reasons for these changes are discussed in the Principal Accounting
Policies note in the 2003 Annual Report.
2. Net operating income
Half year Half year Year
to 30 September to 30 September to 31
2003 2002+ March
2003
£m £m £m
Continuing operations
Fees and commissions receivable 591.1 400.9 958.4
Fees and commissions payable (246.5) (160.4) (363.0)
Net trading interest income 26.1 13.5 39.0
Other operating income 11.1 1.5 6.3
Net operating income 381.8 255.5 640.7
+In accordance with the change made in the 2003 Annual Report, there has been a
change in the presentation of the comparative figures for the half year to 30
September 2002 as detailed in the basis of preparation note (note 1).
3. Segmental analysis
(a) Segmental analysis of net operating income
Half year Half year Year
to 30 to 30 September to 31
September 2002 March
2003 2003
£m £m £m
Business segment
Continuing operations
Asset Management 243.5 173.2 433.2
Brokerage 138.3 82.3 207.5
381.8 255.5 640.7
3. Segmental analysis continued
(b) Segmental analysis of profit on ordinary activities before taxation
Half year Half year Year
to 30 to 30 September to 31
September 2002 March
2003 2003
£m £m £m
Business segment
Continuing operations
Asset Management - net management fee income 122.8 80.1 181.1
Asset Management - net performance fee income 34.1 35.9 115.0
Asset Management - goodwill amortisation (18.9) (13.5) (31.4)
Asset Management total 138.0 102.5 264.7
Brokerage - before goodwill amortisation and exceptional
items 32.3 20.2 48.3
Brokerage - goodwill amortisation (3.2) (1.5) (4.8)
Brokerage - exceptional items (5.3) - (15.0)
Brokerage total 23.8 18.7 28.5
Sugar Australia 1.3 1.8 3.7
163.1 123.0 296.9
4. Goodwill amortisation
Included in operating expenses is goodwill amortisation of £21.5 million
(September 2002: £14.3 million, March 2003: £34.8 million). Total goodwill
amortisation in the period, including the amount relating to joint ventures and
associates, on a pre-tax basis is £22.1 million (September 2002: £15.0 million,
March 2003: £36.2 million) and on a post-tax basis is £22.1 million (September
2002: £13.2 million, March 2003: £36.2 million).
5. Exceptional operating expense
For the half year to 30 September 2003, following the acquisition of GNI
Holdings Limited, costs amounting to £5.3 million (£4.1 million net of tax) were
incurred, or provided for, relating to the integration of the acquired business
into the Group's existing business. These costs relate principally to
redundancy and staff retention costs of £3.7 million, and other termination and
relocation costs of £1.6 million.
For the year to 31 March 2003, following the acquisition of GNI Holdings
Limited, costs amounting to £15.0 million (£11.5 million net of tax) were
incurred, or provided for, relating to the integration of the acquired business
into the Group's existing business. These costs relate principally to
redundancy and staff retention costs of £11.5 million, and other termination and
relocation costs of £3.5 million.
Of these total costs incurred since acquisition, £18.3 million had been paid by
30 September 2003, with the remaining £2.0 million included as provisions or
accruals in the balance sheet at 30 September 2003.
6. Net interest income
Half year Half year Year
to 30 to 30 September to 31
September 2002 March
2003 2003
£m £m £m
Interest receivable 17.1 17.8 33.3
Interest payable (11.6) (11.2) (22.1)
5.5 6.6 11.2
7. Dividends
Half year Half year Year
to 30 September to 30 to 31
2003 September March
2002 2003
£m £m £m
Ordinary shares
Interim - 11.4 pence (2003: 9.1 pence) 33.5 27.4 27.4
Final - (2003: 14.1 pence) - - 41.9
Under accrual of 2002 Final - 5.9 5.9
33.5 33.3 75.2
The 2002 final dividend was under-accrued as a result of the issue of 43,621,216
shares at the end of May 2002, in connection with the RMF acquisition.
8. Earnings per share
The calculation of basic earnings per ordinary share is based on a profit for
the period of £127.2 million (30 September 2002: £97.2 million, 31 March 2003:
£234.5 million) and on 296,103,183 (30 September 2002: 287,282,883, 31 March
2003: 292,984,011) ordinary shares, being the weighted average number of
ordinary shares in issue during the period after excluding the shares owned by
the Man Group plc employee trusts.
The diluted earnings per share is based on a profit for the period of £132.5
million (30 September 2002: £97.2 million, 31 March 2003: £238.5 million) and on
337,293,353 (30 September 2002: 296,598,037, 31 March 2003: 314,327,270)
ordinary shares, calculated as follows:
30 September 30 September 31
2003 2002 March
Number Number 2003
Number
Basic weighted average number of shares 296,103,183 287,282,883 292,984,011
Dilutive potential ordinary shares
Share awards under incentive schemes 9,805,709 9,085,040 9,321,366
Employee share options 183,213 230,114 139,774
Exchangeable bonds 31,201,248 - 11,882,119
337,293,353 296,598,037 314,327,270
8 Earnings per share continued
The following tables reconcile the earnings per share on total operations with
the earnings per share before goodwill and exceptional items and underlying
earnings per share:
Half year to 30 September 2003
Basic Diluted Basic Diluted
post-tax post-tax earnings earnings per
earnings earnings per share share
£m £m pence pence
Earnings per share on total operations+ 127.2 132.5 43.0 39.3
Exceptional items 4.1 4.1 1.3 1.2
Goodwill amortisation 22.1 22.1 7.5 6.5
Earnings per share - before goodwill and exceptional
items
153.4 158.7 51.8 47.0
Performance related income (27.3) (27.3) (9.2) (8.0)
Sugar Australia (0.9) (0.9) (0.3) (0.3)
Underlying earnings per share 125.2 130.5 42.3 38.7
Half year to 30 September 2002
Basic Diluted Basic Diluted
post-tax post-tax earnings earnings per
earnings earnings per share share
£m £m pence pence
Earnings per share on total operations 97.2 97.2 33.8 32.8
Exceptional items - - - -
Goodwill amortisation 13.2 13.2 4.6 4.4
Earnings per share - before goodwill and exceptional
items
110.4 110.4 38.4 37.2
Performance related income (28.8) (28.8) (10.0) (9.7)
Sugar Australia (1.5) (1.5) (0.5) (0.5)
Underlying earnings per share 80.1 80.1 27.9 27.0
Year to 31 March 2003
Basic Diluted Basic Diluted
post-tax post-tax earnings earnings per
earnings earnings per share share
£m £m pence pence
Earnings per share on total operations+ 234.5 238.5 80.0 75.8
Exceptional items 11.5 11.5 3.9 3.6
Goodwill amortisation 36.2 36.2 12.4 11.6
Earnings per share - before goodwill and exceptional
items 282.2 286.2 96.3 91.0
Performance related income (92.0) (92.0) (31.4) (29.3)
Sugar Australia (3.3) (3.3) (1.1) (1.0)
Underlying earnings per share 186.9 190.9 63.8 60.7
+ The difference between basic and diluted post-tax earnings on total operations
is the adding back of the interest expense in the period relating to the
exchangeable bonds.
9. Debtors
At 30 At 30 September At 31
September 2002 March
2003 2003
£m £m £m
Trade debtors
Amounts owed by broker dealers on secured stock lending and
borrowing 463.5 2.2 488.0
Securities transactions in the course of settlement 71.7 87.4 245.2
Futures transactions 220.8 182.4 315.7
Other trade 270.7 103.3 136.7
Amounts owed by funds 309.1 362.1 310.6
Other categories of debtors 358.7 196.3 247.1
1,694.5 933.7 1,743.3
10. Current asset investments
At 30 At 30 September At 31
September 2002 March
2003 2003
£m £m £m
Listed investments 709.1 1.9 402.2
Unlisted investments 306.4 115.1 291.9
1,015.5 117.0 694.1
Listed investments largely relate to long stock positions held for hedging in
Brokerage. Unlisted investments relate to investments in the new manager
initiative and other managers in Asset Management and US treasury bills and
certificates of deposit in Brokerage.
11. Creditors
At 30 At 30 September At 31
September 2002 March
2003 2003
£m £m £m
Amounts falling due within one year
Bank loans and overdrafts 59.5 353.6 170.1
Private placement notes 9.0 - 9.5
Trade creditors
Amounts owed to broker dealers on secured stock lending and
borrowing
541.9 - 578.4
Securities transactions in the course of settlement 152.8 138.5 169.9
Futures transactions 622.8 122.7 525.1
Short stock positions held for hedging 441.9 - 414.1
Other trade 80.8 57.5 70.5
Other categories of creditors 357.7 240.7 340.1
2,266.4 913.0 2,277.7
Other categories of creditors includes £34.2 million relating to commodity
financing transactions (30 September 2002: £42.4 million, 31 March 2003: £35.9
million).
At 30 At 30 September At 31
September 2002 March
2003 2003
£m £m £m
Amounts falling due after more than one year
Loans
Bank loans 345.1 165.2 88.6
Private placement notes - 9.5 -
Exchangeable bonds 390.2 - 389.7
Other creditors 31.5 32.2 26.1
766.8 206.9 504.4
12. Segregated funds
As required by the United Kingdom Financial Services and Markets Act and by the
US Commodity Exchange Act, the Group maintains certain balances on behalf of
clients with banks, exchanges, clearing houses and brokers in segregated
accounts totalling £3,453.2 million (30 September 2002: £2,455.5 million, 31
March 2003: £3,148.9 million). These amounts and the related liabilities to
clients, whose recourse is limited to the segregated accounts, are not included
in the Group balance sheet.
13. Cash flow from operating activities
Half year Half year Year
to 30 September to 30 September to 31
2003 2002 March
2003
£m £m £m
Operating profit 151.1 112.7 276.1
Depreciation of tangible fixed assets 9.2 4.3 12.7
Amortisation of goodwill 21.5 14.3 34.8
Amortisation of fixed asset investments 11.0 7.9 14.2
Profit on sale of fixed asset investments - - (0.1)
(Increase)/decrease in debtors (35.0) (51.8) 1,212.8
(Increase)/decrease in short-term investments (364.8) 39.5 772.3
Increase/(decrease) in creditors 198.0 (36.1) (1,995.5)
Costs in relation to exceptional items (7.1) - (8.7)
Net cash (outflow)/inflow from operating activities (16.1) 90.8 318.6
14. Analysis of net debt
At 30 September At 30 At 31
2003 September 2002 March
2003
£m £m £m
Cash at bank and in hand 647.9 350.9 642.6
Overdrafts (50.0) (2.6) (13.3)
Loans due within one year
Bank loans (9.5) (351.0) (156.8)
Private placement notes (9.0) - (9.5)
Loans due after one year
Bank loans (345.1) (165.2) (88.6)
Private placement notes - (9.5) -
Exchangeable bonds (390.2) - (389.7)
Closing net debt (155.9) (177.4) (15.3)
15. Exchange rates
The following US dollar exchange rates have been used in the preparation of this
Interim Report:
30 September 30 September 31 March
2003 2002 2003
Average exchange rate 1.62 1.51 1.55
Period end exchange rate 1.67 1.57 1.58
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