Final Results
Man Group PLC
23 May 2002
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2002
FINANCIAL HIGHLIGHTS
Business summary
• Funds under management at 31 March 2002 up 60% to $10.7 billion
• Record level of fund sales in the year, totalling $5.2 billion
• Recurring net management fee income up 66% to £117.6 million
• Brokerage result up 27% to £38.3 million
• Diluted underlying earnings per share up 50% to 45.7 pence
• Net performance fee income down 27% to £55.2 million
• Diluted earnings per share before goodwill amortisation and exceptional
items up 15% to 63.2 pence
• Total diluted earnings per share up 18% to 56.8 pence
• Dividends up 20% to 18.6 pence
• Joined the FTSE 100 on 24 September 2001
March March
2002 2001
Funds under management $10.7bn $6.7bn
£7.5bn £4.7bn
Asset Management net management fee income+ £117.6m £70.7m
Asset Management net performance fee income+ £55.2m £76.0m
Brokerage+ £38.3m £30.2m
Financial Services £211.1m £176.9m
Sugar Australia £2.1m £1.8m
Profit before tax, goodwill amortisation and exceptional items £213.2m £178.7m
Diluted earnings per share *
Underlying+ 45.7p 30.4p
Before goodwill amortisation and exceptional items 63.2p 54.9p
Total operations (including discontinued operations) 56.8p 48.1p
Dividends per share 18.6p 15.5p
Post-tax return on equity before exceptional items 33.2% 35.9%#
Equity shareholders' funds £531.5m £433.4m
+ Before goodwill amortisation
* A reconciliation of earnings per share is shown in note 8
+ Underlying earnings per share represents earnings from net management fee
income in Asset Management plus Brokerage net income.
# Assumes equity raised by the share placing in January 2001 was in place
for the whole year
Man Group plc 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. Man is able to use its
sophisticated risk management capabilities in product structuring and
disciplined manager selection. Man has an investment management track record
dating back to 1983 and now provides a wide range of fund styles together with
worldwide distribution to the private clients and institutional investors. The
Group 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 as an intermediary in the world's metals, energy and
foreign exchange markets with offices in key financial centres.
Stanley Fink, Chief Executive said:
'It has been an exceptional and significant year for the Group in terms of
business development, profits growth and increased shareholder value. Driven by
a record level of sales in Asset Management, funds under management stood at
$10.7 billion at year end, up some 60% on the year, with recurring net
management fee income up 66%.'
Harvey McGrath, Chairman said:
'The acquisition of RMF Investment Group (RMF), announced today, represents a
major step forward in the development of Man Group plc. The combination of Man
and RMF significantly strengthens our position in the fast growing alternative
investment market. RMF brings us further access to asset management capacity,
diversifies our product range and provides added reach in distribution,
particularly in the institutional arena. There is also great cultural fit
between the two businesses and significant opportunity to build on each others
strengths.'
Enquiries
Man Group 020 7285 3000
Stanley Fink
Peter Clarke
Gavin Anderson 020 7554 1400
Howard Lee
Chris Salt
OVERVIEW
It has been an exceptional and significant year for the Group in terms of
business development, profits growth and increased shareholder value. Driven by
a record level of sales in Asset Management, funds under management stood at
$10.7 billion at year end, up some 60% on the year, with recurring net
management fee income up 66%.
Assisted by a strong year in Brokerage, diluted underlying earnings per share, a
measure which excludes variable performance related fee income, was up 50% at
45.7 pence. Performance fee earnings added 16.9 pence per share. Diluted
earnings per share on total operations was 56.8 pence, and the Group recorded a
33.2% post-tax return before exceptional items on shareholders' funds.
These results have enabled us to exceed two of our financial targets, delivery
of significant growth in underlying earnings and maintenance of a high return on
capital. They also place us ahead of the run-rate necessary to meet our third,
which is to double assets under management from their level of $6.7 billion as
at 31 March 2001 to $13.4 billion by 31 March 2004.
In Asset Management, sales of $5.2 billion significantly exceeded our
expectations. This exceptional result reflects continuing investor concern about
the direction of global equity markets, strong trailing performance from most of
our products, and the attractiveness of our principal guaranteed structured
products. We firmly believe that the growing interest in alternative investments
reflects a structural shift in global asset allocations, and that this trend
will continue. Going forward, our strategy will continue to focus on the further
development of our distinctive business model which integrates money management
skills, product structuring and a proven distribution capability. Development of
each of these three components will be both organic and, where appropriate, by
acquisition of complementary businesses.
Our Brokerage division has also had an excellent year, with pre-tax profits up
27% at £38.3 million. Much of this growth has come from our institutional
financial futures, foreign exchange and metals businesses. In financial futures,
in particular, we have continued to be successful at recruiting key producers
and driving down costs. In our retail business, lower activity levels and
interest rates reduced revenues, partially offset by cost cutting and
acquisitions in the UK and Australia. Overall, we expect the futures broking
industry to continue to consolidate and anticipate that we will continue to grow
through the acquisition of both producer teams and businesses.
OUTLOOK
The alternative investment market continues to grow rapidly, reflecting the
structural shift of assets into the alternative class. Increasingly, investors
in alternative investments are requiring disciplined manager selection and
portfolio construction processes with sophisticated risk management capabilities
as well as a good track record. These are areas in which the Man Group has
established credentials. Our products are in high demand, particularly from the
private client market.
The acquisition of RMF Investment Group (RMF) announced today, we believe, will
make the Enlarged Group the largest asset manager by funds under management in
the alternative investments market (excluding real estate and private equity),
and enable it to offer a comprehensive range of multi-style, multi-manager
products. The Enlarged Group will have around $20 billion (£14 billion) of funds
under management. The Acquisition also provides the combined group with a
broadened range of money management expertise, greater depth of structuring
skills and a leading presence in the institutional sector of this market.
In addition to building out the business in our areas of core expertise, we have
continued to meet or exceed our financial targets. Since the year-end,
Man-Glenwood and our other smaller managers have continued to record positive
performance and accordingly, although Man-AHL has given back some of its very
strong performance in 2001, sales of our multi-manager composite products
continue to be good. Man AP Strategic Series 1 which closed in April raised $280
million, with the follow on launch of Series 2 due to close in June. Currently,
excluding the acquisition of RMF, funds under management are estimated to be
$11.0 billion (£7.6 billion) underpinning a significantly higher run-rate of net
management fee income than last year. Our Brokerage activities have also had a
good start to the year.
DIVIDENDS
Given the Group's performance in the year and our strong financial condition,
the Board proposes a final dividend of 13.1 pence per share, which together with
the interim dividend of 5.5 pence per share amounts to 18.6 pence per share, an
increase of 20%. This year's dividend is covered 3.1 times by total earnings and
2.5 times by underlying earnings.
STRATEGY
Recent statistics suggest that in the region of $540 billion to $600 billion is
invested in alternative assets (excluding private equity and real estate), up
around 10% in 2001, having grown 27% per annum over the last 11 years. Whilst
this growth rate is impressive, $540 billion represents only a small percentage
of the world's liquid assets, suggesting that as an investment class there is
room for continued strong growth. Many investment professionals are advocating a
portfolio allocation of 10% or more to alternative investments.
Man is well placed to take advantage of this structural shift in global asset
allocations. We believe that the Man Group has the ability to provide a
combination of high quality money management skills, product-structuring
expertise and access to a global client base. Our strategy is to continue the
development of each of these components.
Managers
Securing access to high quality managers with long track records is key to the
attractiveness of our products and their performance. Our largest two managers,
Man-AHL and Man-Glenwood, which account for 81% of assets under management, are
wholly owned and each has a long track record of achieving the expectations of
investors in terms of returns and volatility.
Man's new manager initiative seeks to identify and form relationships with
developing managers that it believes to have significant potential. While Man's
participation may vary, its focus is on achieving favourable distribution
agreements and preferred access to capacity with each manager. Currently Man has
assets allocated to eight managers whose styles include equity-balanced,
convertible and merger arbitrage, and fixed income relative value. These
managers follow broadly market neutral strategies and focus on quantitative
investment processes.
Product Structuring
Using our range of managers and investment styles we can provide a high degree
of flexibility in asset allocation and a consistent and thorough approach to
risk management. This allows us to offer a range of products to meet a variety
of investor needs and which can evolve to reflect prevailing circumstances.
For the private client investor, our conservatively structured composite
products have been the most sought after, and these products currently account
for about 65% of assets under management. For many years we have been
structuring products for this market which offer a guaranteed return of
principal at maturity of the fund, typically in around 10 years time, in some
cases with a step-up guarantee to lock in a level of good performance across the
term of the product. These guarantees are provided by third party banks and
other financial institutions, who have a detailed understanding of our risk
management and product structuring capabilities and with whom the Group has
established strong relationships.
In conjunction with our good performance track record, being able to provide
these guarantee structures and to meet investor wishes for other attributes such
as monthly liquidity, has enabled us to offer attractive products at the premium
end of the market.
Distribution
Historically our strongest private client markets have been Western Europe
(excluding the UK), South East Asia (including Australia and New Zealand) and
the Middle East. We sell our products through an established intermediary
network in return for a sales commission. This approach allows us to access the
higher private client fee structure with a low and flexible cost base.
Our strategy is to continue to develop both the range and quality of our
intermediaries. In some cases this has been achieved by accessing the
distribution capabilities of those financial institutions who are already
familiar with our product.
Whilst we expect to see continued strong demand from our existing markets, we
have recently made a strategic decision to increase our sales into the domestic
US private client market. We expect to begin selling structured products in the
US during our financial year ending March 2003 and anticipate that US sales will
represent a growing share of our private client sales during the coming years as
our intermediary network there develops.
Fees
Our strategy has been to focus our sales efforts in the private client market
where our structured products and their track record can command premium fees.
We also raise money from institutional clients, who accounted for 19% of sales
in the year.
Our focus is to raise assets in the highest margin products and so drive growth
in net management fee income which was up 66% in the year. This is the key
element of our underlying profits. In those of our managers and styles where we
have significant unused capacity we will raise institutional money, which
typically pays a lower management fee.
In addition to management fees, the Group has the capacity to earn substantial
performance fee income depending upon the performance of the underlying product
managers. In order to generate greater stability in performance fee income, our
strategy is to identify and grow those managers and styles with low levels of
correlation to our existing manager portfolio.
Brokerage
Our Brokerage business is a world leading agency broker of futures, options and
equity derivative products. We have developed the business through the
combination of our leading position on exchanges and growing customer order
flow. This has in turn allowed us to provide liquidity and efficient order
execution to the benefit of our client base, and has attracted producers to join
the Man Group.
Man Financial's international scale provides it with effective market access,
substantial order flows and economies of scale through utilising the same
administrative and technological platform for a wide variety of financial
products. It has invested early in electronic trading platforms and automation
of order routing, processing and back office systems. As a result it is well
placed to take advantage of the new opportunities that will arise from the
continued growth of financial markets, from further consolidation of market
participants and from being at the forefront of rapidly changing trading
technologies.
We continue to derive benefits from having both Brokerage and Asset Management
activities in the Group, in terms of identifying the most efficient trading
access and introducing customers to the other Group activity.
We expect to continue the development of the business by acquiring producer
teams and businesses as the industry consolidates. Although we currently have
only a small presence in the cash equity markets, we have positioned the
business to benefit from the likely growth in equity derivative products,
whether off market such as CFDs (contracts for difference), or on exchange
products such as single stock futures. The development of these products will
also benefit the Asset Management business as we seek more efficient ways of
trading equities.
OPERATING REVIEW
Asset Management
Sales
26 new products were launched during the year. The increase in funds under
management in the year from Man's four global launches (Man-Glenwood Select,
Man-IP 220 Plus Series 3 and 4, and Man Multi Strategy Series 3) was $2,492
million. Joint venture sales (including OM-IP 220 Series 6 and OM-IP Hedge Plus)
accounted for $737 million. Other launches amounted to $269 million and
open-ended funds a further $1,659 million.
New money has been raised primarily in Europe (and in particular Switzerland)
and Asia Pacific. The proportion of sales in the Americas has increased due to
sales made by the Glenwood US business. Sales in the year were split 81% retail
product and 19% institutional product. During the year Man has continued to
build out its distribution platform by increasing both the number and quality of
its intermediaries.
Of our product launches during the year, Man-Glenwood Select, the first global
launch of the financial year, was structured as a more conservative product with
exposure to the full range of alternative investment strategies. It is targeting
returns of 14-15% per annum over the medium term.
Man-IP 220 Plus Series 3 and 4 are part of our successful Man-IP 220 family of
products. The latest launches continued to be based around the core investment
approaches of the Man-AHL Diversified Programme and the Man-Glenwood Portfolio
as well as benefiting from an increased investment exposure of US$/Euro 160 for
every US$/Euro 100 invested. In addition, these two series will achieve greater
diversification through a carefully selected range of complementary strategies.
They are both targeting returns in the 17-20% per annum range.
Man Multi Strategy Series 3 is the third in a family of multi-strategy products
focused on four broad categories: securities selection (long/short), event
driven, managed futures and market neutral and arbitrage. It targets returns of
18% per annum with associated volatility of 13% and benefits from increased
investment exposure of US$/Euro 150 for every US$/Euro 100 invested.
There were two successful OM-IP launches by the new Australian joint venture, OM
Strategic Investments, which raised a total of $245 million of client money. The
OM-IP 220 Series 6 has a similar structure to the Man-IP 220 family. The OM-IP
Hedge Plus product comprises Man-AHL Diversified Programme, Man-Glenwood
Portfolio and MIP Global Equities Programme.
The global launch Man AP Strategic Series 1 Ltd raised $280 million of client
money and started trading on 19 April 2002. It is therefore not included in the
figures for the year to 31 March 2002. It represents an important addition to
the Man AP product family that was established two years ago. It provides
investors access to the Man-AHL Institutional Portfolio as well as complementary
arbitrage and equity hedge styles. It targets a return of 16-18% per annum
whilst seeking to restrict volatility to around 10-11%. It also carries a
guarantee of return of capital at maturity along with a profit lock-in feature
that may allow the guarantee level to rise.
Investment movement
Investment movement for the year was a negative $83 million, after recording a
positive return for the six months to September 2001 of $345 million. After
strong relative performance in the three and five year periods to March 2002,
the performance in the last year, particularly in Man-AHL, has been relatively
weaker.
Man-AHL, our futures fund manager, generated a return of -8.6% in the year.
Unexpected economic weakness in the first half of the year led to highly
profitable long positions in short interest rate futures as the prices of these
contracts rose in response to a series of interest rate cuts. Likewise short
positions in Stock Index futures benefited from falling equity markets and these
profits were added to by short positions in a number of commodity markets where
prices also moved lower as a result of the economic slowdown. In the second half
of the year these trends were reversed causing some of the gains to be given
back. Further losses were incurred subsequently as uncertainty over the likely
direction of the economy led to range bound trading in most financial markets,
which limited profitable trading opportunities.
Man-Glenwood generated positive returns of 4.1%. Long/short equity managers
boosted Man-Glenwood performance due to strong stock selection, especially those
focusing on biotech, utility and financial sectors in the US and on basic
industries in Asia. The environment for distressed investing was also
favourable, benefiting from a cyclical upswing in supply. The merger arbitrage
environment, on the other hand, was particularly weak due to a shortage of
merger and other reorganisation activity.
Redemptions
Redemption levels in the year were lower than last year and towards the lower
end of the range we have experienced over the long term. Asset Management
typically expects redemptions to average between 15%-20% in any one financial
year. This is based on historical experience and it should be noted there is
little correlation between redemptions and fund performance. Redemptions are a
function of a number of factors including geographical diversity. Furthermore,
early redemption charges and the long-term nature of the funds encourage
investors to maintain the long-term view.
Brokerage
Brokerage had a record year with profits, before goodwill amortisation, of
£38.3m up 27% on last year. In Group terms, it accounted for about 20% of Group
pre-tax profits. It continued to enjoy a broadly based contribution from its
product lines during the year.
Man Financial has enjoyed growth in the year in its core institutional
franchise: financial futures and its related new product areas had another
excellent year. The firm has increased its execution volumes and has managed to
enhance that element of its financial futures activities where it was able to
add value through providing liquidity via its extensive and global client base.
The product base continues to widen with regard to equities, equity options,
equity index and equity index options - all of which share similar liquidity
pooling characteristics to the financial futures business. In its metals
business, declining LME volumes were more than off-set by a doubling of its
market share. Foreign exchange made an increased contribution, principally as a
result of higher referrals from the institutional, private client and general
brokerage businesses. Energy maintained the profit levels achieved last year
despite the disruption to its market caused by the 11 September attacks and the
demise of Enron. The firm's market share on both the IPE and NYMEX grew as a
direct consequence of its successful sales executive recruitment programme.
The retail business recorded a lower profit contribution than the previous year
mainly as a result of the large declines in US and UK interest rates. Although
retail activity levels were generally lower, this was partially offset by the
implementation of technology solutions and cost reductions.
ADDITIONAL FINANCIAL INFORMATION
Financial objectives
Our financial objectives are to continue to deliver significant growth in
underlying earnings per share and to maintain high levels of return on capital
through active management of the Group's capital base. We have achieved these
objectives in the current year.
Underlying earnings represent net management fee income from Asset Management
plus Brokerage net income. It excludes the net performance fee income from Asset
Management, Sugar Australia and goodwill amortisation. Underlying earnings per
share has grown by 50% over the last year and by 46% compound per annum over the
last four years.
Our second financial objective is to remain committed to active management of
the Group's capital base to maintain the Group's high level of return on
capital. The Group's post tax return on capital before exceptional items for the
year was 33.2%, compared to 35.9% last year. This was achieved despite the fact
that variable net performance fee income decreased by £20.8 million, and the
capital base grew by £98.1 million, from last year.
Financial capacity
The Group has both committed and uncommitted facilities, totalling $2.0 billion,
available to it from a group of major international banks. 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. It is anticipated that the portion maturing in July 2002 will be
successfully renewed, without any material change to its terms. The Group has
available to it other committed facilities of $0.1 billion and uncommitted
facilities of $0.4 billion. Total undrawn committed facilities at the year-end
were $955 million (£671 million).
The Group has an on-going external funding initiative whereby financing is
arranged directly for individual funds thus refinancing temporary facilities
provided to the funds by the Group. During the last year the initiative resulted
in a series of the funds being able to arrange financing, directly to them,
totalling $759 million (£533 million).
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2002
2002 2001 +
Note Before Goodwill Before Goodwill
goodwill goodwill and
and and exceptional and
exceptional exceptional items exceptional
items items items
£m £m Total £m £m Total
£m £m
Net operating income 2,3 406.1 - 406.1 347.1 - 347.1
Operating expense 4 (220.4) (5.8) (226.2) (187.0) (3.8) (190.8)
Group operating profit- continuing 185.7 (5.8) 179.9 160.1 (3.8) 156.3
operations
Share of operating profit/(loss) 4 7.8 (2.2) 5.6 6.1 (0.9) 5.2
from joint ventures and associates
Total operating profit: Group and share of 193.5 (8.0) 185.5 166.2 (4.7) 161.5
joint ventures and associates
Exceptional items - discontinued operations
5 - (12.1) (12.1) - (13.1) (13.1)
Loss on sale of Agricultural Products
businesses
5 - - - - (1.9) (1.9)
Restructuring costs
Net interest income 6 19.7 - 19.7 12.5 - 12.5
Profit on ordinary activities before 3 213.2 (20.1) 193.1 178.7 (19.7) 159.0
taxation
Taxation (43.9) 2.9 (41.0) (36.9) 2.1 (34.8)
Profit for the financial year 169.3 (17.2) 152.1 141.8 (17.6) 124.2
Ordinary dividends 7 (48.4) (39.5)
Retained profit 103.7 84.7
Earnings per share before goodwill and 8
exceptional items
Basic 65.5p 56.8p
Diluted 63.2p 54.9p
Underlying earnings per share 8
Basic 47.3p 31.4p
Diluted 45.7p 30.4p
Earnings per share on total operations 8
Basic 58.8p 49.8p
Diluted 56.8p 48.1p
Dividends per share
Interim 7 5.5p 4.6p
Final proposed 7 13.1p 10.9p
Historical cost profits and losses are not materially different from those shown
above.
• There has been a change in the presentation of the comparative figures as
detailed in note 1 - basis of preparation.
GROUP BALANCE SHEET
at 31 March 2002
2002 2001 +
Note £m £m £m £m
Fixed assets
Intangible assets - goodwill 67.7 73.1
Tangible assets 24.1 21.0
Investments
Investments in joint ventures
Share of gross assets and goodwill 23.8 25.0
Share of gross liabilities (3.4) (3.9)
20.4 21.1
Investments in associates 18.4 17.8
Other investments 59.1 48.3
97.9 87.2
189.7 181.3
Current assets
Debtors 9 944.7 703.6
Securities purchased under agreements to resell 21.0 104.0
Investments 86.9 127.9
Cash at bank and in hand 416.9 133.7
1,469.5 1,069.2
Creditors: amounts falling due within one year 11 (833.5) (791.3)
Net current assets 636.0 277.9
Total assets less current liabilities 825.7 459.2
Creditors: amounts falling due after more than one year 11 (288.5) (19.2)
Provisions for liabilities and charges (5.7) (6.6)
Net assets 531.5 433.4
Capital and reserves
Called up share capital 26.7 26.8
Share premium account 111.5 111.4
Capital reserve 1.6 1.6
Profit and loss account 391.7 293.6
Equity shareholders' funds 531.5 433.4
• There has been a change in the presentation of the comparative figures as
detailed in note 1 - basis of preparation.
GROUP CASH FLOW STATEMENT
for the year ended 31 March 2002
2002 2001+
Note £m £m
Net cash inflow from operating activities 12 52.7 99.1
Dividends from joint ventures 3.8 2.7
Dividends from associates 4.1 2.3
Returns on investments and servicing of finance 19.7 4.2
Taxation paid (23.8) (8.2)
Capital expenditure and financial investment (33.9) (34.3)
Acquisitions and disposals 18.6 (80.7)
Equity dividends paid (42.6) (32.9)
Net cash outflow (1.4) (47.8)
Management of liquid resources 16.9 (20.2)
Financing 286.0 (75.1)
Increase/(decrease) in cash 301.5 (143.1)
• There has been a change in the presentation of the comparative figures as
detailed in note 1 - basis of preparation.
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the year ended 31 March 2002
2002 2001
£m £m
Increase/(decrease) in cash 301.5 (143.1)
Cash (inflow)/outflow from movement in debt (289.9) 151.7
Cash (inflow)/outflow from movement in liquid resources (16.9) 20.2
Change in net debt resulting from cash flows (5.3) 28.8
Debt disposed of with businesses and subsidiaries - 3.7
Currency translation difference (0.2) (6.3)
Movement in net debt (5.5) 26.2
Opening net debt (35.2) (61.4)
Closing net debt (40.7) (35.2)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 March 2002
2002 2001
Note £m £m
Profit for the financial year 152.1 124.2
Ordinary dividends 7 (48.4) (39.5)
Retained earnings 103.7 84.7
Other recognised gains and losses relating to the year (2.5) 22.6
Issue of ordinary share capital 0.1 76.6
Purchase and cancellation of own shares (4.0) -
Amount added back in respect of scrip dividends - 1.4
Adjustment to goodwill written off on acquisitions 0.8 (2.2)
Net increase in shareholders' funds 98.1 183.1
Opening shareholders' funds 433.4 250.3
Closing shareholders' funds 531.5 433.4
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 March 2002
2002 2001
£m £m
Profit for the financial year 152.1 124.2
Currency translation difference taken directly to reserves (2.5) 22.6
Total recognised gains relating to the year 149.6 146.8
1. Basis of Preparation
The financial information contained herein has been prepared on the basis of the
accounting policies set out in the Annual Report for the year to 31 March 2002.
The Group profit and loss account format has been changed in two respects in
2002. Firstly, goodwill amortisation and exceptional items are now shown in a
separate column and as such one of our alternative earnings per share measures
has been amended so that it is based on earnings before goodwill amortisation
and exceptional items. This has been done to present the profit and loss account
and related measures in a more useful format. Secondly, goodwill amortisation,
which is more significant in 2002, has been split between operating expense and
share of operating profit/(loss) from joint ventures and associates. In 2001,
the aggregate amount was shown in operating expense. In addition, ordinary
shares in the Company held by the employee trusts have been reclassified from
current asset investments to fixed asset investments, and the comparative
figures on the Group balance sheet, cash flow statement and related notes have
been restated accordingly. This has been done in light of current best practice
which suggests that the holding of these shares to reward directors and
employees over the longer term is more fairly represented by classifying them as
fixed rather than current assets. The book value of ordinary shares in the
Company held by the employee trusts at 31 March 2002 was £38.5 million (2001:
£27.2 million, 2000: £13.2 million).
The financial information contained herein is abridged and does not constitute
statutory accounts as defined by Section 240 of the Companies Act 1985.
Statutory accounts for the year to 31 March 2002, upon which the auditors have
indicated their intention to give an unqualified report, will shortly be
delivered to the Registrar of Companies and will be posted to shareholders on 7
June 2002. The accounts for the year ended 31 March 2000 were unqualified and
have been delivered to the Registrar of Companies.
2. Net operating income
2002 2001
£m £m
Continuing operations
Fees and commissions receivable 570.7 504.7
Fees and commissions payable (245.9) (230.4)
Net trading interest income 34.5 44.7
359.3 319.0
Other operating income 46.8 28.1
Net operating income 406.1 347.1
3. Segmental analysis
(a) Segmental analysis of net operating income
2002 2001
£m £m
Business segment
Continuing operations
Asset Management 252.1 214.2
Brokerage 154.0 132.9
406.1 347.1
Geographic area
Europe 299.1 253.4
The Americas 91.2 85.4
Rest of the World 15.8 8.3
406.1 347.1
(b) Segmental analysis of profit on ordinary activities before taxation
2002 2001
Before goodwill After goodwill Before After
allocation allocation goodwill goodwill
allocation allocation
£m £m £m £m
Business segment
Continuing operations
Asset Management - management fee income 117.6 111.0 70.7 67.5
Asset Management - performance fee income 55.2 55.2 76.0 76.0
Brokerage 38.3 36.9 30.2 28.7
Financial Services 211.1 203.1 176.9 172.2
Sugar Australia 2.1 2.1 1.8 1.8
213.2 205.2 178.7 174.0
Exceptional items - discontinued operations (12.1) (12.1) (15.0) (15.0)
201.1 193.1 163.7 159.0
Geographic area
Europe 204.1 163.5
The Americas (8.4) 3.3
Rest of the World 9.5 7.2
Exceptional items - discontinued operations (12.1) (15.0)
193.1 159.0
The impact of acquisitions, joint ventures and associates is not material and
they are therefore not separately identified in the tables above.
4. Goodwill amortisation
Included in operating expenses is goodwill amortisation of £5.8 million (2001:
£3.8 million). Total goodwill amortisation in the year, including the amount
relating to joint ventures is £8.0 million (2001: £4.7 million).
5. Exceptional items
The loss on sale of Agricultural Products businesses of £12.1 million (£12.1
million net of tax) represents an adjustment to the loss on sale reported in
March 2000. The adjustments are the net effect of claims made under limited
warranties given to the management buyout group. These limited warranties were
disclosed in the contingent liabilities note in the prior year, however during
the year an agreement was reached whereby they have been terminated so that the
Man Group will not be required to make any further payments. As part of this
agreement the management buyout group has also settled part of the loan note
given to them by the Man Group such that the outstanding amount of the loan note
has been reduced from $100 million to $55 million as at the year-end.
In 2001, the loss on sale of the Agricultural Products businesses of
£13.1million (£12.9 million net of tax) represents an adjustment of £11.3
million (£11.3 million net of tax) to the loss on sale reported in March 2000,
and £1.8 million (£1.6 million net of tax) in respect of the sale of the US Nuts
activities. Further Agricultural Products restructuring costs of £1.9 million
(£1.9 million net of tax) were also incurred, largely relating to termination
payments.
6. Net interest income
2002 2001
£m £m
Interest payable
On bank loans and overdrafts (21.3) (30.3)
On other loans (10.6) (17.9)
Interest receivable 51.3 60.5
19.4 12.3
Share of net interest income from joint ventures 0.3 0.2
Net interest income 19.7 12.5
7. Dividends
2002 2001
£m £m
Ordinary shares
Interim paid - 5.5 pence (2001: 4.6 pence) 14.6 11.5
Final proposed - 13.1 pence (2001: 10.9 pence) 33.8 28.0
48.4 39.5
The Group offers a Dividend Reinvestment Plan ('DRIP') for shareholders wishing
to buy shares with their cash dividend. The DRIP will be available to ordinary
shareholders in respect of the final dividend.
8. Earnings per share
The calculation of basic earnings per ordinary share is based on a profit for
the year of £152.1 million (2001: £124.2 million) and 258,439,772 (2001:
249,329,463) ordinary shares, being the weighted average number of ordinary
shares in issue during the year after excluding the shares owned by the Man
Group plc employee trusts.
The diluted earnings per share is based on a profit for the year of £152.1
million (2001: £124.2 million) and on 267,656,898 (2001: 258,168,532) ordinary
shares, calculated as follows:
2002 2001
Number Number
Basic weighted average number of shares 258,439,772 249,329,463
Dilutive potential ordinary shares:
9,123,962 8,109,220
Share awards under incentive schemes
93,164 729,849
Employee share options
267,656,898 258,168,532
The reconciliation of adjusted earnings per share is as follows:
2002 2001 +
Basic Diluted Basic earnings Diluted
earnings earnings per share earnings per
per share per share share pence
pence pence
Earnings pence Earnings £m
£m
Earnings per share on total operations 152.1 58.8 56.8 124.2 49.8 48.1
Exceptional items 12.1 4.7 4.5 14.8 5.9 5.7
Goodwill amortisation 5.1 2.0 1.9 2.8 1.1 1.1
Earnings per share before goodwill and 169.3 65.5 63.2 141.8 56.8 54.9
exceptional items
Performance related income (45.3) (17.5) (16.9) (62.3) (25.0) (24.1)
Sugar Australia (1.6) (0.7) (0.6) (1.1) (0.4) (0.4)
Underlying earnings per share 122.4 47.3 45.7 78.4 31.4 30.4
• There has been a change in the presentation of the comparative figures as
detailed in note 1 - basis of preparation.
9. Debtors
2002 2001
£m £m
Amounts falling due within one year
Trade debtors:
Amounts owed by broker dealers on secured stock lending and borrowing 89.6 33.1
Securities transactions in the course of settlement 65.2 86.9
Futures transactions 125.1 168.3
Other trade 59.9 123.3
Amounts owed by joint ventures and associates 1.7 1.8
Amounts owed by funds 419.2 99.9
Other debtors 33.6 38.2
Taxation recoverable 0.8 14.6
Prepayments and accrued income 28.7 32.3
823.8 598.4
Amounts falling due after more than one year
Other debtors 48.2 73.3
Prepayments and accrued income 72.7 31.9
944.7 703.6
Other debtors falling due after more than one year includes £38.6 million (2001:
£70.2 million) in relation to loan notes in the management buyout group who
purchased the Agricultural Products businesses in March 2000. During the year
the balance was reduced from $100 million to $55 million.
10. 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 £2,258.7 million (2001: £2,208.9 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.
11. Creditors
2002 2001
£m £m
Amounts falling due within one year
Bank loans and overdrafts 180.2 158.4
Trade creditors:
Amounts owed to broker dealers on secured stock lending and borrowing 70.1 10.4
Securities transactions in the course of settlement 152.7 177.9
Futures transactions 115.0 63.5
Other trade 37.4 20.7
Amounts owed to joint ventures and associates 1.5 9.5
Taxation (note (b)) 50.3 47.6
Other taxation and social security costs 4.5 2.8
Other creditors (note (c)) 94.4 166.1
Accruals and deferred income 93.6 106.4
Proposed final dividend 33.8 28.0
833.5 791.3
Amounts falling due after more than one year
Loans
Bank loans 266.9 -
Private placement notes (note (a)) 10.5 10.5
Borrowings over one year 277.4 10.5
Other creditors 11.1 8.7
288.5 19.2
Analysis of borrowings due after more than one year
Amounts falling due
Between one and two years 10.5 -
Between two and five years 266.9 10.5
277.4 10.5
Notes:
a. The private placement notes comprise: US$15 million 7.44% notes due 14
December 2003.
b. Taxation payable within one year includes overseas taxation of £26.6 million
(2001: £22.2 million).
c. Other creditors substantially represents balances with counterparties whereby
commodities are bought under financing arrangements on deferred terms. None
of these amounts are secured.
12. Operating activities
2002 2001+
£m £m
Operating profit 179.9 156.3
Depreciation of tangible fixed assets 9.0 9.9
Amortisation of goodwill 5.8 3.8
Amortisation of fixed asset investments 10.6 1.9
Profit on sale of tangible fixed assets - (2.6)
Profit on sale of fixed asset investments (0.5) (1.3)
Decrease in stocks - 0.1
(Increase)/decrease in debtors (269.6) 714.4
Decrease/(increase) in securities purchased under agreements to resell 82.4 (100.6)
Decrease/(increase) in current asset investments 42.2 (57.0)
Decrease in creditors (9.9) (621.7)
Costs in relation to exceptional items (see note 5) 2.8 (4.1)
52.7 99.1
• There has been a change in the presentation of the comparative figures as
detailed in note 1 - basis of preparation.
The increase in debtors is largely due to the increase in loans to funds, as
detailed in note 9.
13. Exchange rates
The following rates of exchange have been used in preparing these accounts:
Year-end rates Average rates
2002 2001 2002 2001
US dollar 1.42 1.42 1.43 1.47
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