Interim Results
Man Group plc
04 November 2004
4 November 2004
UNAUDITED INTERIM RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2004
FINANCIAL HIGHLIGHTS
Half Year Business Summary
• Fund sales in the six month period of $7.7 billion, including $4.3
billion institutional sales in RMF
• Funds under management of $39.1 billion at 30 September 2004 (including
$16.8 billion in RMF), up $0.6 billion from 31 March 2004
• Recurring net management fee income+ up 34% to $265 million
• Brokerage profits+ up 27% to $66 million
• Diluted underlying earnings per share^* up 27% to 79 cents
• Net performance fee income at $29 million, down from $55 million
• Profit before tax on total operations up 21% to $318 million
• Diluted earnings per share on total operations* up 16% to 74 cents
• Dividend up 30% in US dollar terms to 24.0 cents
• Continued development in the second half:
- Man RMF Multi-Style Series 2 Ltd and Japanese and Australasian
regional sales launches closed in October raising aggregate investor money of
over $800 million
- Funds under management at 31 October 2004 are over $40 billion
- Brokerage continues to benefit from active markets in energy and
metals
Half year to Half year to Year to
30 September 30 September 31 March
2004 2003 2004
----------------------------------- ---------- ---------- --------
Funds under management $39.1bn $31.5bn $38.5bn
------------------------------ ---------- ---------- --------
Asset Management net management
fee income+ $265m $198m $459m
Asset Management net performance
fee income+ $29m $55m $236m
Brokerage+ $66m $52m $120m
------------------------------ ---------- ---------- --------
Financial Services $360m $305m $815m
Sugar Australia $2m $2m $6m
------------------------------ ---------- ---------- --------
Profit before tax, goodwill
amortisation and exceptional
items $362m $307m $821m
Goodwill amortisation and
exceptional items# ($44m) ($44m) ($106m)
------------------------------ ---------- ---------- --------
Profit before tax# $318m $263m $715m
------------------------------ ---------- ---------- --------
Diluted earnings per share *
Underlying^ 79c 62c 141c
Total operations# 74c 64c 168c
Total operations before goodwill 86c 76c 198c
amortisation and exceptional items -------------------------------
Dividends per share < 24.0c 18.4c 50.8c
11.4p 30.0p
------------------------------ ---------- ---------- --------
Post-tax return on equity
(annualised)# 22.7% 26.6% 32.5%
------------------------------ ---------- ---------- --------
Equity shareholders' funds# $2,155m $1,566m $2,048m
------------------------------ ---------- ---------- --------
+ 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)
# In accordance with UITF 38, which was adopted in the current period, the
comparative figures for the year ending 31 March 2004 have been restated as a
result of derecognising the exceptional profit on sale of own shares held by the
ESOP trusts. A further requirement of UITF 38 is to present own shares as a
deduction from shareholders' funds, hence both fixed asset investments and
shareholders' funds have been restated. Details of the full effect of the
restatements are given in notes 1 and 17
* A reconciliation of earnings per share is shown in note 9
< Following the redenomination of ordinary share capital into US dollars,
dividends will be declared in US dollars. Therefore, the US dollar equivalents
of the dividends declared in sterling in the prior year have been disclosed
Stanley Fink, Chief Executive said:
'The Man Group has continued to make good progress in the first half of the
year, with net management fee income* up 34% and Brokerage net income* up 27%. A
record $7.7 billion of product sales in the first half demonstrates the strength
of Man's franchise in alternative assets. Asset raising has continued well into
the second half with over $800 million of private investor money raised from
three products in October. This sales success, combined with recent positive
investment performance, means that assets under management have increased to
over $40 billion as at the end of October.
With Asset Management and Brokerage both well placed for further growth, the
Board is confident of significant growth in underlying earnings for the year.'
* Before goodwill amortisation, and prior year exceptional items in Brokerage
DIAL-IN TO ANALYSTS' PRESENTATION
The call begins at 9am and the dial-in numbers are as follows:
UK Dial-in number 020 8996 3920
US Dial-in number 888 339 2688
UK / US Pass Code C967631
There will be a playback facility until 6pm on Monday 8 November:
UK Replay number 01296 618 700
UK Pass Code 406443
US Dial-in number 888 286 8010
US Pass Code 48423131
Enquiries
Man Group plc 020 7144 1000
Stanley Fink
Peter Clarke
David Browne
Merlin Financial 020 7653 6620
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 2,800 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 investments 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 deliver absolute return opportunities uncorrelated to
traditional asset classes such as equities and bonds. 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 as 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
interest rate products, metals and the energy markets.
HALF YEAR REVIEW to 30 September 2004
Group overview and strategy
The Man Group has continued to make good progress in the first half of the year,
in particular, in terms of a record demand for our products. Group profit
before tax, goodwill amortisation and exceptional items for the first half was
up 18% to $362 million, reflecting a 34% increase in net management fee income
and a 27% increase in Brokerage income. Net performance fee income at $29
million was about half of the level of the first six months of last year,
reflecting the weaker first quarter performance at AHL. The Group's profit
before tax on total operations was up 21% to $318 million . This strong
progress has driven diluted underlying earnings per share up 27% to 79 cents
(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). Diluted earnings per share on total
operations grew to a lesser extent, up 16% to 74 cents for the first half,
reflecting higher goodwill amortisation and the decrease in net performance fee
income.
In Asset Management, funds under management were $39.1 billion at 30 September
2004, slightly up on the figure at the end of March. Although sales in the first
half were a record $7.7 billion, the maturity of a major legacy account at RMF
totalling $3.1 billion restrained growth in total assets. As a result,
institutional funds under management as a proportion of total funds under
management decreased slightly in the first half. However, the maturity of this
low margin legacy product has allowed RMF to recycle and improve the pricing of
high quality underlying capacity. Sales of $3.2 billion in our higher margin
private investor products, partially offset by some negative investment
performance, resulted in private investor funds under management increasing by
$0.9 billion in the first half.
Private investor sales are underpinned by a growing distribution network for
private investor business, and we now have 1,782 active intermediaries globally,
up 8% since 31 March 2004. These additions include a number of well-established
international financial institutions. We are also continuing to develop regional
distribution partnerships, with a Japanese institution and Close Man in the UK
being two important recent additions. In the US, the market remains slow pending
the outcome of new regulations, which will be finalised later this year and are
scheduled to go into effect early next year.
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 2004, Man Global Strategies had agreements in place with 39 affiliated
managers, a net increase of seven since 31 March 2004. In addition, RMF
maintains an 'incubator' of hedge funds with a separate team focusing on this
area. To date it has seeded 10 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 also to invest in selected high capacity established
managers with solid track records. The most recent example of this is BlueCrest,
which now manages funds of around $5 billion.
In Brokerage, the continued strong profitability reflects further organic
growth, underpinned by a diversified product offering and a wide geographical
presence across all key markets. This result also reflects the continued
development of matched principal business and further successful recruitment of
producer teams, allowing the business to leverage off the existing
infrastructure and client base.
On 5 August 2004, Man successfully completed the sale of its share of the
Australian and New Zealand sugar refining joint ventures to CSR Ltd for $40
million. This sale completes Man Group's strategy of exiting all its
agricultural product businesses.
Share redenomination, dividend and share repurchase activities
As anticipated in the 2004 Annual Report, the Group has changed its presentation
currency from sterling to US dollars with effect from 1 April 2004, to reflect
the fact that the majority of the Group's revenue streams, assets and
liabilities are denominated in US dollars. It was also proposed to redenominate
the ordinary share capital of Man Group plc to bring it into line with its
functional currency and the functional currency of its main operating
subsidiaries. Following approval of shareholders at the Annual General Meeting
on 7 July 2004, this redenomination into US dollars became effective on 29 July
2004. The US dollar ordinary shares continue to be quoted on the London Stock
Exchange (and settled) in sterling. The Group will declare its dividends in US
dollars but will continue to pay the dividends in sterling, except where
private overseas shareholders have elected to receive dividends via the
Transcontinental Automated Payments Service (TAPS).
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 has been
increased to 24.0 cents, which represents a 30% increase over the US dollar
equivalent of the dividend in the prior first half of 18.4 cents. The dividend
will be payable on 16 December 2004 to shareholders on the register at the
close of business on 12 November 2004 with the shares quoted ex-dividend from 10
November 2004. This dividend will be paid in sterling, at an exchange rate of
1.8405, which was fixed after normal business hours on 3 November 2004,
resulting in a dividend payment of 13.04 pence per share. The final election
date for participation in the Group's Dividend Reinvestment Plan in relation to
the interim dividend is 3.00pm on 25 November 2004. 2,658,000 shares were
repurchased in the first half at an average cost of £12.72 per share, in
accordance with the Group's policy of applying post-tax performance fees over
time in the repurchasing and cancellation of own shares. In addition, Man set
up an irrevocable, non-discretionary programme to purchase shares for
cancellation on its own behalf, during its close period which commenced on 1st
October 2004 and ended on 3rd November 2004 with acquisitions effected within
certain pre-set parameters. 560,000 shares were purchased under this programme
at an average cost of £12.80 per share.
Financial summary
Asset Management
Asset Management increased pre-tax profits, before goodwill amortisation, for
the first half by 16% to $294 million. Recurring net management fee income for
the first half increased 34% to $265 million as a result of growth in funds
under management. Performance fees have been earned by several managers,
including RMF and Glenwood, although net performance fee income at $29 million,
was about half of the level of the first six months of last year, reflecting the
weaker first quarter performance at AHL.
The key feature of the increase in funds under management during the period
continues to be the strong level of sales ($7.7 billion in the first half). 11
new private investor fund products were launched during the half year. The
increase in funds under management in the half year from Man's two global
launches (Man RMF Multi-Style Series 1 and Man Global Strategies Diversified
Series 2) was $1.8 billion. Joint venture sales (including OM-IP 140/150 Plus
and Close Man Hedge fund) accounted for $0.6 billion. Other private investor
sales, mainly relating to open-ended funds, accounted for $0.8 billion and
institutional sales $4.5 billion. At 30 September 2004, the split between
private investor and institutional funds under management was $22.4 billion (31
March 2004: $21.5 billion) and $16.7 billion (31 March 2004: $17.0 billion)
respectively.
Maturities of $3.1 billion in the first half relate to a series of agreements
that RMF had with a major institution that matured at the end of June. Of this,
$0.6 billion has been rolled into a new product for the institution and another
$1.8 billion has been re-packaged into new products and sold to other
institutions - these amounts have been included in the figures shown above
within sales.
Investment movement in the first half was a negative $2.2 billion. AHL saw
negative returns in the three months to June from most sectors, particularly
currencies and metals, although this was partially offset by gains in energy and
bonds thereafter. In Man Global Strategies, performance was also down with
diversified multi-manager products, such as Man Multi-Strategy Guaranteed
Limited, generating a negative return of 7.8%.
Our fund of funds managers, Glenwood and RMF, target more modest returns but
with a lower associated volatility. Both Glenwood and RMF recorded a small fall
in the first half approximately in line with broad fund of funds indices.
Glenwood was held back by equity-based strategies due to weakness in certain
sectors of the equity markets and by relative value, principally convertible
bond arbitrageurs, with most styles being relatively flat. RMF, as represented
by diversified multi-manager products such as RMF Absolute Return Strategies I,
slightly underperformed the fund of funds index due to its higher exposure to
the managed futures sector.
Performance records 6 months to 30 12 months to 30 3 years to 30 5 years to 30
September 2004 September 2001 September 2004 September 2004
(not annualised) (annualised) (annualised)
AHL Diversified
Programme* -12.2% -3.7% 5.1% 12.5%
Man Global
Strategies# -7.8% -1.9% 3.4% 9.3%#
Glenwood@ -2.0% 0.5% 1.1% 5.6%
RMF^ -3.1% 3.3% 5.8% 7.5%
HFRI Fund of Funds
Composite Index -1.2% 5.7% 5.6% 6.9%
Funds
S&P 500 -0.2% 13.9% 4.0% -1.3%
FTSE 100 6.0% 15.5% 1.0% -2.6%
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.
Inception July 2000, so five year track record is only from date of inception
@ 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 were at the
bottom of the 12-18% range that we have typically experienced over the long
term. Institutional redemption levels were $0.9 billion for the first half, with
the majority arising at RMF and the remainder at Glenwood. Redemptions totalled
$2.0 billion in the period.
Foreign exchange and other movements accounted for a further $0.2 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 $66 million, an increase of 27% over the
first half of last year. This reflects continued growth in the high margin
execution and matched principal areas where we have achieved significant organic
growth through the aggressive recruitment of producer teams and the leveraging
of the existing client base. This growth has also benefited from our diversified
product offering whereby strong growth in foreign exchange, energy and metals
markets has more than offset somewhat slower markets in interest rate products
during the summer months. The business is now comparable to a major derivatives
exchange, representing a substantial pool of liquidity and attracting new
clients and producers whilst simultaneously providing large economies of scale
and market information.
We made one small acquisition in the period when we acquired a New York based
energy broker which strengthened our position as the leading player on NYMEX as
well as expanding our clearing and OTC business.
We have also made good progress in the development of our cash market
capabilities for institutional clients in bonds, equities, energy, metals and
foreign exchange. Man's established presence as both a matched principal and
agency broker leaves it well-placed to benefit from the convergence of futures
and cash markets and to expand profit margins through adding spread income to
its existing commission income.
Financial objectives
We have continued to deliver results in line with our long-standing key
financial objectives:
- Significant growth in underlying earnings per share (as defined on the first
page).
The higher level of funds under management has generated an increase in net
management fee income (before goodwill amortisation), which is up 34% to $265
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 27% to 79 cents.
- High levels of return on equity.
The Group's post-tax return on equity on an annualised basis for the first half
was 22.7%, lower than the 26.6% for the comparative period. This is due to a
combination of a materially higher level of net assets in this first half,
reflecting a high level of retained earnings, and to a decrease in net
performance fee income compared to the comparative period.
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 Asset Brokerage Sugar Group
2004 Management Australia Total
-------------------- ----------- --------- --------- -------
$m $m $m $m
-------------------- ----------- --------- --------- -------
Fees and commissions
receivable 568 533 - 1,101
-------------------- ----------- --------- --------- -------
Fees and commissions
payable (114) (346) - (460)
-------------------- ----------- --------- --------- -------
Net trading interest
income 6 44 - 50
-------------------- ----------- --------- --------- -------
Other operating income 13 - - 13
-------------------- ----------- --------- --------- -------
Total operating income 473 231 - 704
-------------------- ----------- --------- --------- -------
Operating expenses (187) (182) - (369)
-------------------- ----------- --------- --------- -------
Operating profit 286 49 - 335
-------------------- ----------- --------- --------- -------
Associates and JVs 9 - 2 11
-------------------- ----------- --------- --------- -------
Net interest
income/(expense) (1) 17 - 16
-------------------- ----------- --------- --------- -------
Profit before tax and
goodwill amortisation 294 66 2 362
-------------------- ----------- --------- --------- -------
Goodwill amortisation (38) (6) - (44)
-------------------- ----------- --------- --------- -------
Profit before tax on
total operations 256 60 2 318
-------------------- ----------- --------- --------- -------
Taxation (71)
-------------------- ----------- --------- --------- -------
Minority interests -
-------------------- ----------- --------- --------- -------
Profit for the period 247
-------------------- ----------- --------- --------- -------
In Asset Management, fees and commissions receivable are principally management
fees, performance fees and brokerage fees. Fees and commissions payable are
mainly sales commissions. Other operating income mainly comprises gains on
'seeding' investments in some of our funds and structuring and arrangement fees
in relation to loans to funds. Total operating income has increased by 20% over
the first half of last year, reflecting the strong growth in management fees
derived from higher levels of funds under management, net of a decrease in
performance fees earned. Operating expenses have increased by 26% from $149
million in the comparative period. This is largely due to investment in people,
systems and infrastructure to provide scale to Asset Management to support the
strong growth of the business. The net interest expense arises on borrowings to
finance recent acquisitions and working capital requirements, offset by the
small margin earned on loans to funds. Goodwill amortisation principally relates
to the RMF acquisition ($24 million) and also to the acquisitions of BlueCrest,
Glenwood and OM Strategic Investments (renamed as Man Investments Australia).
The RMF, BlueCrest and Glenwood goodwill is being amortised over 15 years and
the OM Strategic Investments goodwill over eight years.
In Brokerage, commissions receivable and payable arise from those businesses
where we act as intermediary 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 3% reflecting the continued
recruitment of producer teams, growth in market share and the benefits of active
markets. Operating expenses have remained broadly the same as the $181 million
in the first half of last year, reflecting Man Financial's ability to grow its
businesses without having significantly to expand its support and administrative
functions. Net interest income mainly arises on non-segregated cash balances and
investments. The largest component of goodwill amortisation relates to the GNI
acquisition ($3 million). The GNI goodwill is being amortised over 10 years.
The tax charge for the period amounted to $71 million. The effective tax rate on
total operations was 22.5%, compared to 22.0% last year, reflecting the
estimated rate for the full 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 in the first half. Full details of earnings per share are
given in note 9 to the Interim Financial Statements.
Other financial items
There has been a prior year adjustment as a result of the Group adopting UITF 38
'Accounting for ESOP trusts' and UITF 17 (revised 2003) 'Employee share
schemes'. In accordance with UITF 38, own shares held in ESOP trusts have been
reclassified from fixed asset investments to a deduction from shareholders'
funds. Also gains on the sale of own shares are no longer recognised in the
profit and loss account. In accordance with UITF 17 (revised), the basis for
calculating the profit and loss account charge in relation to employee share
schemes has changed. The effect of these changes is detailed in note 17.
Cash inflow from net operating profits was $372 million after adding back
depreciation and amortisation of $74 million. After other cash flows, the
Group's net cash outflow was $728 million. The increase in working capital was
$945 million, the principal component of which was an increase of $530 million
in the level of loans to funds, which fluctuate according to the level of sales
and product performance. As at 30 September, loans to funds were $884 million
(31 March 2004: $354 million) principally reflecting the high level of private
client sales. Loans to funds were also higher due to the short term impact of
negative performance of some products, where the Group provides cash margin
calls on their behalf on a temporary basis. Before the increase in loans to
funds, cash outflow was $198 million. Other working capital requirements
increased by $415 million in the period. This included the Brokerage business
holding a higher proportion of its liquid assets as short term investments
(rather than cash) to take advantage of yield opportunities; the short term
effect of forward foreign exchange profits within fund entities (where the
Brokerage business transfers cash into customer segregation on a temporary basis
until the profit is realised); and an increase in the level of sales commissions
in Asset Management as a consequence of the high level of sales in the first
half. In addition, the Company paid a dividend of $104 million and invested $28
million in net fixed asset expenditure. Taxation paid in the period was $75
million, $28 million was received from disposals and other items generated a
cash inflow of $24 million.
At 30 September 2004, shareholders' equity was up 5% since the year-end at
$2,155 million. Retained profit added $174 million, although this was offset by
the prior year adjustment relating to own shares held by the ESOP trusts (as
discussed above) and by the consideration paid for the repurchase and
cancellation of own shares. Net debt was $191 million, resulting in gearing of
9%. The Group has $3.9 billion of total financing facilities. This includes
total banking facilities of $2.7 billion; the largest part being a $2.275
billion committed revolving credit facility, which was renewed in June 2004.
This facility has a final maturity date of June 2009. In addition the Group
issued $300 million of senior private placement debt in May 2004, with
maturities ranging from five to ten years.
As outlined in the Annual Report, the Group will be implementing International
Financial Reporting Standards (IFRS) for the financial year ending 31 March 2006
and work to meet the IFRS requirements fully is progressing to plan. A detailed
qualitative review of the impact of IFRS on the Group was given in the financial
review of the last Annual Report. Having assessed the impact of new and revised
IFRSs issued by the International Accounting Standards Board, and the
developments in the interpretation of those standards, the Group will provide an
update of the qualitative review in the 2005 Annual Report, which will be issued
as usual at the end of May 2005 under UK GAAP. In addition, in order to provide
prior year comparatives under IFRS in a timely and helpful manner, it is planned
to release summary IFRS financial information for the financial year ending 31
March 2005 (with reconciliations to the previously published UK GAAP figures)
prior to the Annual General Meeting which is scheduled to take place in July
2005.
Outlook
A record $7.7 billion of product sales in the first half demonstrates the
strength of Man's franchise in alternative assets. Superior product
construction, a long investment track record in this market and a strong
distribution capability, combine to give Man a leading position in the asset
class. The attraction of alternative assets as part of a structured investment
portfolio appeals to private investors and institutions alike and Man continues
to attract assets from both sources.
The distribution platform continues to develop well, with regional joint
ventures enhancing our global product offerings in new markets. Asset raising in
the second half has begun strongly with over $800 million of private investor
money raised from three products in October. This sales success, combined with
recent positive investment performance, means that assets under management have
increased from $39.1 billion at 30 September 2004 and are in excess of $40
billion as at the end of October.
The Brokerage business has continued to widen its product offering and develop
its matched principal business, offering higher levels of client service whilst
leveraging off the existing infrastructure. This has allowed Brokerage to access
both revenue opportunities and margin expansion.
With Asset Management and Brokerage both well placed for further growth, the
Board is confident of significant growth in underlying earnings for the year.
GROUP PROFIT AND LOSS ACCOUNT
Half year to 30 September 2004
Before goodwill Goodwill
and exceptional and exceptional
items items Total
Note $m $m $m
--------------------------- ------ ---------- -------- -------
Net operating
income 2,3 704 - 704
--------------------------- ------ ---------- -------- -------
Operating expenses 4 (369) (37) (406)
Exceptional item -
GNI integration
costs 5 - - -
---------- -------- -------
(369) (37) (406)
--------------------------- ------ ---------- -------- -------
Group operating
profit - continuing
operations 335 (37) 298
Share of operating
profit/(loss) from
joint ventures and
associates 4 11 (7) 4
------------------------------- ------ ---------- -------- -------
Total operating
profit: Group and
share of joint
ventures and
associates 346 (44) 302
Exceptional item
Provision for loss
on sale of business 5 - - -
Net interest income 6 16 - 16
--------------------------- ------ ---------- -------- -------
Profit on ordinary
activities before
taxation 3 362 (44) 318
Taxation (73) 2 (71)
--------------------------- ------ ---------- -------- -------
Profit on ordinary
activities after
taxation 289 (42) 247
Equity minority interest - - -
--------------------------- ------ ---------- -------- -------
Profit for the
period 289 (42) 247
Ordinary dividends 8 (73)
--------------------------- ------ ---------- -------- -------
Retained profit for
the period 174
--------------------------- ------ ---------- -------- -------
Earnings per share
on total operations 9
Basic 81c
Diluted 74c
--------------------------- ------ ---------- -------- -------
Earnings per share
before goodwill and
exceptional items 9
Basic 95c
Diluted 86c
--------------------------- ------ ---------- -------- -------
Underlying earnings
per share 9
Basic 87c
Diluted 79c
--------------------------- ------ ---------- -------- -------
Dividends per share 8 24.0c
--------------------------- ------ ---------- -------- -------
Historical cost profits and losses are not materially different from those shown
above.
Restated+
Half year to 30 September 2003 Year to 31 March 2004
Before Goodwill Before Goodwill
goodwill and and goodwill and and
exceptional exceptional exceptional exceptional
items items Total items items Total
$m $m $m $m $m $m
---------- ---------- --------- ---- --------- --------- --------
617 - 617 1,480 - 1,480
---------- ---------- --------- --------- --------- --------
(330) (34) (364) (719) (73) (792)
- (9) (9) - (9) (9)
---------- ---------- --------- --------- --------- --------
(330) (43) (373) (719) (82) (801)
---------- ---------- --------- ---- --------- --------- --------
287 (43) 244 761 (82) 679
11 (1) 10 38 (4) 34
---------- ---------- --------- ---- --------- --------- --------
298 (44) 254 799 (86) 713
- - - - (20) (20)
9 - 9 22 - 22
---------- ---------- --------- ---- --------- --------- --------
307 (44) 263 821 (106) 715
(60) 2 (58) (168) 6 (162)
---------- ---------- --------- ---- --------- --------- --------
247 (42) 205 653 (100) 553
---------- ---------- --------- ---- --------- --------- --------
- - - (1) - (1)
---------- ---------- --------- ---- --------- --------- --------
247 (42) 205 652 (100) 552
(54) (152)
---------- ---------- --------- ---- --------- --------- --------
151 400
---------- ---------- --------- ---- --------- --------- --------
70c 186c
64c 168c
---------- ---------- --------- ---- --------- --------- --------
84c 220c
76c 198c
---------- ---------- --------- ---- --------- --------- --------
68c 154c
62c 141c
---------- ---------- --------- ---- --------- --------- --------
18.4c 50.8c
---------- ---------- --------- ---- --------- --------- --------
+ See notes 1 and 17
GROUP BALANCE SHEET
restated+ restated+
At 30 September At 30 September At 31
2004 2003 March 2004
Note $m $m $m
--------------------------- ----- ---------- ---------- ----------
Fixed assets
Intangible assets -
goodwill 803 851 812
Tangible assets 68 72 69
Investments
---------- ---------- ----------
Investments in joint
ventures 8 11 14
Investments in
associates 209 50 256
Other investments 59 47 46
---------- ---------- ----------
276 108 316
--------------------------- ----- ---------- ---------- ----------
1,147 1,031 1,197
--------------------------- ----- ---------- ---------- ----------
Current assets
Debtors 10 3,621 2,824 3,475
Investments 11 2,663 1,692 2,393
Cash at bank and in
hand 1,164 1,079 1,702
--------------------------- ----- ---------- ---------- ----------
7,448 5,595 7,570
Creditors: amounts
falling due within
one year 12 (5,069) (3,776) (5,709)
--------------------------- ----- ---------- ---------- ----------
Net current assets 2,379 1,819 1,861
--------------------------- ----- ---------- ---------- ----------
Total assets less
current liabilities 3,526 2,850 3,058
Creditors: amounts
falling due after
more than one year 12
---------- ---------- ----------
Exchangeable bonds (709) (650) (717)
Other (661) (628) (289)
---------- ---------- ----------
(1,370) (1,278) (1,006)
Provisions for
liabilities and
charges (1) (5) (3)
--------------------------- ----- ---------- ---------- ----------
Net assets 2,155 1,567 2,049
--------------------------- ----- ---------- ---------- ----------
Capital and reserves
Called up share
capital 56 51 57
Share premium account 352 185 337
Capital reserve 4 4 4
Merger reserve 722 661 729
Profit and loss
account 1,021 665 921
--------------------------- ----- ---------- ---------- ----------
Equity shareholders'
funds 2,155 1,566 2,048
Equity minority
interests - 1 1
--------------------------- ----- ---------- ---------- ----------
2,155 1,567 2,049
--------------------------- ----- ---------- ---------- ----------
+ See notes 1 and 17
GROUP CASH FLOW STATEMENT
restated restated
Half year Half year Year
to 30 September to 30 September to 31 March
2004 2003 2004
Note $m $m $m
--------------------------- ----- --------- --------- --------
Net cash (outflow)/inflow
from operating activities 14 (575) 8 1,058
Dividends from joint
ventures - 4 4
Dividends from associates 8 1 9
Returns on investments and
servicing of finance 18 12 24
Taxation paid (75) (56) (105)
Capital expenditure and
financial investment (28) (19) (106)
Acquisitions and disposals 28 (11) (11)
Equity dividends paid (104) (67) (128)
--------------------------- ----- --------- --------- --------
Net cash (outflow)/inflow (728) (128) 745
Management of liquid
resources 300 (8) (330)
Financing 188 169 (39)
--------------------------- ----- --------- --------- --------
(Decrease)/increase in
cash (240) 33 376
--------------------------- ----- --------- --------- --------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Half year Half year Year
to 30 September to 30 September to 31 March
2004 2004 2004
Note $m $m $m
--------------------------- ------ --------- --------- --------
(Decrease)/increase
in cash (240) 33 376
Cash (inflow)/outflow
from movement in debt (273) (244) 21
Cash (inflow)/outflow
from movement in
liquid resources (300) 8 330
---------------------------- ---- --------- --------- --------
Change in net debt
resulting from cash
flows (813) (203) 727
Debt disposed of with
businesses and
subsidiaries 11 - -
Currency translation
difference 9 (33) (101)
--------------------------- ----- --------- --------- --------
Movement in net
(debt)/cash (793) (236) 626
Opening net
cash/(debt) 602 (24) (24)
--------------------------- ----- --------- --------- --------
Closing net
(debt)/cash 15 (191) (260) 602
--------------------------- ----- --------- --------- --------
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
restated restated
Half year Half year Year to
to 30 September to 30 September 31 March
2004 2003 2004
Note $m $m $m
--------------------------------- --------- --------- --------
Profit for the period 247 205 552
Currency translation differences
taken directly to reserves (4) (1) (3)
--------------------------------- --------- --------- --------
Total recognised gains and losses
relating to the period 243 204 549
Prior year adjustment
17 (29) - -
--------------------------------- --------- --------- --------
Total recognised gains 214 204 549
--------------------------------- --------- --------- --------
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
restated restated
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
Note $m $m $m
--------------------------------- --------- --------- --------
Profit for the period 247 205 552
Ordinary dividends (73) (54) (152)
--------------------------------- --------- --------- --------
Retained earnings 174 151 400
Other recognised gains and losses
relating to the period (4) (1) (3)
Issue of ordinary share capital 17 - 133
Purchase and cancellation of own shares (62) (28) (31)
Goodwill written back on disposal - - 22
UITF 17 charge for the period 22 17 37
Purchase of own shares by ESOP trusts (59) (62) (69)
Disposal of own shares by ESOP trusts 19 13 83
--------------------------------- --------- --------- --------
Net increase in equity shareholders'
funds 107 90 572
Opening equity shareholders' funds 2,048 1,534 1,534
Prior year adjustment
- (58) (58)
--------------------------------- --------- --------- --------
Closing equity shareholders' funds 17 2,155 1,566 2,048
--------------------------------- --------- --------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited financial statements for the half year to 30 September 2004 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 2004, with the exception as described below.
As from 1 April 2004, the Group has adopted UITF 38 'Accounting for ESOP trusts'
and UITF 17 (revised 2003) 'Employee share schemes'. Under UITF 38 own shares
held in treasury or through an ESOP trust are recorded at cost and shown as a
deduction in arriving at shareholders' funds. Previously these shares were
recorded at cost less amortisation and shown as a fixed asset investment with
amortisation charges being taken to the profit and loss account. Also, gains or
losses on the purchase, sale, issue or cancellation of own shares should no
longer be recognised in the profit and loss account or statement of total
recognised gains and losses. Under the revised UITF 17, employee share scheme
charges to the profit and loss account are now always calculated as the
intrinsic value of the award spread over the performance period. The intrinsic
value is the difference between the fair value of the shares at the date of
grant and the amount paid by the employee to exercise the rights to those shares
irrespective of the cost of shares purchased to fund the award. The adoption of
these two standards represents a change in accounting policy and the comparative
figures have been restated accordingly. Details of the effect of the prior year
adjustments are given in note 17.
In accordance with the change in presentation made in the 2004 Annual Report,
the presentation of the comparative figures at 30 September 2003 has been
changed in the Group balance sheet.
An amount of $661 million has been transferred from the share premium account to
a merger reserve. The reason for this change is discussed in the Principal
Accounting Policies note in the 2004 Annual Report.
As stated in the 2004 Annual Report, the Group has changed its presentation
currency from sterling to US dollars with effect from 1 April 2004. The
comparative figures have therefore been presented in US dollars, applying the
exchange rates as given in note 16.
2. Net operating income
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
--------------------------- ---------- ---------- ----------
Continuing operations
Fees and commissions
receivable 1,101 955 2,185
Fees and commissions payable (460) (398) (853)
Net trading interest income 50 42 99
Other operating income 13 18 49
--------------------------- ---------- ---------- ----------
Net operating income 704 617 1,480
--------------------------- ---------- ---------- ----------
NOTES continued
3. Segmental analysis
(a) Segmental analysis of net operating income
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
---------------------------- ---------- ---------- ----------
Business segment
Continuing operations
Asset Management 473 393 1,023
Brokerage 231 224 457
---------- ---------- ----------
----------------------------
704 617 1,480
---------------------------- ---------- ---------- ----------
(b) Segmental analysis of profit on ordinary activities before taxation
restated
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
--------------------------------- --------- ---------- ---------
Business segment
Continuing operations
Asset Management - net management fee 265 198 459
income
Asset Management - net performance fee
income 29 55 236
Asset Management - goodwill amortisation (38) (30) (67)
---------------------------- --------- ---------- ---------
Asset Management total 256 223 628
Brokerage - before goodwill amortisation
and 66 52 120
exceptional items
Brokerage - goodwill amortisation (6) (5) (10)
Brokerage - exceptional items - (9) (9)
---------------------------- --------- ---------- ---------
Brokerage total 60 38 101
Sugar Australia - before exceptional items 2 2 6
Sugar Australia - exceptional items - - (20)
--------- ---------- ---------
----------------------------
Sugar Australia total 2 2 (14)
---------------------------- --------- ---------- ---------
318 263 715
---------------------------- --------- ---------- ---------
4. Goodwill amortisation
Included in operating expenses is goodwill amortisation of $37 million (30
September 2003: $34 million, 31 March 2004: $73 million). Total goodwill
amortisation in the period, including the amount relating to joint ventures and
associates, on a pre-tax basis is $44 million (30 September 2003: $35 million,
31 March 2004: $77 million) and on a post-tax basis is $42 million (30 September
2003: $35 million, 31 March 2004: $74 million).
5. Exceptional items
Exceptional operating expense
Exceptional operating expenses for the half year to 30 September 2004 were nil.
NOTES continued
5. Exceptional items continued
For the half year to 30 September 2003, and for the year to 31 March 2004,
following the acquisition of GNI Holdings Limited in November 2002, further
costs amounting to $9 million ($6 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 related principally to redundancy and staff
retention costs of $6 million, and other termination and relocation costs of $3
million.
Non-operating exceptional items
Non-operating exceptional items for the half year to 30 September 2004 were nil.
For the year to 31 March 2004, the Group made a provision for the loss on sale
of its Sugar Australia business. Agreement for the sale had been made with CSR
Ltd as at 31 March 2004, but was not fully unconditional. The provision for the
loss on sale amounted to $20 million ($20 million net of tax), relating almost
entirely to attributable goodwill not previously charged to the profit and loss
account. The remainder related to impairment of fixed assets.
For the half year to 30 September 2003, non-operating exceptional items were
nil.
6. Net interest income
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
---------------------------- --------- ---------- ---------
Interest receivable 45 28 62
Interest payable (29) (19) (40)
---------------------------- --------- ---------- ---------
16 9 22
---------------------------- --------- ---------- ---------
7. Sale of Sugar Australia
Included in the Group profit and loss account as continuing operations are the
results of the Group's holding in a sugar refinery business, which was sold in
August 2004. These results are not disclosed as discontinued on the face of the
profit and loss account as the sale does not have a material effect on the
nature and focus of the Group's operations, but for information purposes the
results relating to Sugar Australia are given below:-
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
---------------------------- ---------- ---------- ---------
Share of operating profit from joint
ventures and associates 2 3 7
---------------------------- ---------- ---------- ---------
Total operating profit 2 3 7
Exceptional item - - (20)
- loss on sale of business
Net interest expense - (1) (1)
---------------------------- ---------- ---------- ---------
Profit on ordinary activities before
taxation 2 2 (14)
---------------------------- ---------- ---------- ---------
8. Dividends
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
---------------------------- ---------- ---------- ---------
Ordinary shares
Interim - 24.0 cents (2004: 11.4 pence) 73 54 56
Final - (2004: 18.6 pence) - - 96
---------------------------- ---------- ---------- - --------
73 54 152
---------------------------- ---------- ---------- ---------
9. Earnings per share
The calculation of basic earnings per ordinary share is based on a profit for
the period of $247 million (30 September 2003: $205 million, 31 March 2004: $552
million) and on 303,527,851 (30 September 2003: 296,103,183, 31 March 2004:
297,174,602) 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 $256
million (30 September 2003: $214 million, 31 March 2004: $570 million) and on
345,468,032 (30 September 2003: 337,293,353, 31 March 2004: 338,776,081)
ordinary shares, calculated as follows:
30 September 30 September 31 March
2004 2003 2004
Number Number Number
(millions) (millions) (millions)
------------------------------ --------- --------- ---------
Basic weighted average number of
shares 303.5 296.1 297.2
Dilutive potential ordinary shares
Share awards under incentive
schemes 10.2 9.8 9.9
Employee share options 0.6 0.2 0.5
Exchangeable bonds 31.2 31.2 31.2
------------------------------ --------- --------- ---------
345.5 337.3 338.8
------------------------------ --------- --------- ---------
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 2004
--------- -------- -------- --------
Basic Diluted Basic Diluted
post-tax post-tax earnings earnings
earnings earnings per share per share
$m $m cents cents
------------------------- --------- -------- -------- --------
Earnings per share on
total operations+ 247 256 81 74
Exceptional items - - - -
Goodwill amortisation 42 42 14 12
------------------------- --------- -------- -------- --------
Earnings per share -
before goodwill and
exceptional items 289 298 95 86
Performance related
income (25) (25) (8) (7)
Sugar Australia (1) (1) - -
------------------------- --------- -------- -------- -------
Underlying earnings per
share 263 272 87 79
------------------------- --------- -------- -------- --------
Half year to 30 September 2003
-------- -------- ------- --------
Basic Diluted Basic Diluted
post-tax post-tax earnings earnings
earnings earnings per share per share
$m $m cents cents
------------------------- -------- -------- -------- --------
Earnings
share on total
operations + 205 214 70 64
Exceptional
items 7 7 2 2
Goodwill
amortisation 35 35 12 10
------------------------- -------- -------- -------- --------
Earnings per
share - before
goodwill and
exceptional
items 247 256 84 76
Performance
related income (44) (44) (15) (13)
Sugar
Australia (1) (1) (1) (1)
------------------------- -------- -------- -------- --------
Underlying
earnings per
share 202 211 68 62
------------------------- -------- -------- -------- --------
Year to 31 March 2004 (restated)
-------- -------- -------- --------
Basic Diluted Basic Diluted
post-tax post-tax earnings earnings
earnings earnings per share per share
$m $m cents cents
------------------------- -------- -------- -------- --------
Earnings per
share on total
operations+ 552 570 186 168
Exceptional
items 26 26 9 9
Goodwill
amortisation 74 74 25 21
------------------------- -------- -------- -------- --------
Earnings per
share - before
goodwill and
exceptional
items 652 670 220 198
Performance
related income (188) (188) (64) (56)
Sugar
Australia (5) (5) (2) (1)
------------------------ -------- -------- -------- --------
Underlying
earnings per
share 459 477 154 141
------------------------- -------- -------- -------- --------
+ 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.
10. Debtors
At 30 At 30 At 31
September September March
2004 2004 2004
$m $m $m
------------------------------ --------- --------- ---------
Trade debtors
Amounts owed by broker dealers on secured
stock lending and borrowing 1,308 772 1,627
Securities transactions in the course of
settlement 103 120 149
Futures transactions 331 368 506
Other trade debtors 431 451 311
Loans to funds 884 515 354
Other categories of debtors 564 598 528
------------------------------ --------- --------- ---------
3,621 2,824 3,475
------------------------------ --------- --------- ---------
Included within other categories of debtors are unamortised sales commissions of
$294 million (30 September 2003: $217 million, 31 March 2004: $272 million).
Certain Group companies in Brokerage are involved as principal in the purchase
and simultaneous commitment to sell securities between third parties. The gross
amount of the settlement payables and receivables in respect of such outstanding
transactions was $794 million (30 September 2003: $193 million, 31 March 2004:
$1,358 million). Substantially all of these transactions have now settled.
11. Current asset investment
At 30 At 30 At 31
September September March
2004 2004 2004
$m $m $m
------------------------------ --------- --------- ---------
Listed investments 1,251 1,182 1,708
Unlisted investments 1,412 510 685
------------------------------ --------- --------- ---------
2,663 1,692 2,393
------------------------------ --------- --------- ---------
Listed investments largely relate to long stock positions held for hedging in
Brokerage. Unlisted investments mainly relate to certificates of deposit and US
treasury bills in Brokerage and also to investments in fund managers in relation
to Man Global Strategies.
12. Creditors
At 30 At 30 At 31
September September March
2004 2004 2004
$m $m $m
------------------------------ --------- --------- --------
Amounts falling due within one year
Bank loans and overdrafts 29 99 143
Private placement notes - 15 -
Trade creditors
Amounts owed to broker dealers on secured
stock lending and borrowing 2,497 903 2,347
Securities transactions in the course of
settlement 164 255 189
Futures transactions 1,144 1,038 1,212
Short stock positions held for hedging 461 736 940
Other trade creditors 178 135 185
Other categories of creditors 596 595 693
------------------------------ --------- --------- --------
5,069 3,776 5,709
------------------------------ --------- --------- --------
Other categories of creditors includes $9 million relating to commodity
financing transactions (30 September 2003: $57 million, 31 March 2004: $35
million).
At 30 At 30 At 31
September September March
2004 2004 2004
$m $m $m
------------------------------ --------- --------- --------
Amounts falling due after more than one
year
Loans
Bank loans 158 575 80
Private placement notes 459 - 160
Exchangeable bonds 709 650 717
Other creditors 44 53 49
------------------------------ --------- --------- --------
1,370 1,278 1,006
------------------------------ --------- --------- --------
13. Segregated funds
As required by the United Kingdom Financial Services and Markets Act 2000 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 $7,197 million (30 September 2003: $5,754 million, 31 March
2004: $7,081 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.
14. Cash flow from operating activities
Half year Half year Year
to 30 to 30 to 31
September September March
2004 2003 2004
$m $m $m
Note
---------------------------- ---------- ---------- ---------
Operating profit 298 244 679
Depreciation of tangible
fixed assets 15 15 27
Amortisation of goodwill 37 34 73
Amortisation of fixed asset
investments - 1 3
Loss on sale of tangible
fixed assets - - 3
Profit on sale of fixed asset
investments (2) - (1)
UITF 17 charge for the period 17 22 17 37
Increase in debtors (153) (57) (694)
Increase in short-term
investments (273) (589) (1,288)
(Decrease)/increase in
creditors (519) 355 2,234
Costs in relation to
exceptional items - (12) (15)
---------------------------- ---------- ---------- ---------
Net cash (outflow)/inflow
from operating activities (575) 8 1,058
---------------------------- ---------- ---------- ---------
15. Analysis of net debt
At 30 At 30 At 31
September September March
2004 2004 2004
$m $m $m
------------------------- --------- ---------- ---------
Cash at bank and in hand 1,164 1,079 1,702
Overdrafts (4) (83) (2)
Loans due within one year
Bank loans (25) (16) (141)
Private placement notes - (15) -
Loans due after one year
Bank loans (158) (575) (80)
Private placement notes (459) - (160)
Exchangeable bonds (709) (650) (717)
------------------------- --------- ---------- ---------
Closing net (debt)/cash (191) (260) 602
------------------------- --------- ---------- ---------
16. Exchange rates
The following US dollar : sterling exchange rates have been used in the
preparation of this Interim Report:
---------------------------- ---------- ---------- ---------
30 September 30 September 31 March
2004 2003 2004
---------------------------- ---------- ---------- ---------
Average exchange rate 1.8136 1.6151 1.6938
Period end exchange rate 1.8103 1.6663 1.8380
---------------------------- ---------- ---------- ---------
17. Prior year adjustments
In accordance with UITF 38
The reclassification of own shares from fixed asset investments to equity has
reduced net assets and equity shareholders' funds by $60 million as at 30
September 2004, $93 million as at 30 September 2003, $64 million as at 31 March
2004 and $58 million as at 1 April 2003.
The profit on selling own shares is no longer recognised in the profit and loss
account or statement of total recognised gains and losses. This reduces profits
from exceptional items, and therefore profit before tax, profit after tax and
the total recognised gains, by $23 million for the year to 31 March 2004. This
change had no effect on the profit and loss account for the six months to 30
September 2003.
In accordance with UITF 17
The reversal of the amortisation charge based on the cost of shares purchased
and the inclusion of a charge based on the intrinsic value of the shares at the
date of grant had no material effect on the profit and loss account for the
current period or for the six months to 30 September 2003 or for the year to 31
March 2004. The effect on years prior to the comparative period is to decrease
retained profits by $6 million.
Statement of total recognised gains and losses
The prior year adjustment figure of a loss of $29 million in the statement of
total recognised gains and losses comprises the reversal of the exceptional
profit on sale of own shares of $23 million and the increase in share scheme
charges, relating to earlier years, of $6 million.
Earnings per share
The reversal of the exceptional profit on sale of own shares of $23 million in
the year to 31 March 2004 has had the effect of reducing basic earnings per
share on total operations from 193 cents to 186 cents, and the diluted earnings
per share from 175 cents to 168 cents. There is no change to earnings per share
before goodwill amortisation and exceptional items or to underlying earnings per
share.
Cash flow statement
The transfer of net purchases/(disposals) of own shares from the capital
expenditure and financial investment line to the financing line was $47 million
for the six months to 30 September 2003 and $(13) million for the 12 months to
31 March 2004. In the cash flow from operating activities note (note 14), 'UITF
17 charge for the period' has been added. This combines the amortisation of
fixed asset investments in prior periods, relating to own shares, and the
amortisation of share award costs of shares to be issued.
Reconciliation of movements in equity shareholders' funds
The prior year adjustment to the opening equity shareholders' funds in the
comparative periods of $58 million relates to the reclassification of own shares
from fixed asset investments to equity shareholders' funds as at 1 April 2003.
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