Trading Statement

RNS Number : 3963T

Man Group plc

28 September 2010

 



28 September 2010

PRE-CLOSE TRADING UPDATE for the six months ending 30 September 2010

Key points - operating

·     Funds under Management (FUM) at 30 September 2010 of an estimated $39.5 billion
(30 June 2010: $38.5 billion)

·     Reduced net outflow in Q2 ($0.6 billion) reflects a pick-up in sales driven by funding of institutional mandates and demand for onshore regulated products

·     Positive investment movement in Q2 of $0.8 billion, with Man products well suited to current uncertain markets.  AHL up 7.6% in the calendar year to 31 Aug; IP220 up 17.5%.  

Key points - financial

·     Profit before tax and adjusting items for the six months ending 30 September 2010 of an estimated $215 million (H2 2010: $268 million)

o  Reduction in net management fees reflects lower average FUM

o  Minimal performance fees, with most of AHL below high water mark

·     Diluted earnings per share on continuing operations before adjusting items of an estimated 9.5 cents per share; 7.0 cents per share after adjusting items

·     Financial position remains strong, with a regulatory capital surplus of over $1.5 billion and over $2.5 billion in cash. After closing the GLG acquisition, Man expects to retain a regulatory capital surplus of around $300 million.

Transaction update

·     Acquisition of GLG expected to close shortly after 12 October GLG stockholder meeting.

Summary financials

	Estimates for six months ending 30 Sept 2010     $	Six months ended 31 March 2010 $	Six months ended 30 Sept 2009 $
Funds under management (end of period)	39.5bn	39.4bn	44.0bn
Net management fee income	205m	218m	245m
Net performance fee income	10m	50m	47m
Profit before tax and adjusting items	215m	268m	292m
Adjusting items*	(45m)	(29m)	10m
Discontinued operations**	(35m)	-	-
Total profit before tax	135m	239m	302m

*There are two adjustments to continuing operations in the period - c. $25 million for GLG acquisition costs and c.$20 million for pre-acquisition rationalisation costs, including consultancy advice.  **Discontinued operations reflect an arbitration settlement linked  to claims made by MF Global regarding their closing balance sheet at the date of their IPO in July 2007.

Peter Clarke, Chief Executive of Man, said:

"The last six months have seen further mixed macro signals across global economies and continued uncertainty in markets. The industry has experienced significant variations in performance between investment styles and between managers within each style. It has therefore been pleasing to see Man's investment strategies performing well in these difficult conditions, with AHL up 7.6% in the calendar year to 31 August and our flagship principal protected product, IP220, up 17.5% over the same period. Whilst many investors remain reluctant to commit capital amid current market uncertainty, solid performance is the focus for our investors and the mainstay of the medium term sales outlook.

"The hedge fund landscape will be shaped by investor demand for liquid, transparent portfolios, regulated solutions and risk-controlled returns. Man's strong local relationships, global scale and flexible product range enable us to meet these requirements across markets. Our franchise in onshore regulated products continues to grow, with over $450 million now invested in our UCITS formats, originated in 27 countries within and outside the EU. The addition of GLG's products, on completion of the transaction, will be a valuable expansion in both the scale and scope of our onshore offering. On the institutional side, we continue to see high levels of interest for managed account based solutions, which provide controlled, flexible and transparent access to diversifying return streams. Mandates already secured are now funding progressively.

"The strategic rationale for the acquisition of GLG is based on the creation of a performance focussed, multi-style investment platform, which is capable of delivering superior, uncorrelated returns from a wide range of investment strategies across market cycles. Since the announcement of the transaction, GLG has reported continued asset raising and strong recent performance across a variety of styles including emerging markets, global macro, equity long/short, market neutral and credit. I am delighted with the progress we have made with integration planning to date, with both firms clearly focussed on the powerful investment proposition which will be created by the transaction."

Conference call

A conference call for investors and analysts will be held at 09:00 UK time this morning. 

UK Access Number                            [phone]

UK Toll Free* Number                        0808 238 7377

Playback

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Conference Reference                       275454#

*If you are calling from a mobile phone your provider may charge you when connected to our toll free number.

Interim results

Man Group will announce its interim results for the six months to 30 September 2010 on Thursday 4 November 2010.

FUNDS UNDER MANAGEMENT

Asset flows

Man expects to see a private investor net outflow in the quarter to 30 September 2010 of $0.7 billion and an inflow of $0.1 billion from institutional investors.  There has been a pick-up in sales ($1.4 billion in Q2 compared to $0.7 billion in Q1), driven by the gradual funding of previously announced institutional mandates and continued sales of onshore regulated open-ended product.  Annualised redemption rates for private investors are running slightly higher than the historic average and institutional redemptions remain low.  The total net outflow for the first half was $1.6 billion.

Quarterly institutional redemptions to be paid on 1 October 2010 are expected to be around $0.2 billion.

Investment performance

Investment performance is expected to contribute around $0.8 billion to FUM in the quarter to 30 September, and $1.0 billion for the first half.  This reflects a period of strong outperformance for managed futures, with AHL Diversified plc up 5.3% in the financial year to 31 August compared to world stocks down 9.9%.  AHL performed well compared to its peer group by maintaining sufficient exposure to profit from underlying themes and controlling losses as trends reversed.  Man Multi-Manager is also performing well in these conditions by running less traditional beta and capturing more alternative alpha in its portfolios, in particular managed futures. This, together with a strong appreciation in guarantee instruments, boosted the performance of Man's structured product range, with Man IP220 up 12.3% in the financial year to 31 August.

FX and other movements

Currency movements are expected to increase FUM by $1.7 billion in the quarter to 30 September, driven by the weakening of the US dollar against the Euro and the Australian dollar.  Currency movement for the half year is expected to be a positive $0.6 billion.

Other movements were a negative $0.9 billion for the quarter to 30 September, reflecting negative routine rebalancing of investment exposure in guaranteed products in July and August, and positive rebalancing in September.  Other movements for the half year are expected to be a positive $0.1 billion. 

FINANCIAL SUMMARY

Income statement

Pre-tax profit before adjusting items for the six months ending 30 September 2010 is expected to be around $215 million (H2 2010: $268 million), reflecting a moderate reduction in net management fees and minimal performance fees.  Gross management fee income* is estimated to be around $640 million (H2 2010: $668 million), reflecting largely stable average private investor funds under management and a decrease in average institutional funds under management.  Net management fee income is estimated to be around $205 million.  Net performance fee income is estimated to be around $10 million, with AHL still largely below high water marks.

Two adjusting items have been reflected in the first half profit before tax from continuing operations - approximately $25 million for GLG acquisition costs and around $20 million for pre-acquisition rationalisation costs, including consultancy advice. 

Diluted earnings per share before adjusting items on continuing operations is expected to be around 9.5 cents; 7.0 cents after adjusting items. 

Underlying EPS, which excludes performance fee income and adjusting items, is expected to be around 9 cents.

Discontinued operations of a negative $35 million reflect an arbitration settlement linked to claims made by MF Global regarding their closing balance sheet at the date of their IPO in July 2007.

* Includes management fee income from associates

Financial position

Man's financial position remains strong, with a regulatory capital surplus of $1.5 billion and over $2.5 billion in cash.  After completion of the GLG acquisition, the Company expects to retain a regulatory capital surplus of around $300 million.

GLG TRANSACTION UPDATE

Man's acquisition of GLG Partners, Inc., which was approved by Man shareholders by a margin of over 90% on 1 September, remains subject to the approval of GLG stockholders and certain regulatory authorities as well as other conditions referred to in the announcements of 17 May and 29 June 2010.  Change of control approval has now been received from the majority of the relevant regulators, including from the UK Financial Services Authority.  The GLG stockholder meeting is scheduled to take place on 12 October 2010 and the acquisition is expected to close shortly thereafter. 

Post acquisition planning activities have advanced swiftly over the summer months.  Emmanuel Roman has been appointed Chief Operating Officer from completion as part of an integrated management team. A governance framework has been defined for the enlarged Group, and the previously identified annual cost savings of approximately $50 million have been confirmed in the integration plan.  On the sales front, each regional office within Man has identified the GLG strategies likely to be most attractive to its investor base and training programmes have taken place, so that GLG products can start to be marketed by the Man distribution network immediately after closing.    

FUNDS UNDER MANAGEMENT ANALYSIS

Estimated 3 months to 30 September 2010
	Private investor $bn			Institutional $bn	Total $bn
	Guaranteed	Open-ended	Total
FUM at 30 June 2010	14.8	12.3	27.1	11.4	38.5
Sales	0.1	0.5	0.6	0.8	1.4
Redemptions	(0.7)	(0.6)	(1.3)	(0.7)	(2.0)
Net inflows/(outflows)	(0.6)	(0.1)	(0.7)	0.1	(0.6)
Investment movement	0.2	0.5	0.7	0.1	0.8
FX	0.7	0.3	1.0	0.7	1.7
Other	(0.6)	(0.1)	(0.7)	(0.2)	(0.9)
FUM at 30 September 2010	14.5	12.9	27.4	12.1	39.5

Estimated 6 months to 30 September 2010
	Private investor $bn			Institutional $bn	Total $bn
	Guaranteed	Open-ended	Total
FUM at 31 March 2010	14.0	12.8	26.8	12.6	39.4
Sales	0.3	0.8	1.1	1.0	2.1
Redemptions	(1.3)	(1.1)	(2.4)	(1.3)	(3.7)
Net inflows/(outflows)	(1.0)	(0.3)	(1.3)	(0.3)	(1.6)
Investment movement	0.4	0.6	1.0	-	1.0
FX	0.2	0.1	0.3	0.3	0.6
Other	0.9	(0.3)	0.6	(0.5)	0.1
FUM at 30 September 2010	14.5	12.9	27.4	12.1	39.5

Funds by manager

	Estimated 30 September 2010 $bn	30 June 2010 $bn	31 March 2010  $bn
AHL	21.9	21.2	21.2
Multi-Manager	14.4	14.2	14.8
Ore Hill / Pemba	3.2	3.1	3.4
Total	39.5	38.5	39.4

INVESTMENT PERFORMANCE

	Total return			Annualised return
	2 months to 31-Aug-10	Financial year to 31-Aug-10	Calendar year to 31-Aug-10	3 years to 31-Aug-10	5 years to 31-Aug-10
Fund of funds
Man Four Seasons Strategies1	1.0%	-1.2%	-0.3%	-2.4%	2.0%
Man RMF Diversified2	1.3%	-0.5%	0.9%	-1.8%	2.8%
Structured - principal protected
Man-IP 2203	8.5%	12.2%	17.5%	6.8%	7.7%
Single managers
Man AHL Diversified plc4	4.4%	5.3%	7.6%	11.1%	10.9%
Ore Hill5	2.2%	4.5%	22.8%	-1.0%	3.6%
World Stocks6	2.0%	-9.9%	-6.1%	-11.5%	-2.3%
HFRI Fund Weighted Composite Index7	1.8%	-0.9%	1.5%	0.8%	4.9%
HFRI Fund of Funds Composite Index7	0.8%	-1.8%	-0.4%	-3.1%	2.0%
Corporate bonds8	6.5%	15.5%	17.5%	10.8%	6.5%

Source: Man database and Bloomberg.  There is no guarantee of trading performance and past or projected performance is not a reliable indicator of future performance.  Returns may increase or decrease as a result of currency fluctuations. 

1) Represented by Man Four Seasons Strategies - Class ISI4.

2) Represented by Man RMF Investments SICAV Class D.

3) Represented by Man-IP 220 Ltd from 18 December 1996 to 31 December 2005 and Man-IP 220 Ltd - USD class bonds from 1 January 2006.

4) Man AHL Diversified plc is valued weekly, but for comparative purposes the last weekly valuation of the month has been used.  The month to date return as at 20 September 2010 is -2.3%.

5) Represented by Ore Hill International II Ltd.

6) Represented by MSCI World Index (price return hedged to USD). Quarterly return to 31 August 2010 of -2.4%.   

7) HFRI index performance over the past 4 months is subject to change.

8) Represented by Citigroup High Grade Corporate Bond index (total return).

Enquiries

David Browne

Head of Group Funding & External Relations

[phone]

[e-mail]

Miriam McKay

Head of Investor Relations

[phone]

[e-mail]

Simon Anderson

Global Head of Communications

[phone]

[e-mail]

Robert Clow

Senior CommunicationsOfficer

[phone]

[e-mail]

Maitland

Philip Gawith

George Trefgarne

[phone]

About Man Group

Man is a world-leading alternative investment management business.  With a broad range of funds for institutional and private investors globally, it is known for its performance, innovative product design and investor service.  Man manages $39.5 billion.

The original business was founded in 1783.  Today, Man Group plc is listed on the London Stock Exchange and is a member of the FTSE 100 Index with a market capitalisation of around £4 billion.

Man Group is a member of the Dow Jones Sustainability World Index and the FTSE4Good Index. Man also supports many awards, charities and initiatives around the world, including sponsorship of the Man Booker literary prizes.  Further information can be found at www.mangroupplc.com.

Important information

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. This announcement has been prepared for the purposes of complying with the Listing Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of England.

This announcement is not intended to, and does not constitute, or form part of, an offer to sell or an invitation to purchase or subscribe for any securities or a solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus equivalent document. Shareholders of Man and holders of shares of GLG Common Stock are advised to read carefully the formal documentation in relation to the Acquisition. Any response to the proposals should be made only on the basis of the information in the formal documentation.

This announcement is not an offer of, or solicitation of an offer to purchase, securities in the United States and the new Man Shares, which will be issued in connection with the Acquisition, have not been, and will not be, registered under the US Securities Act or under the securities law of any state, district or other jurisdiction of the United States, Australia, Canada or Japan and no regulatory clearance in respect of the new Man Shares has been, or will be, applied for in any jurisdiction other than the UK.

The new Man Shares to be issued in connection with the Acquisition to certain holders of GLG Common Stock may not be offered, sold, or, delivered, directly or indirectly, in, into or from the United States absent registration under the US Securities Act or an applicable exemption from registration. GLG Stockholders are urged to read the Schedule 13E-3 and GLG's definitive proxy statement and other relevant documents filed with the SEC, because they contain important information about the Acquisition.  The Schedule 13E-3 and GLG's definitive proxy statement and other documents filed with the SEC are available free of charge at the SEC's website, www.sec.gov.

Forward-looking statements

Certain statements in this announcement are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Undue reliance should not be placed on forward-looking statements, which speak only as of the date of this announcement. Except as required by law or regulation, Man is not under an obligation to update or keep current the forward-looking statements contained in this announcement or to correct any inaccuracies which may become apparent in such forward-looking statements.

No statement in this announcement is intended as a profit forecast or profit estimate and no statement in this announcement should be interpreted to mean that the earnings per share of the Enlarged Group, Man and/or GLG for the current or future financial periods will necessarily match or exceed the historical or published earnings per share of Man or GLG.

 

END

 

 

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