Interim Results
Man Group plc
17 November 2005
17 November 2005
UNAUDITED INTERIM RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2005
FINANCIAL HIGHLIGHTS
Half Year Business Summary
• Recurring net management fee income up 26% to $327 million
• Brokerage net income up 19% to $83 million
• Diluted underlying earnings per share^* up 24% to 99 cents
• Net performance fee income at $166 million, up from $31 million
• Profit before tax on total operations up 59% to $576 million (excluding
the exceptional gain in the comparative period)
• Diluted earnings per share on total operations* up 57% to 138 cents
• Funds under management of $44.4 billion at 30 September 2005 (including
$18.4 billion institutional), up $1.4 billion from 31 March 2005
• Fund sales in the six month period of $3.5 billion, including $1.6
billion institutional sales
• Dividend up 30% in US dollar terms to 31.2 cents (which includes the
effect of some rebalancing between interim and final dividend in the current
year)
• Continued development in the second half:
- Man IP 220 Limited closed in October raising aggregate investor money
of $575 million
- Funds under management are currently estimated to be $44.7 billion
- Agreement to acquire the futures brokerage business of Refco Inc.
Half year to Half year to Year to
30 September 30 September 31 March
2005 2004 2005
---------------------------------------- ---------- ----------- --------
Funds under management $44.4bn $39.1bn $43.0bn
------------------------------ ---------- ----------- --------
Asset Management net management
fee income $327m $259m $594m
Asset Management net performance
fee income $166m $31m $119m
Brokerage net income $83m $70m $148m
------------------------------ ---------- ----------- --------
Financial Services $576m $360m $861m
Sugar Australia - $2m $2m
------------------------------ ---------- ----------- --------
Profit before tax and
exceptional items $576m $362m $863m
Exceptional items+ - $251m $195m
------------------------------ ---------- ----------- --------
Statutory profit before tax $576m $613m $1,058m
------------------------------ ---------- ----------- --------
Diluted earnings per share *
Underlying^ 99c 80c 182c
Total operations 138c 88c 207c
Total operations before exceptional 138c 88c 209c
items ---------- ----------- --------
------------------------------
Dividends per share 31.2c 24.0c 66.0c
------------------------------ ---------- ----------- --------
Post-tax return on equity
(annualised)# 32.9% 28.5% 29.8%
------------------------------ ---------- ----------- --------
Equity shareholders' funds $2,877m $2,187m $2,712m
------------------------------ ---------- ----------- --------
^ 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, the results of Sugar Australia (now
sold) and exceptional items)
* A reconciliation of earnings per share to the statutory measure is shown in
note 6 to the Interim Financial Statements
+ The exceptional items in the comparative periods are detailed in note 3 to the
Interim Financial Statements
# Post-tax return on equity excludes the fair value gains on the conversion
option component of the exchangeable bonds, which arose in the comparative
periods
Stanley Fink, Chief Executive said:
'The Man Group has had a successful first half, with our fund investors seeing
good performance across the product range and our shareholders enjoying strong
profit growth in all areas. Since the end of September, momentum in asset
raising has continued, with the latest global launch raising $575m of customer
money. Also, in November we announced the acquisition of the regulated futures
brokerage business of Refco Inc. This represents an exciting opportunity for
Brokerage to access a wider customer base, improve transactional efficiencies
and further develop the pool of liquidity represented by the enhanced customer
flow.
The board is confident of the outlook for the Group and of strong growth in
underlying earnings for the year.'
DIAL-IN TO ANALYSTS' PRESENTATION WHICH BEGINS AT 9AM TODAY
The dial-in numbers are as follows:
Dial-in number: 020 8901 6928
There will be a playback facility until 6pm on Wednesday 23 November.
UK replay number: 020 8515 2499
UK replay pin: 686764#
US replay number: 1 303 590 300
US replay pin: 11044603#
Enquiries
Man Group plc 020 7144 1000
Stanley Fink
Peter Clarke
David Browne
Merlin 020 7653 6620
Paul Downes 07900 244888
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 3,000 people in 15 countries, with key centres in London,
Pfaeffikon (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 access for private and
institutional investors worldwide to hedge fund and other alternative investment
strategies through a range of products and solutions designed to deliver
absolute returns with a low correlation to equity and bond market benchmarks.
Man Investments has a 20 year track record in this field, supported by strong
product development and structuring skills, and an extensive investor service
and global distribution network.
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 2005
Group overview and strategy
The Man Group has continued to make good progress in the first half of the year,
with strong growth in net management fee income, net performance fee income and
Brokerage net income. Demand for our investment products has held up well
against a backdrop of lower investment returns across the industry in the first
six months of the calendar year. Many of our products, particularly those with
AHL content, have seen strong performance over the summer and this has begun to
have a positive effect on more recent product offerings. Since 30 September, the
latest global product launch, Man IP 220 Limited, raised $575 million of
investor money.
On an IFRS basis, in the first half, Group profit before tax (excluding the
exceptional gain in the comparative period) was up 59% to $576 million,
reflecting a 26% increase in net management fee income and a 19% increase in
Brokerage net income. In addition, there has been a substantial increase in net
performance fee income to $166 million, up from $31 million in the comparative
period, reflecting strong performance across most of our managers, in particular
AHL. This has driven diluted underlying earnings per share up 24% to 99 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, the results of Sugar Australia, now
sold, and exceptional items). Diluted earnings per share on total operations
grew to a greater extent, up 57% to 138 cents for the first half, reflecting the
higher net performance fee income.
In Asset Management, funds under management were $44.4 billion at 30 September
2005, up $1.4 billion on the figure at the end of March. Net inflows (sales less
redemptions) for the first half increased funds under management by $1.0
billion, investment movement added $1.6 billion and maturities, FX and other
movements reduced funds under management by $1.2 billion. Overall private
investor and institutional funds under management each grew by $0.7 billion. The
relative proportion of private investor and institutional assets as a percentage
of total assets was unchanged on the position at the year-end. Net management
fee margins and operating expense ratios maintained the improved levels of the
prior full year.
We have continued to develop our intermediary network for private investor
sales, and now have 1,885 active intermediaries globally. This is a net increase
of 31 since March comprising 127 new intermediaries less 96 terminations of
non-performing intermediaries. We have continued to build out our product range
and launch new innovative products, such as our current global launch, Man
BlueCrest Ltd. This is a capital guaranteed product which will invest
exclusively with our associated multi-strategy manager BlueCrest Capital
Management in a diversified portfolio. We continue to see particularly strong
demand from Japanese private investors for our alternative investment products,
which amounted to over $400 million of sales in the first half. We have further
joint venture products in the region, which are planned to be launched in the
second half.
As well as developing our own wholly-owned investment managers, we have
continued to make significant progress in building relationships with high
quality new managers across a range of complementary investment styles. At 30
September 2005, Man Global Strategies had agreements in place with 44 affiliated
managers, a net increase of three since the year-end. Man Global Strategies
currently has 10 strategic alliances, 29 capacity relationships and five others
in the early stages of sponsorship.
We also continue to make progress in the institutional market, building on our
core European investor base to penetrate new markets and expand the product
range. RMF has won new mandates from a number of European insurance companies,
is deepening its presence in the institutional pensions market and has also
recently launched its third CDO fund. New product launches include RMF Three
Pearls, a large capital guaranteed bespoke product, providing access to some of
the RMF focused portfolios, in this case including commodities and Asia.
In addition, RMF maintains an 'incubator' of hedge funds with a separate team
focusing on this area. At 30 September 2005, it has agreements in place with 14
managers.
In Brokerage, the continued strong profitability reflects growth in market
share, the benefits of a diversified product offering and a wide geographical
presence across all key markets. This result also reflects the successful
management of changes to our market, ongoing successful recruitment of producer
teams and further leveraging of our product range throughout our global office
network.
On 11 November 2005, we announced the acquisition of the customer accounts,
balances and certain other assets of Refco Inc., comprising primarily all of the
employees and business of Refco's regulated futures brokerage in the US, Canada,
London and Asia. We are also acquiring Refco Inc.'s institutional foreign
exchange platform and employees. The purchase price consists of $282 million in
cash and the assumption of an estimated $37 million of liabilities. In addition
Man will pay a further $5 million if the US component of the acquisition is not
completed by 21 November 2005. The acquisition is conditional upon regulatory
consents and is expected to close during November. The market value of the
assets being acquired is estimated to be $115 million, of which an estimated $90
million is represented by the value of exchange seats. The purchase price is
subject to downward adjustment to the extent that Refco LLC's customer
segregated funds are less than $1.75 billion as at closing. As at 11 November
2005 Refco's customer segregated funds stood at $2.3 billion.
Refco's brokerage business is highly complementary to Man's in terms of
customers, geography and products. There will be significant integration
benefits and savings arising from the transaction, and we believe that many
former Refco clients will return now that the future of the business is assured.
Man will incur significant integration costs, estimated at up to $125 million,
the bulk of which are expected to fall in the remainder of this financial year.
During the year to March 2007, the acquired assets are expected to make an
operating contribution (prior to any residual integration costs) and be modestly
dilutive to underlying earnings per share. The acquisition is expected to become
earnings enhancing during the year to March 2008 as the business becomes fully
embedded and the full integration benefits are accessed.
With effect from 17 November 2005, Peter Clarke has been appointed Group Deputy
Chief Executive and Finance Director in recognition of his wider role within the
Group. On 31 August 2005, Chris Chambers stepped down as Chief Executive of Man
Investments and as a director of Man Group plc. John Morrison, who was Head of
Marketing and Client Services for Man Investments, has been appointed as Chief
Executive of Man Investments.
Dividend and share repurchase activities
Given the Group's good performance in the first half, the Board's confidence for
the full year, our strong financial condition and the effect of some
rebalancing between interim and final dividend in the current year, the interim
dividend has been increased to 31.2 cents, which represents a 30% increase over
the US dollar equivalent of the interim dividend in the prior year of 24.0
cents. The dividend will be payable on 30 December 2005 to shareholders on the
register at the close of business on 25 November 2005 with the shares quoted ex-
dividend from 23 November 2005. This dividend will be paid in sterling at the
rate of 18.07 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 8 December 2005.
6,493,000 shares were repurchased and cancelled in the first half at an average
cost of £14.82 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 1 October 2005 and ended on 16 November 2005 with
acquisitions effected within certain pre-set parameters. 1,845,000 shares were
purchased under this programme at an average cost of £15.50 per share.
FINANCIAL SUMMARY
Asset Management
Asset Management increased pre-tax profits for the first half by 70% to $493
million. Recurring net management fee income increased 26% to $327 million as a
result of growth in funds under management. Net performance fee income at $166
million was substantially up on last year, reflecting in particular the recent
strong performance at AHL.
Funds under management increased from $43.0 billion at 31 March 2005 to $44.4
billion at 30 September 2005. At 30 September 2005, the split between private
investor and institutional funds under management was $26.0 billion (31 March
2005: $25.3 billion) and $18.4 billion (31 March 2005: $17.7 billion)
respectively. Sales at $3.5 billion were down on the first half of last year. 12
new private investor fund products were launched during the half year. The
increase in funds under management from Man's two global launches (Man AP
Enhanced Series 2 and Man Global Strategies Diversified Opportunities) was $1.0
billion. Joint venture sales accounted for $0.3 billion. Other private investor
sales, mainly relating to open-ended funds, accounted for $0.6 billion and
institutional sales $1.6 billion.
Investment movement in the first half was a positive $1.6 billion. In keeping
with the industry in general, for the six months ended 30 September 2005 our
managers saw a series of mainly positive monthly returns, culminating in a
strong September. This occurred as the overall industry performance recovered
markedly, following on from a poor second quarter of the calendar year.
AHL returned in excess of 14% over the period with positive contributions from
most sectors notably equity, energy and interest rate trading. Consistent with
their investment objectives, our multi-manager products saw lower returns with a
commensurate lower level of volatility. Man Multi-Strategy posted a 8.5% return
over the first half, helped by good performance from equity hedge managers and
managed futures. Our fully diversified fund of hedge fund managers also faired
well with Glenwood showing a 3.8% gain and RMF recording a 4.4% gain over the
period. In both cases equity hedge and event driven managers were major
contributors.
Performance 6 months to 30 12 months to 30 3 years to 30 5 years to 30
records September 2005 September 2005 September 2005 September 2005
(not annualised) (annualised) (annualised)
AHL
Diversified
Programme* 14.6% 23.4% 9.1% 18.1%
Glenwood @ 3.8% 6.6% 4.0% 3.4%
Man Global
Strategies # 8.5% 14.5% 6.2% 10.5%
RMF ^ 4.4% 10.9% 7.6% 7.0%
BlueCrest+ 3.5% 9.6% 7.4% 13.8%+
HFRI Fund of
Funds Composite Index 4.2% 10.2% 8.3% 5.2%
World stocks 7.7% 19.5% 21.0% 0.7%
World bonds -2.5% 3.0% 8.0% 8.2%
Source: Man database and Bloomberg. There is no guarantee of trading performance
and past performance is not necessarily a guide to future results.
* AHL Diversified: represented by Athena Guaranteed Futures Limited.
@ Glenwood: represented by Man-Glenwood Multi-Strategy Fund Limited.
# Man Global Strategies: represented by Man Multi-Strategy Guaranteed Limited.
^ RMF: represented by RMF Absolute Return Strategies I (dividends reinvested).
+ BlueCrest: represented by BlueCrest Capital International Limited. Inception
November 2000 so five year track record is approximated by 4 years 10 months
since inception.
Note: All figures are shown net of fees and commissions, where applicable.
World stocks: MSCI World Stock Index (total return). World bonds: Citigroup
Global Government Bond Index - All Maturities (total return).
Redemptions totalled $2.5 billion in the first half, of which private investor
comprised $1.6 billion. Redemption levels in private investor products of 12.7%
were slightly above the record low level of 10% last year but are still towards
the bottom of the 12-18% long-term range that we have experienced. Institutional
redemption levels were $0.9 billion, similar to last year, with the majority
arising at RMF.
Maturities of $0.5 billion in the first half almost entirely relate to
maturities of third party funds managed by Marin, an affiliated manager, on
which Man had been earning modest fees under a fee sharing arrangement.
FX and other movements accounted for a $0.7 billion decrease in funds under
management in the period, mostly comprising adverse currency translation
impacts, reflecting Euro weakness against the US dollar in the first quarter of
the financial year.
Brokerage
Brokerage had a strong first half with pre-tax profits of $83 million, an
increase of 19% over the first half of last year. This reflects continued growth
in revenue streams, being clearing, execution, matched principal business and
interest income. We have achieved both significant organic growth and grown our
market share through the aggressive recruitment of producer teams and the
leveraging of the existing client base. The benefits of our diversified product
offering provided further impetus to our profit growth as excellent performances
from our foreign exchange, energy and private client businesses more than offset
somewhat slower markets in interest rate products and metals during the summer
months. The business is now comparable to a major derivatives exchange,
representing a global pool of liquidity and attracting new clients and producers
whilst simultaneously providing large economies of scale and market information.
In September, our new office in Hong Kong commenced trading. Our presence in
this region provides an excellent platform for measured growth into the
expanding economy of mainland China.
We have also made good progress in rolling out our product offering throughout
our global office network. Our launch of the contract for difference product in
Australia and the foreign exchange platform in Singapore have proved successful.
We continue to take advantage of changes within our marketplace. For example, we
successfully managed the change and increased our market share following the
move of the International Petroleum Exchange from open out-cry to electronic
trading in the period.
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, which is up 26% to $327 million for the first half. This,
together with a strong contribution from our Brokerage business, has resulted in
continued growth in diluted underlying earnings per share, up 24% to 99 cents. A
full reconciliation of underlying earnings and underlying earnings per share to
their corresponding statutory figures is given in note 6 to the Interim
Financial Statements.
- High levels of return on equity.
The Group's post-tax return on equity on an annualised basis for the first half
was 32.9%, higher than the 28.5% for the comparative period (excluding the
exceptional fair value gain on the exchangeable bonds). This is as a result of
increased earnings, particularly performance fee income, partly offset by the
impact of a materially higher level of net assets in this first half, reflecting
the high level of retained earnings.
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.
Adoption of IFRS
As stated in the basis of preparation note (note 1 to the Interim Financial
Statements), the financial information in this Interim Report has been prepared
in accordance with the provisional accounting policies included in the Group's
IFRS Transition Report (released 5 July 2005).
Income statement
In order to analyse the performance of the Group's two principal businesses, the
table below provides a split of the Group's income statement into its divisional
components.
-------------------- -------------- ----------- ------------
Income Statement Asset Brokerage Group Total
6 months to 30 September 2005 Management
-------------------- -------------- ----------- ------------
$m $m $m
Revenue 812 681 1,493
Cost of sales (122) (418) (540)
Other operating gains 30 8 38
Other operating losses (6) (3) (9)
-------------------- -------------- ----------- ------------
Total operating income 714 268 982
Administrative expenses (238) (213) (451)
-------------------- -------------- ----------- ------------
Operating profit 476 55 531
Associates and JVs 14 - 14
Net finance income 3 28 31
-------------------- -------------- ----------- ------------
Profit before tax 493 83 576
Taxation (121)
-------------------- -------------- ----------- ------------
Profit for the period 455
-------------------- -------------- ----------- ------------
In accordance with IFRS there have been some minor changes to the income
statement line headings. Commissions and fees receivable are now shown under the
revenue heading and commissions and fees payable are now shown as cost of sales.
Other operating income has been grossed up to show gains and losses separately.
Asset Management - operating income, costs and margins
Asset Management revenues have increased by 41% over the first half of last
year, reflecting the strong growth in performance fees and the increase in
management fees derived from higher levels of funds under management. Such
revenues relate principally to management fees and performance fees, together
with brokerage and other fees, each based on net asset values of the fund
products. These include risk transfer fees (on guaranteed products); liquidity
or cash management fees; and valuation and registrar fees. Cost of sales relate
to upfront and trail sales commissions and have increased by 7%, reflecting the
high sales in the prior financial year. This charge was split 39%:61% between
the amortisation of upfront commission and trail commission, broadly in line
with the ratio in the prior year.
Other operating gains mainly comprise gains on 'seeding' investments in some of
our funds, gains on redemption-bridging activities and structuring and
arrangement fees in relation to loans to funds. Other operating losses mainly
comprise some small impairment and foreign exchange losses. Administrative
expenses, previously called operating expenses, have increased by 28% from $186
million in the comparative period to $238 million. Of this amount, $105 million
(44%) are variable overheads, relating to employee discretionary bonus payments.
The increase in administrative expenses in the period results from a $40 million
increase in discretionary bonus payments with the remainder from the investment
in infrastructure to support the growth of the business. Administrative expenses
comprise 33% of total operating income. This operating margin is consistent with
the average over the last five years.
The table below shows an analysis of net management fee income and net
performance fee income over the first half of this year and the previous four
financial years together with the margin ratio, as a percentage of average funds
under management (FUM) in each period. Net management fee income includes the
fee income described above less all sales commissions payable, finance costs and
all overheads not allocated to performance fees. Net performance fee income
includes the fee income detailed above less those overheads allocated to
performance fees, which almost entirely relate to employee performance
compensation.
In the first half, the net management fee income/FUM margin was 2.1% and 0.7%
for private investor and institutional products respectively, which is the same
as for the financial year to March 2005. The performance fee/FUM margin reflects
the underlying performance of the Group's products during each accounting
period. Performance fees from institutional fund products tend to be lower as
these products target lower returns (and lower volatility).
Asset Management margins H1 2006 FY 2005 FY 2004 FY 2003 FY 2002
----------------------- -------- -------- -------- -------- --------
Net management fee income ($m) 327 594 459 280 169
Management fees/FUM 1.5% 1.5% 1.4% 1.3% 1.9%
Net performance fee income($m):
First half of year 166 31 55 54 48
Second half of year 88 181 124 31
-------- -------- -------- -------- --------
Full year 119 236 178 79
Performance fees/FUM 0.8% 0.3% 0.7% 0.9% 0.9%
------------------------------ -------- -------- -------- -------- --------
In the above table the figures for the years 2002 to 2004 are as they were
presented under UK GAAP. The more recent periods are on an IFRS basis. Restating
2002 to 2004 on an IFRS basis would not give rise to any significant
differences.
In the income statement table on the previous page, associates and JVs are the
post-tax contribution (previously, under UK GAAP, the pre-tax contribution was
recorded) from financial interests in Affiliated Managers and includes both
established managers, such as BlueCrest, and new managers. BlueCrest contributed
$9 million to net management fee income and $4 million to net performance fee
income in the first half.
Brokerage - operating income, costs and margins
In Brokerage, revenue arises from those businesses where Man Financial acts as
intermediary and also from those businesses where it acts as a matched principal
broker, such as foreign exchange, securities, metals and energy trading. Income
earned on segregated customer balances, which are held off balance sheet, is now
included within the revenue line as it is deemed that such income is akin to an
administration fee.
The increase in revenue over the comparative period was 18%, reflecting the
continued recruitment of producer teams, growth in market share and the benefits
of active markets. Profitability was also enhanced by the rise in US interest
rates in the first half.
Cost of sales increased 21% and relate to fees charged by the exchanges, fees
paid to other brokers, rebates to introductory brokers and commissions paid to
internal producer teams. There is no fixed element of these commissions; they
are all based on sales volumes or profit contributions.
Other operating gains comprise gains on selling some surplus exchange
memberships and some small foreign exchange gains. Other operating losses mainly
relate to some small impairment losses.
Administrative expenses in Brokerage have increased 16% from $183 million in the
comparative period to $213 million. Of the administrative expenses, $27 million
relates to variable employee compensation.
The table below shows an analysis of the profit and administrative expenses
margins in Brokerage, which have remained at the same level as for the full year
to 31 March 2005.
Brokerage margins H1 2006 FY 2005 FY 2004 FY 2003 FY 2002
Total operating income plus
net finance income ($m) 296 529 481 335 244
Administrative expenses ($m) 213 381 361 260 189
Net profit ($m) 83 148 120 75 55
Administrative
expenses/income 72.0% 72.0% 75.1% 77.6% 77.5%
In the above table the figures for the years 2002 to 2004 are as they were
presented under UK GAAP. The more recent periods are on an IFRS basis. Restating
2002 to 2004 on an IFRS basis would not give rise to any significant
differences.
Other income statement amounts
Net finance income of $31 million arises from interest on non-segregated cash
balances and investments in Brokerage and margins on loans to funds in Asset
Management, offset by interest expense on borrowings to finance acquisitions
made in prior years and working capital requirements.
The tax charge for the period amounted to $121 million. The effective tax rate
on total operations was 21.0%, compared to 20.0% last year on an IFRS basis
(excluding the exceptional fair value gain on the exchangeable bonds),
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 6 to the Interim Financial Statements.
Other financial items
Net Group cash inflow for the first half was $115 million, before shareholder
distributions, driven off strong cash generation from operating profit. The
statutory cash flow statement, which is presented in a different format, is
given in the Interim Financial Statements.
Cash flows in the period $m
Operating profit (pre amortisation and depreciation) 625
Increase in working capital (419)
Taxation paid (77)
Net capital expenditure and financial investment (54)
Other 40
-------------------------------------- -----------
Cash inflow for the period before shareholder distributions 115
Dividends paid (127)
Share repurchases (174)
-------------------------------------- -----------
Cash outflow for the period (186)
Cash inflow from net movements in borrowings 399
-------------------------------------- -----------
Increase in cash in the period 213
-------------------------------------- -----------
The increase in working capital in Asset Management relates to an increase in
accrued fee income of $104 million, largely arising from the strong level of
performance fee income earned in September, and to a $188 million increase in
investments in fund products. This relates to seeding investments, investments
to aid short-term rebalancing of the funds and to short-term redemption bridging
activities. The remaining net increase in working capital largely relates to
Brokerage, reflecting larger open positions as a result of increased client
activity. Loans to funds were $499 million at 30 September 2005, similar to the
balance at the year-end.
Net capital expenditure and financial investment comprise net additions to the
capitalised amount of upfront sales commissions and other intangibles of $41
million, with the remainder largely relating to expenditure on tangible fixed
assets, mainly office refurbishment and IT systems.
In the table above, 'Other' relates to net interest received of $28 million,
dividends receivable from associates, joint ventures and other non-current
investments of $21 million, less other minor net cash outflows of $9 million.
The Group's balance sheet remains strong. At 30 September 2005, shareholders'
equity was $2,877 million, up 6% from the year-end. Retained profit added $455
million to equity in the first half, although this was partially offset by
dividends of $127 million and the consideration paid of $174 million for the
repurchase and cancellation of own shares. At 30 September 2005 the Group had a
net cash position of $854 million (March 2005: $1,011 million net cash).
During the first half the Group extended its debt maturity profile and further
diversified its sources of funding through a $50 million top-up to its existing
subordinated loan issue to the US private placement market and through the issue
of a $400 million floating rate note, which has a 10-year final maturity with a
call option in year five. These debt issues qualify as available capital for
regulatory capital purposes and have therefore contributed to increasing the
Group's Financial Resources, which amounted to $1,540 million at 30 September
2005. At that date the Group's Financial Resources Requirement was $1,030
million, split $410 million and $620 million between Asset Management and
Brokerage respectively, giving the Group a regulatory capital surplus of some
$510 million.
Outlook
The strength of Man's franchise in alternative assets is demonstrated by the
strong results for the first half. 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. Our investors have
seen good performance across the product range, particularly in the case of AHL.
Our distribution platform continues to develop well, with regional joint
ventures enhancing our global product offerings in new markets. This combination
has seen asset raising in the second half begin strongly with $575 million of
investor money raised from our third quarter global launch. This sales success,
combined with recent positive investment performance, means that assets under
management have increased from $44.4 billion at 30 September 2005 and are
currently estimated to be $44.7 billion, despite significant adverse foreign
exchange movements.
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. The acquisition of Refco
represents an exciting opportunity to continue to capitalise on the strengths of
Brokerage. Integrating Refco's business and clients with our own will facilitate
efficient transaction processing and further develop our ability to offer
matched principal trading from the enhanced pool of customer liquidity.
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 INCOME STATEMENT (unaudited)
Half year to Half year to
30 September 2005 30 September 2004 Year to 31 March 2005
----------------------------------------------------------------------------------------------------------------------
Before Before Before
Exceptional Exceptional Exceptional Exceptional Exceptional Exceptional
Items Items Total Items Items Total Items Items Total
Note $m $m $m $m $m $m $m $m $m
Revenue 1,493 - 1,493 1,151 - 1,151 2,459 - 2,459
Cost of sales (540) - (540) (460) - (460) (943) - (943)
Fair value gain on
exchangeable bonds 3 - - - - 251 251 - 202 202
Loss on sale
of business 3 - - - - - - - (7) (7)
Other operating
gains 38 - 38 23 - 23 64 - 64
Other operating
losses (9) - (9) (3) - (3) (9) - (9)
Administrative
expenses (451) - (451) (369) - (369) (764) - (764)
----------------------------------------------------------------------------------------------------------------------
Operating profit
-continuing
operations 2 531 - 531 342 251 593 807 195 1,002
Finance income 86 - 86 47 - 47 109 - 109
Finance expense (55) - (55) (34) - (34) (77) - (77)
Net finance
income 4 31 - 31 13 - 13 32 - 32
Share of after
tax profit of
associates and
joint ventures 14 - 14 7 - 7 24 - 24
------------------------------------------------------------------------------------------------------------------------
Profit on
ordinary
activities
before
taxation 2 576 - 576 362 251 613 863 195 1,058
Taxation 5 (121) - (121) (72) - (72) (173) - (173)
-----------------------------------------------------------------------------------------------------------------------
Profit for the
period 455 - 455 290 251 541 690 195 885
-----------------------------------------------------------------------------------------------------------------------
Attributable to:
Shareholders of
the Company 455 - 455 290 251 541 690 195 885
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Earnings per
share on total
operations 6
Basic 152c 178c 292c
Diluted 138c 88c 207c
------------------------------------------------------------------------------------------------------------------------
Earnings per
share on total
operations
before
exceptional
items 6
Basic 152c 96c 228c
Diluted 138c 88c 209c
-----------------------------------------------------------------------------------------------------------------------
Underlying
earnings per
share 6
Basic 107c 86c 197c
Diluted 99c 80c 182c
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Memo:
Dividends paid
in the period $127m $104m $177m
Proposed dividends per
ordinary share 31.2c 24.0c 66.0c
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
GROUP BALANCE SHEET (unaudited)
At 30 September At 30 September At 31
2005 2004 March
2005
Note $m $m $m
--------------------------- ----- --------- --------- ---------
ASSETS
Non-current assets
Property, plant and
equipment 64 62 64
Goodwill 7 834 832 827
Other intangible
assets 7 353 312 359
Investments in
associates and joint
ventures 218 224 240
Other investments 129 98 105
Deferred income tax
assets 29 27 24
Non-current
receivables 49 48 42
--------------------------- ----- --------- --------- ---------
1,676 1,603 1,661
--------------------------- ----- --------- --------- ---------
Current assets
Trade and other
receivables 8 13,931 7,586 10,137
Derivative financial
instruments 52 61 44
Short term
investments 9 3,464 2,619 3,089
Cash and cash
equivalents 2,359 1,164 2,149
--------------------------- ----- --------- --------- ---------
19,806 11,430 15,419
--------------------------- ----- --------- --------- ---------
Total Assets 21,482 13,033 17,080
--------------------------- ----- --------- --------- ---------
LIABILITIES
Current liabilities
Trade and other
payables 10 16,700 8,867 12,898
Current tax
liabilities 225 143 191
Short term borrowings
and overdrafts 11 - 33 3
Derivative financial
instruments 98 474 47
--------------------------- ----- --------- --------- ---------
17,023 9,517 13,139
--------------------------- ----- --------- --------- ---------
Non-current liabilities
Long term borrowings 11 1,505 1,225 1,135
Deferred income tax
liabilities 17 9 11
Pension obligations 55 61 59
Other creditors 5 34 24
--------------------------- ----- --------- --------- ---------
1,582 1,329 1,229
--------------------------- ----- --------- --------- ---------
Total liabilities 18,605 10,846 14,368
--------------------------- ----- --------- --------- ---------
NET ASSETS 2,877 2,187 2,712
---------------------------- ---- --------- --------- ---------
EQUITY
Capital and reserves
attributable to shareholders
Share capital 54 56 55
Share premium account 377 352 354
Merger reserve 722 722 722
Other capital
reserves 223 4 222
Available for sale
reserve 42 25 29
Cash flow hedge
reserve (1) 1 -
Profit and loss
account 1,460 1,027 1,330
--------------------------- ----- --------- --------- ---------
TOTAL EQUITY 2,877 2,187 2,712
--------------------------- ----- --------- --------- ---------
GROUP CASH FLOW STATEMENT (unaudited)
Half year Half year Year
to 30 September to 30 September to 31
2005 2004 March
2005
Note $m $m $m
------------------------------- ------ --------- --------- --------
Cash flows from operating
activities
Cash generated from
operations 14 194 (517) 830
Interest paid (46) (26) (54)
Income tax paid (77) (75) (143)
--------------------------- ------ --------- --------- --------
71 (618) 633
--------------------------- ------ --------- --------- --------
Cash flows from investing
activities
Proceeds from sale of
subsidiary - 28 20
Purchase of property,
plant and equipment (12) (13) (29)
Proceeds from sale of
property, plant and
equipment - - 1
Purchase of intangible
assets (67) (92) (196)
Proceeds from sale of
intangible assets 26 13 31
Proceeds from sale of
associates and joint
ventures - 2 3
Purchase of other
non-current investments (9) (9) (11)
Proceeds from sale of
other non-current
investments 8 2 5
Interest received 74 50 102
Dividends received from
associates and joint
ventures 18 8 19
Dividends from other
non-current investments 3 1 2
--------------------------- ------ --------- --------- --------
41 (10) (53)
--------------------------- ------ --------- --------- --------
Cash flows from financing
activities
Proceeds from issue of
ordinary shares 23 17 19
Purchase and cancellation
of own shares (174) (62) (78)
Purchase of own shares by
ESOP trust (46) (59) (62)
Disposal of own shares by
ESOP trust 26 22 33
Proceeds from borrowings 451 350 350
Incremental issue costs (2) (5) (4)
Repayments of borrowings (50) (72) (216)
Dividends paid to company
shareholders (127) (104) (177)
--------------------------- ------ --------- --------- --------
101 87 (135)
--------------------------- ------ --------- --------- --------
Net increase/(decrease)
in cash and bank
overdrafts 213 (541) 445
Cash and bank overdrafts
at the beginning of the
period 2,146 1,701 1,701
Cash and bank overdrafts
at the end of the period 2,359 1,160 2,146
--------------------------- ------ --------- --------- --------
For the purposes of the cash flow statement, cash and cash equivalents are
included net of overdrafts repayable on demand. On the balance sheet these
overdrafts are included in short-term borrowings and overdrafts and are not
netted against cash and cash equivalents. At 30 September 2005 overdrafts
repayable on demand amounted to $nil (30 September 2004: $4 million; 31 March
2005: $3 million).
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
----------------------------- ----------- ----------- ------------
Half year Half year to Year to
to 30 September 30 September 31 March
2005 2004 2005
$m $m $m
----------------------------- ----------- ----------- ------------
Currency translation
adjustments (32) (3) 12
Taxation on cost of employee
share schemes 3 - -
Available for sale investments:
Valuation gains taken to
equity 19 6 15
Transfer to income statement
on sale (6) - (5)
Cash flow hedges:
Valuation losses taken to
equity (1) (26) (19)
Transfer to income statement
in the period - 7 (1)
----------------------------- ----------- ----------- ------------
Net (expense)/ income
recognised directly in equity (17) (16) 2
Profit for the period 455 541 885
----------------------------- ----------- ----------- ------------
Total recognised income for
the period 438 525 887
Dividends (127) (104) (177)
Purchase and cancellation of
own shares (174) (62) (78)
Employee share schemes:
Value of employee services 25 22 46
Proceeds from shares issued 23 17 19
Purchase of own shares by
ESOP trusts (46) (59) (62)
Disposal of own shares by
ESOP trusts 26 22 33
Recognition of equity
component of exchangeable
bonds - - 218
----------------------------- ----------- ----------- ------------
Net increase in shareholders'
equity 165 361 886
Opening shareholders' equity 2,712 1,826 1,826
----------------------------- ----------- ----------- ------------
Closing shareholders' equity 2,877 2,187 2,712
----------------------------- ----------- ----------- ------------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The Group will adopt the requirements of International Financial Reporting
Standards and International Accounting Standards (collectively IFRS) for the
first time for the purpose of preparing financial statements for the year ending
31 March 2006.
The Group issued an IFRS Transition Report on 5 July 2005 ('the Transition
Report') which set out the provisional accounting policies expected to be
applied in the preparation of the financial statements for the year ending 31
March 2006 and the restated comparatives for the half year ended 30 September
2004 and full year ended 31 March 2005 and also provided reconciliations to the
previously reported UK GAAP figures. The Transition Report can be found in the
'Press Releases' section of the Group's website at www.mangroupplc.com
The diluted earnings per share on total operations for the comparative periods
have been changed from those given in the Transition Report. The calculation of
diluted post-tax earnings has been amended to deduct the fair value gains on the
conversion option component of the exchangeable bonds of $251 million and $202
million for the period ended 30 September 2004 and year ended 31 March 2005
respectively, to give revised diluted earnings per share on total operations of
88 cents and 207 cents respectively. These are still somewhat higher than the
equivalent earnings per share figures previously published on a UK GAAP basis,
almost entirely as a result of the cessation of goodwill amortisation. There is
no change to the basic earnings per share on total operations or to the
underlying earnings per share measures given in the Transition Report.
As explained in the Transition Report, the next annual financial statements of
the Group will be prepared in accordance with accounting standards issued by the
International Accounting Standards Board ('IASB') and adopted by the European
Union ('EU'). The financial information in this Interim Report has been prepared
in accordance with the Listing Rules of the Financial Services Authority and the
basis of preparation (including the IFRS 1 exemptions adopted by the Group) and
the provisional accounting policies included in the Transition Report. The Group
has shown exceptional items in a separate column on the face of the Group Income
Statement. The Group defines exceptional items as those material items, by
virtue of their incidence, size or nature, which the Group considers should be
presented separately in order to aid comparability from period to period.
The accounting policies are consistent with those the Group intends to use in
the next annual financial statements. As explained in the Transition Report
there is, however, a possibility that some changes may be necessary when
preparing the full annual financial statements for the first time in accordance
with accounting standards issued by the IASB and adopted by the EU. Further
standards and interpretations may be issued that could be applicable for
financial years ending 31 March 2006 or later accounting periods but with the
option for earlier adoption. IFRS is also being applied in the EU and other
countries for the first time and practice on which to draw in applying the
standards is still developing.
In the Transition Report, it was explained that there was uncertainty around the
appropriate accounting treatment for trail commission. The Group has now
concluded that trail commission payments made to intermediaries are for ongoing
services and therefore there is no impact on the financial statements of
restating the previously published UK GAAP figures to be on an IFRS basis in
this regard. To the extent that any future trail commission payments are not for
ongoing services but for services provided in promoting and selling a fund
product initially, the net present value of the future trail commission
obligation will be recognised as a financial liability, together with a matching
financial asset, at the time the obligation arises.
The financial information contained herein does not constitute statutory
accounts as defined by Section 240 of the Companies Act 1985. Statutory accounts
for the year to 31 March 2005, prepared under UK GAAP, upon which the auditors
have given an unqualified report and have made no statement under Sections 237
(2) or (3) of the Companies Act 1985, have been delivered to the Registrar of
Companies and were posted to shareholders on 8 June 2005.
2. Segmental analysis
Reconciliation of segmental profit before tax to total profit before tax
Half-year to 30 September 2005 Asset Brokerage Unallocated Total
Management exceptional
items
$m $m $m $m
--------------------- ----------- --------- --------- ---------
Revenue 812 681 - 1,493
Cost of sales (122) (418) - (540)
Other
operating
gains 30 8 - 38
Other
operating
losses (6) (3) - (9)
Administrative
expenses (238) (213) - (451)
--------------------- ----------- --------- --------- ---------
Operating
profit 476 55 - 531
Net finance
income 3 28 - 31
Share of after
tax profit of
associates and
joint ventures 14 - - 14
----------- --------- --------- ---------
---------------------
Profit before
tax 493 83 - 576
--------------------- ----------- --------- --------- ---------
Half-year to 30 Asset Brokerage Sugar Australia Unallocated Total
September 2004 Management exceptional
items
$m $m $m $m $m
------------------ ---------- -------- -------- ---------- --------
Revenue 574 577 - - 1,151
Cost of sales (114) (346) - - (460)
Fair value
gain on
exchangeable
bonds - - - 251 251
Other
operating
gains 19 4 - - 23
Other
operating
losses (3) - - - (3)
Administrative
expenses (186) (183) - - (369)
------------------ ---------- -------- -------- ---------- --------
Operating
profit 290 52 - 251 593
Net finance
income/(expens
e) (5) 18 - - 13
Share of after
tax profit of
associates and
joint ventures 5 - 2 - 7
------------------ ---------- -------- -------- ---------- --------
Profit before
tax 290 70 2 251 613
------------------ ---------- -------- -------- ---------- --------
Year to 31 March Asset Brokerage Sugar Australia Unallocated Total
2005 Management exceptional
items
$m $m $m $m $m
------------------ ---------- -------- -------- ---------- --------
Revenue 1,250 1,209 - - 2,459
Cost of sales (217) (726) - - (943)
Fair value
gain on
exchangeable
bonds - - - 202 202
Loss on sale
of business (7) - - - (7)
Other
operating
gains 61 3 - - 64
Other
operating
losses (9) - - - (9)
Administrative
expenses (383) (381) - - (764)
------------------ ---------- -------- -------- ---------- --------
Operating
profit 695 105 - 202 1,002
Net finance
income/(expens
e) (11) 43 - - 32
Share of after
tax profit of
associates and
joint ventures 22 - 2 - 24
------------------ ---------- -------- -------- ---------- --------
Profit before
tax 706 148 2 202 1,058
------------------ ---------- -------- -------- ---------- --------
3. Exceptional items
There were no exceptional items in the half year to 30 September 2005. The
following exceptional gains and losses were incurred in the comparative periods:
Fair value gain on exchangeable bonds
The exceptional gains of $251 million for the half year to 30 September 2004 and
$202 million for the year to 31 March 2005 related to the £400 million
exchangeable bonds, issued in November 2002.
As at the date of the Group's transition to IFRS, the bonds were accounted for
as a liability measured at amortised cost with the conversion option classified
as a derivative and measured at fair value with the resulting gains and losses
being reported in the income statement. This accounting treatment was adopted
because the exchangeable bonds included a cash settlement option and on
application of IAS 21 the functional currency of Man Group plc changed from
sterling to US dollars.
On 5 November 2004, the cash settlement option was revoked and the Group put in
place a US dollar/sterling cross currency swap. These changes enabled the Group
to split account for the exchangeable bonds restoring the Group to the position
it was in when it originally issued the bonds, as the conversion option would be
settled by exchanging a fixed amount of cash or another financial asset for a
fixed number of shares. Accordingly, the conversion option was classified as an
equity instrument from 5 November 2004 and not subsequently remeasured.
Loss on sale of business
For the year to 31 March 2005, the Group sold the majority of its holding in
Westport Private Equity Limited (now called Capital Dynamics Limited) and its
entire holding in Parallel Private Equity Holdings Limited, an associate. The
loss on sale amounted to $7 million ($7 million net of tax).
4. Net finance income
Half year to Half year to Year to
30 September 30 September 31 March
2005 2004
$m $m 2005
$m
Interest income 75 44 106
Interest expense:
-on bank borrowings (3) (7) (15)
-on other loans (51) (26) (62)
Fair value movement on
interest rate swaps 11 (1) -
Accretion of discount on
assets and liabilities (1) 3 3
---------------------------- ---------- ---------- ---------
31 13 32
----------------------------- ---------- ---------- ---------
5. Taxation
Half year to Half year to Year to
30 September 30 September 31 March
2005 2004
2005
$m $m $m
---------------------------- ---------- ---------- ---------
Taxation charge for the period
UK 69 40 101
Overseas 52 32 72
---------------------------- ---------- ---------- ---------
121 72 173
------------------------------ ---------- ---------- ---------
6. Earnings per share
The calculation of basic earnings per ordinary share is based on a profit for
the period of $455 million (30 September 2004: $541 million, 31 March 2005: $885
million) and on 299,986,720 (30 September 2004: 303,527,851, 31 March 2005:
302,498,430) 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 $472
million (30 September 2004: $305 million, 31 March 2005: $714 million) and on
341,976,543 (30 September 2004: 345,468,032, 31 March 2005: 344,609,297)
ordinary shares, calculated as follows:
30 September 30 September 31
2005 2004 March
2005
Number Number Number
(millions) (millions) (millions)
------------------------------ --------- --------- ---------
Basic weighted average number of
shares 300.0 303.5 302.5
Dilutive potential ordinary shares
Share awards under incentive
schemes 10.5 10.2 10.4
Employee share options 0.3 0.6 0.5
Exchangeable bonds 31.2 31.2 31.2
------------------------------ --------- --------- ---------
342.0 345.5 344.6
------------------------------ --------- --------- ---------
The following tables reconcile the earnings per share on total operations with
the earnings per share before exceptional items and underlying earnings per
share:
Half year to 30 September 2005
----------------------------
Basic Diluted Basic Diluted
post-tax post-tax earnings earning
earnings earnings per share per share
$m $m cents cents
------------------------- --------- -------- -------- --------
Earnings per share on
total operations+ 455 472 152 138
Exceptional items - - - -
------------------------- --------- -------- -------- --------
Earnings per share -
before exceptional
items 455 472 152 138
Performance related
income (133) (133) (45) (39)
------------------------- --------- -------- -------- --------
Underlying earnings per
share 322 339 107 99
------------------------- --------- -------- -------- --------
Half year to 30 September 2004
---------------------------
Basic Diluted Basic earnings Diluted
post-tax post-tax earnings earnings
earnings earnings per share per share
$m $m cents cents
------------------------- -------- -------- -------- --------
Earnings per
share on total
operations + 541 305 178 88
Exceptional
items (251) - (82) -
------------------------- -------- -------- -------- --------
Earnings per
share - before
exceptional
items 290 305 96 88
Performance
related income (27) (27) (10) (8)
Sugar
Australia (1) (1) - -
------------------------- -------- -------- -------- --------
Underlying
earnings per
share 262 277 86 80
------------------------- -------- -------- -------- --------
Year to 31 March 2005
----------------------------
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+ 885 714 292 207
Exceptional
items (195) 7 (64) 2
------------------------- -------- -------- -------- --------
Earnings per
share - before
exceptional
items 690 721 228 209
Performance
related income (93) (93) (31) (27)
Sugar
Australia (1) (1) - -
------------------------- -------- -------- -------- --------
Underlying
earnings per
share 596 627 197 182
------------------------- -------- -------- -------- --------
+ The difference between basic and diluted post-tax earnings on total operations
is the adding back of the finance expense in the period relating to the
exchangeable bonds (and deducting the fair value gain on the conversion option
component of the exchangeable bonds in the comparative periods).
7. Intangible assets
Other intangible assets
----------------------
---------
Goodwill Upfront sales Other Total
commissions
$m $m $m $m
------------------------- --------- ---------- --------- -------
Net book value
As at 1 April 2005 827 332 27 359
Currency translation
difference 7 - - -
Additions - 63 4 67
Redemptions/disposals - (15) (2) (17)
Charge for the period - (52) (4) (56)
------------------------- --------- ---------- --------- -------
Net book value at 30
September 2005 834 328 25 353
------------------------- --------- ---------- --------- -------
At 30 September 2004 832 294 18 312
------------------------- --------- ---------- --------- -------
At 31 March 2005 827 332 27 359
------------------------- --------- ---------- --------- -------
8. Current trade and other receivables
At 30 At 30 September At 31
September 2004 March
2005 2005
$m $m $m
------------------------------ --------- --------- ---------
Trade receivables:
Amounts owed by broker dealers on secured
stock lending and borrowing 11,288 5,652 7,925
Securities transactions in the course of
settlement 810 103 632
Futures transactions 284 331 502
Other trade receivables 532 393 368
Loans to funds 499 884 505
Other categories of receivables 518 223 205
------------------------------ --------- --------- ---------
13,931 7,586 10,137
------------------------------ --------- --------- ---------
9. Short term investments
At 30 At 30 September At 31
September 2004 March
2005 2005
$m $m $m
------------------------------ --------- --------- ---------
Listed investments 2,298 1,251 1,984
Unlisted investments 1,166 1,368 1,105
------------------------------ --------- --------- ---------
3,464 2,619 3,089
------------------------------ --------- --------- ---------
Listed investments largely relate to long stock positions held for matching
contract for difference (CFD) positions in Brokerage. Unlisted investments
mainly relate to certificates of deposit and US treasury bills in Brokerage and
also to investments in fund managers.
10. Current trade and other payables
At 30 At 30 September At 31
September 2004 March
2005 2005
$m $m $m
------------------------------ --------- --------- --------
Amounts owed to broker dealers on secured
stock lending and borrowing 13,047 6,841 7,238
Securities transactions in the course of
settlement 1,026 624 3,374
Futures transactions 1,197 1,144 1,153
Short stock positions held for matching CFD
positions in Brokerage 809 - 480
Other trade payables 208 131 281
Other categories of payables 413 127 372
------------------------------ --------- --------- --------
16,700 8,867 12,898
------------------------------ --------- --------- --------
11. Borrowings
At 30 At 30 September At 31
September 2004 March
2005 2005
$m $m $m
------------------------------ --------- --------- --------
Amounts falling due within one year
Bank loans and overdrafts - 33 3
------------------------------ --------- --------- --------
At 30 At 30 September At 31
September 2004 March
2005 2005
$m $m $m
------------------------------ --------- --------- --------
Amounts falling due after more than one
year
Bank loans - 159 46
Private placement notes 497 461 448
Floating rate notes 398 - -
Exchangeable bonds 610 605 641
------------------------------ --------- --------- --------
1,505 1,225 1,135
------------------------------ --------- --------- --------
During the six month period to 30 September 2005, the Group issued US$50 million
6.15% subordinated notes due August 2015 and $400 million floating rate
subordinated notes due September 2015.
12. Segregated balances
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 at 30 September 2005 $9,642 million (30 September 2004:
$7,197 million, 31 March 2005: $8,173 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. The reason for their exclusion from
the Group balance sheet is that the Group does not have a liability to its
clients in the event that a third party depository institution, where the
segregated funds are held, does not return all the segregated funds. The
corresponding asset, which is not co-mingled with the Group's funds and over
which the Group's control is severely restricted, is therefore not recognised on
the Group balance sheet.
13. 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
2005 2004 2005
---------------------------- ---------- ---------- ---------
Average exchange rate 0.5494 0.5514 0.5417
Period-end exchange rate 0.5654 0.5524 0.5298
---------------------------- ---------- ---------- ---------
14. Cash generated from operations
---------------------------- ---------- ---------- ---------
Half year Half year Year
to 30 September to 30 September to 31
2005 2004 March
2005
$m $m $m
---------------------------- ---------- ---------- ---------
Profit for the period 455 541 885
Adjustments for:
- Income tax 121 72 173
- Finance income (86) (47) (109)
- Finance expense 55 34 77
- Share of results of
associates and joint ventures (14) (7) (24)
- Depreciation of tangible
fixed assets 13 13 25
- Amortisation of intangible
fixed assets 56 54 104
- Share based payments
expense 25 22 46
- (Profit)/loss on disposal
of businesses - (1) 7
- Profit on disposal of
non-current asset investments (6) (4) -
- Impairment charges 4 - -
- Net losses/(gains) on
financial instruments 1 (248) (211)
- Other non-cash movements (11) (2) (11)
---------------------------- ---------- ---------- ---------
613 427 962
Changes in working capital:
- Increase in receivables (3,846) (585) (3,077)
- Increase in other financial
assets (374) (279) (749)
- Increase/(decrease) in
payables 3,802 (82) 3,698
- (Decrease)/increase in
provisions (1) 2 (4)
---------------------------- ---------- ---------- ---------
Cash generated from
operations 194 (517) 830
---------------------------- ---------- ---------- ---------
15. Event after the balance sheet date
On 11 November 2005, the Group announced the acquisition of the customer
accounts, balances and certain other assets of Refco Inc., comprising primarily
all of the employees and business of Refco's regulated futures brokerage. The
Group is also acquiring Refco Inc.'s institutional foreign exchange platform and
employees. The purchase price consists of $282 million in cash and the
assumption of an estimated $37 million of liabilities. In addition Man will pay
a further $5 million if the US component of the acquisition is not completed by
21 November 2005. The purchase price is subject to possible downward adjustment
dependent on the levels of segregated customer funds at closing. The acquisition
is conditional upon regulatory consents and is expected to close during
November. The acquisition will form part of the Group's Brokerage business.
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