REG - Man Group plc - 2016 Full Year Results <Origin Href="QuoteRef">EMG.L</Origin> - Part 3
01/03/2017 07:07
- Part 3: For the preceding part double click ID:nRSA1408Yb
Transfer to Group income statement upon sale or impairment - (1)
Cash flow hedges:
Valuation losses taken to equity (35) (9)
Transfer to Group income statement 23 18
Deferred tax credited on cash flow hedge movements 2 2
Net investment hedge 1 14
Foreign currency translation (7) (21)
Recycling of FX revaluation to the Group income statement on liquidation of subsidiaries 2 (1)
Items that may be reclassified subsequently to profit or loss (14) 2
Other comprehensive expense (net of tax) (24) (13)
Total comprehensive (expense)/income attributable to owners of the Parent Company (290) 158
Group balance sheet
$m Note At31 December2016 At31 December2015
Assets
Cash and cash equivalents 13 426 607
Fee and other receivables 15 257 303
Investments in fund products and other investments 14 794 598
Pension asset 27 48
Investments in associates 18 31 30
Leasehold improvements and equipment 19 44 44
Goodwill and acquired intangibles 11 1,024 1,497
Other intangibles 12 17 14
Deferred tax assets 8 63 59
2,683 3,200
Non-current assets held for sale 14 263 188
Total assets 2,946 3,388
Liabilities
Trade and other payables 16 647 660
Provisions 17 51 58
Current tax liabilities 8 6 32
Third-party interest in consolidated funds 14 240 136
Borrowings 13 149 149
Deferred tax liabilities 8 47 69
1,140 1,104
Non-current liabilities held for sale 14 132 69
Total liabilities 1,272 1,173
Net assets 1,674 2,215
Equity
Capital and reserves attributable to owners of the Parent Company 21 1,674 2,215
Group cash flow statement
$m Note Year ended31 December2016 Year ended31 December2015
Cash flows from operating activities
Statutory (loss)/profit (266) 171
Adjustments for:
Income tax (6) 13
Net finance expense 30 31
Share of post-tax profit of associates (2) (3)
Revaluation of contingent consideration (40) 62
Depreciation of leasehold improvements and equipment 11 13
Amortisation of acquired intangible assets 94 92
Amortisation of other intangible assets 4 5
Share-based payment charge 18 18
Fund product based payment charge 37 35
Impairment of goodwill and acquired intangibles 379 41
Defined benefit pension plans (including contributions) (5) (27)
Other non-cash movements 40 16
294 467
Changes in working capital:
Decrease in receivables 87 101
Increase in other financial assets1 (63) (118)
Decrease in payables (185) (30)
Cash generated from operations 133 420
Interest paid (11) (16)
Income tax paid (38) (49)
Cash flows from operating activities 84 355
Cash flows from investing activities
Purchase of leasehold improvements and equipment (11) (5)
Purchase of other intangible assets (8) (7)
Acquisition of subsidiaries and other intangibles, net of cash acquired - (38)
Payment of contingent consideration in relation to acquisitions (25) (46)
Transfer of cash in relation to the acquisition of Aalto2 (18) -
Interest received 2 2
Dividends received from associates 1 3
Cash flows from investing activities (59) (91)
Cash flows from financing activities
Proceeds from issue of ordinary shares 5 7
Purchase of own shares by the Employee Trusts and Partnerships (18) (33)
Share repurchase programme (including costs) (35) (176)
Dividends paid to Company shareholders (158) (193)
Cash flows from financing activities (206) (395)
Net decrease in cash (181) (131)
Cash at the beginning of the year 607 738
Cash at year end3 13 426 607
Notes:
1 Includes $16 million (2015: $21 million) of restricted net cash inflows relating to consolidated fund entities
(Note 14).
2 Relates to cash paid into an intermediary holding account in advance of the 1 January 2017 acquisition of
Aalto.
3 Includes $37 million (2015: $21 million) of restricted cash relating to consolidated fund entities (Note 14).
Group statement of changes in equity
Equity attributable to owners of the Parent Year ended 31 December 2016 Equity attributable to owners of the Parent Year ended 31 December 2015
$m Share capitaland capitalreserves Revaluationreservesand retainedearnings Total equity Share capitaland capitalreserves Revaluationreservesand retainedearnings Total equity
At beginning of the year 1,200 1,015 2,215 1,193 1,241 2,434
Statutory (loss)/profit - (266) (266) - 171 171
Other comprehensive expense - (24) (24) - (13) (13)
Total comprehensive (expense)/income for the year - (290) (290) - 158 158
Share-based payments 5 16 21 7 15 22
Purchase of own shares by the Employee Trusts - (13) (13) - (30) (30)
Share repurchase programme (including costs) - (101) (101) - (176) (176)
Dividends - (158) (158) - (193) (193)
At year end (Note 21) 1,205 469 1,674 1,200 1,015 2,215
The proposed final dividend would reduce shareholders' equity by $75 million (2015: $81 million) subsequent to the balance
sheet date (Note 10).
notes to the group financial statements
1. Basis of preparation
In preparing the financial information in this statement the Group has applied policies which are in accordance with the
International Financial Reporting Standards as adopted by the European Union at 31 December 2016. Details of the Group's
accounting policies can be found in the Group's Annual Report for the year ended 31 December 2015. The financial
information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434
of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016, upon which the auditors have issued an
unqualified report, will shortly be delivered to the Registrar of Companies.
The Annual Report and the Notice of the Company's 2017 Annual General Meeting (AGM) will be posted to shareholders on 15
March 2017. The Annual General Meeting will be held on Friday 5 May 2017 at 10am at Man Group's offices at Riverbank House,
2 Swan Lane, London EC4R 3AD.
Man's relationship with independent fund entities
Man acts as the investment manager/advisor to fund entities. Man assesses such relationships on an ongoing basis to
determine whether each fund entity is controlled by the Group and therefore consolidated into the Group's results. Having
considered all significant aspects of Man's relationships with fund entities, the directors are of the opinion that,
although Man manages the assets of certain fund entities, where Man does not hold an investment in the fund entity the
characteristics of control are not met, and that for most fund entities: the existence of independent boards of directors
at the fund entities; rights which allow for the removal of the investment manager/advisor; the influence of investors;
limited exposure to variable returns; and the arm's length nature of Man's contracts with the fund entities, indicate that
Man does not control the fund entities and their associated assets, liabilities and results should not be consolidated into
the Group financial statements. Assessment of the control characteristics for all relationships with fund entities led to
the consolidation of eleven funds for the year ended 31 December 2016 (2015: nine), as detailed in Note 14. An
understanding of the aggregate funds under management (FUM) and the fees earned from fund entities is relevant to an
understanding of Man's results and earnings sustainability, and this information is provided in the Chief Financial
Officer's review.
Impact of new accounting standards
There were no new or amended accounting standards adopted by Man in the current year which had a significant impact.
2. Adjusted profit before tax
Statutory (loss)/profit before tax is adjusted to give a better understanding of the underlying profitability of the
business. The directors consider that in order to assess underlying operating performance, the Group's profit period on
period is most meaningful when considered on a basis which excludes acquisition and disposal related items (including
non-cash items such as amortisation of acquired intangible assets and deferred tax movements relating to the recognition of
tax losses in the US), impairment of assets, restructuring costs, and certain non-recurring gains or losses, which
therefore reflects the recurring revenues and costs that drive the Group's cash flow and inform the base on which the
Group's variable compensation is assessed. The directors are consistent in their approach to the classification of
adjusting items period to period, maintaining an appropriate symmetry between losses and gains and the reversal of any
accruals previously classified as adjusting items. These are explained in detail either below or in the relevant note.
$m Note Year ended 31 December2016 Year ended
31 December2015
Statutory (loss)/profit before tax (272) 184
Adjusting items1:
Acquisition and disposal related
Impairment of goodwill and acquired intangibles 11 379 41
Amortisation of acquired intangible assets 11 94 92
Revaluation of contingent consideration 22 (40) 62
Unwind of contingent consideration discount 7 19 17
Other costs - professional fees and other integration costs 6 2 4
Recycling of FX revaluation to the Group income statement on liquidation of subsidiaries 6 2 (1)
Compensation - restructuring 5 17 -
Other costs - restructuring 6 4 7
Litigation, regulatory and other settlements 6 - (6)
Adjusted profit 205 400
Tax on adjusted profit2 (28) (39)
Adjusted profit after tax 177 361
Note:
1. Tax on adjusting items is $28 million (2015: $15 million), which relates to amortisation of acquired intangible
assets of $15 million (2015: $14 million), impairment of acquired intangible assets of $9 million (2015: nil), compensation
restructuring costs of $3 million (2015: nil) and other restructuring costs of $1 million (2015: $1 million).
2. The difference of $34 million (2015: $26 million) between tax on statutory (loss)/profit and tax on adjusted
profit is made up of a tax credit of $28 million (2015: $15 million credit) on adjusting items (as above) and a tax credit
of $6 million (2015: $11 million) relating to the recognition of a deferred tax asset which is classified as an adjusting
item (Note 8).
Details of the 2016 GLG and FRM goodwill and acquired intangibles impairments of $281 million and $98 million,
respectively, are further detailed in Note 11 (2015: impairment of $41 million relating to FRM). Amortisation of acquired
intangible assets primarily relates to the investment management agreements recognised on the acquisition of GLG and
Numeric.
The revaluation of contingent consideration is an adjustment to the fair value of expected acquisition earn-out payments.
The credit of $40 million in the current year primarily relates to Numeric, with a $28 million fair value decrease in the
contingent consideration largely as a result of a decrease in forecast management fees on long only products and a decrease
in forecast net inflows, partially offset by higher than forecast FUM due to higher sales than expected for 2016. The
revaluation expense in 2015 largely relates to Numeric ($61 million), primarily as a result of higher management fee
margins than previously forecast, as well as higher than forecast FUM due to flows and performance in 2015. The unwind of
the discount on contingent consideration in 2016 primarily relates to Numeric ($18 million), with the remainder arising
from the FRM, Pine Grove, and BAML fund of funds contingent consideration and is included within finance expense (Note 7).
In 2015, this related to the contingent consideration of Numeric, FRM, Pine Grove, BAML fund of funds, NewSmith and
Silvermine.
In 2016, the acquisition related professional fees and other integration costs of $2 million relate to expenses incurred in
association with the acquisition of Aalto which completed on 1 January 2017. The prior year cost of $4 million related to
the acquisitions of the Silvermine, NewSmith, BAML fund of funds and Numeric businesses.
In each of 2016 and 2015, some of the Group's foreign subsidiaries were liquidated, which had accumulated foreign currency
translation reserves at the date of liquidation of $2 million (loss) and $1 million (gain), respectively. Upon liquidation
of these subsidiaries the related foreign currency translation loss/gain was recycled to the Group income statement.
Compensation restructuring costs of $17 million in 2016 relate to termination expenses incurred due to the restructuring of
certain areas of the business. Compensation costs incurred as part of restructuring are accounted for in full at the time
the obligation arises, and include payments in lieu of notice, enhanced termination costs, and accelerated share-based and
fund product based charges.
Other restructuring costs of $4 million in 2016 largely relate to a reassessment of our onerous property lease provision
relating to Riverbank House (our main London office and headquarters) due to the finalisation of a contractual
market-linked rental increase and a reassessment of the related sub-tenancy projections. The market-linked increase was
effective for rental periods from November 2015 and estimation of this for the year ended 31 December 2015 resulted in a
similar restructuring charge. The Riverbank House premises onerous lease was recorded as an adjusting item upon initial
recognition.
The credit of $6 million to litigation, regulatory and other settlements in 2015 related to an insurance recovery of costs
incurred in association with legal claims, which were included as an adjusting item in previous years.
3. Revenue
Fee income is Man's primary source of revenue, which is derived from the investment management agreements that are in place
with the fund entities. Fees are generally based on an agreed percentage of the valuation of net asset value (NAV) or FUM
and are typically charged in arrears. Management fees net of rebates, which include all non-performance related fees and
interest income from loans to fund products, are recognised in the year in which the services are provided.
Performance fees net of rebates relate to the performance of the funds managed during the year and are recognised when the
quantum of the fee can be estimated reliably and has crystallised. This is generally at the end of the performance period
or upon early redemption by a fund investor. Until the performance period ends, market movements could significantly move
the NAV of the fund products. For AHL, GLG and FRM strategies, Man will typically only earn performance fee income on any
positive investment returns in excess of the high water mark, meaning we will not be able to earn performance fee income
with respect to positive investment performance in any year following negative performance until that loss is recouped, at
which point a fund investor's investment surpasses the high water mark. Numeric performance fees are earned only when
performance is in excess of a predetermined strategy benchmark (positive alpha), with performance fees being generated for
each strategy either based on achieving positive alpha (which resets at a predetermined interval, i.e. every one to three
years) or exceeding high water mark.
Rebates relate to repayments of management and performance fees charged, typically in association with institutional
investors, and are presented net within gross management and other fees and performance fees in the Group income
statement.
Analysis of FUM, margins and performance is provided in the Chief Financial Officer's Review on pages 15 to 24.
4. Distribution costs and asset servicing
Distribution costs are paid to external intermediaries for their marketing and investor servicing, largely in relation to
retail investors. Distribution costs are therefore variable with FUM and the associated management fee revenue.
Distribution costs are expensed over the period in which the service is provided. Distribution costs have decreased largely
as a result of the continued mix shift towards institutional FUM and the roll-off of guaranteed product FUM.
Asset servicing includes custodial, valuation, fund accounting and registrar functions performed by third-parties under
contract to Man, on behalf of the funds. The cost of these services vary based on FUM, transaction volumes, the number of
funds, and fund NAVs. The cost is recognised in the period in which the service is provided.
5. Compensation
$m Year ended Year ended
31 December 2016 31 December 2015
Salaries 159 158
Variable cash compensation 141 212
Share-based payment charge 18 18
Fund product based payment charge 37 35
Social security costs 23 33
Pension costs 10 6
Compensation costs - before adjusting items 388 462
Restructuring (Note 2) 17 -
Total compensation costs 405 462
Compensation is the Group's largest cost and an important component of Man's ability to retain and attract talent. In the
short term, the variable component of compensation adjusts with revenues and profitability of the relevant business units.
In the medium term, the active management of headcount can reduce fixed compensation, if required.
Total compensation costs excluding adjusting items have decreased by 16% compared to 2015, largely due to the decrease in
management and performance fee revenues year on year, as reflected in decreased variable cash compensation and associated
social security costs. Salaries are in line with prior year as a result of an increase in headcount due to continued
investment in the business, which has been offset by a more favourable hedged pound sterling to USD rate in 2016 (1.51)
compared to the hedged rate in 2015 (1.66).
Compensation costs before adjusting items are 48% of net revenue (2015: 43%). Net revenue is defined as gross management
and other fees, performance fees, income or gains on investments and other financial instruments, and share of post-tax
profit of associates, less distribution costs. Salaries and variable cash compensation are charged to the Group income
statement in the period in which the service is provided, and include partner drawings. The compensation ratio has
increased as a result of the lower level of performance fee revenue.
6. Other costs
$m Year ended Year ended
31 December 2016 31 December 2015
Occupancy 34 34
Technology and communications 27 34
Temporary staff, recruitment, consultancy and managed services 19 20
Legal fees and other professional fees 18 17
Benefits 15 13
Travel and entertainment 11 12
Audit, accountancy, actuarial and tax fees 8 8
Insurance 6 7
Marketing and sponsorship 6 6
Other cash costs, including irrecoverable VAT 10 10
Total other costs before depreciation and amortisation and adjusting items 154 161
Depreciation and amortisation 14 16
Other costs - before adjusting items 168 177
Acquisition and disposal related (Note 2) 4 3
Restructuring (Note 2) 4 7
Litigation, regulatory and other settlements (Note 2) - (6)
Total other costs 176 181
Other costs, before depreciation and amortisation and adjusting items, are $154 million in 2016, compared to $161 million
in the prior year, which reflects the impact of the more favourable hedged pound sterling to USD rate in 2016 and continued
efforts to remain disciplined on costs.
7. Finance expense and finance income
$m Year ended Year ended
31 December 2016 31 December 2015
Finance expense:
Interest payable on borrowings (Note 13) (9) (9)
Revolving credit facility costs and other (Note 13) (4) (8)
Total finance expense - before adjusting items (13) (17)
Unwind of contingent consideration discount (Note 2) (19) (17)
Total finance expense (32) (34)
Finance income:
Interest on cash deposits and US Treasury bills 2 3
Total finance income 2 3
The reduction in the revolving credit facility costs and other compared to 2015 reflects the reduction and renegotiation of
the revolving credit facility in both June 2015 and October 2016 (Note 13).
8. Taxation
$m Year ended Year ended
31 December 2016 31 December 2015
Analysis of tax (credit)/expense:
Current tax:
UK corporation tax on (losses)/profits 18 37
Foreign tax 5 15
Adjustments to tax charge in respect of previous years (6) (17)
Total current tax 17 35
Deferred tax:
Origination and reversal of temporary differences (17) (11)
Recognition of US deferred tax asset (6) (11)
Total deferred tax (23) (22)
Total tax (credit)/expense (6) 13
Man is a global business and therefore operates across many different tax jurisdictions. Income and expenses are allocated
to these different jurisdictions based on transfer pricing methodologies set in accordance with the laws of the
jurisdictions in which Man operates and international guidelines as laid out by the OECD. The effective tax rate results
from the combination of taxes paid on earnings attributable to the tax jurisdictions in which they arise. The majority of
the Group's profit was earned in the UK, Switzerland and the US. The current effective tax rate of 2% (2015: 7%) differs
from the applicable underlying statutory tax rates principally as a result of the impairment of the GLG and FRM goodwill
and intangibles being largely non-deductible for tax purposes, which is partially offset by the incremental recognition of
the US deferred tax asset of $6 million (2015: $11 million) and the reassessment of tax exposures in Europe and
Asia-Pacific during the year. The effective tax rate is otherwise consistent with this earnings profile. The effective tax
rate on adjusted profits (Note 2) is 14% (2015: 10%).
Accounting for tax involves a level of estimation uncertainty given the application of tax law requires a degree of
judgement, which tax authorities may dispute. Tax liabilities are recognised based on the best estimates of probable
outcomes, with regard to external advice where appropriate. The principal factors which may influence our future tax rate
are changes to tax regulation in the territories in which we operate, the mix of income and expenses by jurisdiction, and
the timing of recognition of available tax losses.
The current tax liabilities, as shown on the Group balance sheet, of $6 million (2015: $32 million) comprise a gross
current tax liability of $9 million (2015: $35 million) net of a current tax asset of $3 million (2015: $3 million).
The tax credit on Man's total loss before tax is lower (2015: expense on profit before tax is lower) than the amount that
would arise using the theoretical effective tax rate applicable to the profits/(losses) of the consolidated companies as
follows:
$m Year ended31 December2016 Year ended31 December2015
(Loss)/profit before tax (272) 184
Theoretical tax (credit)/expense at UK rate: 20.00% (2015: 20.25%) (54) 37
Effect of:
Overseas tax rates compared to UK 11 (8)
Adjustments to tax charge in respect of previous periods (7) (17)
Impairment of goodwill and other adjusting items (Note 2) 43 9
Share-based payments 2 (2)
Recognition of US deferred tax asset (6) (11)
Other 5 5
Tax (credit)/expense (6) 13
The effect of overseas tax rates compared to the UK includes the impact of the 0% effective tax rate of our US business,
which made a loss for the year as a result of goodwill and intangibles impairment.
In the current year the adjustments to the tax charge in respect of previous periods largely relates to a $6 million credit
due to the reassessment of tax exposures in Europe and Asia-pacific. In 2015, adjustments in respect of previous periods
primarily related to the reassessment of tax exposures in the UK and Switzerland.
The impairment of goodwill and other adjusting items reflects that there is no tax relief for the impairment of goodwill
recognised in jurisdictions outside the US.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. Deferred tax is calculated at the rates expected to be applied when the deferred tax asset or liability is
realised.
Movements in deferred tax are as follows:
$m Year ended31 December 2016 Year ended31 December 2015
Deferred tax liability
At 1 January (69) (83)
Credit to the Group income statement 22 14
Deferred tax liability at 31 December (47) (69)
Deferred tax asset
At 1 January 59 47
Credit to the Group income statement 1 8
Credit to other comprehensive income and equity 3 4
Deferred tax asset at 31 December 63 59
The deferred tax liability of $47 million (2015: $69 million) largely relates to deferred tax arising on acquired
intangible assets.
The deferred tax asset comprises:
$m Year ended31 December 2016 Year ended31 December 2015
US tax losses 25 19
Defined benefit pension schemes 11 9
Employee share schemes 10 15
Tax allowances over depreciation 9 11
Other 8 5
Deferred tax asset at 31 December 63 59
The deferred tax asset income statement credit of $1 million (2015: $8 million) relates to the recognition of the deferred
tax asset in respect of US losses of $6 million (2015: $11 million), a decrease in the deferred tax asset on employee share
schemes of $3 million (2015: $2 million decrease), a decrease in the deferred tax asset arising on tax allowances over
depreciation of $2 million (2015: $3 million) and no change in the deferred tax asset on other temporary differences (2015:
$2 million increase in deferred tax asset). The credit to other comprehensive income and equity of $3 million (2015: $4
million) relates to movements in the pension accrual, unrealised cash flow hedge balance and employee share schemes.
The Group has accumulated deferred tax assets in the US of $192 million (2015: $172 million). The increase of $20 million
is principally as a result of an increase in deferred tax assets due to goodwill and intangibles impairment. These assets
principally comprise accumulated operating losses from existing operations of $103 million (2015: $105 million) and future
amortisation of goodwill and intangibles assets generated from acquisitions of $72 million (2015: $59 million) that will be
available to offset future taxable profits in the US. From the maximum available deferred tax assets of $192 million (2015:
$172 million), a deferred tax asset of $25 million has been recognised on the Group balance sheet (2015: $19 million),
representing amounts which can be offset against probable future taxable profits, an increase of $6 million from that
recognised at 31 December 2015. Probable future taxable profits are considered to be forecast profits for the next three
years only, consistent with the Group's business planning horizon. As a result of the recognised deferred tax asset and the
remaining unrecognised available US deferred tax assets of $167 million (2015: $153 million), Man does not expect to pay
federal tax on any taxable profits it may earn in the US for a number of years. Accordingly, any movements in this US tax
asset are classified as an adjusting item in Note 2. The gross amount of losses for which a deferred tax asset has not been
recognised is $160 million (2015: $172 million), which will expire over a period of 12 to 20 years.
9. Earnings per ordinary share (EPS)
The calculation of basic EPS is based on post-tax loss of $266 million (2015: profit of $171 million), and ordinary shares
of 1,679,099,266 (2015: 1,694,081,544), being the weighted average number of ordinary shares on issue during the period
after excluding the shares owned by the Man Employee Trusts. For diluted EPS, the weighted average number of ordinary
shares on issue is adjusted to assume conversion of all dilutive potential ordinary shares, being ordinary shares of
1,695,995,147 (2015: 1,714,925,166).
The details of movements in the number of shares used in the basic and dilutive EPS calculation are provided below.
Year ended 31 December 2016 Year ended 31 December 2015
Total number (million) Weighted average (million) Total number (million) Weighted average (million)
Number of shares at beginning of year 1,700.8 1,700.8 1,756.3 1,756.3
Issues of shares 2.6 1.9 3.5 1.9
Repurchase of own shares (23.5) (2.3) (59.0) (42.0)
Number of shares at period end 1,679.9 1,700.4 1,700.8 1,716.2
Shares owned by Employee Trusts (19.6) (21.3) (22.1) (22.1)
Basic number of shares 1,660.3 1,679.1 1,678.7 1,694.1
Share awards under incentive schemes 15.9 17.1
Employee share options 1.0 3.7
Diluted number of shares 1,696.0 1,714.9
The reconciliation from EPS to adjusted EPS is provided below:
Year ended 31 December 2016 Year ended 31 December 2015
Basic anddiluted post-tax earnings$m Basicearnings per share cents Dilutedearnings per share cents Basic anddiluted post-taxearnings$m Basicearnings per share cents Dilutedearnings per share cents
(Loss)/earnings per ordinary share (266) (15.8) (15.8) 171 10.1 10.0
Effect of potential ordinary shares1 - - 0.1 - - -
Items for which EPS has been adjusted (Note 2) 477 28.4 28.1 216 12.7 12.6
Tax adjusting items (Note 2) (34) (2.1) (2.0) (26) (1.5) (1.5)
Adjusted EPS 177 10.5 10.4 361 21.3 21.1
Less adjusted net performance fee profit before tax (27) (1.6) (1.6) (206) (12.1) (12.1)
Tax on adjusted net performance fee profits 3 0.2 0.2 20 1.2 1.2
Adjusted management fee EPS 153 9.1 9.0 175 10.4 10.2
Note:
1. As their inclusion would decrease the loss per share, potential ordinary shares have not been treated as
dilutive and have therefore been excluded from the diluted statutory EPS calculation.
10. Dividends
$m Year ended31 December2016 Year ended31 December2015
Ordinary shares
Final dividend paid for the year to 31 December 2015 - 4.8 cents (2014: 6.1 cents) 83 104
Interim dividend paid for the six months to 30 June 2016 - 4.5 cents (2015: 5.4 cents) 75 89
Dividends paid 158 193
Proposed final dividend for the year to 31 December 2016 - 4.5 cents (2015: 4.8 cents) 75 81
Dividend distribution to the Company's shareholders is recognised directly in equity in Man's financial statements in the
period in which the dividend is paid or, if required, approved by the Company's shareholders. Details of the Group's
dividend policy are included in Note 21.
11. Goodwill and acquired intangibles
$m Year ended 31 December 2016 Year ended 31 December 2015
Goodwill Investmentmanagementagreements Distributionchannels Brandnames Total Goodwill Investmentmanagementagreements Distributionchannels Brandnames Total
Net book value at beginning of the year 907 545 23 22 1,497 936 595 26 25 1,582
Acquisition of business1 - - - - - 22 35 - 1 58
Amortisation - (86) (4) (4) (94) - (85) (3) (4) (92)
Impairment expense2 (319) (54) (3) (3) (379) (41) - - - (41)
Currency translation - - - - - (10) - - - (10)
Net book value at year end 588 405 16 15 1,024 907 545 23 22 1,497
Allocated to cash generating
units as follows:
AHL 454 - - - 454 454 - - - 454
GLG - 238 16 11 265 222 352 23 17 614
FRM - 28 - 1 29 97 36 - 1 134
Numeric 134 139 - 3 276 134 157 - 4 295
Notes:
1. Acquisition of business relates to Silvermine, NewSmith and the BAML fund of funds businesses for the year ended
31 December 2015.
2. The impairment expense in the year of $379 million relates to GLG ($281 million) and FRM ($98 million). The 2015
impairment of $41 million relates to FRM.
Goodwill
Goodwill represents the excess of consideration transferred over the fair value of identifiable net assets of the acquired
business at the date of acquisition. Goodwill is carried on the Group balance sheet at cost less accumulated impairment,
has an indefinite useful life, is not subject to amortisation and is tested for impairment annually, or whenever events or
circumstances indicate that the carrying amount may not be recoverable.
Investment management agreements (IMAs), distribution channels and brand names
IMAs, distribution channels and brand names are recognised at the present value of the expected future cash flows and are
amortised on a straight-line basis over their expected useful lives, which are between three and 13 years (IMAs and
brands), and nine and 12 years (distribution channels).
Allocation of goodwill to cash generating units
For statutory accounting impairment review purposes, the Group has identified four cash generating units (CGUs): AHL, GLG,
FRM and Numeric. Further details of these are provided below.
Calculation of recoverable amounts for cash generating units
An impairment expense is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(CGUs). The recoverable amounts of the Group's CGUs are assessed each year using a value in use calculation. The value in
use calculation gives a higher valuation compared to a fair value less cost to sell approach, as this would exclude some of
the revenue synergies available to Man through its ability to distribute products using its well established distribution
channels, which may not be fully available to other market participants.
The value in use calculations at 31 December 2016 use cash flow projections based on the Board approved financial plan for
the year to 31 December 2017 and a further two years of projections (2018 and 2019), plus a terminal value. The valuation
analysis is based on best practice guidance whereby a terminal value is calculated at the end of a short discrete budget
period and assumes, after this three year budget period, no growth in asset flows above the long-term growth rate. In order
to determine the value in use of each CGU, it is necessary to notionally allocate the majority of the Group's cost base
relating to operations, product structuring, distribution and support functions, which are managed on a centralised basis.
During H2 2016, the directors reassessed the allocation methodology for the Group's shared costs which are not directly
attributable to an individual CGU, in order to ensure that this best represents the proportionate share of costs
attributable to the value of each. Under the previous allocation methodology, under certain stressed scenarios, CGUs may
have been disproportionately affected by the performance of other CGUs. This exercise involved assessment of the fixed cost
margins of each CGU prior to acquisition by Man, and subsequently allocating other shared items (e.g. interest and
depreciation) to each CGU based on their proportionate net contribution to the profits of the Group. This has resulted in a
value in use output for each CGU which the directors feel best represents each CGU's individual performance and
contribution to the Group. Had we applied the revised shared costs allocation methodology at year end 31 December 2015
there would have been no change in the impairment assessment performed (no impairment recognised).
The value in use calculations for AHL, FRM and GLG continue to be presented on a post-tax basis, consistent with the prior
year, given most comparable market data is available on a post-tax basis. The Numeric CGU value in use calculation has also
been presented on a post-tax basis, compared with pre-tax for the year ended 31 December 2015, in order to aid
comparability between the CGUs. In determining the value of Numeric's future tax obligations, we have considered the
forecast consumption of available US tax losses (Note 8). The value in use calculations presented on a post-tax basis are
not significantly different to their pre-tax equivalent.
The assumptions applied in the value in use calculation are derived from past experience and assessment of current market
inputs. A bifurcated discount rate has been applied to the modelled cash flows to reflect the different risk profile of net
management fee income and net performance fee income. The discount rates are based on the Group's weighted average cost of
capital using a risk free interest rate, together with an equity risk premium and an appropriate market beta derived from
consideration of Man's beta, similar alternative asset managers, and the asset management sector as a whole. The terminal
value is calculated based on the projected closing FUM at 31 December 2019 and applying a mid-point of a range of
historical multiples to the forecast cash flows associated with management and performance fees.
The recoverable amount of each CGU has been assessed at 31 December 2016. The key assumptions applied to the value in use
calculations for each of the CGUs are provided below.
Key assumptions: AHL GLG FRM Numeric
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