REG - Man Group plc - Final Results
01/03/2022 07:00
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RNS Number : 1109D Man Group plc 01 March 2022
Press Release
01 March 2022
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
Performance and net inflows drive strong growth
Key points
· Assets under management (AUM) increased by 20% to $148.6
billion (31 December 2020: $123.6 billion)
o Positive investment performance of $12.5 billion (2020: $3.3 billion)
o Net inflows of $13.7 billion (2020: $1.8 billion)
o Negative FX and other impacts of $1.2 billion (2020: positive $0.8
billion)
· Core earnings per share (EPS)(1) increased by 139% to 38.7¢
(2020: 16.2¢)
o Core management fee EPS(1) increased by 52% to 15.7¢ (2020: 10.3¢)
o Core performance fee EPS(1) increased by 290% to 23.0¢ (2020: 5.9¢)
· Statutory EPS (diluted) increased by 263% to 33.8¢ (2020:
9.3¢)
· Asset weighted investment performance versus peers across our
strategies of +1.9% (2020: -1.0%)
· Run rate net management fee revenue of $939 million at 31
December 2021 (2020: $815 million)
· Balance sheet strength and liquidity position support long-term
growth prospects
· Recommended final dividend of 8.4¢ per share, which implies a
total dividend of 14.0¢ per share for 2021 (2020: 10.6¢ per share)
· At 25 February 2022 we had completed $88 million of the $250
million share buyback announced in December 2021
1. For definitions and explanations of our alternative performance
measures, please refer to page 51 to 56.
Luke Ellis, Chief Executive Officer of Man Group, said:
"2021 was an exceptionally strong period of growth for the firm. We ended the
year with record assets under management, having delivered $12.5 billion of
positive investment performance for our clients and recorded net inflows of
$13.7 billion into both alternative and long-only strategies. Core earnings
per share increased by 139% from a solid outcome in 2020, driven by
significant management fee growth, material performance fees, and the
operating leverage in our business facilitated by our technology capabilities.
"These results demonstrate the potential of the firm we have built and its
ability to deliver growth. Our diversified range of products and longstanding
client relationships, combined with our diverse talent pool and cutting-edge
technology, define Man Group, underpin our strategy and give me great
confidence in our ability to continue to deliver value for our clients and
shareholders."
Summary Financials
$ millions, unless otherwise stated Year ended Year ended
31 Dec 2021 31 Dec 2020
Assets under management (end of period), $ billions 148.6 123.6
Core net management fee revenue(1) 877 730
Core performance fees(1) 569 179
Core gains on investments(1) 27 20
Core sub-lease rental and lease surrender income(1) 13 18
Core net revenue(1) 1,486 947
Asset servicing costs (58) (55)
Compensation costs (596) (451)
Core other costs(1) (161) (145)
Core net finance expense(1) (13) (12)
Core profit before tax(1) 658 284
Non-core items(1) (68) (105)
Statutory profit before tax 590 179
¢
Statutory EPS (diluted) 33.8 9.3
Core EPS(1) 38.7 16.2
Core management fee EPS(1) 15.7 10.3
Dividend per share(2) 14.0 10.6
( )
1. Our alternative performance measures, including reconciliations
between statutory measures and their core equivalents, are outlined on pages
51 to 56.
2. Our dividend policy and availability of dividend resources are
discussed further on page 19.
Dividend and share buyback
Man Group's ordinary dividend policy is progressive, taking into account the
growth in the firm's overall earnings. Man Group's policy is to distribute
available capital to shareholders over time by way of higher dividend payments
and/or share buybacks, while maintaining a prudent balance sheet after taking
into account required capital and potential strategic opportunities. Whilst
the Board considers dividends as the primary method of returning capital to
shareholders, it will continue to execute share buybacks when advantageous.
In line with our dividend policy, the Board confirms it will recommend a final
dividend of 8.4¢ per share for the financial year ended 31 December 2021,
resulting in a total dividend of 14.0¢ per share for the year. This is in
addition to $350 million of share buyback programmes announced in 2021. We
will fix and announce the US dollar to sterling dividend currency conversion
rate on 6 May 2022, in advance of payment.
Dates for the 2021 final dividend
Ex-dividend date 7 April 2022
Record date 8 April 2022
Sterling conversion date 6 May 2022
Payment date 20 May 2022
Conference call and presentation for investors and analysts
A conference call with management including an opportunity to ask questions
will commence
at 10.30am (GMT) on 1 March 2022. A copy of the presentation will be available
on the investor relations section of www.man.com from 10.25am.
The conference call can be accessed at:
https://mangroup.webex.com/mangroup/j.php?MTID=m0d6df0cb9a6a2b03fe40ab7c4f8d018f
(https://mangroup.webex.com/mangroup/j.php?MTID=m0d6df0cb9a6a2b03fe40ab7c4f8d018f)
Webinar number:
2364 671 6251
Webinar password:
pgB9n42hqdm (74296424 from phones)
Join by phone:
+44-203-478-5289 United Kingdom toll
Access code: 236 467 16251
Please note:
· We recommend connecting to the meeting 5-10 minutes prior to
the start time
· To ask a question during the Q&A session you will need to
access the meeting via the link above
Enquiries
Karan Shirgaokar
Director, Investor Relations
+44 20 7144 1434
investor.relations@man.com (mailto:investor.relations@man.com)
Georgiana Brunner
Head of Communications
+44 20 7144 1000
media@man.com (mailto:media@man.com)
Neil Doyle
FTI Consulting
+44 77 7197 8220
man@ (mailto:mangroupUK@finsbury.com) fticonsulting.com
About Man Group
Man Group is a global, technology-empowered active investment management firm
focused on delivering alpha and portfolio solutions for clients. Headquartered
in London, we manage $148.6 billion(1) and operate across multiple offices
globally.
We invest across a diverse range of strategies and asset classes, with a mix
of long-only and alternative strategies run on a discretionary and
quantitative basis, across liquid and private markets. Our investment teams
work within Man Group's single operating platform, enabling them to invest
with a high degree of empowerment while benefiting from the collaboration,
strength and resources of the entire firm. Our platform is underpinned by
advanced technology, supporting our investment teams at every stage of their
process, including alpha generation, portfolio management, trade execution and
risk management.
Our clients and the millions of retirees and savers they represent are at the
heart of everything we do. We form deep and long-lasting relationships and
create tailored solutions to help meet their unique needs. We recognise that
responsible investing is intrinsically linked to our fiduciary duty to our
clients, and we integrate this approach broadly across the firm.
We are committed to creating a diverse and inclusive workplace where
difference is celebrated and everyone has an equal opportunity to thrive, as
well as giving back and contributing positively to our communities. For more
information about Man Group's global charitable efforts, and our diversity and
inclusion initiatives, please visit:
https://www.man.com/corporate-responsibility
(https://www.man.com/corporate-responsibility)
Man Group plc is listed on the London Stock Exchange under the ticker EMG.LN
and is a constituent of the FTSE 250 Index. Further information can be found
at www.man.com
Forward looking statements and other important information
This document contains forward-looking statements with respect to the
financial condition, results, and business of Man Group plc. By their nature,
forward-looking statements involve risk and uncertainty and there may be
subsequent variations to estimates. Man Group plc's actual future results may
differ materially from the results expressed or implied in these
forward-looking statements.
The content of the websites referred to in this announcement is not
incorporated into and does not form part of this announcement. Nothing in this
announcement should be construed as or is intended to be a solicitation for or
an offer to provide investment advisory services or to invest in any
investment products mentioned herein.
1. As at 31 December 2021. All investment management and advisory services
are offered through the investment engines of Man AHL, Man Numeric, Man GLG,
Man FRM and Man Global Private Markets (GPM).
AUM movements for the year ended 31 December 2021
$bn AUM at Net flows Investment performance FX & other AUM at
31 Dec 2020
31 Dec 2021
Absolute return 34.0 4.8 2.5 (0.1) 41.2
Total return 29.0 4.4 2.3 (0.3) 35.4
Multi-manager solutions 14.2 0.2 0.6 0.0 15.0
Alternative 77.2 9.4 5.4 (0.4) 91.6
Systematic long-only 27.8 3.3 5.3 (0.3) 36.1
Discretionary long-only 18.6 1.0 1.8 (0.5) 20.9
Long-only 46.4 4.3 7.1 (0.8) 57.0
Total 123.6 13.7 12.5 (1.2) 148.6
AUM movements for the three months ended 31 December 2021
$bn AUM at Net flows Investment performance FX & other AUM at
30 Sep 2021
31 Dec 2021
Absolute return 39.9 1.6 0.1 (0.4) 41.2
Total return 34.6 0.1 0.9 (0.2) 35.4
Multi-manager solutions 14.1 0.9 0.1 (0.1) 15.0
Alternative 88.6 2.6 1.1 (0.7) 91.6
Systematic long-only 30.0 4.6 1.5 0.0 36.1
Discretionary long-only 20.9 0.0 0.0 0.0 20.9
Long-only 50.9 4.6 1.5 0.0 57.0
Total 139.5 7.2 2.6 (0.7) 148.6
AUM by product category
$bn 31-Dec-20 31-Mar-21 30-Jun-21 30-Sep-21 31-Dec-21
Absolute return 34.0 35.4 38.3 39.9 41.2
Man Institutional Solutions(1) 7.3 8.3 9.5 11.1 11.0
AHL Alpha 7.6 7.8 8.3 7.9 8.6
AHL Dimension 5.3 4.9 5.5 5.4 5.5
GLG equity 4.6 5.1 4.9 5.1 5.5
AHL Evolution 4.4 4.2 4.6 4.5 4.7
AHL Diversified 1.5 1.5 1.4 1.4 1.3
Other(2) 3.3 3.6 4.1 4.5 4.6
Total return 29.0 29.1 32.5 34.6 35.4
AHL TargetRisk 11.2 11.8 14.3 16.6 18.7
Alternative Risk Premia 8.6 8.2 9.1 8.8 8.9
CLOs and other 5.0 4.8 4.7 4.8 3.7
Global Private Markets 2.4 2.5 2.7 2.8 3.0
Emerging markets fixed income 1.8 1.8 1.7 1.6 1.1
Multi-manager solutions 14.2 13.9 13.4 14.1 15.0
Infrastructure & direct access 7.1 7.2 7.5 8.1 9.1
Segregated 6.5 6.1 5.3 5.4 5.4
Diversified and thematic FoHF 0.6 0.6 0.6 0.6 0.5
Systematic long-only 27.8 29.0 30.7 30.0 36.1
Global equity 10.9 12.5 13.4 13.3 18.9
International equity 7.4 7.5 7.5 7.6 8.0
Emerging markets equity 7.2 7.1 8.0 7.4 7.4
US equity 2.3 1.9 1.8 1.7 1.8
Discretionary long-only 18.6 19.6 20.4 20.9 20.9
Credit and convertibles 3.7 3.7 4.1 5.0 5.5
UK equity 4.5 4.7 4.6 4.7 4.7
Japan equity 3.4 4.3 4.2 4.2 3.7
Europe ex-UK equity 4.0 3.8 3.5 3.0 3.2
Emerging markets fixed income 1.7 1.8 1.9 1.9 1.9
Other(3) 1.3 1.3 2.1 2.1 1.9
Total 123.6 127.0 135.3 139.5 148.6
1. Man Institutional Solutions includes AHL Institutional Solutions,
which invests into a range of AHL strategies including AHL Alpha, AHL
Dimension and AHL Evolution.
2. Includes AHL other, Numeric absolute return and GLG credit absolute
return strategies.
3. Includes equity and multi-asset strategies.
Investment performance
Return (net of fees) Annualised return (net of fees)
3 months to 12 months to 3 years to 5 years to Inception to 31 Dec 2021
31 Dec 2021
31 Dec 2021
31 Dec 2021
31 Dec 2021
Absolute return
AHL Alpha (1) -0.8% 4.8% 6.8% 5.3% 10.4%
AHL Dimension (2) 1.4% 8.3% 2.0% 2.6% 4.5%
AHL Evolution (3) 4.7% 17.0% 12.0% 10.3% 12.8%
AHL Diversified (4) -2.5% 3.1% 8.0% 5.0% 10.7%
GLG Alpha Select Alternative (5) 3.2% 8.9% 7.0% 8.3% 4.6%
GLG Event Driven Alternative (6) 0.0% 6.3% - - 8.5%
GLG Global Credit Multi Strategy (7) -1.2% 2.8% 5.6% 6.4% 11.4%
Total return
AHL TargetRisk (8) 3.4% 14.4% 15.8% 12.5% 10.6%
Alternative Risk Premia (9) 5.3% 12.8% 1.5% 2.2% 3.2%
GLG Global Emerging Markets Debt Total Return (10) 0.2% -0.2% 0.2% 0.7% 1.6%
Multi-manager solutions
FRM Diversified II (11) 1.0% 11.3% 5.9% 4.0% 4.1%
Systematic long-only
Numeric Global Core (12) 8.4% 24.3% 19.8% 13.0% 12.2%
Relative return 0.6% 2.5% -2.0% -2.0% 0.4%
Numeric Europe Core (EUR) (13) 7.8% 29.4% 16.1% 9.4% 9.4%
Relative return 0.1% 4.3% 1.0% 0.9% 2.4%
Numeric Emerging Markets Core (14) -1.3% 3.0% 13.1% 11.3% 7.2%
Relative return 0.0% 5.5% 2.2% 1.5% 2.4%
Discretionary long-only
GLG Continental European Growth Fund (15) 6.9% 11.1% 21.9% 13.8% 10.2%
Relative return 1.9% -6.3% 6.5% 3.5% 3.9%
GLG Japan CoreAlpha Equity Fund (16) -3.8% 28.2% 5.6% 2.7% 3.8%
Relative return -2.1% 15.5% -7.1% -5.3% 0.7%
GLG Undervalued Assets Fund (17) 1.2% 15.7% 5.1% 6.0% 6.6%
Relative return -3.0% -2.6% -3.3% 0.6% 0.9%
GLG High Yield Opportunities Fund (18) 0.1% 10.8% - - 11.9%
Relative return 0.7% 8.7% - - 6.8%
Indices
HFRX Global Hedge Fund Index (19) 0.1% 3.7% 6.3% 3.5%
HFRI Fund of Funds Conservative Index (19) 0.6% 7.5% 6.7% 4.7%
HFRI Equity Hedge (Total) Index (19) 0.7% 11.7% 14.4% 9.5%
HFRX EH: Equity Market Neutral Index (19) -0.4% 1.0% -1.6% -1.3%
Barclay BTOP 50 Index (20) 1.8% 10.2% 7.3% 3.1%
1. Represented by AHL Alpha plc from 17 October 1995 to 30 September
2012, and by AHL Strategies PCC Limited: Class Y AHL Alpha USD Shares from 1
October 2012 to 30 September 2013. The representative product was changed at
the end of September 2012 due to the provisioning of fund liquidation costs in
October 2012 for AHL Alpha plc, which resulted in tracking error compared with
other Alpha Programme funds. Both funds are valued weekly; however, for
comparative purposes, statistics have been calculated using the best quality
price that is available at each calendar month end, using estimates where a
final price is unavailable. Where a price, either estimate or final is
unavailable on a calendar month end, the price on the closest date prior to
the calendar month end has been used. Both of the track records have been
adjusted to reflect the fee structure of AHL Alpha (Cayman) Limited - USD
Shares. From 30 September 2013, the actual performance of AHL Alpha (Cayman)
Limited - USD Shares is displayed.
2. Represented by AHL Strategies PCC Limited: Class B AHL Dimension
USD Shares from 3 July 2006 to 31 May 2014, and by AHL Dimension (Cayman) Ltd
- F USD Shares Class from 1 June 2014 until 28 February 2015 when AHL
Dimension (Cayman) Ltd - A USD Shares Class is used. Representative fees of
1.5% Management Fee and 20% Performance Fee have been applied.
3. Represented by AHL Evolution Limited adjusted for the fee structure
(2% p.a. management fee and 20% performance fee) from September 2005 to 31
October 2006; and by AHL Strategies PCC: Class G AHL Evolution USD from 1
November 2006 to 30 November 2011; and by the performance track record of AHL
Investment Strategies SPC: Class E AHL Evolution USD Notes from 1 December
2011 to 30 November 2012. From 1 December 2012, the track record of AHL
(Cayman) SPC: Class A1 Evolution USD Shares has been shown. All returns shown
are net of fees.
4. Represented by Man AHL Diversified plc from 26 March 1996 to 29
October 2012, and by Man AHL Diversified (Guernsey) USD Shares - Class A from
30 October 2012 to date. The representative product was changed at the end of
October 2012 due to legal and/or regulatory restrictions on Man AHL
Diversified plc preventing the product from accessing the Programme's revised
target allocations. Both funds are valued weekly; however, for comparative
purposes, statistics have been calculated using the best quality price that is
available at each calendar month end, using estimates where a final price is
unavailable. Where a price, either estimate or final is unavailable on a
calendar month end, the price on the closest date prior to the calendar month
end has been used.
5. Represented by Man GLG Alpha Select Alternative IL GBP; AUM
included within GLG equity under the absolute return product category.
6. Represented by Man GLG Event Driven Alternative IN USD; AUM
included within GLG equity under the absolute return product category.
7. Represented by GLG Market Neutral Fund - Class Z Restricted - USD
until 31 August 2007. From 1 September 2007, Man GLG Global Credit Multi
Strategy CL IL XX USD unrestricted; AUM included within Other under the
absolute return product category.
8. Represented by Man AHL TargetRisk class I USD.
9. Represented by Man Alternative Risk Premia Class A USD.
10. Represented by Man GLG Global Emerging Markets Debt Total Return
Class I USD; AUM included within Emerging markets fixed income under the total
return product category.
11. Represented by FRM Diversified II Fund SPC - Class A USD ('the
fund') until April 2018 then Class A JPY hedged to USD thereafter. However,
prior to Jan 2004, FRM has created the FRM Diversified II pro forma using the
following methodology: i) for the period Jan 1998 to Dec 2003, by using the
returns of Absolute Alpha Fund PCC Limited - Diversified Series Share Cell
('AA Diversified - USD') adjusted for fees and/or currency, where applicable.
For the period Jan 2004 to Feb 2004, the returns of the fund's master
portfolio have been used, adjusted for fees and/or currency, where applicable.
Post Feb 2004, the fund's actual performance has been used, which may differ
from the calculated performance of the track record. There have been occasions
where the 12-months' performance to date of FRM Diversified II has differed
materially from that of AA Diversified. Strategy and holdings data relates to
the composition of the master portfolio; AUM included within Diversified and
thematic FoHF under the multi-manager product category.
12. Performance relative to the MSCI World. This reference index is
intended to best represent the strategy's universe. Investors may choose to
compare returns for their accounts to different reference indices, resulting
in differences in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed by Numeric
will differ from the securities which comprise the index and may have greater
volatility than the holdings of an index.
13. Performance relative to the MSCI Europe (EUR). This reference index
is intended to best represent the strategy's universe. Investors may choose to
compare returns for their accounts to different reference indices, resulting
in differences in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed by Numeric
will differ from the securities which comprise the index and may have greater
volatility than the holdings of an index; AUM included within International
equity under the systematic long-only product category.
14. Performance relative to MSCI Emerging Markets. This reference index
is intended to best represent the strategy's universe. Investors may choose to
compare returns for their accounts to different reference indices, resulting
in differences in relative return information. Comparison to an index is for
informational purposes only, as the holdings of an account managed by Numeric
will differ from the securities which comprise the index and may have greater
volatility than the holdings of an index.
15. Represented by Man GLG Continental European Growth Fund Class C
Accumulation Shares. Relative return shown vs FTSE World Europe Ex UK (GBP,
GDTR); AUM included within Europe ex-UK equity under the discretionary
long-only product category.
16. Represented by Man GLG Japan CoreAlpha Fund - Class C converted to
JPY until 28 January 2010. From 1 February 2010 Man GLG Japan CoreAlpha Equity
Fund - Class I JPY is displayed. Relative return shown vs TOPIX (JPY, GDTR);
AUM included within Japan equity under the discretionary long-only product
category.
17. Represented by Man GLG Undervalued Assets Fund - C Accumulation
Shares. Relative return shown vs FTSE All Share (GBP, NDTR); AUM included
within UK equity under the discretionary long-only product category.
18. Represented by Man GLG High Yield Opportunities I EUR. Relative
return is shown vs against ICE BofA Global High Yield Index (EUR, TR) Hedged
benchmark. AUM included within Credit and convertibles under the discretionary
long-only product category.
19. HFRI and HFRX index performance over the past 4 months is subject to
change.
20. The historical Barclay BTOP 50 Index data is subject to change.
Past or projected performance is no indication of future results. Financial
indices are used for illustrative purposes only and are provided for the
purpose of making a comparison to general market data as a point of reference
and should not be construed as a true comparison to the strategy.
The information herein is being provided solely in connection with this press
release and is not intended to be, nor should it be construed or used as,
investment, tax or legal advice, any recommendation or opinion regarding the
appropriateness or suitability of any investment or strategy, or an offer to
sell, or a solicitation of an offer to buy, an interest in any security,
including an interest in any fund or pool described herein.
Chief Executive Officer's review
Overview(1)
2021 was another unprecedented year shaped by the COVID-19 pandemic. It was a
year of anticipation as many around the world looked ahead optimistically at a
return to a degree of normality. Markets rose relatively steadily, driven by
the distribution of vaccines, continued fiscal and monetary stimulus, strong
corporate earnings and increased consumer demand as lockdowns eased. Most
major equity indices ended the year at or near record highs, delivering
double-digit returns despite periods of uncertainty and volatility at various
times owing to issues ranging from surging inflation, new virus variants,
supply chain disruptions and the emergence of speculative retail investors.
I am delighted by the exceptionally strong set of results we delivered for
2021. During the year we made significant progress on our key strategic
objectives, which has laid firm foundations for the longer-term growth of the
business.
Our technology-empowered active investment processes delivered strong overall
investment performance for our clients of $12.5 billion, and 1.9% in asset
weighted relative investment outperformance across our strategies. Our clients
have recognised this performance with $13.7 billion of net inflows, including
our strongest quarters ever in Q3 and Q4. More importantly, we continue to
develop better and deeper relationships with the world's largest and most
sophisticated asset owners. In addition, we continued to add to our range of
investment strategies, with new strategies such as Man GPM RI Community
Housing, and invest in our research and innovation, whether that be execution
technology, machine learning, data science or our responsible investing
capabilities.
The strong outperformance together with positive momentum in markets and net
inflows resulted in our AUM increasing to $148.6 billion, a new high for Man
Group. The growth was broad based, with both our alternative and long-only
strategies growing their AUM during the year.
Core profit before tax2 increased to $658 million, compared to $284 million in
2020, due to growth in management fee earnings and an exceptionally strong
performance fee outcome. Our results highlight the benefit of the diversified
set of performance fee earning strategies we offer. Core management fee profit
before tax2 was up 48%, reflecting the strong growth of AUM during the year.
Statutory profit before tax was $590 million, compared to $179 million in
2020.
These results are a reflection of our performance, our growth, the demand for
our products and the value of active investment management. Our ability to
continue to deliver positive client outcomes during uncertain economic periods
reinforces my belief that our range of strategies, dedicated talent,
technological edge, collaborative culture and the depth of our client
relationships, mean we are well positioned for the future.
Performance¹
Absolute investment performance across our product categories was up 10.4%.
Our alternative strategies were up 8.1%, driven by positive performance from
AHL Evolution (+17.0%) and Alternative Risk Premia (+12.8%). On average, our
long-only strategies were up 13.4%, having benefited from rallying equity
markets and the rotation into value. Performance in Numeric Europe (+29.4%)
and GLG Japan CoreAlpha (+28.2%) was particularly strong as a result of this.
Asset weighted relative outperformance of 0.5% in alternatives was driven by
our quantitative strategies, with AHL TargetRisk continuing its relative
outperformance since launch. Relative outperformance of 3.8% across our
long-only strategies was exceptionally strong, largely due to their valuation
focus. Our systematic long-only strategies at Man Numeric, as well as GLG
Japan CoreAlpha, outperformed in the year.
Progress against strategic priorities
Strong client relationships
2021 saw excellent engagement with existing and new clients across the globe,
reflected by record net inflows for the year of $13.7 billion. This is notably
strong relative to the industry, which saw average inflows of 1.3% across
comparable strategies in 2021. It is one of the best signs of the strength of
our business today.
We continued to make good progress in building long-term relationships with
clients and during the year we added a significant number of new relationships
with strategically important asset allocators and distributors. One of the
most notable wins was a large mandate into our Numeric Global Sustainable
Climate strategy. This marks a very exciting milestone for us and is a strong
endorsement of our ability to innovate and deliver a bespoke product that
incorporates proprietary climate research to meet our clients' ESG goals.
The trend of clients investing across the firm continues, with a number of
existing clients investing in new products in 2021. At the end of December,
78% of our AUM is from clients investing in two products or more and 48% from
clients investing in four products or more. Our 50 largest clients are
invested in an average of four of our strategies. This illustrates the
strength and breadth of our offering, and the value of providing clients with
a single point of contact who understands them and their unique requirements.
In September, we hosted the Man Alternative Investing Symposium in partnership
with the Oxford Man Institute, a world-leading academic research institute at
the University of Oxford that Man Group has worked in collaboration with since
2007. The Symposium included clients from the UK, Europe and the US, as well
as a number of internal and guest speakers. The sessions covered a range of
topics from modern monetary theory to climate change models under the
overarching theme of 'forecasting'. The feedback we received from clients was
overwhelmingly positive, and it was fantastic for us to host clients in person
again.
1. Past performance is not indicative of future results. Returns may increase
or decrease as a result of currency fluctuations. Performance figures are
shown net of representative management and performance fees.
2. Man Group's alternative performance measures are outlined on pages 51 to
56.
Innovative investment strategies
Innovation strengthens our business by further diversifying our revenue
streams, providing interesting development opportunities for our people and,
most importantly, maintaining our performance edge and relevance with clients.
We recognise that we need to keep innovating to meet their unique
requirements, and we invest a huge amount of time and energy in research.
During 2021, we continued to see growth from strategies we have seeded and
developed organically in the past. Once again, AHL TargetRisk saw material
client demand during the year and was a significant contributor to the firm as
a whole. We launched additional products within the AHL TargetRisk range,
including TargetGrowth and TargetRisk Core, and now have a total of $18.7
billion of AUM in the strategy range.
We were also pleased to announce the first close of our Man GPM RI Community
Housing Fund earlier in the year, which is focused on addressing the shortage
of new, high-quality housing in the UK that is affordable to those earning the
median income and below. The first residents moved in before Christmas and
included young families and key workers whom we all relied upon during the
pandemic.
We see an opportunity for further growth in credit and fixed income, whether
systematic or discretionary, and strategies focused on Asia. Our fixed income
quantitative investment strategies are using the growing amount of data
available on the fixed income and credit markets to develop new strategies
operating in those markets. We launched a new systematic fixed income strategy
during the year and continue to see inflows into our discretionary and
quantitative high yield strategies. We have also seen good traction with
strategies focused on Asia ex-Japan and both onshore and offshore in China.
We see our pipeline of new ideas and products as very strong and have seeded
16 new strategies this year, increasing our seeding book to $648 million at
the end of 2021.
Using the Global Sustainable Investment Alliance's definitions and
classification, $55.2 billion of Man Group's assets under management across
all our investment engines integrate ESG factors into their decision-making
process. As ESG becomes better understood as something that can be
quantitative as well as qualitative, we believe our 570+ quants and
technologists and 35 years of experience in understanding data and quant
investing puts us in a unique position to provide meaningful RI solutions for
our clients across the range of strategies we offer.
We continue to build our firmwide centre of execution excellence in trading,
trading technology and trading research. Efficient execution is key to our
business's success and the delivery of performance for clients. It enables
them to capture more of the alpha that our portfolio managers generate. It is
also a fast-evolving area that is ripe for innovation, for example, via the
expanded use of machine learning or the development of systematic ways to
trade single name credit.
Efficient and effective operations
Our technology and central infrastructure are the foundations on which the
firm operates. This enables us to evolve and adapt as markets and clients'
needs do. With the firm's knowledge, experience and talent, our single
platform facilitates alpha generation, portfolio management, trade execution,
operations, compliance, risk management and financial reporting.
During the year, we invested over $100 million in our technology capabilities,
which will further support our ability to serve our clients globally.
Continuous investment in our people, data and platform technology in order to
enhance our capabilities is what maintains and increases our technological
lead and our competitive edge. In January 2021, we also announced the HUB
joint venture, in partnership with PIMCO, IHS Markit, State Street, Microsoft
and McKinsey. HUB aims to, for the first time, make our intellectual property
in technology available to third parties via the cloud.
This year we completed an extensive refurbishment of our offices and moved all
our London teams to the same building in the City of London, a space designed
to support our new agile working model. We already see the significant
advantages this generates for employees, the firm and our clients.
We also continue to review a large number of acquisition opportunities, and
while we haven't seen any that meet our criteria in 2021, we think this
capability will prove valuable to shareholders in the longer term, as it has
in the past.
Climate change
The need for rapid action on climate change is beyond debate, and the world of
climate science is moving at a commensurate pace. 2021 has marked an important
milestone in our commitment to combat climate change as we signed up to the
Net Zero Asset Managers initiative and committed to climate neutrality in line
with the Paris Agreement. We are also pleased to report that Man Group has
been listed in the top 300 of the FT's Climate Leaders list for Europe for
reducing our core greenhouse gas emission intensity.
While climate change is undoubtedly a threat to society, it also presents an
opportunity for our firm. We are building and launching climate-oriented
strategies across the business and established climate research capabilities
in-house. Developing and researching innovative investment solutions
compatible with supporting a transition to a low-carbon economy is a key area
of strategic focus for us, both to stay relevant to our clients and achieve
more sustainable growth over time.
People and culture
Our focus on attracting, supporting and retaining the best talent has remained
a top priority throughout this unusual year. We are fundamentally a people
business, and attracting the brightest at all levels is vital to our ability
to deliver better outcomes for all our stakeholders. We place great importance
on being an employer of choice and an organisation where all our employees can
bring their authentic selves to work to learn, develop and achieve excellence.
We are pleased to report that our 2021 staff survey recorded an engagement
score of 81% with a response rate of 78%.
At Man Group, we believe in diversity. It is the right thing to do because it
makes us a better place to work, and a stronger business. Our culture is based
on mutual respect for others, and we believe that by celebrating diversity at
all levels, we encourage original and collaborative thinking with multiple and
differing perspectives.
Our initiatives to support diversity and inclusion are led by Drive, Man
Group's close-knit and collaborative group of networks run by our employees
and sponsored by members of the Senior Executive Committee. It seeks to
inform, support and inspire our people, and we have run a number of successful
events during the year to mark Global Inclusion Week, Mental Health Awareness
Week and Earth Day, to name a few.
In recent years, we have been pleased to see a positive trajectory in relation
to gender diversity. We have seen the proportion of women in senior management
roles rising from 20% in 2017 to 27% in 2021.
I am also pleased to reconfirm Man Group's support for the Ten Principles of
the United Nations Global Compact on human rights, labour, environment and
anti-corruption. As an active signatory, we are committed to making the UN
Global Compact and its principles part of the strategy, culture and day-to-day
operations of our firm, and to engaging in collaborative projects which
advance the broader development goals of the United Nations, particularly the
Sustainable Development Goals.
I am proud of what we've achieved so far, but I know that fostering a truly
diverse and inclusive business takes time. It is a team effort that requires
commitment and collaboration, and there is still work to be done. However, I'm
convinced that this firm and our industry will be better in the long term
because of the steps we are taking today.
Growth
2021 was another strong year of growth for Man Group. Our intensely
client-centric approach has proved key to improving flows, and our technology
leadership has extended our competitive advantage and delivered strong returns
for clients and shareholders. Since the beginning of 2017, we have seen $37.8
billion of net inflows from clients and the number of clients for whom we
manage more than $1 billion has grown from 10 to 26. We have increased our
core management fee profitability¹ by 102% to $266 million and have grown our
core management fee EPS¹ by 134%, while returning on average 10% of our
market cap in dividends and share buybacks every year during that period.
Outlook
2021 was an excellent period of growth and demonstrates the potential of the
firm we have built over the past few years. We are confident in our growth
trajectory, entering the year with good momentum and remain focused on
investing in our talent and technology, which are the foundations of the firm
and cement our sustainable competitive advantage.
Luke Ellis
Chief Executive Officer
1 Details of the calculation of our alternative performance measures are
provided on pages 51 to 56.
Key performance indicators
Financial KPIs
Our financial KPIs illustrate and measure the relationship between the
investment experience of our clients, our financial performance and the
creation of shareholder value over time.
Relative investment performance
What we measure
The asset weighted performance of Man Group's strategies compared to peers
gives an indication of the competitiveness of our investment performance
against similar strategies offered by other investment managers.
How we performed
We had asset weighted relative investment outperformance of 1.9% in 2021,
across both alternative and systematic long-only strategies, an improvement on
2019 and 2020. For further discussion on investment performance see page 9.
Relative net flows
What we measure
Relative net flows are a measure of our ability to attract and retain investor
capital in comparison to our industry peers. AUM drives our financial
performance in terms of our ability to earn management and performance fees.
How we performed
At 9.8%, relative net flows in 2021 have been particularly strong, indicating
the strength of our diversified product offering and depth of our global
client relationships.
Core EPS
What we measure
Core EPS(1) is a measure of core profitability and capital management. From
2021 we changed to this KPI from core profit before tax1 in order to provide
better comparability across our peers and to align management incentives and
shareholder interests further.
How we performed
Core EPS of 38.7¢ for 2021 is an increase of 139% compared to 2020,
reflecting exceptionally strong performance fee generation in the year and the
operating leverage inherent in our business.
Core management fee EPS growth
What we measure
Core management fee EPS¹ growth in the year measures the overall
effectiveness of our business model and reflects the value generation for
shareholders from our more stable earnings stream. In 2021 we changed this KPI
from adjusted to core management fee EPS growth, as these two measures became
aligned in 2020.
How we performed
Core management fee EPS increased by 52% to 15.7¢. Investment performance and
net inflows drove increased management fee profitability in the year,
supplemented by $180 million of capital returned through our share buyback
programmes which reduce total share count.
1 Details of the calculation of our alternative performance measures are
provided on pages 51 to 56.
Non-financial KPIs
Our non-financial KPIs further demonstrate our commitment to our people, wider
society and the environment, which reflect our core values.
Carbon footprint (tCO2e)
What we measure
In order to monitor and decrease our direct carbon footprint, we measure total
greenhouse gas emissions (tCO2e), using the market-based approach1.
How we performed
In 2021, total carbon emissions decreased by 7% compared to 2020, despite our
offices reopening as lockdowns eased. We continued to reduce emissions by
improving the energy efficiency of our offices.
Employee engagement
What we measure
Each year we conduct a staff survey to help us monitor and understand employee
engagement and identify any areas for action.
How we performed
Our 2021 staff survey recorded an engagement score of 81%, with a slight
decrease in the response rate in 2021 to 78% from 85% in 2020. The well-being
of our employees remained a top priority as we transitioned from remote
working to our new agile working model.
Women in senior management roles
What we measure
As we seek to encourage greater diversity across the investment management
industry, we measure the number of women in senior management positions. This
is defined as those who are or report directly to members of our Executive
Committee.
How we performed
We made some progress in the number of women in senior management roles during
the year, increasing the percentage to 27% in 2021. However, we recognise
there remains a long way to go.
ESG-integrated AUM ($bn)
What we measure
The amount of our AUM invested responsibly is crucial to our business and our
clients. We calculate ESG-integrated AUM in line with the Global Sustainable
Investment Alliance definitions, which have emerged as the global standard of
classification.
This is a new non-financial KPI from 2021.
How we performed
We first reported this metric in 2020. Since then, we have made significant
progress and now manage $55.2 billion of ESG-integrated AUM for our clients.
1 Indirect emissions from non-renewable electricity sources (Scope 2) and
upstream leased assets (Scope 3). We have refined our methodology in 2021 and
have restated 2020 numbers to reflect this change. 2019 carbon footprint
measures have not been updated.
Chief Financial Officer's review
Overview
Man Group delivered excellent results in 2021, with the continued strong
growth in both core net management fee revenue¹ and core performance fees¹
leading to core profit¹ exceeding the previous ten-year peak achieved in
2021. As a result, statutory profit has increased to $487 million from $138
million in 2020. Record net inflows and strong investment performance
increased our AUM to a new high of $148.6 billion, leading to a 57% increase
in core net revenue¹ to $1,486 million. Coupled with a cost discipline that
combines prudence with investment in selected growth areas, this resulted in
core EPS¹ growing by 139% to reach new record levels of 38.7¢ in 2021,
thanks to particularly strong performance fee earnings. Core management fee
EPS¹ increased from 10.3¢ to 15.7¢ and core performance fee EPS¹ increased
from 5.9¢ to 23.0¢. Statutory EPS increased from 9.3¢ to 33.8¢. We
continue to deliver strong cash conversion of our profits and, driven by the
growth in earnings, have increased our returns to shareholders significantly
in 2021. Our total proposed dividend for 2021 of 14.0¢ per share represents
an increase of 32% from 10.6¢ in 2020, reflecting the growth in the business
and the implementation of our new progressive dividend policy. After
completing the $100 million share buyback announced in September 2020, we
announced a further $350 million in share buybacks over 2021, of which $116
million had been completed at 31 December 2021. Together with an estimated
$194 million of dividend payments in relation to 2021, this brings the total
announced returns to shareholders for 2021 alone to over $0.5 billion², and
$1.7 billion³ over the last five years.
Our assets under management increased by $25.0 billion to a new record of
$148.6 billion at the end of 2021, due to positive investment performance of
$12.5 billion across both alternative and long-only strategies and net inflows
of $13.7 billion, partially offset by adverse FX and other movements of $1.2
billion. Our five AUM product categories all recorded positive net flows for
the year, with 11.1% net flows overall compared with 1.3% for our peers. At 66
basis points, the average net management fee margin for the year remained
largely in line with 2020. The run rate net management fee margin as of 31
December 2021 stood at 63 basis points, predominantly due to the large
long-only systematic mandate in Q4 which attracts a lower margin due to both
its investment style and the low tracking error of the mandate. As a result,
run rate core net management fee revenue, which applies the run rate net
management fee margin to closing AUM at the end of the year, has increased to
$939 million at the end of 2021, up by 15% from $815 million at the end of
2020.
Management and other fees increased by 20% to $914 million for the year due to
higher average AUM, which also drove the 20% increase in core net management
fee revenue¹ to $877 million. Core performance fee¹ generation was strong,
with $569 million earned in the year, a significant increase from $179 million
in 2020 and our best in over ten years. Our asset weighted relative investment
outperformance was 1.9% above our peers, largely due to particularly strong
performance from our alternative and systematic long-only strategies. Although
the majority of performance fees were earned from systematic macro strategies,
all our investment engines contributed positively. We also made core gains on
investments¹ of $27 million which predominantly relate to our seed book, a
slight increase on the $20 million gain in 2020, reflecting continued
effective risk management and strong performance from various strategies.
Core costs¹, which exclude the gross-up of costs relating to consolidated
fund entities, were $815 million, up from $651 million in 2020, largely driven
by higher performance fee related variable compensation. Other increases in
core costs¹ primarily relate to higher fixed compensation and recruitment
costs, reflecting a step up in hiring due to recent and expected future
growth. The less favourable sterling to US dollar rates in 2021 also
contributed to an increase in core costs¹ of around $14 million compared to
2020. We continued to benefit from savings related to travel and entertainment
as a result of the ongoing pandemic, although we expect these will ultimately
return to more normalised levels. Whilst climate change has not adversely
impacted our financial performance and position to date, our financial
planning and reporting process now incorporates the potential future impacts
of climate change on our business. It is compiled with an emphasis on
sustainability, looking to minimise the carbon emissions of our office
premises in the near term, reduce internal travel, and plan for the future.
This is an area of focus of the Audit and Risk Committee. As part of our
ongoing commitment to reduce our carbon footprint we are introducing carbon
emissions targets into our directors' long-term incentive plans from 2022, as
set out in the Directors' Remuneration report. We have set targets to reduce
our Scope 1, 2 and 3 carbon emissions as part of our commitment to reach net
zero by 2030 and have also recently purchased carbon offsets which support a
net zero emissions position through to this point.
Following the lease surrender by the principal sub-tenant of our London office
in 2020 and the coinciding commercial property market uncertainty due to
COVID-19, we recognised in 2020 a $25 million impairment of the associated
right-of-use lease asset to reflect an expected period of future vacancy (a
non-core¹ item). Following our exit from the remaining portion of the space
available for sub-let during 2021 we recognised a further associated $3
million impairment. In late 2021, we began marketing the remaining vacant
space in our London office for sub-let and, until such time as the sub-let
space is fully occupied, we will incur increased occupancy costs as well as
earn less sub-lease rental income. Finally, we completed a full future-of-work
focused refit of our London office in 2021, and initiated one for our New York
office.
1 Details of the calculation of our alternative performance measures are
provided on pages 51 to 56.
2 Comprises the 2021 interim and final dividends plus the share buybacks
announced during 2021.
3 Comprises the total dividends relating to the last five financial years
and share buybacks announced in those years.
Core and statutory profits
$m Year ended 31 December 2021 Year ended 31 December 2020
Core net management fee revenue1 877 730
Core performance fees1 569 179
Core gains on investments1 27 20
Core sub-lease rental and lease surrender income1 13 18
Core net revenue(1) 1,486 947
Asset servicing costs (58) (55)
Fixed compensation (208) (194)
Variable compensation (388) (257)
Core other costs1 (161) (145)
Core costs1 (815) (651)
Core net finance expense1 (13) (12)
Core profit before tax(1) 658 284
Core management fee profit before tax(1) 266 180
Core performance fee profit before tax(1) 392 104
Core profit(1) 557 240
Non-core items1 (68) (105)
Statutory profit 487 138
Statutory EPS (diluted) 33.8¢ 9.3¢
Core EPS1 38.7¢ 16.2¢
Core management fee EPS1 15.7¢ 10.3¢
Dividend per share2 14.0¢ 10.6¢
In June, we acquired a 23% stake in Hub Platform Technology Partners Limited
(HUB), a start-up company whose objective is to deliver a cloud-based
operating platform aimed at transforming the operations technology for asset
managers. HUB will be loss-making in the early years due to investment in
developing the platform, with our share of these losses of $2 million
recognised as a non-core¹ item in 2021.
Statutory profit increased by $349 million in 2021 to $487 million. When
analysing statutory profit we consider it most meaningful to split this into
core profit¹ and non-core(1) items. Core profit1 of $557 million easily
surpassed the ten-year peak achieved in 2019 of $325 million, largely driven
by the strong performance fee generation. Non-core1 items (excluding tax)
decreased from $105 million in 2020 to $68 million in 2021, reflecting the
impact of the 2020 $55 million GPM goodwill impairment charge which was
partially offset by a related $22 million decrease in the fair value of the
contingent consideration creditor.
Our balance sheet remains strong and liquid and allows us successfully to
navigate stressed periods whilst continuing to invest in the business and
support our long-term growth prospects. This is evidenced by our continued
return of capital to shareholders through dividends and share repurchases
throughout the course of the pandemic, as well as increased seed capital
allocations and capital expenditure to ensure we remain leaders in technology
and provide the most attractive office environment for our employees.
We have net tangible assets of $928 million or 63¢ per share at 31 December
2021, and net financial assets¹ of $907 million. We have cash of $323 million
(2020: $289 million), excluding amounts held by consolidated fund entities,
and continue to be strongly cash generative, with core cash flows from
operations excluding working capital movements¹ of $700 million (2020: $341
million).
1 Man Group's alternative performance measures, including reconciliations
between statutory measures and their core equivalents, are outlined on pages
51 to 56.
2 Dividend per share includes the interim and final dividend relating to
each financial year, which for 2021 includes the proposed final dividend.
Assets under management (AUM)
Change
$bn 31 December 2020 Net inflows/ Investment FX 31 December 2021 $bn %
(outflows)
performance and other
Alternative Absolute return 34.0 4.8 2.5 (0.1) 41.2 7.2 21%
Total return 29.0 4.4 2.3 (0.3) 35.4 6.4 22%
Multi-manager solutions 14.2 0.2 0.6 0.0 15.0 0.8 6%
Total 77.2 9.4 5.4 (0.4) 91.6 14.4 19%
Long-only Systematic 27.8 3.3 5.3 (0.3) 36.1 8.3 30%
Discretionary 18.6 1.0 1.8 (0.5) 20.9 2.3 12%
Total 46.4 4.3 7.1 (0.8) 57.0 10.6 23%
Total 123.6 13.7 12.5 (1.2) 148.6 25.0 20%
Core net management fee revenue1
$m Year ended Year ended
31 December 31 December
2021 2020
Absolute return 451 355
Total return 198 171
Multi-manager solutions 30 32
Systematic long-only 82 73
Discretionary long-only 116 99
Core net management fee revenue1 877 730
Absolute return
The increase in absolute return AUM was driven by net inflows of $4.8 billion,
primarily into Man Institutional Solutions, GLG Event Driven and AHL Alpha,
partially offset by outflows from GLG European Long-Short. Performance of $2.5
billion was driven by a number of strategies in the product category.
Total return
Net inflows of $4.4 billion, primarily into AHL TargetRisk and Man Global
Private Markets, partially offset by outflows from Alternative Risk Premia,
drove the increase in total return AUM. Performance of $2.3 billion was driven
by gains in AHL TargetRisk and Alternative Risk Premia.
Multi-manager solutions
The increase in multi-manager solutions AUM was primarily driven by
performance of $0.6 billion across a number of strategies.
Systematic long-only
Net inflows of $3.3 billion were primarily into Numeric Global strategies.
Performance of $5.3 billion was driven by a number of strategies in the
product category.
Discretionary long-only
Net inflows of $1.0 billion and positive investment performance $1.8 billion
were partially offset by negative FX and other movements of $0.5 billion. Net
inflows were primarily into GLG High Yield and GLG Asia ex Japan, partially
offset by outflows from GLG Continental Europe. Performance was driven by
gains in GLG Japan CoreAlpha and GLG UK Undervalued Assets.
Revenue
Core net revenue¹ increased by $539 million from $947 million in 2020 to
$1,486 million in 2021 as a result of net inflows and strong investment
performance, which grew our AUM to a new peak and generated significant
performance fees. Statutory net revenue increased from $953 million to $1,486
million.
Net management fee revenue and margins
Run rate net management fee revenue was $939 million at 31 December 2021
(2020: $815 million), largely as a result of the increase in absolute return
AUM during the year. Although our total net management fee margin increased
slightly by one basis point during the year to 66 basis points, the run rate
net management fee margin at 31 December 2021 stood at 63 basis points as a
result of the large systematic long-only mandate which funded in December
2021.
The absolute return net management fee margin increased by one basis point to
119 basis points as a result of higher closing AUM in Man Institutional
Solutions and AHL Evolution in particular, which attract higher margins. The
total return net management fee margin is broadly in line with 2020. The
multi-manager net management fee margin decreased to 22 basis points in 2021,
from 24 basis points in 2020, as a result of Man FRM's continued shift towards
solutions from traditional fund of funds. The net management fee margin of
long-only strategies continued its gradual decline due to margin pressure and
mix effects in recent years, with systematic long-only margins decreasing from
30 basis points to 27 basis points and discretionary long-only margins
decreasing from 62 basis points in 2020 to 58 basis points in 2021.
Core net management fee revenue¹, which excludes amounts relating to
consolidated fund entities which are reclassified to core gains on
investments¹ to better reflect these with other seed book activity, increased
by 20% to $877 million in 2021, driven by higher average AUM.
1 Man Group's alternative performance measures are outlined on pages 51 to
56.
Performance fees
Core performance fees¹ for the year were $569 million (2020: $179 million),
which included $533 million from alternative strategies (2020: $175 million)
and $36 million from long-only strategies (2020: $4 million). We have strong
performance fee optionality and diversity, with $60.2 billion of
performance-fee-eligible AUM at year end, the majority being at high-water
mark, and a broad range of strategies having contributed to our performance
fee earnings over recent years.
Investment gains and losses
Core gains on investments1 of $27 million (2020: $20 million) primarily relate
to gains on seed investments. The seed book (see page 36) was $648 million at
year-end, up from $485 million in 2020 as we deploy our capital to support new
strategies, grow the business, and increase returns to shareholders. We had
$108 million of additional seed investment exposure via total return swaps at
year-end (2020: $50 million).
Sub-lease rental and lease surrender income
In 2020, the principal sub-tenant of our main London office paid us $26
million in order to terminate their lease early, which was offset by an
associated non-cash deferred rent write-off of $8 million and resulted in a
net accounting gain on lease surrender of $18 million. The surrender gain
represented payment for sub-lease rental risk and other costs taken on by Man
Group as a result of this agreement and accordingly the amount relating to
future lost sub-lease rental income and additional costs ($7 million) was
deferred through non-core¹ items and subsequently fully utilised in 2021. We
recognised a $25 million impairment of the related right-of-use lease asset in
2020 and, following our exit from occupying the remaining portion of the space
available for sub-let during 2021, we recognised a further associated $3
million impairment.
Costs
Asset servicing
Asset servicing costs vary depending on transaction volumes, the number and
mix of funds, and fund NAVs. Asset servicing costs were $58 million (2020: $55
million), which equates to around 6 (2020: 7) basis points of average AUM
excluding systematic long-only and Man GPM strategies.
Compensation costs
Total compensation costs were $596 million for the year, up by 32% from $451
million in 2020 primarily as a result of higher management and performance fee
revenues increasing the associated variable compensation, as well as the less
favourable sterling to US dollar exchange rates in 2021. Our compensation
ratio is generally between 40% and 50% of core net revenue¹, depending on the
mix and level of revenue. We expect to be at the higher end of the range in
years when absolute investment performance fees are low or driven
predominantly by discretionary strategies, and conversely we expect to be at
the lower end of the range when absolute investment performance fees are high
or driven by systematic strategies. The overall compensation ratio therefore
decreased to 40% in 2021 from 48% in 2020, which reflects the overall increase
in performance fee revenue generated in 2021 and illustrates the inherent
operating leverage in our business.
Other costs
Core other costs¹, which exclude the gross-up of costs relating to
consolidated fund entities, were $161 million for the year (2020: $145
million). Our recruitment and temporary staff costs increased due to hiring,
as attrition levels normalised during the year compared to 2020 and as we
increase headcount to support business growth which we expect to continue in
2022. The less favourable sterling to US dollar exchange rates also increased
other costs compared with 2020.
Tax
The majority of our profits are earned in the UK, with significant profits
also arising in the US, where our cash tax rate is effectively nil as a result
of available tax assets, and in Switzerland, which has a lower rate than the
UK.
The core tax rate¹ in 2021 was 15% (2020: 16%), a decrease largely due to the
reduced weighting of profits in the UK where the applicable statutory tax rate
is 19%.
Tax on statutory profit for the year was $103 million (2020: $41 million),
which equates to a statutory effective tax rate of 17% (2020: 23%). The
decrease in the tax rate is largely due to non-recurring items arising in
2020, including the impairment of the GPM goodwill which was partially offset
by the revaluation of the associated contingent consideration creditor, as
well as the derecognition of a portion of our US deferred tax assets.
In the US we have accumulated tax losses as well as tax deductible goodwill
and intangibles of $85 million (2020: $95 million), which can be offset
against future US profits and will therefore reduce taxable profits. We have
recognised $74 million of these US deferred tax assets on the balance sheet at
31 December 2021 (2020: $81 million) as certain state and city tax losses are
expected to expire before consumption. The US core tax rate¹ will remain at
nil until cash taxes are payable in the US, with movements in the deferred tax
asset classified as a non-core¹ item to reflect this. We currently expect
these to be fully consumed by 2024.
The principal factors influencing our future underlying tax rate are the mix
of profits by tax jurisdiction, the consumption of US deferred tax assets and
changes to applicable statutory tax rates, in particular a rate increase in
the UK and the potential introduction of a global minimum tax rate, both of
which are expected to apply from April 2023. The underlying tax rate in 2022
is currently expected to remain consistent with 2021, dependent on the factors
outlined above, and is expected to increase from 2023.
1 Man Group's alternative performance measures are outlined on pages 51 to
56.
Core profit1
The directors consider that Man Group's profit is most meaningful when
considered together with an alternative 'core' basis which reflects the
revenues and costs that drive our cash flows during the year. Core metrics,
which represent our main alternative performance measures (APMs) and as such
should be read in conjunction with IFRS or statutory metrics, are detailed on
pages 51 to 56.
Core profit¹ was $557 million compared to $240 million in 2020. Our core
profitability exceeded the ten-year peak reached in 2019, driven by our strong
performance fee generation and continued growth in AUM.
The increase in core profit(1) and the $180 million of shares repurchased
during the year drove the increase in core EPS(1) from 16.2¢ in 2020 to
38.7¢ in 2021.
Cash earnings
Given the strong cash conversion of our business, we believe our core profit¹
is a good measure of our cash flow generation, although the timing of cash
conversion is impacted by the cyclical movements in our working capital
position through the year and the size of our seed book over time. Core cash
flows from operations excluding working capital movements¹ were $700 million
during the year.
$m Year ended Year ended
31 December 31 December
2021 2020
Opening core cash and cash equivalents¹ 289 220
Core cash flows from operations excluding working capital movements¹ 700 341
Working capital movements (excluding seeding) (45) 9
Working capital movements - seeding2 (173) 41
Dividends paid (160) (147)
Share repurchases (including costs) (180) (107)
Payment of acquisition-related contingent consideration - (2)
Investment in associate (HUB) (19) -
Other movements (89) (66)
Core cash and cash equivalents at year end¹ 323 289
Working capital movements in 2021 largely relate to the year-on-year increase
in our seed book.
Balance sheet
As at 31 December 2021, our cash balance was $323 million, excluding amounts
held by consolidated fund entities, and the undrawn committed revolving credit
facility, which matures in 2026, was $500 million.
We have a strong and liquid balance sheet. Fees and other receivables have
increased as a result of the higher level of performance fees earned in
December compared to the prior year. Payables have similarly increased due to
an increase in related compensation accruals. The increase in investments in
funds is driven by seed investments, as outlined below.
$m 31 December 2021 31 December 2020
Core cash and cash equivalents¹ 323 289
Core fee and other receivables¹ 480 382
Core payables¹ (712) (568)
Core investments in fund products and other investments¹ 770 607
Pension asset 27 2
Investment in associate (HUB) 18 -
Right-of-use lease assets - investment property 77 78
Right-of-use lease assets - leasehold property 61 74
Leasehold improvements and equipment 43 30
Lease liability (250) (272)
Net deferred tax asset 91 94
Net tangible assets3 928 716
Goodwill and other intangibles 723 781
Shareholders' equity 1,651 1,497
Net financial assets¹ 907 716
Seed investments
We use our balance sheet to invest in new products and both assist in the
growth of the business and generate returns to shareholders, aiming to redeem
as client AUM grows in the funds. At 31 December 2021 our seed investments
were $648 million, which have increased from $485 million at 31 December 2020
due to targeted deployment of capital to invest in new strategies and grow the
business. In addition, we held $108 million of total return swap exposure at
31 December 2021 (2020: $50 million), allowing us to increase seed investments
without utilising large cash balances.
1 Man Group's alternative performance measures are outlined on pages 51 to
56.
2 Excludes amounts related to consolidated fund entities.
3 Equates to net tangible assets per share of 63¢ (2020: 46¢).
Capital management and shareholder returns
Our robust balance sheet and liquidity position allows us to weather crises
whilst continuing to invest in the business to support our long-term growth
prospects and maximising shareholder value, returning capital to shareholders
that we consider to be in excess of our medium-term requirements. In 2021, we
completed both the end of the $100 million share repurchase announced in
September 2020, and the subsequent $100 million repurchase announced in July
2021. In December 2021, we announced our intention to repurchase a further
$250 million of shares ($16 million of the first tranche of $125 million had
been repurchased at 31 December 2021).
In 2020 we moved to a progressive dividend policy, and our 2021 total dividend
of 14.0¢ per share represents an increase of 32% on 2020. Our business is
highly cash-generative, and these cash flows support a growing dividend over
time. We actively manage our capital to seek to maximise value to shareholders
and support our strategy by either investing that capital to improve
shareholder returns in the future or returning it to shareholders through
higher dividends or share buybacks, after taking into account required capital
and potential strategic opportunities, to ensure we maintain a prudent balance
sheet. Over the past five years we have returned $851 million through
dividends and announced $850 million of share buybacks for shareholders.
We have a capital and liquidity framework which allows us to invest in the
growth of our business. Our $500 million revolving credit facility provides
additional liquidity (see page 34) and now matures in 2026 due to the exercise
of our final one-year extension option in December 2021. We have maintained
prudent capital and available liquidity throughout the year and deployed
capital to support investment management operations and the launch of new
investment products. We monitor our capital requirements through continuous
review of our regulatory and economic capital, including regularly reporting
to the Risk and Finance Committee and the Board.
The Board is proposing a final dividend for 2021 of 8.4¢ per share, which
together with the interim dividend of 5.6¢ per share equates to a total
dividend for 2021 of 14.0¢ per share. The proposed final dividend equates to
around $115 million, which is more than covered by our available liquidity and
capital resources. Key dates relating to the proposed final dividend are
provided on page 2.
Antoine Forterre
Chief Financial Officer
Risk management - principal risks
Business risks
Risk Mitigants Status and trend Change
1. Fund underperformance, on an absolute basis, relative to a benchmark or Man Group's investment businesses each have clearly defined investment Despite periods of market volatility linked to COVID-19 developments, Increased
relative to peer groups, could reduce AUM and may result in lower processes designed to target and deliver on the investment mandate of each inflation concerns and Fed tapering, 2021 has seen good overall performance
Investment performance subscriptions and higher redemptions. This risk is heightened at times of product. We focus on hiring and retaining highly-skilled professionals who are for Man Group's funds. Trend-following quantitative strategies performed well
volatile markets. This may also result in dissatisfied clients, negative press incentivised to perform within the parameters of their mandate. and valuation-focused strategies such as Japan CoreAlpha and those within Man
and reputational damage.
Numeric and Alternative Risk Premia recovered from weaker performance in prior
Man Group's diversified range of products and strategies limits the risk to years.
Investment performance is exposed to market disruption or volatility triggered the business from underperformance of any particular strategy or market. This
by severe weather events. Performance could also be impacted by fundamental includes a current focus on responsible investment products incorporating ESG AUM increased largely due to absolute investment performance and net inflows
moves in underlying asset prices or liquidity as the world transitions to a analytics to meet current and future investor needs. over the year in roughly equal parts.
low-carbon economy.
The discussion of Man Group's investment performance is on page 9.
Lower AUM results in lower management fees and underperformance results in
lower performance fees.
2. A key person to the business leaves or is unable to perform their role. This Business and investment processes are designed to minimise the impact of Man Group has continued to be able to attract and retain an array of talented Unchanged
also includes team resilience to individuals being incapacitated by COVID-19. losing any key individuals. Diversification of strategies and the emphasis on individuals across the firm. Voluntary staff turnover has picked up, returning
Key person risk
technology and systematic strategies reduce the overall risk to Man Group. The to pre-pandemic levels.
Retention risk may increase in years of poor performance and reduced COVID-19 response sought to minimise resilience risks through physical
compensation. In 2021 the sector has also seen individuals looking for separation of key persons. We did not see any investor concerns or material outflows as a result of
fundamental lifestyle changes triggered by the pandemic.
announced departures in 2021, including the retirement of the CIO and
Succession plans and deferred compensation schemes are in place to support the subsequent Senior ExCo reorganisation. We continue to operate a succession
retention of senior investment professionals and key management. planning process to manage this risk.
Credit risks
3. A counterparty with which the funds or Man Group have financial transactions, Man Group and its funds diversify exposures across a number of strong Increased regulatory scrutiny, stress testing and capital requirements for Unchanged
directly or indirectly, becomes distressed or defaults. financial counterparties, each of which is approved and regularly reviewed for investment banks and central clearing houses following the 2008 financial
Counterparty
creditworthiness by the Counterparty Monitoring Committee (CMC). The CMC also crisis supported the overall stability of Man Group's core counterparties.
Shareholders and investors in Man Group funds and products are exposed to oversees contingency planning ahead of significant market or political events.
credit risk of prime brokers, custodians, sub-custodians, clearing houses and
The main counterparty event for 2021 was names linked to the collapse of
depository banks. The risk teams monitor credit metrics on the approved counterparties daily. Archegos. This led to our decision to migrate risk away from one of our main
This includes CDS spreads and credit ratings. prime brokers. Our diversification model allowed for a smooth transition to
alternative providers without any issues.
Liquidity risks
Risk Mitigants Status and trend Change
4. Volatile markets and reduced market liquidity can place additional, often A $500 million revolving credit facility (RCF) provides Man Group with a The RCF was extended to mature in five years and now incorporates a carbon Unchanged
short-term, demands on the balance sheet. Man Group is exposed to having robust liquidity backstop. Liquidity forecasting for the Man Group and UK/EEA emissions target.
Corporate and fund insufficient liquidity resources to meet its obligations. entities, including downside cases, facilitates planning and informs
decision-making. The asset liquidity distribution across funds has remained broadly unchanged.
Adverse market moves and volatility may sharply increase the demands on the
A centralised liquidity analysis and reporting toolkit is fully embedded.
liquid resources in Man Group's funds. Market stress and increased redemptions The investment risk teams conduct regular liquidity tests on Man Group's Market liquidity has largely returned to pre-pandemic levels - the
could result in the deterioration of fund liquidity and in the severest cases funds. We endeavour to manage resources in such a way as to meet all demands WallStreetBets short squeeze had a minimal impact on our funds but led to
this could lead to the gating of funds. for fund redemptions according to contractual terms. further developments of the liquidity analysis framework.
Market risks
5. Man Group uses capital to seed new funds to build our fund offering, expand A disciplined framework ensures that each request for seed capital is assessed The investment book grew over 2021. The seeding book returns were positive, Increased
product distribution and generate returns for shareholders. Man Group also on its risk and return on capital. with the benchmark hedges performing as expected.
Investment book holds Collateralised Loan Obligation (CLO) risk retention positions until the
product maturity, and in 2021 participated in a US CLO Warehouse to facilitate Approvals are granted by a Seed Investment Committee (SIC), which is comprised Man Group continues to use repo and swap financing for some of the CLO and
a product launch. of senior management, Risk and Treasury. Investments are subject to risk seed positions to release liquidity but retain the market risk.
limits, an exit strategy and are hedged to a benchmark where appropriate. The
The firm is therefore exposed to a decline in value of the investment book. positions and hedges are monitored regularly by Group Risk and reviewed by the A framework for active balance sheet risk taking in Man Group funds is being
SIC. developed, seeking uncorrelated returns to Man Group's dominant flagship
funds.
6. Man Group underwrites the risks related to the UK defined benefit pension plan The UK pension plan has a low net exposure to UK interest rates and RPI A triennial valuation exercise as of year-end 2020 led to a small funding Decreased
which closed to new members in 1999 and future accrual in 2011. The plan is inflation. The return-seeking assets are low volatility and have a low contribution from Man Group. As of 31 December 2021, the scheme has a surplus
Pension fully funded but is exposed to changes in net asset versus liability values. correlation to directional equity markets. Longevity is the largest remaining on both an accounting and actuarial basis which brings down the overall risk
risk but is uncorrelated to Man Group's other risks. assessment. The impact of COVID-19 has not had a material impact on the
longevity assumptions.
Operational risks
Risk Mitigants Status and trend Change
7. Risk of losses incurred by IT software and hardware failures resulting in Technology plays a fundamental role in delivering our objectives, so the IT In 2021 we commenced our move to a long-term flexible working model which is Unchanged
system downtime, severely degraded performance or limited system functions work closely with each business unit to ensure work is correctly being implemented globally. We continue to improve our technology offering,
Information technology and business continuity functionality. prioritised and financed. The prioritisation process considers the life cycle capability and security to support the new working model. Particular focus and
of both hardware and software to ensure both are adequately supported and investment has been on hardware and software enhancements to core technology
Business continuity risks may arise from incidents such as a denial of access sized. The firm's operational processes include mature risk, incident and and data centres, and the enrichment of the trading and operations platform.
to a key site or a data centre outage, which could lead to business problem management procedures to minimise the likelihood and impact of Progress in centralisation of order management technology for the firm also
disruptions. technology failures. continues apace.
Business continuity risk mitigation includes detailed planning and testing of Remote working and collaboration technologies facilitated a seamless move to
remote access and contingency/recovery operations, and ongoing risk and threat mass working from home at the start of the pandemic and evolved in late 2021
assessments. into secure and efficient flexible working arrangements for the majority of
staff.
8. Risk of losses resulting from inadequate or failed processes within Man Group. Man Group's risk management framework and internal control systems are based Man Group remains focused on enhancing its systems and control processes where Unchanged
on a three lines of defence model. required and ensuring internal process failures are kept to a minimum.
Internal process failure
Heightened risks relating to the pandemic and remote working have continued to Man Group has not observed an increase in material internal events in 2021,
be an area of management focus in 2021. nor any material operational events directly attributable to COVID-19.
9. Man Group continues to outsource a number of functions as well as managing Man Group's operations team has implemented a robust methodology (including The firm has concentrated its outsourcing into a smaller number of carefully Unchanged
outsourcing arrangements on behalf of its funds. The risk is that the ongoing third-party due diligence and KPI monitoring) to confirm that selected and proven outsource providers with which it has established working
External process failure outsourced service providers do not perform as required, resulting in knock-on outsourced service providers are delivering as required. relationships allowing for greater process consolidation and rationalisation.
implications for our business and processes.
We observed a modest increase in issues faced by some of our third-party
External service providers continue to face heightened risks attributable to providers during 2020 and 2021. However, these have not had any material loss
COVID-19. impacts.
Risk Mitigants Status and trend Change
10. The risk of loss resulting from cybercrime, malicious disruption to our Man Group has established information security and cyber security programmes The cyber landscape continued to evolve throughout 2021 with criminals seeking Increased
networks or from the theft, misplacing, interception, corruption or deletion that are aligned with industry expectations and best practices. They are to exploit emerging supply chain vulnerabilities as well as COVID-19 and
Information and cybercrime security of information. continuously reviewed and adjusted to keep pace with the regulatory, working from home. Key threats arise from social engineering (phishing),
legislative and cyber threat landscapes. Man Group practises defence in depth ransomware, denial of service and cloud data storage/processing attacks.
Some of the risks and potential impacts are heightened while the majority of by layering security controls and using state-of-the-art technologies, Criminals continued to increase attacks against remote access infrastructures,
the firm is working from home. enabling us to detect and prevent malicious activities and complex aiming to disrupt workforces and breach poorly configured remote access
cyber-attacks. gateways and services.
Man Group did not experience any material client or operational impact from
cyber events in 2021, nor did Man Group experience any material data breaches
involving customers' personally identifiable information (PII). Our security
operations and incident response functions remained fully operational.
11. The global nature of Man Group's business, the expansion of its investment Man Group operates a global legal and compliance framework which underpins all Man Group continues to experience new regulatory requirements. In 2021 this Unchanged
businesses and the acquisition of new investment businesses, with corporate aspects of its business and is resourced by experienced teams. These teams are included implementation of the Investment Firms Prudential Regime (IFPR)
Legal and regulatory and fund entities located in multiple jurisdictions and a diverse investor physically located in Man Group's key jurisdictions, helping them to regulatory capital and remuneration requirements.
base, makes it subject to a wide range of laws and regulations. Failure to understand the context and impact of any requirements.
comply with these laws and regulations may put Man Group at risk of fines,
Man Group maintained an open dialogue with regulators throughout 2021 around
lawsuits or reputational damage. Emphasis is placed on proactively analysing new legal and regulatory the impact of COVID-19 on markets, fund performance and our resilience.
developments to assess likely impacts and mitigate risks.
Changes in laws and regulations can materially impact Man Group or the sectors
Work continues on a number of regulatory initiatives including IBOR
or the market in which it operates. Man Group continues to liaise directly and indirectly with competent transition, IFPR/ICARA and climate change disclosures (TCFD).
authorities e.g. FCA, SEC, FINMA, CBI.
Reputational risks
Risk Mitigants Status and trend Change
12. The risk that an incident or negative publicity undermines our reputation as a Our reputation is dependent on our operational and fund performance and the Man Group enjoys a good reputation and work continues to build Man Group's Increased
leading investment manager and place to work. Reputational damage could result conduct of our employees. Our governance and control structure mitigate profile and protect its reputation across stakeholder groups.
Negative publicity in significant redemptions from our funds, and could lead to issues with operational concerns, and our attention to people and investment processes are
external financing, credit ratings and relations with core counterparties and designed to comply with accepted standards of investment management practice. We are alert to the increased risk of any suggestion of greenwashing if the
outsourcing providers. We encourage a culture of openness, inclusion and diversity. ESG credentials of an investment strategy does not meet client, regulator or
the wider public's expectations.
Climate change risks
13. Physical risks of business disruption, property damage or to employee Man Group has a small number of employees and a relatively limited physical The firm continues to focus on providing investors with products that Increased
well-being due to a severe weather event or longer-term shifts in climate footprint. Man Group is sufficiently agile to be able to adjust to medium-term incorporate ESG analytics. This is augmented by active stewardship of fund
Physical and transition risks patterns. transition risks and capture any opportunities. assets to influence positive change. In 2021 the firm announced its commitment
to net zero carbon investment portfolios by 2050, and has previously committed
The primary physical risk of the 1.5 to 2°C scenario is to Man Group's to being a net zero carbon workplace by 2030.
offices and data centres, principally the London headquarters which may be
exposed to flooding of the River Thames. The firm will continue to monitor and manage other medium/long-term risks
through business as usual reporting and management processes for the relevant
Transition risks as the world moves towards a low-carbon economy can be legal, principal risk (see risks 1, 7, 11 and 12).
regulatory, technological, market or reputational.
Emerging risks
14. Primarily external in nature and complementary to the principal risks which The Board and Group Risk monitor emerging risks, trends and changes in the The principal and emerging risks were reviewed by the Board in 2021. No Unchanged
are focused on current internal risk. The emerging risk categories include likelihood of impact. This assessment informs the universe of principal risks changes were made to Man Group's headline principal risks, but some
External risks natural disasters, pandemics, disruption to financial markets and business faced by the firm. likelihoods and impacts of the emerging risks were reassessed.
infrastructure, geopolitical risk and changes in the competitive landscape.
Directors' responsibility statement
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
The Companies (Jersey) Law 1991 requires the directors to prepare financial
statements for each financial year. Under that law the directors have elected
to prepare the financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the United
Kingdom. The financial statements are required by law to give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing the Group financial statements, International Accounting Standard
1 requires that directors:
· properly select and apply accounting policies;
· present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity's
financial position and financial performance; and
· make an assessment of the Company's ability to continue as a going
concern.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with
the Companies (Jersey) Law 1991. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Jersey, Channel Islands governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Each of the directors confirm that, to the best of each person's knowledge and
belief:
· the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
· the Strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face;
· the Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's and Group's position, performance,
business model and strategy; and
· there is no relevant audit information of which the Group's auditor
is unaware, and that they have taken all steps that they ought to have taken
as a director in order to make themselves aware of any relevant audit
information and to establish that Man Group's auditor is aware of that
information.
Group income statement
For the year to 31 December
Note 2021 2020
$m
$m
Management and other fees 4 914 762
Performance fees 4 567 177
Revenue 1,481 939
Income or gains on investments and other financial instruments 14 42 40
Third-party share of gains relating to interests in consolidated funds 14 (3) (17)
Sub-lease rental and lease surrender income 18 6 25
Distribution costs 5 (40) (34)
Net revenue 1,486 953
Asset servicing costs 6 (58) (55)
Compensation costs 7 (596) (451)
Other costs 8 (165) (150)
Finance income 9 1 2
Finance expense 9 (14) (16)
Revaluation of contingent consideration 15 2 22
Impairment of right-of-use lease assets - investment property 18 (3) (25)
Amortisation of acquired intangible assets 19 (61) (63)
Impairment of GPM goodwill 19 - (55)
Recycling of FX revaluation to the Group income statement on liquidation of 16 - 17
subsidiaries
Share of post-tax loss of associate 23 (2) -
Statutory profit before tax 590 179
Tax expense 10 (103) (41)
Statutory profit attributable to owners of the Company 487 138
Statutory earnings per share 26
Basic 34.7¢ 9.5¢
Diluted 33.8¢ 9.3¢
Group statement of comprehensive income
For the year to 31 December
Note 2021 2020
$m
$m
Statutory profit attributable to owners of the Company 487 138
Other comprehensive income/(expense):
Remeasurements of post-employment benefit obligations 22 (15)
Current tax credited on pension plans 4 4
Deferred tax debited on pension plans (7) -
Items that will not be reclassified to profit or loss 19 (11)
Cash flow hedges: 16
Valuation gains taken to equity 9 6
Realised gains transferred to Group income statement (8) (3)
Deferred tax credited on cash flow hedge movements - 1
Net investment hedge 16 3 (4)
Recycling of FX revaluation to the Group income statement on liquidation of 16 - (17)
subsidiaries
Foreign currency translation (6) 10
Items that may be reclassified to profit or loss (2) (7)
Other comprehensive income/(expense) (net of tax) 17 (18)
Total comprehensive income attributable to owners of the Company 504 120
Group balance sheet
At 31 December
Note 2021 2020
$m
$m
Assets
Cash and cash equivalents 11 387 351
Fee and other receivables 12 485 386
Investments in fund products and other investments 14 974 787
Leasehold improvements and equipment 17 43 30
Leasehold property - right-of-use lease assets 18 61 74
Investment property - right-of-use lease assets 18 77 78
Goodwill and acquired intangibles 19 678 742
Other intangibles 20 45 39
Deferred tax assets 21 128 119
Investment in associate 23 18 -
Pension asset 27 2
Total assets 2,923 2,608
Liabilities
Trade and other payables 13 702 574
Provisions 22 14 9
Current tax liabilities 10 15 12
Third-party interest in consolidated funds 14 254 219
Lease liability 18 250 272
Deferred tax liabilities 21 37 25
Total liabilities 1,272 1,111
Net assets 1,651 1,497
Equity
Capital and reserves attributable to owners of the Company 1,651 1,497
The financial statements were approved by the Board of Directors on 28
February 2022 and signed on its behalf by:
Luke Ellis Antoine Forterre
Chief Executive Officer Chief Financial Officer
Group cash flow statement
For the year to 31 December
Note 2021 2020
$m
$m
Cash flows from operating activities
Statutory profit 487 138
Adjustments for:
Share-based payment charge 7 39 20
Fund product-based payment charge 7 54 54
Net finance expense 9 13 14
Tax expense 10 103 41
Revaluation of contingent consideration 15 (2) (22)
Depreciation of leasehold improvements and equipment 17 13 12
Depreciation of right-of-use lease assets 18 17 22
Impairment of right-of-use lease assets - investment property 18 3 25
Amortisation of acquired intangible assets 19 61 63
Impairment of GPM goodwill 19 - 55
Amortisation of other intangibles 20 16 14
Share of loss from associate 23 2 -
Recycling of FX revaluation to the Group income statement on liquidation of 16 - (17)
subsidiaries
Foreign exchange movements 9 (16)
Realised gains on cash flow hedges (8) (3)
Funding of defined benefit pension plan (3) -
Other non-cash movements (7) (8)
797 392
Changes in working capital(1):
(Increase)/decrease in fee and other receivables (102) 50
(Increase)/decrease in other financial assets(2) (163) 31
Increase/(decrease) in trade and other payables 49 (30)
Cash generated from operations 581 443
Interest paid 9 (2) (2)
Unwind of lease liability discount 18 (12) (12)
Tax paid (83) (37)
Cash flows from operating activities 484 392
Cash flows from investing activities
Interest received 9 1 2
Purchase of leasehold improvements and equipment: leasehold property 17 (26) (12)
Purchase of leasehold improvements and equipment: right-of-use lease asset - 18 (5) -
investment property
Purchase of other intangible assets (18) (18)
Payment of acquisition-related contingent consideration 15 - (2)
Purchase of interest in associate 23 (19) -
Cash flows used in investing activities (67) (30)
Cash flows from financing activities
Repayments of principal lease liability 18 (21) (22)
Purchase of own shares by the Employee Trust and Partnerships (18) (21)
Proceeds from sale of Treasury shares in respect of Sharesave 2 -
Share repurchase programmes (including costs) 26 (180) (107)
Dividends paid to Company shareholders 27 (160) (147)
Cash flows used in financing activities (377) (297)
Net increase in cash and cash equivalents 40 65
Cash and cash equivalents at the beginning of the year 351 281
Effect of foreign exchange movements (4) 5
Cash and cash equivalents at year end3 11 387 351
Notes:
1 Changes in working capital differ from the movements in these balance
sheet items due to non-cash movements which either relate to the gross-up of
the third-party share of consolidated fund entities (Note 14.2) or are
adjusted elsewhere in the Group cash flow statement, such as movements
relating to the fund product-based payment charge (within operating
activities) and the share repurchase liability (within financing activities).
2 Includes $2 million (2020: $1 million) of restricted net cash inflows
relating to consolidated fund entities (Note 14.2).
3 Includes $64 million (2020: $62 million) of restricted cash relating
to consolidated fund entities (Note 14.2).
Group statement of changes in equity
At 31 December 2021 2020
$m
$m
Share capital and capital reserves (1,633) (1,635)
Revaluation reserves and retained earnings 3,284 3,132
Capital and reserves attributable to owners of the Company 1,651 1,497
Share capital and capital reserves
$m Share Share Capital redemption reserve Merger Reorganisation Total
capital
premium account
reserve
reserve
At 1 January 2020 53 - - - (1,688) (1,635)
At 31 December 2020 53 - - - (1,688) (1,635)
At 1 January 2021 53 - - - (1,688) (1,635)
Transfer from Treasury shares: Partnership Plans and Sharesave - 2 - - - 2
Cancellation of Treasury shares (2) - 2 - - -
At 31 December 2021 51 2 2 - (1,688) (1,633)
Revaluation reserves and retained earnings
$m Profit Own shares held by Employee Trust Treasury shares Cumulative Cash flow Total
and loss account
translation
hedge
adjustment
reserve
At 1 January 2020 3,322 (66) (52) 55 - 3,259
Statutory profit 138 - - - - 138
Other comprehensive income/(expense) (11) - - (11) 4 (18)
Total comprehensive income attributable to owners of the Company 127 - - (11) 4 120
Share-based payment charge 20 - - - - 20
Purchase of own shares by the Employee Trust - (21) - - - (21)
Disposal of own shares by the Employee Trust (26) 27 - - - 1
Share repurchases (100) - - - - (100)
Transfer to Treasury shares 107 - (107) - - -
Transfer from Treasury shares (11) - 11 - - -
Dividends paid (147) - - - - (147)
At 31 December 2020 3,292 (60) (148) 44 4 3,132
At 1 January 2021 3,292 (60) (148) 44 4 3,132
Statutory profit 487 - - - - 487
Other comprehensive income/(expense) 19 - - (3) 1 17
Total comprehensive income attributable to owners of the Company 506 - - (3) 1 504
Share-based payment charge 39 - - - - 39
Current tax credited on share-based payments 1 - - - - 1
Deferred tax credited on share-based payments 10 - - - - 10
Purchase of own shares by the Employee Trust - (18) - - - (18)
Disposal of own shares by the Employee Trust (17) 17 - - - -
Share repurchases (225) - - - - (225)
Transfer to Treasury shares 180 - (180) - - -
Transfer from Treasury shares (6) - 5 - - (1)
Disposal of Treasury shares for Sharesave - - 2 - - 2
Cancellation of Treasury shares (143) - 143 - - -
Dividends paid (160) - - - - (160)
At 31 December 2021 3,477 (61) (178) 41 5 3,284
The proposed 2021 final dividend would reduce shareholders' equity by $115
million (2020: $81 million) subsequent to the balance sheet date (Note 27).
Further details of Man Group's share capital and reserves are included in Note
26.
Notes to the Group financial statements
1. Basis of preparation
Accounting
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs) as adopted by the United
Kingdom, this announcement does not itself contain sufficient information to
comply with IFRSs. Details of our accounting policies can be found in Man
Group's Annual Report for the year ended 31 December 2020. The financial
information included in this statement does not constitute statutory accounts
within the meaning of Article 105 of Companies (Jersey) Law 1991. Statutory
accounts for the year ended 31 December 2021, upon which the auditors have
issued an unqualified report, will shortly be delivered to the Jersey
Registrar of Companies. The Annual Report and the Notice of the Company's 2022
Annual General Meeting (AGM) will be posted to shareholders and will be
available to download from the Company's website on 11 March 2022. The Annual
General Meeting will be held on 6 May 2022 at 10am at Riverbank House, 2 Swan
Lane, London EC4R 3AD. For further details please refer to the Notice of our
2022 Annual General Meeting when available.
Consolidation
The consolidated group is Man Group plc (the Company) and its subsidiaries
(together Man Group). The consolidated financial statements are presented in
United States dollars (USD), the Company's functional currency, as the
majority of our revenues, assets, liabilities and financing are denominated in
USD.
For consolidated entities with a USD functional currency, monetary assets and
liabilities denominated in foreign currencies are translated at each balance
sheet date rate. Non-monetary items carried at fair value that are denominated
in foreign currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured at
historical cost in a foreign currency are not retranslated. Transactions
denominated in foreign currencies are converted at the spot rate at the date
of the transaction or, if appropriate, the average rate for the month in which
the transaction occurs. Resulting exchange differences are recognised in the
Group income statement.
For consolidated entities that have a functional currency other than USD, the
assets and liabilities are translated into USD at the balance sheet date rate.
Income and expenses are translated at the average rate for the period in which
the transactions occur. Resulting exchange differences are recorded in other
comprehensive income.
The consolidated financial information contained within these financial
statements incorporates our results, cash flows and financial position for the
year to 31 December 2021 and includes our share of the results of any
associates and joint ventures using the equity method of accounting.
Subsidiaries are entities we control (including certain structured entities,
as defined by IFRS 12 'Disclosure of Interests in Other Entities') and are
consolidated from the date on which control is transferred to us until the
date that control ceases. Control exists when we have the power to direct the
relevant activities, exposure to significant variable returns and the ability
to utilise power to affect those returns. All intercompany transactions and
balances between our entities are eliminated on consolidation. Although the
Employee Trust has independent trustees and its assets are held separately, it
is consolidated into the Group financial statements given its nature as a
structured entity which has the obligation to deliver deferred compensation
awards to our employees (Note 24).
Business combinations are accounted for using the acquisition method from the
date on which we effectively obtain control of the acquiree. The cost of an
acquisition is measured as the fair value at the acquisition date of assets
transferred, liabilities incurred and equity instruments issued by Man Group.
The fair value of an acquisition is calculated at the acquisition date by
recognising the acquiree's identifiable assets and liabilities at their fair
values at that date, and costs relating to acquisitions are recognised in the
Group income statement as incurred. Any contingent consideration is recognised
at fair value at the acquisition date, with any subsequent changes to the fair
value recognised in the Group income statement.
Impact of new accounting standards
A number of new or amendments to existing accounting standards and
interpretations have been issued by the International Accounting Standards
Board (IASB).
The following accounting standards relevant to our operations were effective
for the first time in the year to 31 December 2021. Their adoption has not had
a significant impact on these financial statements:
· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16).
The following standards are relevant to our operations and have been issued by
the IASB but are not yet mandatory and have not been early adopted:
· Amendments to IAS 1 'Presentation of Financial Statements':
classification of liabilities as current or non-current;
· Amendments to IAS 1 and IFRS Practice Statement 2: disclosure of
accounting policies;
· Amendments to IAS 8 'Accounting Policies, Changes in Accounting Estimates
and Errors': definition of accounting estimates;
· Amendments to IAS 12 'Income Taxes': deferred tax related to assets and
liabilities arising from a single transaction;
· Amendments to IAS 16 'Property, Plant and Equipment': property, plant and
equipment - proceeds before intended use; and
· Annual Improvements to IFRS Standards 2018-2021 Cycle: amendments to IFRS
1 'First-time Adoption of International Financial Reporting Standards', IFRS 9
'Financial Instruments', IFRS 16 'Leases' and IAS 41 'Agriculture'.
No other standards or interpretations issued and not yet effective are
expected to have an impact on the Group financial statements.
2. Going concern
Despite the ongoing volatility seen across financial markets as a result of
the COVID-19 pandemic, including inflationary pressures and monetary and
fiscal policies, we have continued to operate substantially as normal.
Management fee profitability has continued to grow and performance fee
earnings for the year are strong. Although COVID-19 has not had a significant
or ongoing adverse impact on us to date, its impact on our operating
arrangements, including access to capital and liquidity, is subject to ongoing
review by the directors and senior management. This includes assessment of our
medium-term financial plan and capital and liquidity plan, which are built by
aggregating expected business performance, including rigorous downside
scenario testing. We continue to have a strong cash (Note 11) and capital
position, and our business typically has good conversion of profits into cash
flows, which helps protect the business in stressed scenarios.
The directors consider that we are well placed to manage business and
financial risks in the current economic environment and have concluded that
there is a reasonable expectation that we have adequate resources to continue
in operational existence for the foreseeable future. Accordingly, the Group
financial statements have been prepared on a going concern basis.
3. Judgemental areas and accounting estimates
The preparation of financial statements in conformity with IFRS requires the
use of accounting estimates and assumptions. We continually evaluate our
estimates and judgements based on historical experience and expectations of
future events that are considered reasonable in the circumstances. These
judgements and estimates are an area of focus for the Board and, in
particular, the Audit and Risk Committee.
Critical judgements
Man Group acts as the investment manager/adviser to fund entities. The most
significant area of judgement is whether we control certain of those fund
entities to which we are exposed via either direct investment holdings, total
return swaps, or sale and repurchase arrangements. We assess such
relationships on an ongoing basis to determine whether we control each fund
entity and therefore consolidate them into our results (Note 14).
Critical accounting estimates
The directors have considered the estimates and assumptions used in the
preparation of the Group financial statements, which include estimates and
assumptions used in the assessment for impairment of goodwill, right-of-use
lease assets, pension and deferred tax assets, and in the valuation of certain
tax liabilities and provisions. The directors have also considered the
possible impact of climate change on such estimates and assumptions. Other
than the valuation of the net pension asset, the directors have concluded
there are no key assumptions concerning the future or other key sources of
estimation uncertainty at the reporting date that may have a significant risk
of causing a material adjustment to the carrying amounts of our assets and
liabilities within the next financial year.
4. Revenue
Accounting policy
Fee income is our primary source of revenue, which is derived from the
investment management agreements that we have in place with the fund entities
or the accounts that we manage.
Management and other fees (net of rebates), which include all non-performance
related fees, are recognised in the period in which contractual investment
management services are provided and do not include any other performance
obligations. Fees are generally based on an agreed percentage of NAV or AUM
and are typically charged in arrears and receivable within one month.
Performance fees (net of rebates) relate to the performance of the funds or
managed accounts managed during the year and are recognised when the
performance obligation has been met, whereby the fee has crystallised and can
be reliably estimated. This is generally at the end of the performance period
or upon early redemption by an investor. Until the performance period ends,
market movements could significantly move the NAV of the fund products. For
alternative strategies, we will typically only earn performance fees on any
positive investment returns in excess of the high-water mark, meaning we will
not be able to earn performance fees with respect to positive investment
performance in any year following negative performance until that loss is
recouped, at which point an investor's investment surpasses the high-water
mark. For long-only strategies, performance fees are earned only when
performance is in excess of a predetermined strategy benchmark (positive
alpha). Once crystallised, performance fees typically cannot be clawed back.
There are no other performance obligations or services provided which suggest
these have been earned either before or after the crystallisation date.
Rebates, which relate to repayments of management and performance fees
charged, typically to institutional investors, are recognised in the period in
which the associated fees for services are provided. Rebates are presented net
within management and other fees and performance fees in the Group income
statement.
Management and other fees for the period increased to $914 million from $762
million in 2020, driven by strong performance and positive net AUM flows.
Performance fee revenue was $567 million compared to $177 million in 2020,
driven by strong performance in the year across a range of strategies.
5. Distribution costs
Accounting policy
Distribution costs, which are paid to external intermediaries for marketing
and investor servicing, largely in relation to retail investors, are variable
with AUM and the associated management fee revenue. Distribution costs are
expensed over the period in which the service is provided.
6. Asset servicing costs
Accounting policy
Asset servicing includes custodial, valuation, fund accounting, registrar,
research and administration functions performed by third parties under
contract to Man Group, on behalf of the funds or managed accounts, as well as
market data required to perform those services. Asset servicing costs are
recognised in the period in which the services are provided. The costs of
these services vary based on transaction volumes, the number of funds or
managed accounts and their NAVs, and the mix of client strategies.
7. Compensation costs
Accounting policy
Compensation is our largest cost and an important component of our ability to
retain and attract talent. In the short term, the variable component of
compensation adjusts with revenues and profitability.
Salaries, variable cash compensation and social security costs are charged to
the Group income statement in the period in which the service is provided, and
include partner drawings.
Compensation can be deferred by way of both equity-settled share-based payment
schemes as well as fund product-based compensation arrangements. Details of
share-based deferred compensation are set out in Note 25. Where deferred
compensation is invested in fund products managed by us, the fair value of the
employee services received in exchange for the fund investments is recognised
as a straight-line expense of the mark to market value of the awards over the
relevant grant to vest period, with a corresponding liability. We generally
elect to separately purchase the equivalent fund investments at grant date to
offset any associated change in the deferred compensation due (Note 14), and
at vesting the value of the fund investment is delivered to the employee
(subject to the terms of the plan rules, which include malus provisions). If
an award is forfeited, the cumulative charge recognised in the Group income
statement is reversed in full. Details of our hedge accounting arrangements
relating to deferred fund product awards are provided in Note 16.
Pension costs relate to our defined contribution and defined benefit plans.
2021 2020
$m
$m
Salaries 169 163
Variable cash compensation 266 167
Deferred compensation: share-based payment charge (Note 25) 39 20
Deferred compensation: fund product-based payment charge 54 54
Social security costs 54 34
Pension costs (Note 24) 14 13
Total compensation costs 596 451
Made up of:
Fixed compensation: salaries and associated social security costs, and pension 208 194
costs
Variable compensation: variable cash compensation, deferred compensation and 388 257
associated social security costs
Total compensation costs have increased by 32% compared to 2020 due to the
higher levels of management and performance fee revenues year on year, which
drove increased variable cash compensation.
The increase in salaries was driven by the less favourable sterling (GBP) to
USD achieved exchange rates, which averaged 1.38 compared with 1.29 in 2020
and increased these by around $9 million.
The share-based payment charge increased by $19 million in the year,
predominantly due to accelerated vesting charges for certain
performance-linked share awards.
The unamortised deferred compensation at year end is $52 million (2020: $66
million) and has a weighted average remaining vesting period of 1.4 years
(2020: 1.8 years).
Average headcount
The table below provides average headcount by function, including directors,
employees, partners and contractors.
2021 2020
Investment management 388 379
Sales and marketing(1) 218 196
Technology and infrastructure1,2 847 881
Average headcount 1,453 1,456
Headcount at 31 December 1,498 1,444
Notes:
1 Staff performing client service and portfolio analysis functions have
been included within sales and marketing in the year ended 31 December 2021.
Previously these staff were included within technology and infrastructure
headcount.
2 Includes all staff performing technology-based roles, including those
supporting the investment management side of our business.
8. Other costs
2021 2020
$m
$m
Technology and communications 22 25
Audit, tax, legal and other professional fees 21 20
Occupancy 18 14
Staff benefits 14 14
Temporary staff, recruitment, consultancy and managed services 13 9
Insurance 7 5
Marketing and sponsorship 4 2
Travel and entertainment 2 2
Other cash costs, including irrecoverable VAT 18 11
Total other costs before depreciation and amortisation 119 102
Depreciation of leasehold improvements and equipment, and amortisation of 29 26
other intangibles
Depreciation of right-of-use lease assets (Note 18) 17 22
Total other costs 165 150
Other costs, before depreciation and amortisation, increased by $17 million in
2021. Higher levels of hiring, partly due to growth in the business, saw an
increase in recruitment and temporary staff costs, and occupancy costs rose
due to the additional costs incurred in relation to the vacant sub-let space
in our London office (see further details in Note 18.2). Costs were further
impacted by the less favourable GBP to USD achieved exchange rates (see Note
7), which increased 2021 other costs comparatively by around $5 million.
9. Finance expense and finance income
2021 2020
$m
$m
Finance expense:
Unwind of lease liability discount (Note 18) (12) (12)
Unwind of contingent consideration discount (non-core item per page 51) - (2)
Other finance expense (2) (2)
Total finance expense (14) (16)
Finance income:
Interest on cash deposits 1 2
Total finance income 1 2
Net finance expense (13) (14)
10. Tax expense
Accounting policy
Current tax is based on our taxable profit for the year. Taxable profit
differs from net profit as reported in the Group income statement because it
excludes items of income or expense that are taxable or deductible in other
years, in addition to items that are never taxable or deductible. 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.
We are a global business and therefore operate 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 we operate and international guidelines
as laid out by the Organisation for Economic Co-operation and Development
(OECD). The effective tax rate results from the combination of taxes paid on
earnings attributable to the tax jurisdictions in which they arise. Further
details of our deferred tax expense, assets and liabilities are included in
Note 21.
2021 2020
$m
$m
Current tax
UK corporation tax on profits 86 39
Foreign tax 14 2
Adjustments to tax charge in respect of previous years (1) 1
Current tax expense 99 42
Deferred tax
Origination and reversal of temporary differences 5 (1)
Adjustments to tax charge in respect of previous years (1) -
Deferred tax expense (Note 21) 4 (1)
Total tax expense 103 41
What factors affect the tax expense for the year?
The majority of our profits in the period were earned in the UK, Switzerland
and the US. Our tax expense is lower (2020: higher) than the amount that would
arise using the theoretical tax rate applicable to our profits as follows:
2021 2020
$m
$m
Profit before tax 590 179
Theoretical tax expense at UK rate: 19% (2020: 19%) 112 34
Effect of:
Overseas tax rates compared to UK 1 (1)
Adjustments to tax charge in respect of previous years (2) 1
(Recognition)/derecognition of US deferred tax assets (Note 21) (2) 8
Impact of change in UK tax rate (4) -
Other (2) (1)
Tax expense 103 41
Except for the above items, our current effective tax rate of 17% (2020: 23%)
is broadly consistent with our earnings profile.
What factors affect our future tax charges?
The principal factors which may influence our future tax rate are changes in
tax regulation in the territories in which we operate, the mix of income and
expenses earned and incurred by jurisdiction, and the consumption of available
deferred tax assets.
The OECD has published a draft Inclusive Framework to support the introduction
of global minimum tax rates. Governments are consulting on how to implement
the Framework with the expectation that legislation and regulations will take
effect in 2023. Pending further guidance on the potential outcomes of the
consultation, it is not currently practicable to assess the impact of the
Framework on our future tax charges.
11. Cash and liquidity
Accounting policy
Cash and cash equivalents comprise cash and short-term investments in money
market funds or bank deposits with an original maturity of three months or
less. Cash and cash equivalents are measured at amortised cost, which is
approximately equal to fair value. Cash is invested in accordance with strict
limits consistent with the Board's risk appetite, which consider both the
security and availability of liquidity. Accordingly, cash is held in on-demand
and short-term bank deposits and money market funds, and at times invested in
short-term US Treasury bills (which meet the definition of cash). Cash and
cash equivalents include restricted balances held by consolidated fund
entities to which we do not have access and which are subject to legal or
contractual restrictions as to their use.
2021 2020
$m
$m
Less than Greater than Total Less than Greater than Total
1 year
1 year
1 year
1 year
Cash and cash equivalents 387 - 387 351 - 351
Cash held by consolidated fund entities (Note 14.2) (64) - (64) (62) - (62)
Available cash and cash equivalents 323 - 323 289 - 289
Undrawn committed revolving credit facility - 500 500 - 500 500
Total liquidity 323 500 823 289 500 789
Liquidity risk management
Liquidity resources support ongoing operations and potential liquidity
requirements under scenarios that assume stressed market and economic
conditions. Our funding requirements relating to the investment management
process are discretionary. Our liquidity profile is monitored on a daily basis
and the stressed scenarios are updated regularly. The Board reviews our
funding resources at each Board meeting and on an annual basis, as part of the
strategic planning process. Our available liquidity is considered sufficient
to cover current requirements and potential requirements under stressed
scenarios.
Cash and cash equivalents
Available cash and cash equivalents of $323 million (2020: $289 million) at 31
December 2021 comprise cash at bank of $189 million (2020: $161 million),
short-term deposits of $24 million (2020: $128 million) and investments in
money market funds of $110 million (2020: nil), and include $29 million (2020:
$32 million) of cash ring-fenced for regulated entities. At 31 December 2021,
the $323 million available cash and cash equivalents balance is held with
14 banks (2020: $289 million with 15 banks). The single largest counterparty
bank exposure of $85 million is held with an AA- rated bank (2020: $103
million with an A rated bank). At 31 December 2021, balances with
counterparties in the AAA, AA and A ratings bands aggregate to $51 million
(2020: nil), $154 million (2020: $7 million) and $118 million (2020: $282
million) respectively.
Committed revolving credit facility
Our $500 million committed revolving credit facility (RCF), which incorporates
an ESG target-linked interest rate component and does not include financial
covenants in order to maintain maximum flexibility, was undrawn at 31 December
2021 (2020: undrawn), having been drawn for a period of a month in May 2021.
The RCF was put in place in December 2019 as a five-year facility but has
since been extended and, due to the exercise of the final one-year extension
option in 2021, is now scheduled to mature in December 2026.
Intra-day and overnight credit facilities
We guarantee the obligations under the $100 million intra-day (2020: $100
million) and $25 million overnight credit facilities (2020: $25 million) used
to settle the majority of our banking arrangements. At 31 December 2021, the
exposures under both the intra-day and overnight facilities are nil (2020:
nil). The fair value of these commitments has been determined to be nil (2020:
nil).
12. Fee and other receivables
Accounting policy
Fee and other receivables are initially recorded at fair value and
subsequently measured at amortised cost using the effective interest rate
method, except for derivatives (measured at fair value through profit and
loss) and prepayments. Fee receivables and accrued income relate to management
and performance fees and are received in cash following finalisation of the
NAVs of the underlying funds or managed accounts. The majority of fees are
deducted from the NAVs of the respective funds by the independent
administrators and therefore the credit risk of fee receivables is minimal.
2021 2020
$m
$m
Fee receivables 18 16
Accrued income 355 238
Collateral posted with derivative counterparties 29 27
Receivables from Open Ended Investment Collective (OEIC) funds(1) 25 33
Prepayments 16 15
Other fund receivables 11 17
Derivative financial instruments (Note 16) 5 4
Sub-lease rental income receivable 2 5
Receivables relating to consolidated fund entities (Note 14.2) 5 4
Other receivables 19 27
485 386
Note:
1 For the OEIC funds businesses we act as the intermediary for the
collection of subscriptions due from customers and payable to the funds, and
for redemptions receivable from funds and payable to customers. The unsettled
fund payable is recorded in trade and other payables (Note 13).
The increase in accrued income in 2021 largely relates to the year-on-year
increase in performance fee revenues which crystallised at 31 December, with
the associated balance at year end of $241 million compared to $141 million in
2020.
No balances are overdue and, under the expected credit loss model of IFRS 9
'Financial Instruments', no impairment has been recognised at 31 December 2021
(2020: nil). Included in fee and other receivables at 31 December 2021 are
balances of $3 million (2020: $4 million) which are expected to be settled
after more than 12 months.
13. Trade and other payables
Accounting policy
Trade and other payables are initially recorded at fair value, which is
usually the invoiced amount, and subsequently measured at amortised cost using
the effective interest rate method, except for derivatives which are measured
at fair value through profit and loss.
2021 2020
$m
$m
Trade payables 5 7
Accruals 453 326
Share repurchase liability 109 64
Payables under repo arrangements 64 56
Payables to OEIC funds(1) 25 33
Derivative financial instruments (Note 16) 5 18
Tax and social security 5 13
Other fund payables - 5
Contingent consideration - 2
Payables relating to consolidated fund entities (Note 14.2) 19 27
Other payables 17 23
702 574
Note:
1 For the OEIC funds businesses we act as the intermediary for the
collection of subscriptions due from customers and payable to the funds, and
for redemptions receivable from funds and payable to customers. The unsettled
fund receivable is recorded in fee and other receivables (Note 12).
The increase in accruals in 2021 is driven by the higher levels of performance
fee revenues which crystallised at 31 December, which drove an increase in
associated variable compensation cost accruals at year end of $373 million
compared to $253 million in 2020.
Payables under repo arrangements relate to obligations to repurchase seed
investments as detailed in Note 14.1. The share repurchase liability is the
remaining liability relating to the first tranche of the share repurchase
announced in December 2021 (2020: announced in September 2020), as detailed in
Note 26.
Included in trade and other payables at 31 December 2021 are balances of nil
(2020: $3 million) which are expected to be settled after more than
12 months.
14. Investments in fund products and other investments
Accounting policy
Investments in fund products are classified at fair value through profit or
loss, with net gains due to movements in fair value recognised through income
or gains on investments and other financial instruments. The fair values of
investments in fund products are typically derived from the reported NAVs of
each of the fund products, which in turn are based upon the value of the
underlying assets held within each of the fund products. The valuation of
the underlying assets within each fund product is determined by external
valuation service providers based on an agreed valuation policy and
methodology. Whilst these valuations are performed independently of Man Group,
we have established oversight procedures and due diligence processes to ensure
that the NAVs reported by the external valuation service providers are
reliable and appropriate. Purchases and sales of investments are recognised
on trade date.
Our holdings in collateralised loan obligation (CLO) risk retention assets are
priced using a bottom-up valuation method. We use third-party valuations to
price the securities within the underlying portfolios and then apply these
valuations in proportion to the percentage of the CLO notes we hold. Holdings
in subordinated tranches of CLOs are valued using an average of third-party
valuations.
The fair value hierarchy of financial assets is disclosed in Note 15.
Seed investments portfolio
We use capital to invest in fund products as part of our ongoing business, to
build product breadth and to trial investment research developments before
marketing the products broadly to investors. Seed capital is invested via
direct holdings in fund products or sale and repurchase (repo) arrangements,
which allow us to finance seed investments without consuming high levels of
cash. Alternatively, we may obtain exposure to seed investments via total
return swap (TRS) arrangements. Under a repo arrangement we are committed
to repurchase the underlying seed investments at maturity and pay an interest
charge over the period, with the obligation to repurchase the assets on
maturity recorded as a liability within trade and other payables (Note 13).
Under a TRS arrangement we are under no form of repayment obligation and have
no ownership interest (or voting rights) in the underlying investment. In
exchange for the returns on the underlying seed investments, we pay a floating
rate of interest.
Consolidation
The control considerations under IFRS 10 'Consolidated Financial Statements'
apply to fund product investments, including those underlying our repo and TRS
instruments, and therefore we may similarly be required to consolidate them.
Having considered all significant aspects of our relationships with fund
entities, although we manage the assets of certain fund entities, we only
obtain more than limited exposure to the variable returns of those fund
entities, and thus the characteristics of control are only met, where we
either hold an investment in the fund entity or receive the returns on the
fund entity via a TRS or repo arrangement. For most fund entities: the
existence of independent boards of directors; rights which allow for the
removal of the investment manager/adviser; the influence of investors; limited
exposure to variable returns; and the arm's length nature of our contracts
with the fund entities, indicate that we do not control them, and their
associated assets, liabilities and results should not be consolidated into the
Group financial statements.
Fund entities deemed to be controlled (Note 14.2) are consolidated on a
line-by-line from the date control commences until it ceases. Where we are not
deemed to control the fund, the investment in the fund is classified within
investments in fund products (Note 14.1).
Fund investments held for deferred compensation arrangements
Fund product investments related to deferred compensation arrangements are
held to offset any change in deferred compensation over the vesting period,
and at vesting the value of the fund investment is delivered to the employee.
Fund product investments are recorded at fair value. Any gains or losses
during the vesting period are recognised as income or gains on investments and
other financial instruments in the Group income statement, or alternatively
these are accounted for as cash flow hedges as outlined in Note 16. These
include balances held by the Employee Trust (Note 24).
Financial assets at fair value through profit or loss Note 2021 2020
$m
$m
Investments in fund products 14.1 422 332
Investments in consolidated funds: transferrable securities 14.2 549 452
Other investments 3 3
Investments in fund products and other investments 974 787
Less:
Fund investments held for deferred compensation arrangements (119) (119)
Investments in consolidated funds: exclude consolidation gross-up of net 14.2 (204) (180)
investment
Other investments (3) (3)
Seeding investments portfolio 648 485
14.1. Investments in fund products
At 31 December 2021, exposure to fund products via repo arrangements (included
within investments in fund products above, with an offsetting repayment
obligation included within trade and other payables in Note 13) was $64
million (2020: $56 million), and additional exposure via TRS was $108 million
(2020: $50 million). The largest single investment in fund products at 31
December 2021 was $45 million (2020: $48 million). The exposure to market risk
on these investments is outlined in Note 16.
Income or gains on investments and other financial instruments comprises the
following:
Note 2021 2020
$m
$m
Net gains on seeding investments portfolio 24 21
Consolidated fund entities: gross-up of net gains on investments (see core 14.2 12 26
reclassification per page 54)
Unrealised foreign exchange gain/(loss) on lease liabilities, pension and 3 (6)
associated deferred tax (non-core item per page 51)
Net gains/(losses) on fund investments held for deferred compensation and 3 (1)
other investments
Income or gains on investments and other financial instruments 42 40
14.2. Consolidation of investments in funds
In 2021, 26 (2020: 19) funds in which we have an investment meet the control
criteria and have therefore been consolidated on a line-by-line basis.
The investments relating to consolidated funds are included within the Group
balance sheet and income statement as follows:
2021 2020
$m
$m
Balance sheet
Cash and cash equivalents 64 62
Transferable securities1 549 452
Fees and other receivables 5 4
Trade and other payables (19) (27)
Net assets of consolidated fund entities 599 491
Third-party interest in consolidated funds (254) (219)
Net investment held by Man Group 345 272
Income statement
Net gains on investments2 32 53
Management fee expenses3 (3) (2)
Performance fee expenses3 (2) (2)
Other costs (4) (5)
Net gains of consolidated fund entities 23 44
Third-party share of gains relating to interests in consolidated funds (3) (17)
Gains attributable to net investment held by Man Group 20 27
Notes:
1 Included within investments in fund products and other investments.
2 Included within income or gains on investments and other financial
instruments.
3 Relate to management and performance fees paid by the funds to Man
Group during the year, which are eliminated within management and other fees
and performance fees respectively in the Group income statement.
15. Fair value of financial assets and liabilities
Accounting policy
We disclose the fair value measurement of financial assets and liabilities
using three levels, as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2: inputs, other than quoted prices included within Level 1, that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
A transfer into Level 3 would be deemed to occur where the level of prolonged
activity, as evidenced by subscriptions and redemptions, is deemed
insufficient to support a Level 2 classification. This, as well as other
factors such as a deterioration of liquidity in the underlying investments,
would result in a Level 3 classification.
The fair value of our financial assets and liabilities which are held at fair
value through profit and loss can be analysed as follows:
2021 2020
$m
$m
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Financial assets held at fair value:
Investments in fund products and other investments (Note 14) 3 243 179 425 3 170 162 335
Investments in consolidated funds (Note 14) - 538 11 549 - 435 17 452
Derivative financial instruments (Note 12) - 5 - 5 - 4 - 4
3 786 190 979 3 609 179 791
Financial liabilities held at fair value:
Derivative financial instruments (Note 13) - 5 - 5 - 18 - 18
Contingent consideration (Note 13) - - - - - - 2 2
- 5 - 5 - 18 2 20
During the year, there were no significant changes in the business or economic
circumstances that affected the fair value of our financial assets and no
significant transfers of financial assets or liabilities held at fair value
between categories. For investments in fund products, Level 2 investments
primarily comprise holdings in unlisted, open-ended, active and liquid funds,
which are priced using daily or weekly observable market information derived
from third-party sources, as described in Note 14. The material holdings
within the Level 3 category relate to CLO risk retention assets and
subordinated tranches of CLOs which are priced in accordance with the
methodologies set out in Note 14 and rely, in part, on unobservable input
valuations. The effect of using reasonably possible alternative input
assumptions would not result in a significant change to the carrying value.
The movements in Level 3 financial assets and financial liabilities measured
at fair value are as follows:
2021 2020
$m
$m
Assets Liabilities Assets Liabilities
Level 3 financial assets/(liabilities) held at fair value through profit or
loss
At beginning of the year 179 (2) 204 (24)
Transfers into Level 3 9 - - -
Purchases 17 - - -
(Charge)/credit to Group income statement (7) 2 10 20
Sales or settlements (2) - (17) 2
Change in consolidated fund entities held (6) - (18) -
At year end 190 - 179 (2)
The revaluation of contingent consideration in the Group income statement is
an adjustment to the fair value of acquisition earn-out payments.
16. Market risks and derivatives
Accounting policy
Derivatives
We use derivative financial instruments in certain circumstances to manage
market risk. These are measured at fair value through profit and loss and
included in derivative financial instruments within fee and other receivables
(Note 12) and trade and other payables (Note 13), including any unrealised
gains and losses on these derivatives. These consist primarily of market risk
hedges on some of our seeding positions (Note 14) and foreign exchange
contracts.
Hedge accounting
We have elected to apply cash flow hedge accounting to fund investments held
for deferred fund product awards (Note 14) granted from 1 January 2020,
whereby the offsetting gains or losses on these fund products are matched
against the corresponding fund product-based payment compensation charge in
the Group income statement pro rata over the vesting period (Note 7).
Unmatched gains or losses are recognised through other comprehensive income
and held within the cash flow hedge reserve in equity until they are recycled
over the vesting period into the Group income statement.
We apply net investment hedge accounting to hedge the net assets of material
subsidiaries that have a functional currency other than USD, whereby gains or
losses on derivative financial instruments are recycled from the Group income
statement through other comprehensive income to the foreign currency
translation reserve in equity to offset any currency translation of the net
assets of these subsidiaries.
As in 2020, all derivatives are held with counterparties with ratings of A or
higher and mature within one year.
How do we manage market risk arising from investments in funds?
Investments in fund products (Note 14) expose us to market risk and therefore
this process is subject to limits consistent with the Board's risk appetite.
In certain circumstances, we use derivative financial instruments,
specifically equity or credit default swaps, to hedge the risk associated with
mark to market movements.
The market risk from seeding investments, including those financed via repo
and TRS arrangements, is modelled using a value at risk methodology using a
95% confidence interval and one-year time horizon. The value at risk is
estimated to be $42 million at 31 December 2021 (2020: $24 million).
During the year, there were $9 million net realised and unrealised losses
arising from market risk hedges (2020: $10 million), and the notional value of
market risk derivative financial assets and liabilities held at 31 December
2021 is $148 million (2020: $33 million) and $112 million (2020: $131 million)
respectively.
For deferred fund product-based compensation, we generally hold an investment
in the associated fund product to hedge the market movement from grant to
vest.
How do we manage foreign exchange rate risk?
We are subject to risk from changes in foreign exchange rates on monetary
assets and liabilities. In certain circumstances, we use derivative financial
instruments, specifically forward foreign exchange contracts, to hedge our
risk associated with foreign exchange movements.
During the year, there were $3 million of net realised and unrealised foreign
exchange gains (2020: $6 million net realised and unrealised losses)
recognised in the Group income statement through income or gains on
investments and other financial instruments, which include the netting effects
of hedging outlined below. This primarily comprises a $2 million unrealised
gain (2020: $7 million unrealised loss) relating to the revaluation of our
$238 million (2020: $255 million) unhedged GBP lease liability (Note 18), in
addition to those unrealised foreign exchange movements in the pension and
associated deferred tax (a non-core item on page 51).
During the year there were $13 million net realised and unrealised gains
arising from foreign exchange hedges (2020: $23 million losses) and the
notional value of foreign exchange derivative financial assets and liabilities
held at 31 December 2021 is $123 million (2020: $417 million) and $364 million
(2020: $400 million) respectively.
In addition, in 2020 we recognised a non-cash gain of $17 million in relation
to the liquidation of non-USD functional currency subsidiaries, whereby the
related movements in the cumulative translation adjustment reserve within
equity are recycled to the Group income statement upon disposal.
The table below reflects the currency profile of our significant foreign
currency (non-USD) monetary assets and liabilities after the impact of
hedging:
2021 2020
$m
$m
Sterling (208) (257)
A 10% strengthening/weakening of the USD against all other currencies, with
all other variables held constant, would have resulted in a foreign exchange
loss/gain of $21 million (2020: $23 million), with a corresponding impact on
equity. This exposure is based on our USD balances held by non-USD functional
currency entities and non-USD balances held by USD functional currency
entities at 31 December.
How do we manage interest rate risk?
We are subject to risk from changes in interest rates on monetary assets and
liabilities. In respect of our monetary assets and liabilities which
earn/incur interest indexed to floating rates, as at 31 December 2021 a 50
basis point increase/decrease in these rates, with all other variables held
constant, would have resulted in a $1 million increase/decrease (2020:
$1 million) in net interest income.
17. Leasehold improvements and equipment
Accounting policy
All leasehold improvements and equipment are recorded at cost less
depreciation and impairment. Cost includes the original purchase price of the
asset and costs directly attributable to bringing the asset to its working
condition for its intended use. Depreciation is calculated using the
straight-line method over the asset's estimated useful life which for
leasehold improvements is over the shorter of the life of the lease and the
improvement (up to 24 years) and for equipment is between three and ten years.
Leasehold improvements relating to right-of-use lease assets classified as
investment property are presented within Note 18.
2021 2020
$m
$m
Leasehold improvements Equipment Total Leasehold improvements Equipment Total
Cost at beginning of the year 58 59 117 41 100 141
Additions 14 12 26 4 8 12
Disposals - (7) (7) - (49) (49)
Transfer from investment property to leasehold improvements - - - 16 - 16
Transfer from leasehold improvements to investment property (2) - (2) (3) - (3)
Cost at year end 70 64 134 58 59 117
Accumulated depreciation and impairment at beginning of the year (44) (43) (87) (29) (83) (112)
Disposals - 7 7 - 48 48
Transfer from investment property to leasehold improvements - - - (14) - (14)
Transfer from leasehold improvements to investment property 2 - 2 3 - 3
Depreciation (3) (10) (13) (4) (8) (12)
Accumulated depreciation and impairment at year end (45) (46) (91) (44) (43) (87)
Net book value at beginning of the year 14 16 30 12 17 29
Net book value at year end 25 18 43 14 16 30
18. Leases
18.1. Man Group as lessee
Accounting policy
Our lease arrangements relate to business premises property leases.
We assess whether a contract is or contains a lease at the inception of the
contract. For arrangements where we are the lessee, a right-of-use (ROU) lease
asset and a related lease liability are recognised on the Group balance sheet
at the date from which we have the right to use the asset, usually the lease
commencement date. For short-term leases (defined as leases with a term of one
year or less) and leases of low-value assets, we recognise the lease payments
on a straight-line basis over the lease term within other costs in the Group
income statement. The lease term is determined as the non-cancellable period
of a lease, together with periods covered by an option to extend the lease if
we consider that exercise of the extension option is reasonably certain. Lease
extension options and break clauses inherent in our leases do not have a
significant impact on our ROU lease assets and lease liabilities.
ROU lease assets relating to the portion of our leased business premises which
we then sub-let under operating leases are classified as investment property,
with other ROU lease assets classified as leasehold property. Transfers from
investment property to leasehold property occur when we commence development
of a previously sub-let portion of our leased business premises with a view to
occupying that space. Similarly, transfers from leasehold property to
investment property occur when we cease to occupy a portion of the leased
business premises with the intention of sub-letting that space.
All of our ROU lease assets, including those classified as investment
property, are measured at cost less depreciation and impairment. Cost includes
the amount of the initial measurement of the associated lease liability, lease
payments made at or before the lease commencement date, lease incentives
received, associated leasehold improvements classified as investment property
and estimated costs to be incurred in restoring the property to the condition
required under the terms of the lease. Depreciation is calculated on a
straight-line basis over the asset's estimated useful life which, for
leasehold improvements classified as investment property, is the shorter of
the lease term and the life of the improvement (up to 24 years) and for all
other assets is the lease term, and is included within other costs (Note 8).
We assess ROU lease assets for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable.
All lease liabilities are measured at the present value of lease payments that
are due over the lease term, discounted using our incremental cost of
borrowing at the lease commencement or modification date (being the rate we
would have to pay to finance a similar asset). The lease liability is adjusted
for lease payments and unwind of lease liability discount as well as the
impact of any subsequent lease modifications. The unwind of lease liability
discount is included within finance expense (Note 9).
Cash payments in relation to leases, which reduce the lease liability
recognised on the Group balance sheet, are presented as unwind of lease
liability discount (within operating activities) and repayments of principal
lease liability (within financing activities) in the Group cash flow
statement. Payments in relation to short-term leases and leases of low-value
assets are included within cash flows from operating activities.
Right-of-use lease assets
2021 2020
$m
$m
Leasehold property Investment property Total Leasehold property Investment property Total
Cost at beginning of the year 168 240 408 137 305 442
Additions 4 5 9 3 - 3
Disposals (15) - (15) (2) - (2)
Transfer from leasehold property to investment property (9) 9 - (12) 12 -
Transfer from investment property to leasehold property - - - 64 (64) -
Transfer from investment property to leasehold improvements - - - - (16) (16)
(Note 17)
Transfer from leasehold improvements to investment property - 2 2 - 3 3
(Note 17)
Early exercise of break clause(1) - - - (22) - (22)
Remeasurement of lease liability (2) - (2) - - -
Cost at year end 146 256 402 168 240 408
Accumulated depreciation and impairment at beginning of the year (94) (162) (256) (58) (164) (222)
Disposals 14 - 14 2 - 2
Transfer from leasehold property to investment property 4 (4) - 5 (5) -
Transfer from investment property to leasehold property - - - (31) 31 -
Transfer from investment property to leasehold improvements - - - - 14 14
(Note 17)
Transfer from leasehold improvements to investment property - (2) (2) - (3) (3)
(Note 17)
Impairment - (3) (3) - (25) (25)
Depreciation (Note 8) (9) (8) (17) (12) (10) (22)
Accumulated depreciation and impairment at year end (85) (179) (264) (94) (162) (256)
Net book value at beginning of the year 74 78 152 79 141 220
Net book value at year end 61 77 138 74 78 152
Note:
1 Due to the lease surrender and exit of our principal sub-tenant from
our main London leased premises in 2020, we exercised a break clause on our
secondary London premises in order to bring all our London staff together in
one location from 2021. This lease modification had the impact of reducing the
right-of-use lease asset in 2020 in line with the associated reduction in
lease liability, as included in the lease liability movements below.
Lease liability
The maturity of our contractual undiscounted cash flows for the lease
liability is as follows:
2021 2020
$m
$m
Within one year 25 32
Between one and five years 103 105
Between five and ten years 138 122
Between ten and 15 years 105 111
After 15 years 5 -
Undiscounted lease liability at year end 376 370
Discounted lease liability at year end 250 272
At 31 December 2021 $236 million (2020: $253 million) of our total discounted
lease liability relates to our main premises in London (expiring in 2035) and
is denominated in GBP. The revaluation of this GBP lease liability (which is
unhedged as outlined in Note 16) into USD, the lessee's functional and Man
Group's presentation currency, may result in large unrealised gains or losses
in the Group income statement and therefore these non-cash movements
have been classified as a non-core item (see page 51).
Movements in our lease liability are as follows:
2021 2020
$m
$m
At beginning of the year 272 307
Additions 4 2
Disposals (1) -
Cash payments (33) (34)
Unwind of lease liability discount (Note 9) 12 12
Early exercise of break clause - (22)
Remeasurement (2) -
Unrealised foreign exchange (gain)/loss (2) 7
At year end 250 272
18.2. Man Group as lessor (investment property)
Accounting policy
Man Group acts as lessor in respect of certain ROU lease assets which are in
turn sub-let (investment property ROU lease assets), which are classified as
operating leases under IFRS 16 'Leases'. Sub-lease rental income is recognised
on a straight-line basis over the lease term in the Group income statement.
An impairment expense is recognised for the amount by which the related ROU
lease asset's carrying value exceeds its recoverable amount, being its value
in use. For the purposes of assessing impairment, investment property ROU
lease assets are grouped at the lowest levels for which there are separately
identifiable cash flows, being the individual sub-lease contract level.
Sub-lease rental income for 2021 was $6 million (2020: $7 million). In June
2020 the principal sub-tenant of our main London office paid us cash of $26
million in order to terminate their lease early, which was offset by an
associated non-cash deferred rent write-off of $8 million and resulted in a
net accounting gain on lease surrender of $18 million. The surrender gain
represented payment for sub-lease rental risk and other costs taken on as a
result of this agreement. The portion of this gain relating to future lost
sub-lease rental income was deferred from 2020 to 2021 through non-core items
(see page 51).
Operating expenses of $6 million (2020: $3 million) arising from investment
property that did not generate rental income during the period are included
within other costs (Note 8).
At 31 December 2021, the contractual undiscounted operating lease payments
receivable from the sub-leases of our investment property ROU lease assets are
as follows:
2021 2020
$m
$m
Total Total
Within one year 6 7
Between one and two years 6 6
Between two and three years 6 6
Between three and four years 5 6
Between four and five years - 5
23 30
Fair value of investment property and impairment
Investment property ROU lease assets with a carrying value of $77 million at
31 December 2021 (2020: $78 million) have a fair value of $94 million (2020:
$86 million), which is equivalent to their value in use. The increase in fair
value is largely due to the vacancy-related costs incurred in 2021 no longer
being included in the forecast period.
At 31 December 2020, we assessed our investment property ROU lease asset for
impairment as a result of the sub-let vacancy created by the lease surrender
of our principal sub-tenant coinciding with the London commercial property
market uncertainty due to COVID-19. The value in use calculations used cash
flow projections out to the end of the head lease, based on current sub-lease
agreements and estimates for future rentals. The assumptions applied in the
value in use calculations were derived from past experience and assessment
of current market inputs, with the market property yield discount rate then
applied to the modelled cash flows. The assessment resulted in an impairment
of our investment property ROU lease assets of $25 million at 31 December
2020.
Due to our exit from occupying the remaining portion of the space available
for sub-lease during 2021, the associated ROU lease asset and leasehold
improvements were reclassified as investment property. This also resulted in
the recognition of a further $3 million impairment of our ROU lease asset
during the year. There are no other indicators of impairment which would
change our previous recoverability assessment.
19. Goodwill and acquired intangibles
Accounting policy
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. An
impairment expense is recognised for the amount by which the asset's carrying
value exceeds its recoverable amount. The recoverable amounts of our
cash-generating units (CGUs) or groups of CGUs are assessed each year using a
value in use calculation.
Goodwill does not generate cash flows independently of other groups of assets
and thus is assigned to a CGU or group of CGUs for the purposes of impairment
testing. The groups of CGUs are based upon how management monitors the
business and represent the lowest level to which goodwill can be allocated on
a reasonable basis. For impairment review purposes, from 31 December 2021 we
have identified one group of CGUs, comprising the aggregate of the AHL, GLG,
Numeric and FRM CGUs. The combination of these CGUs for the purpose of
goodwill impairment testing reflects the completed integration of legacy
acquisitions and the cohesion of our liquid investment offerings, which aligns
with how management now consider the value and goodwill in the business. Our
private markets CGU (GPM) no longer has any goodwill allocated to it as a
result of the full impairment of this balance in 2020.
The value in use calculation at 31 December 2021 uses cash flow projections
based on the Board-approved financial plan for the year to 31 December 2022
and a further two years of projections (2023 and 2024), 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.
The assumptions applied in the value in use calculation are derived from past
experience and assessment of current market inputs. We have applied a
bifurcated discount rate to the modelled cash flows to reflect the different
risk profile of management fee profits and performance fee profits. The
discount rates are based on our weighted average cost of capital using a
risk-free interest rate, together with an equity market risk premium and an
appropriate market beta derived from consideration of our own beta, similar
alternative asset managers, and the asset management sector as a whole. The
terminal value is calculated based on the projected closing AUM at 31 December
2024 and applying the mid-point of a range of historical multiples to the
forecast cash flows associated with management and performance fee profits.
The value in use calculation is presented on a post-tax basis, consistent with
the prior year, given most comparable market data is available on a post-tax
basis. This is not significantly different to its pre-tax equivalent.
Acquired intangibles
Following initial recognition, acquired intangibles are held at cost less
accumulated amortisation and impairment. Acquired intangibles comprise
investment management agreements and related client relationships (IMAs),
distribution channels and brand names acquired in a business combination, and
are initially recognised at fair value based on 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 eight and 12 years (distribution channels). Acquired intangibles
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Disposals of
acquired intangibles are recognised in the year the related cash inflows
cease.
2021 2020
$m
$m
Goodwill IMAs Distribution channels Brand names Total Goodwill IMAs Distribution channels Brand Total
names
Cost at beginning of the year 2,429 857 58 41 3,385 2,422 857 58 41 3,378
Disposals - (19) (2) (1) (22) - - - - -
Currency translation (4) - - - (4) 7 - - - 7
Cost at year end 2,425 838 56 40 3,359 2,429 857 58 41 3,385
Accumulated amortisation and impairment at beginning of the year (1,837) (721) (47) (38) (2,643) (1,781) (664) (43) (36) (2,524)
Amortisation - (56) (4) (1) (61) - (57) (4) (2) (63)
Impairment - - - - - (55) - - - (55)
Disposals - 19 2 1 22 - - - - -
Currency translation 1 - - - 1 (1) - - - (1)
Accumulated amortisation and impairment at year end (1,836) (758) (49) (38) (2,681) (1,837) (721) (47) (38) (2,643)
Net book value at beginning 592 136 11 3 742 641 193 15 5 854
of the year
Net book value at year end 589 80 7 2 678 592 136 11 3 742
Goodwill impairment: what assumptions have we used?
The recoverable amount of each CGU or group of CGUs (the value in use) to
which goodwill has been allocated has been assessed at each year end. The key
assumptions applied to the value in use calculations are provided below.
There were no indicators of impairment of our liquid manager CGUs at 31
December 2021. The combination of these CGUs from 31 December 2021 for the
purpose of impairment testing, as outlined on page 43, does not impact the
level of impairment recognised in the year.
Key assumptions at 31 December 2021: Liquid managers
Compound average annualised growth in AUM (over three years) 6%
Discount rate
- Management fees1 11%
- Performance fees2 17%
Terminal value (mid-point of range of historical multiples)3
- Management fees 13.0x
- Performance fees 5.5x
Notes:
1 The pre-tax equivalent of the net management fees discount rate is
14%.
2 The pre-tax equivalent of the net performance fees discount rate is
21%.
3 The implied terminal growth rate is 4%. The terminal value is added to
cash flow projections based on the Board-approved financial plan for the year
to 31 December 2022 and a further two years of projections (2023 and 2024),
and discounted.
Key assumptions at 31 December 2020: AHL GLG Numeric FRM GPM
Compound average annualised growth in AUM (over three years) 10% 4% 2% (3%) 13%
Discount rate
- Management fees1 11% 11% 11% 11% 15%
- Performance fees2 17% 17% 17% 17% 21%
Terminal value (mid-point of range of historical multiples)3
- Management fees 13.0x 13.0x 13.0x 5.9x 16.8x
- Performance fees 5.5x 5.5x 5.5x 3.9x 5.5x
Notes:
1 The pre-tax equivalent of the net management fees discount rate is
14%, 13%, 14%, 14% and 18% for each of the AHL, GLG, Numeric, FRM and GPM
CGUs, respectively.
2 The pre-tax equivalent of the net performance fees discount rate is
21%, 21%, 22%, 22% and 26% for each of the AHL, GLG, Numeric, FRM and GPM
CGUs, respectively.
3 The implied terminal growth rates are 4%, 3%, 4%, -10% and 9% for each
of the AHL, GLG, Numeric, FRM and GPM CGUs, respectively. The terminal value
is added to cash flow projections based on the Board-approved financial plan
for the year to 31 December 2021 and a further two years of projections (2022
and 2023), and discounted.
Goodwill impairment and sensitivity analyses
Details of the valuations are provided below, including sensitivity tables
which show scenarios whereby the key assumptions are changed to stressed
assumptions, indicating the modelled headroom or impairment that would result.
We have considered reasonably foreseeable changes in the compound average
annualised growth in AUM forecast assumption, stressing this by 2% and 10% or
to the point at which impairment would arise. Each assumption, or set of
assumptions, is stressed in isolation. The results of these sensitivities make
no allowance for actions that management would take if such market conditions
persisted.
Annual assessment
The value in use calculation of our liquid managers at 31 December 2021
indicates a value of $4.1 billion, with around $3.4 billion of headroom over
the carrying value of the business. Therefore, no impairment charge is deemed
necessary at 31 December 2021.
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis: Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 6% 4% (4)%(1) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom/(impairment) ($m) 3,380 2,940 1,340 3,480(2) 3,280(2) 3,690(3) 3,070(3)
Notes:
1 Stressed by 10%, as opposed to the point of impairment, given an
impairment scenario is not reasonably foreseeable.
2 An increase/decrease in the value in use calculation of $100 million.
3 An increase/decrease in the value in use calculation of $310 million.
Prior year assessment
An impairment expense of $55 million was recognised for the year to 31
December 2020, reflecting the 30 June 2020 impairment of the GPM CGU goodwill
balance in full.
AHL CGU
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis: Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 10% 8% 0%(1) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom/(impairment) ($m) 2,080 1,840 890 2,141(2) 2,019(2) 2,280(3) 1,880(3)
Notes:
1 Stressed by 10%, as opposed to the point of impairment, given an
impairment scenario is not reasonably foreseeable.
2 An increase/decrease in the value in use calculation of $61 million.
3 An increase/decrease in the value in use calculation of $200 million.
GLG CGU
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis: Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 4% 2%(1) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom/(impairment) ($m) 21 - 23(2) 19(2) 30(3) 12(3)
Notes:
1 Stressed in a downside scenario to determine the point at which
headroom would be reduced to nil, after which impairment would arise.
2 An increase/decrease in the value in use calculation of $2 million.
3 An increase/decrease in the value in use calculation of $9 million.
Numeric CGU
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis: Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 2% 0% (8%)(1) 10%/16% 12%/18% 14.0x/6.5x 12.0x/4.5x
Modelled headroom/(impairment) ($m) 332 306 204 346(2) 318(2) 369(3) 295(3)
Notes:
1 Stressed by 10%, as opposed to the point of impairment, given an
impairment scenario is not reasonably foreseeable.
2 An increase/decrease in the value in use calculation of $14 million.
3 An increase/decrease in the value in use calculation of $37 million.
FRM CGU
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis: Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: (3%) (5%) (13%)(1) 10%/16% 12%/18% 6.9x/4.9x 4.9x/2.9x
Modelled headroom/(impairment) ($m) 14 10 - 15(2) 13(2) 17(3) 11(3)
Notes:
1 Stressed to determine the point at which headroom would be reduced to
nil, after which impairment would arise.
2 An increase/decrease in the value in use calculation of $1 million.
3 An increase/decrease in the value in use calculation of $3 million.
GPM CGU
Our value in use assessment at 30 June 2020 indicated an impairment of $55
million which impaired the goodwill balance in full, driven by slower growth
than planned and future fundraising delays due to COVID-19 which led to a
reassessment of the forecast growth of the GPM business. The GPM value in use
calculation run at 31 December 2020 indicated a value of around $14 million,
with $2 million of headroom over the remaining carrying value.
Discount rates (post-tax) Multiples (post-tax)
Sensitivity analysis: Compound average Management fee/ Management fee/
annualised growth in AUM
performance fee
performance fee
Key assumption stressed to: 13% 11% 3%(1) 14%/20% 16%/22% 17.8x/6.5x 15.8x/4.5x
Modelled headroom/(impairment) ($m) 2 (5) (12) 3(2) 1(2) 3(3) 1(3)
Notes:
1 Stressed by 10% to indicate a possible downside scenario.
2 An increase/decrease in the value in use calculation of $1 million.
3 An increase/decrease in the value in use calculation of $1 million.
20. Other intangibles
Accounting policy
Other intangibles relate to capitalised computer software. Following initial
recognition, other intangibles are held at cost, which includes costs that are
directly associated with the procurement or development of identifiable and
unique software products which will generate economic benefits exceeding costs
beyond one year, less accumulated amortisation and impairment. Capitalised
computer software is amortised on a straight-line basis over its estimated
useful life (three years), with amortisation expense included within other
costs in the Group income statement. Capitalised computer software is reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Additions relate to the continued
investment in our operating platforms.
2021 2020
$m
$m
Cost at beginning of the year 112 98
Additions 22 22
Disposals (4) (8)
Cost at year end 130 112
Accumulated amortisation at beginning of the year (73) (67)
Amortisation (16) (14)
Disposals 4 8
Accumulated amortisation at year end (85) (73)
Net book value at beginning of the year 39 31
Net book value at year end 45 39
21. Deferred tax
Accounting policy
Deferred tax is recognised using the balance sheet liability method in respect
of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for tax
purposes.
Details of estimation and future tax rate uncertainty are included in Note 10.
2021 2020
$m
$m
Deferred tax asset
At beginning of the year 119 120
Charge to the Group income statement (Note 10) - (2)
Credit to other comprehensive income and equity 7 1
Transfer to deferred tax liabilities 4 -
Other balance sheet movements (2) -
At year end 128 119
Deferred tax liability
At beginning of the year (25) (28)
(Charge)/credit to the Group income statement (Note 10) (4) 3
Charge to other comprehensive income and equity (4) -
Transfer from deferred tax assets (4) -
At year end (37) (25)
The deferred tax asset Group income statement charge of nil (2020: $2 million)
is net of a $2 million credit relating to the incremental recognition (2020:
$14 million expense relating to derecognition) of US deferred tax assets held
on the Group balance sheet, which is explained further on page 47. The net
credit to other comprehensive income and equity of $3 million (2020: $1
million) relates to the defined benefit pension plan and employee share-based
payment schemes (Note 25).
The deferred tax liability of $37 million (2020: $25 million) largely relates
to temporary differences in respect of partnership interests, unrealised gains
on investments and acquired intangible assets.
The deferred tax asset comprises:
2021 2020
$m
$m
Deferred compensation 52 24
Accumulated operating losses 29 41
Tax allowances over depreciation 22 12
Future amortisation of goodwill and acquired intangible assets 14 26
Other 11 16
Deferred tax asset 128 119
Deferred tax assets arise on deferred compensation in relation to current year
compensation charges which are not deductible for tax purposes until future
periods. Tax allowances over depreciation relate to deferred tax on
depreciation charged on qualifying tangible assets and ROU lease assets.
The gross amount of UK non-trading losses for which a deferred tax asset has
not been recognised is $25 million (2020: $25 million). These losses are not
subject to an expiration period. The gross amount of other future taxable
income deductions for which a deferred tax asset has not been recognised is
$62 million (2020: $95 million), which expire in 2024.
As set out below, we have recognised accumulated deferred tax assets in the US
of $74 million (2020: $81 million) that will be available to offset future
taxable profits. As the result of an increase in forecast future taxable
profits in the US, we recognised an additional $2 million of the available
deferred tax assets in relation to state and city tax losses in 2021 (2020:
derecognised $14 million). At 31 December 2021, the unrecognised available US
deferred tax assets relate to state and city tax losses for which we do not
expect to realise sufficient future taxable profits to utilise before they
expire. We do not currently expect to pay federal tax on any profits we may
earn in the US until 2024 and accordingly any movements in the US deferred tax
asset in the Group income statement are classified as a non-core item (see
page 55).
US net deferred tax assets 2021 2020
$m
$m
Recognised
At beginning of the year 81 89
Credit/(charge) to Group income statement:
Recognition/(derecognition) of available tax assets 2 (14)
Other movements: (consumption)/generation (12) 6
Credit to equity 5 -
Other balance sheet movements (2) -
At year end 74 81
Unrecognised
At beginning of the year 14 -
(Credit)/charge to Group income statement (as above):
(Recognition)/derecognition of available tax assets (2) 14
Other movements (1) -
At year end 11 14
The gross amount of US non-trading losses for which a deferred tax asset has
not been recognised is $158 million (2020: $197 million).
22. Provisions
Accounting policy
Provisions are recognised when Man Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that we will be
required to settle the obligation, and a reliable estimate can be made of the
amount of the obligation. All provisions are current given we do not have the
unconditional right to defer settlement.
2021 2020
$m
$m
At beginning of the year 9 8
Charged to the income statement 6 1
Utilised during the year (1) -
Unused amounts reversed - (1)
Additional provisions - 1
At year end 14 9
Provisions relate to ongoing claims as well as leasehold property
dilapidations.
23. Investment in associate
Accounting policy
Associates are entities in which Man Group holds an interest and over which we
have significant influence but not control and are accounted for using the
equity method. In assessing significant influence, we consider the investment
held and its power to participate in the financial and operating policy
decisions of the investee through its voting or other rights.
Under the equity method, associates are carried at cost plus our share of
cumulative post-acquisition movements in undistributed profits/losses. Gains
and losses on transactions between Man Group and our associates are eliminated
to the extent of our interests in these entities. An impairment assessment of
the carrying value of associates is performed annually or whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable, with any impairment recognised in the Group income statement.
On 30 June 2021, we acquired a 23% interest in Hub Platform Technology
Partners Ltd (HUB), a company incorporated and operating in England and Wales.
HUB will provide a cloud-based operating platform aimed at transforming the
operations technology available to asset managers. In the early years of
operation HUB will be in the development phase and therefore is expected to be
loss-making. Therefore the equity accounted losses are not considered an
indicator of impairment. Our $20 million investment in HUB was comprised of
$19 million of cash and $1 million of non-cash consideration. We have not
provided any financial support to HUB during the year.
2021
$m
At beginning of the year -
Acquisitions 20
Share of post-tax loss (2)
At year end 18
24. Employee Trust
Accounting policy
The Employee Trust, which is consolidated into Man Group as outlined in Note
1, has the obligation to deliver deferred share-based and fund product-based
compensation which has been granted to employees (see Note 7 and Note 25), and
accordingly holds shares and fund investments to deliver against these future
obligations. Shares held by the Employee Trust are accounted for as outlined
in Note 26.
In 2021, we funded $33 million via contribution or loan (2020: $42 million) to
enable the Employee Trust to meet its current period obligations. At
31 December 2021, the net assets of the Employee Trust amounted to $103
million (2020: $105 million). These assets include 30,611,905 (2020:
31,529,719) ordinary shares in the Company (Note 26), and $41 million of fund
product investments (2020: $43 million) which are included within investments
in fund products (Note 14).
During the year, the trustees of the Employee Trust waived all of the interim
dividend for the year ended 31 December 2021 on each of the 30,699,189
ordinary shares registered in its name at the relevant eligible date (2020
interim dividend: waived on all 31,567,105 shares) and all of the final
dividend for the year ended 31 December 2020 on each of the 31,626,264
ordinary shares (2019 final dividend: waived on all 31,553,308 shares).
25. Share-based payment schemes
Accounting policy
Man Group operates equity-settled share-based payment schemes which are
remuneration payments to selected employees that take the form of an award of
shares in the Company. These typically vest over three years, although
conditions vary between different types of award. The fair value of the
employee services received in exchange for the share awards/options granted is
recognised as an expense (Note 7), with the corresponding credit recognised in
equity, and is determined by reference to the fair value of the share
awards/options at grant date.
We calculate the fair value of share options using the Black-Scholes valuation
model, which takes into account the effect of both financial and demographic
assumptions. Forfeiture and early vesting assumptions are based on historical
observable data. Changes to the original estimates, if any, are included in
the Group income statement, with a corresponding adjustment to equity.
26. Share capital, Treasury share reserve and earnings per share (EPS)
Accounting policy
Share capital and Treasury share reserve
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as
a deduction from the proceeds, net of tax.
Share repurchases are accounted for at the point we are committed, recognising
a liability for the full amount of the commitment including directly
attributable costs, with a corresponding debit to equity. Where repurchased
shares are held in Treasury, a transfer from the profit and loss reserve to
the Treasury share reserve is recognised for the full amount of the
consideration paid. Where shares are repurchased and subsequently cancelled,
the equivalent par value by which the Company's share capital is reduced is
transferred to the capital redemption reserve.
Treasury shares and own shares held by the Employee Trust (Note 24) are
recorded at cost, including any directly attributable incremental costs (net
of tax), and are deducted from equity (within the respective reserves) until
the shares are sold, cancelled or transferred to employees. Where such shares
are subsequently sold, any consideration received, net of any directly
attributable incremental transaction costs and the related tax effects, is
included in equity.
EPS
The calculation of basic EPS is based on statutory profit and the weighted
average number of ordinary shares in issue during the period, excluding
Treasury shares and the shares owned by the Employee Trust (Note 24).
For diluted EPS, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all potentially dilutive ordinary shares in
relation to our share-based payment schemes (Note 25).
Ordinary shares have a par value of 3 3/7¢ per share (2020: 3 3/7¢ per
share) and represent 100% of issued share capital. All issued shares are fully
paid. The shares have attached to them full voting, dividend and capital
distribution (including on wind up) rights. They do not confer any rights of
redemption. Ordinary shareholders have the right to receive notice of, attend,
vote and speak at general meetings. A holder of ordinary shares is entitled to
one vote per ordinary share held when a vote is taken on a poll and one vote
only when a vote is taken on a show of hands. Treasury shares are ordinary
shares previously repurchased by the Company but not cancelled (and therefore
deducted from equity and included within the Treasury share reserve) and, as
they are no longer outstanding, they are excluded for earnings per share and
voting rights purposes.
During the year ended 31 December 2021, the Company cancelled 68,686,957
ordinary shares of 3 3/7¢ per share which were held in Treasury. Shares
cancelled during the year represent 5% of issued share capital (excluding
Treasury shares) as at 31 December 2021.
During the year ended 31 December 2021, $180 million (2020: $107 million) of
ordinary shares were repurchased at an average price of 199.9 pence (2020:
122.8 pence), buying back 66 million shares (2020: 69 million shares), which
had an accretive impact on earnings per share of 1.7% (2020: 2.6%). This
relates to the completion of the remaining $64 million of the share repurchase
programme announced in September 2020, the completion of the $100 million
share repurchase announced in July 2021 and $16 million of the initial
committed $125 million tranche of the $250 million share repurchase announced
in December 2021.The share buyback is to be conducted in more than one
tranche, providing flexibility over capital usage .The purpose of the share
repurchases was to deliver returns to shareholders and all repurchased shares
were held in Treasury. Shares repurchased during the year represent 4.7% of
issued share capital (excluding Treasury shares) as at 31 December 2021. At 25
February 2022, we had an unexpired authority to repurchase up to 64,868,693 of
our ordinary shares. A special resolution will be proposed at the forthcoming
Annual General Meeting (AGM), pursuant to which the Company will seek
authority to repurchase up to 136,949,799 ordinary shares, representing 10% of
the issued share capital (excluding Treasury shares) at 25 February 2022.
Details of movements in the number of ordinary shares and the shares used to
calculate basic and diluted EPS are provided below.
2021 2020
Total Weighted Nominal Total Weighted Nominal
number
average
value
number
average
value
$m
$m
Number of shares at beginning of year 1,541,794,770 1,541,794,770 53 1,541,794,770 1,541,794,770 53
Cancellation of own shares held in Treasury (68,686,957) (9,611,929) (2) - - -
Number of shares at period end 1,473,107,813 1,532,182,841 51 1,541,794,770 1,541,794,770 53
Shares held in Treasury reserve (79,040,317) (98,674,820) (86,156,381) (56,589,026)
Shares owned by Employee Trust (Note 24) (30,611,905) (31,044,822) (31,529,719) (30,913,017)
Basic number of shares 1,363,455,591 1,402,463,199 1,424,108,670 1,454,292,727
Dilutive impact of employee share awards 35,415,800 23,875,394
Dilutive impact of employee share options 2,165,726 174,183
Dilutive number of shares 1,440,044,725 1,478,342,304
2021 2020
Statutory profit ($m) 487 138
Basic EPS 34.7¢ 9.5¢
Diluted EPS 33.8¢ 9.3¢
27. Dividends
Accounting policy
Dividend distributions to the Company's shareholders are recognised directly
within equity in the period in which the dividend is paid or, if required,
approved by the Company's shareholders. Details of our dividend policy are
included in the Chief Financial Officer's review on page 19.
2021 2020
$m
$m
Ordinary shares
Final dividend paid for the year to 31 December 2020: 5.7¢ (2019: 5.1¢) 81 75
Interim dividend paid for the six months to 30 June 2021: 5.6¢ (2020: 4.9¢) 79 72
Dividends paid 160 147
Proposed final dividend for the year to 31 December 2021: 8.4¢ (2020: 5.7¢) 115 81
28. Related party transactions
Accounting policy
Related parties comprise key management personnel, associates and fund
entities which we are deemed to control (see Note 14). All transactions with
related parties were carried out on an arm's length basis.
Management fees earned from fund entities which we are deemed to control are
detailed in Note 14.2. Details of transactions with associates are included in
Note 23.
The Executive Committee, together with the non-executive directors, are
considered to be our key management, being those directors, partners and
employees having authority and responsibility for planning, directing and
controlling our activities.
Key management compensation 2021 2020
$m
$m
Salaries and other short-term employee benefits1 64 32
Share-based payment charge 25 10
Fund product-based payment charge 15 13
Pension costs (defined contribution) 1 1
Total 105 56
Note:
1 Includes salary, benefits and cash bonus.
We paid £35,000 to the Standards Board for Alternative Investments Limited
during the year, which is considered a related party.
29. Other matters
In July 2019, the Public Institution for Social Security in Kuwait (PIFSS)
served a claim against a number of parties, including certain Man Group
companies, a former employee of Man Group and a former third-party
intermediary. The subject matter of these allegations dates back over a period
of 20 years. PIFSS is seeking compensation of $156 million (plus compound
interest) and certain other remedies which are unquantified in the claim. We
dispute the allegations and consider there is no merit to the claim (in
respect of liability and quantum), and will therefore vigorously and robustly
defend the proceedings.
We are subject to various other claims, assessments, regulatory enquiries and
investigations in the normal course of business. The directors do not expect
such matters to have a material adverse effect on our financial position.
Alternative performance measures
We assess our performance using a variety of alternative performance measures
(APMs). We discuss our results on a statutory as well as a 'core' basis. The
rationale for using core measures is explained below. The APMs we use may not
be directly comparable with similarly titled measures used by other companies.
The directors consider that, in order to assess operating performance period
on period, our statutory results are most meaningful when considered together
with an alternative 'core' basis which excludes profits or losses generated
outside of our investment management business, acquisition and
disposal-related items (including non-cash items such as amortisation of
acquired intangible assets), impairment of assets, costs relating to
substantial restructuring plans, unrealised foreign exchange movements on
lease liabilities, pension and associated deferred tax and certain significant
event-driven gains or losses, or allocates them to the appropriate time
period, which therefore reflects the revenues and costs that drive our cash
flows and inform the basis on which our variable compensation is assessed. All
income and expenses relating to our consolidated fund entities are also
reclassified to core gains on investments in order to better reflect these as
part of our seed book programme. Tax on non-core items and movements in
deferred tax relating to the consumption or recognition of tax assets in the
US are similarly excluded from core profit in order to best reflect cash taxes
paid. The directors expect to apply their approach to the classification of
non-core items consistently from period to period, maintaining an appropriate
symmetry between losses and gains and the reversal of any amounts previously
classified as non-core.
In addition to core profit and related core measures, we previously reported
adjusted profit and related adjusted measures. Adjusted profit was defined as
core profit plus revenue relating to legacy guaranteed products. Due to the
roll-off of revenues from these products in 2019, core and adjusted profit and
their related measures became equivalent in 2020, and therefore we now report
our APMs on a core basis only.
Core profit and non-core items
Core profit is the key measure of Man Group's performance as driven by our
core operations and cash flows. Core profit flows directly into core EPS (see
page 55).
The reconciliation of statutory profit before tax to core profit is shown
below.
Note to the Group financial statements 2021 2020
$m
$m
Statutory profit before tax 590 179
Non-core items:
Acquisition and disposal related:
Unwind of contingent consideration discount 9 - 2
Revaluation of contingent consideration 15 (2) (22)
Amortisation of acquired intangible assets 19 61 63
Impairment of GPM goodwill 19 - 55
Share of post-tax loss of associate 23 2 -
Impairment of right-of-use lease assets - investment property 18 3 25
Lease surrender income relating to future periods 18 7 (7)
Unrealised foreign exchange (gain)/loss on lease liabilities, pension and (3) 6
associated deferred tax
Recycling of FX revaluation on liquidation of subsidiaries 16 - (17)
Non-core items 68 105
Reclassification of amounts relating to consolidated fund entities to within
core gains on investments:
Net gains on investments 14.2 (32) (53)
Management fee expenses 14.2 3 2
Performance fee expenses 14.2 2 2
Other costs 14.2 4 5
Third-party share of gains relating to interest in consolidated funds 14.2 3 17
Reclassification to core gains on investments (gains attributable to net 14.2 20 27
investment held by Man Group)
- -
Core profit before tax 658 284
Core tax expense (see page 55) (101) (44)
Core profit 557 240
Non-core items are included within various lines in the Group income
statement. Further details on non-core items are included within the related
notes to the Group financial statements as outlined above, and the underlying
core results measures within this are explained further on the following
pages.
Core measures: reconciliation to statutory equivalents
The statutory line items within the Group income statement can be reconciled
to their core equivalents as follows:
2021 Per Group income statement Reclassification of amounts relating to consolidated fund entities Non-core items Core
$m
equivalent
Management and other fees ( APM ) 914 3 - 917
Distribution costs (40) - - (40)
Net management fee revenue( APM ) 874 3 - 877
Performance fees( APM ) 567 2 - 569
Income or gains on investments and other financial instruments( APM ) 42 (12) (3) 27
Third-party share of gains relating to interests in consolidated funds (3) 3 - -
Sub-lease rental and lease surrender income( APM ) 6 - 7 13
Net revenue( APM ) 1,486 (4) 4 1,486
Asset servicing costs (58) - - (58)
Compensation (596) - - (596)
Other costs( APM ) (165) 4 - (161)
Net finance expense( APM ) (13) - - (13)
Revaluation of contingent consideration 2 - (2) -
Impairment of right-of-use lease asset - investment property (3) - 3 -
Amortisation of acquired intangible assets (61) - 61 -
Share of post-tax loss of associate (2) - 2 -
Profit before tax( APM ) 590 - 68 658
Tax expense( APM ) (103) - 2 (101)
Profit( APM ) 487 - 70 557
2020 Per Group income statement Reclassification of amounts relating to consolidated fund entities Non-core items Core
$m
equivalent
Management and other fees( APM ) 762 2 - 764
Distribution costs (34) - - (34)
Net management fee revenue( APM ) 728 2 - 730
Performance fees( APM ) 177 2 - 179
Income or gains on investments and other financial instruments( APM ) 40 (26) 6 20
Third-party share of gains relating to interests in consolidated funds (17) 17 - -
Sub-lease rental and lease surrender income( APM ) 25 - (7) 18
Net revenue( APM ) 953 (5) (1) 947
Asset servicing costs (55) - - (55)
Compensation (451) - - (451)
Other costs( APM ) (150) 5 - (145)
Net finance expense( APM ) (14) - 2 (12)
Impairment of GPM goodwill (55) - 55 -
Revaluation of contingent consideration 22 - (22) -
Impairment of right-of-use lease asset - investment property (25) - 25 -
Amortisation of acquired intangible assets (63) - 63 -
Recycling of FX revaluation on liquidation of subsidiaries 17 - (17) -
Profit before tax( APM ) 179 - 105 284
Tax expense( APM ) (41) - (3) (44)
Profit( APM ) 138 - 102 240
Note:
APM The core equivalents of these statutory measures are defined as
Alternative Performance Measures.
Core costs comprise asset servicing, compensation costs and core other costs.
The statutory line items within the Group balance sheet can be reconciled to
their core equivalents as follows:
2021 Per Group Reclassification of amounts relating to consolidated fund entities (Note 14.2) Core
$m
balance sheet
equivalent
Assets
Cash and cash equivalents( APM ) 387 (64) 323
Fee and other receivables( APM ) 485 (5) 480
Investments in fund products and other investments( APM ) 974 (204) 770
Leasehold improvements and equipment 43 - 43
Leasehold property - right-of-use lease assets 61 - 61
Investment property - right-of-use lease assets 77 - 77
Goodwill and acquired intangibles 678 - 678
Other intangibles 45 - 45
Deferred tax assets 128 - 128
Investment in associate 18 - 18
Pension asset 27 - 27
Total assets 2,923 (273) 2,650
Liabilities
Trade and other payables( APM ) 702 (19) 683
Provisions 14 - 14
Current tax liabilities 15 - 15
Third-party interest in consolidated funds 254 (254) -
Lease liability 250 - 250
Deferred tax liabilities 37 - 37
Total liabilities 1,272 (273) 999
Net assets 1,651 - 1,651
2020 Per Group Reclassification of amounts relating to consolidated fund entities (Note 14.2) Core
$m
balance sheet
equivalent
Assets
Cash and cash equivalents( APM ) 351 (62) 289
Fee and other receivables( APM ) 386 (4) 382
Investments in fund products and other investments( APM ) 787 (180) 607
Leasehold improvements and equipment 30 - 30
Leasehold property - right-of-use lease assets 74 - 74
Investment property - right-of-use lease assets 78 - 78
Goodwill and acquired intangibles 742 - 742
Other intangibles 39 - 39
Deferred tax assets 119 - 119
Investment in associate - - -
Pension asset 2 - 2
Total assets 2,608 (246) 2,362
Liabilities
Trade and other payables( APM ) 574 (27) 547
Provisions 9 - 9
Current tax liabilities 12 - 12
Third-party interest in consolidated funds 219 (219) -
Lease liability 272 - 272
Deferred tax liabilities 25 - 25
Total liabilities 1,111 (246) 865
Net assets 1,497 - 1,497
Note:
APM The core equivalents of these statutory measures are defined as
Alternative Performance Measures.
Core management fee and core performance fee profit
Core profit comprises both core management fee profit, a steadier earnings
stream, and core performance fee profit, the more variable earnings stream.
This split therefore facilitates analysis of our profitability drivers.
2021 Per Group Reclassification of amounts relating Non-core items Core
$m
income statement
to consolidated fund entities
equivalent
Net management fee revenue 874 3 - 877
Sub-lease rental and lease surrender income 6 - 7 13
Asset servicing costs (58) - - (58)
Compensation (management fee) (393) - - (393)
Other costs (165) 4 - (161)
Net finance expense (management fee) (12) - - (12)
Management fee profit before tax 252 7 7 266
Tax expense (39)
Management fee profit 227
Performance fees 567 2 - 569
Income or gains on investments and other financial instruments 42 (12) (3) 27
Compensation (performance fee) (203) - - (203)
Net finance expense (performance fee) (1) - - (1)
Performance fee profit before tax 405 (10) (3) 392
Tax expense (62)
Performance fee profit 330
2020 Per Group Reclassification of amounts relating Non-core items Core
$m
income statement
to consolidated fund entities
equivalent
Net management fee revenue 728 2 - 730
Sub-lease rental and lease surrender income 25 - (7) 18
Asset servicing costs (55) - - (55)
Compensation (management fee) (357) - - (357)
Other costs (150) 5 - (145)
Net finance expense (management fee) (13) - 2 (11)
Management fee profit before tax 178 7 (5) 180
Tax expense (27)
Management fee profit 153
Performance fees 177 2 - 179
Income or gains on investments and other financial instruments 40 (26) 6 20
Compensation (performance fee) (94) - - (94)
Net finance expense (performance fee) (1) - - (1)
Performance fee profit before tax 122 (24) 6 104
Tax expense (17)
Performance fee profit 87
Core gains on investments
We use the measure core gains on investments to better represent the net
return we receive on our seed book portfolio. This is defined as income or
gains on investments and other financial instruments less unrealised foreign
exchange movements on lease liabilities, pension and associated deferred tax
(a non-core item per page 51), and after reclassifying the grossed-up amounts
relating to consolidated fund entities into this line. Core gains on
investments is made up as follows:
2021 2020
$m
$m
Net gains on seeding investments portfolio (see Note 14.1) 24 21
Net gains/(losses) on fund investments held for deferred compensation and 3 (1)
other investments (Note 14.1)
Core gains on investments 27 20
Non-core items:
Consolidated fund entities: gross-up of net gains on investments (Note 14.2) 12 26
Unrealised foreign exchange gain/(loss) on lease liabilities, pension and 3 (6)
associated deferred tax (Note 16)
Income or gains on investments and other financial instruments 42 40
Core tax rate
The core tax rate is the effective tax rate on core profit before tax and is
equal to the tax on core profit divided by core profit before tax. The tax
expense on core profit before tax is calculated by excluding the tax
benefit/expense related to non-core items from the statutory tax expense,
together with amounts relating to the utilisation or recognition of available
US deferred tax assets (Note 21). Therefore, tax on core profit best reflects
our cash taxes payable.
The impact of non-core items on our tax expense is outlined below:
Note to the Group financial statements 2021 2020
$m
$m
Statutory tax expense 103 41
Tax on non-core items:
Amortisation of acquired intangible assets 7 6
Impairment of right-of-use lease asset - investment property 1 4
Unrealised foreign exchange movements on lease liabilities, pension and - 1
associated deferred tax
Non-core tax item on US deferred tax assets 21 (10) (8)
Non-core tax items (2) 3
Core tax expense 101 44
Which comprises:
Tax expense on core management fee profit before tax 39 27
Tax expense on performance fee profit before tax 62 17
The core tax rate is 15% for 2021 (2020: 16%), which has decreased largely due
to a lower weighting of profits in the UK where the applicable statutory tax
rate is 19%. The non-core tax item on US deferred tax assets comprises the
partial recognition of US deferred tax assets in the year of $2 million (2020:
derecognition of $14 million) offset by the consumption of $12 million (2020:
generation of $6 million) as set out in Note 21.
Core EPS and core management fee EPS
Core earnings per share (EPS) is calculated as core profit divided by the
weighted average diluted number of shares. Core management fee EPS is
calculated as core management fee profit divided by the weighted average
diluted number of shares (page 49).
The reconciliation from statutory EPS measures (Note 26) to core EPS measures
is provided below:
2021 2020
Profits Diluted Profits Diluted
$m
EPS
$m
EPS
¢
¢
Statutory profit after tax 487 33.8 138 9.3
Non-core items (excluding tax) 68 4.7 105 7.1
Non-core tax items 2 0.2 (3) (0.2)
Core profit 557 38.7 240 16.2
Less core performance fee profit (330) (23.0) (87) (5.9)
Core management fee profit 227 15.7 153 10.3
Core cash flows from operations excluding working capital movements
Cash flows from operating activities excluding working capital movements can
be reconciled to cash flows from operating activities as reported in the Group
cash flow statement as follows:
2021 2020
$m
$m
Cash flows from operating activities 484 392
Add back changes in working capital
Change in receivables 102 (50)
Change in other financial assets 163 (31)
Change in payables (49) 30
Core cash flows from operations excluding working capital movements 700 341
Net financial assets
Net financial assets is considered a proxy for Group capital, and is equal to
our cash and seed book less borrowings, contingent consideration payable and
payables under repo arrangements, as follows:
Note to the Group financial statements 2021 2020
$m
$m
Seeding investment portfolio 14 648 485
Available cash and cash equivalents(1) 11 323 289
Payables under repo arrangements 13 (64) (56)
Contingent consideration payable 15 - (2)
Net financial assets 907 716
Note:
1 Available cash and cash equivalents excludes $64 million (2020: $62
million) of cash relating to consolidated fund entities (see Note 14.2 to the
Group financial statements).
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