REG - Man Group plc - INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2016 <Origin Href="QuoteRef">EMG.L</Origin> - Part 3
26/07/2016 07:06
- Part 3: For the preceding part double click ID:nRSZ1851Fb
being the weighted
average number of ordinary shares in issue during the period after excluding the shares owned by the Man Employee Trusts.
For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares, being ordinary shares of 1,694,811,481 (H1 2015: 1,728,015,531). The decrease in the weighted
average number of shares relates to the execution of the share repurchase in the latter part of H1 2015.
The reconciliation of basic and diluted weighted average number of shares is provided below:
Six months to 30 June 2016 Six months to 30 June 2015
(million) (million)
Basic weighted average number of shares 1,680.3 1,710.7
Dilutive potential ordinary shares
Share awards under incentive schemes 13.1 12.9
Employee share options 1.4 4.4
Dilutive weighted average number of shares 1,694.8 1,728.0
The reconciliation from EPS to adjusted EPS is given below:
Six months to 30 June 2016
Basic and Basic Diluted
diluted post- earnings earnings
tax earnings per share per share
$m cents cents
Earnings per share 49 2.9 2.9
Items for which EPS has been adjusted (Note 2) 43 2.6 2.6
Tax adjusting items (9) (0.6) (0.6)
Adjusted Earnings per share 83 4.9 4.9
Adjusted net performance fee profit before tax (Note 3) (8) (0.5) (0.5)
Tax on adjusted net performance fee profit 1 0.1 0.1
Adjusted management fee earnings per share 76 4.5 4.5
Six months to 30 June 2015
Basic and Basic Diluted
diluted post- earnings earnings
tax earnings per share per share
$m cents cents
Earnings per share 130 7.6 7.5
Items for which EPS has been adjusted (Note 2) 117 6.9 6.8
Tax adjusting items (6) (0.4) (0.4)
Adjusted Earnings per share 241 14.1 13.9
Adjusted net performance fee profit before tax (Note 3) (172) (10.1) (10.0)
Tax on adjusted net performance fee profit 25 1.5 1.5
Adjusted management fee earnings per share 94 5.5 5.4
13. Goodwill and acquired intangibles
$m Goodwill IMCs and other Total
acquired intangibles
Net book value at 1 January 2016 907 590 1,497
Currency translation 2 - 2
Amortisation - (47) (47)
Net book value at 30 June 2016 909 543 1,452
Made up as follows:
AHL 456 - 456
GLG 222 358 580
FRM 97 34 131
Numeric 134 151 285
Allocation of goodwill to cash generating units and calculation of recoverable amounts
The Group has identified four cash generating units (CGUs) for impairment review purposes: AHL, GLG, FRM and Numeric.
Goodwill must be tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. The recoverable amounts of the Group's CGUs are assessed each year using a value in use
calculation.
An assessment of the key assumptions used in the value in use calculation for each CGU has been undertaken at 30 June 2016.
Despite recent market volatility and uncertainty, including the impact of the UK's vote to leave the European Union, and
weak performance for GLG in H1 2016, the directors consider that given the short time period elapsed there is not currently
sufficient evidence to suggest a change in key assumptions is required. The directors will continue to monitor this
throughout the remainder of the year.
AHL cash generating unit
For the six months to 30 June 2016, AHL's FUM is largely in line with that modelled in the value in use calculation at 31
December 2015. As there was significant headroom as at 31 December 2015, it was deemed that there were no indicators of
impairment.
GLG cash generating unit
For the six months to 30 June 2016, GLG's FUM is lower than the modelled FUM in the value in use calculation at 31 December
2015 as a result of lower than forecast performance and net flows. Therefore, the directors consider it appropriate to
lower their H2 2016 flows assumption in order to incorporate the most recent outlook. The forecast cost base of GLG has
decreased due to the more favourable Pounds Sterling to US Dollar exchange rate and lower variable compensation costs as a
result of the decrease in forecast net revenue. Given the headroom of $269 million at 31 December 2015 and the overall
balance of movements in the GLG CGU since 31 December 2015, it was deemed that there were no significant changes in the key
assumptions and hence no indicators of impairment.
FRM cash generating unit
For the six months to 30 June 2016, as FRM's FUM and margins are largely in line with that modelled in the value in use
calculation at 31 December 2015 and forecast fixed costs have decreased due to a more favourable Pounds Sterling to US
Dollar exchange rate, it was deemed that there were no indicators of impairment.
Numeric cash generating unit
For the six months to 30 June 2016, Numeric's FUM and costs are slightly lower than that modelled in the value in use
calculation at 31 December 2015. As margins are largely as expected, it was deemed that there were no indicators of
impairment.
Despite there being no indication of impairment of the Numeric CGU, the fair value of the Numeric contingent consideration
creditor has decreased by $12 million in the period (Note 2). Numeric FUM is slightly lower than the forecast at 31
December 2015, hence the reduction in the contingent consideration creditor, however is higher than the original forecast
at the acquisition date (on which the Numeric goodwill value was determined).
14. Cash, liquidity and borrowings
Cash and cash equivalents at period end comprises $193 million (31 December 2015: $250 million) of cash at bank on hand,
$191 million (31 December 2015: $336 million) in short-term deposits and $50 million in treasury bills (31 December 2015:
$nil). In addition, $43 million (31 December 2015: $21m) of cash at bank on hand held on the balance sheet relates to the
cash and cash equivalents held by funds which have been consolidated into the Group at 30 June 2016 (Note 15).
Total liquidity resources were $1,434 million at 30 June 2016 (31 December 2015: $1,586 million) and comprised cash and
cash equivalents of $434 million (31 December 2015: $586 million), and the undrawn committed revolving credit facility of
$1,000 million (31 December 2015: $1,000 million).
During the period the maturity date of the $1 billion revolving credit facility was extended to June 2021, with one further
one year extension option remaining.
During 2014 the Group issued $150 million ten year fixed rate reset callable guaranteed subordinated notes (Tier 2 notes),
with associated issuance costs of $1 million. The Tier 2 notes were issued with a fixed coupon of 5.875% until 15 September
2019. The notes may be redeemed in whole at the Group's option in September 2019 at their principal amount, subject to FCA
approval. If the notes are not redeemed at this time then the coupon will reset to the five year mid-swap rate plus 4.076%
and the notes will be redeemed in September 2024 at their principal amount.
The net cash position, excluding cash relating to consolidated fund entities of $43 million (Note 15), at 30 June 2016 was
$434 million, compared to $586 million at 31 December 2015. The movement in cash is analysed in the cash flow statement.
The decrease of $152 million in net cash position during the period is primarily the result of the payment of the final
dividend for 2015 of $83 million and a decrease in working capital of $115 million largely due to payment of the 2015
bonuses, partially offset by cash profits generated during the period.
The following table summarises the Group's available liquidity at the end of the period:
$m As at As at
30 June 2016 31 December 2015
Borrowings: 2024 fixed rate reset callable guaranteed subordinated notes 149 149
Cash and cash equivalents 1 434 586
Undrawn committed revolving credit facility 1,000 1,000
Total liquidity 1,434 1,586
Note:
1 Excludes $43 million of cash held by fund entities which have been consolidated (31 December 2015: $21 million), as
outlined in Note 15.
15. Investments in fund products and other investments
$m At 30 June At 31 December
2016 2015
Investments in fund products and other investments comprise:
Loans to fund products 24 41
Other investments in fund products 208 224
Other investments 4 4
Investment in funds relating to line-by-line consolidated funds 431 329
667 598
Man's seeding investments are included in various Group balance sheet line items. In summary, the total seeding investments
portfolio is made up as follows:
$m At 30 June 2016 At 31 December 2015
Loans to fund products 24 41
Other investments in fund products 208 224
Less those used to hedge deferred compensation awards (77) (71)
Consolidated investments in funds - held for sale 107 119
Consolidated investments in funds - line-by-line consolidation 252 213
Seeding investment portfolio 514 526
Other investments in fund products, excluding those which are held against outstanding deferred compensation arrangements,
relate to seeding investments made to grow the business as we launch new products.
Seed capital invested into funds may at times be significant, and therefore the fund may be deemed to be controlled by the
Group. Where the Group acquired the controlling stake and actively markets the products to third party investors, allowing
the Group to redeem their share,and it is considered highly probable that it will relinquish control within a year, the
investment in the controlled fund is classified as held for sale.
The seeded funds are recognised in the Group balance sheet as non-current assets and liabilities held for sale, with the
interests of any other parties included within non-current liabilities held for sale.
The non-current assets and liabilities held for sale are as follows:
$m At 30 June 2016 At 31 December 2015
Non-current assets held for sale 213 188
Non-current liabilities held for sale (106) (69)
Investments in fund products held for sale 107 119
If a held for sale fund remains under the control of the Group for more than one year, and it is unlikely that the Group
will reduce or no longer control its investment in the short-term, it will cease to be classified as held for sale and will
be consolidated on a line-by-line basis. There are two investments previously classified as held for sale at 31 December
2015 which have been consolidated on a line by line basis at 30 June 2016 (30 June 2015: nil).
Seed investments which are controlled and where it is not expected that control will be relinquished within one year from
the date of initial investment relate to five funds at 30 June 2016 (31 December 2015: three, H1 2015: one), which have
therefore been consolidated on a line-by-line basis as follows:
$m At 30 June 2016 At 31 December 2015
Balance Sheet
Cash and cash equivalents 43 21
Accounts receivable 11 -
Transferrable securities 1 431 329
Accounts payable (12) (1)
Net assets of line-by-line consolidated fund entities 473 349
Third party interest in consolidated funds (221) (136)
Net investment held by Man 252 213
Six months Six months
to 30 June to 30 June
$m 2016 2015
Income statement
Net losses on investments 2 (3) -
Management fee expenses 3 (4) -
Other costs (1) -
Net losses of line-by-line consolidated fund entities (8) -
Third party share of losses relating to interests in consolidated funds 5 -
Losses attributable to net investment held by Man (3) -
Notes:
1 Included within Investments in fund products and other investments.
2 Included within Income or gains/(losses) on investments and other financial instruments.
3 Relates to management fees paid by the funds to Man during the year, and is eliminated within Gross management and
other fees in the Group income statement.
16. Provisions
$m Onerous property lease contracts Litigation Restructuring Total
As 1 January 2016 32 24 2 58
Credited to the income statement:
Exchange differences (3) - - (3)
Used during the period / settlements (1) - (2) (3)
At 30 June 2016 28 24 - 52
The onerous property lease contracts largely relate to the Riverbank House office premises.
17. Share capital and reserves
$m As at 30 June 2016 As at 31 December 2015
Share capital 59 59
Share premium account 19 14
Capital redemption reserve 4 4
Merger reserve 491 491
Reorganisation reserve 632 632
Revaluation reserves and retained earnings 972 1,015
2,177 2,215
The capital redemption reserve represents the notional value of the shares repurchased to offset the reduction in share
capital.
The final dividend for the year to 31 December 2015 of $83 million was approved and paid in May 2016 and was therefore
deducted from the retained earnings reserve in the six months ended 30 June 2016.
18. Related party transactions
The related party transactions during the period are consistent with the categories disclosed in the Annual Report for the
year ended 31 December 2015. Related parties comprise key management personnel and associates. All transactions with
related parties were carried out on an arm's length basis.
Commission income relating to sales of Nephila Capital Ltd (an associate) products totalled $6 million for the six months
ended 30 June 2016 (H1 2015: $7 million), and is included within gross management and other fees in the Group income
statement.
19. Fair value of financial assets/liabilities
The fair value of financial assets and liabilities can be analysed as follows:
30 June 2016
$m Level 1 Level 2 Level 3 Total
Financial assets held at fair value:
Investments in fund products and other investments 4 153 55 212
Investment in funds relating to consolidated fund entities - 431 - 431
Derivative financial instruments - 2 - 2
4 586 55 645
Financial liabilities held at fair value:
Derivative financial instruments - 25 - 25
Contingent consideration - - 180 180
- 25 180 205
31 December 2015
$m Level 1 Level 2 Level 3 Total
Financial assets held at fair value:
Investments in fund products and other investments 4 162 62 228
Investment in funds relating to consolidated fund entities - 329 - 329
Derivative financial instruments - 2 - 2
4 493 62 559
Financial liabilities held at fair value:
Derivative financial instruments - 8 - 8
Contingent consideration - - 206 206
- 8 206 214
Level 1, 2 and 3 financial assets and liabilities are defined in Note 28 to the financial statements in the 2015 Annual
Report.
During the period, there were no significant changes in the business or economic circumstances that affected the fair value
of Man's financial assets and no significant transfers of financial assets or liabilities held at fair value between
categories.
The basis of measuring the fair value of investments in fund products is outlined in Note 16 in the Annual Report for the
year ended 31 December 2015.
The movements in Level 3 financial assets and financial liabilities measured at fair value are as follows:
Six months to 30 June 2016
$m Financial assets at fair value through profit or loss Financial liabilities at fair value through profit or loss Total
Level 3 financial assets/liabilities held at fair value
At beginning of the period 62 (206) (144)
Purchases - - -
Total (losses)/gains in comprehensive income (1) 5 4
Included in profit for the period (1) 5 4
Included in other comprehensive income - - -
Sales or settlements (6) 21 15
At period end 55 (180) (125)
Total (losses)/gains for the period included in the Group statement of comprehensive income for assets/liabilities held at period end (1) 5 4
The financial liabilities in Level 3 relate to the contingent consideration payable at 30 June 2016, largely relating to
the former owners of Numeric ($159 million), with the remaining $21 million relating to contingent consideration for other
smaller acquisitions.
For Numeric the contingent consideration relates to an ongoing 18.3% equity interest in Numeric held by management in the
business and profit interests of 15.5%, pursuant to a call and put option arrangement. The call and put options structure
means that it is virtually certain that Man will elect to, or be obliged to, purchase the interests held by Numeric
management at five (call option) or five and a half (put option) years post-closing. The maximum aggregate amount payable
by Man in respect of the option consideration is capped at $275 million.
The fair values are based on discounted cash flow calculations, which represent the expected future profits of each
business as per the earn-out arrangements. The fair values are determined using a combination of inputs, such as weighted
average cost of capital, net management fee margins, performance, operating margins and the growth in FUM, as applicable.
The discount rates applied are 11% for management fees and 17% for performance fees.
The most significant inputs into the valuations at 30 June 2016 are as follows:
Numeric
Weighted average net management fee margin 0.5%
Compound growth in average FUM 12%
Changes in inputs would result in the following increase/(decrease) of the contingent consideration creditor at 30 June
2016:
Weighted average net management fee margin
0.1% increase 35
0.1% decrease (35)
Compound growth in average FUM
1% increase 5
1% decrease (5)
20. Other matters
Man Group is subject to various other claims, assessments, regulatory enquiries and investigations in the normal course of
its business. The directors do not expect such matters to have a material adverse effect on the financial position of the
Group.
INDEPENDENT REVIEW REPORT TO MAN GROUP PLC
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report
for the six months ended 30 June 2016 which comprises the group income statement, the group statement of comprehensive
income, the group balance sheet, the group cash flow statement and the group statement of changes in equity and related
notes 1 to 20. We have read the other information contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland)
2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state
to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European
Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2016 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
26 July 2016
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Man
See all newsREG - Man Group plc - Transaction in Own Shares
AnnouncementREG - Man Group plc - Transaction in Own Shares
AnnouncementREG - Man Group plc - Transaction in Own Shares
AnnouncementREG - Man Group plc - Transaction in Own Shares
AnnouncementREG - Man Group plc - Transaction in Own Shares
Announcement