REG - Man Group plc - Interim results for the six months ended 30 Jun 17 <Origin Href="QuoteRef">EMG.L</Origin> - Part 2
01/08/2017 07:07
- Part 2: For the preceding part double click ID:nRSA6655Ma
Multi-Strategy Fund - Class G - USD Shares is displayed.
12) 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.
13) Represented by Man GLG Undervalued Assets Fund - C Accumulation Shares.
14) Represented by Man GLG Continental European Growth Fund Class C Accumulation Shares.
15) Represented by Man GLG Global Emerging Markets Debt Total Return Class I USD.
16) Represented by FRM Diversified II Fund SPC - Class A USD ('the fund') but 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.
17) HFRI and HFRX index performance over the past 4 months is subject to change.
18) The historic Barclay BTOP 50 Index data is subject to change.
#The reference index listed by Numeric 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.
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.
RISK MANAGEMENT
It is a key objective of Man to remain a leader in risk management and governance. As such, risk management is an essential
component of our approach, both to the management of investment funds on behalf of investors, and the management of Man's
business on behalf of shareholders. Our reputation is fundamental to our business, and maintaining our corporate integrity
is the responsibility of everyone at Man. Our approach is to identify, quantify and manage risk throughout the Group, in
accordance with the Board's risk appetite. We maintain surplus capital and liquidity to give us strategic and tactical
flexibility, both in terms of corporate and fund management.
The principal risks faced by Man are set out on pages 38 to 39 of our 2016 Annual Report. These remain our principal risks
for the second half of the financial year being: investment underperformance risk; regulatory risk; balance sheet market
risk; operational risk; information security risk; discretionary trading risk; credit/counterparty risk; legal risk;
reputational risk; and key staff retention risk. Our risk framework operated as expected in the six months to 30 June 2017,
with systems and controls functioning as designed despite volatile markets.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge, this condensed set of financial statements in respect of Man
Group plc for the six month period ended 30 June 2017 has been prepared in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union, and that this interim report includes a fair review of the information
required by the Financial Conduct Authority's Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:
· an indication of important events that have occurred during the six months ended 30 June 2017 and their impact on the
condensed interim financial statements, and a description of the principal risks and uncertainties for the remaining six
months of the year ending 31 December 2017; and
· material related party transactions in the six months ended 30 June 2017and any material changes in the related party
transactions described in the last annual report.
The Directors of Man Group plc are as listed in the Annual Report for the year ended 31 December 2016, with the exception
of Dame Katharine (Kate) Barker, who joined the Board on 1 April 2017.
By order of the board
Luke Ellis
Chief Executive Officer
1 August 2017
Mark Jones
Chief Financial Officer
1 August 2017
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 2017 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 15. 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
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 2017 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
Statutory Auditor
London, UK
1 August 2017
INTERIM FINANCIAL STATEMENTS
Group income statement
Six months to 30 June Six months to 30 June
$m Note 2017 2016
Revenue:
Gross management and other fees 2 378 381
Performance fees 2 83 40
461 421
Income or gains/(losses) on investments and other financial instruments 11 39 (3)
Third party share of (gains)/losses relating to interests in consolidated funds 11 (15) 5
Revaluation of contingent consideration 13 (11) 14
Distribution costs 3 (28) (34)
Asset servicing 3 (17) (17)
Amortisation of acquired intangible assets 9 (42) (47)
Compensation 4 (216) (186)
Other costs 5 (82) (84)
Share of after tax profit of associates 4 -
Finance expense 6 (18) (15)
Finance income 6 1 1
Profit before tax 76 55
Taxation expense 7 (14) (6)
Statutory profit for the period attributable to owners of the Parent Company 62 49
Earnings per share: 8
Basic (cents) 3.8 2.9
Diluted (cents) 3.8 2.9
Group statement of comprehensive income
Six months to 30 June Six months to 30 June
$m 2017 2016
Statutory profit for the period attributable to owners of the Parent Company 62 49
Other comprehensive income/(expense):
Remeasurements of post-employment benefit obligations (6) 12
Current tax debited on pension scheme (1) -
Deferred tax credited/(debited) on pension scheme 2 (3)
Items that will not be reclassified to profit or loss (5) 9
Cash flow hedges:
Valuation gains/(losses) taken to equity 12 (20)
Transfer to Group income statement 11 5
Deferred tax (debited)/credited on cash flow hedge movements (4) 3
Net investment hedge (3) -
Foreign currency translation 9 1
Recycling of FX revaluation on liquidation of subsidiaries - 1
Items that may be subsequently reclassified to profit or loss 25 (10)
Other comprehensive income/(expense) for the period (net of tax) 20 (1)
Total comprehensive income for the period attributable to owners of the Parent Company 82 48
Group balance sheet
$m Note At 30 June 2017 At 31 December 2016
Assets
Cash and cash equivalents 10 321 426
Fee and other receivables 334 257
Investments in fund products and other investments 11 711 794
Pension asset 23 27
Investments in associates 29 31
Leasehold improvements and equipment 40 44
Goodwill and acquired intangibles 9 1,065 1,024
Other intangibles 18 17
Deferred tax assets 58 63
2,599 2,683
Non-current assets held for sale 11 203 263
Total assets 2,802 2,946
Liabilities
Trade and other payables 603 647
Provisions 12 54 51
Current tax liabilities 20 6
Third-party interest in consolidated funds 11 169 240
Borrowings 10 149 149
Deferred tax liabilities 44 47
1,039 1,140
Non-current liabilities held for sale 11 80 132
Total liabilities 1,119 1,272
Net assets 1,683 1,674
Equity
Share capital and capital reserves 1,218 1,205
Revaluation reserves and retained earnings 465 469
Capital and reserves attributable to owners of the Parent Company 1,683 1,674
Group cash flow statement
Six months to 30 June Six months to 30 June
$m Note 2017 2016
Cash flows from operating activities
Statutory profit 62 49
Adjustments for:
Income tax 14 6
Net finance expense 17 14
Share of post-tax profits of associates (4) -
Revaluation of contingent consideration 11 (14)
Depreciation of leasehold improvements and equipment 6 6
Amortisation of acquired intangible assets 42 47
Amortisation of other intangible assets 3 2
Share-based payment charge 9 12
Fund product based payment charge 19 17
Defined benefit pension plans (including contributions) - (3)
Other non-cash movements 10 8
189 144
Changes in working capital:
Increase in receivables1 (119) (13)
Decrease in other financial assets 2 52 25
Decrease in payables1 (78) (125)
Cash generated from operations 44 31
Interest paid (5) (5)
Income tax paid (3) (28)
Cash flows from operating activities 36 (2)
Cash flows from investing activities
Purchase of leasehold improvements and equipment (2) (6)
Purchase of other intangible assets (5) (4)
Cash acquired on the completion of Aalto acquisition 2 -
Payment of contingent consideration in relation to acquisitions (6) (21)
Interest received 1 1
Proceeds from sale of associate 2 -
Dividends received from associates 5 1
Cash flows from investing activities (3) (29)
Cash flows from financing activities
Proceeds from issue of ordinary shares 5 5
Purchase of own shares by the Employee Trusts and Partnerships (18) (19)
Share repurchase programme (including costs) (53) -
Dividends paid to Company shareholders (77) (83)
Cash flows from financing activities (143) (97)
Net decrease in cash (110) (128)
Cash at beginning of the period 426 607
Effect of foreign exchange movements 5 (2)
Cash at period end 3 10 321 477
Notes:
1 The comparative figures have been restated to exclude the effect of foreign exchange movements, which have now been
included separately at the bottom of the statement.
2 Includes $14 million (H1 2016: $22 million) of restricted net cash inflows relating to consolidated fund entities
(Note 11).
3 Includes $51 million (H1 2016 $43 million) of restricted cash relating to consolidated fund entities (Note 11).
Group statement of changes in equity
Share capital and capital reserves
$m Share capital Share premium account Capital redemption reserve Merger reserve Reorganisation reserve Total
At 1 January 2017 58 19 5 491 632 1,205
Purchase and cancellation of own shares (1) - 1 - - -
Issue of ordinary shares: Aalto acquisition - 8 - - - 8
Issue of ordinary shares: Partnership Plans and Sharesave - 5 - - - 5
At 30 June 2017 57 32 6 491 632 1,218
At 1 January 2016 59 14 4 491 632 1,200
Purchase and cancellation of own shares (1) - 1 - - -
Issue of ordinary shares: Partnership Plans and Sharesave - 5 - - - 5
At 31 December 2016 58 19 5 491 632 1,205
Revaluation reserves and retained earnings
$m Profit Own shares held by Employee Trusts Cumulative translation adjustment Cash flow hedge reserve Available-for-sale reserve Total
and loss account
At 1 January 2017 564 (43) (39) (15) 2 469
Other comprehensive (expense)/income (5) (2) 8 19 - 20
Share-based payments charge 4 - - - - 4
Purchase of own shares by the Employee Trusts - (13) - - - (13)
Disposal of own shares by the Employee Trusts (14) 14 - - - -
Dividends (77) - - - - (77)
Statutory profit 62 - - - - 62
At 30 June 2017 534 (44) (31) 4 2 465
At 1 January 2016 1,105 (62) (25) (5) 2 1,015
Other comprehensive (expense)/income (10) 10 (14) (10) - (24)
Share-based payments charge 17 - - - - 17
Current tax credited of share-based payments 1 - - - - 1
Deferred tax debited on share-based payments (2) - - - - (2)
Purchase of own shares by the Employee Trusts - (13) - - - (13)
Disposal of own shares by the Employee Trusts (22) 22 - - - -
Share repurchases (101) - - - - (101)
Dividends (158) - - - - (158)
Statutory loss (266) - - - - (266)
At 31 December 2016 564 (43) (39) (15) 2 469
Total equity
$m At 30 June 2017
Share capital and capital reserves 1,218
Revaluation reserves and retained earnings 465
Capital and reserves attributable to owners of the Parent Company 1,683
At 31 December 2016
Share capital and capital reserves 1,205
Revaluation reserves and retained earnings 469
Capital and reserves attributable to owners of the Parent Company 1,674
The final dividend for the year ended 31 December 2016 of $77 million was approved and paid in May 2017 and was therefore
deducted from the retained earnings reserve in the six months ended 30 June 2017.
1. Basis of preparation
The interim financial statements for the six months ended 30 June 2017have been prepared in accordance with IAS 34 'Interim
Financial Reporting', as adopted by the European Union, and the Disclosure and Transparency Rules of the Financial
ConductAuthority.
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a
period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis
in preparing the interim financial statements.
The financial information contained herein is unaudited and does not constitute statutory accounts as defined by Section
434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016, which were prepared in accordance
with International Financial Reporting Standards (IFRS) and relevant IFRIC interpretations issued by the International
Accounting Standards Board (IASB) and IFRIC Committee respectively and adopted by the European Union (EU) and upon which
the auditor hasgiven an unqualified and unmodified report and which contained no statement under Section 498 of the
Companies Act 2006, have been delivered to the Registrar of Companies and were posted to shareholders on 15 March 2017.
The accounting policies applied in these interim financial statements are consistent with those applied in Man's Annual
Report for the year ended 31 December 2016 ('2016 Annual Report').
Man acts as the investment manager/advisor to fund entities. Man assesses such relationships on an ongoing basis to
determine whether each fund entity is controlled and therefore consolidated into the Group's results. Assessment of the
control characteristics for all relationships with fund entities led to the consolidation of 10 fund entities at 30 June
2017 (31 December 2016: 11), which are classified as either held for sale or consolidated on a line by line basis. Based on
their nature, interests of third parties in funds that are consolidated are classified as liabilities, as detailed in Note
11.
In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and
assumptions about the carrying amounts of the assets and liabilities that are not readily available from other sources. The
judgements, estimates and associated assumptions are based on historical experience and other factors that are considered
to be relevant, on a case-by-case basis. Actual results may differ from these estimates. The judgements, estimates and
associated assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
The most significant area of judgement relates to whether the Group controls certain funds through its investments in fund
products and is required to consolidate them (Note 11). In addition, we have used judgement in assessing the purchase price
of the Aalto acquisition, which completed in January 2017, in order to determine whether each component should be accounted
for as purchase consideration or as post-acquisition compensation costs. In assessing the key criteria as set out in IFRS 3
'Business Combinations' we have concluded that all of the purchase price, including the deferred components, should be
accounted for as purchased consideration for the following primary reasons: (i) the sellers will receive all of the
purchase price whether they remain employed by Man or not (subject to certain industry standard non-complete clauses); and
(ii) Aalto management will be compensated for services at market rates, in addition to deferred purchase consideration, for
their services provided to Man as part of their employment contracts.
Furthermore, the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting
period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year include the determination of fair values for contingent consideration in relation to
acquisitions, the estimated amount of accrued discretionary variable compensation, the valuation of goodwill and acquired
intangibles and recognition of deferred tax assets in relation to US losses. The valuation of contingent consideration has
been updated as at 30 June 2017; see Note 13 of these financial statements. The determination of the discretionary variable
compensation accrual is an annual process undertaken at the calendar year-end, therefore the accrual at 30 June 2017 is an
estimated amount based on the financial performance and absolute levels of performance fees of the Group in the year to
date. The other estimates are primarily based on discounted future cash flow models as at 31 December 2016 and are
disclosed within the 2016 Annual Report. The key assumptions and range of possible outcomes are discussed in Note 11 for
goodwill and acquired intangibles and Note 8 for deferred tax assets, in the 2016 Annual Report.
There have been no significant changes in the business in the year to date, and the directors are confident that the
assumptions in the Board's three year financial plan, approved in February 2017, remain appropriate over the forecast
period.
The income statement and cash flow statement presentation in these interim financial statements shows the six months ended
30 June 2017 (H1 2017) together with the six months ended 30 June 2016 (H1 2016). The balance sheet is presented as at 30
June 2017 together with comparatives as at 31 December 2016.
Impact of new accounting standards and interpretations
There have been no new or revised standards or interpretations which have become effective or been early adopted in the six
months to 30 June 2017.
The following standards and interpretations relevant to the Group's operations have been issued by the IASB but are not yet
mandatory:
- IFRS 9: Financial Instruments
- IFRS 15: Revenue from Contracts with Customers
- IFRS 16: Leases
IFRS 9 is effective for annual periods beginning on or after 1 January 2018. As the Group predominantly holds financial
assets and liabilities that that are either short term or are classified on the balance sheet as 'Fair value through profit
and loss', the Group does not anticipate that the implementation of IFRS 9 will have a material impact on the reported
results.
IFRS 15 is effective for annual periods beginning on or after 1 January 2018. The Group have considered the key changes
posed by IFRS 15, within the terms of the existing investment management agreements and as a result the Group does not
anticipate that the implementation of IFRS 15 will have a material impact on the reported results.
IFRS 16 is effective for annual periods beginning on or after 1 January 2019. The Group's preliminary assessment of the
anticipated impact of adoption of IFRS 16 on its reported results and financial position is ongoing. We expect that,
largely as a result of the Riverbank House premises lease, this will result in a significant gross up of the Group's
reported assets and liabilities. We intend to report on the quantification of the impact of adoption of IFRS 16 in our 2017
Annual Report.
The impact of these accounting standards is discussed further in Note 1 of the 2016 Annual Report.
No other standards or interpretations issued and not yet effective are expected to have an impact on the Group's financial
statements.
2. Revenue
Revenue for the six months to 30 June 2017 was $461 million, which is 10% higher than the $421 million in H1 2016.
Gross management and other fees for the period were $378 million, compared to $381 million in H1 2016, as a result of a
decrease in gross management fee margins due to the continued mix shift towards lower margin strategies, the increasing
proportion of solutions business for FRM and the reduced level guaranteed product FUM.
Revenue from performance fees has increased from $40 million in H1 2016 to $83 million in the six months to 30 June 2017,
as a result of stronger investment performance achieved across our investment managers over the period, largely for GLG.
3. Distribution costs and asset servicing
Distribution costs were $28 million for the period (H1 2016: $34 million), comprising investor servicing fees of $27
million (H1 2016: $32 million) and product placement fees of $1 million (H1 2016: $2 million). Distribution costs have
decreased largely as a result of the continued mix shift towards institutional funds under management and the roll off of
guaranteed product funds under management.
Asset servicing includes custodial, valuation, fund accounting and registrar functions performed by third parties under
contract to Man, on behalf of the funds. Asset servicing costs for the period were $17 million (H1 2016: $17 million).
4. Compensation
$m Six months Six months
to 30 June 2017 to 30 June 2016
Salaries 74 78
Variable cash compensation 90 61
Share-based payment charge 9 12
Fund product based payment charge 19 17
Social security costs 15 13
Pension costs 5 5
Total compensation costs - before adjusting items 212 186
Restructuring costs (page 35) 4 -
Total compensation costs 216 186
Salaries have decreased in H1 2017 compared to H1 2016 due to a more favourable Pound Sterling to US Dollar fixed costs
hedged exchange rate in H1 2017 (1.43) compared to the rate secured in H1 2016 (1.51). Variable compensation and social
security costs have increased principally as a result of higher performance fee related bonus accruals in the period.
The unamortised deferred compensation at 30 June 2017 was $77 million (30 June 2016: $76 million), which has a weighted
average remaining vesting period of 2.3 years (30 June 2016: 2.0 years).
5. Other costs
Six months to 30 June Six months to 30 June
$m 2017 2016
Occupancy 16 17
Technology and communications 14 14
Temporary staff, recruitment, consultancy and managed services 10 10
Legal fees and other professional fees 6 8
Benefits 7 7
Travel and entertainment 6 5
Audit, accountancy, actuarial and tax fees 4 4
Insurance 2 3
Marketing and sponsorship 3 3
Other cash costs, including irrecoverable VAT 5 5
Total other costs before depreciation, amortisation and adjusting items 73 76
Depreciation and amortisation 9 7
Other costs - before adjusting items 82 83
Recycling of FX revaluation on liquidation of subsidiaries (page 35) - 1
Total other costs 82 84
Other costs before depreciation, amortisation and adjusting items were $73 million, compared to $76 million in H1 2016 and
$78 million for H2 2016. The decrease of $3 million largely reflects the impact of the more favourable fixed costs Pound
Sterling to US Dollar hedged exchange rate in H1 2017 (1.43) compared to the rate secured in H1 2016 (1.51).
6. Finance expense and finance income
Six months Six months
to 30 June to 30 June
$m 2017 2016
Finance expense:
Interest payable on borrowings (4) (4)
Revolving credit facility costs and other (2) (2)
Total finance expense - before adjusting items (6) (6)
Unwind of contingent consideration discount (Note 13) (12) (9)
Total finance expense (18) (15)
Finance income:
Interest on cash deposits and US treasury bills 1 1
Total finance income 1 1
In the current and prior period the interest payable on borrowings includes $4 million relating to the fixed rate reset
callable guaranteed subordinated notes issued in September 2014 (Note 10).
7. Taxation
The tax charge for the period is $14 million (H1 2016: $6 million), giving a statutory effective tax rate of 18% (H1 2016
11%). The effective tax rate on profits before adjusting items of 14% (H1 2016: 15%) reflects the estimated rate for the
year ending 31 December 2017. The majority of the Group's profit is earned in the UK, Switzerland and the US. The forecast
full year effective tax rate is consistent withthis profit mix.
Tax liabilities are recognised based on the best estimates of probable outcomes, with regard to external advice where
appropriate. The principal factors which may influence our future tax rate are changes to tax regulation in the territories
in which we operate, the mix of income and expenses by jurisdiction, and the timing of recognition of available tax
losses.
As a result of available deferred tax assets in the US, Man does not expect to pay federal tax on any taxable profits it
may earn in the US for a number of years. Based on the Group's three year forecast US taxable profits, a deferred tax asset
of $25 million is recognised on the balance sheet at 30 June 2017 (31 December 2016: $25 million).
8. Earnings per share (EPS)
The calculation of basic earnings per ordinary share is based on: a basic post-tax profit for the period of $62 million (H1
2016: $49 million); and ordinary shares of 1,648,618,222 (H1 2016: 1,680,269,040), 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 1,662,245,222 (H1 2016: 1,694,811,481). The decrease in the weighted average number of
shares relates to the execution of share repurchases in H1 2017.
The reconciliation of basic and diluted weighted average number of shares is provided below:
Six months to 30 June 2017 Six months to 30 June 2016
(million) (million)
Basic weighted average number of shares 1,648.6 1,680.3
Dilutive potential ordinary shares:
Share awards under incentive schemes 12.8 13.1
Employee share options 0.8 1.4
Dilutive weighted average number of shares 1,662.2 1,694.8
The basic and diluted earnings per share figure are provided below. For a reconciliation of earnings per share to adjusted
earnings per share, please see the alternative performance measures section at the end of this report.
Basic and diluted post-tax earnings Basic earnings Diluted earnings
per share per share
$m cents cents
Earnings per share H1 2017 62 3.8 3.8
Earnings per share H1 2016 49 2.9 2.9
9. Goodwill and acquired intangibles
$m Goodwill Investment management agreements Distribution channels Brand names Total
Net book value at 1 January 2017 588 405 16 15 1,024
Acquisition of business 55 10 14 - 79
Currency translation 4 - - - 4
Amortisation - (38) (3) (1) (42)
Net book value at 30 June 2017 647 377 27 14 1,065
Made up as follows:
AHL 458 - - - 458
GLG - 212 14 10 236
FRM - 25 - 1 26
GPM 55 10 13 - 78
Numeric 134 130 - 3 267
Allocation of goodwill to cash generating units and calculation of recoverable amounts
The Group has identified five cash generating units (CGUs) for impairment review purposes: AHL, GLG, FRM, Numeric and GPM.
As a result of the recent acquisition of Aalto, the Group formally identified a new CGU, Global Private Markets ('GPM').
Details of this acquisition are detailed on page 28.
In line with IFRS 3 'Business Combinations' goodwill and acquired intangibles must be tested for impairment at least
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.
We continue to assess whether there are any indicators of impairment by considering each of the five CGUs for the year to
date, and note that the operating environment in the year to date has been positive despite ongoing political uncertainty
in certain regions, which has delivered positive performance across many of Man's funds and resulted in net inflows across
all CGUs (including GPM). There have been no significant changes in the business in the year to date, and the directors are
confident that the assumptions in the Board's three year financial plan, approved in February 2017, remain appropriate over
the forecast period.
AHL cash generating unit
For the six months to 30 June 2017, AHL's FUM is slightly higher than that modelled in the value in use calculation at 31
December 2016, although margins have marginally decreased over the six months. As there was significant headroom as at 31
December 2016, it was deemed that there were no indicators of impairment.
GLG cash generating unit
For the six months to 30 June 2017, GLG's FUM is higher than the modelled FUM in the value in use calculation at 31
December 2016 as a result of higher than forecast performance and net flows. Margins have marginally decreased over the six
months. Given the positive developments in the GLG CGU since 31 December 2016, it was deemed that there were no indicators
of impairment. The goodwill balance for GLG was impaired to nil at 31 December 2016.
FRM cash generating unit
For the six months to 30 June 2017, as FRM's FUM is higher, following higher than expected net inflows, and margins are
largely in line with that modelled in the value in use calculation at 31 December 2016, it was deemed that there were no
indicators of impairment. The goodwill balance for FRM was impaired to nil at 31 December 2016.
Numeric cash generating unit
For the six months to 30 June 2017, Numeric's FUM is slightly higher than that modelled in the value in use calculation at
31 December 2016, as a result of positive performance. As margins are largely as expected, it was deemed that there were no
indicators of impairment.
Acquisition of Aalto
On 1 January 2017, Man acquired the entire issued share capital of Aalto, a US and Europe-based real asset focused
investment manager with $1.8 billion of funds under management at the date of acquisition. The acquisition consideration is
structured to align Aalto's interests with those of Man, and comprised an upfront payment of $18 million in cash, including
$1 million for acquired working capital, $8 million in shares and four earn-out payments. The earn-out payments are
dependent of levels of run rate management fees measured following one, four, six and eight years from completion and are
capped at $207 million in aggregate. The net present value of the aggregate earn-out payments at completion was $52
million.
The deferred consideration payable is equivalent to an earn-out and deemed to be a financial liability measured initially
at fair value with any subsequent fair value movements recognised through the Group income statement.
Values for the acquired business at the date of acquisition are set out below:
$m Book value Fair value adjustments Provisional fair value
Intangible assets - 24 24
Cash and receivables 5 - 5
Loans and payables (4) - (4)
Deferred tax liability - (2) (2)
Net assets acquired 1 22 23
Goodwill on acquisition 55
Net assets acquired including goodwill 78
Contingent consideration 52
Cash consideration 18
Value of shares issued 8
Total consideration 78
The fair value adjustments relate to the recognition of investment management contracts of $10 million and customer
relationships of $14 million. These intangible assets are recognised at the present value of the expected future cash flows
generated from the assets and are amortised on a straight-line basis over their expected lives of eight, eight and six
years respectively. The goodwill balance of $55 million primarily represents direct and efficient access to the private
real estate markets, the highly skilled and experienced Aalto team and the tailor made infrastructure and strong
relationships to expand Man's current offering, to its existing clients.
Provisional fair values have been used and it is expected that these numbers will be finalised in the Annual Report for the
year ended 31 December 2017. We do not expect any material differences from the provisional numbers reported.
None of the goodwill recognised is expected to be deductible for tax purposes.
The fair value of the 5.7 million ordinary shares issued as part of the contingent consideration paid for Aalto ($8
million) was measured on the basis of quoted prices at the time of issue.
Acquisition related costs included in the Group's income statement for the period ended 30 June 2017 amounted to less than
$1 million. Aalto contributed $6 million revenue and $2 million to the Group's profit for the period ended 30 June 2017.
We have made preliminary assessments on the new GPM CGU for the year-to-date, and given the FUM position is in-line with
the forecasted position, it was deemed that there are no indicators of impairment. The value-in-use model will be run on
the GPM CGU at the year ended 31 December 2017.
10. Cash, liquidity and borrowings
Cash and cash equivalents at period end comprises $144 million (31 December 2016: $222 million) of cash at bank on hand,
$126 million (31 December 2016: $102 million) in short-term deposits, and treasury bills were nil (31 December 2016: $65
million). In addition, $51 million (31 December 2016: $37 million) 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 2017 (Note
11).
Total liquidity resources were $770 million at 30 June 2017 (31 December 2016: $889 million) and comprised cash and cash
equivalents of $270 million (31 December 2016: $389 million), and the undrawn committed revolving credit facility of $500
million (31 December 2016: $500 million).
During the period the maturity date of the $500 million revolving credit facility was
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