REG - Man Group plc - RESULTS FOR THE FINANCIAL YEAR ENDED 31 DEC 2015 <Origin Href="QuoteRef">EMG.L</Origin> - Part 3
24/02/2016 07:10
- Part 3: For the preceding part double click ID:nRSX9345Pb
which therefore reflects the recurring revenues and costs that drive the Group's cash flow.
Adjusting items $m Year ended 31 December 2015
Acquisition related professional fees and other integration costs (4)
Impairment of FRM goodwill (41)
Insurance recovery for legal claims 6
Revaluation of contingent consideration creditors (62)
Unwind of contingent consideration discount (17)
Amortisation of acquired intangible assets (92)
Other adjusting items (net) (6)
Total adjusting items (excluding tax) (216)
Recognition of deferred tax asset (see opposite) 11
Adjusted net management fee and net performance fee profit before tax
Adjusted net management fee profit before tax was $194 million compared to $198 million in 2014 as the increase in gross
management fees was more than offset by an increase in costs. Adjusted net performance fee profit before tax of $206
million (2014: $283 million) for the year reflects the lower performance fees of AHL, in conjunction with the above
outlined GLG bonus allocation which is not directly attributable to performance fees generated in the year.
chief financial officer's review (cont'd)
$m Year ended 31 December 2015 Year ended 31 December 2014
Gross management and other fees 833 810
Share of after tax profit of associates 3 9
Less:
Distribution costs (77) (104)
Asset services (32) (27)
Compensation (351) (310)
Other costs (177) (174)
Net finance expense (5) (6)
Adjusted net management fee profit before tax 194 198
Performance fees 302 340
Gains on investments and other financial instruments1 24 27
Less:
Compensation (111) (81)
Finance expense (9) (3)
Adjusted net performance fee profit before tax 206 283
1 Includes the adding back of third party share of losses relating to interests in consolidated funds as shown on the
Group income statement.
Taxation
The effective tax rate on adjusted profits was 10% for the year, which is consistent with the effective tax rate for 2014.
This is lower than the underlying rate of around 13% due to the release of tax provisions that are no longer needed.
The underlying rate of 13% in 2015 is lower than the underlying rate of 17% in 2014 due to a lower UK tax rate and a higher
proportion of profits being earned in the US where we are paying a minimal level of tax due to relief from available past
operating losses and tax amortisation of acquired intangible assets. We have $225 million of accumulated US tax losses
which we can offset against the future profits from US entities and will reduce taxable profits. In addition, we have $537
million of tax deductible goodwill and intangibles, largely relating to the Numeric (2014) and Ore Hill (2008)
acquisitions, which is amortised for tax purposes in the US over 15 years and which will also reduce the US taxable profit
in future periods. We therefore continue to expect not to pay federal tax in the US for a significant number of years.
Based on forecast US taxable profits and consistent with the methodology applied in 2014, Man has recognised a deferred tax
asset of $19 million, which represents probable tax savings over a three year forecast period due to utilisation of these
losses and tax amortisation of intangibles. This has resulted in an $11 million credit to the tax expense in 2015,
following an $8 million credit in 2014, which are included as adjusting items.
Cash earnings (EBITDA)
The Group continues to generate strong cash earnings. As the Group has a number of non-cash items in the income statement
it is important to focus on cash earnings to measure the true earnings generation of our business. The table below gives a
reconciliation of adjusted profit before tax to adjusted EBITDA. The main differences are net finance expense, depreciation
and amortisation, and deferred compensation charges relating to share and fund product awards. Our adjusted EBITDA/net
revenue margin was 38.8% (2014: 44.8%), which can be divided between margin on management fees of 27.2% (2014: 30.3%) and
performance fees of 66.0% (2014: 73.8%). The EBITDA management fee margin has decreased compared to 2014 as a result of the
continued product mix shift from higher margin retail assets to lower margin institutional and long only assets, and the
EBITDA performance fee margin has decreased largely as a result of performance fee variable compensation paid in relation
to certain GLG strategies, as outlined on page 33.
chief financial officer's review (cont'd)
Reconciliation of adjusted PBT to adjusted EBITDA
$m Year ended 31 December 2015 Year ended 31 December 2014
Adjusted PBT 400 481
Add back:
Net finance expense 14 9
Depreciation 13 21
Amortisation of capitalised computer software and placement fees 6 18
Current year amortisation of deferred 53 42
compensation
Less: Deferred compensation awards relating to the current year (64) (79)
Adjusted EBITDA 422 492
Balance sheet
The Group's balance sheet is strong and liquid.
Cash and cash equivalents have decreased during the year largely as a result of dividends on ordinary shares ($193
million), the share repurchase and associated costs ($176 million) and a net increase in seeding investments ($173 million)
and the purchase of Silvermine, NewSmith and the BAML fund of funds business, net of cash acquired ($38 million), partially
offset by other cash inflows from operating activities ($528 million). Goodwill and other intangibles have decreased in
2015 due to amortisation of $98 million, partially offset by the acquisitions of Silvermine, NewSmith and the BAML fund of
funds business.
Balance sheet $m 31 December 2015 31 December 2014
Cash and cash equivalents 607 738
Fee and other receivables 303 396
Total liquid assets 910 1,134
Payables (750) (697)
Net liquid assets 160 437
Investments in fund products and other investments 581 460
Pension asset 48 45
Investments in associates 30 30
Leasehold improvements and equipment 44 52
Total tangible assets 863 1,024
Borrowings (149) (149)
Net deferred tax liability (10) (36)
Net tangible assets 704 839
Goodwill and other intangibles 1,511 1,595
Shareholders' equity 2,215 2,434
chief financial officer's review (cont'd)
Liquidity
Operating cash flows were $355 million during the year and cash and cash equivalents balances were $586 million at year
end, excluding cash relating to consolidated fund entities.
$m Year ended 31 December 2015
Cash at 31 December 2014 738
Operating cash flows before working capital movements 402
Working capital movements (including seeding) (47)
Payment of dividends (193)
Acquisition of subsidiaries, net of cash acquired (38)
Share repurchase (including costs) (176)
Payment of acquisition related contingent consideration (46)
Other movements (33)
Cash and cash equivalents 607
Less cash held by consolidated fund entities (21)
Cash at 31 December 2015 586
Working capital movements principally relate to an increase in seeding investments of $173 million, including fair value
adjustments, partially offset by a decrease in loans to funds of $53 million and a decrease in fee receivables of $71
million at the year end.
In June we renegotiated our revolving credit facility, reducing its size from $1,525 million to $1,000 million, and
extending the maturity to 2020 (with two one-year extension options). The facility remains available and undrawn and the
reduction in the size of the facility, coupled with an improved credit rating from Fitch (from BBB to BBB+), has resulted
in annual commitment fee savings of around $3 million. The management of liquidity and capital are explained in Note 15 and
Note 23 to the financial statements, respectively.
Going concern
The directors have concluded that there is a reasonable expectation that Man has adequate resources to continue in
operational existence for the foreseeable future, and have accordingly prepared the Group financial statements on a going
concern basis.
Regulatory capital
Man is compliant with the FCA's capital standards and has continued to maintain significant surplus regulatory capital
throughout the year. At 31 December 2015, surplus regulatory capital over the regulatory capital requirements was $453
million.
The increase in the Group financial resources of $48 million during 2015 primarily relates to:
(1) H2 2014 post-tax net performance fee income and other reserve movements of $169 million;
(2) H1 2015 post-tax net performance fee income and other reserve movements of $113 million (H2 2015 performance fees will
be added once audited in February 2016); partly offset by
(3) The share repurchase programme of $176 million (including costs); and
(4) The acquisitions of Silvermine, NewSmith and the BAML fund of funds business, which have increased the intangibles
deduction from Tier 1 capital by $58 million.
The increase in the Group financial resources requirement of $14 million primarily relates to a net increase of $53 million
driven by seeding investments in fund products, partly offset by the impact of a lower capital requirement on various
receivables balances ($14 million), loans to funds ($14 million) and cash ($11 million).
chief financial officer's review (cont'd)
Group's regulatory capital position
$m 31 December 2015 31 December 2014
Permitted share capital and reserves 2,087 2,101
Less deductions (primarily goodwill and other intangibles) (1,485) (1,564)
Available Tier 1 Group capital 602 537
Lower Tier 2 capital - subordinated debt 149 149
Other Tier 2 capital 3 20
Group financial resources 754 706
Less financial resources requirement (301) (287)
Surplus capital 453 419
As at 31 December 2015 there has been no change to the Internal Capital Guidance scalar that is applied as part of the
calculation of the financial resources requirement.
Group income statement
$m Note Year ended 31 December 2015 Year ended31 December2014
Revenue:
Gross management and other fees 3 833 810
Performance fees 3 302 340
1,135 1,150
Income or gains on investments and other financial instruments 4 15 27
Third-party share of losses relating to interests in consolidated funds 16.3 9 -
Revaluation of contingent consideration 2 (62) 17
Distribution costs 5 (77) (104)
Asset servicing 6 (32) (27)
Amortisation of acquired intangible assets 13 (92) (72)
Compensation 7 (462) (394)
Other costs 8 (181) (202)
Impairment of FRM goodwill 13 (41) -
Share of after tax profit of associates 20 3 9
Loss on disposal of subsidiaries and other interests 2 - (4)
Finance expense 9 (34) (19)
Finance income 9 3 3
Profit before tax 184 384
Taxation expense 10 (13) (19)
Statutory profit for the year attributable to owners of the Parent Company 171 365
Earnings per share: 11
Basic (cents) 10.1 20.8
Diluted (cents) 10.0 20.5
Adjusted profit before tax 2 400 481
Group statement of comprehensive income
$m Year ended 31 December 2015 Year ended 31 December 2014
Statutory profit for the year attributable to owners of the Parent Company 171 365
Other comprehensive (expense)/income:
Remeasurements of post-employment benefit obligations (21) (21)
Current tax credited on pension revaluation 4 4
Deferred tax credited on pension revaluation 2 -
Items that will not be reclassified to profit or loss (15) (17)
Available for sale investments:
Transfers from Group statement of comprehensive income upon sale or impairment (1) -
Cash flow hedges:
Valuation losses taken to equity (9) (16)
Transfer to Group income statement 18 (17)
Deferred tax credited on cash flow hedge movements 2 3
Net investment hedge 14 13
Foreign currency translation (21) (24)
Recycling of FX revaluation on liquidation of subsidiaries (1) -
Items that may be subsequently reclassified to profit or loss 2 (41)
Other comprehensive expense for the year (net of tax) (13) (58)
Total comprehensive income for the year attributable to owners of the Parent Company 158 307
Group balance sheet
$m Note At 31 December 2015 At 31 December 2014
Assets
Cash and cash equivalents 15 607 738
Fee and other receivables 17 303 396
Investments in fund products and other investments 16 598 307
Pension asset 48 45
Investments in associates 20 30 30
Leasehold improvements and equipment 21 44 52
Goodwill and acquired intangibles 13 1,497 1,582
Other intangibles 14 14 13
Deferred tax assets1 10 59 47
3,200 3,210
Non-current assets held for sale 16 188 186
Total assets 3,388 3,396
Liabilities
Trade and other payables 18 660 581
Provisions 19 58 65
Current tax liabilities 32 51
Third-party interest in consolidated funds 16 136 -
Borrowings 15 149 149
Deferred tax liabilities1 10 69 83
1,104 929
Non-current liabilities held for sale 16 69 33
Total liabilities 1,173 962
Net Assets 2,215 2,434
Equity
Capital and reserves attributable to the owners of the Parent Company 23 2,215 2,434
Note:
1 The deferred tax assets and deferred tax liabilities, which were presented on a net basis on the face of the Group
balance sheet in the Annual Report for the year ended 31 December 2014, have been reclassified in the comparative to
provide the gross figures as included in Note 10.
Group cash flow statement $m Note Year ended 31 December 2015 Year ended 31 December 2014
Cash flows from operating activities
Profit for the period 171 365
Adjustments for:
Income tax 13 19
Net finance expense 31 16
Share of after tax profits of associates (3) (9)
Revaluation of contingent consideration 62 (17)
Loss on disposal of subsidiaries and other interests - 4
Reassessment of the litigation provision - (6)
Depreciation and impairment of leasehold improvements and equipment 13 21
Amortisation of acquired intangible assets 92 72
Amortisation of other intangible assets 5 16
Share-based payment expense 18 11
Fund product based payment charge1 35 30
Impairment of FRM goodwill 41 -
Defined benefit pension plans (including repayments/(contributions)) (27) 3
Other non-cash movements 16 (16)
467 509
Changes in working capital:
Decrease in receivables 101 12
Increase in other financial assets2,3 (118) (139)
Decrease in payables (30) (242)
Cash generated from operations 420 140
Interest paid (16) (3)
Income tax paid (49) (13)
Cash flows from operating activities 355 124
Cash flows from investing activities
Purchase of leasehold improvements and equipment (5) (3)
Purchase of other intangible assets (7) (9)
Acquisition of subsidiaries and other intangibles, net of cash acquired (38) (227)
Payment of contingent consideration in relation to acquisitions (46) (8)
Interest received 2 3
Dividends received from associates 3 10
Cash flows from investing activities (91) (234)
Cash flows from financing activities
Proceeds from issue of ordinary shares 7 2
Proceeds from borrowings (net of costs) - 149
Purchase of own shares by the Employee Trusts and Partnerships (33) (16)
Share repurchase programme (including costs) (176) (116)
Dividends paid to Company shareholders (193) (163)
Cash flows from financing activities (395) (144)
Net decrease in cash (131) (254)
Cash at the beginning of the year 738 992
Cash at year end3 15 607 738
Notes:
1 In the current year the fund product based payment charge has been separately identified as a non-cash charge, a change
in presentation within operating cash flows compared to the prior year when this was included within changes in working
capital. The directors consider that this better reflects the nature of these movements.
2 For the comparative period 'Purchase of investments in fund products for deferred compensation awards and other
investments' and 'Net proceeds from sale of investments in fund products for deferred compensation awards and other
investments' have been reclassified from investing activities to 'Increase in other financial assets' within operating
activities. The directors consider that this better reflects the nature of these cash flows and matches these with the
related underlying transactions.
3 Includes $21 million (2014: nil) of restricted cash relating to consolidated fund entities (Note 16).
Group statement of changes in equity
$m Equity attributable to owners of the Parent Year ended 31 December 2015 Equity attributable to owners of the Parent Year ended 31 December 2014
Share capital and capital reserves Revaluation reserves and retained earnings Total equity Share capital and capital reserves Revaluation reserves and retained earnings Total equity
At beginning of the year 1,193 1,241 2,434 1,191 1,216 2,407
Profit for the year - 171 171 - 365 365
Other comprehensive (expense)/income - (13) (13) - (58) (58)
Total comprehensive income for the year - 158 158 - 307 307
Share-based payments 7 15 22 2 11 13
Purchase of own shares by the Employee Trusts - (30) (30) - (14) (14)
Share repurchase programme (including costs) - (176) (176) - (116) (116)
Dividends - (193) (193) - (163) (163)
At year end (Note 23) 1,200 1,015 2,215 1,193 1,241 2,434
1,241
2,434
The proposed final dividend would reduce shareholders' equity by $81 million (2014: $106 million) subsequent to the balance
sheet date.
Details of share capital and capital reserves, revaluation reserves and retained earnings and related movements are
included in Note 23.
Notes to the Group financial statements
1. Basis of preparation
In preparing the financial information in this statement the Group has applied policies which are in accordance with the
International Financial Reporting Standards as adopted by the European Union at 31 December 2015. Details of the Group's
accounting policies can be found in the Group's Annual Report for the year ended 31 December 2014. The financial
information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434
of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015, upon which the auditors have issued an
unqualified report, will shortly be delivered to the Registrar of Companies.
The Annual Report and the Notice of the Company's 2016 Annual General Meeting (AGM) will be posted to shareholders on 9
March 2016. The Annual General Meeting will be held on Friday 6 May 2016 at 10am at Man Group's offices at Riverbank House,
2 Swan Lane, London EC4R 3AD.
Man's relationship with independent fund entities
Man acts as the investment manager/advisor to fund entities. Man assesses such relationships on an ongoing basis to
determine whether each fund entity is controlled and therefore consolidated into the Group's results. Having considered all
significant aspects of Man's relationships with fund entities, the directors are of the opinion that, although Man manages
the assets of certain fund entities, where Man does not hold an investment in the fund entity the characteristics of
control are not met, and that for most fund entities: the existence of independent boards of directors at the fund
entities; rights which allow for the removal of the investment manager/advisor; the influence of investors; limited
exposure to variable returns; and the arm's length nature of Man's contracts with the fund entities, indicate that Man does
not control the fund entities and their associated assets, liabilities and results should not be consolidated into the
Group financial statements. Assessment of the control characteristics for all relationships with fund entities led to the
consolidation of nine fund entities for the year ended 31 December 2015 (2014: five), as detailed in Note 16.
Impact of new accounting standards
There were no new or amended accounting standards adopted by Man in the current year which had a significant impact.
2. Adjusted profit before tax
Statutory profit before tax is adjusted to give a better understanding of the underlying profitability of the business. The
directors consider that the Group's profit is most meaningful when considered on a basis which excludes acquisition and
disposal related items (including non-cash items such as amortisation of purchased intangible assets and deferred tax
movements relating to the recognition of tax losses in the US), impairment of assets, restructuring costs, and certain
non-recurring gains or losses, which therefore reflects the recurring revenues and costs that drive the Group's cash flow.
The directors are consistent in their approach to the classification of adjusting items period to period, maintaining an
appropriate symmetry between losses and gains and the reversal of any accruals previously classified as adjusting items.
These are explained in detail either below or in the relevant note.
$m Note Year ended 31 December 2015 Year ended 31 December 2014
Statutory profit before tax 184 384
Adjusting items:
Litigation, regulatory and other settlements 8 (6) 24
Reassessment of the litigation provision - (6)
Acquisition and disposal related:
Amortisation of acquired intangible assets 13 92 72
Impairment of FRM goodwill 13 41 -
Revaluation of contingent consideration 13 62 (17)
Unwind of contingent consideration discount 9 17 7
Other costs - professional fees and other integration costs 8 4 9
Compensation - restructuring 7 - 3
Recycling of FX revaluation to the Group income statement on liquidation of subsidiaries 8 (1) -
Loss on disposal of subsidiaries and other interests - 4
Other costs - restructuring 8 7 1
Adjusted profit before tax 400 481
Tax on adjusted profit1 (39) (46)
Adjusted profit after tax 361 435
Note:
1 The difference of $26 million (2014: $27 million) between tax on statutory profit and tax on adjusted profit is made up
of a tax credit of $15 million (2014: $19 million credit) on adjusting items and a tax credit of $11 million (2014: $8
million) relating to the recognition of a deferred tax asset which is classified as an adjusting item (Note 10).
The credit of $6 million to litigation, regulatory and other settlements in 2015 relates to an insurance recovery of prior
year costs incurred in association with legal claims, which were included as an adjusting item in previous years, and the
2014 charge relates to legal claims which are partially linked to this recovery. In 2014 the $6 million reduction in the
litigation provision relates to reassessment of potential legal claims (Note 19).
Amortisation of acquired intangibles primarily relates to investment management contracts and brands recognised on the
acquisition of GLG, FRM and Numeric. Amortisation charges relating to Numeric of $18 million are included for a full year
in 2015, and $7 million relates to the newly acquired Silvermine, NewSmith and BAML fund of funds business intangibles
(Note 13).
The FRM goodwill was impaired by $41 million during the first half of the year, largely as a result of lower sales and
higher redemptions of fund of funds products than anticipated (Note 13).
The revaluation of contingent consideration is an adjustment to the fair value of expected acquisition earn-out payments.
The charge of $62 million in the current year primarily relates to Numeric, with a $61 million increase in the contingent
consideration creditor as a result of increased management fee margins compared to forecast, as well as higher than
forecast FUM due to flows and performance in 2015. The revaluation credit in 2014 relates to FRM, primarily as a result of
lower than anticipated net management fee run rates since acquisition.
The unwind of the discount on contingent consideration in 2015 primarily relates to Numeric ($12 million), with the
remainder arising from the FRM, Silvermine, NewSmith, BAML fund of funds and Pine Grove contingent consideration, and is
included within finance expense (Note 9).
Acquisition related professional fees and other integration costs of $4 million relate to the acquisitions of the
Silvermine, NewSmith, BAML fund of funds and Numeric businesses. In 2014 the acquisition related compensation and other
costs relate to staff termination, legal and other advisory fees relating to the Numeric and Pine Grove transactions, as
well as the costs of integrating our operating platforms. Compensation costs incurred as part of restructuring are
accounted for in full at the time the obligation arises, following communication of the formal plan, and include payments
in lieu of notice, enhanced termination costs, and accelerated share-based payment and fund product based charges.
In 2015, some of the Group's foreign subsidiaries were liquidated, which had accumulated foreign currency translation
reserves of $1 million at the date of liquidation. Upon liquidation of these subsidiaries the related foreign currency
translation gain was recycled to the Group income statement. The $4 million loss on disposal of subsidiaries and other
interests in 2014 is the result of the Group selling two of its subsidiaries to local management in May 2014.
Other restructuring costs principally relate to an increase in the onerous property lease provision relating to Riverbank
House (our main London office and headquarters), as a result of a contractual market-linked rental increase triggered in
2015, consistent with treatment of this onerous lease as an adjusting item upon initial recognition. In 2014, the $1
million of restructuring costs relates to an onerous lease on our New York property.
3. Revenue
Fee income is Man's primary source of revenue, which is derived from the investment management agreements that we have in
place with the fund entities. Fees are generally based on an agreed percentage of the valuation of net asset value (NAV) or
FUM and are typically charged in arrears. Management fees net of rebates, which include all non-performance related fees
and interest income from loans to fund products, are recognised in the year in which the services are provided.
Performance fees net of rebates relate to the performance of the funds managed during the year and are recognised when the
quantum of the fee can be estimated reliably and has crystallised. This is generally at the end of the performance period
or upon early redemption by a fund investor. Until the performance period ends market movements could significantly move
the NAV of the fund products. For AHL, GLG and FRM strategies, Man will typically only earn performance fee income on any
positive investment returns in excess of the high water mark, meaning we will not be able to earn performance fee income
with respect to positive investment performance in any year following negative performance until that loss is recouped, at
which point a fund investor's investment surpasses the high water mark. Numeric performance fees are earned only when
performance is in excess of a predetermined strategy benchmark (positive alpha), with performance fees being generated for
each strategy either based on achieving positive alpha (which resets at a predetermined interval, i.e. every one to three
years) or exceeding high water mark.
4. Income or gains on investments and other financial instruments
The net gains on investments and other financial instruments primarily relate to gains on seeding investments.
5. Distribution costs
$m Year ended 31 December 2015 Year ended 31 December 2014
Distribution costs 77 104
Distribution costs paid to external intermediaries are directly related to their marketing activity and the investors
serviced by them. The distribution expense is therefore variable with FUM and the associated management fee income.
Distribution costs of $77 million (2014: $104 million) comprise investor servicing fees of $74 million (2014: $89 million)
and product placement fees of $3 million (2014: $15 million). Servicing fees, which are paid to intermediaries for ongoing
investor servicing and are expensed as incurred, have decreased primarily as a result of the continued mix shift towards
institutional assets, particularly in the quant alternatives category, and the roll-off of guaranteed product FUM.
Placement fees, which are paid for product launches or sales and are capitalised and amortised over the expected investment
holding period (Note 14), have reduced due to limited new payments in recent years and the roll-off of amortisation of the
previously capitalised balances.
6. Asset servicing
Asset servicing includes custodial, valuation, fund accounting and registrar functions performed by third parties under
contract to Man, on behalf of the funds. The cost of these services is based on FUM, and vary depending on transaction
volumes, the number of funds, and fund NAVs.
7. Compensation
$m Year ended 31 December 2015 Year ended 31 December 2014
Salaries 158 136
Variable cash compensation 212 174
Share-based payment charge 18 12
Fund product based payment charge 35 30
Social security costs 33 33
Pension costs 6 6
Compensation costs - before adjusting items 462 391
Acquisition related costs (Note 2) - 3
Total compensation costs 462 394
Compensation is our largest cost and an important component of our ability to retain and attract talent at Man. In the
short term the variable component of compensation adjusts with revenues and profitability of the relevant business units.
In the medium term the active management of headcount can reduce fixed compensation, if required.
Compensation costs in total are $462 million (2014: $391 million), before adjusting items, or 43% of net revenue (2014:
36%). Net revenue is defined as gross management and other fees, performance fees, income or gains on investments and other
financial instruments, share of after tax profit of associates, less distribution costs. Salaries and variable cash
compensation are charged to the Group income statement in the year in which they are incurred, and include partner
drawings.
The increase in total compensation costs is due to the increase in headcount as a result of the Silvermine and NewSmith
acquisitions (Note 13), as well as inclusion of Numeric and Pine Grove for the full year in 2015, a less favourable hedged
Pounds sterling to USD rate in 2015 (1.66) compared to the hedged rate in 2014 (1.52), and higher GLG performance related
compensation. The compensation structure for the GLG equity long short strategies teams is based on gross profits, which in
2015 were in excess of performance fees generated by the strategies given they started the year below high water mark.
Additionally, compensation costs include an increased year-on-year charge of $5 million as a result of the 2014 change in
application of the accounting policy for deferred compensation, which impacts the charges relating to deferred share and
fund awards granted from 2015 onwards.
The accounting for share-based and fund product based compensation arrangements is detailed in Note 22. The unamortised
deferred compensation at year end is $49 million (2014: $22 million), largely increasing as a result of the change in
application of accounting policy for deferred awards which weights the related vesting expense more in the future compared
to previously, which has a weighted average remaining vesting period of 2.1 years (2014: 1.3 years).
Pension costs relate to Man's defined contribution and defined benefit plans.
8. Other costs
$m Year ended 31 December 2015 Year ended 31 December 2014
Occupancy 34 33
Technology and communication 34 32
Temporary staff, recruitment, consultancy and managed services 20 25
Legal fees and other professional fees 17 13
Benefits 13 12
Travel and entertainment 12 9
Audit, accountancy, actuarial and tax fees 8 8
Insurance 7 7
Marketing and sponsorship 6 6
Other cash costs, including irrecoverable VAT 10 5
Total other costs before depreciation and amortisation and adjusting items 161 150
Depreciation and amortisation 16 24
Other costs - before adjusting items 177 174
Acquisition and disposal related (Note 2) 4 9
Litigation, regulatory and other settlements (Note 2) (6) 24
Reassessment of litigation provision (Note 2) - (6)
Restructuring (Note 2) 7 1
Recycling of FX revaluation on liquidation of subsidiaries (1) -
Total other costs 181 202
Other costs, before depreciation and amortisation and adjusting items, are $161 million in the year, compared to $150
million in the prior year, which reflects the impact of the less favourable hedged Pounds Sterling to USD rate in 2015 and,
to a lesser extent, a full year of other costs relating to prior year acquisitions and a portion of the Silvermine and
NewSmith businesses acquired in 2015 (Note 13), partially offset by continued efforts to remain disciplined on costs which
has resulted in a lower underlying other costs base compared to 2014.
9. Finance expense and finance income
$m Year ended 31 December 2015 Year ended 31 December 2014
Finance income:
Interest on cash deposits and US Treasury bills 3 3
Total finance income 3 3
Finance expense:
Interest payable on borrowings (9) (3)
Revolving credit facility costs and other (Note 15) (8) (9)
Total finance expense - before adjusting items (17) (12)
Unwind of contingent consideration discount (Note 2) (17) (7)
Total finance expense (34) (19)
Interest payable on borrowings has increased for the year ended 31 December 2015 due to the inclusion of a full year of
interest expense on the notes issued in September 2014 (Note 15).
10. Taxation
$m Year ended 31 December 2015 Year ended 31 December 2014
Analysis of tax charge/(credit) for the year:
Current tax:
UK corporation tax on profits of the period 37 54
Foreign tax 15 17
Adjustments to tax charge in respect of previous periods (17) (30)
Total current tax 35 41
Deferred tax:
Origination and reversal of temporary differences (11) (14)
Recognition of US deferred tax asset (11) (8)
Total deferred tax (22) (22)
Total tax charge 13 19
Man is a global business and therefore operates across many different tax jurisdictions. Income and profits are allocated
to these different jurisdictions based on transfer pricing methodologies set in accordance with the laws of the
jurisdictions in which we operate. The effective tax rate results from the combination of taxes paid on earnings
attributable to the tax jurisdictions in which they arise. The majority of the Group's profit was earned in the UK,
Switzerland and the US. The current effective tax rate of 7% (2014: 5%) differs from the underlying rate principally as a
result of the incremental recognition of a US deferred tax asset of $11 million (2014: $8 million), as detailed on the
following page, and the reassessment of tax exposures in Europe during the year, partly offset by the impairment of the FRM
goodwill on which no tax relief is received. The effective tax rate is otherwise consistent with this earnings profile. The
effective tax rate on adjusted profits (Note 2) is 10% (2014: 10%).
The tax on Man's total profit before tax is lower than the amount that would
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AnnouncementREG - Man Group plc - Transaction in Own Shares
AnnouncementREG - Man Group plc - Transaction in Own Shares
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