MAN GROUP – DOWN 15% – WHATS HAPPENING?

by Michael on September 28, 2011

This morning saw MAN GROUP (EMG) issue a RNS and the Share Price has fallen in early trading by 15%. Lets read this together, but I feel this could be an over-reaction, certainly they have had a lowering of asset value due to the volatility of markets, but probably in line with their peers, the dividend is being maintained, liqidity remains robust, managements fees level and overall performance positive: anyone buying now is going to get more bang for their buck:

Peter Clarke, Chief Executive of Man, said:

 ”The extreme volatility of markets in recent months has created challenging performance conditions across asset classes. This has tested investor appetite for risk but also reinforced the need for diversifying, non-correlated investment returns. The benefits of Man’s strategy to build out a range of investment styles to suit differing market conditions have been strongly evident in this period.  AHL is up 7.7% in the five months to end August and is around 5% from high water mark, and GLG macro and European long/short strategies were also positive.  Other hedge fund styles saw mixed performance across the period as concerns around global growth prospects and sovereign debt levels, especially in the Euro zone, precipitated violent swings in equity, currency and bond markets. However, our overall hedge fund performance in the quarter to 30 September was encouragingly positive.

 ”As anticipated, investor sentiment continued to weaken across the summer with lower sales in our second quarter and some increase in redemption rates, notably in September. The first half overall saw net inflows, and although the second quarter saw a net outflow it was encouraging to see positive flows in our institutional multi-manager business, as managed account mandates from BVK and USS continued to fund. We have continued to benefit from our strong regional distribution franchise. Our $2.5 billion Japan AHL product, launched in April 2011, is performing well; we have new products launching in Canada and the United States and have added investment management strength into the important Asian markets.

 ”In terms of financial performance, although assets under management reduced in the second quarter, primarily as a result of market movements in long only and the impact of foreign exchange translation from the weakening Euro, management fees for the half have been broadly stable on a like-for-like basis. Our capital and liquidity position remains very robust and the dividend is being maintained pro rata across our new financial year end.

 ”Looking ahead, we are assuming that investor appetite will be generally suppressed for the remainder of the year. However, we remain confident that our broad range of liquid, diversifying return streams, strong geographic base and robust financial position will continue to differentiate Man’s investment capabilities, even in turbulent markets.”

Dividend

Given business performance for the six months ending 30 September 2011, Man’s strong market position and continued capital strength, the Board intends to maintain an interim dividend for the period of 9.5 cents per share, to be paid in December 2011.

The company’s subsequent dividend payment will be for the three months to 31 December 2011, to align dividend payments with Man’s new December year end. The Board expects to propose a final dividend for this three month period of 7.0 cents per share, to give a maintained total dividend, pro-rated for the nine month period, of 16.5 cents per share. Subject to shareholder approval, the final dividend will be paid in May 2012.

Key points – operating

·     Alternatives performance: uncorrelated returns from Man’s wide range of investment strategies generated positive investment movement of $0.4 billion in hedge fund styles in Q2 (negative $0.8 billion for H1)

o  AHL generated $1.5 billion of positive investment movement in Q2 ($0.9 billion in H1)

o  GLG alternatives delivered a mix of positive and negative performance across styles, but were $1.1 billion negative for Q2 ($1.4 billion for H1)

o  Institutional fund of fund performance was flat for Q2 ($0.3 billion negative for H1) 

·     Long only performance: GLG long only strategies registered a negative market movement of $1.9 billion in Q2 ($1.8 billion for H1)

·     Flows: inflows from AHL and institutional fund of funds and outflows from guaranteed products and GLG styles gave a Q2 outflow of $2.6 billion (H1 inflow of $1.1 billion driven by positive flows from GLG in Q1 and from AHL across both quarters)

o  After record sales in Q1 of $9.0 billion, Q2 sales reduced to $4.5 billion, reflecting an anticipated deterioration in investor sentiment over the summer

o  Redemptions increased from $5.3 billion in Q1 to $7.1 billion in Q2

·     Other: significant negative FX translation effects of $1.9 billion in Q2 ($1.1 billion for H1); other movements were flat in Q2 (negative $1.8 billion for H1)

·     Total FUM: $65.0 billion at 30 September (30 June 2011: $71.0 billion; 31 March 2011: $69.1 billion).

 Key points – financial

·     Statutory profit before tax on continuing operations for the six months ending 30 September 2011 of $145 million (H1 2011: $180 million)

·     Diluted statutory EPS of 5.7 cents per share (H1 2011: 7.6 cents per share)

·     Adjusted profit before tax of $185 million (H1 2011: $227 million)

o  Net management fees (excluding net finance expense) of $200 million (H1 2011: $234 million) reflect the inclusion of GLG, reduced associate income following the sale of Man’s interest in BlueCrest and previously indicated increases to property costs and depreciation

o  Net performance fees of $30 million (H1 2011: $17 million) 

o  Net finance expense of $45 million (H1 2011: $24m), including a one off cost of $19 million related to the recent debt buy back; annualised  interest expense following the buy back will reduce by c. $20 million

·     Adjusted diluted EPS of 7.5 cents per share (H1 2011: 10.2 cents per share)

·     Regulatory capital surplus of $1 billion, net cash of $700 million and total available liquidity resources of $3.4 billion.

 

 

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