28 May 2009
Key points - Financial
- Profit before tax and adjusting items* of $1.2 billion (2008: $2.1 billion)
- Diluted earnings per share before adjusting items* of 57.0 cents (2008: 90.2 cents)
- Annualised return on shareholder’s equity on continuing operations of 13.5% (2008: 41.6%)
- Pre tax margin before adjusting items* of 52% (2008: 64%)
- Proposed final dividend of 24.8 cents per share, giving a total dividend for the year maintained at 44 cents per share
- Regulatory capital surplus preserved at $1.7 billion; available liquidity resources of $4.8 billion, consisting of cash ($2.4 billion) and undrawn committed banking facilities ($2.4 billion)
|Year ended 31-Mar-09 $m||Year ended 31-Mar-08 $m|
|Net management fee income||885||1,143|
|Net performance fee income||358||936|
|Profit before tax and adjusting items||1,243||2,079|
|Adjusting items*||-109 (H1)||-|
|Profit before tax||743||2,079|
Key points – Operating
- Funds under management at 31 March of $46.8 billion, $0.9 billion lower than the March Pre-Close Trading Update as a result of negative performance and negative FX in the last week of March (31 December 2008: $53.3 billion; 31 March 2008: $74.6 billion)
- Fund performance ahead of industry benchmarks for the financial year: AHL +7.7%; RMF -15.5% vs HFRI Fund of Funds Composite -17.5%
- Private investor sales of $11.3 billion; net inflows of $2.2 billion
- Institutional sales of $3.6 billion; net outflows of $4.3 billion
- Private investor sales since 31 March 2009 year-end of $2.6 billion
- Run-rate of fixed costs reduced by $60 million per annum. A further $30 million savings expected from the new hedge fund management business, the majority in 2010
- Funds under management, as at 26 May 2009, are estimated at $44 billion
- Continued investment in AHL to extend leadership in research capability, open up new markets and further enhance trading efficiency
- Launch of an integrated hedge fund management business to provide transparent access to hedge fund investing for institutions and private investors worldwide
Peter Clarke, Chief Executive of Man Group, said:
“The past financial year saw extraordinary turmoil in financial markets globally which put extreme stress on business models across the financial services industry. Man has not been immune; our funds under management have decreased and our earnings for the year reduced 40% to $1.2 billion, before adjusting items. Despite difficult markets we saw a record level of private investor sales in the year, demonstrating the appeal of our products and the strength of our distribution franchise even at times of market stress. We have taken action to reduce the cost base of the firm to reflect the lower level of assets, and adapted our business model and product offerings to suit current investor requirements. We ended the year with an increase in both our capital surplus and net cash position and in light of our financial strength the board is declaring a maintained final dividend for the year.
“We have continued to invest in research and development at AHL to support our core franchise. We have also launched a new integrated hedge fund management business, with a common investment process and philosophy, providing investors with access to the entire Man product range. The new business, which will be operational during June, addresses investor preference for enhanced transparency and increased flexibility, whilst also focussing on the governance and control requirements of investors through an emphasis on managed account investment. It is a powerful and broadly based model for the future of hedge fund investing.
“Since the end of the financial year we have seen strong demand from the private investor, raising $2.6 billion in both open-ended and guaranteed formats, reflecting the attraction and flexibility of our liquid product range in these markets. With global scale and a flexible business model, Man is in a strong position to grow market share."
After the turmoil of 2008, the hedge fund industry has shown signs of stabilisation in early 2009. A number of market commentators anticipate that industry funds under management will bottom-out at around $1 trillion during 2009, then regain upward momentum. With overall industry performance in positive territory for the year to date and outflows slowing, there are some signs in support of this view. However, it is clear that a major industry shake-out is underway, precipitating a sharp fall in the number of managers, led more by attrition than consolidation, as many managers have not been able to survive the decline in assets. The factors underpinning these trends play to the strengths of Man’s business model.
Man has continued to invest in its business and sharpen its product focus to take advantage of markets and new opportunities. The launch of the new integrated hedge fund management business demonstrates where Man sees clear and wide-ranging potential for growth in market share, and the first product will be in the market during June 2009. Man has taken further steps to reduce costs and rationalise products as part of this initiative. Principal investing and seeding activities have also been separated out to take advantage of the clear opportunities in this area.
Investors of all types are reflecting on the turbulence of markets over the last two years and are looking for diversification opportunities within their portfolios offering an appropriate risk and return, and for investment firms who have scale and breadth. Institutional investor sales have remained muted since year end and redemptions, as announced in March, continued into April. Man’s recent private investor product offerings have focussed on liquid strategies, in both guaranteed and non-guaranteed formats, with conservative and sustainable leverage. Private investor demand has been strong, with sales since year end totalling $2.6 billion, including around $1.5 billion across Asia Pacific. Funds under management, as at 26 May 2009, are estimated at $44 billion.
The lower level of Man’s current funds under management will result in lower management fee income in the coming year. Nevertheless, this is a period of significant opportunity in the hedge fund industry. Man has addressed its cost base and has made a number of substantial changes to the business to reinforce Man’s competitive advantage, and address future investor requirements and evolving markets. Man is well positioned for growth in market share.
Based on the Group's earnings generation and business performance in the yfear and the strength of its balance sheet, the Board intends to declare a maintained final dividend of 24.8 cents per share, giving an unchanged total dividend in dollar terms for the year of 44 cents per share. This dividend will be paid at the rate of 15.47 pence per existing share, an increase of 23% in sterling terms from the prior year’s final dividend.
Dates for the 2009 Final Dividend
Ex dividend date 1 July 2009
Record date 3 July 2009
Payment date 21 July 2009
* H2 items include impairment provisions relating to Ore Hill and the residual holding in MF Global ($354 million) and non-recurring restructuring costs ($37 million).