Notes to the Interim Financial Statements
 |
|
|
|
| 5. Disposal of discontinued operation | |||
|
On 19 July 2007 the Group separated its Brokerage business, renamed ‘MF Global’, through an initial public offering (IPO) on the New York Stock Exchange. Its results, up to the date of separation, are presented in these financial statements as discontinued operations. The IPO resulted in the disposal of 81.4% of the share capital of MF Global, giving rise to a gain on sale of $1.7 billion. The residual shareholding held by the Group has been reclassified as a non-current investment and carried at fair value, with fair value movements taken to the available for sale reserve within equity. The fair value of the residual holding was $645 million at 30 September 2007, reflecting an unrealised gain of $432 million, which is included in the available for sale reserve. It is intended that net proceeds of approximately $2.75 billion received from the separation of MF Global are returned to shareholders through a B and C share arrangement, which allows shareholders to elect for either capital or income receipt, or a combination of both. The distribution is expected to take place before the end of the calendar year. |
|||
| Results for discontinued operations comprise: | |||
| Half year to 30 September 2007 $m |
Restated+ Half year to 30 September 2006 $m |
Year to 31 March 2007 $m |
|
| Revenue | 750 | 1,084 | 2,392 |
| Cost of sales | (421) | (658) | (1,445) |
| Other operating income (a) | 12 | 9 | 85 |
| Other operating expenses | 9 | (1) | (3) |
| Administrative expenses (b) | (260) | (364) | (779) |
| Operating profit from discontinued operations | 72 | 70 | 250 |
| Net finance income (c) | 8 | 16 | 11 |
| Share of after tax profit of associates and joint ventures | 1 | 1 | 2 |
| Profit before tax from discontinued operations | 81 | 87 | 263 |
| Taxation | (28) | (47) | (89) |
| Profit on disposal (d) | 1,746 | – | – |
| Profit after tax for the period | 1,799 | 40 | 174 |
| (a) Included in other operating income are exceptional items relating to: | |||
| Gain on sale of NYMEX seats | – | – | 53 |
| Income received from a legal settlement | – | – | 28 |
| (b) Included in administrative expenses are exceptional items relating to: | |||
| Costs directly relating to the planned sale of Brokerage | – | – | (35) |
| Termination costs in relation to US pension schemes | – | (19) | (18) |
| Costs directly relating to a legal settlement | – | – | (10) |
| Refco integration costs | – | (12) | (12) |
| (c) Net finance income comprises: | |||
| Finance income | 70 | 87 | 175 |
| Finance expense | (62) | (71) | (164) |
| 8 | 16 | 11 | |
| (d) Profit on disposal: | |||
| Consideration | 2,921 | – | – |
| Net assets disposed | (928) | – | – |
| Costs related to the IPO | (247) | – | – |
| 1,746 | – | – | |
| + The restatement in the comparative period relates to the classification of Brokerage as a discontinued operation. In addition, revenue and cost of sales have been amended to reduce both lines by $78 million to eliminate intra-group transactions. | |||
|
The costs of the IPO principally relate to: underwriting fees; legal, tax, advisory, audit and other professional fees; and termination costs. The profit on disposal of $1,746 million is subject to amendment in the second half of this financial year, as some taxation and cost items are still to be agreed with MF Global, in accordance with the separation agreement. At the time of the IPO, the Man Group, in the normal course of business, was guaranteeing MF Global’s obligations to some of its clients. Since the IPO, nearly all these guarantees have either been terminated or novated into the name of MF Global. The remaining guarantees are not expected to give rise to any loss for Man Group. |
|||