Chairman’s Statement
“Man Investments’ overall sales for the year were a record $15.9 billion, helping drive assets under management up 24% to $61.7 billion.”
I am pleased to report on what has been another excellent year for the Man Group with pre-tax profit up 27% at $1,564 million. Both Asset Management and Brokerage have performed strongly, enabling us to achieve our key financial targets by delivering an increase in underlying earnings per share of 42% and a post-tax return on equity of 31%.
Reflecting these results and our robust capital position the Board proposes a final dividend of 12.7 cents (payable at the rate of 6.42 pence per share) for a total dividend for the year of 20.0 cents, an increase of 40%. Additionally, during the year we bought back 44,019,161 shares at a total cost of $375 million under our rolling buyback programme. Total shareholder return for the year to March 31 2007 was 38%, with an annual compound return of 25% per annum over the last five years.
In Asset Management, the year saw strong inflows and good performance for the industry. Man Investments’ overall sales for the year were a record $15.9 billion, helping drive assets under management up 24% to $61.7 billion. Returns for all our core investment managers during the year were mixed. Although all contributed to performance fees over the year, the overall level was less than last year, reflecting a lower contribution from AHL. Overall for the division pre-tax profit was up 13% to $1.3 billion.
In Brokerage, Man Financial benefited from the combination of very active markets, a client base augmented by the fully integrated Refco business and continued strong organic expansion. Together these developments drove higher volumes and strong growth in profitability with pre-tax profit before exceptional items up 69% year-on-year.
At the close of the financial year there were two significant developments – the announcement of our intention to separate the businesses, and the appointments of Stanley Fink and Peter Clarke as non-executive Deputy Chairman and Group Chief Executive respectively.
With regard to the first, we announced on 30 March 2007 that the Group
Board, after a thorough review, had concluded that Man Financial and
Man Investments would be best positioned to maximise future returns
and growth opportunities by pursuing focused independent strategies
and having appropriate individual capital structures. It is anticipated
that both Man Group and MF Global’s overall credit rating will be as
good as the existing Group ratings. We therefore intend to separate
the Brokerage business, and believe that significant value will be created
for Man Group shareholders from such a transaction. The separation will
be effected by an initial public offering on the New York Stock Exchange
of a majority interest in the Brokerage business and this is intended
to take place in the third calendar quarter of 2007, subject to market
conditions remaining favourable and shareholder approval.
Man Financial will be renamed ‘MF Global’ with effect from the separation.
Kevin Davis, currently Managing Director of Man Financial will become
CEO of MF Global, Chris Smith will become COO and Deputy CEO and Amy
Butte will be CFO. The non-executive Chairman will be Alison Carnwath.
We believe this separation from the Man Group will emphasise MF Global’s
commitment to specialty brokerage and enhance its position as the largest
specialty broker in its markets. We also believe that having a public
trading market for its shares will enable it to offer more attractive
consideration to potential acquisition targets and to compensate its
employees in a way that more closely aligns their interests with the
business.
We have committed to distribute the net proceeds of the MF Global offering to our shareholders. It is expected that this distribution will be in a form which will allow shareholders to receive their share of the proceeds as either income or capital, at their option. The distribution will be subject to shareholder approval and is expected to take place in the fourth quarter of the calendar year.
The second significant development on 30 March 2007 was Stanley Fink’s appointment as Deputy Chairman. In the seven years of his tenure as Group Chief Executive we have seen pre-tax profits grow from $181 million to $1,564 million; assets under management from $4.7 billion to $61.7 billion; and the Group’s market capitalisation from £1.3 billion to £10.4 billion. These numbers reflect a series of remarkable accomplishments which have both added substantial value for our shareholders and helped change the shape of the investment management industry. Many congratulations and thanks to Stanley for his outstanding contribution, and indeed to all of his executive team across the Group who have played a part in this success. Congratulations as well to Peter Clarke who starts his tenure as Chief Executive at a challenging and exciting time in the development of the Group with all of our best wishes for success.
With respect to other Board changes, during the year we saw the departure of Jonathan Nicholls on 20 July 2006 as a non-executive director following his appointment as an executive director at Old Mutual plc. We thank him for his contribution during his two years on the Board. Effective 31 May 2007, we were pleased to welcome Kevin Hayes to the Board as Finance Director, and wish him every success in his new role.
Funds under management are currently estimated to be over $65 billion, up $3.5 billion since the end of March, reflecting in particular, strong investment performance and further sales momentum. With recent positive performance across our core managers, and a strong pipeline of forthcoming product initiatives, the Board is very confident about the prospects for the coming year.
Harvey McGrath
Chairman