Man Group is going through a horrible time, and things look set to get worse before they get better. A glance at the performance of the hedge-fund manager tells its own story. In 2008, net management fees were $1.05bn, but in the nine months to the end of December 2011 - the company's new year-end - they were a miserable $281m.
- Dividend yield
- Plenty of cash
- Flagship AHL fund still struggling
- Can't cope with volatile markets
- Fund outflows persist
Simultaneously, income from so-called 'performance' fees has been disastrous - down from $936m to just $37m. While funds under management rose from $58.4bn to $59bn in the nine months to end March, this is far from the $74.6bn under management in 2008. Moreover, the latest modest rise in funds managed was due entirely to share prices rising. Investors continued to withdraw funds. In the first quarter of 2012, sales remained flat at $3.1bn against redemptions of $4.1bn.
And, rightly, shareholders are turning up the heat on chief executive Peter Clarke, whose $7m pay package for last year came despite the company failing to meet all six key performance targets. Institutional shareholders came to the rescue, after 15 per cent of shareholders failed to approve the 2011's remuneration report. However, rumours say Mr Clark only has until the end of the year to improve the company's lamentable performance, which has seen the share price fall to an 11-year low.
| MAN GROUP (EMG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 85p | MARKET VALUE: | £1.55bn | |
| TOUCH: | 85-85.5p | 12-MONTH HIGH: | 265p | LOW: 85p |
| DIVIDEND YIELD: | 16.0% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 138p | NET CASH: | $250m | |
| Year to 31 Mar | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (c) | Dividend per share (c) |
|---|---|---|---|---|
| 2008 | 3.17 | 2.08 | 92.8 | 44.0 |
| 2009 | 2.49 | 0.74 | 28.7 | 44.0 |
| 2010 | 1.35 | 0.54 | 25.1 | 44.0 |
| 2011 | 1.66 | 0.32 | 14.2 | 44.0 |
| 2012* | 1.31 | 0.24 | 9.3 | 22.0 |
| % change | - | - | - | - |
Normal market size: 17,500 Matched bargain trading Beta: 0.6 * Numis estimates year to end December (Figures not comparable with earlier years) £1=$1.62 | ||||
Much of Man's problem stems from its heavy reliance on its flagship fund, AHL, which accounts for around 75 per cent of group earnings. AHL delivers a series of complex trading programmes driven by a bank of computers and still has an impressive long-term performance record, but the trend is weakening. The annual return since 1996 is 15 per cent, but since 2007 it's only 6 per cent. And it gets worse - the return in the past three years has been minus 1 per cent negative and minus 6 per cent over the past year. AHL's investment model works well in markets with a trend sustained over six to nine months, but it can't cope with volatile markets that are more down than up.
Man's dividend payment is the subject of much debate. At the moment, Man's bosses are committed to paying out all the adjusted management fee earnings and net performance fees as dividends. On this basis, the company plans to pay out 22 cents a share in 2012 (see table), which will generate a lovely 16 per cent yield. But, net of taxes and everything else, the company can't afford this level of payout and broker Numis expects the dividend to be cut to 12.1 cents in 2013, though even that will generate an 8.8 per cent yield. Group finances are in pretty good shape, too. As well as $250m net in cash, there is a $550m regulatory capital surplus.
