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MAN: a rising tide floats all boats

Rather like surveying a Neolithic body exhumed from a Norfolk bog, investors can only speculate as to MAN’s purpose in life.
MAN: a rising tide floats all boats

 

  • The company benefitted from the rotation out of growth into value stocks
  • The total funds under management rose by 9 per cent

Half-year results for Man Group (EMG) amply illustrate the adage that a rising tide floats all boats. The asset manager would have hard pressed to turn in a bad performance during a half of charging bulls, but the results gave little away as to how management plans to deliver the same returns for shareholders as market conditions have allowed it to do for its customers.

The company clearly benefitted from the rotation out of growth into value stocks that characterised the investing climate during the half. That explained the relative overall outperformance of 1.3 per cent, with long-only strategies delivering 2.5 per cent when compared on an asset-weighted basis with its peers. Meanwhile, total funds under management rose by 9 per cent to $135m (£97m) as lockdown savers channelled their extra cash into investment funds, while the net fee margin stayed stable at 66 basis points. All that extra activity meant that bonuses made a comeback and compensation costs were nearly 50 per cent higher at $293m.

Compensation for shareholders mainly seems to be taking the form of share buybacks; the company completed $99m of these up the 27 July and announced another $100m worth once the current programme is complete. The new programme will take roughly 50m shares out of circulation at current prices.

Whatever the view of buybacks – and there are many who are deeply suspicious of this form of shareholder compensation, with its overtones of being paid simply to go away – MAN’s management at least seems to have taken on board that it cannot simply sit around and earn fees from clients, while paying itself ever larger bonuses for the privilege, without paying any thought to what the shareholders are taking home at the end of the day. The problem, as we have pointed out previously, is that without a clear plan to improve its basic operations – for a company that deals with cash coming and out and has few fixed assets to worry about, the company still has a weak-looking 1.9 per cent free flow yield – the shares will continue to underperform their peers and the rest of the underlying index.

In no sense is MAN an expensive share with a forward PE ratio of 10.6, based on consensus estimates, but in this case, cheapness does not imply deep intrinsic value. The price reflects the company’s current status as a value trap and its mediocre long-term performance. Hold.

Last IC view: Hold, 157p, 2 Mar 2021

MAN (EMG)    
ORD PRICE:192pMARKET VALUE:£2.75bn
TOUCH:192-193p12-MONTH HIGH:199pLOW: 105p
DIVIDEND YIELD:4.2%PE RATIO:12
NET ASSET VALUE:115ȼ*NET DEBT:3%
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
202040355.02.704.9
202171828016.15.6
% change+78+409+496+14
Ex-div:05 Aug   
Payment:03 Sep   
£1.39 = $1.39. *Includes intangible assets of $752m, or 53ȼ a share.