Man Group (EMG), say the fine people at Numis Securities, is “a stock to avoid”. Given its 12-month trailing beta of 1.26 – i.e. 26 per cent more volatile than an arguably already volatile market – many investors will have already drawn that conclusion. But interim results for the listed hedge fund nevertheless offer reasons to not take the analysts’ view at face value.
For one, the absolute performance of Man’s strategies in the first half of 2019 – particularly quantitative alternative mandates – was strong, boosting funds under management by $5.9bn (£4.9bn) and helping to lift performance fees by 67 per cent to $142m. When combined with the group’s ongoing share buyback programme, Man says this led to a 6 per cent rise in adjusted earnings per share.
To get to that figure one needs to add back amortised assets and contingent considerations. And it’s not like that number - 8.6¢ per share - is even close to the point from which dividends are measured, that being the “adjusted management fee earnings per share” metric. This came in at just 4.7¢, 27 per cent down on the same period last year.
As Numis points, this is scant consolation for several years of cost-cutting and restructuring. So far in 2019, an unfavourable foreign exchange hedge rate has been blamed for rising compensation costs, as well as asset servicing and depreciation charges.
Those same analysts forecast management fee earnings of 9.2¢ per share in 2019, rising to 10.5¢ in 2020.
| MAN GROUP (EMG) | ||||
| ORD PRICE: | 172p | MARKET VALUE: | £ 2.65bn | |
| TOUCH: | 172-172.4p | 12-MONTH HIGH: | 185p | LOW: 124p |
| DIVIDEND YIELD: | 6.3% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 102¢* | NET CASH: | $68m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 506 | 90.0 | 4.6 | 4.88 |
| 2019 | 527 | 110 | 5.9 | 3.87 |
| % change | +4 | +22 | +28 | -21 |
| Ex-div: | 8 Aug | |||
| Payment: | 4 Sep | |||
| £1=$1.22 *Includes intangible assets of $897m, or 58¢ a share. | ||||
