MAN GRP RESULTS – MAINTAINED DIVI. SBM TRADING BUY CALL INTACT

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Man group looks to be opening up around 6% this morning on a set of interim results that allay the worst fears over funds under management. Below are the highlights –  

Funds under management (FUM) at 30 June 2012 of $52.7 billion (31 December 2011: $58.4 billion), reflecting sales of $7.2 billion, redemptions of $9.6 billion, investment movement of -$0.3 billion, FX translation effects of -$0.5 billion and other movements, principally guaranteed product degears, of -$2.5 billion  

Adjusted profit before tax (PBT) of $121 million, comprising adjusted net management fee PBT of $108 million and net performance fee PBT of $13 million 

Statutory loss before tax on continuing operations for the six months ended 30 June 2012 of $164 million, reflecting impairment of goodwill associated with GLG ($91 million) and Man Multi-Manager ($142 million)

On track to deliver $95 million of operating cost savings announced in March 2012 

Further annual cost savings of $100 million over the next 18 months announced today 

Surplus regulatory capital of $704 million at 30 June 2012, net cash of $564 million and total liquidity resources of $3.0 billion

Interim dividend of 9.5 cents per share; total dividend for the year expected to be 22 cents.

The stock currently yields an amazing 20% with a net cash buffer of over £350m (at current FX rates) and this mornings statement seems to imply defiantly that the dividend IS going to be maintained and share buybacks possibly continue. 

The GLG acquisition continues to assist the wider Group with this area generating net Funds under management (FUM) sales of just under $5bn and so alleviating the diminution of FUM in the key AHL offering. 

Clients withdrew a net $2.4 billion from its suite of investment funds in the first half of 2012, according to today’s statement. AHL, the company’s largest hedge fund, has been hurt by Europe’s debt crisis as rivals that also rely on computer algorithms have had better responses to political decisions that spurred rapid changes in currency and commodity prices.

“It’s not as easy as it used to be. There is increased competition, there are no trends, there is quantitative easing and there is political intervention,”  said RBC Capital Markets analyst Peter Lenardos.

CEO Peter Clarke, on a conference call this morning said that Man Group would achieve the $100 million of cost cuts by eliminating jobs, cutting back on business in certain countries and moving away from investment products that produce the highest compensation for salespeople. Man Group will try to sell more open-ended products, which allow clients to invest and withdraw money at regular intervals, he said.

AHL, which managed $19.5 billion at the end of March, declined 4.4 percent in the first six months of the year, according to data compiled by Bloomberg. AHL has performed better this month, rising 4.3 percent through July 19, helped by the euro’s decline against the U.S. dollar.

Man Group announced last month that Jonathan Sorrell would replace Kevin Hayes as finance director. Sorrell joined Man Group as head of strategy in August 2011 from Goldman Sachs Group Inc. His father is Martin Sorrell, chief executive officer of WPP Plc, the world’s largest advertising company.

Man Group, which was removed from the FTSE 100 Index of the U.K.’s biggest companies in June, has tried to improve AHL by slowing the speed of trades, increasing the assets it buys and sells, and hiring additional scientists to oversee the program.

SBM called a Trading Buy at 72p just over a month ago and we remain comfortably long Man shares, eagerly anticipating the dividend collection of just under 6p on the 15th August and that should the shares rise further will generate a very nice double digit return on a few short months.

The chart below shows just how much the stock has underperformed the market this year but, you can see in recent weeks that it is beginning to outperform the FTSE now and also the RSI line is attempting to break back above 50. We think these are early signs of outperformance of the stock over the next 12 months.

Keep buying on weakness


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