Man Group Plc (EMG.L), a British alternative investment management business, on Wednesday said it expects pre-tax profit for the first half of the fiscal year to decline from the previous year, with net management fee income dropping sharply from last year.
Funds under management, or FuM, at the end of the second quarter is estimated to have increased sequentially, while second-quarter redemptions declined significantly from the previous quarter. FuM as of September 30 is estimated to be $43.8 billion, up slightly from $43.3 billion as of June 30, 2009. For the half-year ending September 30, 2008, FuM was $67.6 billion.
In a trading update for the half-year ending September 30, the company said it expects pre-tax profit for the period to be around $280 million, sharply lower than last year's $622 million. This projection includes a net exceptional gain of $10 million for the first-half related to a net gain of $33 million on sale of the residual holding in MF Global, partly offset by redundancy and other restructuring costs.
The hedge-fund manager said its profit before tax and exceptional items is projected to be $270 million, down from $729 million a year ago.
Net management fee income is estimated to be $240 million, compared to $569 million reported last year, reflecting the reduced level of Funds under Management. Net performance fee income is estimated to be $30 million, in comparison with $160 million in the previous year.
Earnings per share for the first half is expected to be around 12.5 cents and underlying earnings per share, excluding performance fee income and exceptional items, is expected to be around 10.5 cents.
Sales for the period is estimated to be $5.7 billion, including $2.0 billion in the second quarter from across the distribution network. Private investor sales were $5 billion, while institutional sales were $700 million.
Considering investment movement, forex and other effects, private investor FuM is estimated to be $29.1 billion at 30 September 2009, compared to $27.3 billion as of June 30, 2009. Institutional investor FuM at September 30, 2009 is expected to be $14.7 billion, compared to $16.0 billion at June 30, 2009.
The company noted that although institutional sales remained muted through the second quarter, redemptions declined markedly and are expected to total $1.7 billion for the second quarter, compared to $3.6 billion in the first quarter. Redemptions from private investors is estimated to be $0.8 billion. This slowing of redemptions is set to continue, with quarterly redemptions of $0.7 billion to be paid on October 1, Man Group added.
According to the company, the weakening US dollar drove a positive forex movement of an estimated $2.1 billion for the six months to September 30, 2009, split almost equally between the first and second quarters.
Looking ahead, the company noted that investor sentiment is continuing to improve across the industry and the performance outlook is healthy. The prospects for sustained industry inflows are very promising, it said.
In May, the company reported a drop in pre-tax profit for fiscal year 2009, reflecting declines in net performance fee income and net management fee income as well as costs related to non-recurring items. At that time, the company noted that funds under management as at 26 May, 2009, were estimated to be $44 billion, which would result in lower management fee income in the coming year.
EMG.L is currently trading at 327.80 pence, up 19.70 pence or 6.39%, on 2.84 million shares.
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