24th Aug 2007 07:01
Henderson Group plc24 August 2007 2007 Interim Results 24 August 2007 Financial highlights • Group operating profit before tax from continuing operations excluding non-recurring items £60.5 million, +31% on first half 2006 (1H2006: £46.2 million). • Group operating profit before tax from all operations including non-recurring items £101.0 million, +129% on first half 2006 (1H2006: £44.2 million). • Henderson Global Investors pre-tax profit £61.4 million, +32% on first half 2006 (1H2006: £46.6 million). • Henderson Global Investors cost to income ratio 65.6% for first half 2007, improved from 69.2% in first half 2006. • Total Assets Under Management (AUM) £61.6 billion at 30 June 2007 (£61.9 billion at 31 December 2006). • Earnings per share from continuing operations excluding non-recurring items 5.7 pence (1H2006: 3.3 pence). • Earnings per share from all operations including non-recurring items 9.9 pence (1H2006: 3.1 pence). • Interim dividend declared 1.66 pence per ordinary share (1H2006: 0.88 pence). Key business developments • Investment performance improved across the business, with 57% of Listed Assets funds by value beating their benchmarks in the year to 30 June 2007. Excellent performance in Property funds last year has generated significant performance fees in 1H07. • £0.4 billion net inflow into higher margin products. • Total fee margin 56bps (1H2006: 43bps) and management fee margin 42bps (1H2006: 32bps) on average AUM. • Proposal to return approximately £250 million surplus cash to shareholders by 29 October 2007, by special dividend and share consolidation. Comment from Chief Executive, Roger Yates "Improved investment performance and generally benign markets in the first halfof the year resulted in net inflows across a range of the Group's higher marginbusiness areas. The US Wholesale business has had a record year so far and weare encouraged by early progress in our UK Wholesale channels. Higher managementand performance fee income resulted in significant improvements in our feemargins on average AUM. We also delivered greater balance sheet efficiency byraising £175 million debt earlier this year. Based on a prudent assessment of forecast cash flows, regulatory, seed andworking capital requirements, we plan to return approximately £250 million toshareholders by 29 October 2007. Notwithstanding current market volatility, the business is sound, with gooddiversification of revenues and options for growth. Henderson is still on trackto reach its 70% cost to income ratio target for 2007, and will aim to improvefurther on this in future periods." Click on the link below for the ASX Appendix 4D http://www.rns-pdf.londonstockexchange.com/rns/7478c_-2007-8-23.pdf Click on the link below for the 2007 interim results presentation http://www.rns-pdf.londonstockexchange.com/rns/7478c_2-2007-8-23.pdf Group Net profit before tax from continuing operations excluding non-recurring itemswas £60.5 million in the first half of 2007, up 31% from the first half of 2006.Net profit after tax from all operations, including non-recurring items, was£89.5 million in the first half of 2007, an increase of 152% compared with thefirst half of 2006. The first half 2007 income tax charge for the Group includeda £8.9 million charge for continuing operations and a £2.6 million charge fornon-recurring items. The effective tax rate for all operations, excludingnon-recurring items, was 14.7% and including non-recurring items was 11.4%. Henderson Global Investors Operating profit before tax for Henderson Global Investors was £61.4 million -up 32% from £46.6 million in the first half of 2006, mainly due to increases inmanagement and performance fee income. Management fee income increased 19% to £129.5 million in the first half of 2007,primarily as a result of improved fee margins on average AUM and strongermarkets compared to the first half of 2006. The largest contributors to thisincrease included Property, Wholesale and Hedge funds. Transaction fee income decreased by 21% to £10 million in the first half of2007, mostly due to a slower pace of investment in Property. Net performancefees increased by 44% to £34.9 million in the same period and continue to comefrom a range of products, with Hedge funds, Property, Investment Trusts andPearl being the largest contributors in the first half of 2007. Performance feesin the second half of 2007 are likely to be closer in value to the same periodlast year, which was £13.1 million. As a result of higher management and performance fees, total fee income in thefirst half of 2007 increased to £174.4 million, up 20% from £145.2 million inthe first half of 2006. Continued growth in higher margin product areas and expected outflows in thelower margin areas of our business resulted in a more profitable product mix.The total revenue margin on average AUM increased from 43bps in the first halfof 2006 to 56bps in the first half of 2007. Management fee margins on averageAUM rose from 32bps in the first half of 2006 to 42bps in the first half of2007. Net margins increased from 14bps in the first half of 2006 to 20bps in thefirst half of 2007. Investment income declined 32%, from £6.3 million in the first half of 2006, to£4.3 million in the first half of 2007. This was mostly due to lower profits onseed investments in the first half of 2007 compared to the first half of 2006. Total operating expenses increased by 12% to £115.9 million in the first half of2007. Savings in investment administration, IT and office expenses were offsetby increases in staff expenses, marketing expenditure and some additionalbalance sheet provisioning. The increase in staff expenses was entirely due tovariable remuneration schemes, reflecting improved business performance. Overall, the increase in total revenue exceeded the higher costs in the firsthalf of 2007, resulting in an improvement in the cost to income ratio to 65.6%from 69.2% in the first half of 2006. Total AUM remained stable in the first half of 2007 at £61.6 billion. Net clientoutflows of £2.1 billion consisted of Pearl (£1.8 billion), lower marginInstitutional business (£0.7 billion) and CDOs (£0.9 billion). The CDOs redeemedat above par value and resulted in make-whole management fees, most of whichwere recognised in the first half of 2007. These net outflows were partiallyoffset by higher margin net inflows into Property funds (£0.4 billion) andWholesale funds (£0.9 billion). In addition, there were favourable market andforeign exchange rate movements of £1.8 billion. We are pleased by the improved investment performance so far this year. Thestand-out performers continue to be in the higher margin areas of the businessand include US Wholesale funds, Property and Investment Trusts. In addition,core Institutional investment performance continues to improve and in the UKWholesale range investment performance has been generally strong, particularlyin key UK equity products. Investment performance in the Horizon SICAV range andsome Hedge funds will be an area of focus in the second half of 2007. Corporate Corporate costs were £5 million in the first half of 2007, £2 million lower thanthe first half of 2006. Corporate net interest income declined to £4.1 million in the first half of 2007from £6.6 million in the first half of 2006. This was due to interest earned onlower cash balances following the return of cash in the second half of 2006 andinterest charges on the debt raised in May 2007. Banco Popolare Gruppo Bancario (BP) The merger of Banca Popolare Italiana (BPI) and Banco Popolare di Verona eNovara, to create BP, completed on 1 July 2007. This transaction crystallised anet gain on our investment in BPI of £31.8 million, of which £16.3 million hasbeen received in cash by way of a special dividend. The investment gain has beenrecognised in the Group's income statement in the first half of 2007 as anon-recurring item. The sub-advisory agreement with BPI (AUM: £0.7 billion at 30 June 2007) is dueto expire by the end of 2007. BP has confirmed that this will be the casehowever, we will retain a distribution agreement for higher margin Horizonproducts (AUM: £0.3 billion at 30 June 2007) with BP. Pension schemes There was a net surplus in the Group's approved staff pension scheme, beforedeferred tax movements, of £38.5 million at 30 June 2007 (31 December 2006: £5million net liability). This favourable development was principally due tochanges in service benefits with effect from 1 April 2007 (which resulted in anon-recurring pension scheme credit of £8.7 million in the first half 2007income statement) and a 0.6% increase in the AA corporate bond discount rateused to value pension liabilities for accounting purposes. Balance sheet and return of cash The balance sheet remains strong with Group net assets at 30 June 2007 of £533million. As previously indicated, based on a prudent assessment of forecast cashflows, regulatory, seed and working capital requirements of the business, theBoard proposes to return approximately £250 million surplus cash, equivalent to27.6 pence per share, to shareholders by 29 October 2007. For this purpose, the Board has approved a special dividend payment and, subjectto shareholder approval, a simultaneous share consolidation. The specialdividend is conditional on the share consolidation, the purpose of which is toachieve parity of the share price and earnings per share before and after thepayment of the special dividend. It is common UK practice to combine a specialdividend with a share consolidation in this way. An Extraordinary General Meeting will be held on 9 October 2007 to seekshareholder approval of the share consolidation. Further details, including theshare consolidation ratio, will be set out in a circular and notice of meetingwhich will be sent to shareholders in early September 2007. Interim dividend Our policy is to pay a sustainable flow of ordinary dividends out of recurringoperating profits, whilst maintaining dividend cover of approximately 2x for thetime being. The Directors have declared an ordinary dividend in respect of thesix months ended 30 June 2007 of 1.66 pence per share (1H2006: 0.88 pence). Weplan to pay the dividend on 29 October 2007 to shareholders on the register on19 October 2007, together with the proposed special dividend. Outlook Given recent market volatility, we have to assume that the second half of theyear will be more challenging for fund flows. That said, we have a number of newproducts planned and our emphasis on higher margin products should continue todrive revenues and profitability higher. Therefore, assuming markets remain ator close to their current levels, we still expect Henderson to reach its cost toincome ratio target for 2007 of 70%. Corporate costs should amount to approximately £10 million and Corporate netinterest income is expected to be between £6 million and £7 million in 2007. Wewill pay an interim dividend of 1.66 pence or equivalent per share in October,together with a special dividend of 27.6 pence or equivalent per share, assumingwe obtain shareholder approval for a simultaneous share consolidation. We expect the effective tax rate on profits for continuing operations of theGroup to be between 10% and 15% for 2007 and 2008, reverting to the standard UKcorporate tax rate (28% with effect from April 2008), in 2009 or 2010. Approved by the Board of Directors on 23 August 2007 Henderson Group plc4 BroadgateLondon EC2M 2DARegistered in EnglandNo. 2072534ABN 30 106 988 836 Notes to the announcement The financial information contained in this announcement does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefinancial information for the full year ended 31 December 2006 has been takenfrom the Henderson Group plc Full Annual Financial Report and Accounts for theyear ended 31 December 2006. The auditors have reported on the 2006 accounts andtheir report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Henderson Group plc Full Annual FinancialReport and Accounts have been filed with the Registrar of Companies. * * * Details of market briefings: Friday 24 August 2007 For a telephone link to the briefing, dial one of the following numbers 5 to 10minutes prior to the start of the call. Conference title Henderson Group, Interim Results Market BriefingChairperson Roger Yates First market briefing 8.00am (London time)/5.00pm (Sydney time) FromUnited Kingdom 0500 5510 77 (free call)Australia 1800 9889 41 (free call)All other countries +44 (0)20 7162 0025 (this is not a free call) Second market briefing 10.30am (London time)/7.30pm (Sydney time) FromUnited Kingdom 0500 5510 88 (free call)Australia 1800 9890 15 (free call)All other countries +44 (0)20 7162 0125 (this is not a free call) Replay number FromUnited Kingdom +44 (0)20 7031 4064 Access code: 759941Australia +61 (0)2 8223 9748 Access code: 759941 (available from 27 August to 3 September 2007) Alternatively, you can listen to a live audiocast of the briefing. To listen tothe briefing, go to www.henderson.com and click on the relevant link on the homepage. Forward-looking statements This announcement contains forward-looking statements with respect to thefinancial condition, results and business of Henderson Group. By their nature,forward-looking statements involve risk and uncertainty because they relate toevents and depend on circumstances that will occur in the future. HendersonGroup's actual future results may differ materially from the results expressedor implied in these forward-looking statements. Nothing in this announcementshould be construed as a profit forecast. For further detail on the 2007 Interim Results, please see the ASX Appendix 4Dlodged together with this announcement. Notes to editors About Henderson Group plc Henderson Group plc (Henderson Group) is the holding company of the investmentmanagement group Henderson Global Investors (Henderson). Henderson Group isheadquartered in London and since December 2003 has been dual-listed on theLondon Stock Exchange and Australian Securities Exchange. Henderson Group is aconstituent of the FTSE 250 and S&P/ASX 200 indices. Established in 1934, Henderson is a leading independent global asset managementbusiness. The company provides its institutional, retail and high net-worthclients with access to skilled investment professionals representing a broadrange of asset classes, including equities, fixed income, property and privateequity. Henderson is one of Europe's largest investment managers, with £61.6billion Assets Under Management (as at 30 June 2007) and employs around 900people worldwide. About CHESS Depositary Interests In this announcement, the term "shareholders" refers to all holders of HendersonGroup plc shares, including those whose holdings are in the form of CHESSDepositary Interests on the Australian Securities Exchange. CHESS Depositary Interests, or CDIs, are a way of allowing securities of foreigncompanies to be traded on the Australian Securities Exchange. CDIs affordshareholders all the same direct economic benefits as ordinary shares, like theright to dividends and the right to participate in rights offers. Further information www.henderson.com or Investor enquiriesMav Wynn, Head of Investor Relations +44 (0) 20 7818 5135 or +44 (0) 20 7818 5310 [email protected] or [email protected] Media enquiriesUnited Kingdom: Maitland Australia: CanningsPeter Ogden/Lydia Pretzlik Gloria Barton/Peter Brookes+44 (0)20 7379 5151 +61 (0) 2 9252 0622 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HGG.L