1st May 2008 09:07
Henderson Group plc01 May 2008 Annual General Meeting 1 May 2008 Henderson Group plc today holds its 2008 Annual General Meeting. The scripts for the opening addresses by the Chairman and the Chief Executiveare attached. Part one: Henderson Group Chairman's address to Shareholders. Part two: Henderson Group Chief Executive's address to Shareholders. * * * For further information www.henderson.com or Investor enquiries Mav Wynn Henderson Group +44 (0) 20 7818 5135Head of Investor Relations [email protected] Media enquiries United Kingdom - Maitland +44 20 7395 0422Peter Ogden Australia - Cannings Pip Green +61 2 9252 0622 Address by Rupert Pennant-Rea, Chairman, to the Henderson Group 2008 Annual General Meeting 1 May 2008 Looking back, 2007 was indeed a year of two halves. After the initially benignmarkets, the second half was much tougher. Taken together we are pleased withthe Group's strong financial performance. For the year as a whole, higher marginnet inflows totalled £1 billion and, in revenue terms, these inflows more thanoffset outflows from the lower margin Institutional business and Pearl. Togetherwith slower growth in costs, it meant that the Group made good financialprogress in 2007, with pre-tax profit from continuing operations, excludingnon-recurring items, up by 30% to £107 million - a record for Henderson as alisted company. The Group also improved the efficiency of its balance sheet. As I mentioned atlast year's meeting, we raised £175 million of senior debt in May 2007, whichwas good timing given what happened later. We are comfortable with this level ofgearing. We also made another sizeable return of cash to shareholders last year- £250 million by means of a special dividend and share consolidation. In total,the Company has returned more than £1.3 billion to shareholders since we listedin December 2003. Aside from regular dividends, which I will discuss in amoment, we do not plan to make any further substantial distributions toshareholders in the foreseeable future, as we will reinvest any cash surplusesin the business to boost our potential for growth. The sort of re-investment wewill consider includes acquisition opportunities to build our higher marginbusinesses in areas such as Property, UK Wholesale and Hedge funds. On dividends, the Directors are recommending a final dividend for 2007 of 4.44pence per share, to be paid on May 30th to shareholders on the register on May9th. For holders of CDIs, the A$ equivalent will be around 9.3 cents and the NZ$equivalent will be around 11.1 cents. The exact rates will be confirmed on May9th, the Record Date. This will bring the total ordinary dividend for 2007 to6.1 pence per share, or around 13 cents (Australia) and around 15.5 cents (NewZealand), a 94% increase on last year's total ordinary dividend. The Board will review its dividend policy later this year, but we expect toincrease the pay-out ratio from 50% to 55% for 2008. Beyond that, we might moveup around 5 percentage points a year, bringing the ratio to about 65% from 2010onwards. On another matter, I would like to alert shareholders to various unsolicitedoffers to acquire their shares at values below current market prices. Ms SuzanneLee Forster's company, Hassle Free Share Sales Pty Ltd, has recently written toour shareholders offering to buy Henderson Group shares for A$1.01 each,significantly below the current market price of around A$2.60. We are aware of afew organisations in Australia that target shareholders in this way, and we urgeshareholders to seek independent advice; quite obviously they should check theterms of the offer against the market price of Henderson Group shares. Just a few closing remarks about the future, and you won't be surprised to hearthat we expect markets to remain volatile and difficult this year. As you mayrecall, we took some pre-emptive steps at the start of the year to protect ourprofits for 2008. The Chief Executive will say more on this and how the businessis going. The Board believes these profit protection measures, together with thediversity of the Group, will provide opportunities for further growth. We aim tocontinue creating value for our shareholders and providing a good service forour clients. To all of them and to our excellent staff, thank you for yoursupport. Address by Roger Yates, Chief Executive, to the Henderson Group 2008 Annual General Meeting 1 May 2008 As the Chairman has mentioned, the Group delivered solid growth in profits in2007, with profit before tax from continuing operations, excluding non-recurringitems, up by 30% to £106.7 million. For us this result feels like a vindicationof our strategy of focusing on higher margin products and on profitability, asopposed to just levels of assets under management. Driven by this strong headline result, there were also significant improvementsin earnings per share - up 83%, in the cost to income ratio for Henderson GlobalInvestors - down by over 5 percentage points and in the dividend, where the fullyear total was almost double 2006. Investment performance was generallysatisfactory although market turbulence towards the end of the year created amore challenging environment in which to deliver investment returns to clients.We made good progress in improving the efficiency of the balance sheet,successfully raising debt in May last year, which was both well timed and wellpriced, and we returned a further £250 million to shareholders in October. Looking at the result in more detail, profits in Henderson Global Investors, theGroup's main subsidiary, rose by 35% to £109.6 million on revenues 14% higher at£337.4 million. The positive revenue impact of £1 billion inflows into highermargin products, more than offset the revenues lost from outflows from Pearl andother lower margin mandates. Total fee margins also improved to 53bps in 2007,up from 44bps in 2006, again a reflection of the shift towards higher marginbusiness. The improvement in the cost to income ratio from 72.6% to 67.5% wascomfortably within the guidance we gave in November. Another measure of success is the quantum of performance fees we generate. Onthis measure, 2007 was a very strong year in which we generated net performancefees of £50.1 million compared to £37.3 million in 2006. Encouragingly, the feeswere generated right across the business, in Property, Hedge, and a range oflong only mandates and were sourced from 65 different funds, compared to 52 in2006. This diversity leads us to believe that performance fees will remain afeature of our revenues, although these will be lower in 2008. Assuming flatmarkets, we expect transaction and net performance fees of approximately £30million this year. This is in line with guidance we gave at the end of February. Volatile and uncertain markets have led to subdued investor demand so far thisyear, particularly in mutual funds. However, when investor confidence returns,we believe we have a good range of saleable products. We will provide a moredetailed update on business performance when we release our first InterimManagement Statement on 15 May. We have recently begun a full review of most of our third party administrationarrangements, which we expect to complete by the end of the year. This reviewwill involve some one-off expenditure, on which we will provide guidance withour 2008 interim results on 28 August. The Group continued to enjoy a lower effective tax rate than the UK statutoryrate in 2007, due to the recognition of deferred tax assets and the release ofprovisioning in respect of prior years. As previously indicated, we expect theeffective tax rate on continuing operations excluding non-recurring items, toremain between 10% and 15% in 2008, reverting closer to the statutory rate in2009 or 2010. As the Chairman already mentioned, the Group has returned just over £1.3 billionto shareholders over the past three years and recently took some debt onto itsbalance sheet. Accordingly, we expect Corporate net interest to comprise mainlydebt servicing costs in 2008 and it will therefore turn negative toapproximately £10.5 million before tax relief, assuming an interest rate of 6%.We currently expect corporate costs in 2008 to be similar to those of 2007, inother words approximately £9 million. One of our financial objectives for 2008 is to meet or beat Henderson GlobalInvestors' 2007 operating profit before tax. As we have already seen, the marketbackground for 2008 is more adverse than that which existed in 2007. So havingdemonstrated that we can drive profits higher in a relatively benign marketenvironment which we did in 2007, we now have the job of managing Henderson in aless favourable climate. This means a renewed focus on costs as well ascontinued efforts to drive revenues up via our higher margin business lines. We have already taken some measured cost action, namely headcount and relatedrestructuring, which should generate £20 million of savings in 2008, before arestructuring charge of approximately £2.5 million pre-tax. This has been donewithout cutting any of our investment capabilities. We identified a further £10million of non-staff costs at the start of the year that could be removed fromour cost base if markets remained subdued. We made the decision in early Aprilto proceed with these cost reductions. Unless markets show signs of sustainedimprovement, we do not expect these costs to return to our cost base. Inaddition, savings will be achievable in variable staff costs, should futuremarket levels remain subdued. The prompt action we have taken on costs, togetherwith the variability of our cost base, leaves us reasonably confident,therefore, of delivering a cost to income ratio for Henderson Global Investorsof 65% or below in 2008. At this point, we remain on track to meet our financial objectives - that is tomeet or beat Henderson Global Investors' 2007 operating profit before tax anddelivering a cost to income ratio of 65% or below in 2008. Our primary focus will continue to be on profitable organic growth, but we alsobelieve that, in more difficult markets, we are in a good position to capitaliseon other opportunities. We are actively looking for opportunities where we canlift out teams or make bolt-on acquisitions that meet our criteria. Overall, the business is in good shape. It can withstand a sustained period offlat or weak markets and is well positioned to benefit from any upturn. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HGG.L