28th Feb 2006 07:00
Henderson Group plc28 February 2006 2005 Full-Year Results 28 February 2006 • Henderson Group operating profit before tax from continuing operations of £63.4 million (2004: £53.0 million), reflecting solid progress in Henderson Global Investors, cost savings in Corporate and higher returns on Corporate cash. • Henderson Group operating profit before tax from all operations of £64.0 million (2004: £123.1 million loss). • Henderson Global Investors pre-tax profit up 9%, at £62.9 million, compared to £57.5 million in 2004. This reflects higher management fee and performance fee income. • Henderson Global Investors improved cost to income ratio, to 75.5% for 2005 from 76.4% in 2004. • Total assets under management of £67.7 billion at 31 December 2005, compared with £69.1 billion at 31 December 2004. • Surplus capital of approximately £200 million. Comment from Chief Executive, Roger Yates "It is a little over two years since the demerger from AMP Limited and thelisting of Henderson Group on the London and Australian Stock Exchanges. In thattime, we have worked steadily to turn Henderson Group into a pure fundmanagement company while delivering value to shareholders through this process.At the same time, we have been working hard to improve Henderson GlobalInvestors as a fund management company. The business is now delivering improvedinvestment performance, net fund inflows into the higher margin areas of thebusiness and growth in margins and profits." Operating profit before tax for continuing operations increased 20% from 2004 to£63.4 million in 2005. Net profit after tax from continuing operations was £51.9million in 2005, up 6% from 2004. Net profit after tax from all operations was£47.7 million in 2005 compared with a loss of £173.2 million in 2004. The 2005income tax charge for the Group included an £11.5 million charge for continuingoperations, with an effective tax rate of 18%. The effective tax rate for theGroup overall was 25.5%. As previously indicated, we expect the effective taxrate for the continuing operations to rise closer to the expected rate, i.e.30%, over the medium term. Henderson Global Investors - inflows into higher margin business Operating profit before tax for Henderson Global Investors was £62.9 million -up 9% from £57.5 million in 2004. This reflects the focus on higher marginproducts and improved investment performance. Total fee income in 2005 was £247.2 million, up 5% from £235.4 million in 2004,due to higher management fee income (up 3% to £196.3 million) and an increase inperformance fee income (up 42% to £26.5 million). Transaction fee income waslower in 2005, down 7% to £24.4 million largely as a result of lower PrivateCapital fees. Investment income increased 25%, from £7.9 million in 2004 to £9.9 million in2005, due to higher cash balances. Total operating expenses increased by 5% to £189.1 million in 2005. Savings innon-staff costs were offset by an anticipated increase in staff expenses, dueprincipally to variable remuneration schemes reflecting improved operationalperformance and higher pension service costs. Overall, the increase in total revenue more than offset the higher costs in 2005resulting in an improvement in the cost to income ratio from 76.4% in 2004 to75.5% in 2005. For 2006, assuming benign markets, we expect to achieve a further1.5% improvement in Henderson Global Investors' expense ratio. Continued growth in higher margin business produced a more profitable productmix, with the total fee margin for Henderson Global Investors up from 34bps in2004 to 37bps in 2005. Net margins increased from 8bps in 2004 to 9bps in 2005. Total assets under management at the end of 2005 were £67.7 billion (down 2% on31 December 2004). Client outflows were due to expected outflows associated withthe closed life books of Pearl Group and the Institutional business. Theseoutflows from Pearl Group funds (£2.8 billion) and Institutional mandates (£8.8billion) were more than offset in terms of revenue and profit from net inflowsinto higher margin areas of £1.9 billion and favourable market and exchange ratemovements of £8.3 billion. Corporate office Corporate costs were £12.8 million in 2005, down 18% from £15.6 million in 2004.This decline in Corporate costs was ahead of the £4 million per annum costsaving forecast given at the time of the sale of the Life Services business.These cost savings are due to lower shareholder servicing costs and operating asmaller Corporate office following the sale of the Life Services business. Theoutlook for 2006 is an operating cost figure for the Corporate office ofapproximately £10.0 million. The return on Corporate cash was up significantly in 2005 (£13.3 million)compared to 2004 (£4.5 million). Although the majority of the proceeds of thesale of the Life Services business were returned to shareholders shortly aftercompletion, the Group earned interest income on the retained sale proceeds ofthe Life Services business in 2005. The return on Corporate cash will fall in2006 due to lower anticipated margins and cash balances. Discontinued operations Discontinued operations include the Life Services business, of which the salecompleted in April 2005, and Towry Law UK, following the sale agreement with JS&P Holdings Limited announced in December 2005. The £0.6 million profit fromdiscontinued operations comprises the Life Services business loss of £1.9million to the date of its disposal on 13 April 2005, as reported in our 2005interim results, and a full year profit of £2.5 million for Towry Law UK. Netprofit before tax from all operations moved from a £123.1 million loss in 2004(including the fair value adjustment to the Life Services business) to a £64.0million profit in 2005. The £0.9 million Towry Law UK operating profit for the six months to 31 December2005 was lower than the £1.6 million profit in the first half of 2005 due to theseasonality of this business. Overall, we were pleased with the result for theyear and with the agreement to sell the business. The sale price of £37 millionin cash is approximately £11 million above the net asset value of the businessat 31 December 2005. We anticipate receiving Financial Services Authorityapproval of the sale in March this year and therefore, a profit on disposal willappear in our first half 2006 accounts. We continue to work with the Hong Kong Securities and Futures Commission toensure that all Towry Law International legacy product issues are dealt withappropriately. We remain comfortable with the level of provisioning in place forTowry Law International legacy product mis-selling issues. Balance sheet and liquidity The balance sheet remains strong with good liquidity, no debt and appropriateprovisions. Group net assets at 31 December 2005 were £647 million. We haveidentified current surplus capital and cash of approximately £200 million in theGroup. At the time of releasing our 2005 interim results, we said that we would returncapital not required by the business to shareholders. Our preferred method is astraightforward capital reduction scheme, similar to that used for the return ofcapital in 2005 following the disposal of the Life Services business. It is the Board's view that, in the absence of a strategic acquisition, thissurplus capital will be returned to shareholders in 2006. We are currentlyreviewing a potential strategic opportunity and will update the market on theconclusion of this review in due course. We will continue to review the efficiency of the Group's residual capitalstructure and consider introducing a prudent level of gearing to the balancesheet in 2006, as we prepare for the introduction of the new CapitalRequirements Directive in January 2007. Dividend Our intention is to provide a sustainable flow of dividends into the future and,therefore, we are starting prudently with a dividend cover of 2x. The Directorsrecommend the payment of a dividend in respect of the six months ended 31December 2005 of 1.39p per ordinary share (2004: £nil). We plan to pay thedividend on 26 June 2006 to shareholders on the register on 16 June 2006,subject to approval by shareholders at the AGM. Outlook for full year 2006 For Henderson Group, 2005 was a transition year as we completed the disposal ofnon-core assets. In addition, we took steps to improve investment capabilities,to drive sales and improve margins in Henderson Global Investors. That work isnow paying off. Investment performance is either good or improving, the newhires we made are now bedded into their teams and we have good sales momentum inkey higher margin products and channels. As a result, we expect further improvement in revenue margins and a furtherreduction in the cost to income ratio. Finally, we have identified significant surplus capital in the business which weare looking at how best to deploy. The business is in good shape and assuming benign market conditions, theprospects for Henderson Group are encouraging. We will keep shareholders and the market informed of progress. To view the full details of the ASX Appendix 4E - Preliminary Final Report announcement, paste the following link into your web browser; http://www.rns-pdf.londonstockexchange.com/rns/0265z_1-2006-2-28.pdf To view the full details of the Presentation on the Full Year 2005 FinancialResults, paste the following link into your web browser; http://www.rns-pdf.londonstockexchange.com/rns/0265z_2-2006-2-28.pdf Henderson Group plc4 BroadgateLondon EC2M 2DARegistered in EnglandNo. 2072534 ABN 30 106 988 836 * * * The above financial information does not constitute statutory accounts asdefined in section 240 of the Companies Act 1985. Statutory accounts for theyear ended 31 December 2005 will be delivered to the Registrar.Notes to editors About Henderson Group plc Henderson Group plc is headquartered in London and listed on the London andAustralian stock exchanges. It is a member of both the FTSE 250 and the ASX 200indices. Henderson Group consists of Henderson Global Investors, a leadingEuropean based investment manager with over £67.7 billion of assets undermanagement and the Corporate office. The focus of the Group is to build the asset management operations into a moreprofitable and valuable business. 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 Stock Exchange. Further information www.henderson.com or Investor enquiriesMav WynnHenderson Group Head of Investor Relations +44 20 7818 [email protected] Media enquiriesUnited Kingdom - FinsburyAndrew Mitchell +44 20 7251 3801Australia - CanningsGloria Hawke +61 2 9252 0622 Details of Henderson Group's 2005 full-year results teleconferences Australia - 09.15am (Sydney time), 28 Feb / 22.15pm (London time), 27 Feb For a telephone link to the briefing dial one of the numbers below from 09.00am,for a 09.15am start.FromAustralia 1800 032 175 (free call)United Kingdom 0800 358 5263 (free call)All other countries +44 (0) 20 7190 1595 (this is not a free call) United Kingdom - 10.00am (London time), 21.00pm (Sydney time), 28 Feb For a telephone link to the briefing dial one of the numbers below from 09.45am,for a 10.00am start.FromUnited Kingdom 0800 358 5256 (free call)Australia 1800 032 175 (free call)All other countries +44 (0) 20 7190 1596 (this is not a free call) Alternatively you can listen to a live audiocast of the briefing. To listen tothe briefing go to www.hendersongroupplc.com and click on the link on thehomepage. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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