11th May 2009 09:01
Interim Management Statement
11 May 2009
Henderson Group plc ('the Group' or 'Company') is today publishing its first Interim Management Statement for 2009, in accordance with the EU Transparency Directive and revised UK Listing Authority rules. Unless otherwise stated, the comments below refer to the first three months of the current financial year, representing the period from 1 January 2009 to 31 March 2009 ('the period'), and exclude New Star Asset Management Group PLC ('New Star') as the acquisition completed after the period.
Key points
Difficult market and sales environment during the period, with signs of improvement in the second quarter of 2009.
Assets under management ('AUM') of £43.4 billion at 31 March 2009, net of Pearl outflows (£2.4 billion) and negative market movements (£3.1 billion).
New Star AUM of £8.6 billion at 27 March 2009.
Acquisition of New Star completed on 9 April 2009.
Continued focus on cost management.
Strong investment performance in core areas leaves Henderson Global Investors ('Henderson') well positioned as investor confidence returns.
Commenting on the Interim Management Statement, Andrew Formica, Henderson Group's Chief Executive said: "As we have already highlighted, market conditions remained challenging in the period, with average market levels well below the same period last year. Despite equity markets falling by more than 10% over the period, we experienced only modest client withdrawals (with the exception of previously notified Pearl withdrawals) and our diversified business model meant that our AUM declined by only 6% due to market depreciation.
Our top priority is good investment performance. Overall, our investment performance is competitive, particularly in core products. Since the end of the period we have seen increased interest from clients looking to shift back towards higher margin products. These factors, together with cost management initiatives which we started last year, provide support to earnings.
Henderson Group plc
47 Esplanade
St Helier
Jersey JE1 0BD
Registered in Jersey
No. 101484
ABN 67 133 992 766
In addition, we completed the acquisition of New Star on 9 April 2009 - just nine weeks after announcing our intention to buy that business. So far the integration is running very well. The combined UK retail business reflects the strengths of both firms: the security and stability of the Group coupled with the innovative approach for which New Star was known. We still expect this transaction to be highly accretive for shareholders from 2010 onwards."
Fund flows and assets under management
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Summary of movements in AUM |
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Higher margin |
Opening AUM 1 Jan 2009 £bn |
Net Flows 1 Jan - 31 March 2009 £bn |
Market/FX 1 Jan - 31 March 2009 £bn |
Closing AUM 31 March 2009 £bn |
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Investment Trusts |
2.7 |
(0.1) |
(0.2) |
2.4 |
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Horizon funds |
2.3 |
0.1 |
(0.1) |
2.3 |
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UK Wholesale |
3.1 |
0.1 |
(0.2) |
3.0 |
|
US Wholesale |
2.3 |
(0.1) |
(0.2) |
2.0 |
|
Hedge funds |
0.8 |
(0.3) |
0.0 |
0.5 |
|
Property UK/Europe |
7.6 |
0.0 |
(0.2) |
7.4 |
|
Property US |
1.7 |
0.0 |
0.0 |
1.7 |
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Private Equity |
1.2 |
0.0 |
(0.2) |
1.0 |
|
Structured Products |
2.2 |
(0.1) |
(0.2) |
1.9 |
|
23.9 |
(0.4) |
(1.3) |
22.0 |
|
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Lower margin |
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Institutional |
14.1 |
(0.2) |
(1.2) |
12.7 |
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38.0 |
(0.6) |
(2.5) |
34.9 |
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Pearl Group |
11.5 |
(2.4) |
(0.6) |
8.5 |
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Total AUM |
49.5 |
(3.0) |
(3.1) |
43.4 |
AUM declined by 12% from £49.5 billion at 1 January 2009 to £43.4 billion at 31 March 2009. Higher margin net fund flows were slightly negative during the period. Modest net inflows into UK Wholesale and Horizon funds were offset by net outflows from US Wholesale, Hedge funds and Structured Products. Private Equity net flows were flat. In Property, some modest investment of the existing pipeline was offset by the closure of the Henderson Shop Unit fund. In addition, Property client commitments to invest amounted to £1.8 billion at 31 March 2009. We still expect the majority of this pipeline to be invested in 2010.
Lower margin Institutional net fund flows were also slightly negative during the period, predominantly due to cash funds, where we saw modest redemptions following strong growth in the fourth quarter of 2008. Since the end of the period, our Fixed Income business has won several mandates and currently has a healthy pipeline of client commitments.
We experienced net outflows of £2.4 billion from Pearl in the period, £0.4 billion from the run-off of Pearl's closed life books and £2 billion in respect of previously notified withdrawals. Pearl has a further £2.4 billion of assets which it has given notice on, but has yet to withdraw, so we continue to manage these funds on a care and maintenance basis.
The investment management and other related agreements, entered into with Pearl in June 2006, allow Pearl flexibility to withdraw and/or re-allocate its assets. As such, we cannot predict movements in Pearl funds. However, if actual fees fall below certain thresholds, Pearl has agreed to make compensation payments to Henderson to make good the shortfall, until April 2015. The Pearl fund outflows mentioned above, therefore, will not have any material impact on Henderson's future revenues.
These fund flows, together with unfavourable market and foreign exchange rate movements of £3.1 billion in the period, brought total assets under management to £43.4 billion at 31 March 2009.
Investment performance
Despite continuing market turbulence, our investment performance track record remains competitive.
Within Listed Assets, made up of our Equities and Fixed Income business, 72% of funds beat their benchmark over the period. We remain strongly competitive in our Fixed Income offering. In Equities, our flagship funds in the Horizon and US Wholesale ranges, together with Hedge Funds, are performing well. Investment performance in our UK Wholesale Funds and Institutional equities was much improved over the period.
In Hedge funds, despite strong investment performance in the period a number of funds were impacted by clients' demand for liquidity. Nevertheless, we currently have healthy client interest, for example in the pan-Asian Hedge funds, and we are launching new currency and asset-backed security recovery funds.
Within Property, our US business performed well in the year to 31 December 2008 with 73% and 54% of funds at or exceeding benchmark over 1 and 3 years respectively. Pan-European Property had a challenging year in 2008, with 20% and 49% of funds at or exceeding benchmark over 1 and 3 years respectively.
Although performance fees continue to be sourced from a range of products, we expect them, together with transaction fees, to be significantly lower in 2009 compared to 2008.
Investments
The Group has held an equity stake in Banco Popolare Gruppo Bancario and its predecessors for approximately eight years, to cement a distribution alliance in Italy. In 2008 approximately 20% of the investment was sold and the balance was impaired to its market value at 31 December 2008. During the current year to date, the remaining investment has been sold realising a net profit of £0.8 million.
The Group also holds a portfolio of investments in Henderson products. A number of these investments were realised during the period for a net loss of £0.8 million. This loss, together with lower cash balances and lower interest rates, is expected to result in low investment income for Henderson in 2009.
The Group's balance sheet comprised total net assets of £339 million, including cash balances of £180 million, at 31 March 2009.
New Star
Shareholders overwhelmingly approved the acquisition of New Star on 2 April 2009. The offer was declared wholly unconditional on 6 April 2009 and was completed on 9 April 2009. New Star staff retained by the Group moved to the Group's premises on 14 April 2009. New Star's front office systems were also transitioned to the Group's operating platforms from the same date.
The purchase consideration was paid on 9 April 2009: £90 million in cash from the Group's existing resources and 27 million new shares in the Group. In addition, as previously indicated, we expect to incur transaction and integration costs in total of approximately £31 million after tax relief in respect of the acquisition. We are currently undertaking a fair value exercise of all New Star's assets and liabilities to be recognised on acquisition. This will determine inter alia the level of intangibles and goodwill arising on acquisition and the future amortisation of intangible assets.
We intend to provide a full market update on the integration of New Star prior to the release of the Group's 2009 Interim Results on 27 August 2009.
Other acquisitions
Our recent investment in Attunga Capital Pty Ltd ('Attunga'), an alternative asset management business based in Sydney, Australia, is performing satisfactorily. Attunga AUM amounted to approximately A$140 million at 31 March 2009. Its power and emissions strategy returned 11% during the period and 41% per annum since inception in August 2006. Its agricultural and soft commodity strategy returned 9% during the period and 34% since inception in April 2008. It is currently launching a new offshore fund vehicle based on its existing onshore agricultural and soft commodity strategy.
The currency investment team which we hired from Fortis Investment Bank earlier this year has won its first institutional mandate with Henderson and is currently launching a hedge fund with seed capital provided by a number of existing clients.
Board of Directors
As announced at the end of February 2009, Anthony Hotson will be standing down as a Non-Executive Director at today's AGM. Tim How, who was appointed a Non-Executive Director in November 2008, will replace Anthony Hotson on the Group's Audit Committee.
Appendix: Number of shares for earnings per share (EPS) calculations6
|
FY09(E) |
FY09(E) |
||
|
Basic EPS calculation: |
No. (millions) |
Diluted EPS calculation: |
No. (millions) |
|
Issued share capital |
810.4 |
Shares for Basic EPS calculation |
754.8 |
|
Less: own shares (unconditional awards) |
(49.3) |
Add back: own shares (unconditional awards) |
49.3 |
|
Less: own shares (conditional - LTIP) |
(6.3) |
Add back: dilutive potential of share options |
0.5 |
|
Shares for basic EPS calculation |
754.8 |
Shares for diluted EPS calculation |
804.6 |
6 This is a full-year estimate based on current issued share capital and employee share schemes.
Forward-looking statements
This announcement contains forward-looking statements with respect to the financial condition, results and business of Henderson Group. By their nature, forward-looking statements involve risk and uncertainty because they relate to events, and depend on circumstances, that will occur in the future. Henderson Group's actual future results may differ materially from the results expressed or implied in these forward-looking statements. Nothing in this announcement should be construed as a profit forecast.
Notes to editors
About Henderson Group plc
Henderson Group plc ('Henderson Group' or 'Group') is the holding company of the investment management group Henderson Global Investors ('Henderson'). Henderson Group is headquartered in London and since December 2003 has been dual-listed on the London Stock Exchange and Australian Securities Exchange ('ASX'). Henderson Group is a constituent of the FTSE 250 and S&P/ASX 200 indices. Since 31 October 2008, the Group has been incorporated in Jersey and tax-resident in the Republic of Ireland.
Established in 1934, Henderson is a leading independent global asset management firm. The company provides its institutional, retail and high net-worth clients with access to skilled investment professionals representing a broad range of asset classes, including equities, fixed income, property and private equity. Henderson is one of Europe's largest investment managers, with £43.4 billion assets under management and employed around 827 people worldwide (as at 31 March 2009).
About CHESS Depositary Interests
In this announcement, the term "shareholders" refers to all holders of Henderson
Group plc shares, including those whose holdings are in the form of CHESS Depositary Interests on the Australian Securities Exchange.
CHESS Depositary Interests, or CDIs, are a way of allowing securities of foreign companies to be traded on the Australian Securities Exchange. CDIs afford shareholders all the same direct economic benefits as ordinary shares, like the right to dividends and the right to participate in rights offers.
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Further information www.henderson.com or |
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Investor enquiries |
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Mav Wynn, Head of Investor Relations |
+44 (0) 20 7818 5135 or |
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+44 (0) 20 7818 5310 |
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Media enquiries |
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Richard Acworth, Head of Corporate Communications |
+44 (0) 20 7818 3010 |
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United Kingdom: Maitland |
Australia: Cannings |
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Lydia Pretzlik/ Rebecca Mitchell |
Pip Green/ Luis Garcia |
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+44 (0)20 7379 5151 |
+61 (0) 2 8284 9990 |
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