6th Nov 2008 07:04
Interim Management Statement
6 November 2008
Henderson Group plc ('the Group') today releases its second Interim Management Statement for 2008. It is published in accordance with the EU Transparency Directive and revised UK Listing Authority rules. Unless otherwise stated, the comments below refer to the third quarter of the current financial year, representing the period from 1 July 2008 to 30 September 2008 ('the period').
Key points
Assets Under Management ('AUM') of £51.2 billion at 30 September 2008, 3% lower than at 30 June 2008.
Net fund inflows in the period of £0.8 billion.
Prompt action to reduce costs in early 2008 helped cushion market decline.
Further cost initiatives underway given deteriorating market conditions during the period.
Committed to strategy of providing clients with higher value-add investment products in all market conditions.
Commenting on the interim management statement, Andrew Formica, Henderson Group's Chief Executive said:
"Fund flows over the period remained resilient against a background of challenging and volatile market conditions. Worsening market conditions have resulted in a recent pick-up in client redemptions in some of our higher margin businesses.
We are managing the business on the assumption that market conditions remain difficult in the short to medium-term. We will continue to manage our cost base actively and benefit from the diversity of our business and our sound balance sheet. We remain committed to our strategy and continue to invest in areas that provide our clients with higher value-add investment products in all market conditions.
Our focus remains on profitable organic growth. Current market levels also enable us to consider new investment capabilities or add to existing capabilities at attractive prices. We have already completed one small such transaction and expect to add at least one more capability before year end."
Henderson Group plc
47 Esplanade
St Helier
Jersey JE1 0BD
Registered in Jersey
No. 101484
ARBN 133 992 766
Fund flows and assets under management for Henderson Global Investors ('Henderson')
|
£bn |
Opening AUM 1 Jan 08 |
Net flows 1 Jan 08 - 30 Jun 08 |
Market/ FX
1 Jan 08 - 30 Jun 08 |
ClosingAUM
30 Jun 08 |
Net flows
1 Jul 08 - 30 Sept 08 |
Market/ FX
1 Jul 08 - 30 Sept 08 |
ClosingAUM 30 Sep 08 |
|
Higher margin |
|||||||
|
Investment Trusts |
4.3 |
(0.2) |
(0.6) |
3.5 |
(0.1) |
(0.4) |
3.0 |
|
Horizon funds |
3.5 |
(0.2) |
(0.3) |
3.0 |
(0.1) |
(0.2) |
2.7 |
|
UK Wholesale |
3.8 |
(0.1) |
(0.4) |
3.3 |
- |
(0.1) |
3.2 |
|
US Wholesale |
3.5 |
0.2 |
(0.4) |
3.3 |
(0.2) |
(0.2) |
2.9 |
|
Hedge funds |
1.2 |
- |
0.1 |
1.3 |
(0.1) |
(0.1) |
1.1 |
|
Property UK/Europe |
7.41 |
0.6 |
(0.1) |
7.9 |
0.3 |
(0.1) |
8.1 |
|
Property US |
1.3 |
- |
(0.1) |
1.2 |
- |
0.2 |
1.4 |
|
Private Equity |
1.1 |
- |
0.1 |
1.2 |
- |
- |
1.2 |
|
Structured Products |
1.8 |
- |
- |
1.8 |
- |
- |
1.8 |
|
27.9 |
0.3 |
(1.7) |
26.5 |
(0.2) |
(0.9) |
25.4 |
|
|
Lower margin |
|||||||
|
Institutional |
11.7 |
1.0 |
(0.7) |
12.0 |
1.5 |
(0.8) |
12.7 |
|
Total AUM ex Pearl |
39.6 |
1.3 |
(2.4) |
38.5 |
1.3 |
(1.7) |
38.1 |
|
Pearl |
17.7 |
(3.0) |
(0.6) |
14.1 |
(0.5) |
(0.5) |
13.1 |
|
Pearl Staff Pension Scheme |
1.92 |
(1.8) |
(0.1) |
- |
- |
- |
- |
|
Total AUM |
59.2 |
(3.5) |
(3.1) |
52.6 |
0.8 |
(2.2) |
51.2 |
1 £0.2 billion previously included in 31 Dec 2007 disclosure now included in Pearl Staff Pension Scheme.
2 Includes £0.2 billion of Property (UK/Europe).
Net fund inflows of £0.8 billion in the period, together with unfavourable market and foreign exchange rate movements of £2.2 billion, brought total assets under management to £51.2 billion at 30 September 2008, slightly lower than AUM at 30 June 2008 (£52.6 billion). Higher margin business saw modest net outflows in the period of £0.2 billion, including US Wholesale funds (£0.2 billion), due to general market weakness, partially offset by net inflows into UK/European Property (£0.3 billion), where we launched a new UK Outlet Mall Fund in July 2008. In addition, we retained a Property pipeline of investment commitments from clients of £1.9 billion at 30 September 2008.
Lower margin Institutional net fund flows were positive in the period, at £1.5 billion, the majority of which represents net inflows into our cash funds.
We experienced net outflows of £0.5 billion from Pearl in the period, representing £0.2 billion from the natural run-off of Pearl's closed life books and £0.3 billion in respect of previously notified withdrawals. £5.8 billion (44%) of Pearl's assets under management as at 30 September 2008 remain under notice of withdrawal. 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.
During October 2008, there has been a pick up in client redemption activity across the industry. For Henderson, UK Wholesale was slightly positive, however Horizon and US Wholesale funds saw net outflows of £0.3 billion and £0.2 billion respectively in the month. Redemption requests from Hedge fund clients have also increased. We have agreed with clients to restructure the European Absolute Return Fund for a lock-up and reduced management fee. As a result, the fund size is now expected to remain at approximately £260 million until the end of this year and thereafter reduce to approximately £36 million. Notified redemptions for the rest of our Hedge fund range post the end of the period amount to £0.1 billon. The negative impact of these net redemptions on 2008 revenues is expected to be modest.
Since the end of the period, Henderson has been appointed as investment adviser to Ernst & Young in their role as receiver to Sigma Finance Corporation, a Structured Investment Vehicle ('SIV'). This follows a similar mandate won in January 2008, when Henderson was appointed financial adviser to Bank of New York, the Security Trustee for Orion Finance Corporation, another SIV in enforcement.
Investment performance
Recent investment performance in a number of our funds has been negatively affected by market volatility, whereas our three-year investment performance in most areas remains competitive. Our mainstream fixed income portfolios continue to deliver above average performance and our cash funds are generating industry topping returns. The market backdrop has proved more challenging for equity funds, where our performance is mixed.
Overall, we still expect to meet our guidance of £30 million for transaction fees and net performance fees combined for 2008 as a whole.
Corporate
Corporate costs for 2008 should remain in line with guidance of approximately £8 million, which is approximately £1 million less than in 2007. Fluctuations in 6-month Sterling LIBOR, however, are expected to increase Corporate net interest costs to approximately £12 million (from £11.5 million previously guided) for 2008.
Investments
The Group has held an equity stake in Banco Popolare Gruppo Bancario ('BP') and its predecessors for approximately eight years, to cement a distribution alliance in Italy. In the first half of 2007, an accounting gain on this stake of £31.8 million was recognised in the Group's income statement as a non-recurring item. Due to subsequent adverse market conditions and in accordance with international accounting standards, the Group expects to incur an impairment charge against this investment in the current year, amounting to £40.4 million at 30 September 2008. This charge will appear in the Group's income statement as a non-recurring item; £39.1 million of it has already been recognised in Group reserves through mark-to-market accounting at 30 June 2008.
The Group also holds a portfolio of investments in Henderson products. The value of one holding, an equity position in a Henderson structured product, has been impacted by the deteriorating credit markets. We expect to incur an impairment charge of approximately £6.5 million against this investment in the second half of 2008 which will bring the carrying value of the investment to zero.
We remain comfortable with the current carrying value of all other investments held by the Group and with the ongoing strength of the Group's balance sheet, which comprised total net assets of £271 million, including cash balances of £161 million, at 30 September 2008.
Acquisitions
We are seeing more acquisition opportunities in prevailing markets. Since the end of the period, we have acquired an equity stake of up to 30% in a fast growing, Australian domiciled alternative asset management company, Attunga Capital Pty Ltd ('Attunga'). Attunga holds gross assets of approximately A$2.3 million and AUM of approximately A$150 million. Its main strategy, being a power and emissions fund, has returned 53% per annum since inception in August 2006. The recently launched agricultural and soft commodity strategy has returned 23% since inception in April 2008. We have also entered into a distribution agreement with Attunga. This business matches our strategic intent of offering our clients high value-add, uncorrelated investment products.
Separately, we are also in advanced talks to hire a specialist investment team which will add an important, scaleable capability to our product line-up.
Restructuring costs
As previously reported, we undertook a headcount and related restructuring programme at the start of this year and incurred a charge of £2.5 million pre-tax in the first half of 2008. We are taking further cost action, including headcount reduction, which will incur an additional restructuring charge in the second half of 2008. This charge will also be disclosed as a non-recurring item in the Group's 2008 income statement.
Third party administration review
We have progressed the review of most of our third party investment administration arrangements. The primary goal of the review remains improved service quality. We now expect to conclude it in early 2009 and we will, as previously indicated, provide an update for shareholders with our 2008 full-year results on 26 February 2009. As already guided, the review is expected to incur costs of approximately £2.6 million this year, which will be presented as a non-recurring item in the Group's 2008 income statement.
Tax and update on the Scheme of Arrangement ('Scheme')
As previously guided, we expect the Group's effective tax rate on continuing operations excluding non-recurring items in 2008 to remain between 10% and 15%.
The Scheme was announced on 28 August 2008 and involves moving the tax-residency of the Group's parent company to the Republic of Ireland, to achieve an effective corporate tax rate for the Group of approximately 20% per annum from 2009 onwards. It has been approved by shareholders and by the UK Court and became effective on 31 October 2008.
The costs of implementing the Scheme are, as previously disclosed, approximately £4.5 million and will be reflected as a non-recurring item in the Group's 2008 income statement.
* * *
Appendix: Number of shares for Earnings Per Share (EPS) calculations3
|
FY08(E) |
FY08(E) |
||
|
Basic EPS calculation: |
No. (millions) |
Diluted EPS calculation: |
No. (millions) |
|
Issued share capital |
725.0 |
Shares for Basic EPS calculation |
660.4 |
|
Less: Treasury shares |
(3.8) |
Add back: Own shares (unconditional awards) |
52.9 |
|
Less: Own shares (unconditional awards) |
(52.9) |
Add back: Share options |
0.9 |
|
Less: Own shares (conditional - LTIP) |
(7.9) |
||
|
Shares for Basic EPS calculation |
660.4 |
Shares for Diluted EPS calculation |
714.2 |
3 This is a full-year estimate based on current issued share capital, treasury shares and employee share plans.
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. 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 business. Henderson 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 £51.2 billion of AUM (as at 30 September 2008) and employs around 950 people worldwide.
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 ASX.
CHESS Depositary Interests, or CDIs, are a way of allowing securities of foreign companies to be traded on the ASX. 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
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+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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United Kingdom: Maitland
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Australia: Cannings
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Lydia Pretzlik/Rebecca Mitchell
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Pip Green/Luis Garcia
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+44 (0)20 7379 5151
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+61 (0)2 9252 0622
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Related Shares:
HGG.L