15th May 2008 07:00
Interim Management Statement
15 May 2008
Henderson Group plc ('the Group' or 'Company'), is today publishing its first Interim Management Statement in accordance with the EU Transparency Directive and revised UK Listing Authority rules. Unless otherwise stated, the comments below refer to the first 4 months of the current financial year, representing the period from 1 January 2008 to 30 April 2008 ('the period').
Overview
Market conditions remained challenging throughout the period, which resulted in generally subdued demand for investment management products across the industry, particularly amongst retail investors. Nevertheless, we are encouraged by our own asset raising and retention efforts which, combined with the prompt action we took on costs earlier in the period, should enable us to achieve the financial objectives for 2008 that we announced at the end of February: to meet or beat Henderson Global Investors' ('Henderson') 2007 operating profit before tax of £109.6 million and to deliver a Henderson cost to income ratio of 65% or below.¹
Fund flows and assets under management
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Summary of movements in AUM
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Opening AUM
1 Jan 08
£bn
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Net flows
1 Jan 08 – 30 April 08
£bn
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Market/FX
1 Jan 08 – 30 April 08
£bn
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Closing AUM
30 April 08
£bn
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Higher margin
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Investment Trusts
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4.3
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(0.3)
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(0.2)
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3.8
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Horizon funds
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3.5
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(0.2)
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(0.1)
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3.2
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UK Wholesale
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3.8
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(0.1)
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(0.1)
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3.6
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US Wholesale
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3.5
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0.2
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(0.2)
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3.5
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Hedge funds
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1.2
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0.0
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0.0
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1.2
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Property UK/Europe
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7.4²
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0.5
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0.1
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8.0
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Property US
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1.3
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0.0
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0.0
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1.3
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Private Equity
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1.1
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0.0
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0.1
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1.2
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Structured Products
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1.8
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0.0
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0.0
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1.8
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27.9
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0.1
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(0.4)
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27.6
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Lower margin
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Institutional
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11.7
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0.8
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(0.3)
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12.2
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Total AUM ex Pearl
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39.6
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0.9
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(0.7)
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39.8
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Pearl
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17.7
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(1.1)
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(0.2)
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16.4
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Pearl Staff Pension Scheme
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1.9³
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(1.8)
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(0.1)
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0.0
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Total AUM
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59.2
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(2.0)
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(1.0)
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56.2
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¹ Before non-recurring items.
² £0.2 billion previously included in 31 Dec 2007 disclosure now included in Pearl Staff Pension Scheme.
³ Includes £0.2 billion of Property (UK/Europe).
Overall, net inflows into our higher margin businesses were broadly flat in the period. Within this total, we saw net inflows of £0.2 billion in US Wholesale and £0.5 billion in Property, with a further £2 billion of Property client commitments to invest as at 30 April 2008. We plan to invest this pipeline over the next 18 to 24 months. Against these net inflows we saw net outflows from Investment Trusts (£0.3 billion), Horizon (£0.2 billion) and UK Wholesale (£0.1 billion) in the period. The net outflow from Investment Trusts was largely due to the reduction of an enhanced index mandate by Witan.
Assets under management in Hedge funds (£1.2 billion), US Property (£1.3 billion), Private Equity (£1.2 billion) and Structured Products (£1.8 billion) remained stable during the period.
In Institutional, we achieved net inflows of £0.8 billion, mostly into fixed income products, a significant improvement on recent years.
We experienced net outflows of £1.1 billion from Pearl in the period, £0.6 billion from the run-off of Pearl's closed life books and £0.5 billion in respect of previously notified withdrawals. Pearl has a further £8 billion of assets which it gave notice on in 2007 but has yet to withdraw and, therefore, 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.
The Pearl Staff Pension Scheme withdrew its mandate of £1.8 billion in the period, as previously flagged, resulting in a future revenue loss of approximately £2 million per annum.
These fund flows, together with unfavourable market and foreign exchange rate movements of £1.0 billion in the period, brought total assets under management to £56.2 billion at 30 April 2008.
Investment performance
Despite recent market turbulence, our three year investment performance track record remains generally competitive.
Within Listed Assets, we are encouraged by recent improvements in our Fixed Income performance, although somewhat disappointed by short-term performance in Equities.
Within Property, our US business performed relatively well in the year to 31 December 20074, whereas Pan-European Property endured a more difficult year.
Overall, we remain comfortable with the guidance we gave in February on net performance and transaction fees of £30 million for 2008.
Tax
The Group continues to enjoy a lower effective tax rate than the UK statutory rate, due to the recognition of deferred tax assets and the release of provisioning in respect of prior years. As previously indicated, we expect the effective tax rate on continuing operations excluding non-recurring items in 2008 to remain between 10% and 15%, reverting closer to the statutory rate in 2009 or 2010.
Dividend
We expect to increase the dividend pay-out ratio from 50% to 55% of net profits after tax before non-recurring items for 2008. Beyond that, we are likely to increase the dividend pay-out ratio by 5 percentage points a year, bringing the ratio to about 65% from 2010 onwards.
Third party administration review
As we recently announced at our Annual General Meeting, we have begun a review of most of our third party administration arrangements, which we expect to complete by the end of this year. This review will involve some one-off expenditure, on which we will provide guidance with our 2008 interim results on 28 August. The purpose of the review is to achieve excellent investment administration for our diverse range of Listed Asset funds, both current and future, but it is too early to say whether it will result in cost savings.
Commenting on the interim management statement, Roger Yates, Henderson Group's Chief Executive said:
"Global market conditions in the first four months of the year have been difficult. Retail investor confidence, particularly as a consequence of the credit crunch, is fragile and, as expected, flows into our Wholesale funds have been subdued. The current outlook for our Property and Institutional businesses, however, looks promising and we are pursuing a number of initiatives to expand our hedge fund assets over the next 12 to 18 months. In general, 2008 fundraising will be biased towards the second half of the year.
The prompt action we took earlier this year to protect our profits, along with the diversity of our business, should enable us to achieve our financial goals for 2008: to meet or beat Henderson Global Investors' 2007 operating profit before tax of £109.6 million and to deliver a Henderson Global Investors cost to income ratio of 65% or below5.
Our primary focus is on profitable organic growth, but we also believe that, in these more difficult markets, we are in a good position to capitalise on other opportunities. We are actively looking for those opportunities where we can lift out teams or make bolt-on acquisitions that meet our criteria."
4 Latest available data.
5 Before non-recurring items.
* * *
Appendix: Number of shares for Earnings Per Share (EPS) calculations6
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FY08(E) |
FY08(E) |
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Basic EPS calculation: |
No. (millions) |
Diluted EPS calculation: |
No. (millions) |
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Issued share capital |
724.8 |
Shares for Basic EPS calculation |
651.3 |
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Less: Treasury shares |
(5.0) |
Add back: Own shares (unconditional awards) |
60.3 |
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Less: Own shares (unconditional awards) |
(60.3) |
Add back: Share options |
1.4 |
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Less: Own shares (conditional - LTIP) |
(8.2) |
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Shares for Basic EPS calculation |
651.3 |
Shares for Diluted EPS calculation |
713.0 |
6 This is a full-year estimate based on current issued share capital, treasury shares 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) 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.
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 £56.2 billion assets under management (as at 30 April 2008) and employs around 960 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 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
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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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Peter Ogden/ Lydia Pretzlik
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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