5th Dec 2006 07:26
Henderson Group plc05 December 2006 Trading update4 December 2006 Due to price and volume movements of Henderson Group plc (Group) securitieslisted on the Australian Stock Exchange (ASX) in the week of 27 November 2006,the ASX sought clarification of whether the Group was aware of any reasons forthe price and volume movements. The Group responded on 4 December 2006 that itwas not aware of any reasons for these price and volume movements. Both thequestions from the ASX and the Group's responses are attached at the end of thisannouncement. Notwithstanding this exchange of correspondence, the ASX is now seeking furtherimmediate clarification of Henderson Group's expected earnings for the 12 monthsending 31 December 2006. In light of the additional clarification sought by the ASX, the Group isupdating the market today with its financial results and business performancefor the ten months ended 31 October 2006 (the latest available results) andcurrent expectations for the business. Business developmentsThe Group continues to make good progress in 2006. We completed our secondcapital return of approximately £200 million and paid an interim dividend of 0.88 pence per share on 24 October. Most of the surplus cash held in Corporatehas therefore been returned to shareholders and the return on Corporate cashis expected to fall commensurately. Corporate costs, including the £2 millionone-off legal costs incurred in the first half of 2006, are expected to beapproximately £11 million for the full year 2006, slightly lower than the£12 million previously anticipated. As regards investment performance in Henderson Global Investors (Henderson),most of the higher margin business areas are performing well. Encouragingly, investment performance in UK retail and the Institutional book of business is showing signs of improvement. Overall, we remain confident that we have theright investment talent and team structure in place. From 1 July to 31 October 2006, net flows into higher margin specialist productareas were £0.7 billion (1H2006: £2 billion). In the same period, net outflowsfrom the lower margin institutional book were £0.3 billion (1H2006: £2.9 billionoutflow) and from the Pearl closed books were £2.3 billion (1H2006: £1.5 billionoutflow). These outflows were offset by positive market movements of £3.0billion (1H2006: £0.2 billion) resulting in total assets under management of£64.2 billion at 31 October 2006 compared to £63.1 billion at 30 June 2006. Pearl has also indicated that it will be withdrawing all of its non-profitannuity assets of approximately £4.3 billion before 31 December 2006. We earnlow margins (approximately 6bps) on these assets and this withdrawal will resultin no revenue impact in 2006 and limited impact thereafter. In addition, asforeshadowed by the revised Investment Management Agreements (IMAs) announced inJune 2006, the management of direct property investments (AUM: £450 million,included in the £2.3 billion outflow reported above) transferred back to Pearlin October and management of the European private equity funds (AUM: £150million) is expected to transfer back to Pearl. The IMAs and other relatedagreements revised with Pearl in June 2006 allow Pearl flexibility to withdrawand/or re-allocate assets between investment capabilities. Although Hendersoncannot predict future movements in Pearl funds, if actual fees fall belowcertain thresholds, Pearl has agreed to pay compensation payments to Hendersonto make good the shortfall, until April 2015. Revenues gained from the inflows into the higher margin business areas continueto offset revenues lost from the outflow of lower margin assets. Henderson remains on track to meet its cost to income ratio target of 73% for the full year 2006. Excluding one-off costs of approximately £8 million before tax associated with restructuring the business in the second half of 2006, we currently expect Group net profit before tax from continuing operations for the full year 2006 to be between £78 million and £82 million, compared to £63.4 million for the full year 2005. This range assumes that investmentmarkets do not change materially from current levels. Henderson also remainsconfident of reaching its cost to income ratio target of 70% for 2007. TaxDue to a better than expected outcome from recent discussions with the UK taxauthorities on prior year tax issues, the Group now anticipates reporting an effective tax rate of approximately 15% for both continuing and all operationsfor the full year 2006 (reduced from 18% anticipated at the half year). Subject to negotiations with the UK tax authorities, we expect the effectivetax rate for continuing operations to range between 10% and 15% for the nexttwo or three years, before reverting to the expected rate, i.e. 30%, in 2009 or 2010. LaingThe acquisition of John Laing plc by Henderson Infrastructure Holdco is subjectto approval of John Laing's shareholders at an Extraordinary General Meetingon 5 December 2006. This transaction also remains subject to UK Court approvallater this month. Should the transaction be approved and complete, Hendersonexpects to earn incremental gross investment management fees of approximately£8 million per annum, before associated costs and tax. Banca Popolare Italiana (BPI)The market value of the Group's investment in BPI on 1 December 2006 was£80.1 million, compared to £56.8 million at 30 June 2006 and a book cost of £54.4 million. The gain on this investment is, as yet, unrealised and will therefore be accounted for in the Group's 2006 Statement of Recognised Incomeand Expenditure (SORIE) rather than the profit and loss account. The mergerproposal announced by BPI and Banco Popolare di Verona e Novara in October2006 is expected to be put to their shareholders in the first half of 2007.If approved and completed, the merger will result in a realisation of thegain in the Group's investment in BPI. CapitalCertain provisions of the new Capital Requirements Directive will becomeeffective on 1 January 2007. The remainder will follow from 1 January 2008.The Group continues to expect no significant change in its regulatory capital requirement of approximately £80 million. The Group also continues in discussions with the FSA regarding a waiver fromconsolidated supervision. The goodwill amount on the Group's balance sheet (£225 million at 31 October 2006) will be eligible as capital should this waiver be obtained. The Group will update the market further on capital planning, includinggearing of the balance sheet, when its full year 2006 results are releasedon 28 February 2007. Henderson Group plc4 BroadgateLondon EC2M 2DARegistered in EnglandNo. 2072534ABN 30 106 988 836 ----------------------------------------------------------------------------- For further information: www.henderson.com or Investor enquiries Mav WynnHenderson Group Head of Investor Relations +44 20 7818 [email protected] Media enquiries United Kingdom - FinsburyAndrew Mitchell +44 20 7251 3801 Australia - CanningsGloria Barton +61 2 9252 0622 Related documents: Paste the following links into your web browser to download the PDF documents related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/2435n_1-2006-12-5.pdf http://www.rns-pdf.londonstockexchange.com/rns/2435n_2-2006-12-5.pdf This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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