18th Jul 2007 07:10
Henderson Group plc18 July 2007 Trading update 18 July 2007 Henderson Group plc ('Henderson Group' or 'Group') is updating the market todayon its business performance during the first half of 2007 and its currentoutlook for the remainder of the year. The Group will report its interim resultsfor the six months to 30 June 2007 on 24 August 2007. Key business developments Wholesale funds In the first six months of the year net sales across Henderson wholesale fundstotalled £0.9 billion (1H06: £0.9 billion). Within this total, US mutual fundsales were particularly strong, helped by excellent investment performanceacross the range and by greater enthusiasm amongst US investors forinternational equity funds. Consistent performance across the Horizon SICAV fund range - sold principallyinto Europe and Asia - helped generate additional net inflows, although towardsthe end of the period outflows from property securities funds, due to profittaking, partially offset net gains in other SICAV funds. In the UK wholesale range investment performance has been generally strong,particularly in key UK equity products. Although the impact on flows in thefirst half was modest, we are encouraged by recent successes within our targetdistribution networks. This bodes well for 2008 and beyond, assuming of coursethat investment performance remains robust. Institutional funds Investment performance in our institutional business continues to recover and weexpect a gradual stabilisation of assets under management in this area by theend of 2007. In the first half we experienced institutional net outflows of £0.7billion compared to £2.9 billion outflows in the first half and £0.3 billionoutflows in the second half of 2006. Despite these outflows, our institutionalrevenues are still expected to increase this year as a result of higher marginbusiness wins. In addition, during this period investors in some of ourstructured credit funds (CDOs) redeemed or partially redeemed early havingdelivered good investment performance. Assets under management in this line ofbusiness therefore declined by £0.9 billion, although we have receivedmake-whole management fees as a result of early redemption, most of which willbe recognised in the first half of 2007. Property funds Investment performance in our property funds was excellent in 2006, with 92% offunds beating their benchmarks. As a result performance fee generation has beenstrong, which will be recognised in the first half results. As regards theinvestment of client commitments already won, this totalled £0.4 billion in thefirst half of the year. The outstanding pipeline of funds still to be investedwas similar at the end of June 2007 to 31 December 2006 at £1.9 billion. Private Equity The Private Equity team has made good progress with the integration of JohnLaing, which was acquired in December 2006, and we are optimistic about furtheropportunities in the area of infrastructure. Separately we are in the processof raising assets for a second Asia fund, which we expect to complete by the endof 2007/early 2008. Pearl As previously stated, the investment management and other related agreements,reached with Pearl in June 2006, allow Pearl flexibility to withdraw and/orre-allocate assets. As such we cannot predict future movements in Pearl funds.However, if actual fees fall below certain thresholds, Pearl will makecompensation payments to Henderson to make good the shortfall, until April 2015. We flagged in May that we expected Pearl to withdraw approximately £5 billion ofits with-profits funds in June 2007. This withdrawal had not occurred by 30 June2007, although we believe these funds will be withdrawn in the near future. Thislikely withdrawal will not have any significant impact on earnings relative toprevious assumptions. Net outflows in the half year to 30 June 2007 from Pearlhave been £1.8 billion, in line with the natural attrition of Pearl's closedbooks of business. Assets under management Total assets under management remained stable during the period, amounting to£61.6 billion as at 30 June 2007 compared to £61.9 billion at 31 December 2006. Henderson Global Investors Transaction and performance fees Slightly lower than expected transaction fees in the first half of 2007 weremore than offset by strong performance fees, especially in respect of property. Costs We continue to monitor costs closely and, principally due to profitable revenuegrowth, we remain confident that we will reach our cost to income ratio targetof 70%(1) for the full year 2007 (FY06: 72.6%). Corporate office Corporate costs remain in line with guidance of approximately £10 million for2007, accruing evenly during the year. Investment income for 2007, however, isnow expected to be modestly positive, not zero or negative as previously guided.This is due to higher interest earned on cash balances, partly offset byinterest payable on the debt issued in May of this year. Banca Popolare Italiana (BPI) The merger of BPI and Banco Popolare di Verona e Novara, to create BancoPopolare Gruppo Bancario (BP), completed on 1 July 2007. This transactioncrystallised a net gain in our investment in BPI of £31.8 million, of which£16.3 million has been received in cash by way of a special dividend. Theinvestment gain will be recognised in the Group's first half 2007 incomestatement as a non-recurring item. Our sub-advisory agreement with BPI (AUM: £0.7 billion at 30 June 2007) was dueto expire by the end of this year. BPI has confirmed that this will be the case,however we will retain a distribution agreement for Horizon products (AUM: £0.3billion at 30 June 2007) with BP. Pension fund The funding position of the Group scheme continues to improve as a result ofadditional contributions previously agreed with the Scheme Trustee and higherinvestment returns. In addition, during the first half of 2007, we expect torecognise a one-off £8.7 million pension scheme credit, due to a reduction inassumed salary inflation for pension purposes with effect from April 2007. Thischange to pension benefits was agreed with the Trustee and will appear as anon-recurring item in the Group income statement in the first half of 2007. Taxation We still expect a tax rate on recurring profits of the Group of between 10% and15% for 2007 and 2008, reverting to the standard UK corporate tax rate (28% witheffect from April 2008), in 2009 or 2010. Return of cash The Group previously indicated that it planned to return approximately £200million to shareholders in the second half of 2007. Based on a prudent currentassessment of forecast cash flows, regulatory, seed and working capitalrequirements, the Group now expects to return up to £250 million in the fourthquarter of 2007. We will update the market on the exact amount, method andtiming on 24 August 2007. Summary and outlook Improving investment performance and generally benign markets have facilitatedfund raising across a range of the Group's higher margin products in the firsthalf of 2007. If these factors persist during the remainder of the year,prospects for the business remain good. Henderson Group plc 4 Broadgate London EC2M 2DA Registered in England No. 2072534 ABN 30 106 988 836 Notes to editors About Henderson Group plc Henderson Group is the holding company of the investment management groupHenderson Global Investors (Henderson). Henderson Group is headquartered inLondon and since December 2003, has been dual-listed on the London StockExchange and Australian Securities Exchange. Henderson Group is a constituent ofthe FTSE 250 and S&P/ASX 200 indices. Established in 1934, Henderson is a leading independent global asset managementfirm. The company provides its institutional, retail and high net-worth clientswith access to skilled investment professionals representing a broad range ofasset classes, including equities, fixed income, property and private equity.Henderson is one of Europe's largest investment managers, with £61.6 billionassets under management (as at 30 June 2007) and employs around 900 peopleworldwide. About CHESS Depositary Interests 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 Securities Exchange. CHESS Depositary Interests, or CDIs, are a way of allowing securities of foreigncompanies to be traded on the Australian Securities Exchange. CDIs affordshareholders all the same direct economic benefits as ordinary shares, includingthe right to dividends and the right to participate in rights offers. Further information www.henderson.com or Investor enquiries Mav Wynn, Head of Investor Relations +44 (0) 20 7818 5135 or +44 (0) 20 7818 5310 [email protected] or [email protected] Media enquiries United Kingdom: Maitland Australia: CanningsPeter Ogden/ Lydia Pretzlik Gloria Barton/ Peter Brookes+44 (0)20 7379 5151 +61 (0) 2 9252 0622 -------------------------- (1) Excluding non-recurring items This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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