29th Nov 2007 07:00
Henderson Group plc28 November 2007 Trading update 29 November 2007 Henderson Group plc ('Henderson Group' or 'Group') is updating the market todayon its operational performance during the ten month period to 31 October 2007and its current outlook for the business. The Group will report its 2007full-year results on 27 February 2008. 2007 full-year profit range Assuming markets do not deteriorate materially from today's levels, we expectGroup profit before tax and non-recurring items to be within the range of £101million and £106 million for the full-year 2007. This represents an increase ofapproximately 23% to 29% on the comparable figure for the previous year. Assets under management and fund flows--------------------------------------------------------------------------------£bn Opening Net Market/FX Closing AUM Net Flows Market/FX Closing AUM 1 Jan flows 1H07 30 June Jul-Oct Jul-Oct AUM 31 2007 1H07 2007 2007 2007 Oct 2007------------- ------- ------- ------- ------- ------- ------- -------Higher margin 26.5 0.4 0.9 27.8 0.4 0.2 28.4Lower marginInstitutional 14.9 (0.7) 0.5 14.7 (0.4) 0.2 14.5Pearl 20.5 (1.8) 0.4 19.1 (1.5) 0.8 18.4------------ ------- ------- ------- ------- -------- ------- -------Total 61.9 (2.1) 1.8 61.6 (1.5) 1.2 61.3-------------------------------------------------------------------------------- As expected, market volatility in the second half of 2007 has produced a morechallenging environment for fund flows. Nevertheless, net inflows into highermargin business in the four months July to October 2007 ('the period') were £0.4billion, similar to the first half of 2007. Higher margin business won in the period included net inflows into US Wholesale(£0.5 billion), Hedge funds (£0.2 billion) and UK/Europe direct Property funds(£0.3 billion) which more than offset net outflows from Horizon (£0.4 billion,mostly due to outflows from property securities funds), Investment Trusts (£0.1billion) and UK Wholesale (£0.1 billion). In the same period, the lower margin Institutional business saw net outflows of£0.4 billion (1H07: £0.7 billion net outflow) and there were net outflows fromPearl Group ('Pearl') of £1.5 billion (1H07: £1.8 billion net outflow). Positive market and foreign exchange rate movements added £1.2 billion (1H07:£1.8 billion), resulting in total assets under management of £61.3 billion at 31October 2007, compared to £61.6 billion at 30 June 2007. Total assets undermanagement at 31 October 2007, therefore, comprised higher margin business of£28.4 billion (30 June 2007: £27.8 billion), lower margin Institutional businessof £14.5 billion (30 June 2007: £14.7 billion) and Pearl £18.4 billion (30 June2007: £19.1 billion). As indicated above, our direct Property business continues to grow. Propertyassets under management at 31 October 2007 were £8.7 billion with an, as yet,uninvested pipeline of new business of £1.9 billion. Property assets undermanagement include approximately £0.7 billion of open-ended funds. We expectredemptions during the second half of 2007 of approximately £30 million fromthese funds which are being processed in an orderly manner. Also as indicated above, our Hedge fund business grew during the period. Longterm performance in this area remains strong (see below). Our structured products business remains robust with assets under management of£1.7 billion at 31 October 2007, similar to the half year-end. We flagged in May of this year that we expected Pearl to withdraw approximately£5 billion of its funds in June 2007. This withdrawal is still outstanding,although we believe it will take place in early 2008. Pearl has also recentlygiven notice of its intention to withdraw a further circa £4 billion of assets,expected in early 2008. As previously stated, the investment management andother related agreements, entered into with Pearl in June 2006, allow Pearlflexibility to withdraw and/or re-allocate its assets. As such we cannot predictmovements in Pearl funds. However, if actual fees fall below certain thresholds,Pearl has agreed to make compensation payments to Henderson to make good theshortfall, until April 2015. The withdrawals referred to above are not expectedto have any significant impact on future earnings relative to previousassumptions. In addition, the Pearl Staff Pension Scheme, an Institutional client, hasrecently given notice of its intention to withdraw Henderson's mandate to manageits assets, currently approximately £1.8 billion. These assets are expected tobe withdrawn either by the end of 2007 or in early 2008, and account forapproximately £2 million per annum of Henderson revenues. Investment performance Based on the value of funds achieving or beating their benchmarks, investmentperformance as a whole has remained satisfactory in the period. US Mutual funds,key sectors in UK Wholesale funds and structured products performed well. Inaddition, investment performance in our core Institutional business has beengood. Long term performance in Hedge funds, the Horizon SICAV range andInvestment Trusts remains good or satisfactory, although some short-termperformance is slightly disappointing and we will continue to focus on improvingthis. Approximately half of our direct Property funds by value are subject to absolutereturn rather than peer group benchmarks. Long term investment performanceremains excellent, although current market conditions are more challenging. Transaction and performance fees Transaction fees are expected to amount to approximately £17 million for thefull year 2007, less than the amount achieved last year (£24.6 million), mainlydue to the slower pace of Property investment. We are confident of achieving ourguidance of £13 million for net performance fees in the second half of 2007,bringing net performance fees for the full year 2007 to approximately £48million. Cost to income ratio We currently expect to beat our cost to income ratio target for Henderson of 70%for the full year 2007, largely as a result of profitable revenue growth.Assuming markets remain at least equal to their current levels throughoutNovember and December, then the cost to income ratio for 2007 will beapproximately 68% (FY06: 72.6%). We plan to achieve further incrementalimprovements in this ratio in future years, subject to benign markets. Corporate Corporate costs are likely to be slightly lower than the £10 million previouslyindicated, whereas Corporate net interest income is still expected to be between£6 million and £7 million in 2007. We do not expect any significant change inCorporate costs in 2008 compared to 2007. However, due to lower cash balancesfollowing the special dividend in October 2007 and the cost of servicing thedebt we raised in May of this year, we expect Corporate net interest to turnnegative next year, approximately £12 million before tax relief, assuming nomaterial changes in interest rates. Tax We still expect the effective tax rate on Group profits from continuingoperations, excluding non-recurring items, to be between 10% and 15% for 2007and 2008, reverting closer to the standard UK corporate tax rate in 2009 or2010. 2007 Return of cash and share consolidation We paid a special dividend of 27.6 pence per share and an interim dividend of1.66 pence per share on 29 October. The payment of the special dividend wascombined with a 4:5 share consolidation and, as a result, issued share capitalreduced to 724,473,712 voting shares at 31 October 2007. The Group does notexpect to make any further substantial returns to shareholders in theforeseeable future. The dividend cover for 2007 dividends is expected to remainat approximately two times, although the Board will review this in 2008. Summary and outlook Given the degree of market volatility experienced in the period, the overallperformance of the Group for the year is encouraging. Although we expect marketsto remain challenging in the near-term, our diversity continues to generateopportunities for further growth. We have a number of fund launches in progressand more planned for next year. We aim to build on the generally good investmentperformance in our higher margin business areas, address performance in weakerareas and build on the recent improvements in our Institutional business.Overall, the prospects for the business remain sound. Henderson Group plc4 BroadgateLondon EC2M 2DARegistered in EnglandNo. 2072534ABN 30 106 988 836 Notes to editors About Henderson Group plc Henderson Group plc (Henderson Group) is the holding company of the investmentmanagement group Henderson Global Investors (Henderson). Henderson Group isheadquartered in London and since December 2003 has been dual-listed on theLondon Stock Exchange and Australian Securities Exchange. Henderson Group is aconstituent of the 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 £61.3 billionassets under management (as at 31 October 2007) and employs around 950 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, like theright to dividends and the right to participate in rights offers. Further informationwww.henderson.com or Investor enquiriesMav Wynn, Head of Investor Relations +44 (0) 20 7818 5135 or +44 (0) 20 7818 5310 [email protected] or [email protected] Media enquiriesUnited Kingdom: Maitland Australia: CanningsPeter Ogden/ Lydia Pretzlik Pip Green/ Peter Brookes+44 (0)20 7379 5151 +61 (0) 2 9252 0622 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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