HGG.L Regulatory News (HGG)

2014 Interim Results

7 August 2014

Henderson Group plc (Henderson or the Group) published its Interim Results for the half year ended 30 June 2014 on 7 August 2014. The comments below refer to the period from 1 January 2014 to 30 June 2014 (the period) unless otherwise stated.

Financial highlights

· Assets under management (AUM) at 30 June 2014 up 10% to £74.7bn (30 June 2013: £67.9bn)

· Net inflows for the period of £5.0bn (30 June 2013: outflows £1.4bn)

· Underlying profit before tax from continuing operations of £90.7m (30 June 2013: £88.5m)

· Diluted continuing underlying EPS of 6.8p (30 June 2013: 7.0p)

· Dividend of 2.60p per share (30 June 2013: 2.15p per share).

Business update

· Strong investment performance: 86% of funds outperforming relevant metrics over three years

· Retail client net inflows of £4.7bn (30 June 2013: £0.6bn), from a broadening international footprint

· Institutional client net inflows of £0.3bn (30 June 2013: outflows of £2.0bn), with new mandates outpacing redemptions from funds in natural run-off

· Positive flows and investment performance in all five core capabilities - European Equities, Global Equities, Global Fixed Income, Multi-Asset and Alternatives

· Continued build-out of investment management capabilities, global distribution and global platforms

· Acquisition of Geneva Capital Management announced on 30 June 2014 will increase US AUM to c.15% of the Group.

Andrew Formica, Chief Executive of Henderson, said:  

"Our strong performance in 2013 continued into the first half of 2014. Investment performance remains good across all of our client assets; we have delivered record net inflows in the period of £5.0bn and we are gaining market share in our major markets.

"We have also made great strides on a number of fronts in the first half of 2014 towards delivering on our strategy. We are starting to see early results from some of our previous investments, including mandate wins for our Global Equities strategy and excellent first year performance from our US high yield team. We continue to add resources in investment management and distribution and are enhancing our global platforms. I was delighted to be able to announce the acquisition of Geneva Capital Management at the end of June, to add US equities capability to our business and extend our US institutional client base.

"Markets are currently fairly benign and we continue to see good levels of client activity. The outlook for our business remains strong."

Results for Announcement to the Market

To view the full details of the 2014 Interim Results, paste the following link into your web browser:

http://www.rns-pdf.londonstockexchange.com/rns/4764O_2-2014-8-6.pdf

To view the full details of the 2014 Interim Results Presentation, paste the following link into your web browser:

http://www.rns-pdf.londonstockexchange.com/rns/4764O_1-2014-8-6.pdf

These results for announcement to the market include the interim information required to be provided to the ASX under Listing Rule 4.2A and Appendix 4D.

1.Underlying profit, while not a GAAP measure, in the opinion of the Directors, gives relevant information on the profitability of the Group and its ongoing operations.

2.Net fee income less operating expenses, divided by total net fee income, all from continuing operations.

3. Employee compensation and benefits, divided by net income less income from associates and joint ventures, all from continuing operations.

4.Based on continuing underlying profit after tax attributable to equity holders of the parent.

5.Based on weighted average number of shares in issue less weighted average number of own shares held during the period.

6.Based on weighted average number of shares in issue less weighted average number of own shares held during the period adjusted for the dilutive potential of share awards and share options.

Dividends

On 6 August 2014, the board of directors of Henderson Group plc (the Board) declared an interim dividend in respect of the six months ended 30 June 2014 of 2.60 pence per share (1H13: 2.15 pence per share). Henderson Group plc does not offer a dividend reinvestment plan.

Net tangible assets per ordinary share

Net tangible assets are defined by the ASX as being total assets less intangible assets less total liabilities ranking ahead of, or equally with, claims of ordinary shares.

Summary of movements in AUM

The table below sets out the movement in the Group's total AUM during the six months ended 30 June 2014:

1. Represents the net impact of the property transactions completed on 1 April 2014 and the additional stake taken by the Group in 90 West in May 2014.

Market briefing

Management will present these results on 7 August 2014 at 6.00pm (Sydney time)/9.00am (London time).

Webcast details

You can log on to a webcast of the results briefing which will start at 6.00pm (Sydney time)/9.00am (London time). Go to www.henderson.com/group and click on the relevant link on the homepage. An archive of the webcast will be available shortly after the event.

Teleconference details

We recommend participants start dialling in 5-10 minutes prior to the start of the presentation. To telephone link-up to the briefing, dial one of the following numbers from 5.50pm (Sydney time)/8.50am (London time):

Further information

About Henderson

Henderson is an independent global asset manager, specialising in active investment. Named after its first client and founded in 1934, Henderson is a client-focused global business with over 800 employees worldwide and assets under management of £74.7bn (30 June 2014). Its core areas of investment expertise are European Equities, Global Equities, Global Fixed Income, Multi-Asset and Alternatives.

Henderson is dual-listed on the Australian Securities Exchange (ASX) and the London Stock Exchange (LSE) and has a market capitalisation of approximately £2.7 billion (30 June 2014).

Further information can be found at www.henderson.com/group.

Forward-Looking Statements and Other Important Information

This announcement contains forward-looking statements with respect to the financial condition, results and business of Henderson Group plc. 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'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.

The content of the websites referred to in this announcement is not incorporated into and does not form part of this announcement. Nothing in this announcement should be construed as, or is intended to be, a solicitation for or an offer to provide investment advisory services.

Consolidated Financial Results

1. Underlying profit, while not a GAAP measure, in the opinion of the Directors, gives relevant information on the profitability of the Group and its ongoing operations.

2. Net fee income less operating expenses, divided by total net fee income, all from continuing operations.

3. Employee compensation and benefits, divided by net income (excluding income from associates and joint ventures), all from continuing operations.

4. Net margin calculated on underlying profit before tax.

5. Based on underlying profit after tax attributable to equity holders of the parent.

6. Asset-weighted investment performance of funds measured over one and three years to 30 June 2014.

Business Review

In 1H14, we delivered strong investment performance, net inflows of £5.0bn, increased underlying profit on continuing operations and an increased interim dividend to shareholders of 2.60 pence per share.

The market backdrop in the period was relatively benign, with the asset classes in which we specialise - European Equities, Global Equities, Global Fixed Income, Multi-Asset and Alternatives - all delivering positive returns. In addition, we delivered positive flows in all of these capabilities.

Our strategy is focused on organic growth and on the globalisation of our business. Implementation of this strategy (subject to normal market conditions) will enable us to double our AUM by the end of 2018, from a starting point of £63.7bn (excluding Property assets) as at 31 December 2013. We will achieve this objective by continuing to increase market share and by delivering strong investment performance. We will continue to invest in our business and deploy capital in a disciplined and carefully targeted fashion, and we will maintain cost control to build operating leverage. The first half of 2014 saw further investment to help us achieve our growth and globalisation strategy.

Investment performance

As at 30 June 2014, investment performance remained strong with 86% of our funds outperforming on a three year basis. The table below sets out the investment performance of each core capability:

Performance is calculated as a percentage of funds, asset-weighted, that are outperforming based on the relevant metric: peer quartile ranking for Retail, positive for absolute return, positive versus benchmark for Institutional. Alternatives performance includes Henderson UK Property Unit Trust but excludes performance on other TH Real Estate AUM given the JV structure.

Flow drivers

The £5.0bn of net new client assets we attracted in 1H14 came largely into our global Retail franchise, with the Institutional business switching from being in significant outflow to modestly positive inflows. The following four factors were significant drivers of net new client inflows:

· Broadening geographic reach. The period saw strong Retail flows from the SICAV range (sold in Europe, Asia and Latin America), the UK and from US Mutual funds. Institutional flows broadened from their historical UK client base, with mandates won in the US, Australia and Japan

· The right product to meet client needs. We clearly benefited from increased demand in the past year for European Equities. Our broad product range delivers significant competitive advantage, as client requirements vary from region to region. Within European Equities, Henderson Gartmore Continental European, Henderson Horizon Pan European Equity and Henderson Horizon Euroland all attracted net inflows in excess of £250m during 1H14, and Henderson Horizon Pan European Alpha attracted net flows of over £500m

· Strong distribution relationships. We benefit from strong global distribution relationships. In the UK, these have helped us navigate the structural changes triggered by the UK Retail Distribution Review and to focus our sales efforts on key decision makers. In Europe, we are seeing good growth from our global relationships and in Latin America, there have been strong flows from the offshore channel. In the US, Henderson European Focus is the top selling European equity fund year to date1

· Strength in diversity. All of our core investment management capabilities - European Equities, Global Equities, Global Fixed Income, Multi-Asset and Alternatives - delivered positive investment returns and net inflows in the period.

1. Based on Morningstar data.

Investment for future growth

In order to drive organic growth through flows and investment performance, we have continued to invest in our investment management capabilities, global distribution and global platforms. Significant investments made during the period include:

· Investment management. Building out Global Credit by hiring Emerging Markets specialists, adding investment grade to US high yield capability, building out regional expertise in Asia equities, and continuing to develop the Multi-Asset team

· Distribution. New Retail hires in Italy, Switzerland and Latin America; team build-outs in Japan and Australia

· Global brand and platforms. Launch of a refreshed global brand and new management infrastructure, which enables us to build operational scale and implement regulatory change effectively.

On 30 June 2014, we announced the acquisition of Geneva Capital Management. This marks an important strategic milestone in the development of our North American business, and will add US equity investment capabilities and extend the US institutional client base.

Outlook

We are currently experiencing strong growth momentum, with the key leading indicators of investment performance and flows both positive. Strategic investments are proceeding according to plan.

The second half has begun well, although we expect a slowdown in flows during the summer holiday season and more generally in the US, after an exceptional start to the year. Given our performance and product suite, we remain confident that we can deliver on our growth aspirations. We remain committed to being a trusted global asset manager, focused on delivering excellent performance and service to our clients.

Financial Review

Financial performance

Underlying profit on continuing operations for the period was £90.7m, up 2% compared to 1H13. The most significant driver of this growth was a 21% increase in management fees, driven by strong inflows in 2H13 and 1H14, coupled with stable fee margins. 1H14 has been a period of disciplined investment, with focus on core investment management capabilities, global distribution and global platforms. This investment is reflected in a slight reduction in operating margins, from 35.7% in FY13 to 35.0% in 1H14.

Net income and fee margins

Net underlying income from continuing operations for the period was £261.9m, up 11%. Management fees increased to £193.7m, reflecting four consecutive quarters of positive inflows and strong investment performance. Management fee margins rose to 58.1bps from 56.3bps in FY13. Performance fees, at £45.2m, reflected strong investment returns, but were lower than 1H13, reflecting lower overall levels of market appreciation. Other income was also slightly lower, due to a reduction in the administration fee rates charged on UK funds. Income from associates and joint ventures includes one quarter of our share of after tax profits from TIAA Henderson Real Estate Limited (TH Real Estate), formed on 1 April 2014.

Total expenses

Total underlying expenses from continuing operations were £171.2m, up 16%. At our FY13 results release in February 2014, we announced plans to continue to invest in our core business during 2014, which will result in a 10% increase in fixed staff expenses as well as a £10m uplift in normalised non-staff operating expenses. These investments, notably in investment management, distribution and global platforms, are proceeding according to plan and have driven the increase in operating expenses in the period. A further driver is an increase in variable staff expenses, which reflects strong inflows as well as an increase in share scheme vestings. Our compensation ratio has held relatively steady at 44.6%.

Earnings per share (EPS)

Diluted underlying EPS on continuing operations was 6.8 pence per share. This modest reduction (from 7.0 pence per share in 1H13) is due to a higher effective tax rate (14.0% versus 13.3% in 1H13) and an increase in the dilutive impact of outstanding share schemes on the weighted average number of shares in issue.

Total diluted underlying EPS was 7.2 pence, compared to 8.0 pence in 1H13. This reduction reflects having only one quarter of earnings from the Property business compared to 1H13 following the Property transactions, which completed on 1 April 2014, and which led to the creation of TH Real Estate. A higher effective tax rate, as well as a higher weighted average number of shares in issue, also contributed to this reduction.

Acquisition related and non-recurring items

The acquisition related and non-recurring items are disclosed separately from the Group's underlying profit to enable the users of our financial statements to better understand the components of our total profit. These items totalled a net gain of £112.7m before tax and are mainly due to the gain on the sale of the Property business of £141.9m less intangible amortisation of investment management contracts of £28.6m.

Dividend

The Board has declared an interim dividend of 2.60 pence per share (1H13: 2.15 pence per share). This marks a change in the way the Board sets the interim dividend. Previously, the interim dividend was set at 30% of the prior year's total dividend. As announced in February 2014, the Board now actively reviews the interim dividend as well as the final dividend, whilst maintaining its progressive dividend policy.

Liquidity and capital resources

Net cash flows from operating activities in the period were £22.6m, resulting in net unrestricted cash (after deducting outstanding debt at par value) of £102.8m as at 30 June 2014 (31 December 2013: £56.3m).

Our regulatory capital surplus was £954m as at 30 June 2014 (31 December 2013: £983m). We will continue to operate under a capital waiver until April 2016. We expect to be able to meet our capital requirements without recourse to the waiver during 2015.

Summary of movements in AUM

1. Acquisitions and disposals reflect property transactions and inclusion of 40% TH Real Estate AUM as well as additional stake in 90 West.

2. The Group records AUM and net flows when management or performance fees are generated on an investment mandate as well as its percentage participation in the AUM of associates and joint ventures. For associates and joint ventures, where the Group either sub advises the AUM or where the AUM is contracted to Henderson and sub advised by the JV partner, it will show 100% of that AUM rather than the percentage of participation. Where one fund or client invests part or all of its portfolio into another Henderson fund, then AUM or flow is shown only against that portfolio that is ultimately managed by the Group rather than the client or fund vehicle initially invested in, except where shown by Capability, where AUM is shown by the Capability for which the client invests in. All cross holdings are eliminated.

3. AUM used for margin purposes excludes JV and associate AUM (except where either Henderson sub advises the AUM or where the AUM is contracted to Henderson and sub advised by the JV partner).

4. Private Equity funds' AUM is based on 31 March 2014 valuations.

5. Other includes US Mutuals, Investment Trusts and Managed CDO's.

AUM at 30 June 2014 was £74.7bn. During the six months to 30 June, the Group completed a series of property related transactions with TIAA-CREF which resulted in a net reduction in AUM of £6.7bn, after the inclusion of Henderson's 40% share of assets in TH Real Estate (£5.2bn as at 30 June 2014). Net inflows of £5.0bn and market and FX movements of £1.1bn were the key positive drivers.

Retail flows continued to be strong across geographies, with 45% of inflows coming from the SICAV range (which is sold in Europe, Asia and Latin America), 33% from UK products and 20% from US Mutuals.

SICAV inflows slowed in the second quarter, largely driven by reduced demand for the Henderson Horizon Global Property Equities Fund, as well as a modest industry-wide reduction in net flows into European Equities from the elevated levels of 4Q13 and 1Q14. We continued to see strong demand for a broad range of European Equities products with content tailored to individual European jurisdictions (for example, Henderson Horizon Euroland in Germany), as well as for Global Fixed Income and Alternatives.

In the UK, increased flows in 2Q14 were driven by continued demand for a broad range of products, including Henderson Cautious Managed, Henderson UK Property Unit Trust and Henderson UK Absolute Return.

After a record 1Q14 driven by reallocations from cash, US Mutual fund flows slowed in the second quarter. We continued to gain market share in European Equities, and are broadening our product range to build on the success of our Retail distribution network.

Overall, a broad range of 12 Retail funds covering European Equities, Global Equities, Global Fixed Income and Alternatives saw net inflows of more than £100m in 1H14. The biggest selling fund in the period was Henderson Horizon Pan European Alpha.

Institutional flows remained marginally positive despite known maturing mandates. Institutional inflows are becoming increasingly global, with mandates funded in the period in the US, Australia and Japan as well as the UK.

Risk Management

The key risks within the Group fall into a number of distinct categories and the means adopted to mitigate them are both varied and relevant to the particular risk concerned. Information regarding the key risks and their mitigation is set out in the Group's 2013 Annual Report and Accounts on pages 30 to 33 and the related governance framework is set out on pages 44 to 51. These risks and the Group's response to them have not changed significantly from those described in the Group's 2013 Annual Report and Accounts.

On 1 April 2014, the Group completed the transactions in which it transferred its European and Asia-Pacific based real estate businesses into a joint venture with TIAA-CREF. In a simultaneous transaction, the Group sold its North American property business to TIAA-CREF. There are no longer any risks associated with the completion of these transactions.

On 30 June 2014, the Group announced the acquisition of Geneva Capital Management, a US based equity manager. This transaction is expected to complete on 1 October 2014. An appropriate governance structure has been established to oversee the integration of Geneva Capital Management with the Group's existing business; the risks have been assessed and appropriate resources assigned. The existing risk appetite thresholds have not been exceeded, nor are they likely to be.

Directors' Report

The directors of Henderson Group plc (the Directors) present their report for the six months ended 30 June 2014. The Board approved the financial results for the six months ended 30 June 2014 on 6 August 2014.

Directors

The Directors who served during the six months ended 30 June 2014 and up to the date of this report, unless otherwise stated, are shown below:

Richard Gillingwater (Chairman)

Andrew Formica (Chief Executive)

Roger Thompson (Chief Financial Officer)

Sarah Arkle

Kevin Dolan

Tim How

Robert Jeens

Angela Seymour-Jackson (appointed 23 January 2014).

All Directors are expected to stand for reappointment at the 2015 Annual General Meeting.

Business review and results

The Group's results for the six months ended 30 June 2014 are shown in the Interim Condensed Consolidated Income Statement on page 18. A review of the six months ended 30 June 2014 and future business developments is covered in the Business and Financial Reviews on pages 8 to 12.

Rounding

In accordance with the Australian Securities and Investments Commission Class Order 98/0100, amounts in the Interim Report and Accounts have been rounded to the nearest £0.1m sterling, unless stated otherwise.

Independent auditors

Following a tender process carried out in 2013, PricewaterhouseCoopers LLP were appointed as independent auditors on 1 May 2014 at the 2014 Annual General Meeting.

Directors' declaration

In the opinion of the Directors:

· the Interim Condensed Consolidated Financial Statements set out on pages 18 to 39:

- give a true and fair view (as set out in section 305 of the Australian Corporations Act 2001) of the Group's consolidated financial position as at 30 June 2014 and of its performance for the six months ended on that date; and

- have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed; and

· there are reasonable grounds to believe that the Group will be able to pay its debts as and when they fall due.

Signed in accordance with a resolution of the Board:

Andrew Formica Roger Thompson

Chief Executive Chief Financial Officer

6 August 2014 6 August 2014

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge, in relation to the Interim Condensed Consolidated Financial Statements, that:

· the Interim Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union;

· the Interim Report and Accounts include a fair review of the information required by Disclosure and Transparency Rule 4.2.7R, being an indication of important events that have occurred during the first six months of the current financial year, and their impact on the Interim Condensed Consolidated Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· the Interim Report and Accounts include a fair review of the information required by Disclosure and Transparency Rule 4.2.8R, being disclosure of related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period and of any changes in the related party transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

Signed in accordance with a resolution of the Board:

Andrew Formica Roger Thompson

Chief Executive Chief Financial Officer

6 August 2014 6 August 2014

Independent Review Report to Henderson Group plc

Report on the Interim Condensed Consolidated Financial Statements

Our conclusion

We have reviewed the Interim Condensed Consolidated Financial Statements, defined below, in the Interim Report and Accounts of Henderson Group plc for the six months ended 30 June 2014. Based on our review, nothing has come to our attention that causes us to believe that the Interim Condensed Consolidated Financial Statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The Interim Condensed Consolidated Financial Statements, which are prepared by Henderson Group plc, comprise:

· the Interim Condensed Consolidated Income Statement and Interim Condensed Consolidated Statement of Comprehensive Income for the period then ended;

· the Interim Condensed Consolidated Statement of Financial Position as at 30 June 2014;

· the Interim Condensed Consolidated Statement of Changes in Equity for the period then ended;

· the Interim Condensed Consolidated Statement of Cash Flows for the period then ended; and

· the explanatory notes to the Interim Condensed Consolidated Financial Statements.

As disclosed in note 2, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards as adopted by the European Union.

The Interim Condensed Consolidated Financial Statements included in the Interim Report and Accounts have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What a review of interim condensed consolidated financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Interim Report and Accounts and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Interim Condensed Consolidated Financial Statements.

Responsibilities for the Interim Condensed Consolidated Financial Statements and the review

Our responsibilities and those of the Directors

The Interim Report and Accounts, including the Interim Condensed Consolidated Financial Statements, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report and Accounts in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express to the Company a conclusion on the Interim Condensed Consolidated Financial Statements in the Interim Report and Accounts based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

6 August 2014

7 More London Riverside

London

SE1 2RT

Notes:

· The maintenance and integrity of the Henderson Group plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

· Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Interim Condensed Consolidated Income Statement

For the six months ended 30 June 2014

Interim Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2014

Interim Condensed Consolidated Statement of Financial Position

As at 30 June 2014

Approved by the Board on 6 August 2014.

Interim Condensed Consolidated Statement of Changes in Equity

For the six months ended 30 June 2014

Interim Condensed Consolidated Statement of Cash Flows

For the six months ended 30 June 2014