ferrets stock to watch: henderson group plc

Ferrets Stock to Watch: HENDERSON GROUP PLC
09:27, Thursday, 7 December 2006

A DEMERGED COMPANY MAKING A NAME FOR ITSELF OFFSHORE

Sydney - Thursday - December 7: (RWE Aust Business News)
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OVERVIEW
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Shares of Henderson Group plc (ASX:HGI) have been so hot in the
past week that the company attracted a query from the Australian Stock
Exchange.

You should remember that this is the company that demerged from
AMP Ltd (ASX:AMP) in 2003, going its own way.

Henderson has been doing extremely well in Britain, operating
its own life insurance and northern hemisphere funds management assets
formerly owned by AMP.

Henderson told the ASX that they didn't know what caused the
share price movement other than analysts were predicting better results
for the year.

The company then decided to update its forecasts and said
Henderson was on track for a PBT of 78m-82m pounds.

It expects net profit before tax from continuing operations for
2006 to be between 78 million and 82 million pounds against 63.4
million pounds in the previous year.

Henderson remains confident of reaching its cost-to-income ratio
target of 70pc for 2007.

It said most of its higher margin business areas were performing
well.

The company told the ASX the Group continues to make good
progress in 2006.

"We completed our second capital return of about 200 million
pounds and paid an interim dividend of 0.88 pence per share on 24
October," Henderson said.

"Most of the surplus cash held in Corporate has therefore been
returned to shareholders and the return on Corporate cash is expected to
fall commensurately.

"Corporate costs, including the two million pounds one-off
legal costs incurred in the first half of 2006, are expected to be
approximately 11 million pounds for the full year 2006, slightly lower
than the 12 million pounds previously anticipated.

"As regards investment performance in Henderson Global Investors
most of the higher margin business areas are performing well," the update
said.

"Encouragingly, investment performance in UK retail and the
Institutional book of business is showing signs of improvement.

"Overall, we remain confident that we have the right investment
talent and team structure in place," the company said.

SHARE PRICE MOVEMENTS
*********************

Shares of Henderson Group yesterday drifted down 1c to $3.24
against the previous session rise as the market settled down to mull the
latest upgrade on profits.

Rolling high yesterday was $3.24 down after gaining 16c in the
previous session. The company is paying a dividend of 5.47c to yield 1.69
per cent. Earnings per share is 11.88 while the price/earnings ratio is
27.27. The company has 501 million shares on issue with a market cap of
$1.68 billion.

From July 1 to October 31 net flows into higher margin
specialist product areas were 0.7 billion pounds (1H2006: 2 billion
pounds).

In the same period, net outflows from the lower margin
institutional book were 0.3 billion pounds (1H2006: 2.9 billion pounds
outflow) and from Pearl closed books were 2.3 billion pounds (1H2006: 1.5
billion pounds outflow).

These outflows were offset by positive market movements of 3
billion pounds (1H2006: 0.2 billion pounds) resulting in total assets
under management of 4.2 billion pounds at October 31, compared to
63.1 billion pounds at June 30.

Pearl has also indicated that it will be withdrawing all of its
non-profit annuity assets of about 4.3 billion pounds before December
31.

"We earn low margins (approximately 6bps) on these assets and
this withdrawal will result in no revenue impact in 2006 and limited
impact thereafter," the report disclosed.

In addition, as foreshadowed by the revised Investment
Management Agreements (IMAs) announced in June, the management of
direct property investments (AUM: 450 million pounds, included in the
2.3 billion pounds outflow reported above) transferred back to Pearl in
October and management of the European private equity funds (AUM: 150
million pounds) is expected to transfer back to Pearl.

The IMAs and other related agreements revised with Pearl in
June allow Pearl flexibility to withdraw and/or re-allocate assets
between investment capabilities.

Although Henderson cannot predict future movements in Pearl
funds, if actual fees fall below certain thresholds, Pearl has agreed to
pay compensation payments to Henderson to make good the shortfall, until
April 2015.

Revenues gained from the inflows into the higher margin business
areas continue to offset revenues lost from the outflow of lower margin
assets.

Due to a better than expected outcome from recent discussions
with the UK tax authorities on prior year tax issues, the Group now
anticipates reporting an effective tax rate of approximately 15 per cent
for both continuing and all operations for the full 2006 year (reduced
from 18 per cent anticipated at the half year).

Subject to negotiations with the UK tax authorities, the company
expects the effective tax rate for continuing operations to range between
10 per cent and 15 per cent for the next two or three years, before
reverting to the expected 30 per cent rate in 2009 or 2010.

The acquisition of John Laing plc by Henderson Infrastructure
Holdco was subject to approval of John Laing's shareholders at an
Extraordinary General Meeting.

Should the transaction receive UK court approval later this
month, Henderson expects to earn incremental gross investment management
fees of approximately eight million pounds per annum, before associated
costs and tax.

In relation to Banca Popolare Italiana (BPI), the market value
of the Group's investment in BPI on December 1 was 80.1 million
pounds, compared to 56.8 million pounds at June 30, and a book cost of
54.4 million pounds.

The gain on this investment is, as yet, unrealised and will
therefore be accounted for in the Group's 2006 statement of recognised
income and expenditure

The merger proposal announced by BPI and Banco Popolare di
Verona e Novara in October 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 the gain in the Group's investment in BPI.

BACKGROUND
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Henderson Group Plc, formerly HHG plc, was listed on the
Australian Stock Exchange on December 23, 2003.

HGI has two main divisions: Henderson, an investment manager
with over 68 billion pounds in assets under management, and Life
Services, which comprises the life insurance and pension books of four
life insurance companies closed to new business and in runoff.

Henderson also owns Towry Law plc, a financial planning group.

Henderson is an investment manager centred in London and
operating throughout Europe, North America and Asia.

It is one of the top ten UK-domiciled investment managers, based
on global assets under management.

ENDS

Copyright © 2006 RWE Australian Business News. All rights reserved.