ferret's stock to watch: hhg plc

Ferret's Stock to Watch: HHG plc
08:16, Wednesday, 23 February 2005

A NEW LIFE IN ANOTHER PLACE SHOULD REVITALISE PARENT

Sydney - Wednesday - February 23: (RWE)
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OVERVIEW
********

HHG shareholders this week overwhelmingly approved all proposals
relating to the sale of its Life Services business to Life Company
Investor Group for a cash consideration of 1.07 billion pounds, or $2.6
billion.

The extraordinary general meeting of shareholders cleared the
increased deal price and also decided to rename the company Henderson
Group plc.

The sale brings to end an unfortunate chapter in AMP's history
after the company expanded dramatically in London during the early
1990s, seeking to further its fortunes and carve a bigger niche in the
market.

It destabilised the parent company as it poured millions of
dollars into the British operations to save some of its investments.

In 2003 AMP was forced to cut the British business away through
a demerger as Pearl, London Life, National Provident Life and NPI all
required more financial support.

These are the firms which have now been sold to a company set up
by British entrepreneur Hugh Osmond.

After the sale, HHG will be a much reduced group comprising
funds management business Henderson Global Investors and financial
planner Towry Law, holding net assets worth about $652 million.

One of the few worries for HHG shareholders is possible
litigation from unhappy clients who claim they were misled with products
promoted by Towry Law.

However, any explanation was swept aside at the extraordinary
meeting with the chairman Sir Malcolm Bates claiming it was not the
place to deal with "operational matters".

On the bright side of the deal, HHG shareholders voted in favour
of its $775 million pound cash return, which equates to payment of 55p
to cancel 52 out of every 100 shares held.

Some shareholders though, were disappointed about the payout,
claiming it was at a significant discount to their embedded value.

They pointed out the stock was presently trading around 65p.

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

Shares of HHG yesterday traded steady at $1.56. Rolling high for
the year has been $1.73 and low $1.04. Shares on issue is 1.73 billion
while market cap is $2.7 billion.

At the extraordinary meeting Sir Malcolm told shareholders that
at June 30, 2004, the Life Services business had an embedded value of
1.3 billion pounds and in the first half of last year, the business
earned an operating profit before tax of 33 million pounds.

That was a significant turnaround from the losses recorded in
2003 associated with the life companies prior to the demerger from AMP.

"When HHG listed just over a year ago, the board said that a key
part of HHG's strategy was to maximise shareholder value from the closed
books of business," the chairman declared.

He said a vote of agreement on the sale would accelerate the
release of shareholder capital from the life business and unlock value
now that may otherwise be realised over a longer period.

Sir Malcolm concluded that the HHG board firmly believed the
proposals were in the best interests of shareholders and the directors
voted in favour of the proposed sale and return of capital proposals.

Mr Roger Yates, chief executive of HHG, told shareholders, "It
is a well diversified business, operating throughout UK and Continental
Europe, with expanding operations in North America and Asia."

The company manages a broad range of investment funds for both
institutional and retail investors, across multiple asset classes
including equities, fixed income, property and private equity.

Total funds under management stand at approximately 69 pounds
billion.

This diversification has been a source of strength and stability
during the turbulent market conditions of recent years and the company
intend to retain it.

"Our objective is to build the Henderson operation into a more
profitable and more valuable business," Mr Yates said.

"It will be based on both its core equity and fixed income
offerings and its range of alternative products such as property,
private capital and hedge funds.

"In particular, we intend to continue to improve margins,
measured by revenues as a percentage of funds under management, by
re-orienting the business to higher margin products.

"These include UK and European mutual funds and the alternative
products in property, private capital and hedge funds I described a
moment ago," he said.

BACKGROUND
**********

The HHG group was formed in December 2003 from the UK-based
operations of AMP.

In May 2003 AMP announced that it would be demerging its
businesses along geographic lines - Australasia and the United Kingdom.

By way of background, the Australian Mutual Provident Society
was founded in Australia in 1848.

It opened its first UK branch office in 1908 and began its
policy of UK expansion in 1989 when its UK operations merged with the
long-term insurance business of London Life.

This was followed by the acquisition of Pearl in 1989, a 50 per
cent share in Virgin Direct in 1995, Henderson plc in 1998, NPI Limited
in 1999 and finally Towry Law in 2001.

AMP began to refocus its UK business on it core activities in
2001 with an emphasis on product distribution.

It sold the general insurance business of Pearl and merged the
Virgin Direct business with virginmoney.com to create Virgin Money.

In 2002, Henderson's private client business was sold to Newton
Investment Management and Cogent Investment Operations sold to BNP
Paribas Securities Services.

In July 2002 AMP announced its intention to cease writing new
business for most Pearl and London Life with-profits and annuity
products.

During the first six months of 2003 AMP closed the Pearl direct
sales force and sold its UK banking portfolio.

In June 2003 AMP announced that it was effectively closing the
life insurance and pensions books of Pearl, National Provident Life,
London Life and NPI Limited to new business.

In April 2004 HHG sold its 50 per cent joint venture holding in
Virgin Money Group to Virgin Group.

ENDS