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Section 1: 425 (425)

 

Filed by Henderson Group plc

This communication is filed pursuant to Rule 425 under the United States Securities Act of 1933

Subject Company: Janus Capital Group Inc.

Commission File Number: 001-15253

Date: February 9, 2017

 

FULL-YEAR RESULTS 2016

 

9 February 2017

 

Henderson Group plc (Henderson or the Group) published its Full Year Results for the year ended 31 December 2016 on 9 February 2017.

 

The comments below refer to the period from 1 January 2016 to 31 December 2016 (the period) unless otherwise stated.

 

Financial highlights

 

·                  Assets under management (AUM) at 31 December 2016 up 10% to £101.0bn (31 December 2015: £92.0bn)

 

·                  Net outflows for the year of £4.0bn (2015: £8.5bn net inflows)

 

·                  Underlying profit before tax of £212.7m (2015: £220.0m)

 

·                  Underlying diluted EPS of 15.2p (2015: 17.2p)

 

·                  Capital above regulatory requirement of £69.0m, following FCA review

 

·                  Board recommends a final dividend of 7.30p per share to take the total dividend for the year to 10.5p per share.

 

Business update

 

·                  Strong long-term investment performance despite challenging market conditions: 77% of funds outperforming relevant metrics over three years(1) as at 31 December 2016

 

·                  Institutional inflows reflect success of new investment teams and increasingly diverse client base

 

·                  Transformational merger announced with Janus Capital, positioning the Group for future growth.

 

Andrew Formica, Chief Executive, Henderson Group:

 

“Henderson has delivered resilient financial performance in a year of extraordinary turbulence in politics and financial markets. It is testament to our strategic progress over the past three years that we report assets under management and management fees at record levels — progress that has enabled us to continue to move forward through the proposed merger with Janus Capital Group.  We are well advanced on our integration planning and are on track to complete the merger by the end of May.

 

“In Janus Henderson we are building an investment manager centred on delivering for our clients, that creates opportunities for our colleagues and retains the freedom to innovate, change and grow. I very much look forward to working even more closely with Dick Weil and our new colleagues from Janus.”

 

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. Statutory profit before tax was £139.2m (31 December 2015: £167.9m). Statutory diluted EPS was 9.8p (31 December 2015: 14.1p). A reconciliation between underlying profit and total GAAP profit is presented in the Consolidated Income Statement.

 


(1)         Percentage of funds, on an asset-weighted basis, that are outperforming relative to benchmark, percentile ranking or absolute where appropriate and includes Henderson UK Property PAIF.

 



 

RESULTS FOR ANNOUNCEMENT TO THE MARKET

 

For the year ended 31 December 2016.

 

These results for announcement to the market include the information required as part of the Preliminary Final Report to be provided to the ASX under Listing Rule 4.3A and Appendix 4E.

 

The results for Henderson Group plc for announcement to the market are as follows:

 

Amounts in £m unless otherwise stated

 

Year ended
31 December
2016 (audited)

 

Year ended
31 December
2015 (audited)

 

Change %

 

Management fees (net of commissions)

 

505.9

 

468.3

 

+8

 

Performance fees

 

40.4

 

98.7

 

(59

)

Other income

 

37.4

 

34.8

 

+7

 

Net fee income

 

583.7

 

601.8

 

(3

)

Income/(loss)from associates and joint ventures

 

0.5

 

(0.2

)

+350

 

Finance income

 

10.5

 

17.3

 

(39

)

Net income

 

594.7

 

618.9

 

(4

)

Employee compensation and benefits

 

(255.2

)

(268.6

)

(5

)

Non-staff operating expenses

 

(123.5

)

(118.2

)

+4

 

Total operating expenses

 

(378.7

)

(386.8

)

(2

)

Finance expenses

 

(3.3

)

(12.1

)

(73

)

Total underlying expenses

 

(382.0

)

(398.9

)

(4

)

Underlying profit before tax(1)

 

212.7

 

220.0

 

(3

)

Acquisition related and non-recurring items from total operations before tax

 

(73.5

)

(52.1

)

+41

 

Profit before tax

 

139.2

 

167.9

 

(17

)

Tax charge on underlying profit

 

(43.0

)

(22.9

)

+88

 

Tax credit on acquisition related and non-recurring items

 

13.4

 

16.2

 

(17

)

Total tax charge

 

(29.6

)

(6.7

)

+342

 

Total profit after tax

 

109.6

 

161.2

 

(32

)

 

 

 

 

 

 

 

 

Operating margin(2) (%)

 

35.1

 

35.7

 

(2

)

Compensation ratio(3) (%)

 

43.7

 

44.6

 

(2

)

Earnings per share (non-GAAP)(1), (4)

 

 

 

 

 

 

 

Basic(5)

 

15.6

 

18.0

 

(13

)

Diluted(6)

 

15.2

 

17.2

 

(12

)

 

Assets under management (AUM)

 

 

 

1Q16—3Q16

 

4Q16

 

£m

 

Opening AUM
1 Jan 2016

 

Net
flows

 

Market/
FX

 

Closing AUM
30 Sep 2016

 

Net
flows

 

Market/
FX

 

Closing AUM
31 Dec 2015

 

Retail

 

56,915

 

(2,403

)

6,023

 

60,535

 

(2,213

)

1,031

 

59,353

 

Institutional

 

35,070

 

(247

)

5,555

 

40,378

 

854

 

366

 

41,598

 

Total

 

91,985

 

(2,650

)

11,578

 

100,913

 

(1,359

)

1,397

 

100,951

 

 


(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 from operations less total operating expenses from operations divided by net fee income from operations.

(3)         Employee compensation and benefits from continuing operations divided by net fee income from operations, calculated on an underlying profit basis.

(4)         Based on underlying profit after tax attributable to owners 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 8 February 2017, the Board of Directors of Henderson Group plc (the Board) recommended a final dividend in respect of the year ended 31 December 2016 of 7.30 pence per share (2015: 7.20 pence per share). Henderson Group plc does not offer a dividend reinvestment plan.

 

 

 

Amount per security
pence

 

Franked
amount per
security pence

 

2016 interim dividend (paid on 16 September 2016)

 

3.20

 

 

Recommended 2016 final dividend

 

7.30

 

 

Record date

 

5 May 2017

 

 

 

Payment date

 

19 May 2017

 

 

 

 

Henderson operates a progressive dividend policy, and expects to grow ordinary dividends broadly in line with earnings over the medium term.

 

Net tangible assets per ordinary share

 

 

 

31 December
2016
pence

 

31 December
2015
pence

 

Net tangible assets per ordinary share

 

38

 

32

 

 

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.

 

Audit

 

This Appendix 4E has not been audited but is based upon financial statements which have been audited. The financial statements, together with the audit report, which is unqualified, will be made available with the Henderson Group plc 2016 Annual Report, which will be published on 2 March 2017.

 

Market briefing

 

Management will present these results on 9 February 2017 at 7.15pm (Sydney time) / 8.15am (London time).

 

Webcast details

 

You can log on to a webcast of the results briefing which will start at 7.15pm (Sydney time) / 8.15am (London time). Go to www.henderson.com/ir 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 7.00pm (Sydney time) / 8.00am (London time):

 

From:

 

United Kingdom

0800 376 7922 (free call)

Australia

1800 092 439 (free call)

All other countries

+44 (0) 20 7192 8000 (this is not a free call number)

Conference title

Henderson Group, 2016 Full Year Results Briefing

Conference ID

50842814

Chairperson

Andrew Formica

 

A replay archive of the briefing will be available on the Henderson Group website shortly after the event: www.henderson.com/ir

 



 

Further information

 

Investor enquiries:

Miriam McKay, Head of Investor Relations
 +44 (0) 20 7818 2106
miriam.mckay@henderson.com

Media enquiries:

Angela Warburton, Global Head of Communications

+44 (0) 20 7818 3010

angela.warburton@henderson.com

 

 

Louise Curran, Investor Relations Manager

+44 (0) 20 7818 5927

louise.curran@henderson.com

United Kingdom: FTI Consulting

Andrew Walton

 +44 (0) 20 3727 1514

 

 

or
HendersonInvestorRelations@henderson.com

Asia Pacific:

Honner Rebecca Piercy

 +61 (0) 2 8248 3740

 

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 1,000 employees worldwide and assets under management of £101.0bn (31 December 2016). 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 £2.5 billion (February 2017).

 

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

 

Forward looking statements

 

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.

 

Chief Executive’s review

 

2016 was a significant year for world economies and the political order, which also marked a major step in the history of Henderson.

 

2016 was defined by an unprecedented rise in anti-establishment populism which reasserted itself on the political scene and in turn on markets. As an independent, active fund manager, we do not pretend to be able to predict these seismic shifts in global markets. When they occur, our role is to support our clients by living and breathing our Knowledge.Shared brand promise, and by protecting our clients’ investments to the best of our ability. Deep and trusting relationships, as well as investment performance, differentiate what we do.

 

The UK’s referendum vote to leave the European Union (EU) in June 2016 came as a shock to most participants in the financial services industry. It will be many years before the effects of this decision are truly apparent, but in the short term, the operational implications for Henderson are relatively contained. We will continue to serve our European Retail clients through our EU-based product range, managed from Luxembourg, and do not expect any immediate change in our relationship with our Institutional clients.

 

Market conditions proved challenging for our investment management teams this year. On a three year basis, 77% of our assets outperformed, demonstrating that we continue to deliver exceptional long term track records for our clients. On a one year basis, performance was not as good, with 50% of assets outperforming.

 



 

One year performance was weakest in our European Equities and Global Equities capabilities. At the beginning of 2016, some of our biggest European funds saw a period of poor investment performance as concerns over China and a rally in the energy sector heavily impacted markets. In Global Equities, performance in many of our funds suffered throughout the year because of their lack of exposure to the US and the US dollar. In both areas however, we have a wide range of investment teams with independent investment styles and theses, which means that even in tough market conditions we continue to have interesting investment ideas to discuss with our clients.

 

Whether our performance is good or poor, we always make sure that our clients have frequent access to our managers, both in person and digitally, to make sure that they remain well informed. Strong client relationships can help mitigate the effects of poor short-term investment performance.

 

Investment outperformance

 

 

 

1 year(1)

 

3 years(1)

 

European Equities

 

26

%

86

%

Global Equities

 

34

%

70

%

Global Fixed Income

 

80

%

76

%

Multi-Asset

 

48

%

42

%

Alternatives

 

62

%

99

%

Total

 

50

%

77

%

 


Note

(1)         Percentage of funds, asset-weighted, that are outperforming based on the relevant metric: peer percentile ranking for Retail, positive for absolute return, positive versus benchmark for Institutional.

 

Assets under management reached a record £101.0bn, driven by positive markets and FX movements.

 

In terms of client demand, we experienced outflows from our Retail client base this year mainly as a result of a global pull-back from exposure to European assets. This was in sharp contrast to last year, where our well-regarded European capabilities saw us deliver industry-leading growth and market share gains. Whilst disappointing, we see this as a result of the current environment rather than a longer-term trend.

 

Flows from Institutional clients improved significantly in the course of 2016 as the investments we have been making in Institutional strategies started to bear fruit. The most successful new team this year was the Emerging Markets Equity team, but we also saw flows into technology, fixed income, property securities and absolute return strategies. We are seeing increased geographic diversity in our Institutional business, notably in the US and Australia, helped by the acquisition of Geneva Capital Management in the US in 2014 and the Perennial funds in Australia in 2015.

 

Growth and Globalisation — mid-point review

 

June 2016 marked the mid-point in our five year growth and globalisation plan. By continuing to deliver strong investment performance and service to our clients, and by investing in our business, we aimed to double our AUM by 2018. By December 2016, our AUM stood at £101.0bn, an increase of 59% since the start of our strategy. At 5%, organic growth in net new client money in the period was ahead of the industry. We have created a stronger and better diversified business, with significantly improved potential for future growth.

 

A sea change — merger with Janus Capital Group

 

2016 marks a sea change for Henderson. In a fast-changing, unpredictable marketplace, every asset manager is seeking to remain relevant to their clients, and to adapt to constant structural changes and challenges in our industry. To do so, we need to provide broader investment expertise, greater choice of investment offering, and exemplary client service, delivered as and when our clients expect it. In terms of industry evolution, this year has illustrated the scale of the challenge facing active investment managers. Trends include ever-increasing flows of client money into passive funds, radical advances in technology which could revolutionise the way asset managers do business, and major regulatory initiatives in Europe and the US making further calls on the financial and operational resources of every firm.

 

The regulatory landscape in which we operate continues to evolve. Competition, conduct and capital remain central to reform and the regulators are continuing to undertake reviews into products and markets. The preliminary findings of the FCA’s recent market study on the asset management sector centre around ensuring that investment products offer consumers value for money. During 2017 and looking ahead to 2018, our governance framework will transform, recognising both the proposed merger and the implementation of the FCA’s Senior Managers and Certification Regime.

 



 

It is against this backdrop that the teams at Henderson and Janus announced our intention to merge our businesses. Both businesses start from a position of strength. Henderson, through our Growth and Globalisation strategy, and Janus, through their Intelligent Diversification strategy, have invested substantially in expertise and infrastructure in recent years to create global active investment management franchises, capable of delivering substantial value to clients.

 

Together, we will create a Top 50 global asset manager which will manage over US$322bn on behalf of our clients. The two businesses are deeply complementary in terms of investment management capabilities and distribution reach, and will be able to deliver the diversification and economies of scale necessary to succeed in global markets. Ours is a merger that creates significant benefits for our clients, increases opportunities for our staff, and provides demonstrable value for shareholders — in the short-term through cost synergies but much more significantly, through enhanced growth prospects in the longer term. It is a truly transformative step for both companies.

 

I am looking forward to my new role in Janus Henderson Investors, as co-CEO with Dick Weil, the current CEO of Janus. Dick and I have a shared vision for Janus Henderson, based on relentless client focus, superior risk-adjusted investment returns across a broad range of investment styles, supported by best-in-class client service, the nurturing of employee talent and embedding a deeply collaborative culture. Much work lies ahead of us, but we are excited to be taking this step forward together, to create benefits for our clients, opportunities for our employees and value for our shareholders.

 

I want to finish by paying tribute to all my colleagues at Henderson for their hard work over the past year. It is a privilege to lead such a talented team on the next stage of Henderson’s journey.

 

Andrew Formica

Chief Executive Officer

 

Financial review

 

Since the launch of our Growth and Globalisation strategy at the end of 2013, we have improved the quality and quantity of our earnings.

 

Financial performance

 

Henderson achieved underlying profit before tax of £212.7m, a decrease of 3% (2015: £220.0m) driven by lower underlying net income.

 

Underlying net income was £594.7m, down 4%. This reduction was driven by lower performance fees of £40.4m (2015: £98.7m) in a period of significant market volatility, partially offset by higher management fees.

 

Management fees — our principal revenue stream — increased by 8% to £505.9m, primarily driven by market and FX gains in 2016 as well as strong flows in 2015.

 

Management fee margins fell to 53.0bps, largely due to business mix and one-off effects.

 

Total operating expenses decreased by 2% to £378.7m, demonstrating the Group’s ability to control costs.

 

A 16% decrease in variable compensation, reflecting business performance, was partially offset by increased fixed employee compensation as a result of 2015 headcount increases, FX and wage inflation.

 

Non-staff operating expenses increased by 4%.

 

The Group delivered an operating margin of 35.1% (2015: 35.7%), in line with the first half.

 

Our compensation ratio improved to 43.7% (2015: 44.6%), reflecting lower variable compensation.

 

Underlying profit after tax decreased by 14% to £169.7m, primarily reflecting an increased tax charge for the period of £43.0m. The resulting effective tax rate for the period was 20.2%, in line with guidance.

 

Diluted underlying EPS decreased by 12% to 15.2 pence, primarily driven by a higher effective tax rate and lower underlying profits.

 



 

Financial KPIs (on underlying operations)

 

 

 

 

 

 

 

2016

 

3 year investment performance

 

 

 

 

 

 

 

77%

 

Net fund flows

 

 

 

 

 

 

 

(£4.0bn)

 

Management fee margin

 

 

 

 

 

 

 

53.0bps

 

Compensation ratio

 

 

 

 

 

 

 

43.7%

 

Operating margin

 

 

 

 

 

 

 

35.1%

 

Profit before tax

 

 

 

 

 

 

 

£212.7m

 

Diluted EPS

 

 

 

 

 

 

 

15.2p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

£m

 

 

AUM by channel

 

Opening
AUM
1 Jan 16

 

Net
flows

 

Market/
FX

 

Closing
AUM
31 Dec 16

 

Retail

 

56,915

 

(4,616

)

7,054

 

59,353

 

Institutional

 

35,070

 

607

 

5,921

 

41,598

 

Total

 

91,985

 

(4,009

)

12,975

 

100,951

 

 

Net flows by product

 

 

 

 

 

 

 

£m

 

Retail

 

 

 

 

 

 

 

(4,616

)

UK OEICs/Unit Trusts/Other(1)

 

 

 

 

 

 

 

(1,002

)

SICAVs

 

 

 

 

 

 

 

(2,584

)

US Mutuals

 

 

 

 

 

 

 

(1,128

)

Investment Trusts

 

 

 

 

 

 

 

98

 

Institutional

 

 

 

 

 

 

 

607

 

Total

 

 

 

 

 

 

 

(4,009

)

 


(1)   Other includes Investment Trusts, Australian Managed Investment Schemes and Singapore Mutual funds.

 

AUM and flows

 

The Group’s total AUM as at 31 December 2016 was £101.0bn, reflecting net outflows of £4.0bn, and positive market and FX movements of £13.0bn.

 

Against a challenging backdrop of market volatility and political uncertainty, Retail flows were negative in 2016, with net outflows of £4.6bn. At the start of the year, clients reduced their risk appetite and demand for European assets moderated. This theme continued throughout the year as political events unfolded, most notably the UK’s referendum on EU membership and the US Presidential election.

 

In the UK, the Group saw an increase in outflows in the aftermath of the referendum, as political and market uncertainty intensified. Most notably, the Group saw an acceleration of outflows from the Henderson UK Property Fund and trading was suspended on 5 July 2016, allowing the fund to dispose of assets and rebuild liquidity. The fund re-opened on 14 October 2016, with modest redemptions.

 

Encouragingly, the diversity of the Group’s product range helped to mitigate the impact of the referendum, with demand for UK absolute return and fixed income strategies. The Group also benefited from positive flows in the Australian Retail fund range, captured within the Group’s ‘UK OEICs/Unit Trusts/ Other’ product line.

 

Retail SICAV flows turned negative in 2016, as clients reduced their exposure to European assets and held higher proportions of their portfolios in cash. Outflows were most acute in the last week of June 2016, immediately after the UK referendum.

 

US mutual fund flows were broadly flat for the first half of the year but turned negative following the UK referendum. Fund outflows accelerated in the second half of the year, reflecting a reversal in demand for non-US assets and the outcome of the US Presidential election.

 

The Institutional business had a successful year, with positive net flows of £0.6bn.

 

Despite net outflows at the start of the year driven by previously notified redemptions and the closure of funds in areas of limited client demand, flows were particularly strong in the second half, reflecting the Group’s continued success in its core

 



 

UK business and an increasingly global client base in Continental Europe, the US and Australia. Most notably, the Group saw early success in its Global Emerging Markets strategy.

 

Whilst it remains difficult to predict the trajectory of Institutional flows, it was encouraging to see increasingly diverse sources of flow this year, by client, geography and strategy. Pleasingly, the pipeline of new business — notified but unfunded — remains strong following the recent announcement of the recommended merger of equals with Janus and we are excited about our future prospects in this key segment.

 

Overall market and FX movements for the period totalled £13.0bn driven by positive markets and currency translation gains — a benefit from our increasingly global business mix and Sterling weakness.

 

Although 2016 was a challenging year for Henderson and its clients, Henderson delivered 5% net new money growth (excluding Property related AUM with the exception of Henderson UK Property PAIF) over the three years to 31 December 2016 — a positive result in light of muted industry growth.

 

The increasing diversity of the business by product, client base and geography means that the Group has a strong foundation for the future.

 

Income drivers (underlying)

 

2016
£m

 

2015
£m

 

Income

 

 

 

 

 

Management fees (net of commissions)

 

505.9

 

468.3

 

Performance fees

 

40.4

 

98.7

 

Other income

 

37.4

 

34.8

 

Net fee income from continuing operations

 

583.7

 

601.8

 

Income/(loss) from associates and joint ventures

 

0.5

 

(0.2

)

Finance income

 

10.5

 

17.3

 

Net income from continuing operations

 

594.7

 

618.9

 

 

Expense drivers (underlying)

 

2016
£m

 

2015
£m

 

Expenses

 

 

 

 

 

Fixed employee compensation and benefits

 

113.3

 

99.9

 

Variable employee compensation and benefits

 

141.9

 

168.7

 

Total employee compensation and benefits

 

255.2

 

268.6

 

Non-staff operating expenses

 

123.5

 

118.2

 

Total operating expenses

 

378.7

 

386.8

 

Finance expenses

 

3.3

 

12.1

 

Total expenses

 

382.0

 

398.9

 

 

Management fees and fee margins

 

Management fees were up 8% to £505.9m (2015: £468.3m). The principal positive drivers were market movements and currency translation benefits in the period, the Australian acquisitions in November 2015 and strong flows in 2015, partially offset by outflows in 2016. The negative drivers were one-off adjustments to fees and rebates, a reclassification of certain elements of US mutual fund fees to other income and general margin reduction.

 

The Group’s management fee margin averaged 53bps in 2016, a decrease of 2bps on the 2015 exit rate (55bps), largely attributable to one-off adjustments to management fees and mix shifts in the second half — Retail outflows coupled with an increase in Institutional AUM. As a result, the Retail exit margin declined to 71bps. The Institutional exit margin saw a small decline to 25bps.

 

Performance fees

 

In 2016, long-term investment performance held up well in difficult market conditions, with 77% of funds outperforming on a three year basis. One year performance was more challenged, with 50% of funds outperforming.

 



 

Henderson delivered performance fees of £40.4m, a decrease from the exceptional level reported in 2015 (£98.7m).

 

In 2016, the Group saw lower performance fees from SICAVs and its offshore absolute return range. In the SICAV range, performance fees were lower for the Henderson Gartmore UK Absolute Return fund and no performance fees were paid on some of the European equity long only funds including Henderson Pan European Alpha and Henderson Horizon Pan European Equity, which generated significant performance fees in 2015. A reduction in offshore absolute return performance fees was largely attributable to the closure of the Japanese Absolute Return funds in the first quarter and lower performance fees elsewhere in the range.

 

Performance fees in 2016 were generated from 52 funds and accounted for 7% of net fee income (2015: 16%).

 

The Group continues to generate performance fees from a diverse range of products, creating a solid foundation for the future.

 

Other income and income from associates and joint ventures

 

In 2016, other income rose from £34.8m to £37.4m, an increase of 7% largely due to a re-allocation of income from management fees. The largest component of this line item is a general administration charge to UK funds.

 

Income from associates and joint ventures increased from a £0.2m loss in 2015 and turned positive at £0.5m in 2016 due to the results of Northern Pines following closure of the joint venture in early 2016.

 

Total operating expenses

 

Total operating expenses decreased by 2% to £378.7m, largely driven by a 5% decrease in employee compensation and benefits.

 

The reduction in employee compensation and benefits was driven by lower variable employee compensation and benefits, which were down 16% to £141.9m. The fall in variable compensation, despite higher bonus deferral amortisation in comparison to 2015, reflects weaker business performance, principally investment performance and flows.

 

Fixed employee compensation increased by 13% to £113.3m, primarily reflecting investments made in the second half of 2015 — notably the acquisitions in Australia — and a wage increase averaging 3%. Adverse currency movements contributed £3.4m or 3% to the increase in fixed staff costs.

 

The Group’s resulting compensation ratio for the period was 43.7%.

 

Non-staff operating expenses increased by 4% to £123.5m, reflecting higher information technology and investment administration costs.

 

Finance income and expenses

 

Finance income decreased from £17.3m in 2015 to £10.5m in 2016. The decrease primarily reflects the prior year £10.9m one-off gain on seed capital invested in the property funds sold to TIAA-CREF as part of the sale of the Group’s 40% stake in TH Real Estate.

 

Finance expenses decreased from £12.1m in 2015 to £3.3m in 2016, following repayment of the £150.0m 2016 Senior Notes in March 2016.

 

Acquisition related and non-recurring items

 

The acquisition related and non-recurring items are disclosed separately from that of the Group’s underlying profit to enable the users of our financial statements to better understand the components of our total profit.

 

These costs totalled £60.1m after tax (2015: £35.9m) and are primarily attributable to intangible amortisation of previously acquired investment management contracts. In 2016, the Group recognised non-recurring costs of £12.2m before tax relating to deal and integration expenses due to the proposed merger with Janus Capital.

 

Tax

 

The Group’s policy is to ensure that profits are subject to tax in accordance with applicable tax laws and regulations in the jurisdictions in which it operates.

 

The tax charge on the Group’s underlying profit for 2016 was £43.0m, resulting in an effective tax rate of 20.2% (2015: 10.4%) in comparison to a UK corporation tax rate of 20.0% (2015 pro-rata: 20.25%).

 



 

In 2016, the Group saw an increase in its effective tax rate reflecting changes in the Group’s global tax profile, growth in higher tax jurisdictions and non-recurrence of one-off credits, which reduced the effective tax rate in 2015. We expect the Group’s effective tax rate to remain near the UK tax rate up until the proposed merger.

 

Liquidity and capital management

 

Total cash and cash equivalents at 31 December 2016 were £244.0m, a decrease from £381.6m reported in 2015.

 

The Group repaid the £150.0m 2016 Senior Notes in March 2016 from cash resources. To ensure the Group had access to sufficient liquidity following repayment, Henderson entered into a one year revolving credit facility for £30.0m. In February 2017, the facility was extended for a further one year period. Currently, there are no amounts drawn down under this facility. Should the recommended merger with Janus Capital complete, it is anticipated that the revolving credit facility will be replaced with a facility for the combined Group.

 

Unrestricted cash stood at £225.7m after excluding cash held in consolidated structured entities.

 

In 2016, the Group generated cash flows from operating activities of £178.7m. These were offset by cash flows from investing activities of £54.4m, primarily in relation to seed capital investments, consolidated structured entities and hedging, and an outflow of £280.9m from financing activities, largely reflecting repayment of the 2016 Senior Notes and dividend payments.

 

The Group is subject to regulatory oversight by the FCA and overseas regulatory bodies. The Group ensures it is compliant with its regulatory obligations at all times. Until April 2016, the Group operated under an investment firm waiver from consolidation supervision. In February 2017, Henderson received feedback from the FCA following its review of the Group’s capital position. Henderson’s standalone capital requirement is £216.0m, resulting in capital above regulatory requirement of £69.0m as at 31 December 2016 (2015: £100.0m based on Henderson’s internal calculations). This includes a deduction for the 2016 final dividend.

 

Henderson is committed to the active management of its cash and capital resources. The strength of its capital position gives flexibility around the deployment of cash and capital, be that via organic growth, inorganic investment or returns to shareholders.

 

Despite announcing the intention to buy back shares to the value of £25m in the second half of 2016, the Group decided to cease its on-market share buyback programme following the announcement of the recommended merger of equals with Janus.

 

Dividend

 

The Group operates a progressive ordinary dividend policy and expects to grow ordinary dividends broadly in line with underlying earnings growth over the medium term.

 

The Board declared an interim dividend of 3.20 pence per share and is recommending a final dividend for 2016 of 7.30 pence per share, bringing total dividends for 2016 to 10.50 pence per share. The proposed final dividend will be paid on 19 May 2017 to shareholders on the register on 5 May 2017.

 

On 24 January 2017, the Group announced its intention to pay Henderson shareholders an extraordinary dividend, reflecting its first quarter 2017 earnings, prior to the closing of the merger. The anticipated dividend payment will be of commensurate value to any Janus first quarter 2017 dividend, and remains subject to final Henderson Board approval.

 

Summary of movements in AUM

 

£m

 

Opening AUM
1 Jan 2016

 

Net flows

 

Market/FX

 

Closing AUM
31 Dec 2016

 

Closing AUM
net management
fee bps(1)
31 Dec 2016

 

Retail

 

 

 

 

 

 

 

 

 

 

 

UK OEICs/Unit Trusts/Other(2)

 

23,358

 

(1,002

)

2,057

 

24,413

 

 

 

SICAVs

 

19,328

 

(2,584

)

2,956

 

19,700

 

 

 

US Mutuals

 

8,647

 

(1,128

)

1,454

 

8,973

 

 

 

Investment Trusts

 

5,582

 

98

 

587

 

6,267

 

 

 

Total Retail

 

56,915

 

(4,616

)

7,054

 

59,353

 

71

 

Institutional

 

 

 

 

 

 

 

 

 

 

 

UK OEICs/Unit Trusts

 

9,742

 

254

 

1,123

 

11,119

 

 

 

SICAVs

 

1,565

 

(267

)

126

 

1,424

 

 

 

Australian MIS

 

1,499

 

(96

)

301

 

1,704

 

 

 

Offshore Absolute Return Funds

 

2,397

 

(523

)

432

 

2,306

 

 

 

Managed CDOs

 

102

 

(15

)

16

 

103

 

 

 

Segregated Mandates

 

19,653

 

1,277

 

3,909

 

24,839

 

 

 

Private Equity Funds(3)

 

58

 

(6

)

3

 

55

 

 

 

Other(4)

 

54

 

(17

)

11

 

48

 

 

 

Total Institutional

 

35,070

 

607

 

5,921

 

41,598

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

Group total

 

91,985

 

(4,009

)

12,975

 

100,951

 

52

 

 

 

 

 

 

 

 

 

 

 

 

 

Total asset class

 

 

 

 

 

 

 

 

 

 

 

Equities(5)

 

60,891

 

(3,003

)

9,672

 

67,560

 

64

 

Fixed Income(6)

 

26,841

 

(126

)

3,370

 

30,085

 

26

 

Property(7)

 

4,171

 

(859

)

(74

)

3,238

 

n/a

 

Private Equity(3)

 

82

 

(21

)

7

 

68

 

n/a

 

Total Group

 

91,985

 

(4,009

)

12,975

 

100,951

 

52

 

 

 

 

 

 

 

 

 

 

 

 

 

Absolute Return analysis

 

 

 

 

 

 

 

 

 

 

 

Retail

 

5,549

 

557

 

654

 

6,760

 

 

 

Institutional

 

3,402

 

(640

)

496

 

3,258

 

 

 

Total Absolute Return

 

8,951

 

(83

)

1,150

 

10,018

 

 

 

 



 

Five year financial summary (unaudited)

 

 

 

FY16
£m

 

FY15
£m

 

FY14
£m

 

FY13
(restated)(8)
£m

 

FY12
(restated) (8)
£m

 

Income

 

 

 

 

 

 

 

 

 

 

 

Management fees (net of commissions)

 

505.9

 

468.3

 

403.5

 

331.9

 

301.9

 

Performance fees

 

40.4

 

98.7

 

82.8

 

94.5

 

30.4

 

Other income

 

37.4

 

34.8

 

32.5

 

34.9

 

39.2

 

Net fee income from continuing operations

 

583.7

 

601.8

 

518.8

 

461.3

 

371.5

 

Income/(loss) from associates and joint ventures

 

0.5

 

(0.2

)

5.1

 

1.8

 

 

Finance income

 

10.5

 

17.3

 

10.1

 

10.2

 

14.1

 

Net income from continuing operations

 

594.7

 

618.9

 

534.0

 

473.3

 

385.6

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed employee compensation and benefits(8)

 

(113.3

)

(99.9

)

(88.4

)

(80.6

)

(83.3

)

Variable employee compensation and benefits

 

(141.9

)

(168.7

)

(143.6

)

(128.8

)

(70.6

)

Employee compensation and benefits

 

(255.2

)

(268.6

)

(232.0

)

(209.4

)

(153.9

)

Investment administration

 

(34.0

)

(31.6

)

(30.2

)

(24.4

)

(24.8

)

Information technology

 

(24.0

)

(20.0

)

(17.1

)

(17.1

)

(14.4

)

Office expenses

 

(17.8

)

(16.9

)

(15.0

)

(13.7

)

(13.3

)

Depreciation

 

(6.0

)

(5.2

)

(4.7

)

(3.2

)

(2.8

)

Other expenses(8)

 

(41.7

)

(44.5

)

(35.6

)

(28.9

)

(35.5

)

Total operating expenses from continuing operations

 

(378.7

)

(386.8

)

(334.6

)

(296.7

)

(244.7

)

Finance expenses

 

(3.3

)

(12.1

)

(11.6

)

(11.1

)

(14.3

)

Total expenses from continuing operations

 

(382.0

)

(398.9

)

(346.2

)

(307.8

)

(259.0

)

Underlying profit before tax from continuing operations(9), (10)

 

212.7

 

220.0

 

187.8

 

165.5

 

126.6

 

Underlying profit before tax from discontinued operation

 

 

 

7.6

 

24.6

 

26.4

 

Underlying profit before tax from total operations(9), (10)

 

212.7

 

220.0

 

195.4

 

190.1

 

153.0

 

Tax on underlying profit from continuing operations

 

(43.0

)

(22.9

)

(20.6

)

(17.9

)

(15.3

)

Tax on underlying profit from discontinued operation

 

 

 

(1.3

)

(2.9

)

(4.2

)

Total underlying profit after tax(9), (10)

 

169.7

 

197.1

 

173.5

 

169.3

 

133.5

 

Acquisition related items

 

(57.1

)

(59.6

)

(57.0

)

(58.4

)

(64.1

)

Non-recurring items

 

(16.4

)

7.5

 

145.0

 

(4.3

)

13.8

 

Tax on acquisition related items

 

12.0

 

12.7

 

11.2

 

17.9

 

18.5

 

Tax on non-recurring items

 

1.4

 

3.5

 

(14.2

)

0.6

 

4.7

 

Non-recurring tax credit

 

 

 

 

 

 

Total acquisition related and non-recurring items after tax

 

(60.1

)

(35.9

)

85.0

 

(44.2

)

(27.1

)

Total profit(10)

 

109.6

 

161.2

 

258.5

 

125.1

 

106.4

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

Equity owners of the parent

 

109.6

 

161.2

 

258.5

 

125.1

 

106.2

 

Non-controlling interests

 

 

 

 

 

0.2

 

Continuing KPIs

 

 

 

 

 

 

 

 

 

 

 

Operating margin(11) (%)

 

35.1

 

35.7

 

35.5

 

35.7

 

34.1

 

Compensation ratio(8), (12) (%)

 

43.7

 

44.6

 

44.7

 

45.4

 

41.4

 

Average number of full-time employees

 

1,009

 

955

 

875

 

812

 

861

 

Assets under management (AUM) at year end (£bn)

 

101.0

 

92.0

 

81.2

 

63.7

 

53.9

 

Average AUM for the year for margin calculations on continuing basis (£bn)

 

95.5

 

83.6

 

69.9

 

59.0

 

53.4

 

Management fee margin (bps)

 

53.0

 

56.0

 

57.8

 

56.3

 

56.5

 

Total fee margin (bps)

 

61.1

 

72.0

 

74.3

 

78.2

 

69.6

 

Net margin(13) (bps)

 

22.3

 

26.3

 

26.9

 

28.1

 

23.7

 

Basic and diluted earnings per share (EPS)(10)

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary shares for basic EPS (m)

 

1,091.1

 

1,093.1

 

1,085.2

 

1,058.8

 

1,034.0

 

Weighted average number of ordinary shares for diluted EPS (m)

 

1,115.4

 

1,143.0

 

1,139.8

 

1,137.0

 

1,082.0

 

Basic on total underlying profit(9), (14) (p)

 

15.6

 

18.0

 

16.0

 

16.0

 

12.9

 

Basic on continuing underlying profit(9), (14) (p)

 

15.6

 

18.0

 

15.4

 

13.9

 

10.8

 

Basic (p)

 

10.0

 

14.7

 

23.8

 

11.8

 

10.3

 

Diluted on total underlying profit(9), (14) (p)

 

15.2

 

17.2

 

15.2

 

14.9

 

12.3

 

Diluted on continuing underlying profit(9), (14) (p)

 

15.2

 

17.2

 

14.7

 

13.0

 

10.3

 

Diluted (p)

 

9.8

 

14.1

 

22.7

 

11.0

 

9.8

 

Dividend per share (p)

 

10.50

 

10.30

 

9.00

 

8.00

 

7.15

 

Investment performance(15)

 

 

 

 

 

 

 

 

 

 

 

Funds at or exceeding benchmark over one year (%)

 

50

 

78

 

66

 

78

 

73

 

Funds at or exceeding benchmark over three years (%)(16)

 

77

 

81

 

83

 

81

 

69

 

 



 


Notes

(1)   Closing management fee bps excludes joint venture and associates AUM.

(2)   Includes Australian Managed Investment Schemes (MIS), Singapore Mutuals and Retail Segregated Mandates.

(3)   Private Equity funds’ closing AUM is based on 30 September 2016 valuations.

(4)   Solely US Mutuals.

(5)   Equities includes Multi-Asset and Commodities.

(6)   Fixed Income includes Cash.

(7)   Includes AUM of the Henderson UK Property PAIF which is sub-advised by TH Real Estate.

(8)   Certain items (including training and recruitment agency costs) were reclassified from employee compensation and benefits to other expenses in 2014. There was no impact on prior year profits. Prior year comparatives were restated.

(9)   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.

(10) Figures on these line items for the years ended 31 December 2016, 2015 and 2014 are audited; figures for the years ended 31 December 2013 and 2012 were audited and restated.

(11)  Net fee income from continuing operations less total operating expenses from continuing operations divided by net fee income from continuing operations.

 



 

(12)  Employee compensation and benefits from continuing operations divided by net fee income from continuing operations, calculated on an underlying profit basis.

(13)  Net margin calculated on underlying profit before tax from continuing operations divided by average assets under management.

(14)  Based on underlying profit after tax attributable to owners of the parent.

(15)  Asset-weighted performance of funds measured over one and three years to 31 December 2016. Performance for 2016 through to 2013 includes Henderson UK Property PAIF — all prior periods include Property and Henderson UK Property PAIF performance.

(16)  FY13 performance data reflects a minor restatement, previously reported as 82%.

 

Key performance indicators

 

We measure our strategic and operational progress through a set of indicators that focus on core performance factors.

 

KPI 1
Treating customers fairly (TCF)

 

Link to strategy

 

With our clients’ needs at the heart of everything we do, we continue to strive to meet the expectations of our clients and their customers and to embed the fair treatment of customers into the firm’s business model.

 

Embedding is measured using monthly management information to derive a ‘Red Amber Green’ (RAG) rating for each of the six FCA TCF outcomes.

 

Performance

 

Our continued focus on meeting customer expectations has proactively identified a number of specific areas for enhancement which were addressed over the year (Outcome 5).

 

Key customer-focused initiatives have included:

 

·                  Henderson has taken a central role in co-ordinating industry feedback to regulators and industry bodies from both product manufacturers and distributors on important customer-focused regulatory change such as MiFID II

 

·                  Continued engagement with the Henderson Customer Panel — providing a real time dialogue with 600+ of our UK direct Retail clients — to help better understand their needs and inform the launch of products and services

 

·                  Customer Interests Staff Survey on performance in achieving client goals showed an improved response rate at 87% (2015: 84%, 2014 (UK only): 71%).

 

KPI 2
Investment performance over 1 and 3 years (%)

 

Link to strategy

 

Strong investment performance underpins our growth strategy, our reputation and our ability to attract net new money from clients. We measure the percentage of our assets at or exceeding the relevant metric over one and three years to monitor our performance.

 

Performance

 

·                  At the end of 2016, 50% of funds had outperformed over one year and 77% over three years, demonstrating consistently strong investment performance.

 

KPI 3
Net fund flows (£m)

 

Link to strategy

 

Net fund flows are a strong lead indicator of the success of our strategy and are a key driver of revenue and profitability. Reflected in the mix of our fund flows are investment performance, distribution and client service, the success of our product offering in meeting client needs, and our strategy to globalise our business, as well as external market factors.

 

Performance

 

·                  Net new money outflow of (4%)

 

·                  Total net fund outflows of £4.0bn

 



 

·                  Flows from our Institutional business were particularly strong in the second half of the year, contributing £0.6bn for the full year

 

·                  Retail net outflows of £4.6bn reflected clients’ reduced risk appetite and a moderation of demand for European assets

 

·                  Three year net new money growth of 5%(1).

 

KPI 4
Fee margins (bps)(2)

 

Link to strategy

 

Fee margins are under constant pressure across our industry — from clients, intermediaries, competitors and regulators. Our average fee margin is a strong indicator of our ability to adapt and respond to these pressures, by delivering the right product at the right price to our clients, globally.

 

Performance

 

·                  Total fee margin and net margin decreased to 61.1bps and 22.3bps respectively. The softening was predominantly driven by lower net fee income as a result of reduced performance fees.

 

·                  Management fee margin decreased to 53.0bps, largely attributable to Retail outflows and ongoing fee pressure.

 

KPI 5
Operating margin and compensation ratio (%)(2)

 

Link to strategy

 

Our ability to deliver value to our clients and shareholders depends on achieving the right balance between investing in the growth of our business, rewarding and retaining our staff and operating efficiently. These two ratios enable us to monitor this balance.

 

Performance

 

·                  Despite disciplined expense management, operating margin decreased in 2016 to 35.1%, driven by lower performance fee income

 

·                  Compensation ratio decreased in 2016 to 43.7%, reflecting lower variable employee compensation and benefits.

 

KPI 6
Earnings per share on continuing underlying profit (p)(2)

 

Link to strategy

 

Earnings per share on continuing underlying profit is a clear measure of our ability to deliver sustainable, profitable growth on a global basis, and deliver value to our shareholders.

 

Performance

 

·                  Diluted earnings per share on underlying profit decreased to 15.2 pence in 2016, down from 17.2 pence in 2015.

 

·                  The contraction was primarily driven by a higher effective tax rate (20.2% compared to 10.4% in 2015) as well as reduced profits.

 


Notes:

 

(1)   Excludes AUM subject to Property transactions with TIAA-CREF and resultant TH Real Estate JV AUM but includes Henderson UK Property fund.

 

(2)   Net margin, compensation ratio, operating margin and diluted earnings per share are all based upon continuing underlying profit which, while not a GAAP measure, in the opinion of the Directors, gives relevant information on the profitability of the Group and its ongoing operations.

 



 

Risk management

 

The primary purpose of the Risk and Compliance functions is to assist Henderson in achieving its strategic objectives by ‘doing the right business in the right way’.

 

Developments in 2016

 

Macroeconomic and geopolitical risks throughout 2016 have continued to impact market prices and investors’ risk appetite. These included:

 

·                  The low interest rate environment, with the potential that the rate cycle may be starting to turn as the year draws to a close

 

·                  Risks to emerging market economies, notably China, and related commodity price risks

 

·                  Continued uncertainty over the impact of the tightening of monetary policy in the US.

 

Geopolitical risks included:

 

·                  The UK’s Referendum on its EU membership, which led to investor hesitation in the run up to the vote, a subsequent market shock immediately following the result and nervousness over the medium term impact

 

·                  The US election, which has led to uncertainty following the anti-establishment result

 

·                  Sustained positioning of Russia in relation to eastern Europe and its increasing influence in the Middle East

 

·                  The increased terrorism threat and instability linked to ISIS and other extremist groups.

 

The market impact of the UK’s Referendum on EU membership was relatively short lived in relation to UK large-cap equities, however investor risk appetite in relation to European assets fell, triggering Retail redemptions. The Referendum result led to a significant increase in redemptions in open-ended UK Property funds. Although we had increased the liquidity buffer in Henderson’s UK Property Fund ahead of the referendum, the level of outflows — particularly after other funds in the sector suspended dealing — were higher than anticipated. We concluded it was in the best interests of investors to close Henderson’s UK Property Fund to subscriptions and redemptions on 5 July 2016. Following a period of stabilisation and additional liquidity building, the fund re-opened to investors on 14 October 2016. The devaluation of sterling on the currency markets has been more sustained since the vote, although the impact on Henderson’s business has been broadly positive.

 

Investment underperformance risk, both relative to benchmark and in absolute terms, continues to be a key risk affecting the Group’s business. Market reactions to political events have made this a particularly difficult year to generate consistent investment performance and these risks remain as we go into 2017.

 

The intensity of regulatory scrutiny continued in the year. In the UK, the FCA published their interim Asset Management Market Study report, focusing on competition and value for money. The report contains a number of significant findings and the implications of the potentially far-reaching ‘remedies’, covering both retail investment funds and investment management services to institutional investors, will need to be assessed. The potential for downward pressure on fees appears high. Whilst the implementation deadline of MiFID II was delayed until January 2018, the scale of work required to meet the wide-ranging requirements has necessitated a significant programme of projects running throughout the year.

 

The competitive and technological advances in the industry have increased in the year, with the continued popularity of passive funds and ETFs, and the growing acceptance of alternative approaches such as smart beta investment or the provision of investment services by robo-advisors. The potential disruptive effect of these trends on our business model is closely monitored.

 

Cyber risks have remained a key focus for the Group and its regulators in the year. The recruitment of an experienced Chief Information Security Officer in February, who works closely with the Risk function, further supported the firm’s continued enhancements in this critical area.

 

There has been little structural change to the business in 2016, and so internal risks have remained broadly consistent with the prior year, in being primarily driven by the ongoing embedding and support of our global teams. Global risk management capabilities have continued to develop to ensure an appropriate level of partnership and challenge to the growing business.

 

Merger with Janus Capital Group

 

On 3 October 2016 Henderson announced its planned merger with Janus Capital Group, a global asset management firm based in Denver, USA. The risks associated with a merger of this scale include:

 

·                  the broad risk of strategic failure and negative economics from the transaction

 

·                  the risk of organisational stress and stretch leading to people, process or system failures

 

·                  the loss of key individuals or teams.

 



 

The strategic risks have been mitigated by a robust programme of due diligence carried out by a focused and experienced team. Organisational stress is being mitigated by separate completion and integration programmes, staffed by senior, experienced staff and supported by external specialists. Where business staff are engaged in completion or integration activities, consideration is given to the need for back-filling of roles to ensure that the business as usual functioning of the firm and our service to our clients is unaffected. Communication regarding the activities underway is frequent and as transparent as possible to ensure that staff are engaged in the process, and morale across the business is closely monitored by management and Human Resources.

 

Capital position

 

Henderson’s risk exposure has not materially changed in 2016. Through the continued delivery on our objectives, the Group’s gross capital resources have increased and our capital position remains within the Board’s risk appetite, with net capital above our £216.0m regulatory requirement by £69.0m at 31 December 2016.

 

Risk management framework

 

Risk management is a fundamental component of our global operating model and is deeply integrated in our day-to-day processes and controls. Although overall accountability for risk management lies with the Board, the principle of individual accountability and responsibility for risk awareness, monitoring and management is a key feature of our culture. All staff are assessed against their approach to, and demonstration of, risk management as part of the year end appraisal process.

 

Henderson’s approach to risk management is documented in our risk appetite statement, which includes specific qualitative and quantitative statements covering the material risks which the Group faces as a result of its business model and strategy. The successful management of these risks is considered essential to the successful delivery of the Group’s strategic goals and the risk appetite statement provides direction as to the levels of risk which the business can take. The statement is updated on at least an annual basis and incorporates risk limits which, if reached, will prompt management to take action to reduce risk levels. These are supported by a broad range of key risk metrics to ensure the Board is able to assess levels of risk across the business against the mandated appetite.

 

The risk appetite statement has been considerably enhanced during the year to provide more depth and transparency for the Board, covering the nine Principal Risks detailed later on, and other significant risks noted below. The Board undertakes an annual review of the material risks affecting the firm to ensure that the Principal Risks identified remain relevant and appropriate from one year to the next.

 

Principal Risks:

 

·                  Investment performance

 

·                  Market

 

·                  Fund flow

 

·                  People

 

·                  Acquisitions and divestments

 

·                  Strategic

 

·                  Fund liquidity

 

·                  Regulatory change

 

·                  Operational, IT and legal.

 

Other Risks:

 

·                  Foreign exchange

 

·                  Pension obligation

 

·                  Tax

 

·                  Client concentration

 

·                  Interest rate

 

·                  Credit

 

·                  Corporate liquidity.

 



 

Henderson treats reputational risk as a consequence of other risks crystallising, rather than as a distinct category of primary risk in itself. Whilst considered a second order risk it is nonetheless critical, as any event that results in damage to Henderson’s reputation or brand could trigger a consequential loss of client trust, on which the business is centred.

 

The Board and senior management take a forward looking view of risk to enable timely assessment and, where necessary, mitigation of new and emerging risks. The risk management process supports this approach through the early identification of emerging risks so that they can be evaluated alongside known and continuing risks.

 

The risk management framework is documented in the Group’s risk management policy, a summary of which can be found on our website (henderson.com/ir).

 

Three lines of defence

 

Our framework utilises a ‘three lines of defence’ approach to managing risk.

 

The first line comprises the Chief Executive and business management, who are responsible for the management of the Group on a day-to-day basis in accordance with our risk appetite.

 

The second line comprises the Risk and Compliance functions which monitor the financial, investment, operational and regulatory risks in the business and the related controls in place to manage these risks. The Risk and Compliance teams report to the Chief Risk Officer (CRO), who is independent of management and reports directly to the chair of the Board Risk Committee (BRC). The CRO attends all Board, Audit Committee and BRC meetings and detailed Risk and Compliance reporting is provided to these meetings by the second line functions. The CRO is also a member of the ExCo to ensure that risk management remains central to all aspects of business strategy and management.

 

The third line comprises Internal Audit which provides independent assurance over the operational effectiveness of processes and controls across the business. Internal Audit reports directly to the chair of the Audit Committee.

 

Henderson’s Assurance function

 

The Assurance function comprises both second line of defence (Risk and Compliance) and third line of defence (Internal Audit) activities. The primary purpose of the Risk and Compliance functions is to assist Henderson in achieving its strategic objectives by ‘doing the right business in the right way’.

 

Consequently, Henderson will successfully protect all its clients’ interests and its reputation as a trusted global asset manager. These goals underpin the work of all of Assurance, although each of the component parts of the function achieves them through different blends of educating, providing oversight and challenge, advising and supporting the business.

 

Viability statement

 

In accordance with the provisions of C2.2 of the UK Corporate Governance Code, the Directors have assessed the prospects of the Group, taking into account the current position and the principal risks that could have an impact on the Group’s business model, future performance, solvency or liquidity (see below). The Board has determined the principal risks through a process of consideration and assessment of Henderson’s strategic objectives and current global business model.

 

The Directors have chosen to consider the prospects of the Group over a five year period, which is consistent with Henderson’s strategic planning process.

 

As the Group is a regulated financial services business, the reports and procedures required by the Board to make its assessment are embedded within the Group’s governance processes, which include, but are not limited to, the following:

 

·                  Budget and strategic planning results and assumptions reviewed by the Board containing profit, cash and capital forecasts over the next five years. This process also includes stress testing and a robust downside scenario. The scenarios are designed to be severe, yet plausible, and take into account the likely effectiveness of the mitigating actions that could be taken to reduce the impact should such an adverse event occur

 

·                  Consideration by the BRC of significant risk events that are designed to explore the resilience of the Group as part of its reverse stress testing process

 

·                  Consideration by the BRC of the Group’s risk appetite statement

 

·                  Monitoring throughout the year by the BRC of the Group’s strategic risk metrics.

 



 

The stress testing scenarios were performed on both a standalone and a projected post-merger with Janus basis and include a significant and protracted market downturn, poor investment performance and client withdrawals, as well as a scenario where the proposed merger does not complete.

 

The five year strategic planning period is considered an appropriate timescale over which to assess viability as this is the period assessed by the Board for its Internal Capital Adequacy Assessment Process (ICAAP) and is considered to be the length of time required to determine whether a new investment team or strategy will ultimately be successful from launch. The five year period provides less certainty of outcome than detailed one year budgets used to set internal targets, but provides a robust planning tool against which strategic decisions can be made.

 

The Board have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period used for the assessment. In doing so, it is recognised that such future assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty.

 

Strategic priorities and associated principal risks

 

 

 

Deliver first-class investment performance and service to
our clients

 

Expand our global investment offering to meet
the current and future needs of our clients

 

 

Investment
performance

 

Market

 

Liquidity

 

Fund flows

 

Key personnel

Description

 

· Risk that Henderson funds fail to achieve their performance hurdles or benchmarks, or performance is poor relative to that of peer funds, leading to increased client redemptions and reduction in AUM associated revenues earned by the Group.

· Poor fund performance will also result in lower performance fees and reduced revenue.

 

· Risk that market conditions lead to a reduction in the value of clients’ AUM and revenues earned by the Group.

· Risk that market conditions lead to a decline in the value of Group seed capital investments.

 

· Risk that underlying positions in funds managed by Henderson cannot be sold, liquidated or closed at a reasonable cost in an appropriate timeframe. As a result, a fund may incur losses and have a limited ability to meet its investor redemption obligations. Gating a fund could cause significant reputational damage.

 

· Risk of net redemptions by clients resulting in a decline in AUM and revenues earned by the Group.

 

· Risk that the departure of one or more key individuals, in e.g. ExCo or one of the Group’s key investment or distribution teams, results in a significant impact on the Group’s revenue, business growth and/or the retention of existing business, or that significant turnover results in operational inefficiency or failure.

 

 

 

 

 

 

 

 

 

 

 

Trends in 2016

 

· Weakened fund performance in challenging market conditions, with 50% and 77% of funds (weighted by AUM) outperforming over one and three years respectively.

 

· The volatile global market performance experienced in 2015, continued into 2016.

· Short-term impacts to equity markets from shock events such as the EU Referendum in the UK and the US election result impacted client AUM values, and global geopolitical risks continue to pose a threat.

 

· A spike in redemptions following the result of the EU Referendum in the UK led to the temporary suspension of the UK Property PAIF.

· Continued liquidity pressure in global fixed income markets.

· Sudden and large price movements in certain asset classes/securities became more

 

· Flat flows in the first half of the year turned negative following the EU Referendum vote in the UK, driven by negative investor sentiment and as a reflection of the Group’s scale in European Equities.

· Improved Institutional flows.

· Positive flows in Australia.

 

· Staff turnover remained low throughout the year in key investment teams, although one member of the ExCo left the Company in the year.

· Concentration risk in European Equities has reduced in the year and the percentage of Group revenues managed by any individual remains diversified.

 



 

 

 

 

 

· Continued low interest rate environment.

 

frequent during the year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mitigation

 

· Robust investment process including detailed research.

· Clearly articulated investment philosophy including analysis of our funds by comparing their performance against appropriate benchmarks.

· Broad range of asset classes and fund styles reduces the probability of all funds underperforming at the same time.

· Independent Investment Risk function provides monitoring and challenge to ensure that the level of risk taken for each portfolio is consistent with client expectations.

 

· Risk of a fall in the value of clients’ AUM is mitigated by having a broad range of clients by distribution channel, product, asset class and region.

· A significant amount of our expense base is variable.

· Limits on the aggregate amount of seed capital investment, diversification of the assets invested and appropriate hedging of the risks.

 

· Liquidity risks considered during implementation of new products and approval of new instrument types.

· Dilution levies, swing prices and, in extreme circumstances, gating are used to ensure that all investors are treated fairly.

· Detailed oversight and challenge of holdings by Investment Risk, including stress and scenario testing of portfolios, with timely reporting and escalation to ExCo and Board.

· Close monitoring of global markets and liquidity events to ensure appropriate actions are taken as required.

 

· Diversity of sources of revenue by asset class, capability, fund style, strategy and geography.

· Diversity of investor base between Retail and Institutional channel and by geography.

· Solid long-term investment performance across product ranges.

 

· Competitive remuneration structures designed to recognise and reward staff performance that is in line with our principles.

· Succession plans are in place throughout the organisation to ensure that there is cover for key roles.

· Regular staff surveys are undertaken to identify any issues which could impact staff retention.

· Comprehensive training is offered to staff to improve skills and engagement.

· Strategy of sustaining broad and diverse fund manager teams to avoid dependence on single managers or teams.

 

Reputational risk

 

This is the risk that negative publicity regarding the Group will lead to client redemptions and a decline in AUM and revenue and/or to litigation. The risk of damage to the Group’s reputation is considered more likely to result from one of the other risks materialising rather than as a standalone risk.

 

Reputational risk is, therefore, mitigated primarily by the controls in place around our principal risks, but is also supported by our client-centric culture, which focuses on openness, transparency and delivery for clients.

 

 

 

Diversify our business

 

Operate efficiently

 

 

Acquisitions and
divestments

 

Strategic

 

Operational, IT and legal

 

Regulatory change

Description

 

· Risk that an acquisition is a strategic failure, delivers negative economics or adversely impacts other parts of the business.

· Risk of organisational stress or process failures through potential demands on staff and resources through the need to integrate acquired businesses or to reorganise processes to

 

· Risk that Henderson’s business strategy fails to deliver the required and expected outcomes for stakeholders.

· Risk that technological innovation and/or new market entrants within the asset management industry reduces profitability and requires a fundamental change to Henderson’s business model.

 

· Risk of losses through inadequate or failed internal processes, people or systems or through external events. This includes the risk of loss arising from failing to manage our key outsourced service providers properly, failing to manage financial crime risks, failing to manage operational aspects of our

 

· Risk that a change in laws and regulations, however driven, will materially affect the Group’s global business or markets in which it operates. This risk may affect the business either directly or indirectly by reducing investors’ appetite for our products, increasing capital requirements, restricting our ability to sell certain

 



 

 

 

Diversify our business

 

Operate efficiently

 

 

Acquisitions and
divestments

 

Strategic

 

Operational, IT and legal

 

Regulatory change

 

 

divest parts of the business.

 

 

 

global expansion, the risk arising from major disruption to our business, including from cyber crime, and the risk of losses from trade execution errors or breaches of investment mandates.

· Risk of losses from litigation.

 

products or pursue specific investment strategies, reducing our profitability through fee restrictions, affecting our ability to retain key personnel and/or increasing the cost and complexity of the Group’s business.

 

 

 

 

 

 

 

 

 

Trends in 2016

 

· Announcement of the Group’s proposed merger with Janus Capital LLC, targeted for completion in second quarter of 2017.

· Announcement of the transition of the Volantis hedge fund team to Lombard Odier in the first quarter of 2017.

· Wind down of the joint ventures with Northern Pines Capital and Optimum Investment Management.

 

· Continued innovation within the asset management industry, with ongoing focus on reduced costs and debate as to the relative merits of passive, ‘smart beta’ and active management strategies and business models.

· Emergence of low cost solution providers giving online discretionary investment management/robo-advice.

 

· Continued increase in the number and sophistication of acts of cyber crime against firms generally.

· Global expansion increases general operational risks through new staff, locations, system requirements and new/expanded third party relationships.

· Issues experienced by some of our third party service providers as a result of change projects.

 

· The FCA Asset Management Market Study interim report highlighted the regulatory focus on competition and value for money in the sector.

· The pace of issuance of new regulation slowed, however the implementation of major regulatory change was a continued focus with central counterparty clearing for OTC derivatives, MiFID II and FCA Senior Managers and Certification Regime.

· UK Referendum result and the ongoing uncertainty created.

 

 

 

 

 

 

 

 

 

Mitigation

 

· Acquisitions/divestments/ mergers considered only where they fit with our strategic goals and meet our financial criteria such that we can realise value for our shareholders. The Board’s risk appetite statement includes quantitative and qualitative criteria that must be met by any acquisition/divestment.

· Thorough due diligence performed before any acquisition is made, including assessment of our ability to successfully integrate any acquired/merging business.

· Specific governance and project management structures implemented for acquisitions/disposals.

· Integration risk, post-closing, is managed, monitored and reported.

 

· Concentration on delivery of Henderson’s strategy through provision of first-class actively managed investment performance and service for our clients as efficiently as possible.

· Monitoring of emerging developments in the asset management industry, which might pose a threat to our current business model.

· Maintaining a clear understanding of our clients’ needs through communication and interaction.

 

· Our control systems are designed to ensure operational and legal risks are mitigated to a level which is consistent with our risk appetite.

· Globally embedded ‘three lines of defence model’ is key.
· Dedicated Chief Information Security Officer recruited in the first quarter of 2016 to coordinate IT security and service delivery.

· Outsourced service providers are overseen by the relevant line function and the controls of key service providers are also reviewed by the Group’s Assurance function.

· We maintain and test service and business continuity plans, including crisis management, which are designed to ensure that, in the event of business disruption, we can maintain our operations without material damage to the business.

 

· Continued active and constructive engagement with regulators through regular dialogue.

· Positive engagement in regulatory initiatives and studies.

· Regulatory developments are monitored by a dedicated team in Compliance, in liaison with external experts where required.

· Formalised cross-business project groups implement required changes to our business processes.

· Active involvement with and through relevant industry bodies.

 



 

Directors’ responsibilities statement

 

In relation to the financial statements

 

The Directors are responsible for preparing the Annual Report and Accounts which includes the Directors’ report, the Strategic report, the Directors’ remuneration report and the financial statements. The Directors are required to prepare and approve the financial statements for the Group and Parent Company in accordance with Jersey law for each financial year which show a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period in accordance with generally accepted accounting principles. The Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).

 

IAS 1 Presentation of Financial Statements requires that financial statements present fairly for each financial year the Group’s and Company’s financial position, financial performance and cash flows. In preparing the Group and Company financial statements, the Directors are also required to:

 

·                  Select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently

 

·                  Make judgements and accounting estimates that are reasonable and prudent

 

·                  Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information

 

·                  Provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s and Company’s financial position and financial performance

 

·                  State that the Group and Company have complied with IFRS, subject to any material departures disclosed and explained in the financial statements

 

·                  Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors confirm they have complied with all the above requirements in preparing the financial statements.

 

Directors’ statement as to disclosure of information to auditors

 

Having made enquiries of fellow Directors and of the Company’s auditors, each of these Directors confirms that:

 

·                  So far as the Director is aware, there is no relevant audit information needed by the Company’s external auditors in connection with preparing their report, of which the Company’s external auditors are unaware

 

·                  The Director has taken all the steps that he or she ought to have taken as a Director in order to make themselves aware of any relevant audit information needed by the Company’s external auditors in connection with preparing their report and to establish that the Company’s external auditors are aware of that information

 

·                  The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions which disclose with reasonable accuracy, at any time, the financial position of the Group and the Company to ensure that the financial statements comply with Jersey law. They are also responsible for safeguarding

 



 

the assets of the Group and the Company, and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Directors confirm that to the best of their knowledge:

 

·                  The financial statements have been prepared in accordance with IFRS and give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company for the year ended 31 December 2016

 

·                  The Strategic report includes a fair review of the development and performance of the business and the position of the Group for the year ended 31 December 2016 and a description of the principal risks and uncertainties faced by the Group

 

·                  The Annual Report and Accounts, taken as a whole, provides the information necessary for shareholders to assess the Company’s performance, business model and strategy and is fair, balanced and understandable

 

·                  The accounting records have been properly maintained.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website, www.henderson.com/ir. Legislation in Jersey and the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Signed in accordance with a resolution of the Directors:

 

Andrew Formica
Chief Executive
8 February 2017

 

Roger Thompson
Chief Financial Officer
8 February 2017

 

Consolidated Income Statement
For the year ended 31 December 2016

 

 

 

 

 

2016

 

2015

 

 

 

Notes

 

Underlying
profit
£m

 

Acquisition
related and
non-recurring
items (note 7)
£m

 

Total
£m

 

Underlying
profit
£m

 

Acquisition
related and
non-recurring
items (note 7)
£m

 

Total
£m

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross fee and deferred income

 

3

 

738.0

 

 

738.0

 

756.0

 

 

756.0

 

Commissions and deferred acquisition costs

 

3

 

(154.3

)

 

(154.3

)

(154.2

)

 

(154.2

)

Net fee income

 

 

 

583.7

 

 

583.7

 

601.8

 

 

601.8

 

Income/(loss) from associates and joint ventures

 

14.2

 

0.5

 

(2.7

)

(2.2

)

(0.2

)

(0.5

)

(0.7

)

Finance income

 

3

 

10.5

 

 

10.5

 

17.3

 

12.4

 

29.7

 

Net income/(expense)

 

 

 

594.7

 

(2.7

)

592.0

 

618.9

 

11.9

 

630.8

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

4.1

 

(372.7

)

(17.5

)

(390.2

)

(381.6

)

(5.9

)

(387.5

)

Amortisation and depreciation

 

 

 

(6.0

)

(51.3

)

(57.3

)

(5.2

)

(56.2

)

(61.4

)

Total operating expenses

 

 

 

(378.7

)

(68.8

)

(447.5

)

(386.8

)

(62.1

)

(448.9

)

Finance expenses

 

6

 

(3.3

)

(2.0

)

(5.3

)

(12.1

)

(1.9

)

(14.0

)

Total expenses

 

 

 

(382.0

)

(70.8

)

(452.8

)

(398.9

)

(64.0

)

(462.9

)

Profit/(loss) before tax

 

 

 

212.7

 

(73.5

)

139.2

 

220.0

 

(52.1

)

167.9

 

Tax (charge)/credit

 

8

 

(43.0

)

13.4

 

(29.6

)

(22.9

)

16.2

 

(6.7

)

Profit/(loss) after tax attributable to owners of the parent

 

 

 

169.7

 

(60.1

)

109.6

 

197.1

 

(35.9

)

161.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

9.2

 

 

 

 

 

10.0

p

 

 

 

 

14.7

p

Diluted

 

9.2

 

 

 

 

 

9.8

p

 

 

 

 

14.1

p

 



 

Consolidated Statement of Comprehensive Income For the year ended 31 December 2016

 

 

 

Note

 

2016
£m

 

2015
£m

 

Profit after tax

 

 

 

109.6

 

161.2

 

 

 

 

 

 

 

 

 

Other comprehensive income/(expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified to the Consolidated Income Statement

 

 

 

 

 

 

 

Exchange differences on translation of foreign operations

 

 

 

49.8

 

8.8

 

Exchange differences transferred to the Consolidated Income Statement on disposal of foreign operations

 

 

 

 

0.5

 

Tax effect of exchange differences

 

 

 

0.2

 

 

 

 

 

 

 

 

 

 

Available-for-sale financial assets:

 

 

 

 

 

 

 

Net (losses)/gains on revaluation

 

 

 

(10.0

)

14.8

 

Reclassification to the Consolidated Income Statement on disposal

 

 

 

(0.9

)

(9.6

)

 

 

 

 

 

 

 

 

Items that will not be reclassified to the Consolidated Income Statement

 

 

 

 

 

 

 

Actuarial gains/(losses):

 

 

 

 

 

 

 

On defined benefit pension schemes (after tax deducted at source)

 

20.2

 

8.9

 

(2.9

)

Tax effect of actuarial gains/(losses)

 

 

 

0.2

 

(0.1

)

Other comprehensive income after tax

 

 

 

48.2

 

11.5

 

 

 

 

 

 

 

 

 

Total comprehensive income after tax

 

 

 

157.8

 

172.7

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

Owners of the parent

 

 

 

151.4

 

164.0

 

Non-controlling interests

 

 

 

6.4

 

8.7

 

 

 

 

 

157.8

 

172.7

 

 



 

Consolidated Statement of Financial Position
As at 31 December 2016

 

 

 

Notes

 

2016
£m

 

2015
£m

 

Non-current assets

 

 

 

 

 

 

 

Intangible assets

 

13

 

656.9

 

680.6

 

Investments accounted for using the equity method

 

 

 

0.2

 

2.9

 

Property and equipment

 

15

 

13.9

 

14.4

 

Retirement benefit assets

 

20.2

 

145.9

 

130.0

 

Deferred tax assets

 

22

 

22.0

 

37.5

 

Trade and other receivables

 

17

 

 

0.1

 

 

 

 

 

838.9

 

865.5

 

Current assets

 

 

 

 

 

 

 

Available-for-sale financial assets

 

16

 

41.9

 

64.6

 

Financial assets at fair value through profit or loss

 

16

 

216.1

 

145.7

 

Current tax assets

 

 

 

0.7

 

0.9

 

Trade and other receivables

 

17

 

274.6

 

232.7

 

Cash and cash equivalents

 

18.1

 

244.0

 

381.6

 

 

 

 

 

777.3

 

825.5

 

Total assets

 

 

 

1,616.2

 

1,691.0

 

Non-current liabilities

 

 

 

 

 

 

 

Financial liabilities at fair value through profit or loss

 

 

 

37.6

 

22.6

 

Trade and other payables

 

23

 

5.0

 

10.7

 

Retirement benefit obligations

 

20.2

 

9.6

 

8.1

 

Provisions

 

21

 

9.2

 

10.0

 

Deferred tax liabilities

 

22

 

23.6

 

31.6

 

 

 

 

 

85.0

 

83.0

 

Current liabilities

 

 

 

 

 

 

 

Debt instrument in issue

 

19

 

 

149.9

 

Financial liabilities at fair value through profit or loss

 

 

 

111.7

 

96.7

 

Trade and other payables

 

23

 

319.4

 

291.3

 

Provisions

 

21

 

2.8

 

1.9

 

Current tax liabilities

 

 

 

15.4

 

20.5

 

 

 

 

 

449.3

 

560.3

 

Total liabilities

 

 

 

534.3

 

643.3

 

Net assets

 

 

 

1,081.9

 

1,047.7

 

Capital and reserves

 

 

 

 

 

 

 

Share capital

 

24.2

 

141.5

 

141.5

 

Share premium

 

 

 

747.9

 

747.9

 

Own shares held

 

 

 

(92.0

)

(106.9

)

Translation reserve

 

 

 

42.7

 

6.3

 

Revaluation reserve

 

 

 

3.9

 

7.6

 

Profit and loss reserve

 

 

 

220.9

 

240.7

 

Equity attributable to owners of the parent

 

 

 

1,064.9

 

1,037.1

 

Non-controlling interests

 

 

 

17.0

 

10.6

 

Total equity

 

 

 

1,081.9

 

1,047.7

 

 

The financial statements were approved by the Board of Directors and authorised for issue on 8 February 2017. They were signed on its behalf by:

 

Richard Gillingwater
Chairman

 



 

Consolidated Statement of Changes in Equity
For the year ended 31 December 2016

 

 

 

Share
capital
£m

 

Share
premium
£m

 

Own
shares
held
£m

 

Translation
reserve
£m

 

Revaluation
reserve
£m

 

Profit and
loss
reserve
£m

 

Equity
attributable to
owners of the
parent
£m

 

Non-
controlling
interests
£m

 

Total
equity
£m

 

At 1 January 2015

 

142.4

 

743.9

 

(94.7

)

(1.7

)

9.8

 

216.4

 

1,016.1

 

1.9

 

1,018.0

 

Profit after tax

 

 

 

 

 

 

161.2

 

161.2

 

 

161.2

 

Other comprehensive income/(expense) after tax

 

 

 

 

8.0

 

(2.2

)

(3.0

)

2.8

 

8.7

 

11.5

 

Total comprehensive income/(expense) after tax

 

 

 

 

8.0

 

(2.2

)

158.2

 

164.0

 

8.7

 

172.7

 

Dividends paid to equity shareholders

 

 

 

 

 

 

(105.4

)

(105.4

)

 

(105.4

)

Purchase of own shares for employee share schemes

 

 

 

(63.0

)

 

 

 

(63.0

)

 

(63.0

)

Vesting of share schemes

 

 

 

55.0

 

 

 

(55.0

)

 

 

 

Issue of shares for share schemes

 

0.2

 

4.0

 

(4.2

)

 

 

 

 

 

 

Movement in equity-settled share scheme expenses

 

 

 

 

 

 

39.2

 

39.2

 

 

39.2

 

Tax on equity-settled share schemes

 

 

 

 

 

 

11.2

 

11.2

 

 

11.2

 

Purchase and cancellation of shares

 

(1.1

)

 

 

 

 

(23.9

)

(25.0

)

 

(25.0

)

At 31 December 2015

 

141.5

 

747.9

 

(106.9

)

6.3

 

7.6

 

240.7

 

1,037.1

 

10.6

 

1,047.7

 

Profit after tax

 

 

 

 

 

 

109.6

 

109.6

 

 

109.6

 

Other comprehensive income/(expense) after tax

 

 

 

 

36.4

 

(3.7

)

9.1

 

41.8

 

6.4

 

48.2

 

Total comprehensive income/(expense) after tax

 

 

 

 

36.4

 

(3.7

)

118.7

 

151.4

 

6.4

 

157.8

 

Dividends paid to equity shareholders

 

 

 

 

 

 

(116.2

)

(116.2

)

 

(116.2

)

Purchase of own shares for employee share schemes

 

 

 

(40.1

)

 

 

 

(40.1

)

 

(40.1

)

Vesting of share schemes

 

 

 

55.0

 

 

 

(55.0

)

 

 

 

Movement in equity-settled share scheme expenses

 

 

 

 

 

 

36.4

 

36.4

 

 

36.4

 

Tax on equity-settled share schemes

 

 

 

 

 

 

(3.7

)

(3.7

)

 

(3.7

)

At 31 December 2016