|
"Improving client demand and our competitive long-term investment performance helped the Group generate encouraging results."
Rupert Pennant-Rea
Chairman, Henderson Group
|
|
Overview
At the beginning of 2009, the very survival of the world's financial system still seemed in doubt. By the end of the year, economic growth had resumed and financial markets revived. A remarkable change, but far from painless – jobs lost, incomes cut – and the legacy of the worst financial crisis in living memory will persist for years. Everybody working in financial services should be honest about their industry's collective failure, be grateful for the bail-outs from governments, and be more intelligent and careful about what they do in future: not Masters of the Universe, just servants of the clients.
Against this difficult background, Henderson did relatively well in 2009. Improving markets helped restore client demand and that, together with our competitive long-term investment performance, diversity of revenues, active cost management and the success of the New Star acquisition, helped the Group generate a recurring profit1 of £73.7m (2008: £80.4m). This was an encouraging result, particularly considering that world equity prices were on average 18% lower than in 2008.
The Board
After 17 years with the Group, Toby Hiscock decided to stand down as Chief Financial Officer and as a Director from 1 September 2009. Toby made an outstanding contribution to the Group and continues his good work on the boards of our hedge funds and the board of John Laing plc, part of our infrastructure business. Fortunately, we had a strong internal successor: our Chief Operating Officer, Shirley Garrood. Her experience, leadership skills and knowledge of the Group have made for a seamless transition.
We also had changes among the Non-Executive Directors. Anthony Hotson stepped down in May 2009, and John Roques retired at the end of the year. Robert Jeens, who was appointed in July 2009, became Chairman of the Audit Committee. Tim How, who was appointed in November 2008, succeeded John Roques as Senior Independent Director of the Group.
Our shareholders
The number of shares held in Australia and New Zealand has increased to 56%, up from 51% a year earlier. Investors in Europe held less, 39% compared with 42%; and shares held in the rest of the world were 5%, down from 7% a year earlier.
In November, I met our largest institutional shareholders based in Australia, and heard their views on the Company, its strategy and its management. I also had the opportunity to discuss succession planning, remuneration issues and general trends in fund management. I was encouraged by the continuing support from these shareholders.
Staff incentives
In many countries, executive remuneration is increasingly under the spotlight, most obviously in financial services. At Henderson, we have an established remuneration framework, designed to be market-competitive and to incentivise staff to perform well for our clients; it is also designed to retain key employees and to align staff actions with the interests of shareholders. None of these features can afford to be static: a successful remuneration system must be flexible enough to take account of changes in the business environment and in remuneration practice.
After considering further guidance from the UK Financial Services Authority (FSA) in its code of practice on remuneration and the Walker review (which concentrated on UK financial services), we have extended the period of the partial deferral of annual bonuses of Executive Directors. It was two years, but will be three from now on. This change will also apply to other employees who receive annual bonuses above a certain threshold. In addition, non-financial measures and risk criteria will be more explicitly taken into account in determining annual bonuses.
Dividends
The Board is recommending a final dividend for 2009 of 4.25 pence per share, which will bring the total dividend for 2009 to 6.1 pence per share, the same as the 2008 total. Although this dividend, if approved by shareholders, will result in a higher pay-out ratio than we have had before, the Board is confident about the outlook for the business.
Additionally, the Board has decided to adopt a simple formula for the interim dividend. From now on, assuming the Group has the resources, the interim dividend will be the equivalent of 30% of the total dividend for the previous year.
Outlook
The year ahead will be challenging for all financial services providers, not least because international regulators are emphasising reform in the wake of the 2008 financial crisis. Their key concerns include a rigorous evaluation of corporate governance and risk management structures; more stringent liquidity and capital hurdles; the competence and effectiveness of boards; and ensuring that corporate and strategic policies are aligned with clearly articulated risk appetites and prudent management. Henderson is alive to these regulatory challenges and committed to achieving the highest standards of governance.
Overall, although we are more optimistic about the outlook for markets, the pace of the global economic recovery remains uncertain. We continue to explore ways to expand our business internationally in Continental Europe, Asia and the US. Above all, though, we remain firmly committed to helping our clients achieve their investment objectives
Thank you
The Board would like to thank the Senior Management Team and staff at Henderson for their hard (and often long) hours of work last year. We thank our shareholders for your support in our efforts to make this an even better business.
1 Before intangible amortisation, void property finance charge and tax.