Rupert Pennant-Rea
Chairman
Overview
The global economic recovery that started in 2009 continued in 2010. Gross World Product rose by 5%, well above the long-run average of 3.3%. However, 70% of this growth was accounted for by emerging markets. In most developed economies, conditions remained sluggish and unemployment high. Investors were more than once unnerved by the Eurozone sovereign debt crisis, fearing that it would result in new strains on the banking system. Reflecting these concerns, as well as signs of slower growth in China, equities fell sharply in May and then languished for a while. The turning point for markets came in September when the US Federal Reserve announced a second round of quantitative easing. This, together with good corporate news, revived investors’ appetite for risk, so equities finished with solid gains for the year. When the quantitative easing policy was implemented in November, commodity prices rose sharply, boosting inflation in developed and emerging economies and making some central banks respond with tighter policy.
The overall rise in equity markets was good for Henderson’s business. With the success of the New Star acquisition and higher transaction and performance fees, the Group’s underlying profit rose by 37%.
Dividends
The Board has adopted a progressive dividend policy and, in keeping with this, is recommending a final dividend for 2010 of 4.65 pence per share, bringing the total dividend for 2010 to 6.5 pence per share, 7% higher than the 2009 total dividend. The proposed final dividend will be paid on 27 May 2011 to shareholders who are on the register on 6 May 2011.
As previously announced, we intend the interim dividend to be 30% of the total dividend for the previous year.
The Board
There were no changes to the Board’s membership last year. In accordance with the new UK Corporate Governance Code issued by the FRC in June 2010, from now on Directors will offer themselves for reappointment every year.
Henderson Group share price
Source: Datastream
Corporate activity
The main strategy for the Group is profitable organic growth. That said, and as we have shown in the past, we keep an eye on acquisition opportunities that fill gaps in our product range and/or improve our distribution. Any acquisition possibility will be judged against strict financial criteria, and also by its cultural fit. We have a distinctive culture which (as evidenced by our low staff turnover) works for our staff and, through them, for our clients. In 2010, we reviewed a number of opportunities including RidgeWorth, a US- based company, but we decided not to pursue it. In January 2011, we announced the proposed acquisition of Gartmore. It should reinforce our position as a diversified asset manager with much to offer in traditional long-only and absolute return funds, and it will significantly strengthen our presence among UK retail investors. Shareholders are being asked to vote on this acquisition in March; your Board unanimously recommends that you vote in favour.
Outlook
Although concerns about sovereign debt are likely to continue, the global economy looks set for reasonable growth. Even though the UK recovery will test the nerves, we are well placed to provide a good service for our clients and decent results for our shareholders.
Thank you
The Board would like to thank our staff for their skill and hard work last year. Thanks also to our shareholders for your support for Henderson; we do not take it for granted.