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Henderson Group takes £97m hit after bank stake writedown

Henderson Group has taken a £97.3m hit to profits after writing down a bank stake and making a loss in one of its structured products.

Although the group made a profit of £80.3m before tax and non-recurring items, when these were taken into account it made a loss of £17m in 2008.

Henderson Group profits before non-recurring items took a 25 per cent hit in 2008, falling to £80.3m, having made £106.7m in 2007.

The non-recurring losses included taking a £68.8m hit following the write off of a stake in Banco Popolare Gruppo Bancario and a £7.2m loss in a seed stake in one of its structured products.

Other losses came courtesy of restructuring, third-party administration review and scheme of arrangement costs.

The non-recurring loss of 25 per cent was down to debt raised in May 2007 as well as lower transaction and net performance fees.

Henderson Group chief executive Andrew Formica says: “We have had this bank stake which is both a historical and distribution arrangement, which we decided needed to be unwound in 2008.

“The share price of that bank has also continued to fall markedly since we made the decision in December 2008 so it has proved a wise decision. As for the structured product, the vehicle is still running but we decided to write the equities down to zero as we want to ensure there are no surprises on our balance sheet.”

Henderson Global Investors also saw its assets fall by 9 per cent to £99.7m before tax and non-recurring items in 2008. However the non-recurring losses saw the firm lose £20.8m in 2008.

Assets under management at the firm also fell by 16.3 per cent in 2008 from £59.2bn to £49.5bn. The group says the falls come from unfavorable market conditions and foreign exchange rate movements of £5.9bn as well as £6.7bn of net outflows from Pearl.

Henderson has revealed that operating costs were down 24 per cent and the group has maintained its dividend at 6.1 per cent.

Henderson released a profits warning in October 2008 after admitting that it would not reach its target of £90m.

Formica says: “These results are fairly resilient considering that 2008 saw global equity markets experience one of the worst years on record.

“The property sector saw valuations fall in the early months of the year and remained under pressure throughout. In contrast government bond markets performed well, supported by investors seeking a safe haven, against a backdrop of falling interest rates. Corporate bonds however fared particularly poorly as actual and potential defaults by investment grade entities generally pushed bond prices to much lower levels.

“Given these factors, Henderson’s AUM proved resilient. Presently market levels are significantly below the average levels of 2008 and we expect this situation to persist in the short to medium-term. Therefore, 2009 is likely to be more challenging for earnings than 2008. However, our competitive long-term investment performance, diversity of revenues and active cost management should provide some support.”


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