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TIDM75AS
RNS Number : 1936O
HGI Group Limited
24 June 2010
HGI Group Limited
2009 Report and Financial Statements: Listing Rule 17.3.4 and Disclosure and
Transparency Rule 6.3.5
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE
UNITED STATES, CANADA OR JAPAN.
24 June 2010
HGI Group Limited ("the Company"), which has GBP175,000,000 6.50 per cent Notes
in issue due May 2012 and is a wholly owned subsidiary of Henderson Group plc,
releases its Report and Financial Statements for the year end 31 December 2009,
in accordance with Listing Rule 17.3.4 and Disclosure and Transparency Rule
6.3.5. References to "the Group" refer to HGI Group Limited and its controlled
entities and references to "the Henderson Group" refer to Henderson Group plc
and its controlled entities.
Business review - Group
+------------------------------------------------+----+---------+---------+
| | | 2009 | 2008 |
+------------------------------------------------+----+---------+---------+
| | | GBPm | GBPm |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Management fees (net of commissions) | | 148.5 | 224.4 |
+------------------------------------------------+----+---------+---------+
| Transaction fees | | 17.1 | 16.5 |
+------------------------------------------------+----+---------+---------+
| Performance fees | | 30.6 | 32.0 |
+------------------------------------------------+----+---------+---------+
| Total fee income | | 196.2 | 272.9 |
+------------------------------------------------+----+---------+---------+
| Finance income | | 4.0 | 13.6 |
+------------------------------------------------+----+---------+---------+
| Total income | | 200.2 | 286.5 |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Operating costs | | (186.0) | (192.4) |
| | | | |
+------------------------------------------------+----+---------+---------+
| Finance costs | | (8.9) | (13.7) |
+------------------------------------------------+----+---------+---------+
| Total expenses | | (194.9) | (206.1) |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Recurring profit before intangible | | 5.3 | 80.4 |
| amortisation and tax | | | |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Intangible amortisation | | (0.3) | (0.1) |
+------------------------------------------------+----+---------+---------+
| Recurring profit before tax | | 5.0 | 80.3 |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Non-recurring items | | (36.2) | (15.2) |
+------------------------------------------------+----+---------+---------+
| (Loss)/profit before tax | | (31.2) | 65.1 |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Taxation on recurring operations | | (2.7) | (8.6) |
+------------------------------------------------+----+---------+---------+
| Taxation on non-recurring items | | 8.6 | 4.8 |
+------------------------------------------------+----+---------+---------+
| Total taxation | | 5.9 | (3.8) |
+------------------------------------------------+----+---------+---------+
| (Loss)/profit after tax | | (25.3) | 61.3 |
+------------------------------------------------+----+---------+---------+
| | | | |
+------------------------------------------------+----+---------+---------+
| Attributable to: | | | |
+------------------------------------------------+----+---------+---------+
| Equity holders of the parent | | (25.4) | 61.2 |
+------------------------------------------------+----+---------+---------+
| Minority interests | | 0.1 | 0.1 |
+------------------------------------------------+----+---------+---------+
| | | (25.3) | 61.3 |
+------------------------------------------------+----+---------+---------+
Revenues and fee margins
The decrease in fee income by GBP76.7m (26.8%) to GBP196.2m in FY09 (FY08:
GBP272.9m) reflects lower average market levels which impacted management fees
during the year, with the FTSE 100 Index averaging 15% lower in FY09 than FY08.
In addition the Restructure resulted in a decrease in fee income for the
Group. Transaction fees increased marginally in FY09 to GBP17.1m (FY08:
GBP16.5m), primarily due to advisory fees earned by our Structured Products
business. Performance fees decreased marginally in FY09 to GBP30.6m (FY08:
GBP32.0m), with institutional and hedge funds being the main contributors in
FY09.
Average management fee margins were 36.7bps (FY08: 44.4bps) with the decrease
primarily due to companies with higher management fee margins being transferred
out of the Group as a result of the Restructure. Net margins in FY09 were
1.3bps (FY08: 15.9bps) respectively, with the decreases due primarily to
increased staff costs and lower fee income.
Total fee margin decreased from 53.9bps in FY08 to 48.5bps in FY08, largely due
to lower net management fees as a result of the matters set out above.
Finance income
Finance income in FY09 decreased by GBP9.6m to GBP4.0m primarily due to FY08
dividend income from equity investments in Banco Popolare Gruppo Bancario (BP)
and Aquilae of GBP4.4m (FY09: nil) and net gains on seed capital investment
disposals of GBP6.2m in FY08 (FY09: net losses GBP0.1m).
Operating costs
Operating costs decreased by 3% to GBP186.0m in FY09 with the decrease being
mainly due to a cost reduction programme commenced in FY08 and the Restructure,
but offset by the integration of the New Star Asset Management Group PLC (New
Star), see below for more details.
Employee compensation and benefits were GBP6.7m lower at GBP119.1m in FY09
compared to GBP125.8 in FY08. Within this, fixed staff costs decreased by
GBP4.4m due to a cost reduction programme and variable staff costs increased
slightly by GBP2.3m.
Office and operating lease costs increased by GBP2.0m to GBP15.2m in FY09,
primarily due to the release, in FY08, of a void space provision of GBP2.4m and
a lease incentive of GBP1.2m, following the lease surrender of the Group's
previously occupied London offices, in November 2008. In addition, inflation and
adverse currency movements on overseas accommodation contributed to the increase
in FY09.
Depreciation increased by GBP0.9m to GBP3.2m in FY09, mainly due to depreciation
of capital expenditure incurred in relocating the Group's London offices in
2008.
Operating margin fell in FY09 to 0.7% (FY08: 24.5%) due to the impact of lower
market levels on fee income and the take on of the New Star staff and
operational costs within the Group, partly offset by cost reduction measures.
The compensation ratio has increased by 15.6% to 59.5% in FY09, reflecting the
reduction in fee income resulting from the subdued market conditions throughout
the year and the increase in staff levels due to the acquisition of New Star and
its controlled entities by Henderson Group plc. The service company of the
Henderson Group sits within the Group and includes costs relating to New Star
and the companies transferred as a result of the Restructure, revenues for these
Companies are outside this Group.
Finance costs
Finance costs in FY09 were GBP8.9m, GBP4.8m less than FY08. The reduction was
primarily a result of the amortisation of the profit arising from the unwind of
an interest rate swap on debt in December 2008. The cumulative fair value
adjustment to the carrying value of the debt up to the date of unwinding (as at
31 December 2009: GBP7.2m) is being amortised over the residual term of the
debt, which matures on 2 May 2012.
Non-recurring Items
The following non-recurring items, a net charge of GBP36.2m, were recognised in
FY09:
· a credit of GBP8.8m for insurance recoveries;
· a charge of GBP17.0m in respect of New Star integration;
· a charge of GBP20.7m for infrastructure fund management fees; and
· a charge of GBP7.3m for impairment of seed capital investments in three
property funds.
The non-recurring items in FY08 amounted to a net charge of GBP15.2m.
Further details of the non-recurring items are given in note 7 to the financial
statements.
Outlook
The Group remains committed to providing clients with more valuable investment
products. Generating profitable organic growth continues to be our primary
focus. The Group also remains alert to opportunities to accelerate our strategic
plan subject to our strict financial disciplines. Overall, the Group is
optimistic about the outlook for markets although it is expected that volatility
will remain high throughout the year. The Group is well placed to grow its
existing product ranges in all of our channels and the geographies the Group
operates in.
Risk management
The Henderson Group regards the effective management of its risks as being
central to the successful achievement of business objectives. It therefore has
in place a framework which is designed to embed the management of risk at all
levels within the organisation. The framework also ensures that business
objectives are met without exceeding the Henderson Group's risk appetite; and is
subject to continuous review to ensure it recognises both new and emerging risks
in the business. This framework is applied to entities controlled by Henderson
Group plc and therefore applies to the Group.
Key risks and their mitigation
The principal risks within the Group fall into a number of distinct categories
and the means adopted to mitigate them are both varied and relevant to the
nature of the risk concerned. The principal risks and the means used to mitigate
them as set and identified by the Henderson Group and applied to its controlled
entities are set out below:
+-------------+--------------------------+----------------------------------+
| Key Risks | Description | Mitigation |
+-------------+--------------------------+----------------------------------+
| Acquisition | The Henderson Group's | The Henderson Group only |
| | long-term strategy | considers acquisitions if they |
| | involves its willingness | provide a fit with its strategic |
| | to consider the | goals and are at a price at |
| | acquisition of | which the Henderson Group can |
| | businesses. This | realise value for its |
| | introduces the risk of | shareholders. There is thorough |
| | organisational stress | due diligence performed before |
| | through the potential | any acquisition is made and this |
| | demands made on staff | includes assessing the ability |
| | and resources through | of the Henderson Group to |
| | the need to integrate | successfully integrate the |
| | acquired businesses. | acquired business. |
+-------------+--------------------------+----------------------------------+
| Business | Business disruption risk | The Henderson Group has in place |
| disruption | is the risk of the | business continuity plans |
| | occurrence of | designed to ensure that, should |
| | unforeseeable events | such an event occur, it could |
| | which could have a | maintain its operations without |
| | material impact on the | irreparable damage being done to |
| | operations of the | the business. These plans are |
| | business. | subject to regular testing. The |
| | | Group also ensures that its |
| | | third party administrators have |
| | | in place similarly comprehensive |
| | | plans for their operations. |
| | | Additionally, the Henderson |
| | | Group has insurance arrangements |
| | | should losses of revenue occur |
| | | through business interruption. |
+-------------+--------------------------+----------------------------------+
| Credit | Credit risk is the risk | The Henderson Group has an |
| | of a counterparty to the | established credit policy to |
| | Henderson Group either | ensure its counterparties meet |
| | defaulting on Henderson | strict minimum rating |
| | Group funds deposited | requirements consistent with the |
| | with it or the | Henderson Group's risk appetite; |
| | non-receipt of a trade | and the Henderson Group Credit |
| | debt. | Risk Committee meets regularly |
| | | to approve, review and set |
| | | limits for all new and existing |
| | | counterparties. In addition, the |
| | | Henderson Group has many clients |
| | | that have fees deducted directly |
| | | from their assets or |
| | | alternatively are billed |
| | | regularly with strict payment |
| | | terms. |
+-------------+--------------------------+----------------------------------+
| Employee | The loss of either a | The Henderson Group operates |
| retention | member of the Henderson | appropriate incentive packages |
| | Group Senior Management | designed to be competitive and |
| | Team or one of the | to recognise and reward out |
| | Henderson Group's | performance. It also has a |
| | principal investment or | succession planning policy aimed |
| | distribution | at ensuring there is appropriate |
| | professionals could have | cover for key roles should they |
| | a material adverse | become vacant. In addition, |
| | effect on both the | staff surveys are carried out to |
| | growth of the business | identify any areas which could |
| | and the retention of | adversely impact staff |
| | existing business. If | retention; and comprehensive |
| | the loss were of a | training is undertaken to ensure |
| | principal investment | skills and knowledge reside in |
| | manager, there is also a | more than one individual. |
| | risk that clients may | |
| | either redeem their | |
| | funds or move their | |
| | mandates elsewhere. The | |
| | loss of a key member of | |
| | the distribution team | |
| | could severely impact | |
| | the ability of the | |
| | Henderson Group to grow | |
| | the business in line | |
| | with its strategy. | |
+-------------+--------------------------+----------------------------------+
| Foreign | Foreign currency risk is | The Henderson Group mitigates |
| currency | the risk that the | this risk through the effect of |
| | Henderson Group will | natural hedges i.e. holding |
| | sustain losses through | financial assets and liabilities |
| | adverse movements in | of equal value in the same |
| | exchange rates, as a | currency; by limiting the net |
| | result of its exposure | exposure to an individual |
| | to non-GBP income and | currency; and by entering into |
| | expenses and assets and | hedging instruments such as |
| | liabilities of its | foreign exchange contracts, |
| | overseas subsidiaries; | which are primarily used to |
| | as well as certain other | hedge available-for-sale |
| | assets and liabilities | financial assets. A Hedge |
| | denominated in a | Committee oversees this risk and |
| | currency other than GBP. | reports to the Henderson Group |
| | | Board quarterly. |
+-------------+--------------------------+----------------------------------+
| Investment | Investment performance | The Henderson Group mitigates |
| performance | risk is the risk that | this risk: by operating a robust |
| | funds fail to deliver | investment process which |
| | the expected level of | includes detailed research; by |
| | performance. The effect | having a clearly articulated |
| | of this might be that | investment philosophy; and by |
| | clients redeem | analysing fund performance and |
| | investments, which in | comparing it against appropriate |
| | turn would result in a | benchmarks. |
| | reduction in fees earned | |
| | by the Henderson Group. | |
| | Poor fund performance | |
| | will also impact the | |
| | level of performance | |
| | related fees earned. | |
+-------------+--------------------------+----------------------------------+
+--------------+--------------------------+----------------------------------+
| Liquidity | Liquidity risk is the | The Henderson Group manages its |
| | risk that the Henderson | liquidity on a daily basis |
| | Group may be unable to | within the Finance function, |
| | meet its payment | which ensures that the Henderson |
| | obligations as they fall | Group has sufficient cash and/or |
| | due. | highly liquid assets available |
| | | to meet its liabilities. The |
| | | Group ensures that it has access |
| | | to funds to cover all forecast |
| | | commitments for at least the |
| | | following twelve months. |
| | | |
| | | The Henderson Group does not |
| | | bear any liquidity risk |
| | | associated with its clients' |
| | | funds and has no obligation to |
| | | provide short term liquidity to |
| | | its clients. |
+--------------+--------------------------+----------------------------------+
| Market | Market risk is the risk | The Henderson Group mitigates |
| | that market conditions | the market risk on the Group's |
| | lead to a decline in the | available-for-sale assets by |
| | value of Henderson Group | investing in a diversified range |
| | available-for-sale | of assets; and mitigates a fall |
| | financial assets and/or | in the value of clients' AUM by |
| | a reduction in the value | having a broad range of clients |
| | of clients' AUM, which | by distribution channel, |
| | could result in a | product, asset class and region. |
| | potentially significant | In addition, the Henderson Group |
| | reduction in the level | actively seeks fee bases which |
| | of the fees that are | are not solely related to market |
| | based on the value of | value of AUM. It also makes a |
| | clients' AUM. | significant amount of its |
| | | expense base variable and |
| | | therefore capable of reduction, |
| | | without having a significant |
| | | impact on the Group's operating |
| | | capability. |
+--------------+--------------------------+----------------------------------+
| Operational | Operational risk is the | The Henderson Group operates a |
| | risk that the Henderson | system of controls which is |
| | Group will sustain | designed to ensure operational |
| | losses through | risks are mitigated to the |
| | inadequate or failed | required level. The operation |
| | internal processes, | and effectiveness of the |
| | people, systems and | controls is regularly assessed |
| | external events. In | and confirmed through the work |
| | addition, it could also | of the Henderson Group's |
| | suffer indirect losses | assurance functions: Risk |
| | through damage to its | Management, Compliance and |
| | reputation arising from | Internal Audit. |
| | operational failures. | |
+--------------+--------------------------+----------------------------------+
| Outsourcing | Outsourcing risk is the | The Henderson Group oversees the |
| | risk of failure in | operation of its TPAs to ensure |
| | respect of the provision | agreed key performance standards |
| | of services by third | are being met and meets |
| | party administrators | regularly with its TPAs to |
| | (TPAs). Any significant | discuss any service concerns or |
| | interruption in services | problems and work in partnership |
| | or deterioration in | with TPAs to deliver solutions. |
| | performance could damage | |
| | the Henderson Group's | The Henderson Group's assurance |
| | operations. Furthermore, | functions also review controls |
| | if the contracts with | operated by our major TPAs. |
| | any of the TPAs are | |
| | terminated, the | The financial strength of a TPA |
| | Henderson Group may not | is given careful consideration |
| | be able to find | when contracts are awarded and |
| | alternative TPAs on a | also if a material deterioration |
| | timely basis or on | should occur in a TPA's |
| | equivalent terms. | financial strength. |
+--------------+--------------------------+----------------------------------+
| Reputational | The Henderson Group | The Henderson Group believes |
| | regards the risk of | that avoidance of reputational |
| | damage to its reputation | risk is achieved through |
| | as more likely to result | ensuring that the mitigation of |
| | from one of the risks | the other risks is effective. In |
| | described above | addition it maintains an |
| | materialising rather | effective means of communication |
| | than as a standalone | with shareholders and analysts |
| | risk. | to address rumours and |
| | | misrepresentations of its |
| | | position to further mitigate the |
| | | risk of damage to its |
| | | reputation. |
+--------------+--------------------------+----------------------------------+
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS
+------------------------------------------------------------------------+
| The Directors are responsible for preparing the Directors' report and |
| the financial statements in accordance with applicable law and |
| regulations. |
| |
+------------------------------------------------------------------------+
| Company law requires the Directors to prepare financial statements for |
| each financial year. Under that law the Directors have prepared the |
| financial statements in accordance with International Financial |
| Reporting Standards (IFRS). Under company law the Directors must not |
| approve the financial statements unless they are satisfied that they |
| give a true and fair view of the state of affairs of the company and |
| of the profit or loss of the company for that period. In preparing |
| these financial statements, the Directors are required to: |
| |
+------------------------------------------------------------------------+
| · select suitable accounting policies and then apply them |
| consistently; |
| |
+------------------------------------------------------------------------+
| · make judgments and estimates that are reasonable and |
| prudent; |
| |
+------------------------------------------------------------------------+
| · state whether applicable International Financial Reporting |
| Standards have been followed, 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 are responsible for keeping adequate accounting records |
| that are sufficient to show and explain the Company's transactions and |
| disclose with reasonable accuracy at any time the financial position |
| of the Company and enable them to ensure that the financial statements |
| comply with the Companies Act 2006. They are also responsible for |
| safeguarding the assets of the Company and hence for taking reasonable |
| steps for the prevention and detection of fraud and other |
| irregularities. |
| |
| |
+------------------------------------------------------------------------+
Andrew FormicaShirley Garrood
Director
Director
24 June 2010
24 June 2010
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2009
+-------------------------------------------------+-------+---------+---------+
| | | 2009 | 2008 |
+-------------------------------------------------+-------+---------+---------+
| | Notes | GBPm | GBPm |
+-------------------------------------------------+-------+---------+---------+
| | | | |
+-------------------------------------------------+-------+---------+---------+
| Income | | | |
+-------------------------------------------------+-------+---------+---------+
| Gross fee income and commissions | 3 | 250.3 | 323.5 |
+-------------------------------------------------+-------+---------+---------+
| Finance income | 3 | 4.0 | 13.6 |
+-------------------------------------------------+-------+---------+---------+
| Gross income | | 254.3 | 337.1 |
+-------------------------------------------------+-------+---------+---------+
| Commissions and fees payable | 3 | (54.1) | (50.6) |
+-------------------------------------------------+-------+---------+---------+
| Net income | | 200.2 | 286.5 |
+-------------------------------------------------+-------+---------+---------+
| | | | |
+-------------------------------------------------+-------+---------+---------+
| Expenses | | | |
+-------------------------------------------------+-------+---------+---------+
| Operating costs | 4.1 | (182.8) | (190.1) |
+-------------------------------------------------+-------+---------+---------+
| Depreciation | 14 | (3.2) | (2.3) |
+-------------------------------------------------+-------+---------+---------+
| Total expenses before finance costs | | (186.0) | (192.4) |
+-------------------------------------------------+-------+---------+---------+
| Finance costs | 6 | (8.9) | (13.7) |
+-------------------------------------------------+-------+---------+---------+
| Total expenses | | (194.9) | (206.1) |
+-------------------------------------------------+-------+---------+---------+
| Recurring profit before intangible amortisation | | 5.3 | 80.4 |
| and tax | | | |
+-------------------------------------------------+-------+---------+---------+
| Intangible amortisation | | (0.3) | (0.1) |
+-------------------------------------------------+-------+---------+---------+
| Recurring profit before tax | | 5.0 | 80.3 |
+-------------------------------------------------+-------+---------+---------+
| Non-recurring items | 7 | (36.2) | (15.2) |
+-------------------------------------------------+-------+---------+---------+
| (Loss)/profit before tax | | (31.2) | 65.1 |
+-------------------------------------------------+-------+---------+---------+
| Taxation | 8 | 5.9 | (3.8) |
+-------------------------------------------------+-------+---------+---------+
| (Loss)/profit after tax | | (25.3) | 61.3 |
+-------------------------------------------------+-------+---------+---------+
| | | | |
+-------------------------------------------------+-------+---------+---------+
| Attributable to: | | | |
+-------------------------------------------------+-------+---------+---------+
| Equity holders of the parent | | (25.4) | 61.2 |
+-------------------------------------------------+-------+---------+---------+
| Minority interests | | 0.1 | 0.1 |
+-------------------------------------------------+-------+---------+---------+
| | | (25.3) | 61.3 |
+-------------------------------------------------+-------+---------+---------+
| Dividends | | | |
+-------------------------------------------------+-------+---------+---------+
| Dividends declared and charged to equity during | 10 | 47.9 | 42.9 |
| the year | | | |
+-------------------------------------------------+-------+---------+---------+
| Dividends proposed | 10 | 34.1 | 33.4 |
+-------------------------------------------------+-------+---------+---------+
| | | | |
+-------------------------------------------------+-------+---------+---------+
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2009
+------------------------------------------+----------------+-----------+--------+
| | | 2009 | 2008 |
| | | | |
+------------------------------------------+----------------+-----------+--------+
| | Notes | GBPm | GBPm |
+------------------------------------------+----------------+-----------+--------+
| (Loss)/profit after tax | | (25.3) | 61.3 |
+------------------------------------------+----------------+-----------+--------+
| Other comprehensive income | | | |
+------------------------------------------+----------------+-----------+--------+
| Exchange differences on translation of | | (0.8) | 6.9 |
| foreign operations | | | |
+------------------------------------------+----------------+-----------+--------+
| Available-for-sale financial assets: | | | |
+------------------------------------------+----------------+-----------+--------+
| Exchange differences on translation | | (2.9) | 4.4 |
+------------------------------------------+----------------+-----------+--------+
| Translation reserve transfer on sale | | (1.1) | - |
+------------------------------------------+----------------+-----------+--------+
| Translation reserve transfer on | | 0.5 | - |
| impairment | | | |
+------------------------------------------+----------------+-----------+--------+
| Net losses on revaluation | | (8.2) | (51.4) |
+------------------------------------------+----------------+-----------+--------+
| Revaluation reserve transfer on sale | | 5.6 | 3.6 |
+------------------------------------------+----------------+-----------+--------+
| Revaluation reserve transfer on | | 6.8 | 7.2 |
| impairment | | | |
+------------------------------------------+----------------+-----------+--------+
| Taxation effect of available-for-sale | 8 | (0.6) | 2.3 |
| financial assets movements | | | |
+------------------------------------------+----------------+-----------+--------+
| Actuarial (losses)/gains: | | | |
+------------------------------------------+----------------+-----------+--------+
| Actuarial (losses)/gains on defined | 20 | (69.7) | 65.0 |
| benefit pension schemes | | | |
+------------------------------------------+----------------+-----------+--------+
| Actuarial gains on post-retirement | | 0.1 | - |
| medical benefits | | | |
+------------------------------------------+----------------+-----------+--------+
| Taxation effect of actuarial | 8 | 19.4 | (18.2) |
| losses/(gains) | | | |
+------------------------------------------+----------------+-----------+--------+
| Other comprehensive (expense)/income | | (50.9) | 19.8 |
| after tax | | | |
+------------------------------------------+----------------+-----------+--------+
| Total comprehensive income | | (76.2) | 81.1 |
+------------------------------------------+----------------+-----------+--------+
| Attributable to: | | | |
+------------------------------------------+----------------+-----------+--------+
| Equity holders of the parent | | (76.3) | 81.0 |
+------------------------------------------+----------------+-----------+--------+
| Minority interests | | 0.1 | 0.1 |
+------------------------------------------+----------------+-----------+--------+
| | | (76.2) | 81.1 |
+------------------------------------------+----------------+-----------+--------+
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2009
+----------------------------------------------+-------+--------+------------+
| | | 2009 | 2008 |
| | | | (Restated) |
+----------------------------------------------+-------+--------+------------+
| | Notes | GBPm | GBPm |
+----------------------------------------------+-------+--------+------------+
| Non-current assets | | | |
+----------------------------------------------+-------+--------+------------+
| Intangible assets | 12 | 226.3 | 226.1 |
+----------------------------------------------+-------+--------+------------+
| Investments accounted for using the equity | 13.2 | 5.0 | 5.5 |
| method | | | |
+----------------------------------------------+-------+--------+------------+
| Plant and equipment | 14 | 22.0 | 22.5 |
+----------------------------------------------+-------+--------+------------+
| Retirement benefit assets | 20 | 90.0 | 152.5 |
+----------------------------------------------+-------+--------+------------+
| Deferred tax assets | 22 | 7.0 | 5.4 |
+----------------------------------------------+-------+--------+------------+
| Deferred acquisition and commission costs | 16 | 29.1 | 16.9 |
+----------------------------------------------+-------+--------+------------+
| | | 379.4 | 428.9 |
+----------------------------------------------+-------+--------+------------+
| Current assets | | | |
+----------------------------------------------+-------+--------+------------+
| Available-for-sale financial assets | 15 | 27.3 | 48.2 |
+----------------------------------------------+-------+--------+------------+
| Financial assets at fair value through | 15 | 0.6 | 0.4 |
| profit or loss | | | |
+----------------------------------------------+-------+--------+------------+
| Trade and other receivables | 17 | 297.6 | 247.5 |
+----------------------------------------------+-------+--------+------------+
| Deferred acquisition and commission costs | 16 | 24.9 | 17.7 |
+----------------------------------------------+-------+--------+------------+
| Cash and cash equivalents | 18.1 | 84.5 | 132.7 |
+----------------------------------------------+-------+--------+------------+
| | | 434.9 | 446.5 |
+----------------------------------------------+-------+--------+------------+
| Total assets | | 814.3 | 875.4 |
+----------------------------------------------+-------+--------+------------+
| | | | |
+----------------------------------------------+-------+--------+------------+
| Non-current liabilities | | | |
+----------------------------------------------+-------+--------+------------+
| Debt instrument in issue | 19 | 181.9 | 184.5 |
+----------------------------------------------+-------+--------+------------+
| Retirement benefit obligations | 20 | 6.1 | 4.7 |
+----------------------------------------------+-------+--------+------------+
| Provisions | 21 | 20.9 | 20.1 |
+----------------------------------------------+-------+--------+------------+
| Deferred tax liabilities | 22 | 30.1 | 44.7 |
+----------------------------------------------+-------+--------+------------+
| Deferred income | | 27.3 | 15.7 |
+----------------------------------------------+-------+--------+------------+
| | | 266.3 | 269.7 |
+----------------------------------------------+-------+--------+------------+
| Current liabilities | | | |
+----------------------------------------------+-------+--------+------------+
| Trade and other payables | 24 | 285.3 | 237.1 |
+----------------------------------------------+-------+--------+------------+
| Provisions | 21 | 13.1 | 7.7 |
+----------------------------------------------+-------+--------+------------+
| Deferred income | | 24.5 | 17.0 |
+----------------------------------------------+-------+--------+------------+
| Current tax liabilities | | 12.9 | 23.5 |
+----------------------------------------------+-------+--------+------------+
| | | 335.8 | 285.3 |
+----------------------------------------------+-------+--------+------------+
| Total liabilities | | 602.1 | 555.0 |
+----------------------------------------------+-------+--------+------------+
| Net assets | | 212.2 | 320.4 |
+----------------------------------------------+-------+--------+------------+
| | | | |
+----------------------------------------------+-------+--------+------------+
| Capital and reserves | | | |
+----------------------------------------------+-------+--------+------------+
| Share capital | 25 | 90.6 | 90.6 |
+----------------------------------------------+-------+--------+------------+
| Share premium | | 195.1 | 195.1 |
+----------------------------------------------+-------+--------+------------+
| Own shares held | | - | - |
+----------------------------------------------+-------+--------+------------+
| Translation reserve | | 1.6 | 5.9 |
+----------------------------------------------+-------+--------+------------+
| Revaluation reserve | | 2.0 | (2.1) |
+----------------------------------------------+-------+--------+------------+
| Profit and loss reserve | | (77.5) | 30.6 |
+----------------------------------------------+-------+--------+------------+
| Shareholders' equity | | 211.8 | 320.1 |
+----------------------------------------------+-------+--------+------------+
| Minority interests | 27 | 0.4 | 0.3 |
+----------------------------------------------+-------+--------+------------+
| Total equity | | 212.2 | 320.4 |
+----------------------------------------------+-------+--------+------------+
+--------------------------------------------------------------------------+
| The financial statements were approved by the Board of Directors and |
| authorised for issue on 24 June 2010. They were signed on its behalf |
| by: |
| |
| |
| |
| |
| |
| S J Garrood |
| Director |
+--------------------------------------------------------------------------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2009
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| | Share | Share | Treasury | Own | Translation | Revaluation | Profit | Minority | Total |
| | Capital | premium | shares | shares | reserve | | and | interests | |
| | | | | held | | | loss | | |
+ + + + + + +-------------+---------+ + +
| | | | | | | reserve | account | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| At 1 | 90.6 | 194.6 | (6.7) | (85.5) | (1.8) | (16.3) | 99.0 | 0.2 | 274.1 |
| January | | | | | | | | | |
| 2008 | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Total | - | - | - | - | 7.7 | 14.2 | 59.1 | 0.1 | 81.1 |
| comprehensive | | | | | | | | | |
| income net of | | | | | | | | | |
| tax | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| IFRS 2 | - | - | - | - | - | - | - | 53.0 | 53.0 |
| Capital | | | | | | | | | |
| Contribution | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Dividends | - | - | - | - | - | - | (42.9) | - | (42.9) |
| paid to | | | | | | | | | |
| equity | | | | | | | | | |
| shareholders | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Purchase | - | - | - | (14.8) | - | - | - | - | (14.8) |
| of own | | | | | | | | | |
| shares | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Transfer | - | - | 6.7 | (6.7) | - | - | - | - | - |
| of | | | | | | | | | |
| treasury | | | | | | | | | |
| shares | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Vesting of | - | - | - | 31.6 | - | - | (31.6) | - | - |
| share | | | | | | | | | |
| schemes | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Issue of | - | 0.2 | - | - | - | - | - | - | 0.2 |
| shares for | | | | | | | | | |
| SAYE | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Issue of | - | 0.3 | - | - | - | - | (0.4) | - | (0.1) |
| shares for | | | | | | | | | |
| BAYE | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Movement | - | - | - | - | - | - | 18.8 | - | 18.8 |
| in | | | | | | | | | |
| equity-settled | | | | | | | | | |
| share scheme | | | | | | | | | |
| expenses | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Novation | - | - | - | 75.4 | - | - | 9.5 | - | 84.9 |
| of share | | | | | | | | | |
| schemes on | | | | | | | | | |
| the | | | | | | | | | |
| implementation | | | | | | | | | |
| of the Scheme | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| At 31 | 90.6 | 195.1 | - | - | 5.9 | (2.1) | 111.5 | 53.3 | 454.3 |
| December | | | | | | | | | |
| 2008 | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Restatement | - | - | - | - | - | - | (80.9) | (53.0) | (133.9) |
| (Note 36) | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| At 31 | 90.6 | 195.1 | - | - | 5.9 | (2.1) | 30.6 | 0.3 | 320.4 |
| December | | | | | | | | | |
| 2008 | | | | | | | | | |
| (Restated) | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Total | - | - | - | - | (4.3) | 4.1 | (76.1) | 0.1 | (76.2) |
| comprehensive | | | | | | | | | |
| income net of | | | | | | | | | |
| tax | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Dividends | - | - | - | - | - | - | (47.9) | - | (47.9) |
| paid to | | | | | | | | | |
| equity | | | | | | | | | |
| shareholders | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| Capital | - | - | - | - | - | - | 15.9 | - | 15.9 |
| contribution | | | | | | | | | |
| from | | | | | | | | | |
| Henderson | | | | | | | | | |
| Group plc in | | | | | | | | | |
| relation to | | | | | | | | | |
| share based | | | | | | | | | |
| payments | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
| At 31 | 90.6 | 195.1 | - | - | 1.6 | 2.0 | (77.5) | 0.4 | 212.2 |
| December | | | | | | | | | |
| 2009 | | | | | | | | | |
+----------------+---------+---------+----------+--------+-------------+-------------+---------+-----------+---------+
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2009
+------------------------------------------------+-------+--------+---------+
| | | 2009 | 2008 |
+------------------------------------------------+-------+--------+---------+
| | Notes | GBPm | GBPm |
+------------------------------------------------+-------+--------+---------+
| Cash flows from operating activities | | | |
+------------------------------------------------+-------+--------+---------+
| (Loss)/profit before tax | | (31.2) | 65.1 |
+------------------------------------------------+-------+--------+---------+
| Adjustments to reconcile (loss)/profit before | | | |
| tax to net cash flows from operating | | | |
| activities: | | | |
+------------------------------------------------+-------+--------+---------+
| - depreciation of plant and equipment | 14 | 3.2 | 2.3 |
+------------------------------------------------+-------+--------+---------+
| - amortisation of intangibles | 12 | 0.3 | 0.1 |
+------------------------------------------------+-------+--------+---------+
| - net loss on disposal of plant and equipment | | - | 2.3 |
+------------------------------------------------+-------+--------+---------+
| - net (profit) on group restructuring | | - | (34.2) |
+------------------------------------------------+-------+--------+---------+
| - share-based payment charges | | 15.9 | 22.3 |
+------------------------------------------------+-------+--------+---------+
| - net deferred acquisition and commission | | (3.5) | (0.1) |
| costs and deferred income amortisation | | | |
+------------------------------------------------+-------+--------+---------+
| - impairment of available-for-sale financial | 7 | 7.3 | 17.0 |
| assets | | | |
+------------------------------------------------+-------+--------+---------+
| - profit on disposal of available-for-sale | | 0.6 | (3.9) |
| financial assets | | | |
+------------------------------------------------+-------+--------+---------+
| - defined benefit service credit | | - | (0.2) |
+------------------------------------------------+-------+--------+---------+
| - contributions to the Henderson Group Pension | | (5.6) | (25.5) |
| Scheme in excess of costs recognised | | | |
+------------------------------------------------+-------+--------+---------+
| - share of profit of associates and joint | 13.2 | (0.7) | (2.4) |
| ventures | | | |
+------------------------------------------------+-------+--------+---------+
| - movement in minority interests | | - | 0.1 |
+------------------------------------------------+-------+--------+---------+
| - profit on unwinding of an interest rate swap | | - | (1.5) |
| on Corporate debt | | | |
+------------------------------------------------+-------+--------+---------+
| - debt instrument interest expense | 6 | 8.8 | 12.3 |
+------------------------------------------------+-------+--------+---------+
| Cash flows from operating activities before | | (4.9) | 53.7 |
| changes in operating assets and liabilities | | | |
+------------------------------------------------+-------+--------+---------+
| Changes in operating assets and liabilities | 18.2 | 9.9 | (51.1) |
+------------------------------------------------+-------+--------+---------+
| Net tax paid | | (0.5) | (8.0) |
+------------------------------------------------+-------+--------+---------+
| Net cash flows from operating activities | | 4.5 | (5.4) |
+------------------------------------------------+-------+--------+---------+
| | | | |
+------------------------------------------------+-------+--------+---------+
| Cash flows from investing activities | | | |
| acquisition of subsidiaries, net of cash | | | |
| acquired | | | |
+------------------------------------------------+-------+--------+---------+
| Proceeds from sale of available-for-sale | | 16.3 | 26.9 |
| financial assets | | | |
+------------------------------------------------+-------+--------+---------+
| Cash transferred on group restructuring | | - | (30.7) |
+------------------------------------------------+-------+--------+---------+
| Dividends from associates and distributions | | 0.9 | 1.4 |
| from joint ventures | | | |
+------------------------------------------------+-------+--------+---------+
| Purchases of: | | | |
+------------------------------------------------+-------+--------+---------+
| - available-for-sale financial assets | | - | - |
+------------------------------------------------+-------+--------+---------+
| - plant and equipment | | (3.6) | (20.4) |
+------------------------------------------------+-------+--------+---------+
| - intangible assets | | (0.5) | (1.9) |
+------------------------------------------------+-------+--------+---------+
| - debt or equity instruments and investments | | (5.2) | (31.8) |
| in associates and joint ventures | | | |
+------------------------------------------------+-------+--------+---------+
| Net cash flows from investing activities | | 7.9 | (56.5) |
+------------------------------------------------+-------+--------+---------+
| | | | |
+------------------------------------------------+-------+--------+---------+
| Cash flows from financing activities | | | |
+------------------------------------------------+-------+--------+---------+
| Proceeds from issue of shares | | - | 0.2 |
+------------------------------------------------+-------+--------+---------+
| Acquisition of own shares | | - | (16.2) |
+------------------------------------------------+-------+--------+---------+
| Dividends paid to equity shareholders | 10 | (47.9) | (42.9) |
+------------------------------------------------+-------+--------+---------+
| Proceeds from unwinding of an interest rate | | - | 11.4 |
| swap on Corporate debt | | | |
+------------------------------------------------+-------+--------+---------+
| Interest paid on debt instrument in issue | | (11.4) | (12.2) |
+------------------------------------------------+-------+--------+---------+
| Net cash flows from financing activities | | (59.3) | (59.7) |
+------------------------------------------------+-------+--------+---------+
| Effects of exchange rate changes | | (1.3) | 6.3 |
+------------------------------------------------+-------+--------+---------+
| Net decrease in cash and cash equivalents | | (48.2) | (115.3) |
+------------------------------------------------+-------+--------+---------+
| Cash and cash equivalents at beginning of year | 18.1 | 132.7 | 248.0 |
+------------------------------------------------+-------+--------+---------+
| Cash and cash equivalents at end of year | 18.1 | 84.5 | 132.7 |
+------------------------------------------------+-------+--------+---------+
COMPANY STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2009
+------------------------------------------------+-------+--------+--------+
| | | 2009 | 2008 |
+------------------------------------------------+-------+--------+--------+
| | Notes | GBPm | GBPm |
+------------------------------------------------+-------+--------+--------+
| | | | |
+------------------------------------------------+-------+--------+--------+
| Loss after tax | | (50.2) | (26.3) |
+------------------------------------------------+-------+--------+--------+
| | | | |
+------------------------------------------------+-------+--------+--------+
| Actuarial (losses)/gains on defined benefit | 20 | (68.5) | 63.9 |
| pension schemes | | | |
+------------------------------------------------+-------+--------+--------+
| Tax credit/(charge) on items taken directly to | | 19.2 | (17.9) |
| equity | | | |
+------------------------------------------------+-------+--------+--------+
| (Loss)/income recognised directly in equity | | (49.3) | 46.0 |
+------------------------------------------------+-------+--------+--------+
| | | | |
+------------------------------------------------+-------+--------+--------+
| Total recognised income and expense | | (99.5) | 19.7 |
+------------------------------------------------+-------+--------+--------+
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2009
Registered number 2072534
+------------------------------------------------+-------+---------+------------+
| | | 2009 | 2008 |
| | | | (Restated) |
+------------------------------------------------+-------+---------+------------+
| | Notes | GBPm | GBPm |
+------------------------------------------------+-------+---------+------------+
| Non-current assets | | | |
+------------------------------------------------+-------+---------+------------+
| Investment in subsidiaries | 13.1 | 871.7 | 874.2 |
+------------------------------------------------+-------+---------+------------+
| Retirement benefit assets | 20 | 90.0 | 152.5 |
+------------------------------------------------+-------+---------+------------+
| | | 961.7 | 1,026.7 |
+------------------------------------------------+-------+---------+------------+
| Current assets | | | |
+------------------------------------------------+-------+---------+------------+
| Current tax assets | | - | 29.5 |
+------------------------------------------------+-------+---------+------------+
| Trade and other receivables | 17 | 376.2 | 198.9 |
+------------------------------------------------+-------+---------+------------+
| Cash and cash equivalents | 18.1 | 8.9 | 11.2 |
+------------------------------------------------+-------+---------+------------+
| | | 385.1 | 239.6 |
+------------------------------------------------+-------+---------+------------+
| Total assets | | 1,346.8 | 1,266.3 |
+------------------------------------------------+-------+---------+------------+
| | | | |
+------------------------------------------------+-------+---------+------------+
| Non-current liabilities | | | |
+------------------------------------------------+-------+---------+------------+
| Debt instrument in issue | 19 | 181.9 | 184.5 |
+------------------------------------------------+-------+---------+------------+
| Provisions | 21 | 5.8 | 4.2 |
+------------------------------------------------+-------+---------+------------+
| Deferred tax liabilities | 22 | 6.0 | 25.2 |
+------------------------------------------------+-------+---------+------------+
| | | 193.7 | 213.9 |
+------------------------------------------------+-------+---------+------------+
| Current liabilities | | | |
+------------------------------------------------+-------+---------+------------+
| Borrowings | 23 | 549.0 | 422.0 |
+------------------------------------------------+-------+---------+------------+
| Trade and other payables | 24 | 342.7 | 269.0 |
+------------------------------------------------+-------+---------+------------+
| Provisions | 21 | 0.5 | 2.1 |
+------------------------------------------------+-------+---------+------------+
| Current tax liabilities | | 1.1 | - |
+------------------------------------------------+-------+---------+------------+
| | | 893.3 | 693.1 |
+------------------------------------------------+-------+---------+------------+
| Total liabilities | | 1,087.0 | 907.0 |
+------------------------------------------------+-------+---------+------------+
| Net assets | | 259.8 | 359.3 |
+------------------------------------------------+-------+---------+------------+
| | | | |
+------------------------------------------------+-------+---------+------------+
| Capital and reserves | | | |
+------------------------------------------------+-------+---------+------------+
| Share capital | 25 | 90.6 | 90.6 |
+------------------------------------------------+-------+---------+------------+
| Share premium | | 195.1 | 195.1 |
+------------------------------------------------+-------+---------+------------+
| Profit and loss account | | (25.9) | 73.6 |
+------------------------------------------------+-------+---------+------------+
| Total equity | | 259.8 | 359.3 |
+------------------------------------------------+-------+---------+------------+
+--------------------------------------------------------------------------+
| The financial statements were approved by the Board of Directors and |
| authorised for issue on 24 June 2010. They were signed on its behalf |
| by: |
| |
| |
| |
| |
| |
| |
| S J Garrood |
| Director |
+--------------------------------------------------------------------------+
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2009
+------------------------------+---------+---------+----------+---------+---------+--------+
| | Share | Share | | Own | Profit | |
| |capital | premium | Treasury | shares | and | Total |
| | | | Shares | held | loss | |
| | | | | | account | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+------------------------------+---------+---------+----------+---------+---------+--------+
| At 1 January 2008 | 90.6 | 194.6 | (6.7) | (85.5) | 185.5 | 378.5 |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Total comprehensive income | - | - | - | - | 19.7 | 19.7 |
| net of tax | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Dividends paid to equity | - | - | - | - | (42.9) | (42.9) |
| shareholders | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Purchase of own shares | - | - | - | (14.8) | - | (14.8) |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Transfer of treasury shares | - | | 6.7 | (6.7) | - | - |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Vesting of share schemes | - | - | - | 31.6 | (31.6) | - |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Novation of share schemes on | - | - | - | 75.4 | 9.5 | 84.9 |
| implementation of the scheme | | | | | | |
| of arrangement | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Issue of shares for | - | 0.2 | - | - | - | 0.2 |
| Sharesave scheme (SAYE) | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Issue of shares for Buy As | - | 0.3 | - | - | (0.4) | (0.1) |
| You Earn Share Plan (BAYE) | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Movement in equity-settled | - | - | - | - | 18.7 | 18.7 |
| share scheme expenses | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| At 31 December 2008 | 90.6 | 195.1 | - | - | 158.5 | 444.2 |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Restatement (Note 36) | - | - | - | - | (84.9) | (84.9) |
+------------------------------+---------+---------+----------+---------+---------+--------+
| At 31 December 2008 | 90.6 | 195.1 | - | - | 73.6 | 359.3 |
| (Restated) | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| Total comprehensive income | - | - | - | - | (99.5) | (99.5) |
| net of tax | | | | | | |
+------------------------------+---------+---------+----------+---------+---------+--------+
| At 31 December 2009 | 90.6 | 195.1 | - | - | (25.9) | 259.8 |
+------------------------------+---------+---------+----------+---------+---------+--------+
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2009
+------------------------------------------------+-------+---------+--------+
| | | 2009 | 2008 |
+------------------------------------------------+-------+---------+--------+
| | Notes | GBPm | GBPm |
+------------------------------------------------+-------+---------+--------+
| Cash flows from operating activities | | | |
+------------------------------------------------+-------+---------+--------+
| (Loss)/profit before tax | | (49.1) | (42.2) |
+------------------------------------------------+-------+---------+--------+
| Adjustments to reconcile profit before tax to | | | |
| net cash flows from operating activities: | | | |
+------------------------------------------------+-------+---------+--------+
| - impairment of available-for-sale financial | | - | 6.0 |
| assets | | | |
+------------------------------------------------+-------+---------+--------+
| - impairment of investment in subsidiaries | 13.1 | 50.6 | - |
+------------------------------------------------+-------+---------+--------+
| - contributions to the Henderson Group Pension | | (10.0) | (29.9) |
| Scheme | | | |
+------------------------------------------------+-------+---------+--------+
| - profit on unwinding of an interest rate swap | | - | (1.5) |
| on Corporate debt | | | |
+------------------------------------------------+-------+---------+--------+
| - write off of loan interest payable to | | (9.2) | - |
| subsidiary | | | |
+------------------------------------------------+-------+---------+--------+
| - finance costs | | 17.2 | 38.7 |
+------------------------------------------------+-------+---------+--------+
| Cash flows from operating activities before | | (0.5) | (28.9) |
| changes in operating assets and liabilities | | | |
+------------------------------------------------+-------+---------+--------+
| Changes in operating assets and liabilities | 18.2 | 60.1 | 80.0 |
+------------------------------------------------+-------+---------+--------+
| Net cash flows from operating activities | | 59.6 | 51.1 |
+------------------------------------------------+-------+---------+--------+
| | | | |
+------------------------------------------------+-------+---------+--------+
| Cash flows from investing activities | | | |
+------------------------------------------------+-------+---------+--------+
| Increase in investment in subsidiaries | | (50.5) | - |
+------------------------------------------------+-------+---------+--------+
| | | (50.5) | - |
+------------------------------------------------+-------+---------+--------+
| Cash flows from financing activities | | | |
+------------------------------------------------+-------+---------+--------+
| Proceeds from issue of shares | | - | 0.2 |
+------------------------------------------------+-------+---------+--------+
| Cash payments to owners to acquire or redeem | | - | (14.8) |
| own shares | | | |
+------------------------------------------------+-------+---------+--------+
| Loans received from subsidiary company | | 127.0 | - |
+------------------------------------------------+-------+---------+--------+
| Loans paid to parent company | | (127.0) | - |
+------------------------------------------------+-------+---------+--------+
| Dividends paid to equity shareholders | | - | (42.9) |
+------------------------------------------------+-------+---------+--------+
| Proceeds from unwinding of an interest rate | | - | 11.4 |
| swap on Corporate debt | | | |
+------------------------------------------------+-------+---------+--------+
| Interest paid on long-term borrowings | | (11.4) | (12.2) |
+------------------------------------------------+-------+---------+--------+
| Net cash flows from financing activities | | (11.4) | (58.3) |
+------------------------------------------------+-------+---------+--------+
| | | | |
+------------------------------------------------+-------+---------+--------+
| Net decrease in cash and cash equivalents | | (2.3) | (7.2) |
+------------------------------------------------+-------+---------+--------+
| Cash and cash equivalents at beginning of year | 18.1 | 11.2 | 18.4 |
+------------------------------------------------+-------+---------+--------+
| Cash and cash equivalents at end of year | 18.1 | 8.9 | 11.2 |
+------------------------------------------------+-------+---------+--------+
1. Authorisation of financial statements and statement of compliance with
IFRS
The Group and Company financial statements for the year ended 31 December 2009
were authorised for issue by the Board of Directors on 24 June 2010 and the
respective statements of financial position were signed on the Board's behalf by
Shirley Garrood. The Company is a limited company incorporated in England and
Wales and tax resident in the United Kingdom.
The Group and Company financial statements have been prepared in accordance with
IFRS and the provisions of the Companies Act 2006. The Company has taken
advantage of the exemption under section 408 of the Companies Act 2006 not to
present its own Income Statement within these financial statements.
The principal accounting policies adopted by the Group and by the Company are
set out in note 2.
2. Accounting policies
2.1 Significant accounting policies
Basis of preparation
The Group and Company financial statements have been prepared on the historical
cost basis, except for certain financial instruments that have been measured at
fair value.
The Group and Company financial statements are presented in pounds sterling and
all values are rounded to the nearest one hundred thousand pounds (GBP0.1m),
except when otherwise indicated.
Basis of consolidation
The consolidated financial statements of the Group comprise the financial
statements of the Company and its subsidiaries as at 31 December each year.
The financial statements of all the Group's significant subsidiaries are
prepared to the same year end date as that of the Company. The subsidiary
accounts are not all prepared under IFRS. However, the financial statements of
all the material entities are prepared under either IFRS or UK GAAP. Where
prepared under UK GAAP, balances reported by subsidiaries are adjusted to meet
IFRS requirements for the purposes of the consolidated financial statements.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate. Where there is a loss of
control of a subsidiary, the consolidated financial statements include the
results for the period of the reporting year during which the Group had control.
Minority interests represent the equity interests in subsidiaries not fully held
by the Group.
Interests in property closed-ended funds, private equity infrastructure funds,
Open-Ended Investment Companies (OEICs) and unit trusts are accounted for as
subsidiaries, associates, joint ventures or other financial investments
depending on the holdings of the Group and on the level of influence and control
that the Group exercises. Strategic shareholder investments in associates, where
the Group has the ability to exercise significant influence, as well as joint
ventures where there is joint control, are accounted for using the equity
method.
Income recognition
Fee income and commission receivable
Fee income includes annual management charges, transaction fees and performance
fees (including earned carried interest). Annual management charges and
transaction fees are recognised in the accounting period in which the associated
investment management or transaction services are provided. Performance fees are
recognised when the prescribed performance hurdles have been achieved and it is
probable that the fee will crystallise as a result. The Group's policy is to
accrue 95% of the expected fee on satisfaction that the recognition criteria
have established a performance fee is due, with the balance recognised on cash
settlement. Initial fees and commission receivable are deferred and amortised
over the anticipated period in which services will be provided, determined by
reference to the average term of investors in each product on which commissions
are earned. Other income is recognised in the accounting period in which
services are rendered.
Carried interest
The Group is entitled to receive a share of profits (carried interest) from
certain private equity funds it manages, once the funds meet certain performance
conditions. Where the funds' investments constitute large volumes in relatively
illiquid markets, the Group does not deem it appropriate to recognise unearned
carried interest based on current fair values. Carried interest is recognised
when investments are disposed of and performance conditions are met.
Finance income
Interest income is recognised as it accrues using the effective interest rate
method. Dividend income from investments is recognised on the date that the
right to receive payment has been established.
Realised and unrealised gains and losses on financial assets
See policy set out under financial instruments.
Operating leases
All leases are classified as operating leases. Operating lease payments are
recognised as an expense in the income statement on a straight-line basis over
the lease term. Benefits received and receivable as an incentive to enter into
an operating lease are also spread on a straight-line basis over the lease term.
Post-employment benefits
The Group provides employees with retirement benefits through both defined
benefit and defined contribution schemes. The assets of these schemes are held
separately from the Group's general assets in trustee administered funds.
Defined benefit obligations and the cost of providing benefits are determined
annually by independent qualified actuaries using the projected unit credit
method. The obligation is measured as the present value of the estimated future
cash outflows using a discount rate based on AA rated corporate bonds of
appropriate duration. The resulting surplus or deficit of defined benefit assets
less liabilities is recognised in the statement of financial position. The
Group's expense related to these schemes is accrued over the employees' service
lives, based upon the actuarial cost for the accounting period, having
considered interest costs and the expected return on assets. Actuarial gains and
losses are recognised in the statement of comprehensive income in the accounting
period in which they occur. Normal contributions to the defined contribution
scheme are charged to the income statement as they become payable in accordance
with the rules of the scheme.
Other post-employment benefits, such as medical care and life insurance, are
also provided for certain employees. The costs of such benefits are accrued over
the employee's service life, based upon the actuarial cost for the accounting
period using a methodology similar to that for defined benefit pension schemes.
Share-based payment transactions
The Group issues equity-settled and cash-settled share-based payments to certain
employees. The valuation methodology, assumptions and schemes are disclosed in
note 9.5. All shares issued in settlement of share based payments are shares in
Henderson Group plc, the ultimate parent of the Henderson Group.
Equity-settled share-based payments are measured at the fair value of the equity
instruments at the grant date. The awards are expensed, with a corresponding
increase in reserves, on either a straight-line basis or a graded basis
(depending on vesting conditions) over the vesting period, based on the Group's
estimate of shares that will eventually vest. The expected life of the awards
used in the determination of fair value is adjusted for, based on management's
best estimate, the effects of non-transferability, exercise restrictions, market
performance, and behavioural considerations.
The cost of cash-settled transactions is measured initially at fair value at the
grant date. The fair value is expensed over the period until vesting, with
recognition of a corresponding liability. The liability is remeasured at each
reporting date up to and including the settlement date, with changes in fair
value recognised in the income statement.
Income and sales taxes
The Group provides for current tax expense according to the tax laws of each
jurisdiction in which it operates, using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is provided, using the liability method, on temporary differences
at the reporting date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be
utilised. Such assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax liabilities are not recognised for taxable differences arising on
investments in subsidiaries, branches, associates and joint ventures where the
Group controls the timing of the reversal of the temporary differences and where
the reversal of the temporary differences is not anticipated in the foreseeable
future.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised, based on tax
rates and tax laws that have been enacted or substantively enacted at the
reporting date.
Income tax relating to items recognised in the statement of comprehensive income
is also recognised in that statement and not in the income statement.
Expenses and assets are recognised net of the amount of sales tax, except where
the sales tax is not recoverable, in which case the sales tax is recognised as
part of the cost of acquisition of the asset or as part of expenses. Receivables
and payables are stated with the amount of sales tax included. The net amount of
sales tax recoverable from, or payable to, the taxation authority, is included
separately in receivables or payables in the statement of financial position.
Business combinations
Under the requirements of IFRS 3 Business Combinations, all business
combinations are accounted for using the purchase method (acquisition
accounting). The cost of a business combination is the aggregate of the fair
values, at the date of exchange, of assets given, liabilities incurred or
assumed, equity instruments issued by the acquirer and any costs directly
attributable to the business combination. The cost of a business combination is
allocated at the acquisition date by recognising the acquiree's identifiable
assets, liabilities and contingent liabilities that satisfy the recognition
criteria, at their fair values at that date. The acquisition date is the date on
which the acquirer effectively obtains control of the acquiree. The cost of a
business combination in excess of net identifiable assets or liabilities
acquired, including intangible assets identified, is recognised as goodwill.
Goodwill
Goodwill arising on acquisitions, being the excess of the cost of a business
combination over the fair value of the identifiable assets (including intangible
assets identified), liabilities and contingent liabilities acquired, is
capitalised in the consolidated statement of financial position. Goodwill on
acquisitions prior to 1 January 2004 is carried at its value on 1 January 2004
less any subsequent impairments.
Goodwill arising on investments in associates and joint ventures is included
within the carrying value of the equity accounted investments.
Impairment of goodwill
Goodwill is reviewed for impairment annually or more frequently if changes in
circumstances indicate that the carrying value may be impaired. For this
purpose, management prepares a cash generating unit valuation based on value in
use. This valuation is based on the approved forecasts for future years,
extrapolated for expected future growth rates, and discounted at the Group's
weighted average cost of capital. Where the value in use is less than the
carrying amount, an impairment is recognised. Where goodwill forms part of an
entity or sub-group and the entity or sub-group or part thereof is disposed of,
the goodwill associated with the entity or sub-group disposed of is included in
the carrying amount of the operation when determining the gain or loss on
disposal. Any impairment is recognised immediately through the consolidated
income statement and cannot be subsequently reversed.
Computer software
The costs of purchasing and developing computer software, together with
associated relevant expenditure, are capitalised where it is probable that
future economic benefits that are attributable to the assets will flow to the
Group and the cost of the assets can be measured reliably. Computer software is
included in the statement of financial position as an intangible asset and is
recorded initially at cost and then amortised over its expected useful life of
between three and five years on a straight-line basis.
Plant and equipment
Plant and equipment is valued at cost and depreciated on a straight-line basis
over its useful economic life of between two and 20 years.
An item of plant and equipment is removed upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any
gain or loss arising on the disposal of the asset, calculated as the difference
between the net disposal proceeds and the carrying amount of the item, is
included in the income statement in the year the item is sold or retired.
Investments in subsidiaries
Investments by the Company in subsidiary undertakings are held at cost less any
impairment where circumstances indicate that the carrying value may not be
recoverable.
Equity accounted investment
Equity accounted investments comprise investments in associates and joint
ventures held by the Group. Investments are recognised initially at cost. The
investments are subsequently carried at cost adjusted for the Group's share of
profits or losses and other changes in comprehensive income of the associate or
joint venture, less any dividends or distributions received by the Group. The
income statement includes the Group's share of profits or losses for the year.
Deferred acquisition and commission costs
For investment management contracts, incremental acquisition costs are deferred
to the extent that they are recoverable out of future income. This includes
initial commission expenses paid by the Group in respect of certain investment
products. These costs are then amortised over the period in which they are
expected to be recovered out of margins from matching revenues from related
contracts. At the end of each accounting period, deferred acquisition and
commission costs are reviewed for recoverability against future margins from the
related contracts in force at the reporting date.
Placement fees are deferred and amortised over the expected investment period of
the fund. Where the actual investment period is significantly shorter than
expected, the amortisation rate is accelerated accordingly.
Impairment of assets (excluding goodwill and financial assets)
At each reporting date, the Group assesses whether there is any indication that
an asset may be impaired. Where an indicator of impairment exists, the Group
makes a formal estimate of the recoverable amount, being the higher of an
asset's fair value less cost to sell, and its value in use. In assessing value
in use, the estimated future cash flows are discounted to their net present
value using a post-tax discount rate that reflects a current market assessment
of the time value of money and the risks specific to the asset.
Where the carrying amount of an asset exceeds its recoverable amount, the asset
is considered to be impaired and it is written down to its recoverable amount.
An impairment loss is recognised in the income statement.
Financial instruments
Financial assets and liabilities are recognised in the statement of financial
position, when the Group becomes party to the contractual provisions of an
instrument, at fair value adjusted for transaction costs, except for financial
assets classified at fair value through profit or loss, where transaction costs
are immediately recognised in the income statement. Financial assets are
derecognised when the rights to receive cash flows from the investments have
expired or where they have been transferred and the Group has also transferred
substantially all risks and rewards of ownership. Financial liabilities cease to
be recognised when the obligation under the liability has been discharged,
cancelled or expired.
Financial assets
Purchases and sales of financial assets are recognised at trade date, being the
date when the purchase or sale becomes contractually due for settlement.
Delivery and settlement terms are usually determined by established practices in
the market concerned.
Debt securities, equity securities and holdings in authorised collective
investment schemes are designated as either at fair value through profit or
loss, or available-for-sale, and are measured at subsequent reporting dates at
fair value. The Group determines the classification of its financial assets on
initial recognition. Financial assets classified at fair value through profit or
loss comprise the Group's manager box positions in OEICs and unit trusts, which
are recorded on a fair value basis. Where securities are designated at fair
value through profit or loss, gains and losses arising from changes in fair
value are included in the income statement.
For available-for-sale financial assets, gains and losses arising from changes
in fair value which are not part of a designated hedge relationship are
recognised in the statement of comprehensive income. When an asset is disposed
of the cumulative changes in fair value, previously recognised in the statement
of comprehensive income, is taken to the income statement.
Where a fall in the value of an investment is significant or prolonged, this is
considered an indication of impairment. In such an event, the investment is
written down to fair value and the amounts previously recognised in the
statement of comprehensive income in respect of cumulative changes in fair
value, are taken to the income statement as an impairment charge.
Trade receivables, which generally have 30 - 90 day payment terms, are initially
recognised at fair value, normally equivalent to the invoice amount and
subsequently measured at amortised cost. When the time value of money is
material, the fair value is discounted. Provision for specific doubtful debts is
made when there is evidence that the Group will not be able to recover balances
in full. Balances are written off when the receivable amount is deemed
irrecoverable.
Cash amounts represent cash in hand and on-demand deposits. Cash equivalents are
short-term highly liquid investments with same day or next day maturity.
Financial liabilities
Financial liabilities including trade payables are stated at amortised cost
using the effective interest rate method. Amortised cost is calculated by taking
into account any issue costs and any discount or premium on settlement. A
financial liability ceases to be recognised when the obligation under the
liability has been discharged, cancelled or expired.
Realised and unrealised gains and losses on financial assets
Gains and losses (both realised and unrealised) on financial assets measured at
fair value through profit or loss are recognised in the income statement as
finance income.
Unrealised gains and losses on financial assets designated as available-for-sale
are initially recognised through the statement of comprehensive income. The
treatment of the cumulative changes in fair value on realisation is described
under financial assets.
Realised gains and losses on financial assets are calculated as the difference
between the net sales proceeds and cost or amortised cost. Unrealised gains and
losses on financial assets represent the difference between the fair value of
financial assets at the reporting date and cost or, if these have been
previously revalued, the fair value at the last reporting date. The movement in
unrealised gains and losses recognised in the accounting period also includes
the reversal of unrealised gains and losses recognised in earlier accounting
periods in respect of financial asset disposals in the current accounting
period.
Derivative financial instruments and hedging
The Group may, from time to time, use derivative financial instruments to hedge
against price, interest rate, foreign currency and credit risk. Derivative
financial instruments are classified as financial assets when the fair value is
positive or as financial liabilities when the fair value is negative.
At the inception of a hedge, the Group formally designates and documents the
hedge relationship to which the Group wishes to apply hedge accounting and the
risk management objective and strategy for undertaking the hedge. Such hedges
are expected to be effective in achieving offsetting changes in fair value and
are assessed on an ongoing basis to determine that they have been effective
throughout the reporting periods for which they were designated and are expected
to remain effective over the remaining hedge period.
Currency hedges
Forward currency contracts are used to hedge the currency nominal value of
certain Euro and US dollar denominated available-for-sale financial assets and
are classified as fair value hedges. The change in the fair value of a hedging
instrument is recognised in the income
statement. The change in the fair value of the hedged item, attributable to the
risk being hedged, is also recognised in the income statement, offsetting the
fair value changes arising on the designated hedge instrument.
Fair value estimation
The fair value of financial instruments traded in active markets (such as
publicly traded securities and derivatives) is based on quoted market prices at
the reporting date. The quoted market price used for financial instruments is
the current bid price. The fair value of financial instruments that are not
traded in an active market is determined using valuation techniques commonly
used by market participants including the use of comparable recent arm's length
transactions, discounted cash flow analysis and option pricing models.
Provisions
Provisions which are liabilities of uncertain timing or amount, are recognised
when: the Group has a present obligation, legal or constructive, as a result of
a past event; it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and a reliable estimate can
be made of the amount of the obligation. In the event that the time value of
money is material, provisions are determined by discounting the expected future
cash flows at a pre-tax discount rate that reflects a current market assessment
of the time value of money and, where appropriate, the risks specific to the
liability. When discounting, the increase in the provision due to the passage of
time is recognised as a finance charge.
Foreign currencies
The functional currency of the Company and its UK subsidiaries is GBP.
Transactions in foreign currencies are recorded at the appropriate exchange rate
prevailing at the date of the transaction. Foreign currency monetary balances at
the reporting date are converted at the prevailing exchange rate. Foreign
currency non-monetary balances carried at fair value or cost are translated at
the rates prevailing at the date when the fair value or cost is determined.
Gains and losses arising on retranslation are taken to the income statement,
except for available-for-sale financial assets where the unhedged changes in
fair value are recognised in the statement of comprehensive income.
On consolidation, the assets and liabilities of the Group's overseas operations
whose functional currency is not GBP are translated at exchange rates prevailing
at the reporting date. Income and expense items are translated at average
exchange rates for the accounting period. Exchange differences arising, if any,
are taken through the consolidated statement of comprehensive income to the
translation reserve. Such translation differences are recognised in the
consolidated income statement in the accounting period in which the operation is
disposed of.
Equity shares
The Company's ordinary equity shares of 12.5 pence each are classified as equity
instruments. Equity shares issued by the Company are recorded at the proceeds or
fair value received, with the excess of the amount received over the nominal
value being recognised in share premium. Direct issue costs, net of tax, are
deducted from equity through share premium. When share capital is repurchased,
the amount of consideration paid, including directly attributable costs, is
recognised as a change in equity.
Treasury shares and own shares held
Treasury shares are equity shares of the Company acquired by the Company. Own
shares held are equity shares of the Company acquired by Employee Benefit
Trusts. Both treasury shares and own shares held are recorded at cost and are
deducted from equity. No gain or loss is recognised in the income statement on
the purchase, sale, issue or cancellation of the Company's own equity shares.
Dividend recognition
Dividend distributions to the Company's shareholders are recognised in the
accounting period in which the dividends are declared and paid and, in the case
of final dividends, when these are approved by the Company's shareholders at the
AGM. Dividend distributions are recognised in equity.
Pursuant to the Income Access Share arrangements, shareholders in Henderson
Group plc are able to elect to receive their dividends from a UK source within
the Henderson Group. Those shareholders who have elected to receive their
dividends via the Income Access Share arrangement, receive them from a
subsidiary of the Group.
2.2 Significant accounting judgements, estimates and assumptions
In the process of applying the Group's accounting policies, management has made
significant judgements involving estimations and assumptions which are
summarised below:
Impairment of investments in subsidiaries
Investments in subsidiaries are reviewed for impairment annually or more
frequently if changes in circumstances indicate that the carrying value may be
impaired. The judgement exercised by management in this valuation includes an
assessment of the recoverability of the initial cost of the investment.
Impairment of goodwill
Goodwill is reviewed for impairment annually or more frequently if changes in
circumstances indicate that the carrying value may be impaired.
The judgement exercised by management in arriving at this valuation includes the
selection of market growth rates, fund flow assumptions, expected margins and
costs. Further details are given in note 12.
Share-based payment transactions
The Group measures the cost of equity-settled share schemes at fair value at the
date of grant and expenses them over the vesting period based on the Group's
estimate of shares that will eventually vest.
The liability for cash-settled share schemes represents the estimated
transaction cost up to the settlement date, taking into account historical
experience of good and bad leavers.
Impairment of available-for-sale financial assets
Available-for-sale financial assets are reviewed for impairment on a semi-annual
basis or more frequently as required under the impairment tests of prolonged or
significant. In specific cases, where a quoted market price or fair value is not
available, significant judgement is exercised by management in determining the
extent of impairment, taking into account other available market data.
Management also exercises judgement in determining whether a decrease in the
value of an asset meets the prolonged or significant tests.
Pension and other post-employment benefits
The costs of and period end obligations under defined benefit pension schemes
are determined using actuarial valuations. The actuarial valuation involves
making assumptions about discount rates, expected rates of return on assets,
future salary increases, mortality rates and future pension increases. Due to
the long-term nature of these schemes, such estimates are subject to significant
uncertainty. Further details are given in note 20.
Deferred tax assets
Deferred tax assets are recognised for unused tax losses to the extent that it
is probable that taxable profits will be available against which the losses can
be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely
timing and level of future taxable profits together with future tax planning
strategies.
Provisions
By their nature, provisions often reflect significant levels of judgement by
management. The nature and amount of the provisions included in the statement of
financial position are detailed in note 21 and contingencies not provided for
are disclosed in note 33.
Accrued income
Accrued income is based on latest available information and involves a degree of
estimation. The most significant estimation relates to the accrual of
performance fees.
Consolidation of seed investments
From time to time, the Group provides seed capital on the launch of its
products, such as UCITs, SICAVs, hedge funds and other investment vehicles. The
seed capital investments vary in duration depending on the nature of the
investment, with a typical range of less than one year for Listed Asset products
and between three and five years for Private Equity and Property funds, and
represent less than 50% of the underlying fund's size. Given the limited size
and nature of these investments, the Group does not consider itself to have
significant influence or control over the underlying funds to merit accounting
for them using the equity method or consolidating them in the Group's results.
2.4 Changes in accounting policies
The accounting policies adopted in this Annual Report and Accounts are
consistent with those of the previous financial year, except in relation to the
following new and amended standards set by the International Accounting
Standards Board (IASB) and interpretations made by the International Financial
Reporting Interpretations Committee (IFRIC):
IAS 1 Revised Presentation of Financial Statements
This revised standard introduces the statement of comprehensive income, which
presents all items of recognised income and expense, either in one single
statement, or in two linked statements. The Group has elected to present two
linked statements in the form of an income statement and a statement of
comprehensive income. The adoption of IAS 1 has also resulted in a change to the
name of the 'balance sheet' and the 'cash flow statement', which are now
referred to as the 'statement of financial position' and the 'statement of cash
flows' respectively. IAS 1 also requires the inclusion of a new primary
statement, the 'statement of changes in equity'. The adoption of the amendments
has no effect on the financial performance or position of the Group.
IFRS 2 Share-based Payments - Vesting Conditions and Cancellations
This standard has been amended to clarify the definition of vesting conditions.
The amended standard also requires a cancellation of a share-based award,
whether by the entity or other parties, to be accounted for as an acceleration
or modification of the vesting period. The adoption of this amendment has no
material impact on the financial performance or position of the Group.
IFRS 7 Financial Instruments: Disclosures
The Group applies IFRS 7 to the disclosure of financial instruments and has
therefore adopted the amendments made to this standard, which require enhanced
disclosure about fair value and liquidity risk, effective from 1 January 2009.
The Group has taken advantage of the transitional rules in the amended standard
and comparatives have not been restated. The adoption of the amendments has no
effect on the financial performance or position of the Group.
IFRS 8 Operating Segments
The Group has applied IFRS 8 Operating Segments, which replaced IAS 14 Segment
Reporting for periods beginning on or after 1 January 2009. The new standard
requires disclosures to reflect the information which the chief operating
decision maker of an entity uses internally for evaluating the performance of
its operating segments and allocating resources to those segments. As the Group
is managed as a single segment, the only additional disclosure relates to
entity-wide disclosures in note 11. The adoption of the amendments has no effect
on the financial performance or position of the Group.
In addition, the Group has adopted the following new and amended IFRS and IFRIC
interpretations which do not have an impact on the financial performance or
position, or the financial statements of the Group or Company:
IAS 23 Borrowing Costs (Revised) effective 1 January 2009. IAS 32 Financial
Instruments: Presentation and IAS 1 Puttable
Financial Instruments and Obligations Arising on Liquidation effective 1 January
2009.
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged
Items effective 1 July 2009 (early adopted).
IFRIC 9 Remeasurement of Embedded Derivatives and IAS 39 Financial Instruments:
Recognition and Measurement effective for periods ending on or after 30 June
2009.
IFRIC 16 Hedges of a Net Investment in a Foreign Operation effective 1 October
2008.
Improvements to IFRSs (May 2008) effective 1 January 2009.
2.5 Future changes in accounting policies
During the course of the year, the IASB and IFRIC issued a number of new
accounting standards, amendments to existing standards and interpretations. The
following new or amended standards are not applicable to these financial
statements but are expected to have an impact when they become effective in
future accounting periods. The Group plans to apply these standards in the
reporting period in which they become effective.
IFRS 3 Business Combinations (revised), which the Group will adopt in 2010,
introduces a number of changes to accounting for business combinations that will
impact the amount of goodwill recognised on acquisition. The amendments will
also affect the reported results in the period that an acquisition occurs as
well as future results.
IAS 27 Consolidated and Separate Financial Statements (revised), which the Group
will adopt in 2010, requires that a change in the ownership interest of a
subsidiary (without loss of control) is accounted for as an equity transaction
and such transactions will no longer give rise to goodwill. Furthermore, the
amended standard introduces changes to accounting for losses incurred by a
subsidiary as well as the loss of control of a subsidiary.
IFRS 9 Financial Instruments proposes revised measurement and classification
criteria for financial assets. This standard has a mandatory effective date in
2013. The Group is still assessing the impact on the Group's future financial
statements.
2.6 Change in presentation
Certain comparatives in the consolidated income statement have been restated.
The change relates to performance fee bonuses which have been disclosed in
employee compensation and benefits. The performance fee bonuses had previously
been deducted in arriving at net income.
3. Income
+------------------------------------------------------+--------+------------+
| | 2009 | 2008 |
| | | (Restated) |
+------------------------------------------------------+--------+------------+
| | GBPm | GBPm |
+------------------------------------------------------+--------+------------+
| Gross fee income and commission receivable on sales | | |
+------------------------------------------------------+--------+------------+
| Gross fee income | 224.0 | 299.9 |
+------------------------------------------------------+--------+------------+
| Amortisation of deferred income | 26.3 | 23.6 |
+------------------------------------------------------+--------+------------+
| | 250.3 | 323.5 |
+------------------------------------------------------+--------+------------+
| Finance income | | |
+------------------------------------------------------+--------+------------+
| Interest on cash and cash equivalents | 0.3 | 7.1 |
+------------------------------------------------------+--------+------------+
| Interest on loans to fellow subsidiaries | 3.8 | 0.7 |
+------------------------------------------------------+--------+------------+
| Net income from gains and losses on | (0.1) | 5.7 |
| available-for-sale financial assets | | |
+------------------------------------------------------+--------+------------+
| Net losses arising on derivatives in a designated | 0.3 | (8.2) |
| fair value hedge accounting relationship | | |
+------------------------------------------------------+--------+------------+
| Net gains arising on adjustment for the hedged item | (0.3) | 8.3 |
| in a designated fair value hedge accounting | | |
| relationship | | |
+------------------------------------------------------+--------+------------+
| | 4.0 | 13.6 |
+------------------------------------------------------+--------+------------+
| Gross income | 254.3 | 337.1 |
+------------------------------------------------------+--------+------------+
| Commission and fees payable | | |
+------------------------------------------------------+--------+------------+
| Amortisation of deferred acquisition and commission | (22.8) | (23.4) |
| costs | | |
+------------------------------------------------------+--------+------------+
| Other commissions and fees payable1 | (31.3) | (27.2) |
+------------------------------------------------------+--------+------------+
| | (54.1) | (50.6) |
+------------------------------------------------------+--------+------------+
| Net fee income and commission income | 200.2 | 286.5 |
+------------------------------------------------------+--------+------------+
Note
1 . Other commissions and fees payable against income included performance fee
bonuses in previous years. These are now included as part of employee
compensation and benefits in note 5.2.
4. Expenses
4.1 Operating costs
+-------------------------------------------------+------+--------+------------+
| | Note | 2009 | 2008 |
| | | | (Restated) |
| | | GBPm | GBPm |
+-------------------------------------------------+------+--------+------------+
| Employee compensation and benefits | 5.2 | 119.1 | 125.8 |
+-------------------------------------------------+------+--------+------------+
| Operating leases1 | | 8.1 | 3.7 |
+-------------------------------------------------+------+--------+------------+
| Investment administration | | 15.6 | 16.4 |
+-------------------------------------------------+------+--------+------------+
| Information technology | | 10.2 | 9.6 |
+-------------------------------------------------+------+--------+------------+
| Office expenses | | 7.1 | 9.5 |
+-------------------------------------------------+------+--------+------------+
| Foreign exchange losses/(gains) | | 0.2 | (0.6) |
+-------------------------------------------------+------+--------+------------+
| Other expenses (including marketing, travel and | | 22.5 | 25.7 |
| subsistence, and legal and professional) | | | |
+-------------------------------------------------+------+--------+------------+
| Total operating costs | | 182.8 | 190.1 |
+-------------------------------------------------+------+--------+------------+
Note
1. The operating lease expense for 2008 is shown net of the release of a void
property provision (GBP2.4m) and a lease incentive (GBP1.2m) following the
surrender of the 4 Broadgate, London lease on 28 November 2008.
4.2 Auditors' remuneration
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| | | |
+-------------------------------------------------------+--------+--------+
| Fees payable to the Group's auditors for the audit of | 0.2 | 0.2 |
| the Group's annual consolidated financial statements | | |
+-------------------------------------------------------+--------+--------+
| Fees payable to the Group's auditors and their | | |
| associates for other services: | | |
+-------------------------------------------------------+--------+--------+
| - statutory audit of the Group's subsidiaries | 0.6 | 0.6 |
+-------------------------------------------------------+--------+--------+
| - other services pursuant to legislation | 0.3 | 0.4 |
+-------------------------------------------------------+--------+--------+
| - other services | 0.1 | 0.1 |
+-------------------------------------------------------+--------+--------+
| Total fees | 1.2 | 1.3 |
+-------------------------------------------------------+--------+--------+
The above analysis reflects the amounts billed by Ernst & Young LLP in the
respective periods. Included in the fees payable to the Group's auditors for the
audit of the Group's 2009 consolidated financial statements are fees of
GBP30,000 (2008: GBP30,000) for the audit of the Company's 2009 financial
statements.
Included in the other services pursuant to legislation charge is GBP0.3m in
respect of the Scheme which is included as a non-recurring item in the
consolidated income statement.
5. Employee benefits
5.1 Average number of employees
The average number of full-time employees of the Group was as follows:
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | no. | no. |
+-------------------------------------------------------+--------+--------+
| Average number of employees | 860 | 920 |
+-------------------------------------------------------+--------+--------+
5.2 Analysis of employee compensation and benefits expense
Employee compensation and benefits expense comprises:
+-------------------------------------------------+-------+--------+------------+
| | Notes | 2009 | 2008 |
| | | | (Restated) |
+-------------------------------------------------+-------+--------+------------+
| | | GBPm | GBPm |
+-------------------------------------------------+-------+--------+------------+
| Salaries, wages and bonuses | | 93.6 | 103.1 |
+-------------------------------------------------+-------+--------+------------+
| Share-based payments | 9.2 | 13.9 | 12.0 |
+-------------------------------------------------+-------+--------+------------+
| Social security costs | | 7.2 | 6.4 |
+-------------------------------------------------+-------+--------+------------+
| Pension service cost | 20 | 4.4 | 4.3 |
+-------------------------------------------------+-------+--------+------------+
| Total employee benefits | | 119.1 | 125.8 |
+-------------------------------------------------+-------+--------+------------+
Employees' contracts of employment are with certain subsidiary companies,
primarily Henderson Administration Limited; accordingly, there are no employee
benefits disclosures relating to the Company.
6. Finance costs
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Debt instrument interest expense | 8.8 | 12.3 |
+-------------------------------------------------------+--------+--------+
| Loss on derivatives at fair value through the profit | - | 1.4 |
| and loss | | |
+-------------------------------------------------------+--------+--------+
| Revolving credit facility fees | 0.1 | - |
+-------------------------------------------------------+--------+--------+
| Total finance costs | 8.9 | 13.7 |
+-------------------------------------------------------+--------+--------+
An interest rate swap was entered into at the time of the debt issue in May
2007, to swap the fixed coupon of 6.5% per annum into six month sterling LIBOR
plus 85.75bps per annum. The swap was unwound on 9 December 2008 and the
cumulative fair value adjustment to the debt carrying value, attributable to the
hedged interest rate risk up to the date of unwinding, GBP10.5m, is being
amortised over the remaining term of the debt to maturity on 2 May 2012. The
impact of the amortisation of the profit on unwinding the swap is a reduction in
finance costs of GBP3.1m (2008: GBP0.2m).
7. Non-recurring items before tax
The non-recurring items before tax recorded in the consolidated income statement
comprise the following:
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Insurance recoveries | 8.8 | - |
+-------------------------------------------------------+--------+--------+
| New Star integration costs | (17.0) | - |
+-------------------------------------------------------+--------+--------+
| Infrastructure fund charge | (20.7) | - |
+-------------------------------------------------------+--------+--------+
| Impairment of available-for-sale financial assets - | (7.3) | - |
| property seed capital | | |
+-------------------------------------------------------+--------+--------+
| Profit on Henderson Group restructuring | - | 34.2 |
+-------------------------------------------------------+--------+--------+
| Loss on write down of loan to fellow subsidiary | - | (20.9) |
+-------------------------------------------------------+--------+--------+
| Profit on unwinding of an interest rate swap on | - | 1.5 |
| Corporate debt | | |
+-------------------------------------------------------+--------+--------+
| Impairment of available-for-sale financial assets - | - | (7.2) |
| corporate investments | | |
+-------------------------------------------------------+--------+--------+
| Restructuring costs | - | (15.7) |
+-------------------------------------------------------+--------+--------+
| Scheme costs | - | (4.5) |
+-------------------------------------------------------+--------+--------+
| Third party administration review costs | - | (2.6) |
+-------------------------------------------------------+--------+--------+
| | (36.2) | (15.2) |
+-------------------------------------------------------+--------+--------+
2009
Insurance recoveries
During the second half of 2009, the Group reached agreement with insurers
regarding a number of insurance claims made by Towry Law International and the
Group in 2003 and 2004 under an AMP Limited run-off insurance policy, resulting
in a net receivable of GBP8.8m.
New Star integration costs
On 9 April 2009, the Henderson Group Plc acquired New Star. An expense of
GBP17.0m was incurred by the Group in relation to the integration of New Star
during the period. These integration costs included costs in respect of fund
mergers, rebranding, office relocation and reorganisation, transition of
outsourced retail and investment operations and staff related expenses.
Infrastructure fund charge
During the year, the Group recognised an exceptional charge of GBP20.7m in
respect of management fees on one of its infrastructure funds.
Impairment of available-for-sale financial assets - property seed capital
In accordance with the impairment tests under IAS 39, three available-for-sale
financial assets invested in property funds were impaired during 2009. These
were written down to their fair values at 31 December 2009, resulting in a
charge to the consolidated income statement of GBP7.3m.
2008
Profit on Henderson Group restructuring
On 27 November 2008, the Group completed the sale of the following companies to
Henderson Holdings Group BV, a fellow subsidiary, as part of a Group
restructuring exercise resulting from the implementation of the Scheme:
Henderson Funds Management (Jersey) Limited,
Henderson Global Investors (Ireland) Limited,
Henderson Management SA,
Henderson Fund Management (Luxembourg) SA,
Henderson Equity Partners Funds Limited,
Henderson Global Investors (Hong Kong) Limited,
Henderson Global Investors (Singapore) Limited,
Henderson Property Management Company (Luxembourg) No.1 sarl, and
Henderson International Finances Limited.
The profit on the Group restructuring was calculated as the proceeds, left
outstanding, less the net assets transferred which resulted in a profit of
GBP34.2m in the consolidated income statement.
Loss on write down of loan to fellow subsidiary
As a result of the Scheme a loan was entered into with a fellow subsidiary of
the Company due to the transfer of a limited recourse loan related to the
investment in BPSC. During December 2008, the investment in BPSC was impaired
and as a result the related loans were written down to the recoverable amount of
the investment. This resulted in a loss of GBP20.9m in the consolidated income
statement.
Profit on unwinding of an interest rate swap on Corporate debt
An interest rate swap was entered into at the time of the debt issue in May
2007, to swap the fixed coupon of 6.5% per annum into six month sterling LIBOR
plus 85.75bps per annum. The swap was unwound on 9 December 2008 and realised a
profit of GBP1.5m before tax, which was recognised in the consolidated income
statement as a non-recurring item.
Impairment of available-for-sale financial assets
An investment in a Henderson structured product was impaired to GBPnil at the
end of 2008, resulting in an impairment charge in the consolidated income
statement of GBP7.2m.
Restructuring costs
A restructure charge of GBP15.7m was recognised in the consolidated income
statement in 2008, as a result of headcount and related cost reductions carried
out in response to prevailing market conditions.
Scheme costs
In 2008, the Group undertook a scheme of arrangement which involved reorganising
the Group into a more tax and financially efficient structure. Costs of
approximately GBP4.5m were incurred on this project.
Third party administration review costs
An expense of GBP2.6m before tax relief was incurred in connection with a review
of most of the Group's third party investment administration arrangements during
2008.
8. Taxation
Tax recognised in the income statement
+------------------------------------------------------+---------+--------+
| | 2009 | 2008 |
+------------------------------------------------------+---------+--------+
| | GBPm | GBPm |
+------------------------------------------------------+---------+--------+
| Current tax: | | |
+------------------------------------------------------+---------+--------+
| - (credit) / charge for the year | (11.0) | 2.1 |
+------------------------------------------------------+---------+--------+
| - prior period adjustments | 2.5 | (12.8) |
+------------------------------------------------------+---------+--------+
| | | |
+------------------------------------------------------+---------+--------+
| Deferred tax: | | |
+------------------------------------------------------+---------+--------+
| - charge for the year | 9.2 | 14.5 |
+------------------------------------------------------+---------+--------+
| - prior period adjustments | (6.6) | - |
+------------------------------------------------------+---------+--------+
| | | |
+------------------------------------------------------+---------+--------+
| Total tax (credited)/charged to the income statement | (5.9) | 3.8 |
+------------------------------------------------------+---------+--------+
+------------------------------------------------------+---------+--------+
| Tax recognised in the statement of comprehensive | 2009 | 2008 |
| income | | |
| | | |
+------------------------------------------------------+---------+--------+
| | GBPm | GBPm |
+------------------------------------------------------+---------+--------+
| Deferred tax charge/(credit) in relation to | 0.6 | (2.3) |
| available-for-sale financial assets | | |
+------------------------------------------------------+---------+--------+
| Deferred tax (credit)/charge in relation to | (19.4) | 18.2 |
| actuarial (losses)/gains | | |
+------------------------------------------------------+---------+--------+
| Total tax (credited)/charged to the statement of | (18.8) | 15.9 |
| comprehensive income | | |
+------------------------------------------------------+---------+--------+
Reconciliation of (loss) or profit before tax to tax (credit)/expense
The tax (credit)/charge for the year can be reconciled to the (loss)/profit
before tax in the income statement as follows:
Group
+------------------------------------------------------+---------+--------+
| | 2009 | 2008 |
+------------------------------------------------------+---------+--------+
| | GBPm | GBPm |
+------------------------------------------------------+---------+--------+
| (Loss)/profit before tax | (31.2) | 65.1 |
+------------------------------------------------------+---------+--------+
| | | |
+------------------------------------------------------+---------+--------+
| Tax (credit)/charge at the UK corporation tax rate | (8.7) | 18.6 |
| of 28.0% (2008: 28.5% pro-rata) | | |
+------------------------------------------------------+---------+--------+
| Factors affecting the tax (credit)/charge: | | |
+------------------------------------------------------+---------+--------+
| Other disallowable expenditure and non-taxable | 5.1 | 4.7 |
| income | | |
+------------------------------------------------------+---------+--------+
| Prior periods adjustments | (4.1) | (12.8) |
+------------------------------------------------------+---------+--------+
| Differences in effective tax rates on overseas | 2.4 | 6.4 |
| earnings | | |
+------------------------------------------------------+---------+--------+
| Other items | (0.6) | (0.4) |
+------------------------------------------------------+---------+--------+
| Non-allowable losses/(non-taxable gains) in respect | - | (9.8) |
| of the investment in BP | | |
+------------------------------------------------------+---------+--------+
| Changes in applicable statutory tax rates | - | (0.3) |
+------------------------------------------------------+---------+--------+
| Recognition of previously unrecognised temporary | - | (2.4) |
| differences | | |
+------------------------------------------------------+---------+--------+
| Utilisation of previously unrecognised tax losses | - | (0.2) |
+------------------------------------------------------+---------+--------+
| Total tax (credited)/charged in the income statement | (5.9) | 3.8 |
+------------------------------------------------------+---------+--------+
9. Share-based payments
9.1 Group share-based compensation plans
The following share-based compensation plans were in operation during 2009:
Restricted Share Plan (RSP)
The RSP is a scheme that allows employees to receive shares in the Company's
ultimate parent (Henderson Group) for GBPnil consideration at a future point,
usually after three years. The awards are made typically for staff recruitment
and retention purposes. They may or may not contain a performance hurdle. The
Henderson Group plc Remuneration Committee must approve all awards and the
vesting of awards. On vesting, in order to obtain the shares, the employee must
satisfy any tax and national insurance obligations.
Employee Share Ownership Plan (ESOP)
The ESOP, managed by the Deferred Equity Plan trustee, enables all staff, but
not the Executive Directors, to defer part of their annual bonus into the ESOP
up to a specified limit. The ESOP provides one free matching share of Henderson
Group for every share purchased. To receive the matching shares, employees must
remain in the plan for three years. The ESOP was offered in 2006, 2007 and 2008.
Forfeiture conditions apply in the case of approved and unapproved leavers. No
plan was offered in 2009. Matching shares for the 2007 and 2008 plans will vest
in June 2010 and June 2011 respectively.
Long-Term Incentive Plan (LTIP)
The LTIP is a scheme that allows selected employees to be granted performance
shares of Henderson Group. These awards of free shares are granted on condition
that the selected employees remain within the Henderson Group for three years
after the grant date and that for:
· the 2007 plan, the Total Shareholder Return (TSR) of the Henderson
Group (Henderson Group TSR) compared favourably to the median of companies that
made up the FTSE 250 Index as at 1 January 2007. If the Henderson Group TSR
(average over three months to 31 December 2009) was at the 50th percentile of
the FTSE 250 companies, 35% of the shares would vest, with the full amount of
shares granted vesting if the Henderson Group TSR is at or above the 75th
percentile of the FTSE 250 companies. No vesting would occur if the Henderson
Group TSR is below the 50th percentile of the FTSE 250 companies; and
· the 2008 and 2009 plans, the Henderson Group TSR compares favourably
to the median of companies that made up the FTSE 350 General Financial Services
Index as at 1 January 2008 and 1 January 2009 respectively. If the Henderson
Group TSR (average over three months to 31 December 2010 and 2011 respectively)
is at the 50th percentile of the FTSE 350 General Financial Services Index, 25%
of the shares will vest, with the full amount of shares granted vesting if the
Henderson Group TSR is at or above the 75th percentile of the FTSE 350 General
Financial Services Index. No vesting will occur if the Henderson Group TSR is
below the 50th percentile of the FTSE 350 General Financial Services Index.
For a Henderson Group TSR between the 50th and 75th percentiles, the amount
vesting will increase on a linear basis.
The employees are not entitled to vote or receive dividends in respect of these
Henderson Group awards until the vesting conditions are met, nor are they
allowed to pledge, hedge or assign the expected awards in any way.
In accordance with the scheme terms, the 2007 LTIP met its vesting conditions on
31 December 2009 and the awards will be capable of exercise in March 2010. The
TSR performance condition resulted in 100% of the shares of the award being
capable of exercise.
For non-UK resident participants, awards can be settled in cash or shares.
Deferred Equity Plan (DEP)
Under the Henderson remuneration policy, there is a requirement for employees
who receive short-term incentive awards over a preset threshold to defer an
element of their award. The majority of deferrals are deferred into the
Henderson Group shares with some deferrals into Group managed funds when it is
deemed appropriate. The deferred monies are paid to the trustee, who purchases
shares or funds and holds them in trust. In 2007, the Henderson Group shares
attracted one free matching share for every four shares awarded by the trustee.
Since 2008, there has been no matching share element.
Hedge fund deferrals are deferred into the hedge fund that provided the
performance fee award and are held in trust for two years on a fully restricted
basis and have no matching element.
Forfeiture conditions apply in the case of approved and unapproved leavers.
Deferrals into the Henderson Group shares are held in trust for a minimum of one
year. However, for the 2007 scheme the shares must be held in trust for three
years in order to receive the free matching shares.
Deferrals relating to 2009 performance awards are deferred into the Henderson
Group shares for up to three years and vest in three equal tranches starting in
2011 and ending in 2013.
Buy As You Earn Share Plan (BAYE)
Eligible employees who wish to purchase shares in the Henderson Group invest a
monthly amount up to a maximum of GBP125, which is deducted from their gross
salary. Each participating employee receives, for no additional payment, two
free matching shares for each share purchased (partnership shares). Matching
shares will be forfeited if purchased shares are withdrawn from the trust within
one year.
Company Share Option Plan (CSOP)
The CSOP is a global plan that provides employees with an opportunity to buy
Henderson Group shares after a three year vesting period at an option price
fixed at the start of the scheme. The CSOP is an HMRC approved share option
plan; this means that the maximum value of unvested options at any time is
limited to GBP30,000 for UK employees. No such restrictions apply for overseas
employees. The share options are held in trust. There are no company performance
conditions attached to the awarding of the options. At vesting, the employee
must choose whether or not to exercise the options within two years of the
vesting date. Executive Directors of Henderson Group are not eligible to
participate in the CSOP.
Sharesave scheme (SAYE)
A 2009 SAYE was introduced during the year. UK employees may participate in more
than one scheme but only up to a maximum of GBP250 per month across all plans.
The SAYE vesting period is three years for UK employees.
Eligible employees who participate in SAYE contribute a monthly amount from
their net salary to a savings account up to a maximum of GBP250 after tax per
month. At the end of a 36 month period, the employees in the 2009 SAYE can
choose to exercise their Henderson Group share options using the funds in their
account, together with a bonus, equivalent to 0.6 (2007 SAYE: 1.8 and 2008 SAYE:
2.4) times the monthly saving amount, to subscribe for shares at a preset price,
this being GBP0.58 (2007 SAYE: GBP1.21 and 2008 SAYE: GBP0.76) per share, a 20%
discount to the share price on 4 March 2009 (2007 SAYE: 5 April 2007 and 2008
SAYE: 3 March 2008). Employees have up to six months after the 36 month period
to exercise their options and subscribe for shares. Forfeiture provisions apply
in the case of approved and unapproved leavers. The 2006 SAYE vested in 2009.
In 2008 the Group launched the USA Employee Share Purchase Plan (ESPP). A 2009
ESPP was also introduced during the year. The ESPP works broadly on the same
principles as the UK SAYE but has a 24 month savings period, a lower discount
level at 15% and no bonus element. The preset option price was US$0.88 (2008
ESPP: US$1.61). Employees may participate in more than one plan but only up to a
plan maximum of US$312.50 after tax per month across all plans.
9.2 Share-based payments through the consolidated income statement
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| RSP | 4.5 | - |
+-------------------------------------------------------+--------+--------+
| ESOP | 4.0 | 1.9 |
+-------------------------------------------------------+--------+--------+
| LTIP | 2.2 | 1.9 |
+-------------------------------------------------------+--------+--------+
| DEP | 1.1 | 3.4 |
+-------------------------------------------------------+--------+--------+
| BAYE | 1.0 | 1.9 |
+-------------------------------------------------------+--------+--------+
| CSOP | 0.6 | 2.9 |
+-------------------------------------------------------+--------+--------+
| SAYE | 0.5 | - |
+-------------------------------------------------------+--------+--------+
| Total expense | 13.9 | 12.0 |
+-------------------------------------------------------+--------+--------+
The total expense can be analysed between:
+------------------------------------------------+------+--------+--------+
| | | 2009 | 2008 |
+------------------------------------------------+------+--------+--------+
| | | GBPm | GBPm |
+------------------------------------------------+------+--------+--------+
| Share based payments | | 13.9 | 12.0 |
+------------------------------------------------+------+--------+--------+
| Equity-settled performance fee bonuses | | 2.3 | 8.8 |
| recognised within salaries, wages and bonuses | | | |
+------------------------------------------------+------+--------+--------+
| Amount which is to be settled in cash | | (0.3) | 1.7 |
+------------------------------------------------+------+--------+--------+
| Amounts to be settled with equity of Henderson | | 15.9 | 22.5 |
| Group plc | | | |
+------------------------------------------------+------+--------+--------+
9.3 Share options outstanding - SAYE
Share options outstanding under the Henderson Group SAYE are as follows:
+------------------------------------+-------------+----------+-------------+----------+
| | 2009 | 2008 |
+------------------------------------+------------------------+------------------------+
| | | Weighted | Options | Weighted |
| | Options | average | | average |
| | | exercise | | exercise |
| | | price | | price |
+------------------------------------+-------------+----------+-------------+----------+
| | no. | GBP | no. | GBP |
+------------------------------------+-------------+----------+-------------+----------+
| At 1 January | 4,374,413 | 0.785 | 2,973,249 | 0.980 |
+------------------------------------+-------------+----------+-------------+----------+
| Granted | 4,341,540 | 0.586 | 3,538,192 | 0.771 |
+------------------------------------+-------------+----------+-------------+----------+
| Exercised (refer to note 25.2) | (839,308) | 0.697 | (316,273) | 0.741 |
+------------------------------------+-------------+----------+-------------+----------+
| Forfeited | (2,495,857) | 0.789 | (1,820,755) | 1.093 |
+------------------------------------+-------------+----------+-------------+----------+
| At 31 December | 5,380,788 | 0.636 | 4,374,413 | 0.781 |
+------------------------------------+-------------+----------+-------------+----------+
The weighted average share price on the date options were exercised during 2009
was GBP0.95 (2008: GBP1.30). There were 10,284 options exercisable at 31
December 2009 (2008: nil). The weighted average fair value of options granted
during 2009 was GBP0.22 (2008: GBP0.30). At 31 December 2009, the weighted
average remaining expected and contractual life of outstanding awards was two
years (2008: one year, 10 months).
9.4 Share options outstanding - CSOP
Share options outstanding under the Henderson Group CSOP are as follows:
+------------------------------------+------------+----------+---------+----------+
| | 2009 | 2008 |
+------------------------------------+-----------------------+--------------------+
| | | Weighted | Options | Weighted |
| | Options | average | | average |
| | | exercise | | exercise |
| | | price | | price |
+------------------------------------+------------+----------+---------+----------+
| | no. | GBP | no. | GBP |
+------------------------------------+------------+----------+---------+----------+
| At 1 January | 355,000 | 0.960 | - | - |
+------------------------------------+------------+----------+---------+----------+
| Granted | 10,889,000 | 0.726 | 355,000 | 0.960 |
+------------------------------------+------------+----------+---------+----------+
| Exercised | (9,248) | 0.726 | - | - |
+------------------------------------+------------+----------+---------+----------+
| Forfeited | (926,530) | 0.816 | - | - |
+------------------------------------+------------+----------+---------+----------+
| At 31 December | 10,308,222 | 0.726 | 355,000 | 0.960 |
+------------------------------------+------------+----------+---------+----------+
There were no options exercisable at 31 December 2009 (2008: nil). The weighted
average fair value of options granted during 2009 was GBP0.19 (2008: GBP0.24).
At 31 December 2009, the weighted average remaining expected and contractual
life of outstanding awards was two years (2008: two years).
9.5 Fair values of share-based compensation plans
The fair value amounts for the options granted under the SAYE and CSOP were
determined using the Black Scholes option-pricing method, using the following
assumptions:
+-------------------+----------------+----------+-----------+----------+----------+
| | 2007 SAYE | 2008 | 2008 CSOP | 2009 | 2009 |
| | | SAYE | | SAYE | CSOP |
+-------------------+----------------+----------+-----------+----------+----------+
| Dividend yield | 3.5% | 6.0% | 6.0% | 6.0% | 6.0% |
+-------------------+----------------+----------+-----------+----------+----------+
| Expected | 45.0% | 45.0% | 45.0% | 45.0% | 45.0% |
| volatility | | | | | |
+-------------------+----------------+----------+-----------+----------+----------+
| Risk-free | 5.25% | 5.0% | 5.0% | 4.0% | 4.0% |
| interest rate | | | | | |
+-------------------+----------------+----------+-----------+----------+----------+
| Expected life | 3 years | 3 years | 3 years | 3 years | 3 years |
+-------------------+----------------+----------+-----------+----------+----------+
| Weighted average | | | | | |
+-------------------+----------------+----------+-----------+----------+----------+
| share price | GBP1.520 | GBP0.960 | GBP0.960 | GBP0.726 | GBP0.726 |
+-------------------+----------------+----------+-----------+----------+----------+
| Exercise price | GBP1.216 | GBP0.768 | GBP0.960 | GBP0.582 | GBP0.726 |
+-------------------+----------------+----------+-----------+----------+----------+
Expected volatility has been calculated based on the historic volatility for
Henderson Group plc over three years.
Other share schemes involve the grant of shares for GBPnil consideration. The
fair value of these schemes is calculated using the share price at grant date,
which is set out in the following table. No adjustments have been made for
dividends.
+------------------------------+------------------------------------+----------+
| | Shares granted | Average |
| | | share |
+------------------------------+------------------------------------+----------+
| | during 2009 | price |
+------------------------------+------------------------------------+----------+
| Scheme | no. | GBP |
+------------------------------+------------------------------------+----------+
| BAYE | 1,979,751 | 0.884 |
+------------------------------+------------------------------------+----------+
| LTIP | 16,330,000 | 0.748 |
+------------------------------+------------------------------------+----------+
| RSP | 3,337,350 | 1.249 |
+------------------------------+------------------------------------+----------+
| DEP | 3,215,610 | 0.775 |
+------------------------------+------------------------------------+----------+
The fair value calculation for the LTIP includes a statistical assessment of the
likelihood of the Henderson Group achieving performance targets set out in the
plan. These performance targets are in respect of the Henderson Group TSR over
three years and are as follows:
+--------------------------------------------------------------+--------------+
| | Amount |
| | vesting |
+--------------------------------------------------------------+--------------+
| Criteria | 2007 plan |
+--------------------------------------------------------------+--------------+
| Henderson Group TSR less than the 50th percentile of the | - |
| FTSE 250 companies | |
+--------------------------------------------------------------+--------------+
| Henderson Group TSR at the 50th percentile of the FTSE 250 | 35% |
| companies | |
+--------------------------------------------------------------+--------------+
| Henderson Group TSR at or above the 75th percentile of the | 100% |
| FTSE 250 companies | |
+--------------------------------------------------------------+--------------+
| | 2008 and |
| | 2009 plans |
+--------------------------------------------------------------+--------------+
| Henderson Group TSR less than the 50th percentile of the | - |
| FTSE 250 companies | |
+--------------------------------------------------------------+--------------+
| Henderson Group TSR at the 50th percentile of the FTSE 250 | 25% |
| companies | |
+--------------------------------------------------------------+--------------+
| Henderson Group TSR at or above the 75th percentile of the | 100% |
| FTSE 250 companies | |
+--------------------------------------------------------------+--------------+
For a Henderson Group TSR between the 50th and 75th percentiles, the amount
vesting will increase on a linear basis.
10. Dividends paid and proposed
+-----------------------------------+----------+-------------+--------+----------+
| | 2009 | 2009 | 2008 | 2008 |
+-----------------------------------+----------+-------------+--------+----------+
| | GBPm | pence per | GBPm | pence |
| | | share | | per |
| | | | | share |
+-----------------------------------+----------+-------------+--------+----------+
| Dividends on ordinary shares | | | | |
| declared and | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| paid in the period | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| Final dividend in respect of 2H08 | 33.4 | 4.25 | 30.2 | 4.44 |
| (2H07) | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| Interim dividend in respect of | 14.5 | 1.85 | 12.7 | 1.85 |
| 1H09 (1H08) | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| Total dividends paid and charged | 47.9 | 6.10 | 42.9 | 6.29 |
| to equity | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| Dividends proposed on ordinary | | | | |
| shares and approved by the | | | | |
| shareholders at the Henderson | | | | |
| Group plc AGM | | | | |
+-----------------------------------+----------+-------------+--------+----------+
| Final dividend for 2H09 (2H08) | 34.1 | 4.25 | 33.4 | 4.25 |
+-----------------------------------+----------+-------------+--------+----------+
Pursuant to the Income Access Share arrangements, shareholders in Henderson
Group plc are able to elect to receive their dividends from a UK source within
the Henderson Group. The above table reflects those dividends declared by the
Board of Henderson Group plc and paid to those shareholders who have elected to
receive their dividends via the Income Access Share arrangements, and thereby
paid by a subsidiary of the Group. Shareholders who do not elect to receive
their dividends via the Income Access Share arrangements are paid by a company
that is not part of the Group. The total of these payments in 2009 was GBP0.4m
(2008: nil).
The Directors of the Company have not declared or paid any dividends in 2009
(2008: GBP42.9m).
11. Segmental information
Group operating income and net assets
The Group is an investment manager, operating throughout Europe and with
operations in North America and Asia. The Group manages a broad range of
actively managed investment products for institutional and retail investors,
across multiple asset classes, including equities, fixed income, property and
private equity. Management operates across product lines, distribution channels,
and geographic regions. All investment product types are sold in most, if not
all, of these regions, and are managed in various locations.
Information is reported to the chief operating decision maker, the Board of
Henderson Group plc, on an aggregated basis. Strategic and financial management
decisions are determined centrally by the Board of Henderson Group plc and, on
this basis, the Group is also a single segment investment management business.
Entity-wide disclosures
Revenues by product
+--------------------------------------+-----------------------------+--------+
| | 2009 | 2008 |
+--------------------------------------+-----------------------------+--------+
| | GBPm | GBPm |
+--------------------------------------+-----------------------------+--------+
| UK wholesale | 66.6 | 64.9 |
+--------------------------------------+-----------------------------+--------+
| Property | 30.7 | 58.3 |
+--------------------------------------+-----------------------------+--------+
| Institutional and Cash funds | 41.7 | 21.2 |
+--------------------------------------+-----------------------------+--------+
| Horizon wholesale | 38.4 | 48.0 |
+--------------------------------------+-----------------------------+--------+
| US wholesale | 24.5 | 33.4 |
+--------------------------------------+-----------------------------+--------+
| Hedge funds | 19.4 | 34.0 |
+--------------------------------------+-----------------------------+--------+
| Other | 29.0 | 63.7 |
+--------------------------------------+-----------------------------+--------+
| | 250.3 | 323.5 |
+--------------------------------------+-----------------------------+--------+
| | | |
| Geographic information | | |
+--------------------------------------+-----------------------------+--------+
| Revenues from clients | | |
+--------------------------------------+-----------------------------+--------+
| | | |
+--------------------------------------+-----------------------------+--------+
| | 2009 | 2008 |
+--------------------------------------+-----------------------------+--------+
| | GBPm | GBPm |
+--------------------------------------+-----------------------------+--------+
| UK | 214.3 | 235.2 |
+--------------------------------------+-----------------------------+--------+
| US | 26.0 | 31.4 |
+--------------------------------------+-----------------------------+--------+
| Luxembourg | 1.2 | 29.1 |
+--------------------------------------+-----------------------------+--------+
| Singapore | - | 8.3 |
+--------------------------------------+-----------------------------+--------+
| Other | 8.8 | 19.5 |
+--------------------------------------+-----------------------------+--------+
| | 250.3 | 323.5 |
+--------------------------------------+-----------------------------+--------+
The geographical revenue information is split according to the country in which
the revenue is generated, not necessarily where the client is based.
The Group does not have a single client which accounts for more than 10% of
revenues.
Non-current assets
+--------------------------------+-----------------------------------+--------+
| | 2009 | 2008 |
+--------------------------------+-----------------------------------+--------+
| | GBPm | GBPm |
+--------------------------------+-----------------------------------+--------+
| UK | 272.9 | 262.2 |
+--------------------------------+-----------------------------------+--------+
| Other | 9.6 | 8.8 |
+--------------------------------+-----------------------------------+--------+
| | 282.5 | 271.0 |
+--------------------------------+-----------------------------------+--------+
Non-current assets for this purpose consist of intangible assets, investments in
associates and joint ventures, plant and equipment and deferred acquisition and
commission costs.
12. Intangible assets
Intangible assets are made up as follows:
2009
+----------------------------------------------+----------+----------+-------+
| | Group |
+----------------------------------------------+-----------------------------+
| | Goodwill | Computer | Total |
| | | software | |
+----------------------------------------------+----------+----------+-------+
| | GBPm | GBPm | GBPm |
+----------------------------------------------+----------+----------+-------+
| Cost | | | |
+----------------------------------------------+----------+----------+-------+
| At 1 January | 226.4 | 1.9 | 228.3 |
+----------------------------------------------+----------+----------+-------+
| Additions | - | 0.5 | 0.5 |
+----------------------------------------------+----------+----------+-------+
| At 31 December | 226.4 | 2.4 | 228.8 |
+----------------------------------------------+----------+----------+-------+
| | | | |
+----------------------------------------------+----------+----------+-------+
| Amortisation and impairment losses | | | |
+----------------------------------------------+----------+----------+-------+
| At 1 January | (2.1) | (0.1) | (2.2) |
+----------------------------------------------+----------+----------+-------+
| Amortisation charge during the year | - | (0.3) | (0.3) |
+----------------------------------------------+----------+----------+-------+
| At 31 December | (2.1) | (0.4) | (2.5) |
+----------------------------------------------+----------+----------+-------+
| Carrying value at 31 December | 224.3 | 2.0 | 226.3 |
+----------------------------------------------+----------+----------+-------+
2008
+----------------------------------------------+----------+----------+-------+
| | Group |
+----------------------------------------------+-----------------------------+
| | Goodwill | Computer | Total |
| | | software | |
+----------------------------------------------+----------+----------+-------+
| | GBPm | GBPm | GBPm |
+----------------------------------------------+----------+----------+-------+
| Cost | | | |
+----------------------------------------------+----------+----------+-------+
| At 1 January | 226.4 | - | 226.4 |
+----------------------------------------------+----------+----------+-------+
| Additions | - | 1.9 | 1.9 |
+----------------------------------------------+----------+----------+-------+
| At 31 December | 226.4 | 1.9 | 228.3 |
+----------------------------------------------+----------+----------+-------+
| | | | |
+----------------------------------------------+----------+----------+-------+
| Amortisation and impairment losses | | | |
+----------------------------------------------+----------+----------+-------+
| At 1 January | (2.1) | - | (2.1) |
+----------------------------------------------+----------+----------+-------+
| Amortisation charge during the year | - | (0.1) | (0.1) |
+----------------------------------------------+----------+----------+-------+
| At 31 December | (2.1) | (0.1) | (2.2) |
+----------------------------------------------+----------+----------+-------+
| Carrying value at 31 December | 224.3 | 1.8 | 226.1 |
+----------------------------------------------+----------+----------+-------+
The Group considers itself to be a single segment investment management business
and, therefore, a single cash generating unit to which goodwill can be
allocated.
The recoverable amount of goodwill at 31 December 2009 has been determined from
a value in use calculation, using the budgets and forecasts approved by the
Board and a terminal value for the period thereafter. The key growth assumptions
used in the budgets and forecasts include assumptions on market movements,
business growth, margins, business investment and inflation. The terminal value
has been calculated assuming a long-term growth rate of 2% per annum in
perpetuity, based on the Group's view of long-term nominal growth. A discount
rate of 10.9% per annum has been applied, being the Henderson Group weighted
average cost of capital, calculated using the Capital Asset Pricing Model.
The resultant value in use calculation has been compared with the carrying
amount of goodwill to determine if any goodwill impairment arises. The
calculation shows significant headroom in the recoverable amount of goodwill.
Recent transaction experience provides additional evidence that the recoverable
amount of goodwill is in excess of the carrying amount.
13. Investments in subsidiaries, associates and joint ventures
13.1 Principal subsidiaries
Group
The principal subsidiaries of the Group, excluding the directly held
subsidiaries of the Company shown below, are as follows:
+--------------------------------+---------------+------------+------------+------------+
| | Country of |Functional |Percentage |Percentage |
| |incorporation | currency |owned 2009 |owned 2008 |
| |and principal | | | |
| | place of | | | |
| | operation | | | |
+--------------------------------+---------------+------------+------------+------------+
| | | | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Administration | UK | Pounds | 100% | 100% |
| Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Alternative | UK | Pounds | 100% | 100% |
| Investment Advisor Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Equity Partners | UK | Pounds | 100% | 100% |
| Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Fund Management plc | UK | Pounds | 100% | 100% |
| | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Global Investors | Netherlands | Euros | 100% | 100% |
| (International Holdings) BV | and UK | | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Global Investors | Jersey and | Pounds | 100% | 100% |
| (Jersey) Limited | UK | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Global Investors | Jersey and | Pounds | 100% | 100% |
| (Jersey) 2 Limited | UK | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Global Investors | UK | Pounds | 100% | 100% |
| Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Holdings Limited | UK | Pounds | 100% | 100% |
| | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson International | Jersey and | Pounds | 100% | 100% |
| Holdings Limited | UK | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson International Inc. | USA | US | 100% | 100% |
| | | dollars | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Investment Funds | UK | Pounds | 100% | 100% |
| Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Investment | UK | Pounds | 100% | 100% |
| Management Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| | | | | |
+--------------------------------+---------------+------------+------------+------------+
The information disclosed in the table above is only in respect of those
subsidiaries which principally affect the figures shown in the Group's accounts.
There are a number of other subsidiaries whose business does not materially
affect the Group's profits or the amount of its assets. Particulars of these
have been omitted for simplification purposes.
Company
+-------------------------------------------------------+--------+------------+
| | 2009 | 2008 |
| | | (Restated) |
+-------------------------------------------------------+--------+------------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+------------+
| At 1 January | 874.2 | 1,921.7 |
| | | |
+-------------------------------------------------------+--------+------------+
| Additional investment in subsidiaries | 48.1 | - |
+-------------------------------------------------------+--------+------------+
| Impairment of investment in subsidiaries | (50.6) | - |
+-------------------------------------------------------+--------+------------+
| Investments realised on liquidation | - | (1,047.5) |
+-------------------------------------------------------+--------+------------+
| At 31 December | 871.7 | 874.2 |
+-------------------------------------------------------+--------+------------+
The impairment relates to an investment in a subsidiary of the Company that does
not have sufficient distributable reserves or forecast future cashflow to
support the carrying value of the investment. As a result, the investment has
been fully impaired.
The directly held subsidiaries of the Company are as follows:
+--------------------------------+---------------+------------+------------+------------+
| | Country |Functional |Percentage |Percentage |
| | of | currency |owned 2009 |owned 2008 |
| |incorporation | | | |
| |and principal | | | |
| | place of | | | |
| | operation | | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Global Investors | UK | Pounds | 100% | 100% |
| (Holdings) plc | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Finances | UK | Pounds | 100% | 100% |
| | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| Henderson Portfolio Managers | UK | Pounds | 100% | 100% |
| Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| UKLS Financial Planning | UK | Pounds | 100% | 100% |
| Limited | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| HHG (VH) Limited | UK | Pounds | 100% | 100% |
| | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
| HGI (Investments) Limited | UK | Pounds | 100% | 100% |
| | | sterling | | |
+--------------------------------+---------------+------------+------------+------------+
13.2 Associates and joint ventures
Group
The Group holds interests in the following associates and joint ventures:
+-----------------------------------+---------------+------------+------------+------------+
| | Country |Functional |Percentage |Percentage |
| | of | currency |owned 2009 |owned 2008 |
| |incorporation | | | |
| |and principal | | | |
| | place of | | | |
| | operation | | | |
+-----------------------------------+---------------+------------+------------+------------+
| Attunga Capital Pty Limited | Australia |Australian | 30% | 30% |
| | | dollars | | |
+-----------------------------------+---------------+------------+------------+------------+
| Henderson-mfi Shopping Centre | Germany | Euros | 50% | 50% |
| GmbH & Co. KG | | | | |
+-----------------------------------+---------------+------------+------------+------------+
| Henderson-mfi Shopping Centre | Germany | Euros | 50% | 50% |
| Verwaltungs GmbH | | | | |
+-----------------------------------+---------------+------------+------------+------------+
| HGI Immobilien GmbH | Germany | Euros | 50% | 50% |
+-----------------------------------+---------------+------------+------------+------------+
| Warburg-Henderson | Germany | Euros | 50% | 50% |
| Kapitalanlagegesellschaft fur | | | | |
| Immobilien mbH | | | | |
+-----------------------------------+---------------+------------+------------+------------+
+----------------------------------------------+--------+--------+--------+
| | | 2009 | 2008 |
+----------------------------------------------+--------+--------+--------+
| | | GBPm | GBPm |
+----------------------------------------------+--------+--------+--------+
| Share of aggregate net assets | | 5.0 | 5.5 |
+----------------------------------------------+--------+--------+--------+
| Share of profit for the year | | 0.7 | 2.4 |
+----------------------------------------------+--------+--------+--------+
The Group's investments in associates and joint ventures are accounted for under
the equity method. The investments are carried at cost adjusted for
post-acquisition share of profits and losses and other changes in equity.
Distributions received from associates and joint ventures during the year are
deducted from the carrying value of the investment.
14. Plant and equipment
+-------------------------------------------------------+--------+--------+
| | |
| | Group |
+-------------------------------------------------------+-----------------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Cost | | |
+-------------------------------------------------------+--------+--------+
| At 1 January | 30.6 | 41.0 |
+-------------------------------------------------------+--------+--------+
| Additions | 2.7 | 21.7 |
+-------------------------------------------------------+--------+--------+
| Disposals | (0.4) | (31.6) |
+-------------------------------------------------------+--------+--------+
| Disposal of subsidiary companies | - | (0.5) |
+-------------------------------------------------------+--------+--------+
| At 31 December | 32.9 | 30.6 |
+-------------------------------------------------------+--------+--------+
| | | |
+-------------------------------------------------------+--------+--------+
| Depreciation | | |
+-------------------------------------------------------+--------+--------+
| At 1 January | (8.1) | (35.3) |
+-------------------------------------------------------+--------+--------+
| Charge during the year | (3.2) | (2.3) |
+-------------------------------------------------------+--------+--------+
| Disposals | 0.4 | 29.1 |
+-------------------------------------------------------+--------+--------+
| Disposal of subsidiary companies | - | 0.4 |
+-------------------------------------------------------+--------+--------+
| At 31 December | (10.9) | (8.1) |
+-------------------------------------------------------+--------+--------+
| | | |
+-------------------------------------------------------+--------+--------+
| Net book value at 31 December | 22.0 | 22.5 |
+-------------------------------------------------------+--------+--------+
Included in cost as at 31 December 2009 were fully depreciated assets amounting
to GBP1.3m (2008: GBP0.1m).
15. Fair value of financial instruments
Total financial assets and liabilities
+-------------------------------+-------+--------+------------+--------+------------+
| | | Group |
+-------------------------------+-------+-------------------------------------------+
| | | Carrying value | Fair value |
+-------------------------------+-------+---------------------+---------------------+
| | Notes | 2009 | 2008 | 2009 | 2008 |
| | | GBPm | (Restated) | GBPm | (Restated) |
| | | | GBPm | | GBPm |
+-------------------------------+-------+--------+------------+--------+------------+
| Financial assets | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Current assets: | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Financial assets at fair | | | | | |
| value through profit or loss | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Shares/units in OEICs/unit | | 0.6 | 0.4 | 0.6 | 0.4 |
| trusts | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Other financial assets | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Available-for-sale financial | | 27.3 | 48.2 | 27.3 | 48.2 |
| assets | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| OEIC and unit trust debtors, | 17 | 256.0 | 202.7 | 256.0 | 202.7 |
| loans to and amounts owed | | | | | |
| from fellow subsidiaries and | | | | | |
| other debtors | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Derivative financial | 17 | 0.2 | - | 0.2 | - |
| instruments | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Cash and cash equivalents | 18.1 | 84.5 | 132.7 | 84.5 | 132.7 |
+-------------------------------+-------+--------+------------+--------+------------+
| Total financial assets | | 368.6 | 384.0 | 368.6 | 384.0 |
+-------------------------------+-------+--------+------------+--------+------------+
| | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Financial liabilities | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Non-current liabilities: | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Debt instrument in issue | 19 | 181.9 | 184.5 | 173.5 | 126.0 |
+-------------------------------+-------+--------+------------+--------+------------+
| | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Current liabilities: | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| OEIC and unit trust | 24 | 178.6 | 133.6 | 178.6 | 133.6 |
| creditors, loans from and | | | | | |
| amounts owed to fellow | | | | | |
| subsidiaries and other | | | | | |
| creditors | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Derivative financial | 24 | 1.0 | 0.6 | 1.0 | 0.6 |
| instruments | | | | | |
+-------------------------------+-------+--------+------------+--------+------------+
| Total financial liabilities | | 361.5 | 318.7 | 353.1 | 260.2 |
+-------------------------------+-------+--------+------------+--------+------------+
+-------------------------------+-------+--------+--------+--------+-------+
| | | Company |
+-------------------------------+-------+----------------------------------+
| | | Carrying value | Fair value |
+-------------------------------+-------+-----------------+----------------+
| | Notes | 2009 | 2008 | 2009 | 2008 |
| | | GBPm | GBPm | GBPm | GBPm |
+-------------------------------+-------+--------+--------+--------+-------+
| Financial assets | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Current assets: | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Loans to and amounts owed | 17 | 376.0 | 198.4 | 376.0 | 198.4 |
| from fellow subsidiaries and | | | | | |
| other assets | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Cash and cash equivalents | 18.1 | 8.9 | 11.2 | 8.9 | 11.2 |
+-------------------------------+-------+--------+--------+--------+-------+
| Total financial assets | | 384.9 | 209.6 | 384.9 | 209.6 |
+-------------------------------+-------+--------+--------+--------+-------+
| | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Financial liabilities | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Non-current liabilities: | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Debt instrument in issue | 19 | 181.9 | 184.5 | 173.5 | 126.0 |
+-------------------------------+-------+--------+--------+--------+-------+
| | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Current liabilities: | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Loans from subsidiaries | 23 | 549.0 | 422.0 | 549.0 | 422.0 |
+-------------------------------+-------+--------+--------+--------+-------+
| Amounts owed to fellow | 24 | 74.1 | 264.6 | 74.1 | 264.6 |
| subsidiaries | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Total financial liabilities | | 805.0 | 871.1 | 796.6 | 812.6 |
+-------------------------------+-------+--------+--------+--------+-------+
The Group enters into forward exchange contracts to hedge various financial
assets and liabilities denominated in foreign currency and therefore applies
fair value hedge accounting. On 9 December 2008, the interest rate swap held on
the Corporate debt was unwound and the cumulative fair value adjustment to the
carrying value of the debt up to the date of unwinding is being amortised to the
consolidated income statement over the remaining life of the debt, which matures
on 2 May 2012. (Refer to note 19).
Debtor and creditor balances, included in the tables above, are mainly balances
settling in a short time frame, and accordingly, the fair value of these assets
and liabilities is considered to be materially equal to their carrying value
after taking into account any likely impairment.
Fair value hierarchy - Group only
The group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2: other techniques for which all inputs, which have significant effect on
the recorded fair value, are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable data.
+-------------------------------+-------+--------+--------+--------+-------+
| | Notes | 2009 | Level | Level | Level |
| | | GBPm | 1 | 2 | 3 |
| | | | GBPm | GBPm | GBPm |
+-------------------------------+-------+--------+--------+--------+-------+
| Financial assets | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Current assets: | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Financial assets at fair | | | | | |
| value through profit or loss | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Shares/units in OEICs/unit | | 0.6 | 0.6 | - | - |
| trusts | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Other financial assets | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Available-for-sale financial | | 27.3 | 0.9 | - | 26.4 |
| assets | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Derivative financial | 17 | 0.2 | 0.2 | - | - |
| instruments | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Total financial assets | | 28.1 | 1.7 | - | 26.4 |
+-------------------------------+-------+--------+--------+--------+-------+
| | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Financial liabilities | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Current liabilities | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Derivative financial | 24 | (1.0) | (1.0) | - | - |
| instruments | | | | | |
+-------------------------------+-------+--------+--------+--------+-------+
| Total financial liabilities | | (1.0) | (1.0) | - | - |
+-------------------------------+-------+--------+--------+--------+-------+
During the year ended 31 December 2009, there were no transfers between Level 1
and Level 2 fair value measurements, and no transfers into or out of Level 3
fair value measurements.
The following is a reconciliation of the Group's financial instruments
classified as Level 3 during the year:
+-----------------------------------------------------------------+-------+
| | 2009 |
| | GBPm |
+-----------------------------------------------------------------+-------+
| Fair value at 1 January | 38.1 |
+-----------------------------------------------------------------+-------+
| Additions | 0.2 |
+-----------------------------------------------------------------+-------+
| Fair value movements recognised in the statement of | (4.4) |
| comprehensive income | |
+-----------------------------------------------------------------+-------+
| Impairment recognised in the consolidated income statement | (7.5) |
+-----------------------------------------------------------------+-------+
| Fair value at 31 December | 26.4 |
+-----------------------------------------------------------------+-------+
As the fair value measurement of the financial instruments included in Level 3,
is based on both observable and non-observable inputs, a change in one or more
underlying assumptions would not result in a significant change in the fair
value.
16. Deferred acquisition and commission costs
+------------------------------------------------+-----+--------+--------+
| | | |
| | | Group |
+------------------------------------------------+-----+-----------------+
| | | 2009 | 2008 |
+------------------------------------------------+-----+--------+--------+
| | | GBPm | GBPm |
+------------------------------------------------+-----+--------+--------+
| At 1 January | | 34.6 | 31.8 |
+------------------------------------------------+-----+--------+--------+
| Foreign exchange movement | | (0.4) | 2.3 |
+------------------------------------------------+-----+--------+--------+
| Costs and commissions capitalised | | 42.6 | 24.3 |
+------------------------------------------------+-----+--------+--------+
| Amortisation charge during the year | | (22.8) | (23.5) |
+------------------------------------------------+-----+--------+--------+
| Disposal of subsidiary companies | | - | (0.3) |
+------------------------------------------------+-----+--------+--------+
| At 31 December | | 54.0 | 34.6 |
+------------------------------------------------+-----+--------+--------+
| | | | |
+------------------------------------------------+-----+--------+--------+
| Non-current | | 29.1 | 16.9 |
+------------------------------------------------+-----+--------+--------+
| Current | | 24.9 | 17.7 |
+------------------------------------------------+-----+--------+--------+
| At 31 December | | 54.0 | 34.6 |
+------------------------------------------------+-----+--------+--------+
17. Trade and other receivables
+------------------------------------+--------+------------+--------+------------+
| | | |
| | Group | Company |
+------------------------------------+---------------------+---------------------+
| | 2009 | 2008 | 2009 | 2008 |
| | | (Restated) | | (Restated) |
+------------------------------------+--------+------------+--------+------------+
| | GBPm | GBPm | GBPm | GBPm |
+------------------------------------+--------+------------+--------+------------+
| Amounts owed by fellow | 17.1 | 10.9 | 237.3 | |
| subsidiaries | | | | 198.4 |
+------------------------------------+--------+------------+--------+------------+
| Loans to fellow subsidiaries | 183.2 | 131.0 | 128.4 | - |
+------------------------------------+--------+------------+--------+------------+
| OEIC and unit trust debtors | 24.9 | 52.6 | - | - |
+------------------------------------+--------+------------+--------+------------+
| Derivative financial instruments | 0.2 | - | - | - |
+------------------------------------+--------+------------+--------+------------+
| Accrued income | 37.8 | 41.0 | 0.2 | 0.5 |
+------------------------------------+--------+------------+--------+------------+
| Other debtors | 30.8 | 8.2 | 10.3 | - |
+------------------------------------+--------+------------+--------+------------+
| Prepayments | 3.6 | 3.8 | - | - |
+------------------------------------+--------+------------+--------+------------+
| | 297.6 | 247.5 | 376.2 | 198.9 |
+------------------------------------+--------+------------+--------+------------+
The loans to fellow subsidiaries are either interest free or attract annual
interest at a rate linked to sterling LIBOR and are repayable on demand.
18. Cash and cash equivalents
18.1 Cash and cash equivalents
+------------------------------------+--------+--------+--------+--------+
| | | |
| | Group | Company |
+------------------------------------+-----------------+-----------------+
| | 2009 | 2008 | 2009 | 2008 |
+------------------------------------+--------+--------+--------+--------+
| | GBPm | GBPm | GBPm | GBPm |
+------------------------------------+--------+--------+--------+--------+
| Cash at bank and in hand | 14.7 | 42.7 | - | 0.1 |
+------------------------------------+--------+--------+--------+--------+
| Cash equivalents | 69.8 | 90.0 | 8.9 | 11.1 |
+------------------------------------+--------+--------+--------+--------+
| Cash and cash equivalents | 84.5 | 132.7 | 8.9 | 11.2 |
+------------------------------------+--------+--------+--------+--------+
Cash and cash equivalents consist of cash in hand, cash at bank and short-term
investments with financial institutions with original maturity periods of three
months or less.
Included within cash and cash equivalents as at 31 December 2009 was GBP4.7m
(2008: GBP5.3m) held in escrow, representing amounts held for the Pension Scheme
GBP4.7m (2008: GBP4.7m). The GBP0.6m held in escrow at 31 December 2008 in
respect of the outstanding obligations of Towry law International has been
released following an agreement with the Hong Kong Securities and Futures
Commission.
18.2 Changes in operating assets and liabilities
+------------------------------------+--------+--------+--------+------------+
| | | |
| | Group | Company |
+------------------------------------+-----------------+---------------------+
| | 2009 | 2008 | 2009 | 2008 |
| | | | | (Restated) |
+------------------------------------+--------+--------+--------+------------+
| | GBPm | GBPm | GBPm | GBPm |
+------------------------------------+--------+--------+--------+------------+
| Change in OEICs and unit trusts | (5.3) | (19.3) | - | - |
| debtors and creditors | | | | |
+------------------------------------+--------+--------+--------+------------+
| Increase in deferred acquisition | 42.6 | (24.4) | - | - |
| and commission costs | | | | |
+------------------------------------+--------+--------+--------+------------+
| Decrease in other assets | 78.4 | (34.1) | (39.1) | 4.5 |
+------------------------------------+--------+--------+--------+------------+
| Increase in deferred income | (45.5) | 23.7 | - | - |
+------------------------------------+--------+--------+--------+------------+
| Increase in provisions and other | (80.1) | 3.0 | (21.0) | 75.5 |
| liabilities | | | | |
+------------------------------------+--------+--------+--------+------------+
| Changes in operating assets and | (9.9) | (51.1) | (60.1) | 80.0 |
| liabilities | | | | |
+------------------------------------+--------+--------+--------+------------+
19. Debt instrument in issue
+----------------------------------------------------+----------+---------+
| | Group & |
| | Company |
+----------------------------------------------------+--------------------+
| | 2009 | 2008 |
+----------------------------------------------------+----------+---------+
| | GBPm | GBPm |
+----------------------------------------------------+----------+---------+
| Debt instrument in issue | 181.9 | 184.5 |
+----------------------------------------------------+----------+---------+
The debt instrument in issue represents GBP175m senior, unrated, fixed rate
notes listed on the London Stock Exchange. The debt instrument is unsecured,
repayable in full on 2 May 2012 and bears interest at a fixed rate of 6.5% per
annum payable every six months.
The Group swapped the fixed interest coupon into a floating rate on issue of the
debt. The swap was unwound on 9 December 2008 and realised a profit of GBP1.5m
before tax, recognised as a non-recurring item in the consolidated income
statement. The fair value adjustment to the debt carrying value, attributable
to the hedged interest rate risk up to the date of unwinding the swap, GBP10.5m,
is being amortised over the remaining term of the debt.
The fair value of the debt instrument at the balance sheet date was GBP173.5m
(2008: GBP126.0m).
20. Retirement benefits
Retirement benefit assets recognised in the statement of financial position
+-------------------------------+------+-------+-------+-------+-------+
| | | | Company |
| | | Group | |
+-------------------------------+------+---------------+---------------+
| | | 2009 | 2008 | 2009 | 2008 |
+-------------------------------+------+-------+-------+-------+-------+
| | Note | GBPm | GBPm | GBPm | GBPm |
+-------------------------------+------+-------+-------+-------+-------+
| | | | | | |
+-------------------------------+------+-------+-------+-------+-------+
| Henderson Group Pension | 20.1 | 90.0 | 152.5 | 90.0 | 152.5 |
| Scheme | | | | | |
+-------------------------------+------+-------+-------+-------+-------+
Retirement benefit obligations recognised in the statement of financial position
+-------------------------------+------+-------+-------+-------+-------+
| | | | Company |
| | | Group | |
+-------------------------------+------+---------------+---------------+
| | | 2009 | 2008 | 2009 | 2008 |
+-------------------------------+------+-------+-------+-------+-------+
| | Note | GBPm | GBPm | GBPm | GBPm |
+-------------------------------+------+-------+-------+-------+-------+
| | | | | | |
+-------------------------------+------+-------+-------+-------+-------+
| Henderson Group unapproved | 20.2 | 6.1 | 4.7 | - | - |
| pension schemes | | | | | |
+-------------------------------+------+-------+-------+-------+-------+
Pension service cost/(credit) recognised in the income statement
+-------------------------------+-------+-------+-------+-------+-------+
| | | | Company |
| | | Group | |
+-------------------------------+-------+---------------+---------------+
| | | 2009 | 2008 | 2009 | 2008 |
+-------------------------------+-------+-------+-------+-------+-------+
| | Notes | GBPm | GBPm | GBPm | GBPm |
+-------------------------------+-------+-------+-------+-------+-------+
| | | | | | |
+-------------------------------+-------+-------+-------+-------+-------+
| Henderson Group Pension | 20.1 | (0.7) | (0.8) | (0.7) | (0.8) |
| Scheme | | | | | |
+-------------------------------+-------+-------+-------+-------+-------+
| Money Purchase Scheme | | 4.7 | 4.5 | - | - |
+-------------------------------+-------+-------+-------+-------+-------+
| Henderson Group unapproved | 20.2 | 0.4 | 0.6 | - | - |
| pension schemes | | | | | |
+-------------------------------+-------+-------+-------+-------+-------+
| Pension service cost/(credit) | | 4.4 | 4.3 | (0.7) | (0.8) |
| recognised in the income | | | | | |
| statement | | | | | |
+-------------------------------+-------+-------+-------+-------+-------+
Amounts recognised in the statement of comprehensive income (SOCI)
+-------------------------------+-------+--------+-------+--------+-------+
| | | | Company |
| | | Group | |
+-------------------------------+-------+----------------+----------------+
| | | 2009 | 2008 | 2009 | 2008 |
+-------------------------------+-------+--------+-------+--------+-------+
| | Notes | GBPm | GBPm | GBPm | GBPm |
+-------------------------------+-------+--------+-------+--------+-------+
| | | | | | |
+-------------------------------+-------+--------+-------+--------+-------+
| Henderson Group Pension | 20.1 | (68.5) | 63.9 | (68.5) | 63.9 |
| Scheme | | | | | |
+-------------------------------+-------+--------+-------+--------+-------+
| Henderson Group unapproved | 20.2 | (1.2) | 1.1 | - | - |
| pension schemes | | | | | |
+-------------------------------+-------+--------+-------+--------+-------+
| Actuarial (losses)/gains | | (69.7) | 65.0 | (68.5) | 63.9 |
| recognised in the SOCI | | | | | |
+-------------------------------+-------+--------+-------+--------+-------+
20.1 Henderson Group Pension Scheme - Final Salary Scheme
Group and Company
The Final Salary Scheme represents the defined benefit section of the Pension
Scheme, which closed to new members on 15 November 1999. The sponsor and
principal employer of the Pension Scheme is the Company and the participating
company is Henderson Administration Limited. The appointed investment manager
for the final salary scheme is Henderson Global Investors Limited. The Final
Salary Scheme is funded by contributions to a separately administered fund. The
actuarial advisers to the Pension Scheme are Towers Watson.
The 2009 Pension Scheme accounting valuation under IAS 19 Employee Benefits, is
based on full membership data as at 31 December 2008 and adjusted for movements
in membership data during 2009. The financial assumptions as disclosed below are
set in accordance with IAS 19 and, with the exception of the mortality
assumption, the demographic assumptions are the same as those used for the
Pension Scheme's IAS 19 valuation as at 31 December 2008. The post-retirement
mortality assumption as at 31 December 2009 is based on 100% of the SAPS 'S1
Light' tables and improvements from 2002 in line with the medium cohort
projections with a 1% per annum underpin. The Pension Scheme assets are stated
at their fair value at 31 December 2009 and 31 December 2008. The Group has
reached agreement with the Pension Scheme trustee regarding the results of the
2008 triennial valuation. The agreed results show that there was a small surplus
in the Scheme as at 31 December 2008. As a result no deficit funding
contributions are required to be made or have been made by the Group.
Reconciliation of present value of defined benefit obligations
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 251.9 | 282.4 |
+-------------------------------------------------------+--------+--------+
| Current service cost | 2.7 | 3.6 |
+-------------------------------------------------------+--------+--------+
| Interest cost | 16.0 | 16.3 |
+-------------------------------------------------------+--------+--------+
| Past service cost | - | 0.1 |
+-------------------------------------------------------+--------+--------+
| Actuarial losses/(gains) | 50.0 | (43.3) |
+-------------------------------------------------------+--------+--------+
| Actual benefit payments | (7.8) | (7.2) |
+-------------------------------------------------------+--------+--------+
| At 31 December | 312.8 | 251.9 |
+-------------------------------------------------------+--------+--------+
Reconciliation of the fair value of defined benefit scheme assets
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 404.4 | 344.7 |
+-------------------------------------------------------+--------+--------+
| Expected return on scheme assets | 19.4 | 20.8 |
+-------------------------------------------------------+--------+--------+
| Actuarial (losses)/gains | (18.5) | 20.6 |
+-------------------------------------------------------+--------+--------+
| Group contributions | 5.3 | 25.5 |
+-------------------------------------------------------+--------+--------+
| Actual benefit payments | (7.8) | (7.2) |
+-------------------------------------------------------+--------+--------+
| At 31 December | 402.8 | 404.4 |
+-------------------------------------------------------+--------+--------+
Reconciliation of defined benefit asset recognised in the consolidated statement
of financial position
+--------------------------------------------------+----+---------+---------+
| | | 2009 | 2008 |
+--------------------------------------------------+----+---------+---------+
| | | GBPm | GBPm |
+--------------------------------------------------+----+---------+---------+
| Present value of defined benefit obligations | | (312.8) | (251.9) |
+--------------------------------------------------+----+---------+---------+
| Fair value of scheme assets | | 402.8 | 404.4 |
+--------------------------------------------------+----+---------+---------+
| Net asset at 31 December | | 90.0 | 152.5 |
+--------------------------------------------------+----+---------+---------+
Pension service credit recognised in the consolidated income statement
+--------------------------------------------------+----+--------+--------+
| | | 2009 | 2008 |
+--------------------------------------------------+----+--------+--------+
| | | GBPm | GBPm |
+--------------------------------------------------+----+--------+--------+
| Current service cost | | 2.7 | 3.6 |
+--------------------------------------------------+----+--------+--------+
| Interest cost | | 16.0 | 16.3 |
+--------------------------------------------------+----+--------+--------+
| Expected return on scheme assets | | (19.4) | (20.8) |
+--------------------------------------------------+----+--------+--------+
| Past service cost | | - | 0.1 |
+--------------------------------------------------+----+--------+--------+
| | | (0.7) | (0.8) |
+--------------------------------------------------+----+--------+--------+
+-------------------------------------------------------+--------+--------+
| Amounts recognised in the consolidated statement of | |
| comprehensive income | |
+-------------------------------------------------------+-----------------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 76.1 | 12.2 |
+-------------------------------------------------------+--------+--------+
| Actuarial (losses)/gains recognised in the SOCI | (68.5) | 63.9 |
+-------------------------------------------------------+--------+--------+
| At 31 December | 7.6 | 76.1 |
+-------------------------------------------------------+--------+--------+
Movements in net asset recognised in the consolidated statement of financial
position
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 152.5 | 62.3 |
+-------------------------------------------------------+--------+--------+
| Pension service credit recognised in the consolidated | 0.7 | 0.8 |
| income statement | | |
+-------------------------------------------------------+--------+--------+
| Contributions | 5.3 | 25.5 |
+-------------------------------------------------------+--------+--------+
| Actuarial (losses)/gains recognised in the | (68.5) | 63.9 |
| consolidated statement of comprehensive income | | |
+-------------------------------------------------------+--------+--------+
| Net asset at 31 December | 90.0 | 152.5 |
+-------------------------------------------------------+--------+--------+
Pension Scheme assets
The major categories of assets in the final salary section of the Pension
Scheme, were as follows:
Fair value of the defined benefit assets
+------------------+-------+-------+--------+--------+--------+--------+
| | Market value |% as a total of | Expected rate |
| | | assets | of return |
+------------------+---------------+-----------------+-----------------+
| | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
+------------------+-------+-------+--------+--------+--------+--------+
| | GBPm | GBPm | % | % | % | % |
+------------------+-------+-------+--------+--------+--------+--------+
| Final salary | | | | | | |
| section | | | | | | |
+------------------+-------+-------+--------+--------+--------+--------+
| Equities | 133.3 | 98.6 | 33 | 25 | 7.9 | 7.3 |
+------------------+-------+-------+--------+--------+--------+--------+
| Corporate bonds | 33.4 | 40.5 | 8 | 10 | 5.3 | 5.0 |
+------------------+-------+-------+--------+--------+--------+--------+
| Other return | 14.4 | 8.5 | 4 | 2 | 6.8 | 6.0 |
| seeking assets | | | | | | |
+------------------+-------+-------+--------+--------+--------+--------+
| Government bonds | 183.9 | 194.5 | 46 | 48 | 4.4 | 3.8 |
+------------------+-------+-------+--------+--------+--------+--------+
| Swaps | 13.8 | 30.2 | 3 | 7 | 4.4 | 3.8 |
+------------------+-------+-------+--------+--------+--------+--------+
| Cash | 24.0 | 32.1 | 6 | 8 | 4.4 | 3.8 |
+------------------+-------+-------+--------+--------+--------+--------+
| Total | 402.8 | 404.4 | 100 | 100 | 5.7 | 4.5 |
+------------------+-------+-------+--------+--------+--------+--------+
The Pension Scheme does not hold any investments in employer-related companies.
The expected return on assets assumption is the weighted average of the expected
returns from each of the main asset classes as shown above. The expected rate of
return on assets is based on long-term expectations as at 31 December 2009. The
expected rate of return on bonds has been set by reference to current market
redemption yields. The rates of return for the equities, property and cash asset
classes have been based on the Group's realistic expectations of investment
returns over the longer term.
Actual return on defined benefit assets
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Actual return on scheme assets | 0.9 | 41.4 |
+-------------------------------------------------------+--------+--------+
Principal actuarial assumptions
(a) Financial assumptions
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | % per | % per |
| | annum | annum |
+-------------------------------------------------------+--------+--------+
| Discount rate | 5.6 | 6.4 |
+-------------------------------------------------------+--------+--------+
| Expected rate of return on scheme assets | 5.7 | 4.5 |
+-------------------------------------------------------+--------+--------+
| Salary increases | 2.5 | 2.5 |
+-------------------------------------------------------+--------+--------+
| Pension increases: | | |
+-------------------------------------------------------+--------+--------+
| - where guarantee is the Retail Price Index capped at | 3.6 | 3.0 |
| 5% per annum | | |
+-------------------------------------------------------+--------+--------+
| - where guarantee is the Retail Price Index capped at | 2.4 | 2.2 |
| 2.5% per annum | | |
+-------------------------------------------------------+--------+--------+
| - where guarantee is fixed | At | At |
| | fixed | fixed |
| | rate | rate |
+-------------------------------------------------------+--------+--------+
| Inflation | 3.7 | 3.0 |
+-------------------------------------------------------+--------+--------+
(b) Demographic assumptions
The post-retirement mortality assumptions as at 31 December 2009 follows 100% of
the SAPS 'S1 Light' tables and improvements from 2002 in line with the 'medium
cohort' projections with an underpin of 1% per annum. The table below
illustrates the changes in implied life expectancies as at 31 December 2009
using this mortality assumption. All other demographic assumptions were
consistent with those used for the accounting disclosures at 31 December 2008:
+-------------------------------------------------------+--------+--------+
| | Male | Female |
+-------------------------------------------------------+--------+--------+
| | no. of | no. of |
| | years | years |
+-------------------------------------------------------+--------+--------+
| Life expectancy for a member who is currently 60 | 27.8 | 29.3 |
+-------------------------------------------------------+--------+--------+
| Life expectancy at 60 for a member who is currently | 29.2 | 30.8 |
| 45 | | |
+-------------------------------------------------------+--------+--------+
(c) Historical amounts
+-------------------------+------------+----------+----------+----------+---------+
| | 2009 | 2008 | 2007 | 2006 | 2005 |
+-------------------------+------------+----------+----------+----------+---------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------------+------------+----------+----------+----------+---------+
| Defined benefit | (312.8) | (251.9) | (282.4) | (311.8) | (296.2) |
| obligations | | | | | |
+-------------------------+------------+----------+----------+----------+---------+
| Defined benefit scheme | 402.8 | 404.4 | 344.7 | 306.8 | 256.1 |
| assets | | | | | |
+-------------------------+------------+----------+----------+----------+---------+
| Surplus/(deficit) in | 90.0 | 152.5 | 62.3 | (5.0) | (40.1) |
| the Pension Scheme | | | | | |
+-------------------------+------------+----------+----------+----------+---------+
| Experience | | | | | |
| gains/(losses) | | | | | |
+-------------------------+------------+----------+----------+----------+---------+
| on scheme liabilities | 12.1 | (1.2) | (0.5) | 8.5 | (31.6) |
+-------------------------+------------+----------+----------+----------+---------+
| Experience | | | | | |
| (losses)/gains | | | | | |
+-------------------------+------------+----------+----------+----------+---------+
| on scheme assets | (18.5) | 20.6 | 1.2 | (3.7) | 18.9 |
+-------------------------+------------+----------+----------+----------+---------+
20.2 Henderson Group unapproved pension schemes
Group
The Group operates a number of unapproved pension schemes, the details of which
are provided below:
The Pearl Executive Scheme. Members of this scheme are also members of the
Pension Scheme. However, pensionable earnings under the Pension Scheme are
limited to 1/60th for each year of service and the earnings cap. The Pearl
Executive Scheme provides benefits at 1/30th for each year of service with a
maximum of two thirds of salary after 20 years' service based on pensionable
earnings above the earnings cap, on an unfunded basis.
The Henderson Top Up Scheme. Members of this scheme are also members of the
Pension Scheme. However, pensionable earnings under the Pension Scheme are
limited to the earnings cap, and the Henderson Top Up Scheme enables benefits to
be based on pensionable earnings without restriction of the earnings cap. These
additional uncapped benefits are generally provided for on an unfunded basis.
There is also an unfunded liability in respect of one member, to whom the Group
has made a contractual promise to pay a fixed pension from age 60.
Reconciliation of present value of defined benefit obligations
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 4.7 | 5.2 |
+-------------------------------------------------------+--------+--------+
| Current service cost | 0.1 | 0.3 |
+-------------------------------------------------------+--------+--------+
| Interest cost | 0.3 | 0.3 |
+-------------------------------------------------------+--------+--------+
| Actuarial losses/(gains) | 1.2 | (1.1) |
+-------------------------------------------------------+--------+--------+
| Benefit payments | (0.2) | - |
+-------------------------------------------------------+--------+--------+
| At 31 December | 6.1 | 4.7 |
+-------------------------------------------------------+--------+--------+
The defined benefit obligations at 31 December are split as follows:
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Pearl Executive Scheme | 5.0 | 3.7 |
+-------------------------------------------------------+--------+--------+
| Henderson Top Up Scheme | 0.9 | 0.8 |
+-------------------------------------------------------+--------+--------+
| Individual contractual promise | 0.2 | 0.2 |
+-------------------------------------------------------+--------+--------+
| Total | 6.1 | 4.7 |
+-------------------------------------------------------+--------+--------+
Reconciliation of defined benefit liability recognised in the consolidated
statement of financial position
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Present value of defined benefit obligations | 6.1 | 4.7 |
+-------------------------------------------------------+--------+--------+
| Fair value of defined benefit scheme assets | - | - |
+-------------------------------------------------------+--------+--------+
| At 31 December | 6.1 | 4.7 |
+-------------------------------------------------------+--------+--------+
Pension service cost recognised in the consolidated income statement
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Current service cost | 0.1 | 0.3 |
+-------------------------------------------------------+--------+--------+
| Interest cost | 0.3 | 0.3 |
+-------------------------------------------------------+--------+--------+
| | 0.4 | 0.6 |
+-------------------------------------------------------+--------+--------+
Amounts recognised in the consolidated statement of comprehensive income
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 3.0 | 1.9 |
+-------------------------------------------------------+--------+--------+
| Actuarial gains | (1.2) | 1.1 |
+-------------------------------------------------------+--------+--------+
| At 31 December | 1.8 | 3.0 |
+-------------------------------------------------------+--------+--------+
Movements in net liability recognised in the consolidated statement of financial
position
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| At 1 January | 4.7 | 5.2 |
+-------------------------------------------------------+--------+--------+
| Expense recognised in the consolidated income | 0.4 | 0.6 |
| statement | | |
+-------------------------------------------------------+--------+--------+
| Actuarial losses/(gains) recognised in the | 1.2 | (1.1) |
| consolidated statement of comprehensive income | | |
+-------------------------------------------------------+--------+--------+
| Benefit payments from outside scheme assets | (0.2) | - |
+-------------------------------------------------------+--------+--------+
| At 31 December | 6.1 | 4.7 |
+-------------------------------------------------------+--------+--------+
Principal actuarial assumptions
(a) Financial assumptions
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | % per | % per |
| | annum | annum |
+-------------------------------------------------------+--------+--------+
| Discount rate | 5.6 | 6.4 |
+-------------------------------------------------------+--------+--------+
| Expected rate of return on scheme assets | - | - |
+-------------------------------------------------------+--------+--------+
| Salary increases | n/a | 4.5 |
+-------------------------------------------------------+--------+--------+
| Pension increases: | | |
+-------------------------------------------------------+--------+--------+
| - where guarantee is the Retail Price Index | 3.6 | 3.0 |
+-------------------------------------------------------+--------+--------+
| - where guarantee is fixed | At | At |
| | fixed | fixed |
| | rate | rate |
+-------------------------------------------------------+--------+--------+
| Inflation | 3.7 | 3.0 |
+-------------------------------------------------------+--------+--------+
(b) Demographic assumptions
The post-retirement mortality assumption as at 31 December 2009 follows 100% of
the SAPS 'S1 Light' tables and improvements from 2002 in line with the 'medium
cohort' projections with an underpin of 1% per annum. The table below
illustrates the changes in implied life expectancies as at 31 December 2009
using this mortality assumption. All other demographic assumptions were
consistent with those used for the accounting disclosures at 31 December 2008:
+-------------------------------------------------------+--------+--------+
| | Male | Female |
+-------------------------------------------------------+--------+--------+
| | no. of | no. of |
| | years | years |
+-------------------------------------------------------+--------+--------+
| Life expectancy for a member who is currently 60 | 27.8 | 29.3 |
+-------------------------------------------------------+--------+--------+
| Life expectancy at 60 for a member who is currently | 29.2 | 30.8 |
| 45 | | |
+-------------------------------------------------------+--------+--------+
(c) Historical amounts
+----------------------------+----------+-----------+----------+--------+-------+
| | 2009 | 2008 | 2007 | 2006 | 2005 |
+----------------------------+----------+-----------+----------+--------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+----------------------------+----------+-----------+----------+--------+-------+
| Defined benefit | 6.1 | 4.7 | 5.2 | 5.5 | 5.7 |
| obligations | | | | | |
+----------------------------+----------+-----------+----------+--------+-------+
| Defined benefit scheme | - | - | - | (0.1) | (0.2) |
| assets | | | | | |
+----------------------------+----------+-----------+----------+--------+-------+
| Deficit in the pension | 6.1 | 4.7 | 5.2 | 5.4 | 5.5 |
| schemes | | | | | |
+----------------------------+----------+-----------+----------+--------+-------+
| Experience (losses)/gains | - | (0.1) | 0.2 | 0.5 | 1.5 |
| on scheme liabilities | | | | | |
+----------------------------+----------+-----------+----------+--------+-------+
Employer contributions
The Group does not expect to contribute to the unapproved pension arrangements
in the year ending 31 December 2010.
21. Provisions
Group
+------------------------+---------+-------------+--------+--------+--------+
| | Staff | Product | | Other | Total |
| | related | | Idle | | |
| | | mis-selling | cash | | |
+------------------------+---------+-------------+--------+--------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+------------------------+---------+-------------+--------+--------+--------+
| At 1 January 2009 | 3.7 | 6.3 | 8.2 | 9.6 | 27.8 |
+------------------------+---------+-------------+--------+--------+--------+
| Additions | - | - | - | 9.7 | 9.7 |
+------------------------+---------+-------------+--------+--------+--------+
| Provisions utilised | (0.6) | - | - | (0.5) | (1.1) |
+------------------------+---------+-------------+--------+--------+--------+
| Provisions released | - | - | (0.2) | (1.8) | (2.0) |
+------------------------+---------+-------------+--------+--------+--------+
| Foreign exchange | (0.4) | - | - | - | (0.4) |
| movements | | | | | |
+------------------------+---------+-------------+--------+--------+--------+
| At 31 December 2009 | 2.7 | 6.3 | 8.0 | 17.0 | 34.0 |
+------------------------+---------+-------------+--------+--------+--------+
| | | | | | |
+------------------------+---------+-------------+--------+--------+--------+
| Non-current | - | 5.8 | 8.0 | 7.1 | 20.9 |
+------------------------+---------+-------------+--------+--------+--------+
| Current | 2.7 | 0.5 | - | 9.9 | 13.1 |
+------------------------+---------+-------------+--------+--------+--------+
| At 31 December 2009 | 2.7 | 6.3 | 8.0 | 17.0 | 34.0 |
+------------------------+---------+-------------+--------+--------+--------+
Company
+------------------------------------------------------+-------------+---------+
| | Product | Total |
| | | |
| | mis-selling | |
+------------------------------------------------------+-------------+---------+
| | GBPm | GBPm |
+------------------------------------------------------+-------------+---------+
| At 1 January 2009 | 6.3 | 6.3 |
+------------------------------------------------------+-------------+---------+
| Additions | - | - |
+------------------------------------------------------+-------------+---------+
| Provisions utilised | - | - |
+------------------------------------------------------+-------------+---------+
| At 31 December 2009 | 6.3 | 6.3 |
+------------------------------------------------------+-------------+---------+
| | | |
+------------------------------------------------------+-------------+---------+
| Non-current | 5.8 | 5.8 |
+------------------------------------------------------+-------------+---------+
| Current | 0.5 | 0.5 |
+------------------------------------------------------+-------------+---------+
| | 6.3 | 6.3 |
+------------------------------------------------------+-------------+---------+
Staff related
Staff-related provisions have been recognised in respect of a business
restructure.
Product mis-selling
Product mis-selling provisions relate to alleged inappropriate advice given to
certain investors by Towry Law International prior to the Group's ownership.
Idle cash
Idle cash provisions are obligations in relation to the disposal of Cogent
Investment Operations Limited by the Group in 2002.
Other
Other provisions relate to issues which have arisen as a result of litigation
and obligations during the course of the Group's and Company's business
activities.
The provisions reflect the current estimates of amounts and timings.
22. Deferred taxation
Deferred tax assets and liabilities recognised by the Group and movements
therein are as follows:
Group
+-------------------------+-------------+----------+------------+-------------+--------+
| Deferred tax | Accelerated | Share | Retirement | Other | Total |
| assets/(liabilities) | capital | based | benefits | temporary | |
| | allowances | payments | | differences | |
+-------------------------+-------------+----------+------------+-------------+--------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+-------------------------+-------------+----------+------------+-------------+--------+
| At 1 January 2008 | 0.8 | 2.8 | (10.7) | (1.8) | (8.9) |
+-------------------------+-------------+----------+------------+-------------+--------+
| Current year (charge) | (0.7) | | | (1.9) | (14.5) |
| to the consolidated | | (2.1) | (9.8) | | |
| income statement | | | | | |
+-------------------------+-------------+----------+------------+-------------+--------+
| Current year | - | | | 2.3 | (15.9) |
| (charge)/credit to the | | - | (18.2) | | |
| consolidated statement | | | | | |
| of comprehensive income | | | | | |
+-------------------------+-------------+----------+------------+-------------+--------+
| At 31 December 2008 | 0.1 | 0.7 | (38.7) | (1.4) | (39.3) |
+-------------------------+-------------+----------+------------+-------------+--------+
| Current year | 1.4 | (5.3) | (4.1) | 5.4 | (2.6) |
| (charge)/credit to the | | | | | |
| consolidated income | | | | | |
| statement | | | | | |
+-------------------------+-------------+----------+------------+-------------+--------+
| Current year | - | | | (0.6) | 18.8 |
| (charge)/credit to the | | - | 19.4 | | |
| consolidated statement | | | | | |
| of comprehensive income | | | | | |
+-------------------------+-------------+----------+------------+-------------+--------+
| At 31 December 2009 | 1.5 | (4.6) | (23.4) | 3.4 | (23.1) |
+-------------------------+-------------+----------+------------+-------------+--------+
Certain deferred tax assets and liabilities in the above summary have been
offset as follows:
+--------------------------------------------+--------+-------------+--------+
| | Assets | Liabilities | Total |
| | GBPm | GBPm | GBPm |
+--------------------------------------------+--------+-------------+--------+
| At 31 December 2008 | 5.4 | (44.7) | (39.3) |
+--------------------------------------------+--------+-------------+--------+
| At 31 December 2009 | 7.0 | (30.1) | (23.1) |
+--------------------------------------------+--------+-------------+--------+
At the balance sheet date, the Group had unused tax losses in respect of which
no deferred tax has been recognised as utilisation of the losses is dependent on
future profits. The unrecognised deferred tax asset in respect of trading losses
carried forward is GBP23.8m (2008: GBP9.4m). The unrecognised deferred tax asset
in respect of capital losses carried forward is GBP16.1m (2008: GBP2.7m). The
losses have no expiry date.
Consistent with prior years, deferred tax is not recognised in respect of
taxable temporary differences associated with the Group's investments in
overseas subsidiaries, branches, associates and joint ventures where the Group
controls the timing of the reversal of the temporary differences and where the
reversal of the temporary differences is not anticipated in the foreseeable
future.
Company
+------------------------------------------------------------------+------------+
| Deferred tax (liabilities) | Retirement |
| | benefits |
+------------------------------------------------------------------+------------+
| | GBPm |
+------------------------------------------------------------------+------------+
| At 1 January 2008 | (16.7) |
+------------------------------------------------------------------+------------+
| Current year credit to the income statement | 9.4 |
+------------------------------------------------------------------+------------+
| Current year (charge) to the statement of comprehensive income | (17.9) |
+------------------------------------------------------------------+------------+
| At 31 December 2008 | (25.2) |
+------------------------------------------------------------------+------------+
| Current year charge to the income statement | - |
+------------------------------------------------------------------+------------+
| Current year credit to the statement of comprehensive income | 19.2 |
+------------------------------------------------------------------+------------+
| At 31 December 2009 | (6.0) |
+------------------------------------------------------------------+------------+
23. Borrowings
+---------------------------------------------------------+-------+-------+
| | |
| | Company |
+---------------------------------------------------------+---------------+
| | 2009 | 2008 |
+---------------------------------------------------------+-------+-------+
| | GBPm | GBPm |
+---------------------------------------------------------+-------+-------+
| Loans from subsidiaries | 549.0 | 422.0 |
+---------------------------------------------------------+-------+-------+
The loans from subsidiaries are either interest free or attract annual interest
at a linked to LIBOR and are repayable on demand.
24. Trade and other payables
+----------------------------------------+-------+------------+-------+------------+
| | Group | Company |
+----------------------------------------+--------------------+--------------------+
| | 2009 | 2008 | 2009 | 2008 |
| | | (Restated) | | (Restated) |
+----------------------------------------+-------+------------+-------+------------+
| | GBPm | GBPm | GBPm | GBPm |
+----------------------------------------+-------+------------+-------+------------+
| OEIC and unit trust creditors | 30.8 | 53.2 | - | - |
+----------------------------------------+-------+------------+-------+------------+
| Derivative financial instruments | 1.0 | 0.6 | - | - |
+----------------------------------------+-------+------------+-------+------------+
| Other creditors | 9.3 | 6.3 | - | - |
+----------------------------------------+-------+------------+-------+------------+
| Accruals | 105.7 | 102.9 | 3.5 | 4.4 |
+----------------------------------------+-------+------------+-------+------------+
| Amounts owed to fellow subsidiaries | 111.7 | 74.1 | 339.2 | 264.6 |
+----------------------------------------+-------+------------+-------+------------+
| Loans from fellow subsidiaries | 26.8 | - | - | - |
+----------------------------------------+-------+------------+-------+------------+
| | 285.3 | 237.1 | 342.7 | 269.0 |
+----------------------------------------+-------+------------+-------+------------+
25. Share capital
25.1 Share capital authorised
+--------------------------------------------------------+-------+-------+
| | Group |
| | and Company |
+--------------------------------------------------------+---------------+
| | 2009 | 2008 |
+--------------------------------------------------------+-------+-------+
| | GBPm | GBPm |
+--------------------------------------------------------+-------+-------+
| 1 A ordinary share of 12.5 pence | - | - |
+--------------------------------------------------------+-------+-------+
| 1,949,910,776 ordinary shares of 12.5 pence each | | |
| | 243.7 | 243.7 |
+--------------------------------------------------------+-------+-------+
25.2 Allotted share capital
Allotted, called up and fully paid shares:
+--------------------------------------------------------+-------------+-------+
| | Group |
| | and Company |
+--------------------------------------------------------+---------------------+
| | no. | GBPm |
+--------------------------------------------------------+-------------+-------+
| A Ordinary shares | | |
+--------------------------------------------------------+-------------+-------+
| Shares in issue at 31 December 2008 and 31 December | 1 | - |
| 2009 | | |
+--------------------------------------------------------+-------------+-------+
| | | |
+--------------------------------------------------------+-------------+-------+
| Ordinary shares | | |
+--------------------------------------------------------+-------------+-------+
| Shares in issue at 1 January 2008 | 724,504,573 | 90.6 |
+--------------------------------------------------------+-------------+-------+
| Issue of shares for SAYE | 316,273 | - |
+--------------------------------------------------------+-------------+-------+
| Issue of shares for BAYE | 372,123 | - |
+--------------------------------------------------------+-------------+-------+
| Shares in issue at 31 December 2008 and 31 December | 725,192,969 | 90.6 |
| 2009 | | |
+--------------------------------------------------------+-------------+-------+
All of the ordinary shares in issue carry the same right to receive dividends
and other distributions declared, made or paid by the Company.
On 20 October 2008, one 12.5 pence A ordinary share was issued to new Henderson
Group plc in order to maintain continuity of ownership of the Company during the
implementation of the Scheme. The A ordinary share does not entitle the holder
to receive notice of, attend or vote at any general meeting of the Company.
On 31 October 2008, the Scheme effective date, the shares of the Company were
cancelled by way of a reduction of capital. The shareholders of the Company on
the same date were issued shares in new Henderson Group plc on a one for one
basis in consideration for the cancellation of their shares in the Company. New
ordinary shares in the Company were then issued to new Henderson Group plc,
which then became the ultimate holding company of the Henderson Group.
Pursuant to the Scheme, the shareholding of the Company, including the A
ordinary share, was transferred from Henderson Group plc to Henderson Holdings
Group Limited.
The Directors consider shareholders' equity to represent Group capital. The
Directors manage the Group's capital structure on an ongoing basis. Changes to
the Group's capital structure can be affected by adjusting the dividend policy,
returning capital to shareholders or issuing new shares and other forms of
capital.
26. Reserves
Group and Company
Nature and purpose of reserves
The consolidated statement of changes in equity and Company statement of changes
in equity provide details of movements in equity for the Group and Company.
Share premium
Share premium records the difference between the nominal value of shares issued
and the full value of the consideration received.
Translation reserve
The translation reserve comprises differences on exchange arising from the
translation of opening statements of financial position of subsidiaries, whose
reporting currency is not GBP, and differences between the results of these
subsidiaries translated at average rates for the reporting period and period end
rates.
The translation reserve also includes unrealised foreign exchange gains and
losses on available-for-sale financial assets which are not part of a designated
hedge relationship. Upon disposal or impairment of these assets, amounts
previously recognised in the translation reserve are reversed out and the
cumulative amount of the gain or loss or impairment is recognised in the
consolidated income statement.
Revaluation reserve
The revaluation reserve comprises the amount of any unrealised gain or loss
recognised in the consolidated statement of comprehensive income in relation to
the revaluation of available-for-sale financial assets.
Upon disposal or impairment of these assets, amounts previously recognised in
the revaluation reserve are reversed out and the cumulative amount of the gain
or loss or impairment is recognised.
27. Minority interests
The Group has consolidated the following company which has minority interests:
+----------------------------+----------------+-------------+----------+--------+
| | 2009 | 2008 | 2009 | 2008 |
+----------------------------+----------------+-------------+----------+--------+
| | % minority | % minority | GBPm | GBPm |
| | interest | interest | | |
+----------------------------+----------------+-------------+----------+--------+
| HGI Immobilien Austria | 35% | 35% | 0.4 | 0.3 |
| GmbH | | | | |
+----------------------------+----------------+-------------+----------+--------+
| | | | 0.4 | 0.3 |
| At 31 December | | | | |
+----------------------------+----------------+-------------+----------+--------+
28. Financial risk management
Financial risk management objectives and policies
Financial assets principally comprise investments in equity securities,
short-term investments, trade and other receivables, and cash and cash
equivalents. Financial liabilities comprise borrowings for financing purposes,
certain provisions and trade and other payables. The main risks arising from
financial instruments are price risk, interest rate risk, liquidity risk,
foreign currency risk and credit risk. Each of these risks are discussed in
detail below. The Group monitors financial risks on a consolidated basis and
intra-Group balances are settled when it is deemed appropriate for both parties
to the transaction.
The Company is not exposed to material financial risk as all material financial
assets and liabilities on its balance sheet, with the exception of the debt
instrument in issue, relate to transactions with its subsidiaries or with fellow
subsidiaries of its ultimate parent. The Company believes that balances arising
from these transactions carry no material risk. With regards to the debt
instrument in issue, the liquidity and interest rate risks are shown within the
Group disclosures below. As a result separate disclosures for the Company have
been excluded.
The Group has designed a framework to manage the risks of its business and to
ensure that the Directors have in place risk management practices appropriate to
a listed company. The management of risk within the Group is governed by the
Board.
28.1 Price risk
Price risk is the risk that a decline in the value of assets adversely impacts
on the profitability of the Group.
The Group is exposed to price risk in respect of seed capital investments in
Henderson Funds (available-for-sale financial assets). Seed capital investments
vary in duration, depending on the nature of the investment, with a typical
range of less than one year for Listed Asset products and between three and five
years for Private Equity and Property funds. The total market value of seed
capital investments at 31 December 2009 was GBP27.3m (2008: GBP48.2m).
Management monitors exposures to price risk on an ongoing basis. Movements in
significant investment values are monitored on a daily basis. Occasionally,
management will consider hedging price risk, but there were no such hedges in
place at 31 December 2009 (31 December 2008: nil).
A fall in the value of an investment which is significant or prolonged is
considered to be an indication of impairment under IAS 39. In such an event,
the investment is written down to fair value and the amounts previously
recognised in equity, in respect of market value and unhedged foreign exchange
movements on the investment, are recognised in the consolidated income statement
as an impairment charge.
Price risk sensitivity analysis on available-for-sale financial assets
+--------------------------------+--------------+---------+---------------+---------+
| | 2009 | 2008 |
+--------------------------------+------------------------+-------------------------+
| Price risk sensitivities | Consolidated | Equity | Consolidated | Equity |
| | income | GBPm | income | GBPm |
| | statement | | statement | |
| | GBPm | | GBPm | |
+--------------------------------+--------------+---------+---------------+---------+
| Market value movement +/- 10% | - | 2.7 | - | 4.8 |
+--------------------------------+--------------+---------+---------------+---------+
28.2 Interest rate risk
Interest rate risk is the risk that the Group will sustain losses from adverse
movements in interest bearing assets and liabilities. The Group is exposed to
interest rates on banking deposits held in the ordinary course of business.
Available-for-sale financial assets and debt instruments in issue are not
currently exposed to interest rate risk. This exposure is monitored by
management on a continuing basis.
Financial assets and liabilities exposed to interest rate risk
At 31 December 2009
+--------------------------+----------+-----------+-----------+---------+
| | | Not directly exposed | |
| | | to interest rate risk | |
+--------------------------+----------+-----------------------+---------+
| | Floating | Fixed | Other | Total |
| | rate | Rate | | |
+--------------------------+----------+-----------+-----------+---------+
| | GBPm | GBPm | GBPm | GBPm |
+--------------------------+----------+-----------+-----------+---------+
| Financial assets | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Shares/units in | - | - | 0.6 | 0.6 |
| OEICs/unit trusts | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Available-for-sale | - | - | 27.3 | 27.3 |
| financial assets | | | | |
+--------------------------+----------+-----------+-----------+---------+
| OEIC, unit trust and | - | - | 256.0 | 256.0 |
| other debtors | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Derivative financial | - | - | 0.2 | 0.2 |
| instruments | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Cash and cash | 84.5 | - | - | 84.5 |
| equivalents | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Total financial assets | 84.5 | - | 284.1 | 368.6 |
+--------------------------+----------+-----------+-----------+---------+
| | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Financial liabilities | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Debt instrument in issue | - | 181.9 | - | 181.9 |
+--------------------------+----------+-----------+-----------+---------+
| OEIC, unit trust and | - | - | 178.6 | 178.6 |
| other creditors | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Derivative financial | - | - | 1.0 | 1.0 |
| instruments | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Total financial | - | 181.9 | 179.6 | 361.5 |
| liabilities | | | | |
+--------------------------+----------+-----------+-----------+---------+
At 31 December 2008
+--------------------------+----------+-----------+-----------+---------+
| | | Not directly exposed | |
| | | to interest rate risk | |
+--------------------------+----------+-----------------------+---------+
| | Floating | Fixed | Other | Total |
| | rate | rate | | |
+--------------------------+----------+-----------+-----------+---------+
| | GBPm | GBPm | GBPm | GBPm |
+--------------------------+----------+-----------+-----------+---------+
| Financial assets | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Shares/units in | - | - | 0.4 | 0.4 |
| OEICs/unit trusts | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Available-for-sale | - | - | 48.2 | 48.2 |
| financial assets | | | | |
+--------------------------+----------+-----------+-----------+---------+
| OEIC, unit trust and | 125.8 | - | 76.9 | 202.7 |
| other debtors | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Cash and cash | 132.7 | - | - | 132.7 |
| equivalents | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Total financial assets | 258.5 | - | 125.5 | 384.0 |
+--------------------------+----------+-----------+-----------+---------+
| | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Financial liabilities | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Debt instrument in issue | - | 184.5 | - | 184.5 |
+--------------------------+----------+-----------+-----------+---------+
| OEIC, unit trust and | - | - | 133.6 | 133.6 |
| other creditors | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Derivative financial | - | - | 0.6 | 0.6 |
| instruments | | | | |
+--------------------------+----------+-----------+-----------+---------+
| Total financial | - | 184.5 | 134.2 | 318.7 |
| liabilities | | | | |
+--------------------------+----------+-----------+-----------+---------+
Interest on financial instruments classified as floating rate is repriced at
intervals of less than one year. Interest on financial instruments classified
as fixed rate is fixed until the maturity of the instrument.
Interest rate risk sensitivity analysis
Interest rate risk sensitivity analysis on the consolidated income statement has
been performed on the basis of a 50bps fall in interest rates at the beginning
of the year. The impact of such a decrease would reduce anticipated earnings by
circa GBP0.4m per annum.
28.3 Liquidity risk
Liquidity risk is the risk that the Group may be unable to meet its payment
obligations as they fall due.
Group liquidity is managed on a daily basis by the finance function, to ensure
that the Group always has sufficient cash and/or highly liquid assets available
to meet its liabilities. This function also controls and monitors the use of the
Group's non-operating capital resources. It is the Group's policy to ensure that
it has access to funds to cover all forecast commitments for the next 12 months.
The maturity dates of the Group's financial liabilities are as follows:
At 31 December 2009
+--------------------------------+-----------+---------+----------+----------+
| | Within | Within | Total | Carrying |
| | 1 year | 2-5 | | value in |
| | or | years | | the |
| | repayable | | | balance |
| | on demand | | | sheet |
+--------------------------------+-----------+---------+----------+----------+
| | GBPm | GBPm | GBPm | GBPm |
+--------------------------------+-----------+---------+----------+----------+
| | | | | |
+--------------------------------+-----------+---------+----------+----------+
| Debt instrument in issue | 11.4 | 192.0 | 203.4 | 181.9 |
| (including interest) | | | | |
+--------------------------------+-----------+---------+----------+----------+
| OEIC, unit trust and other | 178.6 | - | 178.6 | 178.6 |
| creditors | | | | |
+--------------------------------+-----------+---------+----------+----------+
| Derivative financial | 1.0 | - | 1.0 | 1.0 |
| instruments | | | | |
+--------------------------------+-----------+---------+----------+----------+
| | 191.0 | 192.0 | 383.0 | 361.5 |
+--------------------------------+-----------+---------+----------+----------+
At 31 December 2008
+--------------------------------+-----------+---------+----------+----------+
| | Within | Within | Total | Carrying |
| | 1 year | 2-5 | | value in |
| | or | years | | the |
| | repayable | | | balance |
| | on demand | | | sheet |
+--------------------------------+-----------+---------+----------+----------+
| | GBPm | GBPm | GBPm | GBPm |
+--------------------------------+-----------+---------+----------+----------+
| | | | | |
+--------------------------------+-----------+---------+----------+----------+
| Debt instrument in issue | 11.4 | 203.4 | 214.8 | 184.5 |
| (including interest) | | | | |
+--------------------------------+-----------+---------+----------+----------+
| OEIC, unit trust and other | 133.6 | - | 133.6 | 133.6 |
| creditors | | | | |
+--------------------------------+-----------+---------+----------+----------+
| Derivative financial | 0.6 | - | 0.6 | 0.6 |
| instruments | | | | |
+--------------------------------+-----------+---------+----------+----------+
| | 145.6 | 203.4 | 349.0 | 318.7 |
+--------------------------------+-----------+---------+----------+----------+
28.4 Foreign currency risk
Foreign currency risk is the risk that the Group will sustain losses through
adverse movements in currency exchange rates.
The Group's business is impacted through its exposure to non-GBP income and
expenses, and assets and liabilities of its overseas subsidiaries as well as
assets and liabilities denominated in currency other than GBP. The currency
exposure is managed by closely monitoring foreign currency positions. The Group
also uses foreign currency contracts to eliminate currency exposure on certain
individual transactions. The Group also seeks to use natural hedges to limit
exposure. Where there is a mismatch on material currency flows, which are
reasonably certain, they are actively hedged. Where there is insufficient
certainty the currency is translated into GBP on receipt. In addition, the Group
carries a small foreign exchange position as principal to facilitate the smooth
conduct of its client business.
Foreign currency risk management is overseen by the Hedge Committee and hedge
effectiveness is reported quarterly to the Henderson Group plc Board.
A rolling programme of forward currency contracts has been implemented to hedge
the currency exposures arising from certain available-for-sale financial assets,
with year end notional values of US$25.8m and EUR12.5m (2008: US$32.0m) (refer to
note 28.6).
Foreign currency risk sensitivity analysis
Significant financial instruments are either denominated in pounds sterling or
hedged back to pounds sterling using foreign currency forward contracts.
However, there remain some foreign currency balances which are not fully hedged
since, individually, they are below the policy level for implementing hedging
arrangements. In addition, there are unhedged foreign currency cash balances in
overseas subsidiaries of the Group.
The table below illustrates the impact of adjusting year end exchange rates on
all unhedged financial assets and cash balances denominated in a currency other
than pounds sterling:
Currency sensitivities
+--------------------------------------+--------------+--------+--------------+--------+
| | 2009 | 2008 |
+--------------------------------------+-----------------------+-----------------------+
| | Consolidated | Equity | Consolidated | Equity |
| | income | | income | |
| | statement | GBPm | statement | GBPm |
| | GBPm | | GBPm | |
+--------------------------------------+--------------+--------+--------------+--------+
| Euro exchange rate +/- 10% | 0.1 | - | 0.1 | 1.5 |
+--------------------------------------+--------------+--------+--------------+--------+
| US dollar exchange +/- 10% | - | 0.1 | 0.2 | 0.1 |
+--------------------------------------+--------------+--------+--------------+--------+
| Australian dollar exchange +/- 10% | - | - | - | 0.1 |
+--------------------------------------+--------------+--------+--------------+--------+
28.5 Credit risk
Credit risk is the risk of a counterparty of the Group defaulting on funds
deposited with it or on a trade debt.
The Group has an established credit policy, to ensure that it only transacts
with counterparties that are able to meet satisfactory rating requirements.
Counterparty limits are reviewed and set centrally by the Credit Risk Committee.
Management is responsible for ensuring that it remains within these limits and
the risk management function monitors and reports any exceptions to policy. The
Group has not suffered any losses as a result of trade debtor defaults during
the year.
The risk management function is also responsible for reporting credit exposures
to the Henderson Group plc audit committee on a quarterly basis and for ensuring
that any credit concerns are raised and actions taken to mitigate risks.
The table below contains an analysis of current and overdue financial assets:
At 31 December 2009
+---------------------+-------+--------+--------+--------+---------+-------+
| | Not | 0-3 | 3-6 | 6-12 | Greater | Total |
| | past | months | months | months | than 12 | |
| | due | past | past | past | months | |
| | | due | due | due | past | |
| | | | | | due | |
+---------------------+-------+--------+--------+--------+---------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------+-------+--------+--------+--------+---------+-------+
| Financial assets | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
| Shares/units in | 0.6 | - | - | - | - | 0.6 |
| OEICs/unit trusts | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
| Available-for-sale | 27.3 | - | - | - | - | 27.3 |
| financial assets | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
| OEIC, unit trust | 252.9 | 2.6 | 0.2 | 0.1 | 0.2 | 256.0 |
| and other debtors | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
| Derivative | 0.2 | - | - | - | - | 0.2 |
| financial | | | | | | |
| instruments | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
| Cash and cash | 84.5 | - | - | - | - | 84.5 |
| equivalents | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
| Total financial | 365.5 | 2.6 | 0.2 | 0.1 | 0.2 | 368.6 |
| assets | | | | | | |
+---------------------+-------+--------+--------+--------+---------+-------+
At 31 December 2008
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| | Not | 0-3 | 3-6 | 6-12 | Greater | Total |
| | past | months | months | months | than 12 | |
| | due | past | past | past | months | |
| | | due | due | due | past | |
| | | | | | due | |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| Financial assets | | | | | | |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| Shares/units in OEICs/unit trusts | 0.4 | - | - | - | - | 0.4 |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| Available-for-sale financial assets | 48.2 | - | - | - | - | 48.2 |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| OEIC, unit trust and other debtors | 200.4 | 1.3 | 0.6 | 0.3 | 0.1 | 202.7 |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| Cash and cash equivalents | 132.7 | - | - | - | - | 132.7 |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
| Total financial assets | 381.7 | 1.3 | 0.6 | 0.3 | 0.1 | 384.0 |
+--------------------------------------+-------+--------+--------+--------+---------+-------+
The table below contains an analysis of financial assets as rated by Moody's
Investors Service:
At 31 December 2009
+---------------------+-------+--------+-------+-------+-------+-------+
| | AAA | AA | A | BBB | Not | Total |
| | | | | | rated | |
+---------------------+-------+--------+-------+-------+-------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------+-------+--------+-------+-------+-------+-------+
| Financial assets | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
| Shares/units in | - | - | - | - | 0.6 | 0.6 |
| OEICs/unit trusts | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
| Available-for-sale | - | - | - | - | 27.3 | 27.3 |
| financial assets | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
| OEIC, unit trust | - | - | - | - | 256.0 | 256.0 |
| and other debtors | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
| Derivative | - | 0.2 | - | - | - | 0.2 |
| financial | | | | | | |
| instruments | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
| Cash and cash | 69.9 | 7.0 | 7.6 | - | - | 84.5 |
| equivalents | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
| Total financial | 69.9 | 7.2 | 7.6 | - | 283.9 | 368.6 |
| assets | | | | | | |
+---------------------+-------+--------+-------+-------+-------+-------+
At 31 December 2008
+---------------------+-------+-------+-------+-------+-------+-------+
| | AAA | AA | A | BBB | Not | Total |
| | | | | | rated | |
+---------------------+-------+-------+-------+-------+-------+-------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+---------------------+-------+-------+-------+-------+-------+-------+
| Financial assets | | | | | | |
+---------------------+-------+-------+-------+-------+-------+-------+
| Shares/units in | - | - | - | - | 0.4 | 0.4 |
| OEICs/unit trusts | | | | | | |
+---------------------+-------+-------+-------+-------+-------+-------+
| Available-for-sale | - | - | - | - | 48.2 | 48.2 |
| financial assets | | | | | | |
+---------------------+-------+-------+-------+-------+-------+-------+
| OEIC, unit trust | - | - | - | - | 202.7 | 202.7 |
| and other debtors | | | | | | |
+---------------------+-------+-------+-------+-------+-------+-------+
| Cash and cash | 109.0 | 23.6 | 0.1 | - | - | 132.7 |
| equivalents | | | | | | |
+---------------------+-------+-------+-------+-------+-------+-------+
| Total financial | 109.0 | 23.6 | 0.1 | - | 251.3 | 384.0 |
| assets | | | | | | |
+---------------------+-------+-------+-------+-------+-------+-------+
28.6 Hedging activities
At 31 December 2009, the Group held three forward exchange contracts to hedge
the foreign currency risk arising from investments denominated in Euro and US
dollar (refer to note 28.4).
These forward exchange contracts have been assessed as effective fair value
hedges. A net unrealised gain arising on these instruments of GBP0.3m (2008:
loss GBP24.2m) has been offset in the consolidated income statement by GBP0.3m
(2008: GBP24.3m), being the portion of the unrealised foreign exchange loss on
available-for-sale investments in designated hedging relationships (refer to
note 28.4).
+----------------------+----------+--------+-------------+----------+--------+-------------+
| | 2009 | 2008 |
+----------------------+---------------------------------+---------------------------------+
| | Notional | Assets | Liabilities | Notional | Assets | Liabilities |
| | amount | | | amount | | |
+----------------------+----------+--------+-------------+----------+--------+-------------+
| | GBPm | GBPm | GBPm | GBPm | GBPm | GBPm |
+----------------------+----------+--------+-------------+----------+--------+-------------+
| Fair value hedges | | | | | | |
+----------------------+----------+--------+-------------+----------+--------+-------------+
| Forward exchange | 39.9 | (0.2) | 1.0 | 21.6 | - | 0.6 |
| contracts at fair | | | | | | |
| value | | | | | | |
+----------------------+----------+--------+-------------+----------+--------+-------------+
29. Leases
Operating lease
The Group was party to an operating lease which was surrendered on 28 November
2008. A new 20.5 year operating lease was entered into during 2008 which
provides for reviews to open market rent on every fifth anniversary of the lease
and an initial rent-free period of 30 months. The rental expense on this lease
will be recognised on a straight-line basis over the lease period.
The future minimum lease payments under non-cancellable operating leases fall
due as follows:
+-------------------------------------------------------+--------+--------+
| | 2009 | 2008 |
+-------------------------------------------------------+--------+--------+
| | GBPm | GBPm |
+-------------------------------------------------------+--------+--------+
| Within one year | 2.9 | 0.7 |
+-------------------------------------------------------+--------+--------+
| In the second to fifth years inclusive | 22.8 | 28.2 |
+-------------------------------------------------------+--------+--------+
| After five years | 74.2 | 99.5 |
+-------------------------------------------------------+--------+--------+
| Total | 99.9 | 128.4 |
+-------------------------------------------------------+--------+--------+
30. Capital commitments
The amounts of capital expenditure contracted for but not provided for in the
financial statements at 31 December 2009 amounted to GBPnil (2008: GBP1.1m).
31. Related party transactions
Disclosures relating to the Henderson Group Pension Scheme are covered under
note 20.
Group
Intra group related party transactions and outstanding balances are eliminated
in the preparation of the consolidated financial statements of the Group.
Details of transactions between the Group and its fellow subsidiaries, which are
related parties, together with amounts due from and to these related parties at
the balance sheet date, are disclosed below:
+-------------------------------------------------------+---------+------------+
| | 2009 | 2008 |
| | | (Restated) |
+-------------------------------------------------------+---------+------------+
| | GBPm | GBPm |
+-------------------------------------------------------+---------+------------+
| Transactions with related parties | | |
+-------------------------------------------------------+---------+------------+
| Profit on group restructuring | - | 34.2 |
+-------------------------------------------------------+---------+------------+
| Transfer of financial instruments to fellow | - | 30.5 |
| subsidiary on group restructure | | |
+-------------------------------------------------------+---------+------------+
| Interest receivable | 3.7 | 0.7 |
+-------------------------------------------------------+---------+------------+
| Loss on write down of loan to fellow subsidiary | - | (20.9) |
+-------------------------------------------------------+---------+------------+
| Income from fellow subsidiaries | 56.6 | 63.0 |
+-------------------------------------------------------+---------+------------+
| Expenses from fellow subsidiaries | (63.1) | (61.2) |
+-------------------------------------------------------+---------+------------+
| Share of associates profit for the year | 0.7 | 2.4 |
+-------------------------------------------------------+---------+------------+
| | | |
+-------------------------------------------------------+---------+------------+
| Amounts owed by/(to) related parties | | |
+-------------------------------------------------------+---------+------------+
| Amounts owed by fellow subsidiaries | 200.3 | 141.9 |
+-------------------------------------------------------+---------+------------+
| Amounts owed to fellow subsidiaries | (138.5) | (74.1) |
+-------------------------------------------------------+---------+------------+
Compensation of key management personnel (including Directors)
+------------------------------------------------+-----+--------+--------+
| | | 2009 | 2008 |
+------------------------------------------------+-----+--------+--------+
| | | GBPm | GBPm |
+------------------------------------------------+-----+--------+--------+
| Short-term employee benefits | | 5.2 | 4.2 |
+------------------------------------------------+-----+--------+--------+
| Post-employment benefits | | 0.2 | 0.2 |
+------------------------------------------------+-----+--------+--------+
| Share-based payments | | 4.1 | 9.0 |
+------------------------------------------------+-----+--------+--------+
| | | 9.5 | 13.4 |
+------------------------------------------------+-----+--------+--------+
Company
Details of transactions between the Company and its controlled entities, which
are related parties, together with amounts due from and to these related parties
at the balance sheet date, are disclosed below:
+-------------------------------------------------------+---------+------------+
| | 2009 | 2008 |
| | | (Restated) |
+-------------------------------------------------------+---------+------------+
| | GBPm | GBPm |
+-------------------------------------------------------+---------+------------+
| Transactions with related parties | | |
+-------------------------------------------------------+---------+------------+
| Additional investment in subsidiary companies | 48.1 | - |
+-------------------------------------------------------+---------+------------+
| Impairment of investment in subsidiary companies | (50.6) | - |
+-------------------------------------------------------+---------+------------+
| Dividends receivable | - | 1.0 |
+-------------------------------------------------------+---------+------------+
| Expenses recovered from other Group companies | 4.0 | 12.6 |
+-------------------------------------------------------+---------+------------+
| Interest payable | (9.8) | (25.8) |
+-------------------------------------------------------+---------+------------+
| Interest receivable | 1.4 | - |
+-------------------------------------------------------+---------+------------+
| | | |
+-------------------------------------------------------+---------+------------+
| Amounts owed by/(to) related parties | | |
+-------------------------------------------------------+---------+------------+
| Amounts owed by fellow subsidiaries | 365.7 | 198.4 |
+-------------------------------------------------------+---------+------------+
| Amounts owed to fellow subsidiaries | (888.2) | (686.6) |
+-------------------------------------------------------+---------+------------+
32. Ultimate Parent Undertaking and Controlling Party
The Company's immediate parent undertaking is Henderson Holdings Group Limited
and the ultimate parent undertaking is Henderson Group plc. A copy of the
Henderson Group plc's Annual Report and Accounts for the year ended 31 December
2009 can be obtained from its registered office at 47 Esplanade, St Helier,
Jersey, JE1 0BD and at www.henderson.com.
33. Contingent liabilities
The following contingent liabilities existed or may exist at 31 December 2009:
· In the normal course of business, the Group is exposed to certain
legal issues, which can involve litigation and arbitration, and may result in
contingent liabilities;
· In the normal course of business, the Group enters into foreign
exchange contracts for Group hedging purposes and for facilitating foreign
currency transactions of its clients. Such contracts can give rise to contingent
liabilities;
· On 2 May 2006, the Hong Kong Securities and Futures Commission
announced that it had reached a settlement with UKFP (Asia) HK Limited (formerly
part of Towry Law International) regarding certain legacy products sold by Towry
Law International. Significant payments have subsequently been made to investors
in line with accounting provisions made for that purpose. The Directors are of
the opinion that the provisions remaining at the reporting date are adequate to
cover any future payments;
· Under the sale agreement with Pearl Group Limited, normal tax-related
warranties and indemnities given by the Group expire up to six years from the
disposal date of 13 April 2005; and
· Under the Towry Law UK sale agreement, normal tax-related warranties
and indemnities given by the Group expire up to six years from the disposal date
of 3 May 2006.
As at the date of approval of the 2009 financial statements, the Group and
Company neither foresee nor have they been notified of any claims under
outstanding warranties and indemnities from the abovementioned sale agreements.
34. Acquisitions and disposals of subsidiaries
34.1 Acquisitions
The Group did not acquire any subsidiaries during the current or previous year.
34.2 Disposals
The Group did not dispose of any subsidiaries during the current period.
On 27 November 2008, the Group completed the sale of the following companies to
Henderson Holdings Group BV, a fellow subsidiary of Henderson Group plc:
Henderson Funds Management (Jersey) Limited,
Henderson Global Investors (Ireland) Limited,
Henderson Management SA,
Henderson Fund Management (Luxembourg) SA,
Henderson Equity Partners Funds Limited,
Henderson Global Investors (Hong Kong) Limited,
Henderson Global Investors (Singapore) Limited,
Henderson Property Management Company (Luxembourg) No.1 sarl, and
Henderson International Finances Limited.
Information relating to this disposal is included in note 7 to these accounts.
35. Events after the balance sheet date
The Board has not, as at 24 June 2010, being the date the financial statements
were approved, received any information concerning significant conditions in
existence at the balance sheet date, which have not been reflected in the
financial statements as presented. The Board has, however, given due regard to
the events described below which occurred after the balance sheet date.
On 17 May 2010 the Company made an additional investment a subsidiary of
GBP32.7m. In addition, on 27 May 2010 the Company has received a dividend of
GBP50.0m from a subsidiary and received a capital contribution of GBP50.0m from
its immediate parent.
36. Restatement
The Group and Company statement of financial position as at 31 December 2008 and
the Group and Company statement of changes in equity for the year ended 31
December 2008, have been restated to reflect an accounting adjustment to the
recognition of own shares held by the employee benefit trust on implementation
of the scheme of arrangement on 31 October 2008. The cumulative impact of the
restatement as at 31 December 2008 is to increase the investment in subsidiaries
by GBP49.0m (Company only), reduce trade and other receivables by GBP131.5m
(Group and Company), increase trade and other payables by GBP2.4m (Group and
Company), decrease the minority interest by GBP53.0m (Group only) and reduce the
Group and Company profit and loss reserve by GBP80.9m and GBP84.9m respectively.
As this restatement relates only to transactions occurring in 2008, and has no
impact prior to 31 October 2008, the Directors do not consider that the
presentation of a statement of financial position at 1 January 2008 would
provide useful information.
37. Directors emoluments
The Directors of the Company have contracts of employment with Henderson Group
plc and Henderson Administration Limited. The emoluments of the Directors of the
Company who are also Directors of Henderson Group plc are disclosed in the
financial statements of that company. The emoluments of the Director who is also
a director of other Henderson Group companies, but not Henderson Group plc, are
disclosed in the financial statements of Henderson Administration Limited, as it
is not practicable to apportion this amount between his services as Director of
the Company and his services as Director of other Henderson Group companies.
Forward-looking statements
This announcement contains forward-looking statements with respect to the
financial condition, results and business of Henderson Group. 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
Group's actual future results may differ materially from the results expressed
or implied in these forward-looking statements.
For further detail, please see the Report and Financial Statements for the year
ended 31 December 2009, lodged together with this announcement.
To view the full details of the 2009 Report and Financial Statements, paste the
following link into your web browser:
http://www.rns-pdf.londonstockexchange.com/rns/1936O_-2010-6-24.pdf
Copies of the Report and Financial Statements for the year ended 31 December
2009 have today been submitted to the UK Listing Authority and will shortly be
available for inspection at the UK Listing Authority's Document Viewing
Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Telephone: +44(0) 20 7066 1000.
Copies can also be found on the Henderson Group plc website at
www.henderson.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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