Shares in Henderson Group fell to their lowest since late 2005 after the UK asset manager issued a profit warning yesterday.
Henderson said it was scrapping a profit target for this year set out in August and that 2007 pre-tax profit would be less than the £90m it had aimed for. The company is understood to be looking at a fresh round of cost cuts and a further round of redundancies after cutting 30 jobs earlier this year. The shares plunged 18 per cent to 74.75p yesterday, having traded up 1 per cent before the profit warning.
"Since [August], global market conditions have deteriorated significantly and we have seen high levels of volatility as well as increased client activity. Hence, a number of the assumptions that underpin our stated goal, and which are beyond management's control, are no longer valid, resulting in pressure on assets under management and fee income," the company said.
Henderson said it was taking actions to protect its business and profitability and would give further details on 6 November in a full trading update. The company had already announced £30m of cost cuts earlier this year.
In August the company reported a 16 per cent fall in first-half pre-tax profits before non-recurring items to £50.8m. The equivalent figure for the whole of 2007 was £106.7m.
Henderson has been caught by plunging markets that have seen the FTSE 100 fall by a third this year, reducing assets under management and fee income at fund managers. It said in August that its full-year target assumed markets would not worsen materially.
"No one should be surprised that HGI will miss its £90m PBT target. Primarily long only managers cannot escape the market vortex," Evolution Securities analyst Jason Street said. He predicted pre-tax profit of £80m this year and a worsening climate cutting profit to £65m for 2009.
Henderson warned of weaker markets and subdued demand for investment products from retail investors in August, putting pressure on fee income. Assets under management fell to £52.6bn from £61.6bn in the first half. Management fee income dropped 8 per cent and transaction fee income fell 13 per cent. Its shares have lost 52 per cent of their value this year, leaving the company valued at £542m. Roger Yates, its chief executive, is leaving in November after nine years. He gives way to Andrew Formica, the head of equities.
Mr Yates has expanded into higher-margin businesses such as hedge funds, cut costs and looked for acquisitions to boost revenue. The company is moving its tax domicile to Ireland to take advantage of lower tax rates.Reuse content