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Henderson Group plc disappoints with flat underlying profit: Is it a buy?

Globally focused and UK-based fund manager Henderson Group plc (ASX: HGG) posted a flat underlying profit of UK£90.7 million for the first half of 2014, up 2% on the prior corresponding period (pcp).

The group is aiming to grow shareholder returns through a globalisation strategy of both physically expanding its presence outside the UK and increasing its global sales and distribution strategy.

Henderson’s management are on the record as stating that they are actively looking to grow their presence further in countries like Australia. In 2013 it acquired H3 Global Advisors and 90 West, two small Australian equity managers. While in the most recent half it expanded further into the U.S. with the acquisition of Geneva Capital Management.

Net FUM flows for the first half were up UK£5 billion on the pcp, but total FUM under management was flat on the prior period at UK£74.7 billion, as global equity markets experienced a relatively disappointing six months. Performance fees were also down on the pcp to UK£45.2 million, although total management fees were up 21% to UK£193.7 million.

Henderson is listed on the ASX as a result of the fact that it originally demerged from AMP Limited (ASX: AMP) in 2003 and its international focus means it now competes with Platinum Asset Management Limited (ASX: PTM), Magellan Financial Group Ltd (ASX: MFG) and BT Investment Management Ltd (ASX: BTT).

Alongside BT Investment Management, Henderson trades on more attractive price multiples than its capital-light rivals Magellan and Platinum, who have both enjoyed big success in attracting FUM flows from Australian investors coveting exposure to international equities.

Henderson increased its dividend payout 21% on the pcp and yields around a healthy 3.6% based on current prices.

Although the outlook remains reasonable based on strong investment performance, generally supportive markets and modestly improving net fund flows the ASX-listed shares are likely to come under selling pressure this morning due to the flat profit growth.

However for Australian investors looking for leverage to global equity markets, Henderson remains an attractive proposition and price weakness today may provide an even more value-focused entry point for those with a long-term approach.

ASX-listed shares closed Thursday at $4.51.

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Motley Fool contributor Tom Richardson owns shares in Magellan Financial. You can find him on Twitter @tommyr345

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