The Janus Henderson Group plc (ASX:JHG) share price rose 5% to $47.90 this morning after the company posted strong annual results. Although the fund manager experienced net outflows of US$10 billion, assets under management (AUM) grew strongly to US$371 billion.
Revenues rose by 74% to US$1,744 million, and earnings per share grew 136% to US$3.93 per share.
Overwhelmingly, most of Henderson's income is from management fees, so the firm gets paid more for accumulating assets to manage than it does from generating performance. However, 66% of Henderson's funds have outperformed their benchmark over the past 3 years – not a bad result given the size of the assets under management.
However, while the headline 'GAAP' (Generally Accepted Accounting Principles) results look strong, they are affected by the timing of the Janus Capital Group merger.
Management states that the 'non-GAAP' results are a more appropriate measure of the company's ongoing profitability. On this basis, revenues rose 10%, and earnings per share rose 20% to US$2.48 per share. It is rare that a management team tells the market that the lower version of GAAP/non-GAAP results (a.k.a. 'Statutory'/'Underlying') is the one that is more accurate.
Looking ahead to 2018, management has stated that its focus is on generating organic growth by "being a trusted partner for clients, delivering first class investment performance, insights and experiences."
A further focus will be on integration of the combined groups, with further cost synergies to be achieved from this. Management stated cost synergies were running ahead of expectations.
The merged company does appear in a sound position to grow its assets under management. However, given recent ructions in global markets, I wonder if 2018 might not be such a lucrative year for the management titan. Nevertheless, the company appears well managed, and is an interesting prospect in the wealth management space.
