Interim Results
Ashmore Group PLC
26 February 2008
PRESS RELEASE
26th February 2008 07.00
Ashmore Group plc
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2007
Ashmore Group plc ('Ashmore', the 'Group'), a leading specialist emerging
markets asset manager, today announces its interim results for the six months
ended 31 December 2007.
Highlights
• Assets under management ('AuM') of U$36.5 billion at 31 December 2007, up
US$4.9 billion (16%) from 30 June 2007
• Net management fees of £85.9 million, 54% higher than the six month period to
31 December 2006
• Performance fees of £32.2 million (£8.2 million in the six month period to 31
December 2006)
• Profit before tax of £100.9 million, up 68% from the six months to 31 December
2006
• Basic eps of 10.47p (2006: 6.31p) and diluted eps of 9.9p (2006: 5.96p)
• An interim dividend of 3.66p per share will be paid on 25 April 2008 (2007:
2.3p)
• Corporate high yield launched as Ashmore's fifth investment theme
• Listing of Ashmore Global Opportunities Limited on the London Stock Exchange
raised EUR500 million
Commenting on the results, Mark Coombs, Chief Executive Officer of Ashmore Group
plc said;
'The first half of the financial year has seen the Group achieve strong
financial performance through executing on its stated strategy. Macroeconomic,
demographic and political factors underpin the long term growth prospects of the
emerging market asset classes. The current market volatility continues to
provide attractive investment opportunities. The Group's experienced team, the
breadth of its product offering and its long term investment performance track
record, position the Group well for continued progress.'
Analyst briefing
There will be a briefing for analysts at 9.30am GMT today at the offices of
Goldman Sachs Peterborough Court, 133 Fleet Street, London, EC4A 2BB.
Contacts
Penrose Financial Gay Collins +44 20 7786 4882/mobile 07798 626282
Ashmore@penrose.co.uk
Ashmore Group plc Graeme Dell, Group Finance Director +44 20 7557 4100
Chief Executive Officer's Statement
The results for the six months to 31 December 2007 represent a period where
Ashmore Group plc ('Ashmore', the 'Group') has again delivered strong financial
performance accompanied by further progress in line with the Group's strategic
objectives.
Financial performance
Assets under management ('AuM') at 31 December 2007 were US$36.5 billion, an
increase of US$4.9 billion (+16%) in the six month period. Net subscriptions in
the period were US$2.6 billion, with a combination of subscriptions into
existing funds and the launch of new funds and themes. Net investment
performance for the period was US$2.3 billion.
Total net revenue has increased to £123.5 million resulting from strong growth
in both management fee and performance fee categories over the equivalent period
last year. Net management fees were £85.9 million (2006: £55.8 million) an
increase of 54% driven by the continued AuM growth. The Group's net management
fee margin for the period on an annualised basis was 103 basis points ('bp') in
the period, this compares with 90bp for the equivalent period last year.
Performance fees in the period have increased nearly fourfold to £32.2 million,
arising from strong performances from the August and December year end funds, as
well as crystallised and other regular performance fees throughout the period.
The Group's cost structure, incorporating a tightly controlled recurring cost
base and a high degree of variable performance related costs, remains our core
philosophy. In order to support our growth, we have invested further in staff
and infrastructure in this period and will continue to do so as the year
continues. As described in the Group's full year remuneration report, the
Group's variable compensation as a percentage of earnings before interest, tax
and variable compensation, can be at a level of up to 25%. For the six months to
31 December 2007, variable compensation was accrued at 20% (six months to 31
December 2006: 16.4%, year ended 30 June 2007: 18.4%). As a result, for the
period the overall operating profit margin was 75% (six months to 31 December
2006: 78%, year ended 30 June 2007: 76%)
The Group's profit before tax for the six months to 31 December 2007 was £100.9
million, an increase of 68% from £60.2 million for the equivalent period last
year demonstrating the significant financial achievements of this period. The
basic earnings per share have increased to 10.47p (six months to 31 December
2006: 6.31p)
Operational review
During the period, we have continued to make progress within our existing
investment themes and have seen the development of a new theme together with
further product and fund launches as outlined below.
Dollar debt
The dollar debt investment theme comprises US dollar and other hard currency
denominated instruments which may include derivatives, investing principally in
sovereign bonds. AuM at 31 December 2007 were US$23.1 billion, an increase of
US$1.9 billion (9%) from 30 June 2007. Net subscriptions in the period were
US$0.6 billion. Good investment performance contributed US$1.3 billion.
Local currency
The local currency investment theme comprises local currency and local currency
denominated debt instruments, principally sovereign in nature, and it may
include derivatives. AuM at 31 December 2007 were US$6.4 billion; an increase of
US$1.4 billion (28%) from 30 June 2007. There has been strong demand for the
Group's local currency products with net subscriptions in the period of US$0.9
billion. Good investment performance in this theme contributed US$0.5 billion. A
new Turkish Debt fund was launched in the period and initially funded at US$0.1
billion.
Special situations (distressed debt/private equity)
The special situations (distressed debt/private equity) theme comprises
investments in debt and/or equity or other instruments focusing on situations
usually involving specialist corporate investments and/or projects and including
distressed assets or distressed sellers of assets, often incorporating
restructuring, reorganisations and/or a private equity approach. AuM at 31
December 2007 were US$5.1 billion, an increase of US$1.7 billion (50%). Net
subscriptions were US$1.5 billion, with performance contributing US$0.2 billion.
Included within net subscriptions is the launch of the Ashmore Global Special
Situations Fund 4 ('GSSF4') which was launched with commitments totalling US$1.3
billion. As at 31 December 2007, 20% of the US$1.3 billion commitment had been
drawn-down. It has been another positive period for investment performance, deal
opportunities and realisations. The Group's network continues to source an
attractive pipeline of deals.
Equity
The equity investment theme comprises public equity and equity-related
securities. The instruments invested in by the funds can include equities,
convertibles, warrants and equity derivatives. AuM at 31 December 2007 were
US$1.9 billion, a decrease of US$0.1 billion (5%) from 30 June 2007. A US$0.3
billion segregated fund was closed in the period and is included within the net
redemptions of US$0.4 billion with investment performance contributing US$0.3
billion.
Corporate High Yield
During the period, Ashmore launched its fifth investment theme, emerging
corporate high yield with the launch of the Ashmore Emerging Markets Corporate
High Yield fund ('AEMCHY'). This launch recognised the fact that the asset class
can offer investors a risk return profile distinct from other segments of
emerging market fixed income. At the end of the period, AEMCHY had AuM of US$0.6
billion drawn principally from within the total dollar debt balance above.
Multi-strategy funds, permanent capital vehicle and liquidity fund
The five core investment themes for the Ashmore product range are supplemented
by the multi-strategy funds and a permanent capital vehicle. In each of these
cases, Ashmore makes the asset allocation analysis across the investment themes.
At the end of the period, the total AuM within the five themes arising from the
multi strategy funds was US$2.8 billion. In addition, Ashmore was appointed
investment manager following the launch of a newly incorporated publicly listed
closed-ended investment company, Ashmore Global Opportunities Limited ('AGOL'),
whose shares were listed on the Main Market of the London Stock Exchange on 12
December 2007. AGOL raised EUR500 million on listing and these funds are now
invested across the investment themes. AGOL provides the Group with a new point
of access for an investor class to gain access to Ashmore's investment themes
within a listed fund vehicle with a stated focus on the special situations
investment theme, in line with which, AGOL has a commitment to GSSF4 of US$250
million.
In addition, during the period, the liquidity fund was launched offering a
Standard & Poor's 'AAAm' rated fund which is able to manage the cash components
of the underlying Ashmore funds, retained by the funds for liquidity purposes,
with a view to enhancing the absolute return received on this cash.
Balance sheet and cash flow
The Group's strategy is to maintain a strong balance sheet in order to support
regulatory capital requirements, to meet the commercial demands of current and
prospective investors and to fulfil the development needs of the business
including seeding new funds and other strategic initiatives. During the period,
the Group invested £14.6 million in meeting the underwriting costs of the AGOL
fundraising. In accordance with International Accounting Standards, these
underwriting costs are recognised in the balance sheet as deferred acquisition
costs which are amortised as the related revenue is recognised. The Group
continues to generate significant cash from operations which totalled £67.1
million in the period (six months to 31 December 2006: £35.7 million). In the
period, the Group paid £10.3 million of the deferred acquisition costs and,
after taking account of the payments for taxation, property, plant and equipment
purchases, interest received and the final dividend related to year ended 30
June 2007 the overall cash has increased during the six months ended 31 December
2007 to £221.0 million (31 December 2006: £157.9 million; 30 June 2007: £218.0
million).
Dividend
Recognising the significant achievements in the period and in line with the
Group's stated progressive dividend policy, an interim dividend of 3.66p per
share will be paid for the six month period to 31 December 2007 (2.30p per share
for the six month period to 31 December 2006).
Strategy and outlook
The Group's strategy - to be the leading emerging markets investment manager -
remains consistent. This is achieved through the delivery of long term
investment outperformance, the generation and diversification of Group earnings
through the attraction of net subscriptions across investment themes, a
controlled manner of business growth and the development of the Ashmore brand
and business model.
The first half of the financial year has seen the Group achieve strong financial
performance through executing on its stated strategy. During the remaining
months of this year, and into the next, we will undertake further steps in the
development of our systems and infrastructure to enable us to maintain our
growth and performance. In addition, we will see continued investment in
initiatives to bring further diversification to our product range and enhance
our capabilities. The Group believes that macroeconomic, demographic and
political factors underpin the long term growth prospects of the emerging market
asset classes and the current market volatility continues to provide attractive
investment opportunities. The Group's experienced team, the breadth of its
product offering and its long term investment performance track record, position
the Group well for continued progress.
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Note £m £m £m
Management fees 88.7 57.8 130.2
Performance fees 32.2 8.2 20.4
Other revenue 5.4 7.9 13.0
Total revenue 126.3 73.9 163.6
Less: Distribution costs (2.8) (2.0) (3.8)
Net revenue 123.5 71.9 159.8
Personnel expenses (26.6) (13.1) (32.6)
Other expenses (4.0) (2.6) (5.5)
Operating profit 92.9 56.2 121.7
Interest income 8.0 4.0 9.7
Profit before tax 100.9 60.2 131.4
Income tax expense (30.8) (18.2) (39.9)
Profit for the period 70.1 42.0 91.5
Attributable to:
Equity holders of the parent 70.0 42.0 91.4
Minority interest 0.1 - 0.1
Profit for the period 70.1 42.0 91.5
Earnings per share:
Basic 2 10.47p 6.31p 13.7p
Diluted 2 9.90p 5.96p 12.9p
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
As at As at As at
31 December 31 December 30 June
2007 2006 2007
Note £m £m £m
Assets
Property, plant and equipment 0.5 0.2 0.2
Intangible assets 4.1 4.1 4.1
Deferred acquisition costs 4 14.5 - -
Other receivables - 0.1 0.1
Deferred tax assets 14.8 11.5 14.4
Total non-current assets 33.9 15.9 18.8
Trade and other receivables 57.0 38.2 27.2
Derivative financial instruments - 0.5 0.5
Cash and cash equivalents 221.0 157.9 218.0
Total current assets 278.0 196.6 245.7
Total assets 311.9 212.5 264.5
Equity
Issued capital - - -
Share premium 0.3 0.3 0.3
Retained earnings 223.8 154.3 195.6
Total equity attributable to equity 224.1 154.6 195.9
holders of the parent
Minority interest 0.6 - 0.1
Total equity 224.7 154.6 196.0
Liabilities
Deferred tax liabilities 4.1 - -
Total non-current liabilities 4.1 - -
Current tax 24.4 15.3 15.7
Derivative financial instruments 1.2 - -
Trade and other payables 57.5 42.6 52.8
Total current liabilities 83.1 57.9 68.5
Total liabilities 87.2 57.9 68.5
Total equity and liabilities 311.9 212.5 264.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total equity
attributable
to equity
Issued Share Retained holders of the Minority Total
capital premium earnings parent interest equity
£m £m £m £m £m £m
Balance at 1 July 2006 - 0.3 96.3 96.6 - 96.6
Profit for the period - - 42.0 42.0 - 42.0
Share based payments - - 1.2 1.2 - 1.2
Deferred tax related to - - 9.5 9.5 - 9.5
share based payments
Current tax - - 4.2 4.2 - 4.2
Sale of own shares held - - 1.1 1.1 - 1.1
Balance at 31 December - 0.3 154.3 154.6 - 154.6
2006
Profit for the period - - 49.4 49.4 0.1 49.5
Share based payments - - 5.3 5.3 - 5.3
Deferred tax related to - - 2.1 2.1 - 2.1
share based payments
Dividends - - (15.5) (15.5) - (15.5)
Balance at 30 June 2007 - 0.3 195.6 195.9 0.1 196.0
Profit for the period - - 70.0 70.0 0.1 70.1
Issue of share capital - - - - 0.4 0.4
Share based payments - - 2.7 2.7 - 2.7
Current tax - - 0.7 0.7 - 0.7
Dividends - - (45.2) (45.2) - (45.2)
Balance at 31 December - 0.3 223.8 224.1 0.6 224.7
2007
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Note £m £m £m
Operating activities
Cash receipts from customers 105.9 62.1 164.6
Cash paid to suppliers and employees (38.8) (26.4) (32.3)
Cash generated from operations 67.1 35.7 132.3
Income taxes paid (17.9) (17.5) (39.2)
Net cash from operating activities 49.2 18.2 93.1
Investing activities
Interest received 8.0 3.9 9.5
Purchase of deferred acquisition costs (10.3) - -
Purchase of property, plant and equipment (0.3) - (0.1)
Net cash (used in)/from investing activities (2.6) 3.9 9.4
Financing activities
Dividends paid 3 (45.2) - (15.5)
Sale of own shares - 1.0 -
Net cash (used in)/from financing activities (45.2) 1.0 (15.5)
Effect of exchange rate changes on cash and 1.6 2.1 (1.7)
cash equivalents
Net increase in cash and cash equivalents 3.0 25.2 85.3
Cash and cash equivalents at beginning of 218.0 132.7 132.7
period
Cash and cash equivalents at end of period 221.0 157.9 218.0
Cash and cash equivalents comprise:
Cash at bank and in hand as shown in balance 221.0 157.9 218.0
sheet
221.0 157.9 218.0
NOTES TO THE FINANCIAL STATEMENTS
1) Basis of preparation and significant accounting policies
The interim report is unaudited and does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985. The financial
statements have been prepared in accordance with IAS 34 'Interim Financial
Reporting' and the Listing Rules of the Financial Services Authority ('FSA').
The accounting policies applied in these interim financial statements are
consistent with those applied in the Group's annual report and accounts for the
year ended 30 June 2007. The annual report and accounts is available on the
Group's website.
In addition to the accounting policies applied in the Group's annual report, the
following accounting policies were adopted:
Deferred acquisition costs
Costs that are directly attributable to securing an investment management
contract are deferred if they can be identified separately and measured reliably
and it is probable that they will be recovered. Deferred acquisition costs
represent the contractual right to benefit from providing investment management
services and is amortised as the related revenue is recognised.
2) Earnings per share
Basic earnings per share is calculated by dividing the profit for the financial
year attributable to equity holders of the parent of £70m (six months ended 31
December 2006:£42m) by the weighted average number of ordinary shares in issue
during the year.
Diluted earnings per share is calculated as for basic earnings per share with a
further adjustment to the weighted average number of ordinary shares to reflect
the effects of all dilutive potential ordinary shares.
There is no difference between the profit for the financial year attributable to
equity holders of the parent used in the basic and diluted earnings per share
calculations.
Reconciliation of the figures used in calculating basic and diluted earnings per
share:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Weighted average number of ordinary shares used 668,501,230 664,780,163 667,467,808
in calculation of basic earnings per share
Effect of dilutive potential ordinary shares - 38,428,080 38,281,264 38,827,815
share options
Weighted average number of ordinary shares used 706,929,310 703,061,427 706,295,623
in calculation of diluted earnings per share
3) Dividends
An analysis of dividends paid is as follows:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2007 2006 2007
Interim dividend - - £15.5m
Final dividend £45.2m - -
Interim dividend per share - - 2.30p
Final dividend per share 6.70p - -
Dividends are recognised in the accounts in the year in which they are paid, or
in the case of a final dividend when approved by the shareholders.
The board has approved an interim dividend for the six months ended 31 December
2007 of 3.66p per share (six months 2006:2.30p).
This will be payable on 25 April 2008 to shareholders on the register on 28
March 2008.
4) Deferred acquisition costs
During the period deferred acquisition costs of £14.6m were incurred directly
attributable to securing the investment management contract for a permanent
capital vehicle Ashmore Global Opportunities Limited, a newly incorporated
investment company, which was listed on the London Stock Exchange. Amortisation
of £0.1m for the period was recognised in other expenses.
5) Own shares
The Ashmore 2004 Employee Benefit Trust ('EBT') was established to encourage and
facilitate the acquisition and holding of shares in the company by the employees
of the company with a view to facilitating the recruitment and motivation of the
employees of the company. As at the period end, the EBT owned 37,762,500
ordinary shares of 0.01p with a nominal value of £3,776.25 and shareholders'
funds are reduced by £5,822,150 in this respect.
6) Exchange rates
The only foreign exchange rate which has a material impact on the reporting of
the Group's results is the US dollar.
Average rate Average rate Average rate
Closing rate Closing rate Closing rate six months six months year
as at as at as at ended ended ended
31 December 31 December 30 June 31 December 31 December 30 June
2007 2006 2007 2007 2006 2007
US dollar 1.9850 1.9589 2.0088 2.0368 1.9129 1.9466
7) Related party transactions
There were no material changes to the related party transactions during the six
months ended 31 December 2007.
8) Post balance sheet events
There are no post balance sheet events for the six months ended 31 December
2007.
RESPONSIBILITY STATEMENT OF THE DIRECTORS' IN RESPECT OF THE HALF-YEARLY
FINANCIAL REPORT
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU;
• the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
Mark Coombs
Chief Executive Officer
26 February 2008
INDEPENDENT REVIEW REPORT to Ashmore Group plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2007 which comprises the consolidated income statement, consolidated
balance sheet, consolidated statement of changes in equity, consolidated cash
flow statement and the related explanatory notes. We have read the other
information contained in the half-yearly financial report and considered whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ('the DTR') of the UK's Financial Services Authority
('the UK FSA'). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work, for
this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the DTR of the UK FSA.
As disclosed in note one, the annual financial statements of the Ashmore Group
plc are prepared in accordance with IFRSs as adopted by the EU. The condensed
set of financial statements included in this half-yearly financial report has
been prepared in accordance with IAS 34 Interim Financial Reporting as adopted
by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard of Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for the use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 31 December 2007 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR of
the UK FSA.
KPMG Audit Plc
Chartered Accountants
One Canada Square
London E14 5AG
26 February 2008
This information is provided by RNS
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