Ashmore Regulatory News (ASHM)

26 Feb 2008 07:01

Ashmore Group PLC26 February 2008 PRESS RELEASE 26th February 2008 07.00 Ashmore Group plc UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED31 DECEMBER 2007 Ashmore Group plc ("Ashmore", the "Group"), a leading specialist emergingmarkets asset manager, today announces its interim results for the six monthsended 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 Groupplc said; "The first half of the financial year has seen the Group achieve strongfinancial performance through executing on its stated strategy. Macroeconomic,demographic and political factors underpin the long term growth prospects of theemerging market asset classes. The current market volatility continues toprovide attractive investment opportunities. The Group's experienced team, thebreadth of its product offering and its long term investment performance trackrecord, position the Group well for continued progress." Analyst briefing There will be a briefing for analysts at 9.30am GMT today at the offices ofGoldman Sachs Peterborough Court, 133 Fleet Street, London, EC4A 2BB. Contacts Penrose Financial Gay Collins +44 20 7786 4882/mobile 07798 626282Ashmore@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 whereAshmore Group plc ("Ashmore", the "Group") has again delivered strong financialperformance accompanied by further progress in line with the Group's strategicobjectives. Financial performance Assets under management ("AuM") at 31 December 2007 were US$36.5 billion, anincrease of US$4.9 billion (+16%) in the six month period. Net subscriptions inthe period were US$2.6 billion, with a combination of subscriptions intoexisting funds and the launch of new funds and themes. Net investmentperformance for the period was US$2.3 billion. Total net revenue has increased to £123.5 million resulting from strong growthin both management fee and performance fee categories over the equivalent periodlast year. Net management fees were £85.9 million (2006: £55.8 million) anincrease of 54% driven by the continued AuM growth. The Group's net managementfee margin for the period on an annualised basis was 103 basis points ("bp") inthe 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, aswell as crystallised and other regular performance fees throughout the period. The Group's cost structure, incorporating a tightly controlled recurring costbase and a high degree of variable performance related costs, remains our corephilosophy. In order to support our growth, we have invested further in staffand infrastructure in this period and will continue to do so as the yearcontinues. As described in the Group's full year remuneration report, theGroup's variable compensation as a percentage of earnings before interest, taxand variable compensation, can be at a level of up to 25%. For the six months to31 December 2007, variable compensation was accrued at 20% (six months to 31December 2006: 16.4%, year ended 30 June 2007: 18.4%). As a result, for theperiod the overall operating profit margin was 75% (six months to 31 December2006: 78%, year ended 30 June 2007: 76%) The Group's profit before tax for the six months to 31 December 2007 was £100.9million, an increase of 68% from £60.2 million for the equivalent period lastyear demonstrating the significant financial achievements of this period. Thebasic earnings per share have increased to 10.47p (six months to 31 December2006: 6.31p) Operational review During the period, we have continued to make progress within our existinginvestment themes and have seen the development of a new theme together withfurther product and fund launches as outlined below. Dollar debt The dollar debt investment theme comprises US dollar and other hard currencydenominated instruments which may include derivatives, investing principally insovereign bonds. AuM at 31 December 2007 were US$23.1 billion, an increase ofUS$1.9 billion (9%) from 30 June 2007. Net subscriptions in the period wereUS$0.6 billion. Good investment performance contributed US$1.3 billion. Local currency The local currency investment theme comprises local currency and local currencydenominated debt instruments, principally sovereign in nature, and it mayinclude derivatives. AuM at 31 December 2007 were US$6.4 billion; an increase ofUS$1.4 billion (28%) from 30 June 2007. There has been strong demand for theGroup's local currency products with net subscriptions in the period of US$0.9billion. Good investment performance in this theme contributed US$0.5 billion. Anew Turkish Debt fund was launched in the period and initially funded at US$0.1billion. Special situations (distressed debt/private equity) The special situations (distressed debt/private equity) theme comprisesinvestments in debt and/or equity or other instruments focusing on situationsusually involving specialist corporate investments and/or projects and includingdistressed assets or distressed sellers of assets, often incorporatingrestructuring, reorganisations and/or a private equity approach. AuM at 31December 2007 were US$5.1 billion, an increase of US$1.7 billion (50%). Netsubscriptions were US$1.5 billion, with performance contributing US$0.2 billion.Included within net subscriptions is the launch of the Ashmore Global SpecialSituations Fund 4 ("GSSF4") which was launched with commitments totalling US$1.3billion. As at 31 December 2007, 20% of the US$1.3 billion commitment had beendrawn-down. It has been another positive period for investment performance, dealopportunities and realisations. The Group's network continues to source anattractive pipeline of deals. Equity The equity investment theme comprises public equity and equity-relatedsecurities. The instruments invested in by the funds can include equities,convertibles, warrants and equity derivatives. AuM at 31 December 2007 wereUS$1.9 billion, a decrease of US$0.1 billion (5%) from 30 June 2007. A US$0.3billion segregated fund was closed in the period and is included within the netredemptions of US$0.4 billion with investment performance contributing US$0.3billion. Corporate High Yield During the period, Ashmore launched its fifth investment theme, emergingcorporate high yield with the launch of the Ashmore Emerging Markets CorporateHigh Yield fund ("AEMCHY"). This launch recognised the fact that the asset classcan offer investors a risk return profile distinct from other segments ofemerging market fixed income. At the end of the period, AEMCHY had AuM of US$0.6billion 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 supplementedby the multi-strategy funds and a permanent capital vehicle. In each of thesecases, 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 themulti strategy funds was US$2.8 billion. In addition, Ashmore was appointedinvestment manager following the launch of a newly incorporated publicly listedclosed-ended investment company, Ashmore Global Opportunities Limited ("AGOL"),whose shares were listed on the Main Market of the London Stock Exchange on 12December 2007. AGOL raised EUR500 million on listing and these funds are nowinvested across the investment themes. AGOL provides the Group with a new pointof access for an investor class to gain access to Ashmore's investment themeswithin a listed fund vehicle with a stated focus on the special situationsinvestment theme, in line with which, AGOL has a commitment to GSSF4 of US$250million. In addition, during the period, the liquidity fund was launched offering aStandard & Poor's "AAAm" rated fund which is able to manage the cash componentsof 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 supportregulatory capital requirements, to meet the commercial demands of current andprospective investors and to fulfil the development needs of the businessincluding seeding new funds and other strategic initiatives. During the period,the Group invested £14.6 million in meeting the underwriting costs of the AGOLfundraising. In accordance with International Accounting Standards, theseunderwriting costs are recognised in the balance sheet as deferred acquisitioncosts which are amortised as the related revenue is recognised. The Groupcontinues to generate significant cash from operations which totalled £67.1million in the period (six months to 31 December 2006: £35.7 million). In theperiod, the Group paid £10.3 million of the deferred acquisition costs and,after taking account of the payments for taxation, property, plant and equipmentpurchases, interest received and the final dividend related to year ended 30June 2007 the overall cash has increased during the six months ended 31 December2007 to £221.0 million (31 December 2006: £157.9 million; 30 June 2007: £218.0million). Dividend Recognising the significant achievements in the period and in line with theGroup's stated progressive dividend policy, an interim dividend of 3.66p pershare will be paid for the six month period to 31 December 2007 (2.30p per sharefor 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 terminvestment outperformance, the generation and diversification of Group earningsthrough the attraction of net subscriptions across investment themes, acontrolled manner of business growth and the development of the Ashmore brandand business model. The first half of the financial year has seen the Group achieve strong financialperformance through executing on its stated strategy. During the remainingmonths of this year, and into the next, we will undertake further steps in thedevelopment of our systems and infrastructure to enable us to maintain ourgrowth and performance. In addition, we will see continued investment ininitiatives to bring further diversification to our product range and enhanceour capabilities. The Group believes that macroeconomic, demographic andpolitical factors underpin the long term growth prospects of the emerging marketasset classes and the current market volatility continues to provide attractiveinvestment opportunities. The Group's experienced team, the breadth of itsproduct offering and its long term investment performance track record, positionthe 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 57.8 130.2Performance fees 32.2 8.2 20.4Other revenue 5.4 7.9 13.0 Total revenue 126.3 73.9 163.6Less: 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 91.4Minority interest 0.1 - 0.1 Profit for the period 70.1 42.0 91.5 Earnings per share: Basic 2 10.47p 6.31p 13.7pDiluted 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 AssetsProperty, plant and equipment 0.5 0.2 0.2Intangible assets 4.1 4.1 4.1Deferred 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 27.2Derivative financial instruments - 0.5 0.5Cash 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 EquityIssued capital - - -Share premium 0.3 0.3 0.3 Retained earnings 223.8 154.3 195.6 Total equity attributable to equity 224.1 154.6 195.9holders of the parent Minority interest 0.6 - 0.1 Total equity 224.7 154.6 196.0 LiabilitiesDeferred tax liabilities 4.1 - - Total non-current liabilities 4.1 - - Current tax 24.4 15.3 15.7Derivative 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 - 42.0Share based payments - - 1.2 1.2 - 1.2Deferred tax related to - - 9.5 9.5 - 9.5share based paymentsCurrent tax - - 4.2 4.2 - 4.2Sale of own shares held - - 1.1 1.1 - 1.1 Balance at 31 December - 0.3 154.3 154.6 - 154.62006 Profit for the period - - 49.4 49.4 0.1 49.5Share based payments - - 5.3 5.3 - 5.3Deferred tax related to - - 2.1 2.1 - 2.1share based paymentsDividends - - (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 70.1Issue of share capital - - - - 0.4 0.4Share based payments - - 2.7 2.7 - 2.7Current tax - - 0.7 0.7 - 0.7Dividends - - (45.2) (45.2) - (45.2) Balance at 31 December - 0.3 223.8 224.1 0.6 224.72007 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 62.1 164.6Cash 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 activitiesInterest received 8.0 3.9 9.5Purchase 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 218.0 132.7 132.7period 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 221.0 157.9 218.0sheet 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 accountswithin the meaning of Section 240 of the Companies Act 1985. The financialstatements have been prepared in accordance with IAS 34 'Interim FinancialReporting' and the Listing Rules of the Financial Services Authority ("FSA"). The accounting policies applied in these interim financial statements areconsistent with those applied in the Group's annual report and accounts for theyear ended 30 June 2007. The annual report and accounts is available on theGroup's website. In addition to the accounting policies applied in the Group's annual report, thefollowing accounting policies were adopted: Deferred acquisition costs Costs that are directly attributable to securing an investment managementcontract are deferred if they can be identified separately and measured reliablyand it is probable that they will be recovered. Deferred acquisition costsrepresent the contractual right to benefit from providing investment managementservices 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 financialyear attributable to equity holders of the parent of £70m (six months ended 31December 2006:£42m) by the weighted average number of ordinary shares in issueduring the year. Diluted earnings per share is calculated as for basic earnings per share with afurther adjustment to the weighted average number of ordinary shares to reflectthe effects of all dilutive potential ordinary shares. There is no difference between the profit for the financial year attributable toequity holders of the parent used in the basic and diluted earnings per sharecalculations. Reconciliation of the figures used in calculating basic and diluted earnings pershare: Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 Weighted average number of ordinary shares used 668,501,230 664,780,163 667,467,808in calculation of basic earnings per shareEffect of dilutive potential ordinary shares - 38,428,080 38,281,264 38,827,815share optionsWeighted average number of ordinary shares used 706,929,310 703,061,427 706,295,623in 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 - - £15.5mFinal dividend £45.2m - - Interim dividend per share - - 2.30pFinal dividend per share 6.70p - - Dividends are recognised in the accounts in the year in which they are paid, orin the case of a final dividend when approved by the shareholders. The board has approved an interim dividend for the six months ended 31 December2007 of 3.66p per share (six months 2006:2.30p). This will be payable on 25 April 2008 to shareholders on the register on 28March 2008. 4) Deferred acquisition costs During the period deferred acquisition costs of £14.6m were incurred directlyattributable to securing the investment management contract for a permanentcapital vehicle Ashmore Global Opportunities Limited, a newly incorporatedinvestment company, which was listed on the London Stock Exchange. Amortisationof £0.1m for the period was recognised in other expenses. 5) Own shares The Ashmore 2004 Employee Benefit Trust ("EBT") was established to encourage andfacilitate the acquisition and holding of shares in the company by the employeesof the company with a view to facilitating the recruitment and motivation of theemployees of the company. As at the period end, the EBT owned 37,762,500ordinary 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 ofthe 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 sixmonths ended 31 December 2007. 8) Post balance sheet events There are no post balance sheet events for the six months ended 31 December2007. 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 ofimportant events that have occurred during the first six months of the financialyear and their impact on the condensed set of financial statements; and adescription of the principal risks and uncertainties for the remaining sixmonths of the year; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. Mark CoombsChief Executive Officer26 February 2008 INDEPENDENT REVIEW REPORT to Ashmore Group plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31December 2007 which comprises the consolidated income statement, consolidatedbalance sheet, consolidated statement of changes in equity, consolidated cashflow statement and the related explanatory notes. We have read the otherinformation contained in the half-yearly financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the Disclosureand 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 thecompany those matters we are required to state to it in this report and for noother purpose. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company for our review work, forthis report, or for the conclusions we have reached. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the DTR of the UK FSA. As disclosed in note one, the annual financial statements of the Ashmore Groupplc are prepared in accordance with IFRSs as adopted by the EU. The condensedset of financial statements included in this half-yearly financial report hasbeen prepared in accordance with IAS 34 Interim Financial Reporting as adoptedby the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of review We conducted our review in accordance with International Standard of ReviewEngagements (UK and Ireland) 2410 "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for the use in the UK. A review of interim financial informationconsists of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing (UK and Ireland) and consequently does notenable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express anaudit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 31 December 2007 is not prepared, in allmaterial respects, in accordance with IAS 34 as adopted by the EU and the DTR ofthe UK FSA. KPMG Audit PlcChartered AccountantsOne Canada SquareLondon E14 5AG26 February 2008 This information is provided by RNS The company news service from the London Stock Exchange