CCAP.L Regulatory News (CCAP)

24 Sep 2009 16:27



24th September 2009 

Charlemagne Capital Limited

 Results for the six months to 30 June 2009

Replacement Announcement

The following replaces Charlemagne Capital Limited's previous announcment, Headlined - Half Yearly Report, RNS number 4973Z released on 23 September at 7am. This release corrects the header in that announcement which referred to audited, rather than unaudited results. The remainder of the announcment is unchanged.

Charlemagne Capital Limited ("Charlemagne", or the "Group"), the specialist emerging markets equity investment manager, today announces unaudited results for the six months to 30 June 2009.

Key Highlights

Group Assets under Management ("AuM") up 9.0% since 1 January 2009 to US$2.4 billion as at 30 June 2009 reflecting improving market conditions but still down significantly since 30 June 2008 (US$5.7 billion)

Net management fees of US$8.4 million down 67% versus June 2008, reflecting the impact that the fall in global emerging markets has had on average AuM in the first half of 2009

Net performance fees of US$0.4 million down 88% versus June 2008

Operating profit of US$1.3 million, down 90% versus June 2008

Earnings per share of 0.41 US cents per share 

Ordinary interim dividend of 0.4 US cents per share 

Investment case for emerging markets remains strong, with de-coupling to continue 

Charlemagne well positioned to benefit from improving market sentiment and positive fund flows

Commenting on the results, Jayne Sutcliffe, Chief Executive: 

"Despite the turbulence in global markets, the fundamental case for emerging markets remains compelling. During this challenging period we kept our infrastructure and operating platform intact and consequently we are well positioned to continue to build the business and take advantage of new  investment opportunities. 

"The recovery experienced during the second quarter has continued, with Assets under Management increasing by 17% to US$2.8 billion since the end of June to date. We are confident that Charlemagne will continue to benefit from this trend as investors return to emerging markets equities."

Enquiries:

There is a presentation for analysts and investors at 09.30am today at the offices of Smithfield Consultants, 10 Aldersgate St., London EC1A 4HJ.

Notes to Editors:

Charlemagne Capital is a specialist emerging markets equity investment management group. Charlemagne Capital Limited was admitted to the AIM market of the London Stock Exchange on 4 April 2006.

Charlemagne's product range comprises mutual funds, institutional and specialist fund products and hedge funds primarily covering GEMs, EMEA, Latin America and Asia. Charlemagne Capital employs a range of investment strategies including: long only, long/short, structured products and private equity. Charlemagne Capital's funds aim to exploit the inefficiencies in the market via a strict bottom up approach and focused stock selection.

  Chief Executive's Report

The second quarter of 2009 has seen recovery in global markets, which has continued into the third quarter, with the recovery being even more significant in emerging markets. The issues that blighted the world economies in the latter part of 2008 were primarily created by the world's developed markets, so whilst this has impacted global demand, growing domestic demand has made emerging markets less dependent on the economies of the developed world. It is our belief that this de-coupling will continue to assert itself.

Assets under Management ("AuM") rose to US$2.4 billion by the end of June, up 9% from the start of year and up 28% from the end of March 2009 and had reached US$2.8 billion by mid September. Whilst this performance is very encouraging, AuM is still significantly behind the same time last year (US$5.7 billion) and therefore revenues for the first half of the year were severely impacted at just US$9.5 million (2008: US$30.3 million). Net management fees were US$8.4 million (2008: US$25.1 million) and net crystallised performance fees were US$0.4 million (2008: US$3.3 million) reflecting the difficult market conditions. Accruing performance fees1 which have not crystallised but have crystallisation dates falling in 2009 were US$0.9 million compared with US$0.7 million as at the same date in 2008, although the accruing amount may not necessarily be indicative of the eventual crystallised figure. The balance of the total revenues arose from investment and other income.

Fund performance in the first half has been strong with overall growth of 27% across all products over the period, with certain funds seeing growth of around 60%.

We have seen net outflows across all fund groups in keeping with most of the industry. Hedge funds saw the highest proportionate levels of outflows, despite solid positive performance, due to client demands for the return of cash from more liquid assets. In addition to the general market malaise, certain clients have reported impacts from special situations, such as the Madoff affair, which led them to require liquidity at short notice.

The scale of the changes in the underlying mix of products has led to a fall in the average levels of fee revenue per dollar of AuM. Whilst the revenue margins in the Magna and OCCO fund ranges have held up well, there has been a fall in the overall revenue margin to 74 basis points from 82 basis points in 2008.  The Group believes this lower figure to be sustainable moving forward.

The Group does not see any reason to change its policy of paying dividends reflecting the long-term earnings and cash flow of the Group. For the first half of 2009, the Group is declaring an ordinary interim dividend of US 0.4 cents (2008: US 2.4 cents) reflecting reduced but still positive levels of sustainable earnings in the period and signalling confidence in the outlook.  Shareholders' equity continues to be almost completely backed by cash.  

Despite the turbulence in global markets during the period under review, the fundamental case for emerging markets remains sound. Market performance in the first half has been strong, and the Group has continued to be profitable. We have maintained our infrastructure and operating platform intact despite market pressures. The Group remains confident that it is well positioned and appropriately structured to gain an appropriate share of investment monies allocated to the sphere in which it operates.

Jayne Sutcliffe

Chief Executive

23 September 2009

 Financial Summary

Summary Financial Information

The results and the assets and liabilities of the Group for the current and comparative interim periods along with the last full financial year (extracted from the audited financial statements) are set out below in summary:-

Assets under Management ("AuM")

The table below sets out the Group's AuM as at 30 June 2009 and the movements experienced in each product range in the period since 1 January 2009.

Note: Closing AuM is stated as including all subscription and redemption orders received for the relevant funds as at the close of the period but not processed until the first dealing date of the following period.

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

  Consolidated Statement of Changes in Equity

  Consolidated Statement of Cash Flows

   Notes to the Consolidated Interim Financial Statements

The consolidated interim financial statements have been prepared on a condensed basis, in accordance with the requirements of International Accounting Standard 34 "Interim Financial Reporting". They do not include all of the information required in annual financial statements in accordance with IFRS and where appropriate should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2008.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 December 2008 except for the adoption of IAS 1 "Presentation of Financial Statements" (Revised 2007) and IFRS 8 "Operating Segments".

The adoption of IAS 1 (Revised 2007) makes certain changes to the format and titles of the primary financial statements and to the presentation of some items within these statements. It also gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expenses are unchanged. However, some items that were recognised directly in equity are now recognised in other comprehensive income. IAS 1 affects the presentation of owner changes in equity and introduces a "Statement of comprehensive income". In accordance with the new standard the entity does not present a "Statement of recognised income and expense", as was presented in the 2008 consolidated financial statements. Further a "Statement of changes in equity" is now presented as a prime statement.

The adoption of IFRS 8 has not affected the disclosure of segment reporting for the Group as the information previously presented was already consistent with the segmental reporting structure reviewed by management.

The condensed consolidated interim financial statements are prepared on the historical cost basis except that the following are stated at their fair value: financial instruments at fair value through profit or loss including derivative financial instruments. Recognised assets and liabilities that are hedged are stated at fair value in respect of the risk that is hedged.

2. Comparative Figures

Where necessary, comparatives figures have been adjusted to conform to changes in presentation for the current period.

  Notes to the Consolidated Interim Financial Statements (continued)

4.  Taxation

Income tax expense is recognised in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year. Amounts accrued for income tax expense in one interim period may be adjusted in a subsequent period of that financial year if the estimate of the effective rate of income tax changes.

5. Dividends

An interim ordinary dividend of 1.3 US cents (GB 0.9205p) (2008: 2.4 US cents, GB 1.2179p) per ordinary share in respect of the year ended 31 December 2008 was paid on 7 April 2009 to those shareholders on the register on 13 March 2009 and was charged to the income statement in 2009. There was no interim special dividend paid in the period (2008: 10.35 US cents, GB 5.2522p).

The Group has declared an ordinary interim dividend of 0.4 US cents (GB 0.2453p) in respect of the half year to 30 June 2009 which will be paid on 30 October 2009 to those shareholders who were registered on 2 October 2009

6. Receivables

  Notes to the Consolidated Interim Financial Statements (continued)

7. Accounts Payable, Accruals and Other Payables

8. Minority Interest

On 11 June 2009 the Group acquired the remaining interest in Charlemagne Capital (Services) Ltd, one of its subsidiaries The Group has also created a new subsidiary during the period in which there is a minority interest. The subsidiary's income is directly related to the profitability of one the investment funds managed by the Group.

9.  Issued Share Capital

During the six months ended 30 June 2009, the Company did not repurchase any of its own shares. During the six months ended 30 June 2008, the Company repurchased 1,250,000 of its own shares from a total of 4,463,500 shares repurchased in 2008 as a whole.

As at the date of issuing the financial statements there were 280,810,673 ordinary shares of US$0.01 each issued and fully paid.

10. Earnings per Share

The calculation of basic earnings per share of the Group is based on the net profit attributable to shareholders for the six months to 30 June 2009 of US$1.1m (2008: US$11.1m) and the weighted average number of shares of 277,388,488 (2008: 281,041,548) in issue during the period.

The calculation of diluted earnings per share of the Group includes the effect of those outstanding share options where specified performance conditions being satisfied which have not yet vested. As at 30 June 2009 there are no dilutive effects. 

Shares issued during 2006 to Sanne Trust Company Limited have been excluded from the earnings per share calculation as such shares are currently accounted for as treasury shares.

  Notes to the Consolidated Interim Financial Statements (continued)

11. Share Based Payments

During the period the Group issued new share based incentive programmes to its employees. A number of previously granted options expired due to failure to meet their performance conditions.

Equity Settled

The Group has established several share based incentive programmes that entitle certain employees to acquire shares in the Company subject to the vesting conditions set out below at an exercise price that was set at the date of grant.

The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest.

The number and weighted average exercise price of outstanding share options is as follows:

  Notes to the Consolidated Interim Financial Statements (continued)

11. Share Based Payments (continued)

The options outstanding at 30 June 2009 have an exercise price between GBPNil and GBP0.75 and a weighted average contractual life of 6.7 years. Outstanding share options are contingent upon specified performance and service criteria being satisfied. As at 30 June 2009 some of the performance criteria had been achieved however the service criteria have not yet been met. Also during the period to 30 June 2009 some of the options were cancelled or settled, in the case of unvested options, this was treated as an acceleration of the vesting period. 

The fair values of the options granted under the new equity settled schemes are measured at the grant date using a Black-Scholes binomial lattice model and spread over the three year vesting period of these schemes. The values are adjusted to reflect the actual number of shares that are expected to vest and recognised as an employee expense with a corresponding increase in equity.

During the period the Group established a new subsidiary entity and entered into an economic interest agreement with this entity in respect of one of the management contracts held by the Group. An employee of the Group holds a 49.9% minority interest in the shares of this entity and has an option to acquire a further 12.6% of the shares in issue. The Group has retained an option to re-acquire the shares held by the employee for a nominal sum under certain conditions, should the employee's option no longer be exercisable for any reason. As at the grant date, the Directors believe that the option granted to the employee has no significant value.

The share options are granted under service and non-market performance conditions. Such conditions are not taken into account in the grant date fair value measurement of the services received. There are no market related conditions associated with the share option grants.

Cash Settled

As at the reporting date the Charlemagne 2005 Employee Benefit Trust ("the EBT" ) holds 3,422,185 Company shares, which had a fair value of US$672,215 as at 30 June 2009 (31 December 2008: US$368,264), based on the market price as at that date, after adjusting for the waiver of dividend rights at an assumed dividend yield of 5%. Previously the Directors of the Group's global employment company, Charlemagne Capital Services Limited ("CCSL"), recommended to the Trustee of these Company shares held by the EBT be held until certain AuM performances targets and service targets were met, after which time the shares should be sold and the Trustee of the EBT (Sanne Trust Limited, an independent trustee company) may at its discretion allocate the proceeds to discretionary sub-trusts of which certain employees and their families are beneficiaries. 

During the period to 30 June 2009, certain of the original performance targets were not met, the Directors of CCSL, therefore recommended to the Trustee of the EBT that 2,404,236 of the Company shares held by the EBT should continue to be held until new AuM performances targets and service targets are met, after which time the shares should be sold. The Trustee of the EBT may at its discretion allocate the proceeds to discretionary sub-trusts of which certain employees and their families are beneficiaries. 

The fair value of the future cash settlement is spread over the vesting period, and recognised as an expense in the accounts with a corresponding increase in liabilities. The fair value is re-measured at each reporting date, with any adjustment in the cumulative fair value being recognised in the reporting period.

12. Interest in Jointly Controlled Entity

During the period a jointly controlled entity made a part distribution of its assets by way of a dividend.