RNS Number : 6133S
Ashmore Group PLC
14 September 2010
 

 

Ashmore Group plc

 

14 September 2010

 

 RESULTS FOR THE YEAR ENDED 30 JUNE 2010

 

Ashmore Group plc, one of the world's leading emerging market investment managers, today announces its audited results for the year ended 30 June 2010.

 

Highlights

 

•       Final assets under management ("AuM") of US$35.3 billion at 30 June 2010, an increase of US$10.4 billion (42%) from US$24.9 billion at 30 June 2009

 

•       Total net revenue of £286.2 million, an increase of 41% from FY2008/09 (£203.5 million)

 

−      Net management fees up by 4% to £189.9 million

 

−      Performance fees up 58% to £82.9 million (FY2008/09: £52.5 million)

 

−      Foreign exchange gain £7.0 million (FY2008/09: £38.6 million loss)

 

•       Operating margin of 73.0% (FY2008/09: 74.0%)

 

•       Profit before tax of £217.2 million, an increase of 36% from FY2008/09 (£159.8 million)

 

•       Basic earnings per share of 23.9p (FY2008/09: 17.1p)

 

§  9.34p final dividend, making a full year dividend of 13.0p

 

 

Commenting on the preliminary results, Mark Coombs, Chief Executive Officer,  Ashmore Group plc said:

 

" The Group has delivered good financial results for the year ended June 2010 and performed well in respect of our key targets of overall investment performance of assets managed, growth of assets under management and the financial performance of the company.

 

" Our well established active investment processes and ability to recognise the key market opportunities led to investment outperformance during the year.  Of our accounts managed to benchmark , 97% by AuM outperformed the benchmark over 1 year. 

 

" We have also made good progress in deepening and broadening our distribution capability and in advancing our local asset management ventures in key emerging markets. The year has seen an increase in the levels of AuM sourced from within the emerging markets, and this is a trend we expect to continue.

 

"We remain confident of the Company's prospects for the new financial year and beyond."

 

Analysts/investors briefing

 

There will be a presentation for analysts at 09.00 on 14 September at the offices of

Goldman Sachs at Peterborough Court, 133 Fleet Street, London EC4A 2BB. A copy of the

presentation will be made available on the Group's website at www.ashmoregroup.com

 

 

Contacts

 

For further information please contact:

 

Ashmore Group plc                               +44 20 3077 6000

Graeme Dell

Group Finance Director

 

Penrose Financial                                 +44 20 7786 4888 / 07798 626 282

Gay Collins

ashmore@penrose.co.uk



Chairman's Statement

 

It gives me pleasure to present the results for the year ended 30 June 2010 in what has been a good year for Ashmore Group plc ("Ashmore", or the "Group"). The Group has made significant progress in financial terms with strong growth in assets under management ("AuM") and good investment performance producing management and performance fee growth. Through the maintenance of a robust and efficient business model overall this results in an increase of 36% in profit before tax to £217.2 million (FY 2008/09: £159.8 million).

 

The Group has also made further progress in operational terms with the development of new funds and investment themes, increased scale and geographical reach to its distribution team, and, as part of the third phase of its strategy - mobilising emerging market capital - by developing further local asset management businesses in some of the key emerging markets.

 

In recognition of this financial performance and underlining the Board's confidence in the future prospects of the Group, the Directors' are recommending an increased final dividend of 9.34 pence per share for the year ended 30 June 2010 which, subject to shareholder approval, will be paid on 3 December 2010 to shareholders on the register on 5 November 2010. This makes a total dividend for the year of 13.0 pence per share (2009: 12.0 pence), an increase of 8.3%.

 

The Board continues to maintain its focus on good corporate governance and recognises the year has seen a new Corporate Governance Code released in May 2010 ("the 2010 Code"). Whilst the 2010 Code does not apply to Ashmore until the next financial year the Company intends to adopt it with immediate effect.

 

The team at Ashmore has had a year they can be proud of and I should like to thank them all for the efforts they have made in contributing to the achievement of these results. These remain challenging times in the global financial markets but the events of last year have emphasised the increasing importance of emerging markets within the global order. I am confident that Ashmore, with its long history and excellent track record of investment in emerging markets, is extremely well positioned to benefit from the growing opportunity.

 

 

Michael Benson

Chairman



CEO Report

I am pleased to be able to report that in the year ended 30 June 2010 Ashmore Group plc ("Ashmore", "the Group") performed well in respect of its key targets of overall investment performance of assets managed, growth of assets under management and the financial performance of the company. The Group also made good progress in its plans to deepen and broaden its distribution capability, and in advancing its local asset management ventures in key emerging markets. Meanwhile, the investment world is steadily getting our messages that emerging markets must become a core part of an investment portfolio in the future and that few have enough of their investable assets committed to those regions.

Assets under management and financial performance

AuM development

The Group's AuM increased by 42% from an opening level of US$24.9 billion to reach US$35.3 billion at the year end.  This was achieved through net subscriptions of US$7.6 billion and positive investment performance of US$2.8 billion.  Gross subscriptions were significantly higher than the prior year at US$ 11.3 billion (FY 2008/09 US$3.8 billion) with the majority of the inflows going to the Group's most liquid investment themes of external debt and local currency, much as predicted at the time of last year's annual report and in line with our previous experience at this stage of the cycle after crisis.  The principal sources of funds were larger segregated account mandates, including significant new funds from governments/reserve managers and sovereign wealth funds from the emerging markets themselves.  In line with the overall secular shift that we have been predicting, such accounts are no longer moving simply into dollar denominated instruments, but into local currency assets in emerging markets, and which now include currency overlay and hedging product in addition to active mandates in both currencies and bonds.  Levels of gross redemptions were reduced sharply from the prior period at US$ 3.7 billion (FY 2008/09 US$ 11.3 billion).

Financial performance

The Group achieved good growth in revenue in the year, with a 41% increase in net revenue to £286.2 million (FY2008/09: £203.5 million). Management fee income in sterling terms increased by 4% to £192.1 million (FY 2008/09: £186.8 million) as a result of increased average AuM and improved foreign exchange conversion rates, offset by reduced average fee margins.  This reduction in margins is as a result of the mix of subscriptions as the business and its asset classes grow and evolve, with larger segregated client inflows and the most liquid investment themes attracting lower pricing. Performance fee income grew strongly by 58% to £82.9 million (FY2008/09: £52.5 million), as a result of strong investment performance from funds across investment themes, principally this year from annual fees of funds with 31 December and 30 April year end dates. This again demonstrates the benefits of our performance fee model where annual fees are staggered across the financial year.  Profit before tax increased 36% from £159.8 million to £217.2 million with earnings per share increasing to 23.9p (FY 2008/09 17.1p). In line with the increase in earnings per share, and in view of the positive outlook for the business, whilst maintaining a strong balance sheet to support seed capital for new products, we are delighted to recommend an increase in the total dividend for the year to 13.0 pence (FY 2008/09 12.0 pence).

Emerging markets: Developments and opportunities

The year has been marked by the further enhancement of the relative positioning of emerging markets over developed markets in several ways. Firstly, the forecast for economic growth in emerging markets remains a credible 6-7% in both 2010 and 2011, significantly outstripping the forecast growth levels for the developed world of just over 2% in each year.  Developed markets will only recover slowly from the credit crisis as the effects of deleveraging will still be felt for some time and policy has to adjust to reflect the much less levered environment. Secondly, balance of payment fundamentals in many emerging markets remain strong and improving.  A number of emerging economies already have the theoretical capacity to use reserves to pay off all of their debt and still be left with surpluses; an impossible dream for any major developed country. Thirdly, despite home country bias, the historic prejudices of investors towards the "safer" developed world over "riskier" emerging markets is steadily being dispelled by the recent events in the Eurozone, where downgrades have begun to contrast with the steady upgrades expected in emerging markets over coming years. Finally, the role of the emerging markets, and their importance within the G20 as it sets international policy, continues to expand, particularly in exploring the longer term reform of the international monetary system and the likely increased role of emerging markets' currencies.

In summary, there is a new structure to the global economy and in particular the bargaining power of the emerging world. Ashmore has a long history of successful investment across emerging markets and regards this long term structural opportunity, coupled with an inexorable shift of investors' allocations to the emerging markets, as providing a platform for further development in shareholder value through the execution of our stated three phase strategy.

Operational achievements

The key to the long term success of any asset manager is to consistently produce strong investment performance and establish and distribute products that capture the requirements of a diverse and growing client base. Investment performance during the year was good overall with 97% by AuM of those accounts managed to benchmarks outperforming their benchmarks over one year, and 53% outperforming over three years. Hence the Group's well established active investment processes, which have been tested during a number of cycles, continued to generate alpha.  Importantly, this alpha also came from where we expected and had predicted to clients, in the roll down of risk through our investment themes from sovereign investment grade through non investment grade to local currency, corporate debt, equity and, just beginning in this year and expected to continue over the next 1-2 years, special situations/private equity.

Recognising developments within emerging markets, availability of assets for investment and providing routes to invest in them is our core function.  As more investors realise the opportunity of emerging market investing, and those markets grow and provide more diversified opportunities, our challenge is to provide suitable products to each potential client.  This year saw us establish a variety of new products as we saw increasing opportunity to provide investors differing slices of emerging markets risk with different target returns and liquidity profiles. 

As a result, and as our existing investors will know, we now provide sub-themes within each of the major public markets investment themes of external debt, local currency and corporate debt with different liquidity and risk characteristics.  If an investor wants a highly liquid, plain vanilla, single theme, daily dealing product, with lower targeted returns than the strategies that accept less liquidity, or than the more blended and complex investment packages , then we can now provide it, both in the UK and Europe (and to some extent Asia), through a full suite of SICAV products.  We also expect to be able to do so in the USA in this financial year.

An external debt investor can now access the sub-themes of a) sovereign investment grade only; b) sovereign and/or c) blended mandates incorporating differing proportions of external debt, local currency and corporate debt and in some cases special situations.  In all cases this can now be done on a daily dealing basis.  The local currency investment theme also now sees increasing levels of investor interest and understanding of the diversity of the opportunity set, ranging from purely foreign exchange (short term / money markets) to local currency bonds (long term / interest rate duration) to a blend of both, optimising risk / return and liquidity.  Again, we have established funds and accounts including SICAVs on a daily dealing basis for each.  This variety of sub-themes of investment grade, non-investment grade or a blend is also now available in corporate debt, except where there is lesser liquidity, and, in addition, our global public equity investment theme is now available on a daily dealing basis in SICAV form, alongside the sub-theme investing in closed end funds.  We are also delighted to have received QFII quota from China during the year to run a monthly dealing set of funds providing China A share, domestic fixed income and blended products.  Obtaining such scarce capacity from the Chinese authorities both provides our investors with access to the onshore market and demonstrates our growing involvement within the local asset management market.

We have made progress on building a broader distribution platform during the year and, in line with the plans we outlined last year, added headcount in institutional business development, client relationship management and marketing services.  Total headcount across the three areas at year end has increased by 62% to 21. This additional resource was added in existing offices in London and New York, and through the recruitment of dedicated distribution resources in Beijing and Tokyo by year end and Melbourne shortly thereafter, as well as within the local asset management ventures in Brazil and Turkey.  We have now begun to focus on the global retail markets as the next stage in the development of our distribution platform, and are finalising the establishment and infrastructure associated with our new geographic locations, so we expect to add further resources and product conduits globally in the current year.

The Group's local asset management operations in Turkey, Brazil and India were enhanced during the year and we expect that one or two additional local asset management platforms will be opened in the current year. In all such locations we are currently actively undertaking processes to raise AuM through a range of open ended fixed income and equity products as well as infrastructure, private equity, real estate and distressed debt asset classes where we see talent and opportunity. Whilst these businesses are currently a small percentage of the overall Group AuM, we believe that the development of a network of domestic asset management businesses operating in a number of the world's key emerging markets gives us direct access to the extraordinary growth potential arising both within these markets and across border and are seeds planted for the Group's future growth.

People and culture

A core part of Ashmore's culture is the focus on, and a deep understanding of, all aspects of the emerging markets in a team based approach.  The year just past has seen significant events both within the emerging markets and within markets traditionally viewed as developed. Ashmore tries to capture value from its view of the world and the markets' reactions from such events, both impacting on and arising from the emerging markets, and the demographic, macroeconomic, political and cultural trends in operation across the globe.  This means maximising the advantage our broad Ashmore platform can give us, encompassing our track record, history, product range and scale, the exchange of ideas within the investment processes as well as across the business from distribution to support areas, and within both global and local asset management businesses. Our headcount has grown further in the year to 165 at 30 June 2010 (30 June 2009: 142) and our geographical and cultural diversity continues to broaden as a result, but we all focus on emerging markets and are determined to maintain our ability to maximise the Ashmore advantage. This absolute focus on the emerging markets is our primary alignment with our clients. We believe it also aligns us to our shareholders whose investment rationale ultimately relates back to the emerging market investment opportunity. It continues to be a pleasure to work with everyone at Ashmore and I should like to thank everyone for their efforts which contributed to the achievement of our good results this year for both our fund investors and our shareholders.

Outlook

In the new financial year, unaudited annual performance fees for the funds with performance years ended 31 August 2010 were £43.5 million (August 2009: £5.1 million) which will be recognised in the financial year ended 30 June 2011.

The opportunities for investment continue to be good across our investment themes although probably in a lower absolute return world than the last year in the more liquid markets.  External and local currency debt benefit from the ongoing recognition by investors of the relative attractiveness of sovereign emerging market issuers over their developed world counterparts. Recent local currency volatility simply means that it is a traders' market for the moment and we are happy to adjust for that, whilst in the medium term we expect continued Euro weakness and the structural decline of the Dollar to strengthen the case for investing in emerging market currencies. Meanwhile currency nervousness and overstated predictions of near term emerging markets inflation, without proper recognition of improved policy management by local monetary authorities, will provide great opportunities to add local currency bonds and interest rate exposure in the coming year.  Corporate debt and equities both benefit from the strong fundamentals of many of the emerging markets companies, with steady growth of both debt and equity issuance creating deeper markets and more scope to add capital. Of these two themes, we expect corporate debt to have stronger near term performance, and it is one of our more favoured themes. We believe  equity markets will be held back somewhat by the outlook for equity in low growth developed world markets , and as fundamental investors take time to increase their weightings to the emerging markets until they finally see the impact of domestic growth.  Special situations assets within our portfolio continue to see increased realisations from investments made in 2004-2006 at attractive premia to historic valuations.  We expect more over the next couple of years as strategies reach maturity as usual at this time in the cycle. 

In terms of asset raising, the last year has seen an increase in the levels of AuM sourced from emerging markets themselves and their largest sources of capital ie central banks/reserve managers, governments and sovereign wealth managers, and this is a trend we expect to continue. It is likely that over the long term the local currency asset class will be of steadily increasing focus to these institutions and Ashmore continues to pride itself on gaining early, direct access to trading in the local market instruments directly for both the globally and locally managed funds we provide.  Our local custodial network and hence ability to invest without complete dependence on international bank balance sheets is another benefit of diversification in which we invest significant time.  We will continue this focus as we continue to see this asset class growing over time to be our biggest volume theme. The steps taken in the past year toward enhancing and broadening the distribution of Ashmore's funds will continue, and we expect to undertake further product development and organisational alignment to develop a greater proportion of business from the retail distribution channel, alongside our established institutional business development team.

Although the problem of home country bias in investment will never be completely eliminated as it has strong tribal roots, it is at its weakest in the developed world after crisis and in recovery mode.  Hence, this is a strong current positive for Ashmore as our continued and consistent message receives a broader hearing.  However, an even stronger positive is that our growth target market for capital flows is from within the emerging markets, and so when these investors exhibit home country bias, we will be there to encourage it and channel it into their own markets and away from the developed world.

In summary, we believe we are steadily better positioned in emerging markets investing and well set to deal with the greater competition that a growing investable universe inevitably brings.  Our investment and business thesis remains on track and we look forward to developing it further in the coming year.

 

 

Mark Coombs

Chief Executive Officer



Business Review

The financial and operational highlights previously described are analysed further in the following financial and business review, providing a detailed account of the Group's activities and their financial impact in the period.

 

Key Performance Indicators

 


Year ended 30 June 2010

Year ended 30 June 2009

Year end AuM

US$ 35.3 bn

US$ 24.9 bn

Average AuM

US$ 31.3 bn

US$ 27.7 bn

Average net management fee margins (bps)

95bps

107bps

Operating profit margin

73%

74%

Variable compensation ("VC")/ EBVCIT

18%

14%

Year end headcount

165

142

 

Ashmore Group result

The Group recorded an operating profit for the year ended 30 June 2010 of £209.3 million (FY2008/09: £150.6 million), giving rise to an operating margin of 73 per cent (FY2008/09: 74 per cent); a profit before tax of £217.2 million (FY2008/09: £159.8 million); and a profit after tax of £160.6 million (FY2008/09: £115.5 million). The financial results are analysed further below.

 

Assets under Management and Fund Flows

Gross subscriptions in the year increased significantly from the previous period to a level of US$11.3 billion, these subscriptions being received almost equally between the first and second half concentrated particularly in the first and fourth quarters. Subscriptions were weighted predominantly to the most liquid themes, external debt and local currency as well as currency hedging/overlay. The majority of subscriptions were into segregated mandates with a number of further subscriptions from existing clients.

 

Other notable gross subscriptions on a smaller scale were those into the corporate debt theme, as investors appetite for this asset class began to gather momentum through the year and at the end of the year, a new segregated mandate, in the special situations theme.

 

Gross redemptions declined sharply to US$3.7 billion and in line with our statement at the interims, these continue to arise principally from clients' continued needs for liquidity. Often, these are undertaken by clients through a rebalancing process following periods of strong emerging market performance relative to other asset classes.

 

 


Year ended 30 June 2010

Year ended 30 June 2010

Year ended 30 June 2009

Year ended 30 June 2009

Opening AuM (US$bn)


24.9


37.5

Gross subscriptions (US$bn)

11.3


3.8


Gross redemptions (US$bn)

(3.7)


(11.3)


Net subscriptions (US$bn)


7.6


(7.5)

Performance  (US$bn)


2.8


(5.1)






Closing AuM (US$bn)


35.3


24.9

 

 

New funds and accounts

 

The year saw a marked increase in the level of new funds launched from earlier years in terms of both number and levels of AuM. In the public funds category 14 funds were launched including 8 sub funds of the Ashmore SICAV within the external debt theme (Sovereign Investment Grade Debt Fund, Sovereign Debt Fund); local currency theme (Emerging Markets Local Markets Fund, Local Currency Bond Fund); corporate debt theme (Investment Grade Corporate Debt Fund, Corporate Debt Fund) and equity theme (Equity Fund, Equity Select Fund). The Ashmore SICAV 3 and Ashmore Institutional Multi Strategy Fund were launched within the multi-strategy theme. In real estate the Ashmore Russian Real Estate Recovery Fund and Everbright Ashmore China Real Estate Fund were launched. The Ashmore Greater China Fund focussing on equities and fixed income investing principally within the domestic Chinese market utilising the QFII quota and a local currency fund managed by our Brazilian local asset management subsidiary were also launched.

 

Additionally 10 new segregated and dual branded mandates were won in the period within the external debt, local currency, special situations, multi-strategy and local currency hedging/overlay strategies.

 

AuM movements by investment theme

In line with the quarterly presentation of AuM, by theme as classified by mandate, the following table breaks this down into net subscriptions/redemptions and investment performance by theme.

 

AuM movements by investment theme as mandated:-

 


AuM at 30 June 09

(US$bn)

Net subs/ (reds)

(US$bn)

Net performance

(US$bn)

AuM at

31 Dec 09

(US$bn)

Net subs/ (reds)

(US$bn)

Net performance

(US$bn)

AuM at

30 June 10

(US$bn)

External debt

14.7

0.8

2.1

17.6

1.6

0.2

19.4

Local currency

4.2

0.9

0.6

5.7

1.5

(0.2)

7.0

Special situations

3.3

(0.1)

(0.1)

3.1

0.4

(0.1)

3.4

Equity

 

0.1

0.0

0.1

0.2

0.0

0.0

0.2

Corporate debt

0.5

0.2

0.0

0.7

0.1

0.1

0.9

Multi-strategy

2.0

(0.1)

0.1

2.0

0.0

0.0

2.0

Other

 

0.1

2.2

0.0

2.3

0.1

0.0

2.4

 

Total

24.9

3.9

2.8

31.6

3.7

0.0

35.3

 

Investor profile - type and geography

The Group's AuM are sourced from a diverse range of investors, which are predominantly institutional in type (30 June 2010 92%; 30 June 2009: 91%), including pension providers, government agencies, banks and insurers. The balance is retail in nature including high net worth individuals and some distributed products.

 

Within the institutional investor profile, the most significant trend during the period has been the increase in the government category of investors which include central bank, treasurers / reserve managers and sovereign wealth funds which have increased from 21% to 34% as a result of strong inflows from these investors.

 

The regions demonstrating the strongest growth in AuM are Asia and the Middle East in line with the strong inflows outlined above from government type investors, most of which have been from emerging markets within these geographies, in line with the third phase of the Group's strategy - Mobilising Emerging Market capital.

  

 

Management fees and performance fees

As the Group's AuM is predominantly US dollar-based, the majority of management and performance fees are also US dollar denominated.  The table below sets out AuM, net management fees, net management fee margins, and performance fees, by theme in US dollars:

 

Underlying US dollar management and performance fees


AuM

at

30 June 2009

(US$bn)

AuM

at

30 June 2010

(US$bn)

Net management fees to

30 June 2010

(US$m)

Avg mgt fee margin bps

Performance fees to

 30 June 2010

(US$m)

External

debt

14.7

19.4

124.3

71

68.6

Local

currency

4.2

7.0

56.2

99

21.9

Special

situations

3.3

3.4

68.4

217

7.6

Equity

 

0.1

0.2

2.8

171

5.5

Corporate debt

0.5

0.9

12.5

172

14.7

Multi-strategy

 

2.0

2.0

30.0

147

13.2

Other

 

0.1

2.4

3.9

20

0.0

 

Total (US$)

24.9

35.3

298.1

95

131.5

 

Total (GBP)

15.1

23.6

189.9

95

82.9

 

 

Management fees

Management fee income in sterling terms increased by 4% to £189.9 million as a function of increased levels of average AuM (FY2009/10: US$31.3 billion; FY2008/09: US$27.7 billion), improved GBP:USD foreign exchange rates (FY2009/10: 1.57 effective; FY2008/09: 1.62 effective) offset by a reduction in average management fee margins (FY2009/10: 95 bps; FY2008/09: 107 bps).

 

Management fee margins were reduced in line with the receipt of the strongest inflows within the most liquid themes, external debt and local currency, which have the lower margins. In addition the majority of inflows into these themes were received in the form of larger segregated mandates which are lower margin in nature. Likewise those flows into the currency hedging/overlay strategy attract a lower management fee in line with the hedging rather than active management nature of the mandate.

 

 

Performance fees

Total performance fee income for the year increased by 58% to £82.9 million (FY2008/09: £52.5 million) being earned across the investment themes. The majority of these fees were annual performance fees from funds having December and April year ends with the balance being made up of other annual performance fees and crystallised fees arising on redemptions during the period.

 

It is the Group's policy to maintain a good balance between those funds where the Group is eligible to earn performance fees and those that generate revenues for the Group solely through management fees. At the year end the Group was eligible to earn performance fees on 56% of AuM (30 June 2009: 67%), and 63% of funds (30 June 2009: 61%).  Within those funds that are eligible to generate performance fees, 10% were ineligible in the year under review, either because such fees are earned at the end of the multi-year fund life or are subject to rebate agreements.

 

Operating costs and operating margin

The Group has maintained its tightly controlled cost structure, with a low proportion of recurring costs and a large proportion of variable performance related costs. Headcount increased from 142 at 30 June 2009 to 165 at 30 June 2010, in line with which is the increase in wages and salaries to £9.7 million (FY2008/09: £8.9 million). There is continued recruitment to support the future growth of the business, principally within the distribution and investment teams and within the local asset management subsidiaries and associates.

 

Variable compensation costs represent the majority of overall personnel expenses and consists of performance related bonuses, share based payments and associated social security costs. Variable compensation is calculated as a percentage of profit before tax, interest and variable compensation. The rate of variable compensation applied in the year to 30 June 2010 was increased to 18.0% (FY2008/09: 14.0%) in recognition of the growth in AuM, good investment performance and financial results.

 

The Group continues to increase the number of geographic locations in which it has a presence through a combination of organic growth, which included the establishment of new offices in Colombia, Japan, China and Russia and through the investment in an associate in China, Everbright Ashmore.                                            

 

The overall total for other expenses for the year to 30 June 2010 was £18.1 million (FY2008/09: £16.9 million) with key drivers for the year on year rise being increased travel costs of £4.1 million (2009: £3.3 million) and professional fees of £3.5 million (FY2008/09: £3.0 million), in line with the geographic expansion of the business and increased distribution activity. It is expected that other costs in aggregate will increase ahead of the rate of growth of headcount over the next period taking into account a number of smaller locations being established for the first time.

 

Taxation                             

The vast majority of the Group's profit is subject to UK taxation. The Group's effective tax rate for the year is 26.1% (FY2008/09: 27.7%). The tax rate for the year is less than the UK corporation tax rate (currently 28.0%) as a result of deductions in respect of share based payments and movements in provisions.

There is a £14.4 million deferred tax asset on the Group's balance sheet at 30 June 2010, as a result of timing differences in the recognition of the accounting expense and actual tax deductions in connection with share price appreciation on share-based awards.

Balance sheet management and cash flow

It is the Group's policy 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 across the business which include funding establishment costs of distribution offices and local asset management ventures, seeding new funds, trading or investment in funds or other assets and other strategic initiatives.

 

Regulatory capital requirements as outlined in the Group's Pillar III disclosures have increased reflecting the growth of the business and the increased levels of seed capital investment.

 

As at 30 June 2010, total equity attributable to shareholders of the parent was £370.5 million, compared to £308.5 million at 30 June 2009. There is no debt on the Group's balance sheet.

 

Cash

The Group's cash and cash equivalents balance increased by £56.0 million in the year to £344.4 million. The Group continues to generate significant cash from operations, totalling £250.9 million in the year (FY2008/09: £150.9 million), from which it paid the following significant items: £82.6 million in cash dividends (FY2008/09: £81.9 million); £52.9 million of taxation (FY2008/09: £47.7 million); £26.9 million for new seed capital investments (FY2008/09: £11.6 million); £34.0 million for purchase of own shares  (FY2008/09: £0.9 million); and £2.3 million to acquire a new associate (FY2008/09: nil).

 

The Group's cash balances are invested with the objective of optimising returns within a strict framework which emphasises capital preservation, security, liquidity and counterparty risk. Cash is invested only in institutions with approved credit ratings of A or better. Typically, during the financial year, investments have been in short-term cash deposits. Based on the level of cash balances at 30 June 2010, a 1 per cent change in UK interest rates would have a £3.4 million impact on the Group's profit before tax.

 

Seed Capital Investments

As at 30 June 2010 the amount invested was £61.0 million (at cost), with a market value of £68.6 million. During the period seed capital investments were made in funds managed by the Group's local asset management subsidiaries and associates and in the global asset management business to facilitate the launch of new funds.

 

Purchase of own shares

The Group purchases and holds shares through an Employee Benefit Trust ("EBT") in anticipation of the exercise of outstanding share options and variable compensation share awards. At the 30 June 2010 the EBT owned 36,007,445 (30 June 2009: 34,293,185) ordinary shares.

 

Foreign exchange management

The Group's long-standing policy is to hedge up to two-thirds of the foreign exchange exposure in connection with its net management fee cash flows, using either forward foreign exchange contracts or options for up to two years forward. The GBP:USD exchange rate in the year to 30 June 2010 was relatively stable in comparison to the prior year, with the GBP:USD exchange rate ranging between GBP1.00:1.42- 1.70USD.

 

The group experienced an overall foreign exchange gain for the year to 30 June 2010 of £7.0m (FY2008/09: £38.6m loss), comprising a gain of £11.8 million (FY2008/09: £3.8 million) on translation of non-Sterling denominated assets and liabilities, partially offset by a loss of £4.8m (FY2008/09: £42.4 million) on realised and unrealised hedging transactions.

 

The level of foreign exchange hedges in place at 30 June 2010 is US$85 million (FY2008/09: US$180 million). This consists entirely of options in respect of FY2010/11 net management fee cash flows. The options effectively operate as a collar, protecting the Sterling value of US$85 million of the Group's forecast management fee revenue cash flows for FY2010/11 from being impacted by currency movements outside the contracted ranges. The options have been marked-to-market at the year-end rate of GBP1:1.49USD. Lower levels of hedging transactions were undertaken in the year as a result of the less attractive GBP:USD rates available compared with those forecast.

 

As designated hedges the mark-to-market movement in the value of the options will be taken through reserves, until such time as they and the associated hedged revenues mature, so long as the hedges are assessed as being effective. If assessed as ineffective, the mark-to-market of the options will be taken through the income statement.

 

Dividend

In recognition of the financial performance during the period, and our confidence in the Group's future prospects, the Directors are recommending a final dividend of 9.34 pence per share for the year ended 30 June 2010 which, subject to shareholder approval, will be paid on 5 December 2010 to all shareholders who are on the register on 3 November 2010.

 

An interim dividend for the six-month period to 31 December 2009 of 3.66 pence (2008: 3.66 pence) was paid on 1 April 2010. Together, these result in a full-year dividend of 13.0 pence (2009: 12.0 pence), an increase of 8.3%.

 

 

 

Graeme Dell

Group Finance Director

 

 

 

 

 

 

                           Consolidated statement of comprehensive income 
                      Year ended 30 June 2010

 







 

2010

 

2009


Notes

£m

£m




Management fees


192.1

186.8

Performance fees


82.9

52.5

Other revenue


6.4

6.4

Total revenue


245.7

Distribution costs


(2.2)

(3.6)

Foreign exchange


7.0

(38.6)

Net revenue


286.2

203.5





Personnel expenses

2

(58.8)

(36.0)

Other expenses

3

(18.1)

(16.9)

Operating profit


209.3

150.6





Finance income


7.9

9.2

Profit before tax


217.2

159.8





Tax expense

4

(56.6)

(44.3)

Profit for the year


115.5





Other comprehensive income:




Exchange adjustments on translation of foreign operations


0.4

0.5

Net gains on available-for-sale and held for sale financial assets including deferred tax


7.3

2.3

Gains on available-for-sale and held for sale financial assets previously recognised directly in equity


(5.9)

-

Cash flow hedge intrinsic value losses


(0.6)

-





Total comprehensive income for the period


161.8

118.3








Profit attributable to:








Equity holders of the parent


160.0

115.0

Non-controlling interests


0.6

0.5

Profit for the year


160.6

115.5




Total comprehensive income attributable to:








Equity holders of the parent


161.2

117.8

Non-controlling interests


0.6

0.5

Total comprehensive income for the year


161.8

118.3




Earnings per share:








Basic

5

23.87p

17.12p

Diluted

5

22.51p

15.99p

                            Consolidated balance sheet


 

 

 

 

 

As at

30 June

2010

 

 

As at

30 June

2009

 


Notes

£m

£m





Assets




Property, plant and equipment


3.8

4.6

Intangible assets


6.7

6.7

Deferred acquisition costs


9.3

11.3

Investment in associate

8

2.3

-

Non-current asset investments


2.0

-

Other receivables


0.7

0.9

Deferred tax assets

 


14.4

14.0

Total non-current assets


39.2

37.5





Trade and other receivables


45.7

33.1

Available-for-sale financial assets


39.9

4.8

Derivative financial instruments


-

0.8

Cash and cash equivalents


344.4

288.4

Total current assets


430.0

327.1





Non-current assets held for sale


35.9

34.8





Total assets


505.1

399.4





Equity




Issued capital


-

-

Share premium 


0.3

0.3

Retained earnings

 

 


365.8

305.0

Foreign exchange reserve


0.9

0.5

Available-for-sale and held-for-sale fair value reserve


4.1

2.7

Cash flow hedging reserve


(0.6)

-

Total equity attributable to equity holders of the parent


370.5

308.5





Non-controlling interests


2.2

2.0





Total equity


372.7

310.5





Liabilities




Deferred tax liabilities


1.3

1.5

Total non-current liabilities


1.3

1.5





Current tax


30.3

24.0

Derivative financial instruments


1.8

5.0

Trade and other payables


89.8

51.0

Total current liabilities


121.9

80.0





Non-current liabilities held for sale


9.2

7.4





Total liabilities


132.4

88.9

Total equity and liabilities


505.1

399.4

 

 

 

 

 

Mark Coombs                                                                 Graeme Dell

Chief Executive Officer                                                   Group Finance Director

                    Consolidated statement of changes in equity


 

 

 

Issued capital

 

 

 

Share premium 

 

 

 

Retained earnings

 

Foreign exchange reserve

 

Available-for-sale (AFS) and Held-for-sale (HFS) fair value reserve

 

 

Cash flow hedging reserve

Total equity attributable to equity holders of the parent

 

 

 

Non-controlling  interests

 

 

 

 

Total equity


£m

£m

£m

£m

£m

£m

£m

£m

£m











Balance at 1 July 2008

-

0.3

271.1

-

0.4

-

271.8

1.5

273.3











Profit for the year

-

-

115.0

-

-

-

115.0

0.5

115.5

Other comprehensive income










Exchange adjustments on translation of foreign operations

-

-

-

0.5

-

-

0.5

-

0.5

Net gains on AFS/HFS assets

-

-

-

-

2.3

-

2.3

-

2.3

Cash flow hedge intrinsic value  movements

-

-

-

-

-

-

-

-

-

Own shares

-

-

(0.8)

-

-

-

(0.8)

-

(0.8)

Treasury shares

-

-

(6.9)

-

-

-

(6.9)

-

(6.9)

Share based payments

-

-

8.2

-

-

-

8.2

-

8.2

Current tax related to share based payments

-

-

0.2

-

-

-

0.2

-

0.2

Deferred tax related to share based payments

-

-

0.1

-

-

-

0.1

-

0.1

Dividends to equity holders

-

-

(81.9)

-

-

-

(81.9)

-

(81.9)

Balance at 30 June 2009

-

0.3

305.0

0.5

2.7

-

308.5

2.0

310.5











Profit for the year

-

-

160.0




160.0

0.6

160.6

Other comprehensive income










Exchange adjustments on translation of foreign operations

-

-

-

0.4

-

-

0.4

-

0.4

Net gains on AFS/HFS assets

-

-

-

-

7.3

-

7.3

-

7.3

Gains on AFS previously recognised in equity

-

-

-

-

(5.9)

-

(5.9)

-

(5.9)

Cash flow hedge intrinsic value  movements

-

-

-

-

-

(0.6)

(0.6)

-

(0.6)

Own shares

-

-

(34.0)

-

-

-

(34.0)

-

(34.0)

Share based payments

-

-

19.1

-

-

-

19.1

-

19.1

Deferred tax related to share based payments

-

-

(2.1)

-

-

-

(2.1)

-

(2.1)

Dividends to equity holders

-

-

(82.2)

-

-

-

(82.2)

-

(82.2)

Dividends to  non-controlling  interests

-

-

-

-

-

-

-

(0.4)

(0.4)

Balance at 30 June 2010

-

0.3

365.8

0.9

4.1

(0.6)

370.5

2.2

372.7

 

                           Consolidated cash flow statement
                      Year ended 30 June 2010 

 



 

2010

 

2009



£m

£m









Operating activities




Cash receipts from customers


305.4

198.9

Cash paid to suppliers and employees


(54.5)

(48.0)





Cash generated from operations


250.9

150.9





Taxes paid


(52.9)

(47.7)





Net cash from operating activities


198.0

103.2





Investing activities




Interest received


1.5

9.3

Acquisition of subsidiary


-

(3.7)

Investment in associate


(2.3)

-

Purchase of non-current asset investments


(2.0)

-

Net purchase of non-current assets held for sale


(23.1)

(6.9)

Net purchase of available-for-sale financial assets


(1.8)

(4.7)

Purchase of property, plant and equipment


(0.5)

(2.1)





Net cash used in investing activities


(28.2)

(8.1)





Financing activities








Dividends paid to equity holders


(82.2)

(81.9)

Dividends paid to non-controlling interests


(0.4)

-

Purchase of own shares


(34.0)

(0.9)

Purchase of treasury shares


-

(6.9)





Net cash used in financing activities


(116.6)

(89.7)





Net increase in cash and cash equivalents


53.2

5.4





Cash and cash equivalents at beginning of year


288.4

279.2





Effect of exchange rate changes on cash and cash equivalents


2.8

3.8





Cash and cash equivalents at end of year


344.4

288.4









Cash and cash equivalents comprise:




Cash at bank and in hand


344.4

288.4



344.4

288.4

 

 

 

 

                             Notes to the financial statements 

1)                     Basis of preparation and significant accounting policies

 

In preparing the financial information in this statement the Group has applied policies which are in accordance with IFRSs as adopted by the European Union at 30 June 2010.

 

In addition to consistently applying the accounting policies applied in the Group's annual report for the year ended 30 June 2009, which is available on the Group's website, the following accounting policies were adopted:

 

Associates

Associates are entities over which the Group has significant influence. Significant influence exists when the Group has the power to participate in the financial and operating policy decisions of the investee but does not control those policies.

 

Associates are accounted for using the equity method as described under IAS 28, whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Company's share of net assets of the investee.

 

 

Non-current asset investments

Non-current asset investments, relating to closed-end funds, are classified as financial assets at fair value through profit or loss. Fair value is assessed by taking account of the extent to which potential dilution of gains or losses may arise as a result of additional investors subscribing to the fund where the final close of a fund has not occurred.

 

2)                     Personnel expenses

 

Analysis of employee benefits expense





 Year ended

30 June

2010


 Year ended

30 June

2009


£m


£m

Wages and salaries

9.7


8.9

Performance related bonuses

21.0


10.1

Share based payments

21.3


11.9

Social security costs

4.6


3.2

Pension costs

0.6


0.6

Other costs

1.6


1.3

Total employee benefits

58.8


36.0

 

 

3)                     Other  expenses

 

 


 Year ended

30 June

2010


 Year ended

30 June

2009


£m


£m

Travel

4.1


3.3

Professional fees

3.5


3.0

Information technology and communications

2.2


2.1

Deferred acquisition costs charges

2.0


2.1

Operating leases

2.0


1.9

Premises related costs

0.8


0.8

Insurance

0.6


0.6

Auditors' remuneration

0.6


0.6

Depreciation of property, plant and equipment

1.3


0.8

Other expenses

1.0


1.7

Total other expenses

18.1


16.9

  

4)                     Taxation

 


 Year ended

30 June

2010


 Year ended

30 June

2009


£m


£m

Current tax:




Corporation tax on profits of the year

55.2


47.6

Adjustments in respect of prior years

3.7


0.1

Total current tax

58.9


47.7





Deferred tax arising from origination and reversal of temporary differences:




Current year

(2.3)


(3.4)

Total tax charge for the year

56.6


44.3

 

 

Factors affecting tax charge for the year

 Year ended

30 June

2010


 Year ended

30 June

2009


£m


£m

Profit before tax

217.2


159.8

Tax at the UK tax rate of 28% (2009: 28%)

60.8


44.7

Effects of:








Expenses not deductible

3.2


3.4

Deduction in respect of exercised options (Schedule 23 Finance Act 2003)

(7.1)


(0.2)

Deferred tax arising from origination and reversal of temporary differences

(2.3)


(3.4)

Other

(1.7)


(0.1)





Adjustments in respect of prior years




Current tax

3.7


(0.1)

Total tax charge for the year

56.6


44.3

 

 


 Year ended

30 June

2010


 Year ended

30 June

2009


£m


£m

Current tax on share-based payments

-


(0.2)

Deferred tax on share-based payments

2.1


(0.1)

Deferred tax on available-for-sale assets

(0.4)


1.0

Total charge recognised in equity/other comprehensive income

1.7


0.7

 

 

5)                     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 £160.0m (2009: £115.0m) 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 an 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:

 


 Year ended

30 June

2010


 Year ended

30 June

2009





Weighted average number of ordinary shares used in calculation of basic earnings per share

669,926,744


671,667,998

Effect of dilutive potential ordinary shares - share options/awards

40,484,600


47,330,538

Weighted average number of ordinary shares used in calculation of diluted earnings per share

710,411,344


718,998,536

 

 

6)                     Dividends

 

An analysis of dividends is as follows:

 

Group and Company

2010


2009





Dividends declared/proposed in respect of the year:




Interim dividend declared per share (p)

3.66


3.66

Final dividend proposed per share (p)

9.34


8.34





Dividends paid in the year:




Interim dividend paid(£m)

25.0


24.9

Interim dividend per share (p)

3.66


3.66





Final dividend paid(£m)

57.2


57.0

Final dividend per share (p)

8.34


8.34

 

In addition to the £82.2m (2009: £81.9) dividends paid to equity holders of the parent, the Group also paid £0.4m (2009: nil) of dividends to non-controlling interests.

 

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. 

 

On 13 September 2010 the Board proposed a final dividend of 9.34p per share for the year ended 30 June 2010. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end which qualify to receive a dividend, the total amount payable would be £63.7m (2009:£57.0m). 

 

7)                     Own shares

 

The Ashmore 2004 Employee Benefit Trust ("EBT") was established to act as an agent to facilitate the acquisition and holding of shares in 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 36,007,445 (2009: 34,293,185) ordinary shares of 0.01p with a nominal value of £3,600.74 (2009: £3,429.32) and shareholders' funds are reduced by £40.2m (2009: £6.2m) in this respect. It is the intention of the directors to make these shares available to employees by way of sale through the share based compensation plans. The EBT is periodically funded by the Company for these purposes.   

 

8)                     Associates

 

 

Investment in associates

As at

30 June

2010


As at

30 June

2009


£m

 

£m

Total assets

2.8 


-

Total liabilities

(0.7)


-

Net assets

2.1


-

Group's share of associates net assets

0.6


-

Revenue for period since acquisition

2.2


-

Profit for period since acquisition

0.1


-

Group's share of associates profit for period since acquisition

-


-

 

The Group held 30.0% of the equity of an associate, Everbright Ashmore, as at 30 June 2010 (2009: nil).

 

The Group's share of net assets of the associate is currently below the carrying value of the investment reflected on the consolidated balance sheet. This is considered to be a temporary position which has arisen as the associate progresses through an initial establishment phase. No permanent impairment is believed to exist and as such the carrying value of the investment in associate has not been adjusted.

 

The Group has an undrawn capital commitment of £15.1m to an investment fund managed by the associate. Further details are provided in note 9.

 

 

9)                     Capital commitments

 

 

 

 

Group


 

Company


2010

2009


2010

2009

Undrawn investment call commitments

£m

£m


£m

£m

Ashmore Russian Real Estate Recovery Fund

4.8

-


-

-

Everbright Ashmore China Real Estate Fund

15.1

-


-

-







 

 

10)                   Group risks

 

The Group's principal risks are as detailed within the Business Review and Corporate Governance sections of the Group's Annual Report and are categorised as strategic and business, investment and operational. 

 

11)                   Post balance sheet events

 

There are no post balance sheet events for the year ended 30 June 2010.

  

12)                   Statutory accounts

 

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 June 2010 or 2009. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009 or 2010.

 

13)                   Forward-looking statements

 

This news release contains certain forward-looking statements with respect to the Ashmore Group's financial condition, operations, and business opportunities.  These forward-looking statements represent the Group's expectations or beliefs concerning future events, and involve known and unknown risks, and uncertainty, that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements.  Past performance cannot be relied on as a guide to future performance.

 

 

 

 

 

 

 

 


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