TIDMASHM
RNS Number : 0421Q
Ashmore Group PLC
07 September 2017
Ashmore Group plc
7 September 2017
RESULTS FOR THE YEARING 30 JUNE 2017
Ashmore Group plc (Ashmore, the Group), the specialist Emerging
Markets asset manager, today announces its audited results for the
year ending 30 June 2017.
Overview
- Improvement in Emerging Markets cycle continues, recovery has
further to go
- Assets under management (AuM) increased 12% to US$58.7 billion
- Broad client demand reflected in gross subscriptions of
US$14.8 billion, approximately double the prior year level (US$7.6
billion)
- Net inflows of US$1.9 billion and positive market performance of US$4.2 billion
- Investment processes delivering strong investment
performance
- 91% of AuM outperforming benchmarks over one year, 86% over three years and 87% over five years
- Highly efficient business model continues to deliver
- Revenue growth of 11%, with net management fees +13% and performance fees of GBP28.3 million
- Cost growth limited to 7% (excluding consolidated funds)
- Adjusted EBITDA margin increased from 62% to 65%
- Active seed capital management generated profits of GBP41.0
million, half of which were realised
- Profit before tax increased 23% to GBP206.2 million and diluted EPS increased 31% to 23.7p
- Strong balance sheet maintained with excess regulatory capital of GBP448.3 million
- Proposed final dividend per share of 12.10p to give 16.65p for the year
Commenting on the Group's results, Mark Coombs, Chief Executive
Officer, Ashmore Group said:
"Ashmore has delivered strong investment performance for clients
and grown assets under management by 12% over the year through
positive market performance and net inflows. The Group's business
model is delivering as expected, with good operating and financial
performance resulting in a 31% increase in diluted EPS. There
remains substantial absolute and relative value available across
the diversified Emerging Markets, and Ashmore's focused strategy
means it is in a strong position to continue to deliver superior
investment performance and to benefit as investors raise their
allocations to Emerging Markets from underweight levels."
Analysts briefing
There will be a presentation for analysts at 9.30am on 7
September 2017 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.
Other information
Copies of the Company's Annual Report for the year ended 30 June
2017 and Notice of Annual General Meeting will be uploaded to the
UK Financial Conduct Authority National Storage Mechanism and will
shortly be available for inspection at
www.morningstar.co.uk/uk/NSM. The documents will also be made
available on the Group's website.
Ashmore will post its Annual Report and Notice of Annual General
Meeting to shareholders on 20 September 2017. The Circular
containing the Notice of Annual General Meeting contains a summary
of the business of the resolutions to be proposed at the meeting
and will be made available on the Group's website. The Company's
Annual General Meeting will be held at 12.00pm on 20 October 2017
at Kingsway Hall, 66 Great Queen Street, London WC2B 5BX.
Contacts
For further information please contact:
Ashmore Group plc
Tom Shippey +44 (0)20 3077 6191
Group Finance Director
Paul Measday +44 (0)20 3077 6278
Investor Relations
FTI Consulting
Andrew Walton +44 (0)20 3727 1514
Kit Dunford +44 (0)20 3727 1143
Chief Executive's review
Active Emerging Markets specialism delivering performance across
cycles
As expected, Emerging Markets generated good returns over the
past year both in absolute terms and relative to Developed Markets,
and capital flows into Emerging Markets have resumed. With this
favourable backdrop, Ashmore continues to deliver strong investment
performance for clients, and its business model has performed as
expected with good operational and financial performance
demonstrated by the increase in the Group's revenues, adjusted
EBITDA margin and diluted EPS. The ongoing improvements in economic
and political fundamentals across Emerging Markets compare
favourably with the structural growth challenges in the developed
world, and provide substantial opportunities for Ashmore to
continue to deliver value for clients and shareholders.
Emerging Markets backdrop
Index returns across the main Emerging Markets asset classes
were strong over the year to 30 June 2017 and ranged from +6% in
external debt to +24% in equities. This means that Emerging Markets
assets continue to outperform their developed world counterparts,
in both fixed income and equity markets. While the rally has not
been a straight line, the brief interruptions have been caused by
events in the developed world, such as the US election result in
November 2016. The consequent reset in Emerging Markets prices
presented attractive value opportunities for investors, most of
whom are underweight the asset classes.
Investment performance and AuM growth
Ashmore's investment performance is strong, as expected at this
point in the market cycle, with outperformance relative to
benchmarks and peers reflecting the decisions to add risk when
market conditions were weaker and Ashmore's active investment
processes identified and acted upon the significant value available
across a wide range of asset classes. The market recovery is in its
early stages, with plenty of value still to be captured by active
managers. The positive outlook, described in more detail in the
Market review, provides the potential for continued outperformance
by Ashmore's investment processes that have been consistently
deployed over the past 25 years
Ashmore's assets under management increased by 12% over the 12
months from US$52.6 billion to US$58.7 billion, through positive
investment performance of US$4.2 billion and net inflows of US$1.9
billion. As the cycle turned, gross sales momentum picked up and
the second half of the year delivered consecutive quarters of net
inflows.
The typical investor is underweight Emerging Markets, with an
allocation of less than 10% and in some cases well below 5%,
compared with representative benchmark weights of 20%. This
presents a significant medium-term growth opportunity, as investors
should raise allocations towards benchmark weights, and those
benchmarks increasingly reflect the growing relevance of Emerging
Markets within the world's economy and capital markets.
Financial performance
Reflecting the growth in assets under management, the Group's
net revenue increased by 11% year-on-year. The favourable market
environment also provided opportunities to generate performance
fees, although the vast majority (89%) of the Group's fee income
continues to be derived from recurring net management fees.
The Group's disciplined control of fixed costs limited operating
cost growth excluding consolidated funds to 7% and notwithstanding
investment in the rapidly expanding local market platforms in
countries such as Colombia, Indonesia and Saudi Arabia.
Consequently, the adjusted EBITDA margin rose from 62% to 65%. Cash
generation in the period was strong, with 109% of adjusted EBITDA
converted to cash flow excluding consolidated funds of GBP174.8
million. The Group's balance sheet remains well-capitalised and
liquid, with total regulatory financial resources of GBP559.4
million compared with a regulatory capital requirement of GBP111.1
million, and cash and cash equivalents excluding amounts held in
consolidated funds of GBP420.1 million.
Profit before tax increased by 23% to GBP206.2 million, with the
Group's actively-managed seed capital programme contributing
profits of GBP41.0 million. Diluted EPS increased by 31% to 23.7
pence, and the Board has proposed a final dividend per share of
12.10 pence to give total dividends per share of 16.65 pence for
the year.
Strategic and business developments
There are several prominent themes that will affect the asset
management industry over the medium term, including the increase in
passive investing in certain markets, continual regulatory
developments, and, partly in response to some of the perceived
challenges, the industry has seen some consolidation activity. In
relation to recent regulatory developments such as MiFID2, Ashmore
has been working towards the implementation date of January 2018
and consequently is well prepared and believes the impact on its
business model will be manageable. Ashmore's strategy and business
model are designed to deliver value to clients and shareholders
over the longer term by growing a high-quality, diversified,
focused, specialist active investment management business. This
should mean that Ashmore is well placed to deal with any
medium-term industry challenges and to take advantage of the
opportunities that may arise.
Phase 1: Emerging Markets investment universe continues to
grow
The Emerging Markets investment universe continues to grow
rapidly and now comprises US$44.6 trillion of fixed income and
equity securities, an increase of 12% or US$4.7 trillion over the
past 12 months. While the representation of these markets in
benchmark indices remains inadequate, with just 8% of bonds and 18%
of equities included in indices, this presents a substantial set of
investment opportunities for active investment managers to address
outside of those securities meeting the rigid index eligibility
criteria. Furthermore, over time, some countries will remove the
impediments to index inclusion, for example by improving foreign
investor access to their domestic capital markets.
Looking at Emerging Markets fixed income securities, the US$20.1
trillion of outstanding bonds is dominated by local currency
issuance comprising 89% of the total. When combined with the
US$30.3 trillion of domestic credit outstanding, Emerging Markets
account for only 27% of global finance. Yet Emerging Markets
generate nearly 58% of global GDP, which therefore offers
compelling evidence of a significantly better investment
proposition than Developed Markets fixed income where 73% of global
financing is supported by just 42% of global GDP.
Institutional investors in the developed world have limited
exposure to Emerging Markets, with target weights for a typical
pension fund being below 10% for fixed income and equities. In some
cases, actual allocations are significantly below targets. It
therefore remains the case that as emerging nations continue to
grow more rapidly than developed countries, and their capital
markets increase their representation in global markets and
benchmark indices, the pressure on investors to address this
underweight position will increase. This situation is amplified by
the relative value arguments in favour of Emerging Markets, with
attractive yields and equity valuations contrasting with the
elevated price levels and negative real yields prevailing in many
Developed Markets.
Phase 2: diversification through growth in intermediary AuM
The second phase of the Group's strategy looks to diversify its
sources of AuM, and therefore revenues, through broadening access
to its distribution channels and its client mix. This includes
developing a meaningful retail business that sources high net worth
capital through agents such as private banks, broker-dealers,
wirehouses, wealth advisers and other intermediaries.
Over the past five years, the proportion of AuM from
intermediated retail clients has ranged between 9% and 12%. Strong
AuM growth from clients in Europe, the US and Asia ex Japan has all
but replaced the anticipated run-off of the Japanese retail money
raised in 2010 and 2011, and the proportion of Group AuM from these
geographies has nearly trebled from 4% to 11%.
Ashmore has delivered growth in retail AuM, notwithstanding the
challenging market conditions for much of the period when
sentiment, and especially retail investor attitudes, was negative
towards Emerging Markets. While retail capital-raising was
difficult against this backdrop, the Group secured new distribution
agreements and gained intermediaries' approval for products to put
it in a stronger position when the cycle turned and investor
sentiment improved.
Of particular note are the blended debt, short duration and
frontier equity products, which are selling well through retail
channels in Europe and the US. Asian private bank relationships
have also delivered growth through fixed duration products.
Phase 3: local markets
A key strategic initiative is to develop a network of local
Emerging Markets asset management platforms to capture domestic
flows. These businesses also provide access to global investors
wishing to take specialised single-country or regional exposure
through local managers affiliated with Ashmore's strong brand and
control culture. While many of the businesses are at an early stage
of development, the network spans seven countries, represents a
meaningful proportion of Ashmore's employees including investment
professionals, and contributes approximately 5% of Group AuM.
The local businesses are performing as expected, with good
growth in AuM, revenues and profits. During the financial year,
action was taken to resolve growth challenges in some of the
weaker-performing franchises. This resulted in selling the Turkish
business to a local, independent manager, and introducing a major
distribution partner to the China joint venture. These actions have
not only improved the aggregate financial performance of the local
businesses, but have also enabled the Group to provide greater
support to the businesses that are performing well and have created
capacity to consider other markets.
Clients
Ashmore has a high-quality, diversified client base that is
largely institutional but with a growing contribution from retail
clients accessed through intermediaries such as private banks,
broker-dealers and wirehouses. Client relationships are managed by
a 40-strong distribution team that is located throughout Ashmore's
worldwide office network. This enables direct, long-standing
relationships to be developed, which assists in sustaining client
engagement throughout the market cycle, and ensures that value
opportunities can be directly discussed as market cycles turn. As
expected, this type of 'early adopter' activity has been seen
recently from certain of the Group's clients.
The average tenure of client relationship has increased over the
past two years from five years to six years, which implies that a
greater proportion of the client base has experienced a full
Emerging Markets cycle and seen the value opportunities that can
arise. It also means that the potential for cross-selling increases
as clients become more familiar with the breadth and depth of the
Emerging Markets asset classes, and with Ashmore's ability to
identify attractive investment opportunities.
The Emerging Markets allocation opportunity described above is
substantial and predominantly relates to developed world
institutions. However, there is an additional source of AuM growth
accessed through the third phase of the Group's strategy, which
seeks to manage capital for investors domiciled in the emerging
world. Success here is illustrated by the 33% of the Group's AuM
that is sourced from such clients, through global client
relationships and Ashmore's network of local asset management
platforms.
Cost efficiency
The Group takes a disciplined approach to operating costs and
during the year cost savings achieved in the global business units
have enabled continued investment in the rapidly-growing local
businesses, for example in Colombia, Indonesia and Saudi Arabia.
Group headcount has fallen over the period, which largely reflects
natural levels of turnover and where business processes have been
made more efficient.
In November 2016, the Group consolidated its US operations into
its operating hub in New York. This locates specialist equities
investment professionals alongside distribution and support
functions, and will deliver operational efficiencies through the
combination of the offices.
Brexit
In March 2017, the UK formally started the process to leave the
European Union (EU), triggering a two-year period to determine the
exit terms for the UK (Brexit). However, there remains uncertainty
regarding the terms on which the UK will leave and the implications
for the UK financial services industry, notably for Ashmore
regarding the passporting of services into and out of the EU.
Ashmore will continue to monitor developments closely and will take
appropriate action once there is greater clarity. For now, the
direct operational implications of Brexit are deemed
manageable.
Outlook
As described in the Market review, the performance of Emerging
Markets assets over the past year has been strong. However, given
the significant price moves and macroeconomic adjustments
undertaken over the past cycle, there remains substantial value
available across the Emerging Markets asset classes, in absolute
terms but also relative to developed world assets. Ashmore's
strategy to capitalise on Emerging Markets growth, its proven
investment processes, and its efficient business model, mean it is
in a strong position to continue to deliver superior investment
performance for clients, to raise investor allocations to Emerging
Markets, and to generate further value for shareholders.
People and culture
Ashmore's distinctive culture, underpinned by its remuneration
philosophy that places an emphasis on pay-for-performance and
long-dated equity incentivisation, has withstood another market
cycle. The superior investment performance and improving financial
performance delivered over the past year, together with strategic
and operational developments, are testament to the hard work of all
employees, for which I would like to say thank you on behalf of all
shareholders.
Mark Coombs
Chief Executive Officer
6 September 2017
Market review
Positive trends across Emerging Markets
Year in review
The year to 30 June 2017 has been positive for Emerging Markets
investors. Developed world central banks have become more hawkish,
which has put pressure on the returns available from their fixed
income markets that still have a significant amount, nearly US$9
trillion, of bonds with negative yields and a further substantial
amount with historically low real yields. In contrast, Emerging
Markets central banks have been cutting rates as inflation is
falling in response to the macro adjustments undertaken in recent
years. Emerging Markets bonds and currencies have therefore
performed well in absolute terms, but also relative to developed
world assets.
Equity markets have performed strongly, and the high absolute
and relative returns achieved in Emerging Markets reflect
accelerating GDP growth across a wide range of countries as their
economic cycles turn more positive after a period of
adjustment.
A weaker US dollar has contributed to good returns for local
currency investors, and more stable commodity prices over the
period, particularly oil, have improved investor sentiment towards
Emerging Markets.
The geopolitical landscape remains complex. While the US and UK
have seen a significant degree of political change over the 12
months, Europe now appears more settled following the French
presidential election. Events on the Korean peninsula and in the
Middle East continue to act as sources of volatility for many
markets.
Resilience of Emerging Markets
The long-term growth opportunity across Emerging Markets is
significant and is in contrast to the structural growth impediments
facing many Developed Markets. Emerging Markets generate 58% of
world GDP and this share is expected to rise steadily as the 87% of
the world's population that resides in these countries becomes
wealthier over time. Consequently, GDP per capita in Emerging
Markets, which today is roughly where the developed world was in
1980, is expected to continue to increase at a fast pace.
In the shorter term, Emerging Markets countries have faced and
successfully dealt with a series of financial and economic
challenges. Between 2010 and 2015, the 'US taper tantrum', a
stronger US dollar, the 50% fall in commodity prices and the start
of the Fed rate hiking cycle all presented headwinds. Emerging
Markets economies grew more slowly over this period as global asset
allocators moved capital to investments supported by quantitative
easing (QE) in Developed Markets.
Yet, despite these headwinds, Emerging Markets economic and
political fundamentals held up far better than most investors
expected. Aggregate GDP growth remained at least twice that of the
developed world, and the Emerging Markets growth premium began to
increase again in early 2016 and looks set to continue to expand
for several more years.
The resilience of Emerging Markets can be seen elsewhere. For
example, sovereign defaults were limited in number and very few
countries had to resort to IMF support over this period, barring a
small number of the most vulnerable economies. In the Emerging
Markets corporate high yield sector, default rates remain
materially lower than for similarly-rated US companies.
This resilience can be attributed to Emerging Markets' stronger
fundamentals, such as low debt levels, inflation targeting by
central banks, the establishment of domestic pension funds, greater
prevalence of floating exchange rates with high levels of foreign
exchange reserves, high savings and investment rates, room to ease
both fiscal and monetary policies, better demographics, and a
greater proclivity to reform as soon as challenges arise.
Therefore, the weakness in Emerging Markets asset prices in the
recent past was primarily the result of investor behaviour and
capital flows during the QE period rather than deterioration in the
underlying fundamentals. This implies that substantial value has
been created for Emerging Markets investors, a situation that began
to be recognised over the past year.
Market recovery appears sustainable
Emerging Markets valuations remain attractive relative to
comparable investments in Developed Markets, but they are also
attractive in their own right. The principal drivers of Emerging
Markets returns over the next few years are likely to be as
follows.
- GDP growth has been accelerating since 2015 and should
continue to recover given the large slowdown in growth between 2010
and 2015. The recovery so far has been led by improving external
balances as exchange rates fell to 13-year lows, but economic
conditions should continue to improve as capital flows return to
Emerging Markets.
- Many Emerging Markets countries have pursued deep structural
reforms in recent years, including Argentina, Brazil, Colombia,
India, Indonesia, Mexico and Russia. Successful reforms remove the
obstacles to growth and allow countries to grow faster before
encountering inflationary constraints.
- Most foreign investors have underweight allocations to
Emerging Markets, typically at less than 10% versus the 20% weight
in the more representative global indices.
- Foreign investor capital flows back into Emerging Markets
should ease financial conditions, which in turn will stimulate
economic growth. Hence, the QE-related financial tightening of
recent years should start to be reversed. This should support
returns in local markets as well as leading to tighter spreads on
external debt.
Active management can mitigate the risks
There are risks to this optimistic outlook, but the major
systemic risks to Emerging Markets, such as a decline in commodity
prices and US dollar strength, have already been endured and have
been largely managed well by the majority of Emerging Markets
countries.
There will always be a small number of country specific risks,
however these can be addressed through active management.
Similarly, buying opportunities for active investors can be
presented by price volatility induced by events in Developed
Markets that may have little or no bearing on Emerging Markets
fundamentals.
Higher US interest rates appear to be more than priced in by the
relative yields available across Emerging Markets. Indeed, as rates
continue to rise in the US, spreads on US dollar-denominated
Emerging Markets debt have substantial room to compress so as to
continue to deliver outperformance against US Treasuries.
One of the external risks, particularly to local currency
markets, appeared to be the threat of a US border adjustment tax,
which could have undermined the case for capital flowing back into
faster-growing Emerging Markets economies in favour of supporting
domestic US production. However, this threat has receded with the
US administration recently abandoning this policy.
Significant value available across Emerging Markets
Although Emerging Markets assets have performed well recently,
there remains substantial value available and the recovery should
be supported over the medium term by inbound capital flows from
underweight foreign institutional investors. These are likely to
proceed at a measured pace because investors are mindful of the
market volatility caused by the 2013 US taper tantrum and,
ironically, there is a degree of risk aversion influenced by
concerns about elevated asset price levels in Developed Markets. As
evidenced by the high yields and attractive equity valuations in
Emerging Markets, there is a very significant value opportunity
available and specialist, active investment management can deliver
outperformance across a broad range of Emerging Markets asset
classes.
External debt
The JP Morgan EMBI GD benchmark index delivered a +6.0% return
over the 12 months, but with a wide dispersion of returns from the
65 constituent countries ranging from Venezuela with a +29.9%
return to Philippines with a -1.5% return. High yield credits
performed particularly well, returning +10.0% over the year versus
+2.6% for investment grade bonds.
Over three years, Ashmore's external debt broad composite has
generated gross annualised returns of +6.8%, outperforming the
index (+5.4% annualised).
The outlook for external debt returns over the next few years is
positive, with a spread of approximately 300bps over the US
Treasury curve providing good value and with the potential for
tighter spreads as flows to Emerging Markets pick up and reduce the
need for governments to raise new debt. Also, with more than 100
Emerging Markets countries yet to issue index-eligible sovereign
debt, the diversity of the external debt benchmark should continue
to increase.
Local currency
The JP Morgan GBI-EM GD index performed in line with hard
currency bonds, returning +6.4% over the year. The index yield of
6.5% is attractive in nominal and real terms, with index-weighted
inflation of around 4%, and stronger Emerging Markets currencies
against the US dollar contributing to returns.
Over three years, Ashmore's local currency bonds composite has
returned -1.7% gross annualised, outperforming the index (-2.8%
annualised).
While inflation is expected to rise slightly, real yields should
remain positive and currencies have room to recover some of the 40%
to 50% decline in value experienced against the US dollar between
2010 and 2015. The value proposition available in local currency
bonds is therefore one of the strongest in global fixed income and,
as capital flows back into local markets, financial conditions
should ease, stimulating investment, consumption and growth across
Emerging Markets. As with external debt, the index diversity is
increasing steadily with the number of countries in the GBI-EM GD
index rising from 15 to 17 over the past year.
Corporate debt
The CEMBI BD benchmark index delivered a +6.8% return over the
12 months and, echoing the performance of sovereign bonds, high
yield outperformed investment grade (+11.6% versus +3.9%). The HY
default rate fell from 4.2% to 2.2% over the period and remains
well below the US HY default rate of 4.4%, reflecting the greater
diversification of the Emerging Markets universe, less use of
financial leverage, and the potential for sovereign support in
certain cases.
Ashmore's corporate debt composite performed in line with the
benchmark over three years with gross annualised returns of +4.9%.
The relative performance should continue to improve as the periods
of underperformance in late 2014 and early 2015 roll off.
The fundamental outlook for Emerging Markets corporates is
expected to benefit from the cyclical upswing described for
sovereign credit, as it will lead to rising profits and falling
default risk. When compared with US corporates, there is a clear
value argument in favour of Emerging Markets credit, as it has a
lower default rate, wider spreads, particularly in the HY market,
and typically less leverage than identically-rated US
companies.
Blended debt
The standard blended debt benchmark index returned +5.9% over
the year.
Active management of investment theme allocations - external
debt, local currency and corporate debt - has delivered significant
outperformance over three years, with Ashmore's blended debt
composite returning +4.7% gross annualised versus +1.4% for the
benchmark index. The typical blended debt portfolio is positioned
for further market strength, with a current overweight allocation
to local currency markets.
Given the wide range of asset class returns typically available,
investors allocating to Emerging Markets may not have the
confidence or experience to target a discrete asset class.
Ashmore's blended debt and multi-asset products can provide
broad-based exposure to Emerging Markets fixed income and all
investment themes, respectively, with active management producing
significant outperformance versus the constituent asset classes.
Blended debt is therefore expected to enjoy good growth as industry
allocations increase.
Equities
Equities outperformed fixed income over the year, reflecting
expectations of accelerating GDP growth. The Group's specialist
products provide a range of risk and return profiles, from single
country exposure to frontier equities and global Emerging Markets
small cap. Over three years, the investment performance track
records of these funds are strong with, for example, frontier
equities delivering gross annualised returns of +5.0% versus -3.4%
for the MSCI benchmark index.
The uncorrelated returns available from specialist equity
products are highly attractive, and with investment opportunities
typically driven by domestic factors such as infrastructure
development or deregulation, they can be insulated from the
vagaries of global macro forces.
Alternatives
Capital raising in the period was focused on a number of new
funds in the Group's local market franchises, such as Colombia and
Saudi Arabia. There are several established growth trends in
Emerging Markets that require long-term investment, such as
infrastructure development, private healthcare provision, and
renewable energy. The Group's experience of structuring funds and
sourcing investors who can make multi-year capital commitments
means it is in a good position to capitalise on these growth
trends.
Multi-asset
As described above, multi-asset products provide broad access to
retail and institutional investors that do not wish to take more
specific Emerging Markets risks. Investment performance was
positive over the period across the Group's multi-asset funds.
Overlay/liquidity
The investment theme increased its AuM over the year through net
inflows from institutional clients, particularly in the second
half.
Business review
Ashmore delivered a strong operating and financial performance
for the year with a 12% increase in AuM, 11% revenue growth, cost
growth limited to 7% (excluding consolidated funds) and strong
returns on seed capital generating a 23% increase in profit before
tax to GBP206.2 million. Diluted EPS increased by 31% to 23.7p.
Adjusted EBITDA for the year was GBP161.1 million, an increase
of 23% compared with the prior year, and resulting in an increase
in the adjusted EBITDA margin from 62% to 65%.
Summary non-GAAP financial performance
The table below reclassifies items relating to seed capital and
the translation of non-Sterling balance sheet positions to aid
clarity and comprehension of the Group's operating performance, and
to provide a more meaningful comparison with the prior year. For
the purposes of presenting 'Adjusted' profits, operating expenses
have been adjusted for the variable compensation on foreign
exchange translation gains and losses.
Non-GAAP alternative performance measures (APMs) are defined and
explained below.
Reclassification
of
------------------------------
Seed Foreign
FY2016/17 capital-related exchange FY2016/17 FY2015/16
GBPm Reported items translation Adjusted Adjusted
----------------------------- --------- ---------------- ------------ --------- ---------
Management fees net of
distribution costs 221.6 - - 221.6 195.9
Performance fees 28.3 - - 28.3 10.4
Other revenue 2.7 - - 2.7 4.1
Foreign exchange 5.0 - (7.8) (2.8) 1.1
----------------------------- --------- ---------------- ------------ --------- ---------
Net revenue 257.6 - (7.8) 249.8 211.5
Investment securities 22.4 (22.4) - - -
Third-party interests (12.5) 12.5 - - -
Personnel expenses (67.8) - 1.6 (66.2) (55.5)
Other expenses excluding
depreciation & amortisation (27.4) 4.9 - (22.5) (25.1)
----------------------------- --------- ---------------- ------------ --------- ---------
EBITDA 172.3 (5.0) (6.2) 161.1 130.9
EBITDA margin 67% - - 65% 62%
Depreciation & amortisation (5.5) - - (5.5) (5.1)
----------------------------- --------- ---------------- ------------ --------- ---------
Operating profit 166.8 (5.0) (6.2) 155.6 125.8
Net finance income/expense 38.6 (22.6) (13.4) 2.6 2.0
Associates & joint ventures 0.8 - - 0.8 (1.7)
Seed capital-related items - 27.6 - 27.6 5.1
----------------------------- --------- ---------------- ------------ --------- ---------
Profit before tax excluding
FX translation 206.2 - (19.6) 186.6 131.2
----------------------------- --------- ---------------- ------------ --------- ---------
Foreign exchange translation - - 19.6 19.6 36.3
----------------------------- --------- ---------------- ------------ --------- ---------
Profit before tax 206.2 - - 206.2 167.5
----------------------------- --------- ---------------- ------------ --------- ---------
Assets under management
AuM increased by 12% over the year from US$52.6 billion to
US$58.7 billion, through gross subscriptions of US$14.8 billion,
approximately double the prior year level of US$7.6 billion, lower
gross redemptions of US$12.9 billion (FY2015/16: US$15.1 billion)
and positive investment performance of US$4.2 billion (FY2015/16:
US$1.2 billion). Average assets under management increased by 5% to
US$54.8 billion.
Gross subscriptions represent 28% of opening AuM (FY2015/16:
13%) and gross redemptions represent 25% (FY2015/16: 26%). Sales
momentum improved throughout the year as Emerging Markets rallied
and Ashmore's investment processes delivered outperformance. Client
demand was fairly broadly spread across the fixed income and
equities themes.
In the blended debt theme, which saw the highest level of
subscriptions, there was notable demand from US pension funds and
European retail clients. Corporate debt also generated good flows,
particularly into short duration funds from European retail
clients. Subscriptions into the other fixed income themes were from
a broad mix of Asian and European pension funds, government-related
clients and retail investors sourced through intermediaries.
Equities saw momentum in the specialist products, particularly
frontier markets, and local market platforms such as Indonesia
including global institutional clients allocating to single country
funds. There were also meaningful flows into the overlay theme.
Redemptions picked up for a short period after the US election
result in November 2016, but reduced steadily through the second
half of the year, notwithstanding some large institutional account
withdrawals from blended debt, corporate debt and local currency
mandates. The result was a much improved net flow performance in
the second half of the year, with US$2.6 billion of net inflows
versus a net outflow of US$0.7 billion in the first half. The
larger institutional redemptions experienced in the period were
from a variety of US and European pension funds in blended debt,
corporate debt and equities, and government-related clients in the
external debt and local currency themes.
The momentum in the third-party intermediary business continued
to build during the period, with net inflows of US$1.2 billion
after anticipated Japanese retail redemptions of US$0.2 billion.
Short duration, specialist equity and blended debt products
continue to benefit from good demand from retail clients in Europe,
the US and Asia.
AuM movements by investment theme
The AuM by theme as classified by mandate is shown in the table
below. Reclassifications typically occur when a fund's investment
objectives, investment guidelines or performance benchmark change
such that its characteristics cause it to be included in a
different theme.
AuM AuM
30 June Gross Gross 30 June
2016 Performance subscriptions redemptions Net flows Reclassifications 2017
Theme US$bn US$bn US$bn US$bn US$bn US$bn US$bn
------------------ -------- ----------- -------------- ------------ --------- ----------------- --------
External debt 11.7 1.0 2.2 (2.5) (0.3) 0.9 13.3
Local currency 13.3 1.0 2.1 (2.7) (0.6) - 13.7
Corporate debt 5.0 0.7 2.6 (2.0) 0.6 - 6.3
Blended debt 13.7 1.1 4.0 (3.3) 0.7 (0.9) 14.6
Equities 3.1 0.4 1.1 (1.2) (0.1) - 3.4
Alternatives 1.5 (0.1) 0.1 - 0.1 - 1.5
Multi-asset 1.2 0.1 0.1 (0.3) (0.2) - 1.1
Overlay/liquidity 3.1 - 2.6 (0.9) 1.7 - 4.8
------------------ -------- ----------- -------------- ------------ --------- ----------------- --------
Total 52.6 4.2 14.8 (12.9) 1.9 - 58.7
------------------ -------- ----------- -------------- ------------ --------- ----------------- --------
Investor profile
The Group's client base remains predominantly institutional in
nature, with 88% (30 June 2016: 90%) of AuM from such clients.
Ashmore has established direct, long-term relationships with its
institutional clients, the most significant categories of which are
government-related entities (such as central banks, sovereign
wealth funds and pension schemes) and private and public pension
plans, together accounting for 68% of AuM (30 June 2016: 70%). AuM
sourced through intermediaries, which provide the Group with access
to retail markets, increased to 12% of the Group's total AuM (30
June 2016: 10%).
Segregated accounts represent 67% of AuM (30 June 2016: 69%),
and the Group continues to expect institutional demand for such
fund structures to increase to satisfy regulatory obligations, to
enable the application of specific investment guidelines, and to
provide for bespoke reporting.
AuM as invested
The table below shows AuM 'as invested' by underlying asset
class, which adjusts from 'by mandate' to take account of the
allocation into the underlying asset class of the multi-asset and
blended debt themes; and of crossover investment from within
certain external debt funds.
AuM as invested
30 June 30 June
2017 2016
% %
------------------ ------- -------
External
debt 39 39
Local currency 30 31
Corporate
debt 13 14
Equities 7 7
Alternatives 3 3
Overlay/liquidity 8 6
------------------ ------- -------
The Group's AuM by investment destination is diversified
geographically and broadly consistent with the prior year, with 37%
in Latin America, 23% in Asia Pacific, 12% in the Middle East and
Africa, and 28% in Eastern Europe.
Financial review
Revenues
Net revenue increased 11% from GBP232.5 million to GBP257.6
million, with higher net management fees driven by growth in AuM
and a beneficial average GBP:USD rate compared with the prior year.
Stronger markets enabled a higher level of performance fees to be
generated, which offset lower foreign exchange translation
revenues.
Management fee income net of distribution costs rose by 13% to
GBP221.6 million (FY2015/16: GBP195.9 million). Good AuM growth and
the benefit of a stronger US dollar against Sterling more than
offset the reduction in the aggregate net management fee margin
from 55bps to 52bps.
The majority of the movement is accounted for by changes in
investment theme mix and mandate size effects. The former reflects
growth in lower margin themes such as overlay/liquidity and lower
average AuM in higher margin themes such as equities and
multi-asset. The latter is attributable to individually small
redemptions late in the prior year and early in the current
financial year, particularly in the external debt, local currency,
equities and multi-asset themes, and large institutional
subscriptions in the local currency and equity themes. The
alternatives margin reflects institutional rebates granted on two
funds in realisation phase and the underlying run-rate theme margin
is around 130bps.
Performance fees of GBP28.3 million (FY2015/16: GBP10.4 million)
were generated during the year, reflecting good market conditions.
At 30 June 2017, 12% of the Group's AuM was eligible to earn
performance fees (30 June 2016: 14%), of which a significant
proportion is subject to rebate agreements.
Translation of the Group's non-Sterling assets and liabilities
at the period end resulted in a foreign exchange gain of GBP7.8
million (FY2015/16: GBP21.0 million), reflecting US dollar strength
against Sterling. The Group recognised net realised and unrealised
hedging losses of GBP2.8 million (FY2015/16: GBP1.1 million gain)
to give total foreign exchange revenues of GBP5.0 million
(FY2015/16: GBP22.1 million).
Fee income and net management fee margin by investment theme
The table below summarises net management fee income after
distribution costs, performance fee income, and average net
management fee margin by investment theme, determined with
reference to weighted average assets under management.
Net management Net management Performance Performance Net management Net management
fees fees fees fees fee margin fee margin
FY2016/17 FY2015/16 FY2016/17 FY2015/16 FY2016/17 FY2015/16
Theme GBPm GBPm GBPm GBPm bps bps
------------------ -------------- -------------- ----------- ----------- -------------- --------------
External debt 48.9 37.0 9.4 1.5 50 49
Local currency 42.8 40.5 11.9 0.1 41 45
Corporate debt 25.9 21.9 1.8 0.2 62 61
Blended debt 57.8 52.3 2.6 0.1 53 54
Equities 21.5 22.3 0.9 - 90 104
Alternatives 12.8 10.9 1.0 8.5 124 141
Multi-asset 7.4 7.8 0.7 - 80 94
Overlay/liquidity 4.5 3.2 - - 15 16
------------------ -------------- -------------- ----------- ----------- -------------- --------------
Total 221.6 195.9 28.3 10.4 52 55
------------------ -------------- -------------- ----------- ----------- -------------- --------------
Operating costs
Total operating costs of GBP100.7 million (FY2015/16: GBP92.3
million) include GBP4.9 million of consolidated fund expenses
(FY2015/16: GBP2.4 million). Excluding these costs, and
notwithstanding the 21% increase in the variable compensation
charge, total operating expenses rose by only 7% compared with the
prior year, demonstrating the Group's unrelenting focus on cost
control.
Excluding variable compensation, consolidated fund expenses and
adverse currency effects of GBP4.4 million, operating costs were
reduced by 11%.
Average headcount fell 8% from 277 to 256 employees, reflecting
the sale of the Turkish business and the effect of consolidating
the US offices, together with some natural staff turnover in the
global business, partially offset by expansion in the rapidly
growing local businesses in Colombia, Indonesia and Saudi Arabia.
The Group's headcount at 30 June 2017 was 252 employees (30 June
2016: 266 employees). Fixed staff costs of GBP24.8 million were 3%
higher (FY2015/16: GBP24.1 million) than in the prior year, but
excluding the effect of lower average exchange rates, fixed staff
costs reduced by 4% versus the prior year.
Other operating costs, excluding depreciation and amortisation,
were GBP27.4 million (FY2015/16: GBP27.5 million) and excluding
consolidated fund expenses fell by 10% to GBP22.5 million
(FY2015/16: GBP25.1 million). This reduction was due to an ongoing
focus on controlling discretionary expenditure, such as travel, and
other operating costs such as insurance. Additionally, where the
Group acts as an agent in respect of certain services contracted
for by its funds, for example third-party services, the recharge
for these services was historically recognised in other income.
This year, in order to reflect the pass-through nature of these
costs, the recharge of GBP1.5 million (FY2015/16: GBP1.2 million)
has been offset within other operating costs. There is no impact on
operating profit.
The charge for variable compensation was GBP43.0 million, an
increase of 21% compared with the prior year (FY2015/16: GBP35.6
million). This represents 21% of EBVCIT (FY2015/16: 20%),
reflecting the improved business and operating performance
including particularly strong seed capital gains. Total personnel
expenses for the period were therefore GBP67.8 million (FY2015/16:
GBP59.7 million).
EBITDA
EBITDA for the period of GBP172.3 million was 20% higher than in
the prior financial year (FY2015/16: GBP143.0 million). On an
adjusted basis, reclassifying the effects of seed capital
investments and foreign exchange translation, EBITDA was 23% higher
at GBP161.1 million (FY2015/16: GBP130.9 million).The adjusted
EBITDA margin was 65% (FY2015/16: 62%), benefiting from higher
revenues and the ongoing strict control of operating costs
described above.
Finance income
Net finance income of GBP38.6 million for the period (FY2015/16:
GBP31.3 million) includes items relating to seed capital
investments, which are described in more detail below. Excluding
these items, net interest income for the period was similar to last
year at GBP2.6 million (FY2015/16: GBP2.0 million).
Taxation
The majority of the Group's profit is subject to UK taxation; of
the total current tax charge for the year of GBP40.7 million
(FY2015/16: GBP37.0 million), GBP31.3 million (FY2015/16: GBP31.5
million) relates to UK corporation tax.
There is an GBP18.2 million net deferred tax asset on the
Group's balance sheet as at 30 June 2017 (30 June 2016: GBP14.3
million), which arises principally as a result of timing
differences in the recognition of the accounting expense and actual
tax deduction in connection with (i) share-based payments and (ii)
goodwill and intangibles arising on the acquisition of Ashmore's
equity business.
The Group's effective tax rate for the year is 17.8% (FY2015/16:
23.2%), which is lower than the blended UK corporation tax rate of
19.75% (FY2015/16: 20.0%). This reflects the blend of the varying
rates that apply across territories in which the Group operates as
well as other effects. Note 12 to the financial statements provides
a full reconciliation of this difference compared to the blended UK
corporate tax rate.
Balance sheet, cash flow and foreign exchange
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 clients, and to
fulfil development needs across the business. These include funding
establishment costs of distribution offices and local asset
management ventures, seeding new funds, trading or investing in
funds or other assets, and other strategic initiatives.
As at 30 June 2017, total equity attributable to shareholders of
the parent was GBP724.4 million (30 June 2016: GBP676.7 million).
There is no debt on the Group's balance sheet.
Cash
Ashmore's business model delivers a high conversion rate of
operating profits to cash. The Group generated cash of GBP177.0
million before working capital changes (FY2015/16: GBP151.2
million) and GBP171.3 million of cash from operations (FY2015/16:
GBP125.2 million) from operating profit of GBP166.8 million for the
period (FY2015/16: GBP137.9 million).
Cash and cash equivalents by currency
30 June 2017 30 June 2016
GBPm GBPm
---------- ------------ ------------
Sterling 149.7 212.6
US dollar 253.8 123.2
Other 29.0 28.2
---------- ------------ ------------
Total 432.5 364.0
---------- ------------ ------------
The 19% increase in the Group's cash balance over the period
reflects operational cash generation and the successful recycling
of historical seed capital investments, as described below, offset
by the payment of ordinary dividends.
Seed capital investments
The Group's seeding programme has successfully enabled growth in
third-party AuM with approximately 13% of Group AuM in funds that
have been seeded.
Seed capital is actively managed and during the period the Group
made new investments of GBP57.0 million, realised GBP117.4 million
from previous investments and therefore, after including positive
market movements of GBP32.1 million, the market value of the
Group's seed capital reduced from GBP238.5 million to GBP210.2
million over the period. The Group has also committed GBP29.4
million that was undrawn at the year end. The original cost of the
Group's current seed capital investments is GBP170.7 million (30
June 2016: GBP207.4 million), representing 33% of Group net
tangible equity (30 June 2016: 35%). The majority of the seed
capital is held in liquid funds, such as daily-dealing SICAVs and
US 40-Act mutual funds.
New investments were made across a broad range of funds, but
with significant investments in alternatives funds in Colombia, the
frontier equities SICAV, and an absolute return fund in the
external debt theme. The most significant realisations were from
the mutual funds in the local Indonesian business, which now
manages more than US$1.0 billion and has returned substantially all
of the Group's seed capital, the US frontier equities fund, and the
US short duration fund.
Seed capital market value by currency
30 June 30 June
2017 2016
GBPm GBPm
----------- ------- -------
US dollar 188.3 189.2
Indonesian
rupiah 5.0 33.9
Colombian
peso 9.6 7.6
Other 7.3 7.8
----------- ------- -------
Total 210.2 238.5
----------- ------- -------
The seed capital programme generated a pre-tax profit of GBP41.0
million for the year (FY2015/16: GBP24.6 million), comprising
foreign exchange translation gains of GBP13.4 million and market
and other movements of GBP27.6 million. Over half (GBP20.8 million)
of the pre-tax profit contribution was realised on the recycling of
previous investments, with the balance representing unrealised
profits at the year end. The table below draws together the
relevant line items to assist in the understanding of the financial
impact of the Group's seed capital programme.
Financial impact of seed capital investments
FY2016/17 FY2015/16
GBPm GBPm
--------------------------------- --------- ---------
Consolidated funds (note
20):
Gains/(losses) on investment
securities 22.4 (5.7)
Change in third-party
interests in consolidated
funds (12.5) 3.4
Operating costs (4.9) (2.4)
Finance income 7.8 4.7
--------------------------------- --------- ---------
Sub-total: consolidated
funds 12.8 0.0
Unconsolidated funds (note
8):
Market return 14.8 5.1
Foreign exchange 13.4 19.5
--------------------------------- --------- ---------
Sub-total: unconsolidated
funds 28.2 24.6
Total seed capital profit/(loss) 41.0 24.6
--------------------------------- --------- ---------
* realised 20.8 1.2
* unrealised 20.2 23.4
--------------------------------- --------- ---------
Goodwill and intangible assets
At 30 June 2017, goodwill and intangible assets on the Group's
balance sheet totalled GBP79.9 million (30 June 2016: GBP82.5
million) with the decrease attributable to an amortisation charge
of GBP4.5 million (FY2015/16: GBP3.9 million) and a foreign
exchange revaluation gain through reserves of GBP1.9 million
(FY2015/16: GBP12.3 million).
Own shares held
The Group purchases and holds shares through an Employee Benefit
Trust (EBT) in anticipation of the vesting of share awards. At 30
June 2017, the EBT owned 38,701,321 (30 June 2016: 41,173,968)
ordinary shares.
Foreign exchange
The majority of the Group's fee income is received in US dollars
and it is the Group's established policy to hedge up to two-thirds
of the notional value of budgeted foreign currency-denominated net
management fees, using either forward or option foreign exchange
contracts. The Group's Foreign Exchange Management Committee
determines the proportion of budgeted fee income to hedge by
regular reference to expected non-US dollar, and principally
Sterling, cash requirements. The proportion of fee income received
in foreign currency and not subject to hedging is held as cash or
cash equivalents in the foreign currency and marked to market at
the period end exchange rate.
Translation of the Group's non-Sterling denominated balance
sheet resulted in a foreign exchange translation gain of GBP7.8
million, principally as a result of the strength of the US dollar
against Sterling. The Group sold US$95 million of its US dollar
cash holdings as the exchange rate moved in its favour during the
year. The sensitivity of the Group to exchange rate movements,
including GBP:USD, is shown in note 21. Net realised and unrealised
hedging losses of GBP2.8 million were recognised for the
period.
Regulatory capital
As a UK listed asset management group, Ashmore is subject to
regulatory supervision by the Financial Conduct Authority (FCA)
under the Prudential Sourcebook for Banks, Building Societies and
Investment Firms. At the year end, the Group had two UK-regulated
entities: Ashmore Investment Management Limited (AIML), and Ashmore
Investment Advisors Limited (AIAL), on behalf of which half-yearly
capital adequacy returns are filed. Both AIML and AIAL held excess
capital resources relative to their requirements at all times
during the period under review.
Since 1 January 2007, the Group has been subject to consolidated
regulatory capital requirements, whereby the Board is required to
assess the degree of risk across the Group's business, and is
required to hold sufficient capital against these requirements.
The Board has therefore assessed the amount of Pillar II capital
required to be GBP111.1 million (30 June 2016: GBP99.9 million).
The net increase of GBP11.2 million compared with the prior year is
largely attributable to a higher market risk requirement reflecting
more volatile market conditions, together with a slightly higher
operational risk requirement and an increase in the capital
requirements for undrawn illiquid seed capital commitments. The
Group has total capital resources of GBP559.4 million, giving a
solvency ratio of 404% and excess regulatory capital of GBP448.3
million. Therefore, the Board is satisfied that the Group is
adequately capitalised.
Dividend
The Board intends to pay a progressive ordinary dividend over
time, taking into consideration factors such as prospects for the
Group's earnings, demands on the Group's financial resources, and
the markets in which the Group operates.
In recognition of Ashmore's operating and financial performance
during the period, its balance sheet strength, and the Board's
confidence in the Group's future prospects, the Directors are
recommending a final dividend of 12.10 pence per share for the year
ending 30 June 2017, which, subject to shareholder approval, will
be paid on 1 December 2017 to shareholders who are on the register
on 3 November 2017.
Tom Shippey
Group Finance Director
6 September 2017
Alternative performance measures
The Group discloses non-GAAP financial alternative performance
measures in order to assist shareholders' understanding of the
operational performance of the Group during the accounting
period.
Net revenue
As shown on the face of the consolidated statement of
comprehensive income, net revenue is total revenue less
distribution costs and including foreign exchange. This provides a
comprehensive view of the revenues recognised by the Group in the
period.
Variable compensation ratio
Defined as the charge for employee variable compensation as a
proportion of earnings before variable compensation, interest and
tax (EBVCIT). The linking of variable annual pay awards to the
Group's profitability is one of the principal methods by which the
Group controls its operating costs. EBVCIT is defined as operating
profit excluding the charge for variable compensation and seed
capital-related items. The items relating to seed capital are
gains/losses on investment securities; change in third-party
interests in consolidated funds; and other expenses in respect of
consolidated funds.
EBITDA
The standard definition of earnings before interest, tax,
depreciation and amortisation is operating profit before
depreciation and amortisation. It provides a view of the business
before certain non-cash items, financing income and charges, and
taxation.
Adjusted EBITDA
Defined as EBITDA excluding items relating to foreign exchange
translation and seed capital. This provides a better understanding
of the Group's operational performance excluding the mark-to-market
volatility of foreign exchange translation and seed capital
investments. These adjustments are merely reclassified within the
adjusted profit and loss account, leaving statutory profit before
tax unchanged.
Conversion of operating profits to cash
This compares adjusted EBITDA to cash generated from operations
excluding consolidated funds, and is a measure of the effectiveness
of the Group's operations at converting profits to cash.
Risk management
Risk management and internal control systems
In accordance with the principles of the UK Corporate Governance
Code, the Board is ultimately responsible for the Group's risk
management and internal control systems and for reviewing their
effectiveness. Such systems and their review are designed to manage
rather than eliminate the risk of failure to achieve business
objectives, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Group's principal risks that are most relevant to the
implementation of its strategy and business model are described in
the table below, together with examples of associated controls and
mitigants. Reputational and conduct risks are common to most
aspects of the strategy and business model.
Principal risks and associated controls and mitigants
Description of principal Examples of associated controls
risks and mitigants
----------------------------------------------------------- -----------------------------------------------------------
Strategic and business risks (Responsibility: Ashmore
Group plc Board)
--------------------------------------------------------------------------------------------------------------------------
* Long-term downturn in Emerging Markets fundamentals / * Group strategy is approved by a Board with relevant
technicals / sentiment industry experience
* Market capacity issues and increased competition * Experienced Emerging Markets investment professionals
constrain growth participate in Investment Committees
* Inadequate communication with, and management of, * Strong balance sheet with no borrowing
existing and potential shareholders of Ashmore Group
plc
* Diversification of investment themes and capabilities
,
and periodic capacity reviews
* Dedicated investor relations position that reports to
the Group Finance Director and Board
* Group Media policies and list of approved
spokespeople
----------------------------------------------------------- -----------------------------------------------------------
Client risks (Responsibility: Product Committee and
Group Risk and Compliance Committee)
--------------------------------------------------------------------------------------------------------------------------
* Inappropriate marketing strategy and/or ineffective * Frequent and regular Product Committee meetings
management of existing and potential fund investors review product suitability and appropriateness
and distributors
* Experienced distribution team with appropriate
* Inadequate client oversight including alignment of geographic coverage
interests
* Investor education to ensure understanding of Ashmore
investment themes and products
* Monitoring of client-related issues including a
formal complaints handling process
* Compliance and legal oversight to ensure clear and
fair terms of business and disclosures, and
appropriate client communications and financial
promotions
----------------------------------------------------------- -----------------------------------------------------------
Treasury risks (Responsibility: Chief Executive Officer
and Group Finance Director)
--------------------------------------------------------------------------------------------------------------------------
* Inaccurate financial projections and hedging of * Defined risk appetite and ICAAP demonstrates excess
future cash flows and balance sheet, as well as financial resources
inadequate liquidity and regulatory capital provision
for Group and its subsidiaries
* Group Liquidity and FX hedging policies
* Seed capital is subject to strict monitoring by the
Board within a framework of set limits including
diversification
----------------------------------------------------------- -----------------------------------------------------------
Investment risks (Responsibility: Group Investment
Committees)
--------------------------------------------------------------------------------------------------------------------------
* Downturn in long-term performance * Consistent investment philosophy over 25 years with
dedicated Emerging Markets focus including country
visits and network of local offices
* Manager non-performance including i) ineffective
leverage, cash and liquidity management and similar
portfolios being managed inconsistently; ii) neglect * Funds in the same investment theme are managed by
of duty, market abuse; iii) inappropriate oversight consistent investment management teams, and
of special purpose vehicles and related legal allocations approved by Investment Committees
structures and compliance with law and regulations;
iv) inappropriate oversight of market, liquidity,
credit, counterparty and operational risks; v) * Frequent and regular reviews of market and liquidity
insufficient number of trading counterparties; and risk
vi) breaching investment guidelines or restrictions
* Policies in place to cover conflicts, best execution
and market abuse
* Tools to manage liquidity issues as a result of
redemptions including restrictions on illiquid
exposures, swing pricing and ability to use in specie
redemptions
* Investment decisions are subject to pre-trade
compliance
* Legal team and use of external counsel to ensure
appropriate documents are in place
* Group Trading counterparty policy
----------------------------------------------------------- -----------------------------------------------------------
Description of principal Examples of associated controls
risks and mitigants
----------------------------------------------------------- -----------------------------------------------------------
Operational risks (Responsibility: Group Risk and Compliance
Committee)
--------------------------------------------------------------------------------------------------------------------------
* Security of information including cyber security * Information security and data protection policies
* Threat to business continuity affecting people, * BCP working group
buildings and systems
* Pricing Oversight Committee
* Inaccurate or invalid data including manual processes
/ reporting, and transactions, static data and prices
* Annual ISAE3402 process and report
* Failure to book, process and settle trades
appropriately * Front office systems require trade booking and
authorisation
* Failure of IT infrastructure, including inability to
support business growth * Appropriate IT policies and procedures in place
* Trading with unauthorised counterparties * Approved counterparty list
* Legal action, fraud or breach of contract perpetrated * Independent Internal Audit department
against the Group, funds or investments
* Financial crime policy, which also covers service
* Insufficient resources, which includes loss of key providers
staff or inability to attract staff, constrains
growth
* Committee-based investment management reduces key man
risk
* Lack of understanding and compliance with global and
local regulatory requirements, as well as conflicts
of interest and treating customers fairly; and * Appropriate remuneration policy with emphasis on
financial crime, which includes money laundering, performance-related pay and long-dated deferral of
bribery and corruption leading to high level equity awards
publicity or regulatory sanction
* Insurance policies in place to ensure appropriate
* Inappropriate accounting and/or tax practices lead to litigation cover
sanction
* Compliance policies covering global and local
* Inadequate oversight of Ashmore overseas offices offices. Adherence to regulatory requirements is
closely managed through compliance monitoring
programmes
* Ineffective or mismanaged third-party services
* Conflicts of interest policy
* Inadequate management, oversight or documentation of
new and existing funds
* Anti-bribery and corruption procedures issued and
adopted for investee companies where Ashmore has a
* Inappropriate governance and oversight of people, controlling stake
departments and committees
* Group accounting policies reviewed by Group Finance
Director, Head of Finance and external auditor;
signed off by external auditor and ARC
* Group tax policy and dedicated in-house tax
specialist; external tax advice sought where
appropriate
* Group Finance Director has oversight responsibility
for overseas offices
* Due diligence on all new third parties, and regular
meetings / reviews of third-party service providers
* Frequent and regular Product Committee meetings
* Department policies and procedures reviewed at least
annually
----------------------------------------------------------- -----------------------------------------------------------
Statement of Directors' responsibilities
The Directors are responsible for preparing the annual report
and the Group and parent company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union (EU) and applicable law and have
elected to prepare the parent company financial statements on the
same basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company and of
their profit and loss for that period. In preparing each of the
Group and parent company financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable, relevant
and reliable;
- state whether they have been prepared in accordance with IFRSs
as adopted by the EU; and
- assess the Group and parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
- use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or to have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors' report,
Directors' remuneration report and corporate governance statement
that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and
fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
- the Strategic report includes a fair review of the development
and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks
and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance,
business model and strategy.
Peter Gibbs
Chairman
6 September 2017
Consolidated statement of comprehensive income
For the year ended 30 June 2017
2017 2016
Notes GBPm GBPm
------------------------------------------------- ------ ------ ------
Management fees 226.2 197.1
Performance fees 28.3 10.4
Other revenue 2.7 4.1
------------------------------------------------- ------ ------ ------
Total revenue 257.2 211.6
Distribution costs (4.6) (1.2)
Foreign exchange 7 5.0 22.1
------------------------------------------------- ------ ------ ------
Net revenue 257.6 232.5
Gains/(losses) on investment securities 20 22.4 (5.7)
Change in third-party interests in consolidated
funds 20 (12.5) 3.4
Personnel expenses 9 (67.8) (59.7)
Other expenses 11 (32.9) (32.6)
------------------------------------------------- ------ ------ ------
Operating profit 166.8 137.9
Finance income 8 38.6 31.7
Finance expense 8 - (0.4)
Profit on disposal of joint ventures
and subsidiaries 26, 27 1.6 -
Share of losses from associates and
joint ventures 27 (0.8) (1.7)
------------------------------------------------- ------ ------ ------
Profit before tax 206.2 167.5
Tax expense 12 (36.7) (38.8)
------------------------------------------------- ------ ------ ------
Profit for the year 169.5 128.7
Other comprehensive income, net of related
tax effect
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences
arising on foreign operations (16.7) 27.5
Fair value reserve (available-for-sale
financial assets):
Net change in fair value 2.9 1.1
Net amount transferred to profit or
loss - 0.3
Cash flow hedge intrinsic value gains/(losses) 3.8 (3.9)
------------------------------------------------- ------ ------ ------
Other comprehensive income, net of tax (10.0) 25.0
------------------------------------------------- ------ ------ ------
Total comprehensive income for the year 159.5 153.7
------------------------------------------------- ------ ------ ------
Profit attributable to:
Equity holders of the parent 167.6 127.8
Non-controlling interests 1.9 0.9
------------------------------------------------- ------ ------ ------
Profit for the year 169.5 128.7
------------------------------------------------- ------ ------ ------
Total comprehensive income attributable
to:
Equity holders of the parent 157.8 152.0
Non-controlling interests 1.7 1.7
------------------------------------------------- ------ ------ ------
Total comprehensive income for the year 159.5 153.7
------------------------------------------------- ------ ------ ------
Earnings per share
Basic 13 25.07p 19.13p
Diluted 13 23.71p 18.08p
------------------------------------------------- ------ ------ ------
Consolidated balance sheet
As at 30 June 2017
2017 2016
Notes GBPm GBPm
---------------------------------------------- ----- ----- ------
Assets
Non-current assets
Goodwill and intangible assets 15 79.9 82.5
Property, plant and equipment 16 1.6 2.2
Investment in associates and joint ventures 27 2.3 6.3
Non-current asset investments 20 22.5 11.7
Other receivables 0.1 0.1
Deferred acquisition costs 0.6 0.4
Deferred tax assets 18 27.4 19.5
---------------------------------------------- ----- ----- ------
134.4 122.7
---------------------------------------------- ----- ----- ------
Current assets
Investment securities 20 231.2 143.7
Available-for-sale financial assets 20 11.3 8.8
Fair value through profit or loss investments 20 36.0 68.2
Trade and other receivables 17 70.9 61.2
Derivative financial instruments 21 0.3 -
Cash and cash equivalents 432.5 364.0
---------------------------------------------- ----- ----- ------
782.2 645.9
---------------------------------------------- ----- ----- ------
Non-current assets held for sale 20 7.1 106.7
---------------------------------------------- ----- ----- ------
Total assets 923.7 875.3
---------------------------------------------- ----- ----- ------
Equity and liabilities
Capital and reserves - attributable
to equity holders of the parent
Issued capital 22 - -
Share premium 15.7 15.7
Retained earnings 703.2 645.7
Foreign exchange reserve 4.6 21.1
Available-for-sale fair value reserve 1.1 (1.8)
Cash flow hedging reserve (0.2) (4.0)
---------------------------------------------- ----- ----- ------
724.4 676.7
Non-controlling interests 2.3 3.3
---------------------------------------------- ----- ----- ------
Total equity 726.7 680.0
---------------------------------------------- ----- ----- ------
Liabilities
Non-current liabilities
Deferred tax liabilities 18 9.2 5.2
---------------------------------------------- ----- ----- ------
9.2 5.2
---------------------------------------------- ----- ----- ------
Current liabilities
Current tax 14.7 24.8
Third-party interests in consolidated
funds 20 108.9 75.6
Derivative financial instruments 21 - 4.5
Trade and other payables 25 64.2 55.4
---------------------------------------------- ----- ----- ------
187.8 160.3
---------------------------------------------- ----- ----- ------
Non-current liabilities held for sale 20 - 29.8
---------------------------------------------- ----- ----- ------
Total liabilities 197.0 195.3
---------------------------------------------- ----- ----- ------
Total equity and liabilities 923.7 875.3
---------------------------------------------- ----- ----- ------
Approved by the Board on 6 September 2017 and signed on its
behalf by:
Mark Coombs Tom Shippey
Chief Executive Group Finance
Officer Director
Consolidated statement of changes in equity
For the year ended 30 June 2017
Attributable to equity holders
of the parent
--------------------------------------------------------------------------
Cash
Foreign flow
Issued Share Retained exchange Available-for-sale hedging Non-controlling Total
capital premium earnings reserve reserve reserve Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Balance at 30 June
2015 - 15.7 649.3 (5.6) (3.2) (0.1) 656.1 14.0 670.1
Profit for the year - - 127.8 - - - 127.8 0.9 128.7
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising
on foreign
operations - - - 26.7 - - 26.7 0.8 27.6
Net fair value gain
on
available-for-sale
assets including
tax - - - - 1.1 - 1.1 - 1.1
Net gains
reclassified
from
available-for-sale
reserve to
comprehensive
income - - - - 0.3 - 0.3 - 0.3
Cash flow hedge
intrinsic
value losses - - - - - (3.9) (3.9) - (3.9)
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Total comprehensive
income/(loss) - - 127.8 26.7 1.4 (3.9) 152.0 1.7 153.7
Transactions with
owners:
Purchase of own
shares - - (22.2) - - - (22.2) - (22.2)
Acquisition of
non-controlling
interests - - (5.1) - - - (5.1) (1.2) (6.3)
Sale to
non-controlling
interests - - - - - 0.4 0.4
Share-based
payments - - 11.9 - - - 11.9 (7.4) 4.5
Proceeds received
on
exercise of vested
options - - 0.1 - - - 0.1 - 0.1
Dividends to equity
holders - - (116.1) - - - (116.1) - (116.1)
Dividends to
non-controlling
interests - - - - - - - (4.2) (4.2)
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Total contributions
and distributions - - (131.4) - - - (131.4) (12.4) (143.8)
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Balance at 30 June
2016 - 15.7 645.7 21.1 (1.8) (4.0) 676.7 3.3 680.0
Profit for the year - - 167.6 - - - 167.6 1.9 169.5
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising
on foreign
operations - - - (16.5) - - (16.5) (0.2) (16.7)
Net fair value gain
on
available-for-sale
assets including
tax - - - - 2.9 - 2.9 - 2.9
Cash flow hedge
intrinsic
value gains - - - - - 3.8 3.8 - 3.8
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Total comprehensive
income/(loss) - - 167.6 (16.5) 2.9 3.8 157.8 1.7 159.5
Transactions with
owners:
Purchase of own
shares - - (11.8) - - - (11.8) - (11.8)
Acquisition of
non-controlling
interests - - - - - - - (0.4) (0.4)
Share-based
payments - - 18.3 - - - 18.3 - 18.3
Dividends to equity
holders - - (116.6) - - - (116.6) - (116.6)
Dividends to
non-controlling
interests - - - - - - - (2.3) (2.3)
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Total contributions
and distributions - - (110.1) - - - (110.1) (2.7) (112.8)
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Balance at 30 June
2017 - 15.7 703.2 4.6 1.1 (0.2) 724.4 2.3 726.7
--------------------- ------- ------- -------- -------- ------------------ ------- ------- --------------- -------
Consolidated cash flow statement
For the year ended 30 June 2017
2017 2016
GBPm GBPm
----------------------------------------------------- -------- -------
Operating activities
Operating profit 166.8 137.9
Adjustments for non-cash items:
Depreciation and amortisation 5.5 5.1
Accrual for variable compensation 24.4 35.6
Unrealised foreign exchange gains (8.7) (20.4)
Other non-cash items (11.0) (7.0)
----------------------------------------------------- -------- -------
Cash generated from operations before working
capital changes 177.0 151.2
Changes in working capital:
Decrease/(increase) in trade and other receivables (9.7) 2.9
Decrease/(increase) in derivative financial
instruments (4.8) 4.5
Increase/(decrease) in trade and other payables 8.8 (33.4)
----------------------------------------------------- -------- -------
Cash generated from operations 171.3 125.2
Taxes paid (48.0) (26.7)
----------------------------------------------------- -------- -------
Net cash from operating activities 123.3 98.5
----------------------------------------------------- -------- -------
Investing activities
Interest received 8.8 6.8
Dividends received 0.4 -
Proceeds on disposal of joint ventures and
subsidiaries 4.8 -
Purchase of non-current asset investments (8.8) (3.2)
Purchase of financial assets held for sale (26.9) (42.6)
Purchase of available-for-sale financial
assets - (0.2)
Purchase of fair value through profit or
loss investments (14.0) (1.4)
Purchase of investment securities (17.0) (55.7)
Sale of non-current asset investments 0.5 -
Sale of financial assets held for sale 47.9 9.3
Sale of available-for-sale financial assets - 3.3
Sale of fair value through profit or loss
investments 43.2 22.0
Sale of investment securities 28.1 33.5
Net cash from initial consolidation of seed
capital investments 8.1 1.5
Purchase of property, plant and equipment (0.4) (0.6)
----------------------------------------------------- -------- -------
Net cash generated/(used) in investing activities 74.7 (27.3)
----------------------------------------------------- -------- -------
Financing activities
Dividends paid to equity holders (116.6) (116.1)
Dividends paid to non-controlling interests (2.3) (4.2)
Third-party subscriptions into consolidated
funds 18.7 49.1
Third-party redemptions from consolidated
funds (8.6) (11.0)
Distributions paid by consolidated funds (3.1) (3.5)
Acquisition of interest from non-controlling
interests (0.4) (1.2)
Sale of interest to non-controlling interests - 0.4
Purchase of own shares (11.8) (22.2)
----------------------------------------------------- -------- -------
Net cash used in financing activities (124.1) (108.7)
----------------------------------------------------- -------- -------
Net increase/(decrease) in cash and cash
equivalents 73.9 (37.5)
Cash and cash equivalents at beginning of
year 364.0 380.8
Effect of exchange rate changes on cash and
cash equivalents (5.4) 20.7
----------------------------------------------------- -------- -------
Cash and cash equivalents at end of year 432.5 364.0
----------------------------------------------------- -------- -------
Cash and cash equivalents at end of year
comprise:
Cash at bank and in hand 71.1 52.5
Daily dealing liquidity funds 216.5 103.7
Deposits 144.9 207.8
----------------------------------------------------- -------- -------
432.5 364.0
----------------------------------------------------- -------- -------
Company balance sheet
As at 30 June 2017
2017 2016
Notes GBPm GBPm
------------------------------------ ----- ----- -----
Assets
Non-current assets
Goodwill 15 4.1 4.1
Property, plant and equipment 16 0.7 1.1
Investment in subsidiaries 26 19.9 20.0
Deferred acquisition costs 0.7 0.4
Deferred tax assets 18 11.5 8.2
------------------------------------ ----- ----- -----
36.9 33.8
------------------------------------ ----- ----- -----
Current assets
Trade and other receivables 17 398.0 285.4
Cash and cash equivalents 229.7 301.4
------------------------------------ ----- ----- -----
627.7 586.8
------------------------------------ ----- ----- -----
Total assets 664.6 620.6
------------------------------------ ----- ----- -----
Equity and liabilities
Capital and reserves
Issued capital 22 - -
Share premium 15.7 15.7
Retained earnings 580.3 554.8
------------------------------------ ----- ----- -----
Total equity attributable to equity
holders of the Company 596.0 570.5
------------------------------------ ----- ----- -----
Liabilities
Current liabilities
Trade and other payables 25 68.6 50.1
------------------------------------ ----- ----- -----
68.6 50.1
------------------------------------ ----- ----- -----
Total equity and liabilities 664.6 620.6
------------------------------------ ----- ----- -----
Approved by the Board on 6 September 2017 and signed on its
behalf by:
Mark Coombs Tom Shippey
Chief Executive Group Finance
Officer Director
Company statement of changes in equity
For the year ended 30 June 2017
Total
equity
attributable
to equity
holders
Issued Share Retained of the
capital premium earnings parent
GBPm GBPm GBPm GBPm
---------------------------- -------- -------- --------- -------------
Balance at 30 June 2015 - 15.7 547.0 562.7
Profit for the year - - 125.1 125.1
Purchase of own shares - - (22.2) (22.2)
Share-based payments - - 21.0 21.0
Dividends to equity holders - - (116.1) (116.1)
---------------------------- -------- -------- --------- -------------
Balance at 30 June 2016 - 15.7 554.8 570.5
---------------------------- -------- -------- --------- -------------
Profit for the year - - 140.5 140.5
Purchase of own shares - - (11.8) (11.8)
Share-based payments - - 13.4 13.4
Dividends to equity holders - - (116.6) (116.6)
---------------------------- -------- -------- --------- -------------
Balance at 30 June 2017 - 15.7 580.3 596.0
---------------------------- -------- -------- --------- -------------
Company cash flow statement
For the year ended 30 June 2017
2017 2016
GBPm GBPm
----------------------------------------------------- ------- -------
Operating activities
Operating profit 145.0 137.6
Adjustments for:
Depreciation and amortisation 0.5 0.7
Accrual for variable compensation 15.4 27.1
Unrealised foreign exchange gains (5.9) (46.2)
Dividends received from subsidiaries (99.2) (89.6)
----------------------------------------------------- ------- -------
Cash generated from operations before working
capital changes 58.0 29.6
Changes in working capital:
Decrease/(increase) in trade and other receivables (36.0) 49.8
Increase/(decrease) in trade and other payables 18.5 12.2
----------------------------------------------------- ------- -------
Cash generated from operations 38.3 91.6
Taxes paid (8.8) (4.3)
----------------------------------------------------- ------- -------
Net cash from operating activities 29.5 87.3
Investing activities
Interest received 1.7 0.8
Loans repaid by/(advanced to) subsidiaries (76.6) 16.6
Dividends received from subsidiaries 92.3 189.6
Purchase of property, plant and equipment (0.1) (0.6)
Net cash from investing activities 17.3 206.4
----------------------------------------------------- ------- -------
Financing activities
Dividends paid (116.6) (116.1)
Purchase of own shares (11.8) (22.2)
----------------------------------------------------- ------- -------
Net cash used in financing activities (128.4) (138.3)
----------------------------------------------------- ------- -------
Net increase/(decrease) in cash and cash
equivalents (81.6) 155.4
Cash and cash equivalents at beginning of
year 301.4 114.5
Effect of exchange rate changes on cash and
cash equivalents 9.9 31.5
----------------------------------------------------- ------- -------
Cash and cash equivalents at end of year 229.7 301.4
----------------------------------------------------- ------- -------
Cash and cash equivalents at end of year
comprise:
Cash at bank and in hand 19.3 9.4
Daily dealing liquidity funds 80.4 93.0
Deposits 130.0 199.0
----------------------------------------------------- ------- -------
229.7 301.4
----------------------------------------------------- ------- -------
Notes to the financial statements
1) General information
Ashmore Group plc (the Company) is a public limited company
listed on the London Stock Exchange and incorporated and domiciled
in
the United Kingdom. The consolidated financial statements of the
Company and its subsidiaries (together the Group) for the year
ended 30 June 2017 were authorised for issue by the Board of
Directors on 6 September 2017.
2) Basis of preparation
The Group and Company financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU) effective for the Group's
reporting for the year ended 30 June 2017 and applied in accordance
with the provisions of the Companies Act 2006.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for the
measurement at fair value of certain financial assets that are
available-for-sale or classified as at fair value through profit or
loss.
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 that allows it not to present its
individual statement of comprehensive income and related notes.
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making the judgements about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates. Further information about key assumptions and other key
sources of estimation and areas of judgement are set out in note
32.
3) New standards and interpretations not yet adopted
At the date of authorisation of these consolidated financial
statements, the following standards and interpretations relevant to
the Group's operations were issued by the International Accounting
Standards Board (IASB) but are not yet mandatory:
- IFRS 9 Financial Instruments effective for annual periods
beginning on or after 1 January 2018
- IFRS 15 Revenue from Contracts with Customers effective for
annual periods beginning on or after 1 January 2018
- IFRS 16 Leases effective for annual periods beginning on or
after 1 January 2019, subject to EU endorsement.
The Group completed an assessment of the impact of the new
standards on its financial statements during the year. Overall, the
Group does not expect the implementation of these standards to have
a material impact on its results, net assets or regulatory capital
requirements. However, the Group expects to update the relevant
accounting policies when these standards come into force, as well
as making necessary presentational changes on the face of the
consolidated statement of comprehensive income and consolidated
balance sheet.
- IFRS 9 Financial Instruments has been endorsed by the EU and
replaces the classification and measurement models for financial
instruments in IAS 39 Financial Instruments: Recognition and
Measurement with three classification categories: amortised cost,
fair value through profit or loss and fair value through other
comprehensive income. Under IFRS 9, the Group's business model and
the contractual cash flows arising from its investments in
financial instruments determine the appropriate classification. All
equity investments within the scope of IFRS 9 are measured at fair
value, with gains or losses reported either in the statement of
comprehensive income or, by election, through other comprehensive
income. The impact will be on classification and presentation of
the Group's seed capital investments, with limited changes in
measurement basis for available-for sale financial assets that will
be measured at fair value through profit or loss.
In addition, IFRS 9 introduces an expected loss model for the
assessment of impairment. The current incurred loss model under IAS
39 requires the Group to recognise impairment losses when there is
objective evidence that an asset is impaired. The new impairment
model in IFRS 9 is based on the premise of providing for expected
losses, even in the absence of a default event. The Group does not
anticipate the impact of the expected losses to be material as a
result of the nature of assets held and the low level of historical
defaults.
- IFRS 15 Revenue from Contracts with Customers has been
endorsed by the EU and deals with revenue recognition. The standard
provides a single, principles-based five-step model to be applied
to all contracts with customers to recognise revenue in a manner
that depicts the pattern of transfer of services to the customer.
IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts
and related interpretations. The standard provides guidance on
topics such as the point at which revenue is recognised, accounting
for variable consideration such as performance-based incentive
fees, and costs related to obtaining and fulfilling investment
management contracts. The Group has assessed that IFRS 15 will not
have a material impact on its results or a material change to the
estimation of management fee or performance fees revenue; however,
additional note disclosure will be required to update the Group's
revenue recognition policy when the standard is adopted.
- IFRS 16 Leases was issued on 13 January 2016 and replaces IAS
17 Leases. IFRS 16 requires all operating leases in excess of one
year, where the Group is the lessee, to be included on the Group's
statement of financial position, and recognised as a right-of-use
(ROU) asset and a related lease liability representing the
obligation to make lease payments. The ROU asset will be amortised
on a straight-line basis with the lease liability being amortised
using the effective interest method. Optional exemptions are
available under IFRS 16 for short-term leases (lease term of less
than 12 months) and for small-value leases. Based on the
preliminary assessment, the Group expects its existing operating
lease arrangements as a lessee (refer to note 30) to be recognised
as ROU assets with corresponding lease liabilities under the new
standard. The operating lease commitments on an undiscounted basis
amount to approximately 1% of the consolidated total assets and 7%
of consolidated total liabilities. The Group will complete a
detailed impact analysis closer to the adoption of IFRS 16.
No other standards or interpretations issued and not yet
effective are expected to have an impact on the Group's
consolidated financial statements.
4) Significant accounting policies
The following principal accounting policies have been applied
consistently where applicable to all years presented in dealing
with items considered material in relation to the Group and Company
financial statements, unless otherwise stated.
Basis of consolidation
The consolidated financial statements of the Group comprise the
financial statements of the Company and its subsidiaries,
associates and joint ventures. This includes an Employee Benefit
Trust (EBT) established for the employee share-based awards and
consolidated investment funds.
Interests in subsidiaries
Subsidiaries are entities, including investment funds, over
which the Group has control as defined by IFRS 10. The Group has
control if it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until
the date when control ceases. The Group reassesses whether or not
it controls an entity if facts and circumstances indicate that
there are changes to one or more of the elements of control.
The profit or loss and each component of other comprehensive
income are attributed to the equity holders of the Company and to
any non-controlling interests. Based on their nature, the interests
of third parties in consolidated funds are classified as
liabilities and appear as 'Third-party interests in consolidated
funds' on the Group's balance sheet. Associates and joint ventures
are presented as single-line items in the statement of
comprehensive income and balance sheet (refer to note 27).
Intercompany transactions and balances are eliminated on
consolidation. Consistent accounting policies have been applied
across the Group in the preparation of the consolidated financial
statements as at 30 June 2017.
A change in the ownership interest of a consolidated entity that
does not result in a loss of control by the Group is accounted for
as an equity transaction. If the Group loses control over a
consolidated entity, it derecognises the related assets, goodwill,
liabilities, non-controlling interest and other components of
equity, and any gain or loss is recognised in consolidated
comprehensive income. Any investment retained is recognised at its
fair value at the date of loss of control.
Interests in associates and joint arrangements
Associates are partly owned entities over which the Group has
significant influence but no control. Joint ventures are entities
through which the Group and other parties undertake an economic
activity which is subject to joint control.
Investments in associates and interests in joint ventures are
measured using the equity method of accounting. Under this method,
the investments are initially recognised at cost, including
attributable goodwill, and are adjusted thereafter for the
post-acquisition changes in the Group's share of net assets. The
Group's share of post-acquisition profit or loss is recognised in
the statement of comprehensive income.
Where the Group's financial year is not coterminous with those
of its associates or joint ventures, unaudited interim financial
information is used after appropriate adjustments have been
made.
Interests in consolidated structured entities
The Group acts as fund manager to investment funds that are
considered to be structured entities. Structured entities are
entities that have been designed so that voting or similar rights
are not the dominant factor in deciding which party has control:
for example, when any voting rights relate to administrative tasks
only and the relevant activities of the entity are directed by
means of contractual arrangements. The Group's assets under
management are managed within structured entities. These structured
entities typically consist of unitised vehicles such as Sociétés
d'Investissement à Capital Variable (SICAVs), limited partnerships,
unit trusts and open-ended and closed-ended vehicles which entitle
third-party investors to a percentage of the vehicle's net asset
value.
The Group has interests in structured entities as a result of
the management of assets on behalf of its clients. Where the Group
holds a direct interest in a closed-ended fund, private equity fund
or open-ended pooled fund such as a SICAV, the interest is
accounted for either as a consolidated structured entity or as a
financial asset, depending on whether the Group has control over
the fund or not.
Control is determined in accordance with IFRS 10, based on an
assessment of the level of power and aggregate economic interest
that the Group has over the fund, relative to third-party
investors. Power is normally conveyed to the Group through the
existence of an investment management agreement and/or other
contractual arrangements. Aggregate economic interest is a measure
of the Group's exposure to variable returns in the fund through a
combination of direct interest, carried interest, expected
management fees, fair value gains or losses, and distributions
receivable from the fund.
The Group concludes that it acts as a principal when the power
it has over the fund is deemed to be exercised for self-benefit,
considering the level of aggregate economic exposure in the fund
and the assessed strength of third-party investors' kick-out
rights. The Group concludes that it acts as an agent when the power
it has over the fund is deemed to be exercised for the benefit of
third-party investors.
The Group concludes that it has control and, therefore, will
consolidate a fund as if it were a subsidiary where the Group acts
as a principal. If the Group concludes that it does not have
control over the fund, the Group accounts for its interest in the
fund as a financial asset.
Interests in unconsolidated structured entities
The Group classifies the following investment funds as
unconsolidated structured entities:
- Segregated mandates and pooled funds managed where the Group
does not hold any direct interest. In this case, the Group
considers that its aggregate economic exposure is insignificant
and, in relation to segregated mandates, the third-party investor
has the practical ability to remove the Group from acting as fund
manager, without cause. As a result, the Group concludes that it
acts as an agent for third-party investors.
- Pooled funds managed by the Group where the Group holds a
direct interest, for example seed capital investments, and the
Group's aggregate economic exposure in the fund relative to
third-party investors is less than 20% (i.e. the threshold
established by the Group for determining agent versus principal
classification). As a result, the Group concludes that it is an
agent for third-party investors and, therefore, will account for
its beneficial interest in the fund as a financial asset.
The disclosure of the AuM in respect of consolidated and
unconsolidated structured entities is provided in note 28.
Foreign currency
The Group's financial statements are presented in Pounds
Sterling (Sterling), which is also the Company's functional and
presentation currency. Items included in the financial statements
of each of the Group's entities are measured using the functional
currency, which is the currency that prevails in the primary
economic environment in which the entity operates.
Foreign currency transactions
Transactions in foreign currencies are translated into the
respective functional currency of the Group entities at the spot
exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated into the
functional currency at the spot exchange rate at that date.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
Foreign currency differences arising on translation are
generally recognised in comprehensive income. However, foreign
currency differences arising from the translation of the following
items are recognised in other comprehensive income:
- available-for-sale equity instruments; and
- qualifying cash flow hedges to the extent that the hedge is
effective.
Foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated into Sterling at the spot exchange rates at the balance
sheet date. The revenues and expenses of foreign operations are
translated into Sterling at rates approximating to the foreign
exchange rates ruling at the dates of the transactions.
Foreign currency differences are recognised in other
comprehensive income, and accumulated in the foreign currency
translation reserve, except to the extent that the translation
difference is allocated to non-controlling interests.
When a foreign operation is disposed of such that control is
lost, the cumulative amount in the foreign currency translation
reserve related to that foreign operation is reclassified to
comprehensive income as part of the gain or loss on disposal. If
the Group disposes of only part of its interest in a subsidiary
that includes a foreign operation while retaining control, the
relevant proportion of the cumulative amount is reattributed to
non-controlling interests.
If the settlement of a monetary item receivable from or payable
to a foreign operation is neither planned nor likely in the
foreseeable future, foreign currency differences arising on the
item form part of the net investment in the foreign operation and
are recognised in other comprehensive income, and accumulated in
the foreign currency translation reserve within equity.
Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date. The acquisition date is the date
on which the acquirer effectively obtains control of the
acquiree.
The consideration transferred for the acquisition is generally
measured at the acquisition date fair value, as are the
identifiable net assets acquired, liabilities incurred (including
any asset or liability resulting from a contingent consideration
arrangement) and equity instruments issued by the Group in exchange
for control of the acquiree.
Acquisition-related costs are expensed as incurred, except if
they are related to the issue of debt or equity securities.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date.
Subsequently, changes to the fair value of the contingent
consideration that is deemed to be a liability will be recognised
in accordance with IAS 39 in comprehensive income. If the
contingent consideration is classified as equity, it will not be
remeasured and settlement is accounted for within equity.
If share-based payment awards (replacement awards) are required
to be exchanged for awards held by the acquiree's employees
(acquiree's awards) and relate to past services, all or a portion
of the amount of the acquirer's replacement awards is included in
measuring the consideration transferred in the business
combination. This determination is based on market-based value of
the replacement awards compared with the market-based value of the
acquiree's awards and the extent to which the replacement awards
relate to pre-combination service.
Goodwill
The cost of a business combination in excess of the fair value
of net identifiable assets or liabilities acquired, including
intangible assets identified, is recognised as goodwill and stated
at cost less any accumulated impairment losses. Goodwill has an
indefinite useful life, is not subject to amortisation and is
tested annually for impairment or when there is an indication of
impairment.
Intangible assets
The cost of intangible assets, such as management contracts and
brand names, acquired as part of a business combination is their
fair value as at the date of acquisition. The fair value at the
date of acquisition is calculated using the discounted cash flow
methodology and represents the valuation of the profits expected to
be earned from the management contracts and brand name in place at
the date of acquisition.
Following initial recognition, intangible assets are carried at
cost less any accumulated amortisation and impairment losses.
Intangible assets are amortised, if appropriate, over their useful
lives, which have been assessed as being eight years.
Non-controlling interests (NCI)
NCI are measured at their proportionate share of the acquiree's
identifiable net assets at the acquisition date. Changes to the
Group's interest in a subsidiary that do not result in a loss of
control are accounted for as equity transactions.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Cost is determined
on the basis of the direct and indirect costs that are directly
attributable. Property, plant and equipment are depreciated using
the straight-line method over the estimated useful lives, assessed
to be five years for office equipment and four years for IT
equipment. The residual values and useful lives of assets are
reviewed at least annually.
Deferred acquisition costs
Costs that are directly attributable to securing an investment
management contract are deferred if they can be identified
separately and measured reliably and it is probable that they will
be recovered. Deferred acquisition costs represent the contractual
right to benefit from providing investment management services and
are charged as the related revenue is recognised.
Financial instruments
Recognition and initial measurement
Financial instruments are recognised when the Group becomes
party to the contractual provisions of an instrument, initially at
fair value plus transaction costs except for financial assets
classified at fair value through profit or loss. Purchases or sales
of financial assets are recognised on the trade date, being the
date that the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash
flows from the investments have expired or been transferred or when
the Group has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognised when the
obligation under the liability has been discharged, cancelled or
expires.
Subsequent measurement
The subsequent measurement of financial instruments depends on
their classification in accordance with IAS 39 Financial
Instruments: Recognition and Measurement and IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations.
Financial assets
The Group classifies its financial assets into the following
categories: financial assets held for sale, investment securities
designated as fair value through profit or loss (FVTPL), fair value
through profit or loss investments, available-for-sale financial
assets and non-current financial assets held for sale.
The Group may, from time to time, invest seed capital in funds
where a subsidiary is the investment manager or an adviser. Where
the holding in such investments is deemed to represent a
controlling stake and is acquired exclusively with a view to
subsequent disposal through sale or dilution, these seed capital
investments are recognised as non-current financial assets held for
sale in accordance with IFRS 5. The Group recognises 100% of the
investment in the fund as a 'held for sale' asset and the interest
held by other parties as a 'liability held for sale'. Where control
is not deemed to exist, and the assets are readily realisable, they
are recognised as financial assets at fair value through profit or
loss in accordance with IAS 39. Where the assets are not readily
realisable, they are recognised as non-current asset investments.
If a seed capital investment remains under the control of the Group
for more than one year from the original investment date, the
underlying fund is consolidated line-by-line.
Investment securities designated as FVTPL
Investment securities represent securities, other than
derivatives, held by consolidated funds. These securities are
designated as FVTPL and are measured at fair value with gains and
losses recognised through the consolidated statement of
comprehensive income.
Non-current financial assets held for sale (HFS)
Non-current financial assets held for sale are measured at the
lower of their carrying amount and fair value less costs to sell
except where measurement and remeasurement is outside the scope of
IFRS 5. Where investments that have initially been recognised as
non-current financial assets held for sale, because the Group has
been deemed to hold a controlling stake, are subsequently disposed
of or diluted such that the Group's holding is no longer deemed a
controlling stake, the investment will subsequently be classified
as fair value through profit or loss investments in accordance with
IAS 39. Subsequent movements will be recognised in accordance with
the Group's accounting policy for the newly adopted
classification.
Available-for-sale financial assets
Available-for-sale financial assets (AFS) include readily
realisable interests in seeded funds that are either allocated
specifically to this category or cannot be assigned to any other
category. They are carried at fair value and changes in fair value
are recognised in other comprehensive income, until the asset is
disposed of or impaired, at which time the cumulative gain or loss
previously recognised in other comprehensive income is included in
profit for the year as part of comprehensive income. Dividend
income and impairment losses are recognised in the consolidated
statement of comprehensive income.
Financial assets designated as FVTPL
Financial assets designated as FVTPL include certain readily
realisable interests in seeded funds, non-current asset investments
and derivatives. The Group designates financial assets as FVTPL
when:
- the financial assets are managed, evaluated and reported
internally on a fair value basis; and
- the classification at fair value eliminates or significantly
reduces an accounting mismatch which would otherwise arise.
From the date the financial asset is designated as FVTPL, all
subsequent changes in fair value, foreign exchange differences,
interest and dividends are reflected in the consolidated statement
of comprehensive income and presented in finance income or
expense.
(i) FVTPL investments
The Group classifies new readily realisable interests in seeded
funds as FVTPL investments with fair value changes being directly
recognised through the consolidated statement of comprehensive
income. Fair value is measured based on the proportionate net asset
value in the fund.
(ii) Non-current asset investments
Non-current asset investments include closed-end funds that are
designated as FVTPL. They are held at fair value with changes in
fair value being recognised through the consolidated statement of
comprehensive income.
(iii) Derivatives
Derivatives include foreign exchange forward contracts and
options used by the Group to manage its foreign currency exposures
and those held in consolidated funds. Derivatives are initially
recognised at fair value on the date on which a derivative contract
is entered into and subsequently remeasured at fair value.
Transaction costs are recognised immediately in the statement of
comprehensive income. All derivatives are carried as financial
assets when the fair value is positive and as financial liabilities
when the fair value is negative.
Any gains or losses arising from changes in the fair value of
derivatives are taken directly in comprehensive income, except for
the effective portion of cash flow hedges, which is recognised in
other comprehensive income.
Trade and other receivables
Trade and other receivables are initially recorded at fair value
plus transaction costs. The fair value on acquisition is normally
the cost. Impairment losses with respect to the estimated
irrecoverable amount are recognised through the statement of
comprehensive income when there is appropriate evidence that trade
and other receivables are impaired. The resulting adjustment is
recognised as interest expense or interest income. Subsequent to
initial recognition these assets are measured at amortised cost
less any impairment.
Cash and cash equivalents
Cash represents cash at bank and in hand, and cash equivalents
comprise short-term deposits and investments in money market
instruments with an original maturity of three months or less.
Financial liabilities
The Group classifies its financial liabilities into the
following categories: non-current financial liabilities held for
sale, financial liabilities designated as FVTPL and financial
liabilities at amortised cost.
Non-current financial liabilities held for sale
Non-current financial liabilities represent interests held by
other parties in funds in which the Group recognises 100% of the
investment in the fund as a held for sale financial asset. These
liabilities are carried at fair value with gains or losses
recognised in the statement of comprehensive income within finance
income or expense.
Financial liabilities at FVTPL
Financial liabilities at FVTPL include derivative financial
instruments and third-party interests in consolidated funds. They
are carried at fair value with gains or losses recognised in the
consolidated statement of comprehensive income within finance
income or expense.
Other financial liabilities
Other financial liabilities including trade and other payables
are subsequently measured at amortised cost using the effective
interest rate method.
Fair value of financial instruments
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (i.e. the 'exit
price') in an orderly transaction between market participants at
the measurement date. In determining fair value, the Group uses
various valuation approaches and establishes a hierarchy for inputs
used in measuring fair value that maximises the use of relevant
observable inputs and minimises the use of unobservable inputs by
requiring that the most observable inputs be used when available.
Observable inputs are inputs that market participants would use in
pricing the asset or liability developed based on market data
obtained from sources independent of the Group.
Unobservable inputs are inputs that reflect the Group's
assumptions about the assumptions other market participants would
use in pricing the asset or liability, developed based on the best
information available in the circumstances.
Securities listed on a recognised stock exchange or dealt on any
other regulated market that operates regularly, is recognised and
open to the public are valued at the last known available closing
bid price. If a security is traded on several actively traded and
organised financial markets, the valuation is made on the basis of
the last known bid price on the main market on which the securities
are traded. In the case of securities for which trading on an
actively traded and organised financial market is not significant,
but which are bought and sold on a secondary market with regulated
trading among security dealers (with the effect that the price is
set on a market basis), the valuation may be based on this
secondary market.
Where instruments are not listed on any stock exchange or not
traded on any regulated markets, valuation techniques are used by
valuation specialists. These techniques include the market
approach, the income approach or the cost approach for which
sufficient and reliable data is available. The use of the market
approach generally consists of using comparable market transactions
or using techniques based on market observable inputs, while the
use of the income approach generally consists of the net present
value of estimated future cash flows, adjusted as deemed
appropriate for liquidity, credit, market and/or other risk
factors.
Investments in open-ended funds are valued on the basis of the
last available net asset value of the units or shares of such
funds.
The fair value of the derivatives is their quoted market price
at the balance sheet date.
Hedge accounting
The Group applies cash flow hedge accounting when the
transactions meet the specified hedge accounting criteria. To
qualify, the following conditions must be met:
- formal documentation of the relationship between the hedging
instrument(s) and hedged item(s) must exist at inception
- the hedged cash flows must be highly probable and must present
an exposure to variations in cash flows that could ultimately
affect comprehensive income
- the effectiveness of the hedge can be reliably measured
- the hedge must be highly effective, with effectiveness
assessed on an ongoing basis.
For qualifying cash flow hedges, the change in fair value of the
effective hedging instrument is initially recognised in other
comprehensive income and is released to comprehensive income in the
same period during which the relevant financial asset or liability
affects the Group's results.
Where the hedge is highly effective overall, any ineffective
portion of the hedge is immediately recognised in comprehensive
income. Where the instrument ceases to be highly effective as a
hedge, or is sold, terminated or exercised, hedge accounting is
discontinued.
Derecognition of financial assets and liabilities
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risk and
rewards of ownership of the asset. The Group derecognises a
financial liability when the Group's obligations are discharged,
cancelled or they expire.
Impairment of financial assets
General
At each reporting date, the carrying amounts of the Group's
assets are reviewed to assess whether there is any objective
evidence of impairment in the value of financial assets classified
as either available-for-sale or as trade and other receivables.
Impairment losses are recognised if an event has occurred that will
have an adverse impact on the expected future cash flows of an
asset and the expected impact can be reliably estimated. If any
such indication exists, the asset's recoverable amount is
estimated. An impairment loss is recognised whenever the carrying
amount of an asset exceeds its recoverable amount.
The recoverable amount of an asset is the higher of an asset's
fair value less costs to sell and its value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using the Group's weighted average cost of
capital. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
Impairment losses on available-for-sale financial assets are
measured as the difference between cost and the current fair value.
Where there is evidence that the available-for-sale financial asset
is impaired, the cumulative loss that had been previously
recognised in other comprehensive income is reclassified from the
available-for-sale fair value reserve and recognised in the
consolidated statement of comprehensive income.
Impairment losses in respect of assets other than goodwill are
measured as the difference between the carrying amount of the
financial asset and the present value of estimated cash flows
discounted at the asset's original effective interest rate. Such
impairment losses are recognised in the consolidated statement of
other comprehensive income and are recognised against the carrying
amount of the impaired asset on the consolidated statement of
financial position. Interest on the impaired asset continues to be
accrued on the reduced carrying amount based on the original
effective interest rate of the asset.
Subsequent increases in fair value of previously impaired
available-for-sale financial assets are reported as fair value
gains in the available-for-sale fair value reserve through other
comprehensive income and not separately identified as an impairment
reversal.
For all other assets other than goodwill, if in a subsequent
year the amount of the estimated impairment loss decreases because
of an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed, but is limited
to the extent that the value of the asset may not exceed the
original carrying amount that would have been determined, net of
depreciation or amortisation, had no impairment occurred.
Goodwill
Goodwill is tested for impairment annually or whenever there is
an indication that the carrying amount may not be recoverable based
on management's judgements regarding the future prospects of the
business, estimates of future cash flows and discount rates. When
assessing the appropriateness of the carrying value of goodwill at
year end, the recoverable amount is considered to be the greater of
fair value less costs to sell or value in use. The pre-tax discount
rate applied is based on the Group's weighted average cost of
capital after making allowances for any specific risks.
The business of the Group is managed as a single unit, with
asset allocations, research and other such operational practices
reflecting the commonality of approach across all fund themes.
Therefore, for the purpose of testing goodwill for impairment, the
Group is considered to have one cash-generating unit to which all
goodwill is allocated and, as a result, no further split of
goodwill into smaller cash-generating units is possible and the
impairment review is conducted for the Group as a whole.
An impairment loss in respect of goodwill is not reversed.
Revenue
Revenue comprises the fair value of the consideration received
or receivable for the provision of investment management services,
and includes management fees, performance fees and other revenue.
Revenue is recognised in the statement of comprehensive income as
and when the related services are provided. Revenue is recognised
to the extent that it is probable that the economic benefits will
flow to the Group and the revenue can be reliably measured. Net
revenue is total revenue less distribution costs and including
foreign exchange.
Specific revenue recognition policies are:
Management fees
Management fees are presented net of rebates, and are calculated
as a percentage of net fund assets managed in accordance with
individual management agreements. Management fees are accrued over
the period for which the service is provided. Where management fees
are received in advance, they are recognised over the period of the
provision of the asset management service.
Performance fees
Performance fees are presented net of rebates, and are
calculated as a percentage of the appreciation in the net asset
value of a fund above a defined hurdle. Performance fees are
recognised when the quantum of the fee can be estimated reliably
and it is probable that the fee will crystallise. This is usually
at the end of the performance period or upon early redemption by a
client.
Other revenue
Other revenue includes transaction, structuring and
administration fees, and reimbursement by funds of costs incurred
by the Group. This revenue is recognised when the related services
are provided.
Distribution costs
Distribution costs are cost of sales payable to third-parties
and are recognised over the period for which the service is
provided.
Employee benefits
Obligations for contributions to defined contribution pension
plans are recognised as an expense in the statement of
comprehensive income when payable in accordance with the scheme
particulars.
Share-based payments
The Group issues share awards to its employees under share-based
compensation plans.
For equity-settled awards, the fair value of the amounts payable
to employees is recognised as an expense with a corresponding
increase in equity over the vesting period after adjusting for the
estimated number of shares that are expected to vest. The fair
value is measured at the grant date using an appropriate valuation
model, taking into account the terms and conditions upon which the
instruments were granted. At each balance sheet date prior to
vesting, the cumulative expense representing the extent to which
the vesting period has expired and management's best estimate of
the awards that are ultimately expected to vest is calculated. The
movement in cumulative expense is recognised in the statement of
comprehensive income with a corresponding entry within equity.
For cash-settled awards, the fair value of the amounts payable
to employees is recognised as an expense with a corresponding
liability on the Group's balance sheet. The fair value is measured
using an appropriate valuation model, taking into account the
estimated number of awards that are expected to vest and the terms
and conditions upon which the instruments were granted. During the
vesting period, the liability recognised represents the portion of
the vesting period that has expired at the balance sheet date
multiplied by the fair value of the awards at that date. Movements
in the liability are recognised in the statement of comprehensive
income.
Operating leases
Payments due under operating leases are recognised in the
statement of comprehensive income on a straight-line basis over the
term of the lease. Lease incentives received are recognised on a
straight-line basis over the lease term and are recorded as a
reduction in premises costs.
Finance income and expense
Finance income includes interest receivable on the Group's cash
and cash equivalents, realised gains on available-for-sale
financial assets and both realised and unrealised gains on held for
sale assets and investments measured at FVTPL.
Finance expense includes realised losses on available-for-sale
financial assets and both realised and unrealised losses on held
for sale assets and investments measured at FVTPL.
Taxation
Tax expense for the year comprises current and deferred tax. Tax
is recognised in the consolidated statement of comprehensive income
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year, and any adjustment to the
tax payable or receivable in respect of previous years. It is
measured using tax rates enacted or substantively enacted at the
balance sheet date in the countries where the Group operates.
Current tax also includes withholding tax arising from
dividends.
Deferred tax
Deferred tax is recognised using the balance sheet liability
method, in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following
differences are not provided for:
- goodwill not deductible for tax purposes and
- differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable
future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against
which the assets can be utilised. Deferred tax assets are reviewed
at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the balance sheet
date.
Dividends
Dividends are recognised when shareholders' rights to receive
payments have been established.
Equity shares
The Company's ordinary shares of 0.01 pence each are classified
as equity instruments. Ordinary shares issued by the Company are
recorded at the fair value of the consideration received or the
market price at the day of issue. Direct issue costs, net of tax,
are deducted from equity through share premium. When share capital
is repurchased, the amount of consideration paid, including
directly attributable costs, is recognised as a change in
equity.
Own shares
Own shares are held by the Employee Benefit Trust (EBT). The
holding of the EBT comprises own shares that have not vested
unconditionally to employees of the Group. In both the Group and
Company, own shares are recorded at cost and are deducted from
retained earnings.
Treasury shares
Treasury shares are recognised in equity and are measured at
cost. Consideration received for the sale of such shares is also
recognised in equity, with any difference between the proceeds from
the sale and original cost being taken to retained earnings.
Segmental information
Key management information, including revenues, margins,
investment performance, distribution costs and AuM flows, which is
relevant to the operation of the Group, is reported to and reviewed
by the Board on the basis of the investment management business as
a whole. Hence the Group's management considers that the Group's
services and its operations are not run on a discrete geographic
basis and comprise one business segment (being provision of
investment management services).
Company-only accounting policies
In addition to the above accounting policies, the following
specifically relates to the Company:
Investment in subsidiaries
Investments by the Company in subsidiaries are stated at cost
less, where appropriate, provisions for impairment.
5) Segmental information
The location of the Group's non-current assets at year end other
than financial instruments, deferred tax assets and post-employment
benefit assets is shown in the table below. Disclosures relating to
revenue are in note 6.
Analysis of non-current assets by geography
2017 2016
GBPm GBPm
------------------------- ----- ------
United Kingdom 7.8 12.1
United States 76.1 78.8
Other 0.5 0.5
------------------------- ----- ------
Total non-current assets 84.4 91.4
------------------------- ----- ------
6) Revenue
Management fees are accrued throughout the year in line with
prevailing levels of assets under management and performance fees
are recognised when they can be estimated reliably and it is
probable that they will crystallise. The Group is not considered to
be reliant on any single source of revenue. During the year, none
of the Group's funds (FY2015/16: none) provided more than 10% of
total revenue in the year respectively when considering management
fees and performance fees on a combined basis.
Analysis of revenue by geography
2017 2016
GBPm GBPm
--------------- ----- -----
United Kingdom 232.8 194.0
United States 8.7 9.2
Other 15.7 8.4
--------------- ----- -----
Total revenue 257.2 211.6
--------------- ----- -----
7) Foreign exchange
The foreign exchange rates which had a material impact on the
Group's results are the US dollar, the Euro, the Indonesian rupiah
and the Colombian peso.
Average Average
Closing Closing rate rate
rate rate year year
as at as at ended ended
30 June 30 June 30 June 30 June
GBP1 2017 2016 2017 2016
------------------ -------- -------- -------- --------
US dollar 1.2946 1.3234 1.2766 1.4759
Euro 1.1426 1.1970 1.1671 1.3359
Indonesian rupiah 17,340 17,482 16,918 20,172
Colombian peso 3,965 3,866 3,788 4,456
------------------ -------- -------- -------- --------
Foreign exchange gains and losses are shown below.
2017 2016
GBPm GBPm
--------------------------------------------------- ------ -----
Net realised and unrealised hedging gains/(losses) (2.8) 1.1
Translation gains/(losses) on non-Sterling
denominated monetary assets and liabilities 7.8 21.0
--------------------------------------------------- ------ -----
Total foreign exchange gains/(losses) 5.0 22.1
--------------------------------------------------- ------ -----
8) Finance income and expense
2017 2016
GBPm GBPm
-------------------------------------------------------- ----- -----
Finance income
Interest income 10.4 6.7
Net realised gains on seed capital investments
measured at fair value 20.8 1.4
Net unrealised gains on seed capital investments
measured at fair value 7.4 23.4
Total finance income 38.6 31.5
-------------------------------------------------------- ----- -----
Finance expense
Net realised losses on disposal of available-for-sale
financial assets - (0.2)
Total finance expense - (0.2)
-------------------------------------------------------- ----- -----
Net finance income 38.6 31.3
-------------------------------------------------------- ----- -----
9) Personnel expenses
Personnel expenses during the year comprised the following:
2017 2016
GBPm GBPm
--------------------------------- ----- -----
Wages and salaries 19.6 19.1
Performance-related cash bonuses 18.5 24.9
Share-based payments 24.4 10.7
Social security costs 1.8 1.8
Pension costs 1.6 1.6
Other costs 1.9 1.6
--------------------------------- ----- -----
Total personnel expenses 67.8 59.7
--------------------------------- ----- -----
Number of employees
The number of employees of the Group (including Executive
Directors) during the reporting year was as follows:
Average Average
for the for the
year year
ended ended At At
30 June 30 June 30 June 30 June
2017 2016 2017 2016
Number Number Number Number
---------------- -------- -------- -------- --------
Total employees 256 277 252 266
---------------- -------- -------- -------- --------
Directors' remuneration
There are retirement benefits accruing to two Executive
Directors under a defined contribution scheme (FY2015/16: two).
10) Share-based payments
The cost related to share-based payments recognised by the Group
in the statement of comprehensive income is shown below:
2017 2016
Group GBPm GBPm
-------------------------------------------- ----- ------
Omnibus Plan 24.2 25.8
Ashmore Equities Investment Management (US)
L.L.C (AEIM) operating agreement - 0.1
Phantom Bonus Plan 0.2 0.2
-------------------------------------------- ----- ------
Total related to compensation awards 24.4 26.1
Related to acquisition of AEIM - (15.4)
-------------------------------------------- ----- ------
Total share-based payments expense 24.4 10.7
-------------------------------------------- ----- ------
The total expense recognised for the year in respect of
equity-settled share-based payment awards was GBP21.3 million
(FY2015/16:
GBP10.5 million).
The Executive Omnibus Incentive Plan (Omnibus Plan)
The Omnibus Plan was introduced prior to the Company listing in
October 2006 and provides for the grant of share awards, market
value options, premium cost options, discounted options, linked
options, phantoms and/or nil-cost options to employees. The Omnibus
Plan will
also allow bonuses to be deferred in the form of share awards
with or without matching shares. Awards granted under the Omnibus
Plan typically vest after five years from date of grant, with the
exception of bonus awards which vest after the shorter of five
years from date of grant or on the date of termination of
employment. Awards under the Omnibus Plan are accounted for as
equity-settled, with the exception of phantoms which are classified
as cash-settled.
The share-based payments relating to the Omnibus Plan represent
the combined cash and equity-settled payments.
Total expense by year awards were granted (excluding national
insurance)
Group and Company 2017 2016
Year of grant GBPm GBPm
------------------------------------------- ----- -----
2011 - 2.8
2012 2.6 2.8
2013 3.7 3.8
2014 2.3 2.4
2015 3.5 3.0
2016 3.4 8.3
2017 6.0 -
Total omnibus share-based payments expense
reported in comprehensive income 21.5 23.1
------------------------------------------- ----- -----
Awards outstanding under the Omnibus Plan were as follows:
i) Equity-settled awards
2017 2017 2016 2016
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ----------- --------- ----------- ---------
Restricted share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 22,929,174 GBP3.18 20,524,634 GBP3.46
Granted 4,378,988 GBP3.40 7,366,910 GBP2.43
Vested (3,426,172) GBP3.87 (3,058,877) GBP3.19
Forfeited (1,843,890) GBP3.32 (1,903,493) GBP3.21
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 22,038,100 GBP3.14 22,929,174 GBP3.18
------------------------------- ----------- --------- ----------- ---------
Bonus share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 8,438,295 GBP3.15 7,404,574 GBP3.43
Granted 1,569,761 GBP3.39 2,527,672 GBP2.43
Vested (1,739,720) GBP3.86 (1,493,951) GBP3.18
Forfeited - - - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,268,336 GBP3.10 8,438,295 GBP3.15
------------------------------- ----------- --------- ----------- ---------
Matching share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 8,438,295 GBP3.18 7,404,574 GBP3.43
Granted 1,574,860 GBP3.39 2,527,672 GBP2.43
Vested (1,116,079) GBP3.92 (1,401,866) GBP3.17
Forfeited (623,641) GBP3.75 (92,085) GBP3.32
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,273,435 GBP3.14 8,438,295 GBP3.18
------------------------------- ----------- --------- ----------- ---------
Total 38,579,871 GBP3.18 39,805,764 GBP3.18
------------------------------- ----------- --------- ----------- ---------
ii) Cash-settled awards
2017 2017 2016 2016
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ---------- --------- ---------- ---------
Restricted share awards
------------------------------- ---------- --------- ---------- ---------
At the beginning of the year 269,754 GBP3.72 582,848 GBP3.48
Granted 27,700 GBP3.40 38,504 GBP2.43
Vested - - (45,325) GBP3.50
Forfeited (162,470) GBP3.94 (306,273) GBP3.14
------------------------------- ---------- --------- ---------- ---------
Awards outstanding at year end 134,984 GBP3.72 269,754 GBP3.72
------------------------------- ---------- --------- ---------- ---------
Bonus share awards
------------------------------- ---------- --------- ---------- ---------
At the beginning of the year 190,576 GBP3.78 382,985 GBP3.49
Granted 11,530 GBP3.40 6,179 GBP2.43
Vested (121,852) GBP3.94 (198,588) GBP3.17
Forfeited - - - -
------------------------------- ---------- --------- ---------- ---------
Awards outstanding at year end 80,254 GBP3.78 190,576 GBP3.78
------------------------------- ---------- --------- ---------- ---------
Matching share awards
------------------------------- ---------- --------- ---------- ---------
At the beginning of the year 190,576 GBP3.78 382,985 GBP3.49
Granted 11,530 GBP3.40 6,179 GBP2.43
Vested - - - -
Forfeited (121,852) GBP3.94 (198,588) GBP3.17
------------------------------- ---------- --------- ---------- ---------
Awards outstanding at year end 80,254 GBP3.78 190,576 GBP3.78
------------------------------- ---------- --------- ---------- ---------
Total 295,492 GBP3.75 650,906 GBP3.75
------------------------------- ---------- --------- ---------- ---------
iii) Total awards
2017 2017 2016 2016
Number Weighted Number Weighted
of shares average of shares average
subject share subject share
Group and Company to awards price to awards price
------------------------------- ----------- --------- ----------- ---------
Restricted share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 23,198,928 GBP3.19 21,107,482 GBP3.46
Granted 4,406,688 GBP3.40 7,405,414 GBP2.43
Vested (3,426,172) GBP3.87 (3,104,202) GBP3.20
Forfeited (2,006,360) GBP3.37 (2,209,766) GBP3.20
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 22,173,084 GBP3.14 23,198,928 GBP3.19
------------------------------- ----------- --------- ----------- ---------
Bonus share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 8,628,871 GBP3.17 7,787,559 GBP3.43
Granted 1,581,291 GBP3.39 2,533,851 GBP2.43
Vested (1,861,572) GBP3.87 (1,692,539) GBP3.18
Forfeited - - - -
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,348,590 GBP3.11 8,628,871 GBP3.17
------------------------------- ----------- --------- ----------- ---------
Matching share awards
------------------------------- ----------- --------- ----------- ---------
At the beginning of the year 8,628,871 GBP3.20 7,787,559 GBP3.43
Granted 1,586,390 GBP3.39 2,533,851 GBP2.43
Vested (1,116,079) GBP3.92 (1,401,866) GBP3.17
Forfeited (745,493) GBP3.78 (290,673) GBP3.22
------------------------------- ----------- --------- ----------- ---------
Awards outstanding at year end 8,353,689 GBP3.14 8,628,871 GBP3.20
------------------------------- ----------- --------- ----------- ---------
Total 38,875,363 GBP3.13 40,456,670 GBP3.19
------------------------------- ----------- --------- ----------- ---------
The weighted average share price of awards granted to employees
under the Omnibus Plan during the year was GBP3.40 (FY2015/16:
GBP2.43), as determined by the average Ashmore Group plc closing
share price for the five business days prior to grant. For
Executive Directors, the fair value of awards also takes into
account the performance conditions set out in the Remuneration
report in the Annual Report and Accounts.
Where the grant of restricted and matching share awards is
linked to the annual bonus process, the fair value of the awards is
spread over a period including the current financial year and the
subsequent five years to their vesting date when the grantee
becomes unconditionally entitled to the underlying shares. The fair
value of the remaining awards is spread over the period from the
date of grant to the vesting date.
The liability arising from cash-settled awards under the Omnibus
Plan at the end of the year and reported within trade and other
payables on the consolidated balance sheet is GBP0.4 million (30
June 2016: GBP0.6 million) of which GBPnil (30 June 2016: GBPnil)
relates to vested awards.
The Approved Company Share Option Plan (CSOP)
The CSOP was also introduced prior to the Company listing in
October 2006 and is an option scheme providing for the grant of
market value options to employees with the aggregate value of
outstanding options not exceeding GBP30,000 per employee. The CSOP
qualifies as a UK tax approved company share option plan and
approval thereto has been obtained from HMRC. To date, there have
been no awards made under the CSOP.
Other arrangements
AEIM operating agreement
All remaining unvested units granted under the terms of AEIM's
operating agreement were forfeited during the year. There were no
outstanding units as at 30 June 2017.
11) Other expenses
Other expenses consist of the following:
2017 2016
GBPm GBPm
---------------------------------------------- ----- -----
Travel 2.2 3.6
Professional fees 4.9 4.6
Information technology and communications 5.2 5.4
Amortisation of intangible assets (note 15) 4.5 3.9
Operating leases 3.5 3.3
Premises-related costs 1.2 1.2
Insurance 1.0 1.1
Auditor's remuneration (see below) 0.6 0.8
Depreciation of property, plant and equipment
(note 16) 1.0 1.2
Consolidated funds (note 20) 4.9 2.4
Other expenses 3.9 5.1
---------------------------------------------- ----- -----
32.9 32.6
---------------------------------------------- ----- -----
Auditor's remuneration
2017 2016
GBPm GBPm
----------------------------------------------------------- ----- -----
Fees for statutory audit services:
* Fees payable to the Company's auditor for the audit
of the Group's accounts 0.2 0.2
* Fees payable to the Company's auditor and its
associates for the audit of the Company's
subsidiaries pursuant to legislation 0.2 0.2
Fees for non-audit services:
* Fees payable to the Company's auditor and its
associates for tax services - 0.2
* Fees payable to the Company's auditor and its
associates for other services 0.2 0.2
----------------------------------------------------------- ----- -----
0.6 0.8
----------------------------------------------------------- ----- -----
12) Taxation
Analysis of tax charge for the year:
2017 2016
GBPm GBPm
-------------------------------------------------- ----- -----
Current tax
UK corporation tax on profits for the year 31.3 31.4
Overseas corporation tax charge 7.9 4.8
Adjustments in respect of prior years 1.5 0.7
-------------------------------------------------- ----- -----
40.7 36.9
Deferred tax
Origination and reversal of temporary differences
(see note 18) (3.2) 1.0
Effect on deferred tax balance of changes
in corporation tax rates (0.8) 0.9
-------------------------------------------------- ----- -----
Tax expense 36.7 38.8
-------------------------------------------------- ----- -----
Factors affecting tax charge for the year
2017 2016
GBPm GBPm
-------------------------------------------------- ----- ------
Profit before tax 206.2 167.5
-------------------------------------------------- ----- ------
Profit on ordinary activities multiplied
by the blended UK tax rate of 19.75% (FY2015/16:
20.00%) 40.7 33.5
Effects of:
Non-deductible expenses 0.2 4.7
Deduction in respect of vested shares/exercised
options (Part 12, Corporation Tax Act 2009) (2.8) (2.8)
Different rate of taxes on overseas profits 1.4 1.5
Non-taxable income (4.1) -
Tax relief on amortisation and impairment
of goodwill and intangibles - (1.2)
Effect on deferred tax balance of changes
in corporation tax rates (0.8) 0.9
Other items 0.5 1.5
Adjustments in respect of prior years 1.6 0.7
-------------------------------------------------- ----- ------
Tax expense 36.7 38.8
-------------------------------------------------- ----- ------
Non-taxable income relates to the impact of local tax exemptions
on realised investment income in certain jurisdictions in which the
Group operates.
The tax charge recognised in equity/other comprehensive income
is as follows:
2017 2016
GBPm GBPm
----------------------------------------------------- ----- -----
Current tax on foreign exchange gains 0.1 0.9
Deferred tax on seed capital investments - 1.0
Tax expense recognised in equity/other comprehensive
income 0.1 1.9
----------------------------------------------------- ----- -----
A reduction to the main rate of UK corporation tax from 20% was
enacted in the Finance Act 2013 and became effective from 1 April
2015. Finance (No. 2) Act 2015 introduced legislation to reduce the
UK corporation tax rate to 19% from 1 April 2017. Finance Act 2016
further reduces the tax rate to 17% from 1 April 2020. These tax
rate reductions have been taken into account in the calculation of
the Group's UK deferred tax assets and liabilities as at 30 June
2017.
13) Earnings per share
Basic earnings per share at 30 June 2017 of 25.07 pence (30 June
2016: 19.13 pence) is calculated by dividing the profit after tax
for the financial period attributable to equity holders of the
parent of GBP167.6 million (FY2015/16: GBP127.8 million) by the
weighted average number of ordinary shares in issue during the
period, excluding own shares.
Diluted earnings per share is calculated based on basic earnings
per share adjusted for all dilutive potential ordinary shares.
There is no difference between the profit for the year attributable
to equity holders of the parent used in the basic and diluted
earnings per share calculations.
Reconciliation of the weighted average number of shares used in
calculating basic and diluted earnings per share is shown
below.
2017 2016
Number Number
of ordinary of ordinary
shares shares
--------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
used in the calculation of basic earnings
per share 668,488,046 667,777,465
Effect of dilutive potential ordinary shares
- share awards 38,451,642 38,958,842
--------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
used in the calculation of diluted earnings
per share 706,939,688 706,736,307
--------------------------------------------- ------------ ------------
14) Dividends
Dividends paid in the year
2017 2016
Company GBPm GBPm
--------------------------------------------------- ----- -----
Final dividend for FY2015/16 - 12.10p (FY2014/15:
12.10p) 84.9 84.5
Interim dividend for FY2016/17 - 4.55p (FY2015/16:
4.55p) 31.7 31.6
--------------------------------------------------- ----- -----
116.6 116.1
--------------------------------------------------- ----- -----
In addition, the Group paid GBP2.3 million (FY2015/16: GBP4.2
million) of dividends to non-controlling interests.
Dividends declared/proposed in respect of the year
2017 2016
Company pence pence
---------------------------------- ------ ------
Interim dividend per share paid 4.55 4.55
Final dividend per share proposed 12.10 12.10
---------------------------------- ------ ------
16.65 16.65
---------------------------------- ------ ------
On 6 September 2017, the Board proposed a final dividend of
12.10 pence per share for the year ended 30 June 2017. 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 that qualify to receive a dividend,
the total amount payable would be GBP84.6 million.
15) Goodwill and intangible assets
Fund
management
Goodwill relationships Total
Group GBPm GBPm GBPm
---------------------------------------- -------- -------------- ------
Cost - (at original exchange rate)
---------------------------------------- -------- -------------- ------
At 30 June 2015, 30 June 2016 and 30
June 2017 57.5 39.5 97.0
---------------------------------------- -------- -------------- ------
Accumulated amortisation and impairment
---------------------------------------- -------- -------------- ------
At 30 June 2015 - (27.2) (27.2)
Amortisation charge for the year - (3.9) (3.9)
At 30 June 2016 - (31.1) (31.1)
Amortisation charge for the year - (4.5) (4.5)
At 30 June 2017 - (35.6) (35.6)
---------------------------------------- -------- -------------- ------
Net book value
---------------------------------------- -------- -------------- ------
At 30 June 2015 60.0 14.1 74.1
Accumulated amortisation for the year - (3.9) (3.9)
Foreign exchange revaluation through
reserves* 10.1 2.2 12.3
---------------------------------------- -------- -------------- ------
At 30 June 2016 70.1 12.4 82.5
Accumulated amortisation for the year - (4.5) (4.5)
Foreign exchange revaluation through
reserves* 1.5 0.4 1.9
---------------------------------------- -------- -------------- ------
At 30 June 2017 71.6 8.3 79.9
---------------------------------------- -------- -------------- ------
* Foreign exchange revaluation through reserves is a result of
the retranslation of US dollar-denominated intangibles and
goodwill.
Goodwill
Company GBPm
--------------------------------------------- --------
Cost
At the beginning and end of the year 4.1
--------------------------------------------- --------
Net carrying amount at 30 June 2016 and 2017 4.1
--------------------------------------------- --------
Goodwill
The Group's goodwill balance relates principally to the
acquisition of the equities business in May 2011.
The Company's goodwill balance relates to the acquisition of the
business from ANZ in 1999.
The annual impairment review of goodwill was undertaken for the
year ending 30 June 2017. The Group consists of a single
cash-generating unit for the purpose of assessing the carrying
value of goodwill. In performing the impairment review, management
prepares a calculation of
the recoverable amount of goodwill and compares this with the
carrying value. The recoverable amount was based on a fair value
less costs to
sell calculation using the Company's year end share price. Based
on management's assessment as at 30 June 2017, the recoverable
amount was in excess of the carrying value of goodwill and no
impairment was implied. No impairment losses have been recognised
in the current
or preceding years.
Fund management relationships
Intangible assets comprise fund management relationships related
to profit expected to be earned from clients of AEIM.
An annual impairment review of the fund management relationships
was undertaken for the year ending 30 June 2017. The recoverable
amount was derived from the cumulative pre-tax net earnings
anticipated to be generated over the remaining useful economic
life, discounted to present value using the Group's weighted
average cost of capital of 13.0% per annum. Cumulative net earnings
associated with the fund management relationships intangible asset
were derived from the annual operating profit contribution that
would arise as a result of the remaining fund management
relationships, adjusted for investment performance and investor
attrition.
The recoverable amount of the fund management relationships
intangible asset was determined to be higher than its carrying
value as at 30 June 2017. Accordingly, no impairment charge was
recognised during the year (FY2015/16: no impairment charge
recognised).
The remaining amortisation period for fund management
relationships is two years (30 June 2016: three years).
16) Property, plant and equipment
2017 2016
Fixtures, Fixtures,
fittings fittings
and equipment and equipment
Group GBPm GBPm
--------------------------------- -------------- --------------
Cost
At the beginning of the year 7.8 6.6
Additions 0.4 0.8
Foreign exchange revaluation 0.1 0.6
Disposals (1.9) (0.2)
--------------------------------- -------------- --------------
At the end of the year 6.4 7.8
--------------------------------- -------------- --------------
Accumulated depreciation
At the beginning of the year 5.6 4.1
Depreciation charge for the year 1.0 1.2
Foreign exchange revaluation - 0.3
Disposals (1.8) -
--------------------------------- -------------- --------------
At the end of the year 4.8 5.6
--------------------------------- -------------- --------------
Net book value at 30 June 1.6 2.2
--------------------------------- -------------- --------------
2017 2016
Fixtures, Fixtures,
fittings fittings
and equipment and equipment
Company GBPm GBPm
----------------------------- -------------- --------------
Cost
At the beginning of the year 3.6 3.0
Additions 0.1 0.7
Disposals - (0.1)
----------------------------- -------------- --------------
At the end of the year 3.7 3.6
----------------------------- -------------- --------------
Accumulated depreciation
At the beginning of the year 2.5 1.9
Depreciation charge for year 0.5 0.6
Disposals - -
----------------------------- -------------- --------------
At the end of the year 3.0 2.5
----------------------------- -------------- --------------
Net book value at 30 June 0.7 1.1
----------------------------- -------------- --------------
17) Trade and other receivables
Group Company
------------- --------------
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
---------------------------------- ----- ------ ------ ------
Current
Trade debtors 67.2 56.8 3.6 3.5
Prepayments 2.9 3.0 1.6 1.7
Loans due from subsidiaries - - 354.1 277.5
Amounts due from subsidiaries - - 38.1 2.2
Other receivables 0.8 1.4 0.6 0.5
---------------------------------- ----- ------ ------ ------
Total trade and other receivables 70.9 61.2 398.0 285.4
---------------------------------- ----- ------ ------ ------
Group trade debtors include all billed and unbilled management
fees due to the Group at 30 June 2017 in respect of investment
management services provided up to that date. Loans and amounts due
from subsidiaries for the Company include intercompany loans
related to seed capital investments held by subsidiaries and
trading balances. Intercompany loans are issued on commercial terms
and repayable on demand.
18) Deferred taxation
Deferred tax assets and liabilities recognised by the Group and
Company at year end are attributable to the following:
2017 2016
-------------------------------- --------------------------------
Other Other
temporary Share-based temporary Share-based
differences payments Total differences payments Total
Group GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------------ ----------- ----- ------------ ----------- -----
Deferred tax assets 13.4 14.0 27.4 8.9 10.6 19.5
Deferred tax liabilities (9.2) - (9.2) (5.2) - (5.2)
------------------------- ------------ ----------- ----- ------------ ----------- -----
4.2 14.0 18.2 3.7 10.6 14.3
------------------------- ------------ ----------- ----- ------------ ----------- -----
2017 2016
-------------------------------- --------------------------------
Other Other
temporary Share-based temporary Share-based
differences payments Total differences payments Total
Company GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------ ----------- ----- ------------ ----------- -----
Deferred tax assets 0.2 11.3 11.5 0.1 8.1 8.2
-------------------- ------------ ----------- ----- ------------ ----------- -----
Movement of deferred tax balances
The movement in the deferred tax balances between the balance
sheet dates has been reflected in equity or the statement of
comprehensive income as follows:
Other
temporary Share-based
differences payments Total
Group GBPm GBPm GBPm
--------------------------------------- ------------ ----------- -----
At 30 June 2015 6.1 10.7 16.8
Credited/(charged) to the consolidated
statement of comprehensive income (2.4) (0.1) (2.5)
--------------------------------------- ------------ ----------- -----
At 30 June 2016 3.7 10.6 14.3
--------------------------------------- ------------ ----------- -----
Credited/(charged) to the consolidated
statement of comprehensive income 0.5 3.4 3.9
--------------------------------------- ------------ ----------- -----
At 30 June 2017 4.2 14.0 18.2
--------------------------------------- ------------ ----------- -----
Other
temporary Share-based
differences payments Total
Company GBPm GBPm GBPm
------------------------------------ ------------ ----------- ------
At 30 June 2015 0.3 8.7 9.0
Credited/(charged) to the statement
of comprehensive income (0.2) (0.6) (0.8)
------------------------------------ ------------ ----------- ------
At 30 June 2016 0.1 8.1 8.2
Credited/(charged) to the statement
of comprehensive income 0.1 3.2 3.3
------------------------------------ ------------ ----------- ------
At 30 June 2017 0.2 11.3 11.5
------------------------------------ ------------ ----------- ------
Refer to the details in note 12 in relation to future changes to
the UK corporation tax rate which have been reflected in the
Group's deferred
tax position.
19) Fair value of financial instruments
The Group has an established control framework with respect to
the measurement of fair values. This framework includes committees
that have overall responsibility for all significant fair value
measurements. Each committee regularly reviews significant inputs
and valuation adjustments. If third-party information is used to
measure fair value, the team assesses and documents the evidence
obtained from the third parties to support such valuations. There
are no material differences between the carrying amounts of
financial assets and liabilities and their fair values at the
balance sheet date.
Fair value hierarchy
The Group measures fair values using the following fair value
hierarchy that reflects the significance of inputs used in making
the measurements:
- Level 1: Valuation is based upon a quoted market price in an
active market for an identical instrument. This fair value measure
relates to the valuation of quoted and exchange traded equity and
debt securities.
- Level 2: Valuation techniques are based upon observable
inputs, either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This fair value measure relates to the
valuation of quoted equity securities in inactive markets or in
interests in unlisted funds whose net asset values are referenced
to the fair values of the listed or exchange traded securities held
by those funds.
- Level 3: Valuation techniques use significant unobservable
inputs.
For financial instruments that are recognised at fair value on a
recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by reassessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each
reporting period.
The fair value hierarchy of financial instruments which are
carried at fair value at year end is summarised below:
2017 2016
----------------------------- ----------------------------
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----- ------ ------ ------ ----- ------ ----- ------
Financial assets
Investment securities 60.8 85.5 84.9 231.2 27.2 69.6 46.9 143.7
Non-current financial
assets held for sale - 7.1 - 7.1 - 78.6 28.1 106.7
Available-for-sale
financial assets - 0.1 11.2 11.3 0.4 0.4 8.0 8.8
Fair value through
profit or loss investments - 36.0 - 36.0 - 68.2 - 68.2
Non-current asset
investments - 4.5 18.0 22.5 - - 11.7 11.7
Derivative financial
instruments - 0.3 - 0.3 - - - -
---------------------------- ----- ------ ------ ------ ----- ------ ----- ------
60.8 133.5 114.1 308.4 27.6 216.8 94.7 339.1
---------------------------- ----- ------ ------ ------ ----- ------ ----- ------
Financial liabilities
Third-party interests
in consolidated funds 30.9 42.4 35.6 108.9 11.0 36.2 28.4 75.6
Derivative financial
instruments - - - - - 4.5 - 4.5
Non-current financial
liabilities held
for sale - - - - - 29.8 - 29.8
30.9 42.4 35.6 108.9 11.0 70.5 28.4 109.9
---------------------------- ----- ------ ------ ------ ----- ------ ----- ------
There were no transfers between Level 1, Level 2 and Level 3
during the year (FY2015/16: total of GBP19.5m non-current assets
and available-for-sale financial assets were transferred from Level
2 to Level 3).
Changes in Level 3 financial assets and liabilities recognised
at fair value on a recurring basis
Non-current Available- Third-party
financial for-sale interests
Investment assets held financial Non-current in consolidated
securities for sale assets asset investments funds
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----------- ------------ ---------- ------------------ ----------------
At 30 June 2015 47.5 - - - 17.8
Additions 22.0 - - 1.1 10.0
Transfers in from Level
2 2.2 - 7.9 9.4 -
Reclassification from consolidated
funds to HFS investments (26.0) 26.0 - - -
Unrealised gains recognised
in finance income 1.2 2.1 - 1.2 0.6
Unrealised gains recognised
in other comprehensive
income - - 0.1 - -
=================================== =========== ============ ========== ================== ================
At 30 June 2016 46.9 28.1 8.0 11.7 28.4
Additions - - - 4.5 -
Reclassification from HFS
investments to consolidated
funds 28.1 (28.1) - - -
Unrealised gains recognised
in finance income 9.9 - - 1.8 7.2
Unrealised gains recognised
in other comprehensive
income - - 3.2 - -
At 30 June 2017 84.9 - 11.2 18.0 35.6
=================================== =========== ============ ========== ================== ================
Valuation of Level 3 financial assets and liabilities recognised
at fair value on a recurring basis
Investments valued using valuation techniques include financial
investments which, by their nature, do not have an externally
quoted price based on regular trades, and financial investments for
which markets are no longer active as a result of market conditions
e.g. market illiquidity. The valuation techniques used include
comparison to recent arm's length transactions, reference to other
instruments that are substantially the same, discounted cash flow
analysis, and, if applicable, enterprise valuation.
These techniques may include a number of assumptions relating to
variables such as interest rate and price earnings multiples.
Changes in assumptions relating to these variables could positively
or negatively impact the reported fair value of these instruments.
When determining the inputs into the valuation techniques used
priority is given to publicly available prices from independent
sources when available, but overall the source of pricing is chosen
with the objective of arriving at a fair value measurement that
reflects the price at which an orderly transaction would take place
between market participants on the measurement date.
The fair value estimates are made at a specific point in time,
based upon available market information and judgements about the
financial instruments, including estimates of the timing and amount
of expected future cash flows. Such estimates do not typically
reflect any premium or discount that could result from offering for
sale at one time the Group's entire holdings of a particular
financial instrument, nor do they typically consider the tax impact
of the realisation of unrealised gains or losses from selling the
financial instrument being fair valued. In some cases the disclosed
value cannot be realised in immediate settlement of the financial
instrument.
In accordance with the Group's Pricing Methodology and Valuation
framework, the estimated fair values of derivative financial
instruments valued internally using standard market practices are
subject to assessment against external counterparties'
valuations.
20) Seed capital investments
Financial instruments not measured at fair value
Financial assets and liabilities that are not measured at fair
value include cash and cash equivalents, trade and other
receivables, and trade and other payables. The carrying value of
financial assets and financial liabilities not measured at fair
value is considered a reasonable approximation of fair value as at
30 June 2017 and 2016.
The Group considers itself a sponsor of an investment fund when
it facilitates the establishment of a fund in which the Group is
the investment manager. The Group ordinarily provides seed capital
in order to provide initial scale and facilitate marketing of the
funds to third-party investors. The fund is then financed through
the issue of units to investors. Aggregate interests held by the
Group include seed capital, management fees and performance fees.
The Group generates management and performance fee income from
managing the assets on behalf of third-party investors.
The movements of seed capital investments and related items
during the year are as follows:
Investment
securities Other Third-party
(relating (relating interests
to to in Non-current
HFS AFS FVTPL consolidated consolidated consolidated asset
investments investments investments funds)* funds)** funds investments Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----------- ----------- ----------- ------------ ------------ ------------ ----------- -------
Carrying amount at
30 June 2015 20.7 10.6 61.8 131.0 15.5 (41.5) 8.9 207.0
Reclassification:
HFS to
consolidated
funds (15.8) - - 20.7 - (4.9) - -
FVTPL to HFS
investments 7.6 - (7.6) - - - - -
Consolidated
funds
to HFS
investments 26.9 - - (26.9) - - - -
Consolidated
funds
to FVTPL
investments - - 18.3 (47.3) - 29.0 - -
Net purchases,
disposals
and fair value
changes 37.5 (1.8) (4.3) 66.2 (10.7) (58.2) 2.8 31.5
Carrying amount at
30 June 2016 76.9 8.8 68.2 143.7 4.8 (75.6) 11.7 238.5
------------------ ----------- ----------- ----------- ------------ ------------ ------------ ----------- -------
Reclassification:
HFS investments
to
consolidated
funds (49.3) - - 52.8 - (3.5) - -
HFS investments
to
FVTPL (8.8) - 8.8 - - - - -
FVTPL to
consolidated
funds - - (23.2) 60.3 - (37.1) - -
Consolidated
funds
to FVTPL
investments - - 1.8 (6.0) - 4.2 - -
Net purchases,
disposals
and fair value
changes (11.7) 2.5 (19.6) (19.6) 6.2 3.1 10.8 (28.3)
------------------ ----------- ----------- ----------- ------------ ------------ ------------ ----------- -------
Carrying amount at
30 June 2017 7.1 11.3 36.0 231.2 11.0 (108.9) 22.5 210.2
------------------ ----------- ----------- ----------- ------------ ------------ ------------ ----------- -------
* Investment securities in consolidated funds are designated as
FVTPL.
** Relates to cash and other assets in consolidated funds that
are not investment securities.
a) Non-current assets and non-current liabilities held for
sale
Where Group companies invest seed capital into funds operated
and controlled by the Group and the Group is actively seeking to
reduce its investment and it is considered highly probable that it
will relinquish control within a year, the interests in the funds
are treated as held for sale and are recognised as financial assets
and liabilities held for sale. During the year, three funds
(FY2015/16: five) were seeded in this manner, met the above
criteria, and consequently the assets and liabilities of these
funds were initially classified as held for sale.
The non-current assets and liabilities held for sale at 30 June
2017 were as follows:
2017 2016
GBPm GBPm
-------------------------------------------- ----- -------
Non-current financial assets held for sale 7.1 106.7
Non-current financial liabilities held for
sale - (29.8)
-------------------------------------------- ----- -------
Seed capital investments classified as held
for sale 7.1 76.9
-------------------------------------------- ----- -------
Investments cease to be classified as held for sale when they
are no longer controlled by the Group. A loss of control may happen
through sale of the investment and/or dilution of the Group's
holding. When investments cease to be classified as held for sale,
they are classified as financial assets designated as FVTPL. One
such fund was transferred to the FVTPL category during the year
after the Group reduced its interests following investment inflows
from third parties (FY2015/16: none).
If the fund remains under the control of the Group for more than
one year from the original investment date, it will cease to be
classified as held for sale, and will be consolidated line-by-line
after it is assessed that the Group controls the investment fund in
accordance with the requirements of IFRS 10. During the year, two
such funds (FY2015/16: seven) with an aggregate carrying amount of
GBP12.5 million (FY2015/16: GBP15.8 million) were transferred from
held for sale to consolidated funds category. There was no impact
on net assets or comprehensive income as a result of the
transfer.
Included within finance income are net gains of GBP9.3 million
(FY2015/16: net gains of GBP4.2 million) in relation to held for
sale investments.
As the Group considers itself to have one segment (refer to note
4), no additional segmental disclosure of held for sale assets or
liabilities is applicable.
b) Available-for-sale financial assets
Available-for-sale financial assets at 30 June 2017 comprise
shares held in debt and equity funds as follows:
2017 2016
GBPm GBPm
---------------------------------------------- ----- ------
Equities listed on stock exchange - 0.4
Equity funds 11.3 8.4
Seed capital classified as available-for-sale 11.3 8.8
---------------------------------------------- ----- ------
Included within other comprehensive income are net gains of
GBP2.5 million (FY2015/16: net gains of GBP1.1 million) in relation
to available-for-sale investments.
c) Fair value through profit or loss investments
FVTPL investments at 30 June 2017 comprise shares held in debt
and equity funds as follows:
2017 2016
GBPm GBPm
--------------------------------------------- ----- ------
Equity funds 30.2 46.6
Debt funds 5.8 21.6
--------------------------------------------- ----- ------
Seed capital classified as FVTPL investments 36.0 68.2
--------------------------------------------- ----- ------
Included within finance income are net gains of GBP9.6 million
(FY2015/16: net losses of GBP16.3 million) on the Group's FVTPL
investments.
d) Consolidated funds
The Group has consolidated 13 investment funds as at 30 June
2017 (30 June 2016: 14 investment funds), over which the Group is
deemed to have control (refer to note 26). Consolidated funds
represent seed capital investments where the Group has held its
position for a period greater than one year and its interest
represents a controlling stake in the fund in accordance with IFRS
10. Consolidated fund assets and liabilities are presented
line-by-line after intercompany eliminations. The table below sets
out an analysis of the carrying amounts of interests held by the
Group in consolidated investment funds.
2017 2016
GBPm GBPm
-------------------------------------------- -------- -------
Investment securities 231.2 143.7
Cash and cash equivalents 12.4 5.6
Other (1.4) (0.8)
Third-party interests in consolidated funds (108.9) (75.6)
-------------------------------------------- -------- -------
Consolidated seed capital investments 133.3 72.9
-------------------------------------------- -------- -------
Investment securities are designated as FVTPL and include listed
and unlisted equities and debt securities. Other includes trade
receivables, trade payables and accruals.
The maximum exposure to loss is the carrying amount of the
assets held. The Group has not provided financial support or
otherwise agreed to be responsible for supporting any consolidated
fund financially.
Included within the consolidated statement of comprehensive
income are net gains of GBP12.8 million (FY2015/16: GBPnil)
relating to the Group's share of the results of the individual
statements of comprehensive income for each of the consolidated
funds, as follows:
2017 2016
GBPm GBPm
------------------------------------------------ ------- ------
Finance income 7.8 4.7
Gains/(losses) on investment securities 22.4 (5.7)
Change in third-party interests in consolidated
funds (12.5) 3.4
Other expenses (4.9) (2.4)
------------------------------------------------ ------- ------
Net gains/(losses) on consolidated funds 12.8 -
------------------------------------------------ ------- ------
Included in the Group's cash generated from operations is GBP3.5
million cash utilised in operations (FY2015/16: GBP2.2 million cash
utilised in operations) relating to consolidated funds.
As of 30 June 2017, the Group's consolidated funds were
domiciled in Guernsey, Indonesia, Luxembourg, Saudi Arabia, and the
United States.
e) Non-current asset investments
Non-current asset investments relate to the Group's holding in
closed-end funds and are designated as FVTPL. 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.
2017 2016
GBPm GBPm
------------------------------ ----- -----
Non-current asset investments 22.5 11.7
------------------------------ ----- -----
Included within finance income are net gains of GBP2.5 million
(FY2015/16: net losses of GBP0.4 million) on the Group's
non-current asset investments.
21) Financial instrument risk management
Group
The Group is subject to strategic and business, client,
investment, treasury and operational risks throughout its business
as discussed in the Risk management section. This note discusses
the Group's exposure to and management of the following principal
risks which arise from the financial instruments it uses: credit
risk, liquidity risk, interest rate risk, foreign exchange risk and
price risk. Where the Group holds units
in investment funds, classified either as held for sale,
available-for-sale, FVTPL or non-current asset investment financial
assets, the related financial instrument risk disclosures in the
note below categorise exposures based on the Group's direct
interest in those funds without
looking through to the nature of underlying securities.
Risk management is the ultimate responsibility of the Board, as
noted in the Risk management section.
Capital management
It is the Group's policy that all entities within the Group have
sufficient capital to meet regulatory and working capital
requirements and
it conducts regular reviews of its capital requirements relative
to its capital resources.
As the Group is regulated by the United Kingdom Financial
Conduct Authority (FCA), it is required to maintain appropriate
capital and perform regular calculations of capital requirements.
This includes development of an Internal Capital Adequacy
Assessment Process (ICAAP), based upon the FCA's methodologies
under the Capital Requirements Directive. The Group's Pillar III
disclosures can be found on the Group's website at
www.ashmoregroup.com. These disclosures indicate that the Group had
excess capital of GBP448.3 million as at 30 June 2017 (30 June
2016: excess capital of GBP406.4 million) over the level of capital
required under a Pillar II assessment. The objective of the
assessment is to check that the Group has adequate capital to
manage identified risks and the process includes conducting stress
tests to identify capital and liquidity requirements under
different future scenarios including a potential downturn.
Credit risk
The Group has exposure to credit risk from its normal activities
where the risk is that a counterparty will be unable to pay in full
amounts
when due.
Exposure to credit risk is monitored on an ongoing basis by
senior management and the Group's Risk management and control
function.
The Group has a counterparty and cash management policy in place
which, in addition to other controls, restricts exposure to any
single counterparty by setting exposure limits and requiring
approval and diversification of counterparty banks and other
financial institutions.
The Group's maximum exposure to credit risk is represented by
the carrying value of its financial assets. The table below lists
financial
assets subject to credit risk.
2017 2016
Notes GBPm GBPm
---------------------------------------------- ----- ----- ------
Investment securities 19 231.2 143.7
Non-current financial assets held for
sale 19 7.1 106.7
Available-for-sale financial assets 19 11.3 8.8
Fair value through profit or loss investments 19 36.0 68.2
Derivative financial instruments 19 0.3 -
Trade and other receivables 17 70.9 61.2
Cash and cash equivalents 432.5 364.0
---------------------------------------------- ----- ----- ------
Total 789.3 752.6
---------------------------------------------- ----- ----- ------
Investment securities, derivative financial instruments,
non-current financial assets held for sale, available-for-sale
financial assets and FVTPL investments expose the Group to credit
risk from various counterparties, which is monitored and reviewed
by the Group.
The Group's cash and cash equivalents, comprising short-term
deposits with banks and liquidity funds, are predominantly held
with counterparties with credit ratings ranging from A+ to AAA as
at 30 June 2017 (30 June 2016: A to AAA).
All trade and other receivables are considered to be fully
recoverable and none were overdue at year end (30 June 2016: none).
They include
fee debtors that arise principally within the Group's investment
management business. They are monitored regularly and,
historically, default levels have been insignificant, and, unless a
client has withdrawn funds, there is an ongoing relationship
between the Group and the client. There is no significant
concentration of credit risk in respect of fees owing from
clients.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations associated with its financial
liabilities that are settled by delivering cash or other financial
assets.
In order to manage liquidity risk, there is a Group Liquidity
Policy to ensure that there is sufficient access to funds to cover
all forecast committed requirements for the next 12 months.
The maturity profile of the Group's contractual undiscounted
financial liabilities is as follows:
At 30 June 2017
More
Within than
1 year 1-5 years 5 years Total
GBPm GBPm GBPm GBPm
-------------------------------------------- ------- --------- --------- -----
Third-party interests in consolidated funds 53.8 55.1 - 108.9
Current trade and other payables 64.2 - - 64.2
-------------------------------------------- ------- --------- --------- -----
118.0 55.1 - 173.1
-------------------------------------------- ------- --------- --------- -----
At 30 June 2016
More
Within than
1 year 1-5 years 5 years Total
GBPm GBPm GBPm GBPm
-------------------------------------- ------- --------- -------- -----
Non-current liabilities held for
sale 29.8 - - 29.8
Third-party interests in consolidated
funds 32.1 43.5 - 75.6
Derivative financial instruments 4.5 - - 4.5
Current trade and other payables 55.4 - - 55.4
-------------------------------------- ------- --------- -------- -----
121.8 43.5 - 165.3
-------------------------------------- ------- --------- -------- -----
Details of leases and other commitments are provided in note
30.
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of financial instruments will fluctuate because of
changes in market
interest rates.
The principal interest rate risk is the risk that the Group will
sustain a reduction in interest income through adverse movements in
interest
rates. This relates to bank deposits held in the ordinary course
of business. The Group has a cash management policy which monitors
cash levels and returns within set parameters on a continuing
basis.
Bank and similar deposits held at year end are shown on the
consolidated balance sheet as cash and cash equivalents. The
effective interest earned on bank and similar deposits during the
year is given in the table below:
Effective interest rates applicable to bank deposits
2017 2016
% %
---------------------------------------- ---- ----
Deposits with banks and liquidity funds 0.67 1.01
---------------------------------------- ---- ----
Deposits with banks and liquidity funds are repriced at
intervals of less than one year.
At 30 June 2017, if interest rates over the year had been 50
basis points higher/lower with all other variables held constant,
profit before tax
for the year would have been GBP2.0 million higher/lower
(FY2015/16: GBP1.0 million higher/lower), mainly as a result of
higher/lower interest on
cash balances. An assumption that the fair value of assets and
liabilities will not be affected by a change in interest rates was
used in the model to calculate the effect on profit before tax.
In addition, the Group is indirectly exposed to interest rate
risk where the Group holds seed capital investments in funds that
invest in
debt securities.
Group
Foreign exchange risk
Foreign exchange risk is the risk that the fair value or future
cash flows of financial instruments will fluctuate because of
changes in foreign exchange rates.
The Group's revenue is almost entirely denominated in US
dollars, while the majority of the Group's costs are denominated in
Sterling. Consequently, the Group has an exposure to movements in
the GBP:USD exchange rate. In addition, the Group operates
globally, which
means that it may enter into contracts and other arrangements
denominated in local currencies in various countries. The Group
also holds
a number of seed capital investments denominated mainly in US
dollars, Colombian pesos and Indonesian rupiah.
The Group's policy is to hedge a proportion of the Group's
revenue by using a combination of forward foreign exchange
contracts and options for a period of up to two years forward. The
Group also sells US dollars at spot rates when opportunities
arise.
The table below shows the Group's sensitivity to a 1.0% exchange
movement in the US dollar, Colombian peso and Indonesian rupiah,
net of hedging activities.
2017 2016
---------------------- ----------------------
Impact Impact
on profit on profit
before Impact before Impact
tax on equity tax on equity
Foreign currency sensitivity test GBPm GBPm GBPm GBPm
---------------------------------- ---------- ---------- ---------- ----------
US dollar +/- 1% 1.8 2.6 2.6 2.7
Euro +/- 1% 0.1 0.1 0.1 0.1
Indonesian rupiah +/- 1% 0.1 0.1 0.4 0.3
Colombian peso +/- 1% 0.1 0.1 0.1 0.1
---------------------------------- ---------- ---------- ---------- ----------
Price risk
Price risk is the risk that the fair value or future cash flows
of financial instruments will fluctuate because of market
changes.
Seed capital
The Group is exposed to the risk of changes in market prices in
respect of seed capital investments. Such price risk is borne by
the Group directly through interests in available-for-sale and
non-current asset seed capital investments or indirectly either
through line-by-line consolidation of underlying financial
performance and positions held in certain funds or potential
impairments when fair values less costs to sell of seed investments
held for sale are less than carrying amounts. Details of seed
capital investments held are given in note 20.
The Group has well defined procedures governing the appraisal,
approval and monitoring of seed capital investments.
At 30 June 2017, a 5% movement in the fair value of these
investments would have had a GBP10.5 million (FY2015/16: GBP11.9
million) impact
on net assets and the impact on profit before tax would have
been GBP3.3 million (FY2015/16: GBP7.8 million).
Management and performance fees
The Group is also indirectly exposed to price risk in connection
with the Group's management fees, which are based on a percentage
of value
of AuM, and fees based on performance. Movements in market
prices, exchange and interest rates could cause the AuM to
fluctuate, which
in turn could affect fees earned. Performance fee revenues could
also be reduced depending upon market conditions.
Management and performance fees are diversified across a range
of investment themes and are not measurably correlated to any
single market index in Emerging Markets. In addition, throughout
Ashmore's history, the policy of having funds with year ends staged
throughout
the financial year has meant that in periods of steep market
decline, some performance fees have still been recorded. The
profitability impact
is likely to be less than this, as cost mitigation actions would
apply, including the reduction of the variable compensation paid to
employees.
Using the year end AuM level of US$58.7 billion and applying the
year's average net management fee rate of 52bps, a 5% movement
in AuM would have a US$15.3 million impact, equivalent to
GBP11.8 million using year end exchange rate of 1.2946, on
management fee revenues (FY2015/16: using the year end AuM level of
US$52.6 billion and applying the year's average net management fee
rate of 55bps, a 5% movement in AuM would have a US$14.5 million
impact, equivalent to GBP10.9 million using year end exchange rate
of 1.3234 on management fee revenues).
Hedging activities
The Group uses forward and option contracts to hedge its
exposure to foreign currency risk. These hedges, which have been
assessed as effective cash flow hedges as at 30 June 2017, protect
a proportion of the Group's revenue cash flows from foreign
exchange movements.
The cumulative fair value of the outstanding foreign exchange
hedges asset at 30 June 2017 was GBP0.3 million (30 June 2016:
GBP4.5 million foreign exchange hedges liability) and is included
within the Group's derivative financial instrument assets.
The notional and fair values of foreign exchange hedging
instruments were as follows:
2017 2016
------------------------ ------------------------
Fair Fair
value value
Notional assets/ Notional assets/
amount (liabilities) amount (liabilities)
GBPm GBPm GBPm GBPm
----------------------------------------- -------- -------------- -------- --------------
Cash flow hedges
Foreign exchange nil-cost option collars 60.0 0.3 85.0 (4.5)
60.0 0.3 85.0 (4.5)
----------------------------------------- -------- -------------- -------- --------------
The maturity profile of the Group's outstanding hedges is shown
below.
2017 2016
Notional amount of option collars maturing: GBPm GBPm
-------------------------------------------- ----- -----
Within 6 months 30.0 40.0
6-12 months 30.0 30.0
>12 months - 15.0
-------------------------------------------- ----- -----
60.0 85.0
-------------------------------------------- ----- -----
When hedges are assessed as effective, intrinsic value gains and
losses are initially recognised in other comprehensive income and
later reclassified to comprehensive income as the corresponding
hedged cash flows crystallise. Time value in relation to the
Group's hedges is excluded from being part of the hedging item and,
as a result, the net unrealised loss related to the time value of
the hedges is recognised
in the consolidated statement of comprehensive income for the
year.
A GBP3.8 million intrinsic gain (FY2015/16: GBP3.9 million
intrinsic loss) on the Group's hedges has been recognised through
other comprehensive
income and GBP3.7 million intrinsic value loss (FY2015/16:
GBP1.7 million intrinsic value gain) was reclassified from equity
to the statement of comprehensive income in the year.
Included within the net realised and unrealised hedging loss of
GBP2.8 million (note 7) recognised at 30 June 2017 (GBP1.1 million
gain at 30 June 2016) are:
- a GBP0.9 million gain in respect of foreign exchange hedges
covering net management fee income for the financial year ending 30
June 2017 (FY2015/16: GBP0.6 million loss in respect of foreign
exchange hedges covering net management fee income for the
financial year ended 30 June 2016); and
- a GBP3.7 million loss in respect of crystallised foreign
exchange contracts (FY2015/16: GBP1.7 million gain).
Company
The risk management processes of the Company, including those
relating to the specific risk exposures covered below, are aligned
with
those of the Group as a whole unless stated otherwise.
In addition, the risk definitions that apply to the Group are
also relevant for the Company.
Credit risk
The Company's maximum exposure to credit risk is represented by
the carrying value of its financial assets. The table below lists
financial assets subject to credit risk by credit rating:
2017 2016
GBPm GBPm
---------------------------- ----- -----
Cash and cash equivalents 229.7 301.4
Trade and other receivables 398.0 285.4
----------------------------- ----- -----
Total 627.7 586.8
----------------------------- ----- -----
The Company's cash and cash equivalents comprise short-term
deposits held with banks and liquidity funds which have credit
ratings ranging from A+ to AAA as at 30 June 2017 (30 June 2016: A
to AAA).
All trade and other receivables are considered to be fully
recoverable and none were overdue at year end (30 June 2016:
none).
Liquidity risk
The contractual undiscounted cash flows relating to the
Company's financial liabilities all fall due within one year.
Details on leases and other commitments are provided in note
30.
Company
Interest rate risk
The principal interest rate risk for the Company is that it
could sustain a reduction in interest revenue from bank deposits
held in the ordinary course of business through adverse movements
in interest rates.
Bank and similar deposits held at year end are shown on the
Company's balance sheet as cash and cash equivalents. The effective
interest earned on bank and similar deposits during the year is
given in the table below:
Effective interest rates applicable to bank deposits
2017 2016
% %
---------------------------------------- ---- ----
Deposits with banks and liquidity funds 0.30 0.59
---------------------------------------- ---- ----
Deposits with banks and liquidity funds are repriced at
intervals of less than one year.
At 30 June 2017, if interest rates over the year had been 50
basis points higher/lower with all other variables held constant,
post-tax profit for the year would have been GBP1.1 million
higher/lower (FY2015/16: GBP0.5 million higher/lower), mainly as a
result of higher/lower interest on cash balances. An assumption
that the fair value of assets and liabilities will not be affected
by a change in interest rates was used in the model to calculate
the effect on post-tax profits.
Foreign exchange risk
The Company is exposed primarily to foreign exchange risk in
respect of US dollar cash balances and US dollar-denominated
intercompany balances. However, such risk is not hedged by the
Company.
At 30 June 2017, if the US dollar had strengthened/weakened by
1% against Sterling with all other variables held constant, profit
before tax
for the year would have increased/decreased by GBP3.9 million
(FY2015/16: increased/decreased by GBP3.4 million).
22) Share capital
Authorised share capital
2017 2016
2017 Nominal 2016 Nominal
Number of value Number value
Group and Company shares GBP'000 of shares GBP'000
------------------------------ ----------- -------- ----------- --------
Ordinary shares of 0.01p each 900,000,000 90 900,000,000 90
============================== =========== ======== =========== ========
Issued share capital - allotted and fully paid
2017 2016
2017 Nominal 2016 Nominal
Number of value Number value
Group and Company shares GBP'000 of shares GBP'000
------------------------------ ----------- -------- ----------- --------
Ordinary shares of 0.01p each 712,740,804 71 712,740,804 71
============================== =========== ======== =========== ========
All the above ordinary shares represent equity of the Company
and rank pari passu in respect of participation and voting
rights.
At 30 June 2017, there were equity-settled share awards issued
under the Omnibus Plan totalling 38,579,871 (30 June 2016:
39,805,764) shares that have release dates ranging from July 2017
to December 2021. Further details are provided in note 10.
23) Own shares
The Ashmore 2004 Employee Benefit Trust (EBT) acts as an agent
to acquire and hold shares in Ashmore Group plc with a view to
facilitating the recruitment and motivation of employees. As at the
year end, the EBT owned 38,701,321 (30 June 2016: 41,173,968)
ordinary shares of 0.01p with a nominal value of GBP3,870 (30 June
2016: GBP4,117) and shareholders' funds are reduced by GBP115.4
million (30 June 2016: GBP122.3 million) in this respect. It is the
intention of the Directors to make these shares available to
employees through the share-based compensation plans. The EBT is
periodically funded by the Company for these purposes.
24) Treasury shares
Treasury shares held by the Company
2017 2016
--------------- ---------------
Group and Company Number GBPm Number GBPm
---------------------------------- --------- ---- --------- ----
Ashmore Group plc ordinary shares 5,368,331 6.9 5,368,331 6.9
---------------------------------- --------- ---- --------- ----
Reconciliation of treasury shares
2017 2016
Number Number
------------------------------------- --------- ---------
At the beginning and end of the year 5,368,331 5,368,331
------------------------------------- --------- ---------
The market value of treasury shares was GBP19.0 million at the
year end (30 June 2016: GBP16.0 million).
25) Trade and other payables
Group Group Company Company
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
------------------------------- ----- ----- ------- -------
Current
Trade and other payables 29.5 19.9 26.7 39.9
Accruals and deferred income 34.7 35.5 1.9 2.5
Amounts due to subsidiaries - - 40.0 7.7
------------------------------- ----- ----- ------- -------
Total trade and other payables 64.2 55.4 68.6 50.1
------------------------------- ----- ----- ------- -------
26) Interests in subsidiaries
Operating subsidiaries
Movements in investments in subsidiaries during the year were as
follows:
2017 2016
Company GBPm GBPm
---------------- ----- -----
Cost
---------------- ----- -----
At 30 June 2016 20.0 20.1
Disposals (0.1) (0.1)
---------------- ----- -----
At 30 June 2017 19.9 20.0
---------------- ----- -----
During December 2016, Ashmore disposed of its entire interest in
Ashmore Portfoy Yonetimi Anonim Sirketi for a cash consideration of
GBP0.4 million resulting in a loss on disposal of GBP0.2 million.
At the time of sale, associated seed capital positions were
redeemed, crystallising gains in the period of GBP0.3 million which
have been presented within finance income.
In the opinion of the Directors, the following subsidiary
undertakings principally affected the Group's results or financial
position at 30 June 2017. A full list of the Group's subsidiaries
and all related undertakings is disclosed in note 33.
Country % of
of incorporation/ equity
formation shares
and principal held
place by the
Name of operation Group
----------------------------------------------- ------------------- -------
Ashmore Investments (UK) Limited England 100.00
Ashmore Investment Management Limited England 100.00
Ashmore Investment Advisors Limited England 100.00
Ashmore Management Company Colombia SAS Colombia 61.00
Ashmore CAF-AM Management Company SAS Colombia 53.66
Ashmore Management Company Limited Guernsey 100.00
PT Ashmore Asset Management Indonesia Indonesia 66.67
Ashmore Japan Co. Limited Japan 100.00
AA Development Capital Investment Managers
(Mauritius) LLC Mauritius 55.00
Ashmore Investments (Holdings) Limited Mauritius 100.00
Saudi
Ashmore Investments Saudi Arabia Arabia 90.00
Ashmore Investment Management (Singapore)
Pte. Ltd. Singapore 100.00
Ashmore Investment Management (US) Corporation USA 100.00
Ashmore Equities Holding Corporation USA 100.00
Ashmore Equities Investment Management (US)
LLC USA 100.00
----------------------------------------------- ------------------- -------
Consolidated funds
The Group consolidated the following investment funds as at 30
June 2017 over which the Group is deemed to have control:
% of
net
Country assets
of incorporation/ value
principal held
Type of place by the
Name fund of operation Group
---------------------------------------------- --------------- ------------------- -------
Ashmore Special Opportunities Fund
LP Alternatives Guernsey 39.06
Ashmore Emerging Markets Distressed Corporate
Debt Fund debt Guernsey 40.02
Ashmore Emerging Markets Debt and Blended
Currency Fund Limited debt Guernsey 100.00
External
Ashmore Dana USD Nusantara debt Indonesia 65.49
Ashmore SICAV Absolute Return Debt Blended
Fund debt Luxembourg 70.48
Ashmore SICAV 2 Global Bond Fund Local currency Luxembourg 100.00
Ashmore SICAV Multi Asset Fund Multi-asset Luxembourg 37.73
Saudi
Ashmore Saudi Equity Fund Equity Arabia 50.38
Saudi
Ashmore Saudi GCC Equity Fund Equity Arabia 72.67
Ashmore Emerging Markets Value Fund Equity USA 62.07
Ashmore Emerging Markets Equity Opportunities
Fund Equity USA 96.75
Ashmore Emerging Markets Active Equity
Fund Equity USA 84.60
Ashmore Emerging Markets Hard Currency External
Debt Fund debt USA 84.83
---------------------------------------------- --------------- ------------------- -------
27) Interests in associates and joint ventures
The Group held interests in the following associates as at 30
June 2017 that are unlisted:
Country % of
of incorporation/ equity
formation shares
and principal held
Nature of place of by the
Name Type business operation Group
------------------------------------- ---------- ------------ ------------------- -------
Investment
VTB-Ashmore Capital Holdings Limited Associate management Russia 50%
Investment
Everbright Ashmore* Associate management China 30%
Investment
Taiping Fund Management Company** Associate management China 15%
------------------------------------- ---------- ------------ ------------------- -------
* Everbright Ashmore includes four related entities.
** Formerly Ashmore-CCSC Fund Management Company Limited,
renamed Taiping Fund Management Company.
During August 2016, Ashmore reduced its interest in the joint
venture Ashmore-CCSC Fund Management Company Limited (ACCSC), from
49% to 15% following the introduction of a new shareholder, Taiping
Group. Ashmore received cash consideration of GBP4.8 million
resulting in a profit of GBP1.8 million in the period. ACCSC was
renamed Taiping Fund Management Company Limited after the
transaction and Ashmore Group's remaining 15% equity interest in
the company was reclassified to investment in associate.
Movements in investments in associates and joint ventures during
the year were as follows:
2017 2016
----------------------------- ---------------------
Joint Joint
Associates ventures Total Associates ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ---------- --------- ------ ---------- --------- -----
At the beginning of the
year 1.6 4.7 6.3 1.4 5.9 7.3
Additions/(disposals) 0.1 (3.0) (2.9) - - -
Share of profit/(loss) - (0.8) (0.8) - (1.7) (1.7)
Distributions (0.4) - (0.4) - - -
Reclassification from
joint venture to associate 0.9 (0.9) - - - -
Foreign exchange revaluation 0.1 - 0.1 0.2 0.5 0.7
----------------------------- ---------- --------- ------ ---------- --------- -----
At the end of the year 2.3 - 2.3 1.6 4.7 6.3
----------------------------- ---------- --------- ------ ---------- --------- -----
The summarised aggregate financial information on associates is
shown below.
2017 2016
Group GBPm GBPm
-------------------------------------------- ------ ------
Total assets 3.3 3.9
Total liabilities (0.3) (0.3)
-------------------------------------------- ------ ------
Net assets 3.0 3.6
Group's share of net assets 0.9 1.1
-------------------------------------------- ------ ------
Revenue for the year 8.9 0.5
Profit/(loss) for the year (4.5) -
Group's share of profit/(loss) for the year (0.8) -
-------------------------------------------- ------ ------
The carrying value of the investments in associates includes
attributable goodwill that arose on acquisition of the associates.
Although the Group's share of net assets of the associates is
currently below the aggregate carrying value of the associates
reflected on the consolidated balance sheet, the Group has
considered that this position is temporary. No permanent impairment
is believed to exist relating to the associates.
The Group has undrawn capital commitments of GBP4.9 million (30
June 2016: GBP4.8 million) to investment funds managed by the
associates. Further details are provided in note 28.
28) Interests in structured entities
The Group has interests in structured entities as a result of
the management of assets on behalf of its clients. Where the Group
holds a
direct interest in a closed-ended fund, private equity fund or
open-ended pooled fund such as a SICAV, the interest is accounted
for either
as a consolidated structured entity or as a financial asset,
depending on whether the Group has control over the fund or
not.
The Group's interest in structured entities is reflected in the
Group's AuM. The Group is exposed to movements in AuM of
structured
entities through the potential loss of fee income as a result of
client withdrawals. Outflows from funds are dependent on market
sentiment,
asset performance and investor considerations. Further
information on these risks can be found in the Business review.
Considering the potential for changes in AuM of structured
entities, management has determined that the Group's
unconsolidated
structured entities include segregated mandates and pooled funds
vehicles. Disclosure of the Group's exposure to unconsolidated
structured entities has been made on this basis.
The reconciliation of AuM reported by the Group within
unconsolidated structured entities is shown below.
Less: AuM within
AuM within unconsolidated
consolidated structured
Total AuM funds entities
US$bn US$bn US$bn
------------- --------- ------------- ---------------
30 June 2017 58.7 0.3 58.4
------------- --------- ------------- ---------------
30 June 2016 52.6 0.2 52.4
------------- --------- ------------- ---------------
Included in the Group's consolidated management fees of GBP226.2
million (FY2015/16: GBP197.1 million) are management fees
amounting
to GBP225.4 million (FY2015/16: GBP195.4 million) earned from
unconsolidated structured entities.
The table below shows the carrying values of the Group's
interests in unconsolidated structured entities, recognised in the
Group balance sheet, which are equal to the Group's maximum
exposure to loss from those interests.
2017 2016
GBPm GBPm
---------------------------- ----- -----
Management fees receivable 35.0 29.7
Trade and other receivables 30.0 24.8
Seed capital investments 76.9 165.6
---------------------------- ----- -----
Total exposure 141.9 220.1
---------------------------- ----- -----
The main risk the Group faces from its beneficial interests in
unconsolidated structured entities arises from a potential decrease
in the fair value
of seed capital investments. The Group's beneficial interests in
seed capital investments are disclosed in note 20. Note 21 includes
further information on the Group's exposure to market risk arising
from seed capital investments.
The Group has undrawn investment commitments relating to
structured entities as follows:
2017 2016
GBPm GBPm
--------------------------------------------- ----- -----
AA Development Capital India Fund 1 LLC 1.2 1.2
Ashmore Andean Fund II, LP 1.8 -
Ashmore Emerging Markets Corporate Private
Debt Fund 0.3 1.0
Ashmore I - CAF Colombian Infrastructure
Senior Debt Fund 15.0 15.2
Ashmore I - FCP Colombia Infrastructure Fund 0.1 0.8
Ashmore Special Opportunities Fund LP 1.6 3.2
Everbright Ashmore China Real Estate Fund 1.4 1.4
KCH Healthcare LLC 4.5 5.2
VTBC-Ashmore Real Estate Partners I, LP 3.5 3.4
--------------------------------------------- ----- -----
Total undrawn investment commitments 29.4 31.4
--------------------------------------------- ----- -----
29) Related party transactions
Related parties of the Group include key management personnel,
close family members of key management personnel, subsidiaries,
associates, joint ventures, Ashmore funds, the EBT and the Ashmore
Foundation.
Key management personnel - Group and Company
The compensation paid to or payable to key management personnel
for employee services is shown below:
2017 2016
GBPm GBPm
----------------------------------- ----- -----
Short-term employee benefits 1.4 0.9
Defined contribution pension costs - -
Share-based payment benefits 4.8 2.2
----------------------------------- ----- -----
6.2 3.1
----------------------------------- ----- -----
Share-based payment benefits represent the fair value charge to
the statement of comprehensive income of current year share
awards.
During the year, there were no other transactions entered into
with key management personnel (FY2015/16: none). Aggregate key
management personnel interests in consolidated funds at 30 June
2017 were GBP42.4 million (30 June 2016: GBP28.5 million).
Transactions with subsidiaries - Company
Details of transactions between the Company and its subsidiaries
are shown below:
2017 2016
GBPm GBPm
------------------------------------------- ----- ------
Transactions during the year
Management fees 110.3 73.7
Net dividends 99.2 89.6
Loans advanced to/(repaid by) subsidiaries 76.6 (16.6)
------------------------------------------- ----- ------
Amounts receivable or payable to subsidiaries are disclosed in
notes 17 and 25 respectively.
Transactions with Ashmore Funds - Group
During the year, the Group received GBP111.6 million of gross
management fees and performance fees (FY2015/16: GBP89.4 million)
from the
86 funds (FY2015/16: 91 funds) it manages and which are
classified as related parties. As at 30 June 2017, the Group had
receivables due
from funds of GBP5.1 million (30 June 2016: GBP1.5 million) that
are classified as related parties.
Transactions with the EBT - Group and Company
The EBT has been provided with a loan facility to allow it to
acquire Ashmore shares in order to satisfy outstanding unvested
share awards. The EBT is included within the results of the Group
and the Company. As at 30 June 2017, the loan outstanding was
GBP103.5 million (30 June 2016: GBP112.6 million).
Transaction with the Ashmore Foundation - Group and Company
The Ashmore Foundation is a related party to the Group. The
Foundation was set up to provide financial grants to worthwhile
causes within
the Emerging Markets countries in which Ashmore invests and/or
operates with a view to giving back to the countries and
communities.
The Group donated GBP0.1 million to the Foundation during the
year (FY2015/16: GBP0.1 million).
30) Commitments
Operating lease commitments
The Group and Company have entered into certain property leases.
The future aggregate minimum lease payments under non-cancellable
operating leases, taking account of escalation clauses and renewal
options, fall due as follows:
Group
2017 2016
GBPm GBPm
---------------------- ----- -----
Within 1 year 3.0 3.2
Between 1 and 5 years 7.3 9.9
Later than 5 years 3.3 4.4
---------------------- ----- -----
13.6 17.5
---------------------- ----- -----
Company
2017 2016
GBPm GBPm
---------------------- ----- -----
Within 1 year 1.2 1.2
Between 1 and 5 years 4.6 4.6
Later than 5 years 1.8 2.9
---------------------- ----- -----
7.6 8.7
---------------------- ----- -----
Operating lease expenses are disclosed in note 11.
Company
The Company has undrawn loan commitments to other Group entities
totalling GBP77.5 million (30 June 2016: GBP124.5 million) to
support their investment activities but has no investment
commitments of its own (30 June 2016: none).
31) Post-balance sheet events
There are no post-balance sheet events that require adjustment
or disclosure in the consolidated financial statements.
32) Accounting estimates and judgements
Estimates and judgements used in preparing the financial
statements are regularly evaluated and are based upon management's
assessment
of current and future events. The principal estimates and
judgements that have a significant effect on the carrying amounts
of assets and liabilities are discussed below.
Share-based payment transactions
The Group measures the cost of equity-settled and cash-settled
share-based awards at fair value at the date of grant and expenses
them over the vesting period based on the Group's estimate of the
shares that will vest. Market-related performance conditions are
incorporated into the grant price of the awards. The estimation of
the likelihood of the performance conditions being met is made at
the
time of granting the awards for equity-settled arrangements and
also at each reporting date for cash-settled share-based
arrangements.
32) Accounting estimates and judgements
Classification of seed capital investments
The Group invests seed capital from time to time to support the
initial launch and growth of new products, such as SICAVs, private
equity
funds and alternative investment funds. The seed capital
investments vary in duration depending on the nature of the product
and the time expected to grow the funds to a size and track record
required for participation by third-party investors. The Group
reviews the size and nature of these investments to consider the
level of control over the fund and to determine the appropriate
classification for accounting either as
full consolidation (where the Group concludes that it has
control over the fund), using equity-method accounting (where the
Group exercises significant influence or joint control), or as a
financial asset classified as available-for-sale, held for sale or
at fair value through profit or loss.
In the case of seed capital investments, where the Group
concludes that it does not have control over the fund, the Group is
also not deemed to have significant influence over the fund, and
therefore does not apply equity-method accounting. The Group would
account for the seed capital investment as a financial asset,
classified either as an available-for-sale financial asset,
financial asset held for sale, or a financial asset
at fair value through profit or loss. The Group considers that
its seeding activity is intended to help establish a fund's track
record and to
provide initial scale until the fund has attracted sufficient
third-party capital, at which stage the Group will actively seek to
redeem and
redeploy the seed capital.
Management exercises judgement to determine whether the Group
controls an investment fund under IFRS 10, including making an
assessment of whether the Group has power over the fund which the
Group exercises primarily for self-benefit. Management also
assesses the magnitude of the Group's aggregate economic interest
in the fund (comprising direct interests, carried interests,
expected management fees, fair value gains or losses, and
distributions receivable from funds managed) relative to
third-party investors, and whether third-party investors have
substantive rights to remove the Group from acting as a fund
manager without cause.
The Group has assessed and classified the following fund
vehicles as unconsolidated structured entities:
- Segregated mandates and pooled funds managed where the Group
does not hold any direct interest. In this case, the Group
considers
that its aggregate economic exposure is insignificant and, in
relation to segregated mandates, the third-party investor has the
practical
ability to remove the Group from acting as fund manager, without
cause. As a result, the Group concludes that it acts as an agent
for
third-party investors.
- Pooled funds managed by the Group where the Group holds a
direct interest, for example seed capital investments, and the
Group's aggregate economic exposure in the fund relative to
third-party investors is less than 20% (i.e. the threshold
established by the Group for determining agent versus principal
classification). As a result, the Group concludes that it is an
agent for third-party investors and, therefore, will account for
its beneficial interest in the fund as a financial asset. Further
details on the carrying values of these seed capital financial
assets have been disclosed in note 20.
The disclosure of the AuM in respect of consolidated and
unconsolidated structured entities is provided in note 28.
Impairment of intangible assets
The Group tests goodwill and intangible assets annually for
impairment. The recoverable amount for goodwill is determined in
reference to
the Group's market capitalisation, whereas the recoverable
amount for intangible assets is determined based upon value in use
calculations prepared on the basis of management's assumptions and
estimates. The carrying value of goodwill and intangible assets on
the Group's balance sheet at 30 June 2017 was GBP79.9 million (30
June 2016: GBP82.5 million). Management considers that reasonably
possible changes in any of the key assumptions applied would not
cause the carrying value of fund management relationships
intangible asset to materially exceed its recoverable value. The
recoverable amount of the intangible asset was determined to be
higher than its carrying value as at 30 June 2017. Accordingly, no
impairment charge was recognised during the year (see note 15).
33) Subsidiaries and related undertakings
The following is a full list of the Ashmore Group plc
subsidiaries and related undertakings as at 30 June 2017 pursuant
to the requirements of Statutory Instrument 2015 No. 80 The
Companies, Partnerships and Groups (Accounts and Reports)
Regulations 2015. The list includes the Group's subsidiaries and
related undertakings, all significant holdings (greater than 20%
interest), associate undertakings, joint ventures and significant
holdings in Ashmore-sponsored public funds in which the Group has
invested seed capital:
Name Classification % interest Registered address
------------------------------------- ---------------- ---------- -----------------------
Ashmore Investments (UK) Subsidiary 100.00 61 Aldwych, London
Limited WC2B 4AE United
Kingdom
-----------------------
Ashmore Investment Management
Limited Subsidiary 100.00
-----------------------
Ashmore Investment Advisors
Limited Subsidiary 100.00
Aldwych Administration Services
Limited Subsidiary 100.00
Ashmore Asset Management
Limited Subsidiary 100.00
------------------------------------- ---------------- ---------- -----------------------
Ashmore Investment Management Subsidiary 100.00 475 Fifth Avenue,
(US) Corporation 15th Floor
New York, 10017
USA
-----------------------
Ashmore Equities Holding
Corporation Subsidiary 100.00
-----------------------
Ashmore Equities Investment
Management (US) LLC Subsidiary 100.00
------------------------------------- ---------------- ---------- -----------------------
Ashmore Investment Management Subsidiary 100.00 1 George Street
(Singapore) Pte. Ltd. #15-04, Singapore
049145
------------------------------------- ---------------- ---------- -----------------------
PT Ashmore Asset Management Subsidiary 66.67 18 Parc SCBD
Indonesia Tower E, 8th
Floor
Jl. Jend. Sudirman
Kav.52-53
Jakarta 12190,
Indonesia
-----------------------
Consolidated
Ashmore Dana USD Nusantara fund 65.49
-----------------------
Ashmore Dana USD Equity Significant
Nusantara holding 30.38
------------------------------------- ---------------- ---------- -----------------------
Ashmore Management Company Subsidiary 61.00 Carrera 7 No.
Colombia SAS 75 -66, Office
702 Bogotá,
Colombia
-----------------------
Ashmore-CAF-AM Management
Company SAS Subsidiary 53.66
------------------------------------- ---------------- ---------- -----------------------
Ashmore Japan Co. Limited Subsidiary 100.00 11F, Shin Marunouchi
Building 1-5-1
Marunouchi Chiyoda-ku
Tokyo Japan 100-6511
------------------------------------- ---------------- ---------- -----------------------
Ashmore Investments (Colombia) Subsidiary 100.00 c/ Hermosilla
SL 11, 4 A
28001 Madrid,
Spain
------------------------------------- ---------------- ---------- -----------------------
Ashmore Management (DIFC Subsidiary 100.00 Office 105 ,
) Limited Gate Village
03, Level 1 Dubai
International
Financial Centre
Dubai, UAE
------------------------------------- ---------------- ---------- -----------------------
AA Indian Development Capital Subsidiary 100.00 507A Kakad Chambers
Advisors Private Limited Dr Annie Besant
(in liquidation) Road
Worli
Mumbai 400 018
India
-----------------------
Ashmore Investment Advisors
(India) Private Limited Subsidiary 99.82
-----------------------
Ashmore-Centrum India Opportunities
Investment Advisers Private
Limited (in liquidation) Subsidiary 51.00
Ashmore-Centrum Funds Trustee
Company Private Limited
(in liquidation) Subsidiary 51.00
------------------------------------- ---------------- ---------- -----------------------
Ashmore Investment Saudi Subsidiary 90.00 3rd Floor Tower
Arabia B
Olaya Towers
Olaya Main Street
Riyadh, Saudi
Arabia
-----------------------
Consolidated
Ashmore Saudi Equity Fund fund 50.38
-----------------------
Ashmore Saudi GCC Equity Consolidated
Fund fund 72.67
------------------------------------- ---------------- ---------- -----------------------
AA Development Capital Investment Subsidiary 55.00 Les Cascades
Managers (Mauritius) LLC Building
33 Edith Cavell
Street, Port
Louis
Mauritius
-----------------------
Ashmore Investments (Holdings)
Limited Subsidiary 100.00
------------------------------------- ---------------- ---------- -----------------------
Ashmore Emerging Markets Subsidiary 100.00 Trafalgar Court
Special Situation Opportunities Les Banques
Fund (GP) Limited St Peter Port
GY1 3QL
Guernsey
-----------------------
Ashmore Management Company
Limited Subsidiary 100.00
-----------------------
Ashmore Global Special Situations
Fund 3 (GP) Limited Subsidiary 100.00
Ashmore Global Special Situations
Fund 4 (GP) Limited Subsidiary 100.00
Ashmore Global Special Situations
Fund 5 (GP) Limited Subsidiary 100.00
Ashmore Special Opportunities
(GP) Limited Subsidiary 100.00
Ashmore Special Opportunities Consolidated
Fund LP fund 39.06
Ashmore Emerging Markets Consolidated
Distressed Debt Fund fund 40.02
Ashmore Emerging Markets Consolidated
Debt and Currency Fund Limited fund 100.00
------------------------------------- ---------------- ---------- -----------------------
Ashmore SICAV Absolute Return Consolidated
Debt Fund fund 70.48
Ashmore SICAV 2 Global Bond Consolidated
Fund fund 100.00
Ashmore SICAV Multi Asset Consolidated 37.73 6 rue Lou Hemmer
Fund fund L - 1748 Senningerberg
Grand-Duchy of
Luxembourg
Ashmore SICAV Active Equity Significant
Fund holding 35.14
Ashmore SICAV Investment Significant
Grade Total Return Fund holding 100.00
------------------------------------- ---------------- ---------- -----------------------
Ashmore Emerging Markets Consolidated
Value Fund fund 62.07
Ashmore Emerging Markets Consolidated
Equity Opportunities Fund fund 96.75
Ashmore Emerging Markets Consolidated 84.60 475 Fifth Avenue,
Active Equity Fund fund 15th Floor
New York, 10017
USA
Ashmore Emerging Markets Consolidated
Hard Currency Debt Fund fund 84.83
------------------------------------- ---------------- ---------- -----------------------
Ashmore Investment Consulting Subsidiary 100.00 Room 3401, Tower
(Beijing) Co. Limited (in 1, China World
liquidation) Trade Center
Office, No.1
Jian Wai Da Jie,
Chaoyang District
Beijing, China
------------------------------------- ---------------- ---------- -----------------------
Ashmore Emlak ve Yatirim Subsidiary 100.00 Cömert Sk.
Ltd Sirketi (in liquidation) Yapı Kredi
Plaza C Blok
Kat:11 34330
Levent-Istanbul,
Turkey
------------------------------------ ---------------- ----------- -----------------------
Ashmore Investments (Turkey) Subsidiary 100.00 Prins Bernhardplein
NV (in liquidation) 200, 1097JB Amsterdam
Netherlands
------------------------------------ ---------------- ----------- -----------------------
Everbright Ashmore China Significant 22.78 89 Nexus Way
Real Estate Fund holding Camana Bay
Grand Cayman
KY1-9007
Cayman Islands
------------------------------------ ---------------- ----------- -----------------------
Everbright Ashmore Services
and Consulting Limited Associate 30.00
-----------------------
EA Team Investment Partners Associate 30.00 c/o Appleby Trust
Limited (Cayman) Ltd.,
Clifton House,
75 Fort Street
PO Box 1350,
Grand Cayman,
KY-1108 Cayman
Islands
------------------------------------- ---------------- ---------- -----------------------
Everbright Ashmore Real
Estate Partners Limited Associate 30.00
-----------------------
Everbright Ashmore Investment Associate 30.00 190 Elgin Avenue,
Management Limited George Town,
Grand Cayman
KY1-9007, Cayman
Islands
------------------------------------- ---------------- ---------- -----------------------
Taiping Fund Management Associate 15.00 Unit 101, Building
Company Limited No.5, 135 Handan
Road, Shanghai,
China
------------------------------------- ---------------- ---------- -----------------------
VTB-Ashmore Capital Holdings Associate 50.00 Trafalgar Court
Limited Les Banques
St Peter Port
GY1 3QL
Guernsey
-----------------------
VTBC-Ashmore Investment
Management Limited Associate 50.00
-----------------------
VTBC-Ashmore Partnership
Management 1 Limited Associate 50.00
------------------------------------- ---------------- ---------- -----------------------
Cautionary statement regarding forward-looking statements
It is possible that this document could or may contain
forward-looking statements that are based on current expectations
or beliefs, as well as assumptions about future events. These
forward-looking statements can be identified by the fact that they
do not relate only to historical or current facts. Forward-looking
statements often use words such as anticipate, target, expect,
estimate, intend, plan, goal, believe, will, may, should, would,
could or other words of similar meaning.
Undue reliance should not be placed on any such statements
because, by their very nature, they are subject to known and
unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and the Group's plans and
objectives, to differ materially from those expressed or implied in
the forward-looking statements. There are several factors that
could cause actual results to differ materially from those
expressed or implied in forward-looking statements. Among the
factors that could cause actual results to differ materially from
those described in the forward-looking statements are changes in
global, political, economic, business, competitive, market and
regulatory forces, future exchange and interest rates, changes in
tax rates and future business combinations or dispositions. The
Group undertakes no obligation to revise or update any
forward-looking statement contained within this document,
regardless of whether those statements are affected as a result of
new information, future events or otherwise.
Statutory accounts
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 30 June 2017 or 30
June 2016. Statutory accounts for 2016 have been delivered to the
registrar of companies, and those for 2017 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 2016 or 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LFMRTMBAMBIR
(END) Dow Jones Newswires
September 07, 2017 02:00 ET (06:00 GMT)
Ashmore (LSE:ASHM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Ashmore (LSE:ASHM)
Historical Stock Chart
From Sep 2023 to Sep 2024