TIDMASHM
RNS Number : 2480E
Ashmore Group PLC
08 February 2018
Ashmore Group plc
8 February 2018
RESULTS FOR THE SIX MONTHSING 31 DECEMBER 2017
Ashmore Group plc (Ashmore, the Group), the specialist Emerging
Markets asset manager, today announces its unaudited results for
the six months ending 31 December 2017.
Overview
- Strong absolute and relative performance across Emerging Markets and increased client flows
- Assets under management (AuM) increased 18% to US$69.5
billion
- Net inflows of US$7.9 billion and positive market performance
of US$3.2 billion
- Broad client demand across the range of fixed income, equity
and overlay products as investors recognise the value available in
Emerging Markets
- Ashmore's investment processes continuing to deliver strong investment performance
- 82% of AuM outperforming benchmarks over one year, 93% over
three years and 87% over five years
- Business model delivering positive operating leverage
- Growth in operating revenues with net management fees +5% and
performance fees of GBP14.8 million
- Adjusted EBITDA of GBP91.2 million, margin increased from 66%
to 67%
- Improvement in operating performance offset by lower level of
seed capital gains and impact of FX translation
- Seed capital gains of GBP10.5 million (H1 2016/17: GBP25.8
million) and mark-to-market FX translation loss of GBP2.3 million
(H1 2016/17: GBP8.4 million gain)
- Statutory profit before tax of GBP99.0 million and diluted EPS
of 11.3p
- Interim dividend per share of 4.55p
Commenting on the Group's results, Mark Coombs, Chief Executive
Officer, Ashmore Group said:
"The favourable environment for Emerging Markets is reflected in
Ashmore's solid operating performance during the period, with 18%
growth in assets under management, strong investment performance
for clients, and increased profitability. We expect another good
year of performance across the range of Emerging Markets asset
classes in 2018, as economic conditions continue to be supportive,
valuations remain attractive, and therefore investors continue to
increase allocations."
Analysts briefing
There will be a presentation for analysts at 9.30am on 8
February 2018 at the offices of Goldman Sachs at Peterborough
Court, 133 Fleet Street, London EC4A 2BB. A copy of the
presentation will be made available on the Group's website at
www.ashmoregroup.com.
Contacts
For further information please contact:
Ashmore Group plc
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
Laura Ewart +44 (0)20 3727 1160
Chief Executive Officer's report
Emerging Markets have delivered consistently strong returns over
the past two years, and have significantly outperformed developed
world asset classes. The fundamental drivers of this performance
have been attractive valuations across Emerging Markets asset
classes and supportive economic conditions including accelerating
GDP growth and stable inflation. Consequently, institutional
investors are returning to Emerging Markets after a period of
shifting allocations to Developed Markets investments that were
supported by quantitative easing. Ashmore expects these positive
drivers to continue in 2018.
Ashmore's performance over the six months to 31 December 2017
reflects this favourable environment. Assets under management
increased by 18%, principally driven by net inflows, with
broad-based investor demand across the range of fixed income,
equity and overlay products as investors recognise the value
available in Emerging Markets and seek to address their underweight
positions. Ashmore's investment processes have continued to deliver
strong performance for clients, in absolute terms and against both
benchmark indices and their peer groups.
The Group's business model seeks to align the interests of
clients, shareholders and employees through market cycles. For
clients, Ashmore's specialist focus and active investment processes
have delivered strong long-term performance. For example, the
Group's first fixed income fund, EMLIP, celebrated its 25-year
anniversary in October 2017, and over this period the fund has
generated annualised net returns of 14.4%, outperforming its
benchmark (+10.6% annualised) as well as equity indices such as the
S&P500 (+9.8% annualised).
As Ashmore has generated attractive returns for clients over the
past year, leading to strong inflows, it has also delivered
positive operating leverage for shareholders, with growth in
operating revenues and a reduction in adjusted operating costs
leading to an increase in the adjusted EBITDA margin from 66% to
67%. The current margin represents an improvement from the cyclical
low of 62% reported in 2016.
As described in the Market review below, the economic and market
performance of Emerging Markets has further to run, as financial
conditions continue to ease in a wide range of developing
economies. Against this positive backdrop, Ashmore is well
positioned to continue to benefit from the next phase of Emerging
Markets growth.
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 period. For
the purposes of presenting 'Adjusted profits', operating expenses
have been adjusted for the 20% variable compensation charge
relating to foreign exchange translation gains and losses.
Non-GAAP alternative performance measures (APMs) are defined and
explained below.
Reclassification
of
=================
Seed
H1 2017/18 capital-related Foreign exchange H1 2017/18 H1 2016/17
GBPm Statutory items translation Adjusted Adjusted
================= ================= ================= ================= ================= =================
Net management
fees 120.5 - - 120.5 114.9
Performance fees 14.8 - - 14.8 21.6
Other revenue 1.1 - - 1.1 2.2
Foreign exchange (2.0) - 2.3 0.3 (3.0)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Net revenue 134.4 - 2.3 136.7 135.7
Investment
securities 9.4 (9.4) - - -
Third-party
interests (4.9) 4.9 - - -
Personnel
expenses (34.0) - (0.5) (34.5) (34.5)
Other expenses
excluding
depreciation &
amortisation (12.1) 1.1 - (11.0) (11.5)
================= ================= ================= ================= ================= =================
EBITDA 92.8 (3.4) 1.8 91.2 89.7
EBITDA margin 69% - - 67% 66%
Depreciation and
amortisation (2.6) - - (2.6) (2.7)
================= ================= ================= ================= ================= =================
Operating profit 90.2 (3.4) 1.8 88.6 87.0
Net finance
income/(expense) 9.1 (7.1) - 2.0 1.2
Associates and
joint ventures (0.3) - - (0.3) 0.8
Seed
capital-related
items - 10.5 - 10.5 25.8
Profit before tax
excluding FX
translation 99.0 - 1.8 100.8 114.8
================= ================= ================= ================= ================= =================
Foreign exchange
translation - - (1.8) (1.8) 6.7
================= ================= ================= ================= ================= =================
Profit before tax 99.0 - - 99.0 121.5
================= ================= ================= ================= ================= =================
Market review
Investment themes
External debt Local currency Corporate debt Blended debt
======================== =========================== ====================== ===============================
Invests in debt Invests in local Invests in debt Invests in both
instruments currencies and instruments G3 currency
issued by sovereigns local currency-denominated issued by public and local currency-denominated
(governments) instruments and private assets across
and issued by sovereign, sector companies, sovereigns,
quasi-sovereigns quasi-sovereign principally quasi-sovereigns
(government-sponsored), and corporate denominated and corporates.
principally issuers. in G3 currencies.
denominated
in G3 currencies.
======================== =========================== ====================== ===============================
Equities Alternatives Multi-asset Overlay/liquidity
======================== =========================== ====================== ===============================
Invests in equity Provides access Specialised, Separates and
and equity-related to private equity, efficient, all-in-one centralises
instruments healthcare, access to a the currency
within the Emerging infrastructure, long-term strategic risk of an underlying
Markets including special situations, asset allocation Emerging Markets
global, regional, distressed across the full asset class
small cap and debt and real Emerging Markets in order to
frontier opportunities. estate investment universe. manage it effectively
investment and efficiently.
opportunities.
======================== =========================== ====================== ===============================
Emerging Markets performed strongly over the six months,
reflecting attractive valuations, high and accelerating GDP growth,
and supportive fiscal and monetary conditions.
External debt
The EMBI GD external debt index increased by 3.8% over the six
months, and its spread over US Treasuries compressed by 25bps. High
yield bonds outperformed investment grade. There is a common
misperception that this asset class is vulnerable to higher US
interest rates, yet it has delivered significant positive absolute
and relative returns since the first rate increase by the Federal
Reserve (Fed) in December 2015. So far in this cycle, the Fed has
increased rates five times, and over that period the EMBI GD index
has produced a total return of +22% with its spread reducing by
139bps. Importantly, only one country (Mozambique) defaulted,
resulting in less than 10bps of index loss and with no read-across
to the other 66 countries in the benchmark index.
Over three years, Ashmore's external debt composite has
delivered gross annualised returns of +10.9%, a meaningful level of
outperformance against its benchmark index, which has returned
+7.1% annualised.
The diversity of the asset class coupled with attractive yields
and spreads versus US Treasuries implies that external debt will
continue to deliver good returns for the foreseeable future. Given
the range of opportunities available, active management will
continue to be critical to achieving these returns.
Local currency
The unhedged GBI-EM GD index increased by 4.4% over the period
with good returns from rates and a positive contribution from
stronger Emerging Markets currencies against the US dollar.
Ashmore's local currency bonds composite has delivered an
annualised gross return of +4.2% over the past three years, ahead
of its benchmark index (+2.5%).
From their cyclical peak in 2011, Emerging Market currencies
fell 40% against the US dollar and have subsequently rallied only
5%, demonstrating that the recovery in this asset class has only
just begun. When combined with high nominal and real yields, the
ongoing recovery in currencies means there is the potential for
local currency assets to deliver double-digit annualised returns
for several more years. The outlook for investor allocations to
this asset class is therefore positive.
Corporate debt
Corporate debt generated good returns over the six months with
the CEMBI BD index rising 2.8%. High yield credit performed more
strongly with a total return of 4.2%, thereby comfortably
outperforming JP Morgan's US high yield corporate bond index
(+2.9%), and it ended the period with a lower default rate of 2.0%
versus 3.6% in the US high yield market.
Over three years, the Group's corporate debt composite has
generated positive gross investment performance of +10.0%
annualised. This is significantly ahead of the performance of its
benchmark index, which has returned +6.2% annualised over the same
period.
Several factors support continued strong corporate debt
performance: the economic backdrop remains favourable; increases in
US rates appear priced in; and there is the potential for further
significant spread tightening in Emerging Markets corporate credit,
particularly in the high yield market. With more than 600 issuers
in the benchmark index, credit analysis and security selection is
critical to deliver outperformance, and Ashmore's value-based
active management approach underpins the delivery of a strong
long-term investment track record.
Blended debt
The standard blended debt benchmark (50% EMBI GD, 25% GBI-EM GD,
25% ELMI+) increased by 4.0% over the period, with all constituent
asset classes delivering positive returns. Stronger economic growth
across Emerging Markets will be positive for local markets, but
will also improve credit quality with positive implications for
bonds. Consistent with the Group's positive outlook for Emerging
Markets and the significant value available across each of the
underlying asset classes, the blended debt strategy is positioned
for further market appreciation, and currently has a bias towards
local currency assets.
The Group's blended debt strategy has delivered attractive
performance, with gross annualised returns of +9.1% over the past
three years compared with +4.8% annualised for the standard
benchmark. As described above, each underlying asset class has
generated positive returns over the period, and Ashmore has
delivered significant outperformance through its proven ability to
identify relative value and dynamically allocate across each of its
specialised themes.
Ashmore expects ongoing demand for blended debt funds,
particularly from investors wanting broad but actively managed
exposure to Emerging Markets debt, or those wishing to define
bespoke performance benchmarks.
Equities
Emerging Markets equities performed strongly over the six months
as economic growth accelerated. The MSCI EM index increased 15.9%,
the MSCI Frontier Markets index rose by 14.1% and the MSCI EM small
cap index increased by 15.4%.
Ashmore has delivered between 200bps and 300bps of annualised
outperformance versus benchmarks over three years for the small cap
and frontier markets composites, respectively.
The strong performance across emerging equity markets has been
underpinned by a recovery in corporate earnings, meaning valuations
remain at attractive levels. For instance, the MSCI EM index
currently trades on 12.5x prospective earnings, in line with its
long-run average and largely unchanged from its level a year ago
despite the 38% price rally in 2017. The market expects
double-digit earnings growth in 2018, providing a solid backdrop
for further positive investment performance.
Alternatives
AuM in the theme increased slightly through capital raised into
thematic funds such as education and infrastructure. Ashmore
continues to explore opportunities to grow the alternatives theme,
with a particular focus on Latin America and the Middle East and
Asia.
Multi-asset
The multi-asset investment theme offers clients exposure to the
full range of Ashmore's actively managed Emerging Markets
investment themes, thereby increasing diversification and offering
potentially higher returns through the cycle. The Group's Emerging
Markets multi-asset strategy is performing well, with all funds
significantly outperforming their respective benchmarks over three
years.
Overlay/liquidity
AuM increased by US$1.5 billion during the period as a result of
net inflows to the overlay theme.
Market outlook
Emerging Markets assets have delivered attractive absolute
returns over the past two years, and outperformed developed world
assets by a wide margin. Importantly, this performance has been
justified by improving economic conditions and most investors have
only just begun to recognise the value available across a very
broad range of Emerging Markets asset classes, countries,
currencies and issuers.
GDP growth is accelerating across a large number of Emerging
Markets countries, following the significant macro-economic
adjustments undertaken between 2011 and 2015. So far, this has
principally reflected the effect of cheap currencies on export
volumes. Ashmore expects the next phase of economic expansion to be
driven by domestic demand, as capital flows into
financially-constrained nations lead to easier financial
conditions, stimulating investment and production, and consequently
raising wages and consumption. This will support growth as domestic
demand represents on average more than 70% of emerging nations'
GDP.
One consequence of faster economic growth is that inflation is
likely to pick up across Emerging Markets, from a low level of
around 4%. It is therefore probable that Emerging Markets central
banks will tighten monetary policy and eventually lead the global
rates cycle, leaving the main Developed Markets central banks to
contend with low growth, low inflation, high indebtedness and a
lack of reforms. This has important positive implications for
Emerging Markets currencies, and therefore will be supportive for
further capital flows and an extension of the economic and business
cycles.
There are several important elections in Emerging Markets in
2018, such as in Brazil and Mexico, and these typically provide
opportunities for active managers to generate alpha as markets
misprice assets based on unlikely implied outcomes. Another
important political factor is the pursuit of reforms, as these can
underpin or enhance GDP growth expectations. This is most obviously
the case in China, but also relevant to other large developing
nations such as India, Brazil and Argentina.
This positive outlook for Emerging Markets is set against a
background of continued challenges facing Developed Markets. In the
developed world, economic growth is relatively slow, high leverage
constrains central banks' ability to raise interest rates, there is
little occurring by way of reform, and valuations appear stretched
in both equity and fixed income markets. The opportunity cost of
being overweight Developed Markets and underweight Emerging Markets
is high and rising as the latter enter a third consecutive year of
outperformance.
Beyond the country-specific and isolated risks that occur every
year, the main risks to the positive outlook for Emerging Markets
relate to growth scenarios for the United States. While a low
probability, there is a chance that productivity growth forces the
Fed to raise rates significantly faster than currently expected by
the market, thereby strengthening the US dollar. This would
undermine the arguments in favour of flows into local currency
markets. Conversely, a weaker growth scenario, potentially
including a recession, would have mixed implications for Emerging
Markets: it would be negative for certain Emerging Markets
equities, but with the probability of lower rates and a weaker US
dollar, local currency bonds would stand to benefit.
However, the resilience shown by Emerging Markets in the 2011 to
2015 period in the face of challenges that originated primarily in
the developed world, suggest that the asset classes are able to
continue to deliver appreciable absolute and relative returns and
attract significant investor flows over the medium term. The fact
that investors remain underweight Emerging Markets adds further
support to the view that the cyclical recovery has only just begun.
As a specialist, active manager delivering outperformance from a
scalable platform, Ashmore is well-positioned to benefit from the
structural growth opportunities in Emerging Markets.
Strategy/business developments
Ashmore continues to invest in its future growth. During the
period, the Group's global and specialist equities capabilities
were enhanced through the recruitment of a number of senior
investment professionals in London. Over the medium term, the
Group's goal is to increase the level and proportion of the Group's
AuM managed in equity strategies from 6% today.
The Group continues to manage its seed capital programme
actively. During the six months, new investments of GBP27.7 million
were made across a range of funds, and successful recycling of
previous seed capital investments totalled GBP18.7 million.
The Group's local market businesses are performing well.
Together, the five businesses in Colombia, Saudi Arabia, Dubai,
India and Indonesia manage US$4.3 billion, or 6% of the Group's
total AuM, and are increasingly profitable.
With consistently good performance across Emerging Markets,
Ashmore's intermediary retail AuM increased by 20% to US$8.1
billion over the six months. The majority of the growth has been
delivered through net inflows, which at US$1.1 billion for the
period are equivalent to the total retail net flows achieved in the
whole of the preceding financial year.
There is ongoing demand for blended debt and short duration
products from retail clients in Asia, Europe and the US, and
particular interest in specialist equity strategies, such as
frontier markets. There was also a significant increase in Europe
and US client flows into local currency funds during the period. By
intermediary type, the Group has seen strong flow momentum from
Asian and European private banks, and good net inflows from
European and US wealth managers and platforms, as well as US
registered investment advisers (RIAs) and wirehouses.
With regards to the process for the UK to leave the European
Union (Brexit), there has been no new information relevant to the
Group since it published its annual report in September 2017.
Ashmore remains of the view that the operational implications of
Brexit will be manageable.
AuM development
As at 31 December 2017, assets under management were US$69.5
billion, an increase of US$10.8 billion, or 18%, during the six
months. A significant proportion of this resulted from net inflows
of US$7.9 billion over the six months, continuing the positive
trend experienced in the prior financial year.
The strong net flow performance is consistent with this stage in
the cycle, as there is inevitably a lag between consistently good
market performance and institutional investors taking action, which
in many cases is dependent on manager selection, asset allocation
and mandate funding processes that can play out over several months
or quarters.
Investment performance contributed US$3.2 billion and average
AuM of US$64.3 billion was 21% higher than in the same period in
the prior year (H1 2016/17: US$53.3 billion).
Gross subscriptions increased significantly to US$15.0 billion,
or 26% of opening AuM (H1 2016/17: US$5.5 billion, 10% of opening
AuM), with broad-based demand across client categories and
geographies. The stronger sales performance reflects both higher
allocations from existing institutional clients and new segregated
mandates, and an acceleration of flows through retail intermediary
channels.
Gross redemptions were similar to last year at US$7.1 billion,
or 12% of opening AuM (H1 2016/17: US$6.2 billion, 12% of opening
AuM). Redemptions were slightly higher in the second quarter, as
some clients took the opportunity to realise profits towards the
end of the calendar year.
During the first quarter of the financial year, assets totalling
US$2.2 billion were reclassified into the blended debt theme as a
result of, for example, changes to performance benchmarks or
investment guidelines. The majority of the assets (US$2.0 billion)
were previously in the local currency theme, with the remainder in
the external debt theme.
The Group's client base is predominantly institutional, with 88%
of AuM from such clients (30 June 2017: 88%) and the remainder
sourced through intermediaries, which provide access to retail
investors. Segregated accounts represent 64% of AuM (30 June 2017:
67%).
Ashmore's principal mutual fund platforms are in Europe and the
US, which together account for 20% of AuM (30 June 2017: 19%). The
European SICAV range comprises 26 funds with AuM of US$12.1 billion
(30 June 2017: US$9.3 billion in 26 funds) and the US 40-Act range
has eight funds with AuM of US$2.0 billion (30 June 2017: US$1.7
billion in 10 funds).
Investment performance
The Group's investment performance remains strong with 82% of
AuM outperforming over one year, 93% over three years, and 87% over
five years (30 June 2017: 91%, 86% and 87%, respectively). As at 31
December 2017, the majority of the Group's fixed income and
specialist equity products are in the first or second performance
quartile when compared with peers, over one, three and five
years.
EMLIP's 25-year track record is an important factor in
illustrating to clients not only the potential returns available in
Emerging Markets, but also the virtues of active management and the
success across numerous market cycles of Ashmore's rigorous and
consistent investment processes.
The Group's investments are geographically diverse and
consistent with recent periods, with 37% in Latin America, 23% in
Asia Pacific, 27% in Eastern Europe and 13% in the Middle East and
Africa.
AuM movements by investment theme as classified by mandate
The development during the period of AuM by theme as classified
by mandate is shown in the following table.
AuM AuM
30 June Gross Gross Other/ 31 December
Investment 2017 subscriptions redemptions Net flows Performance reclassification 2017
theme US$bn US$bn US$bn US$bn US$bn US$bn US$bn
================== ======== ================= ============ ========= =========== ================= ============
External
debt 13.3 2.4 (1.1) 1.3 0.6 (0.2) 15.0
Local
currency 13.7 4.1 (1.7) 2.4 0.8 (2.0) 14.9
Corporate
debt 6.3 2.6 (1.5) 1.1 0.4 - 7.8
Blended
debt 14.6 2.6 (1.4) 1.2 0.8 2.2 18.8
Equities 3.4 1.1 (0.9) 0.2 0.3 - 3.9
Alternatives 1.5 0.1 - 0.1 - - 1.6
Multi-asset 1.1 - (0.1) (0.1) 0.2 - 1.2
Overlay/liquidity 4.8 2.1 (0.4) 1.7 0.1 (0.3) 6.3
================== ======== ================= ============ ========= =========== ================= ============
Total 58.7 15.0 (7.1) 7.9 3.2 (0.3) 69.5
================== ======== ================= ============ ========= =========== ================= ============
In August 2017, Ashmore's equity interest in Taiping Fund
Management Company Limited reduced from 15% to 8.5%, resulting in a
US$0.3 billion reduction in AuM in the overlay/liquidity investment
theme.
AuM % by investment theme as classified by mandate and as
invested
The following table reports AuM 'as invested' by underlying
asset class, which adjusts from the 'by mandate' presentation to
reflect the allocation to underlying asset classes of the
multi-asset and blended debt themes, and the cross-over investment
by certain external debt funds.
AuM at 30 June 2017 AuM at 31 December 2017
======================================= =======================================
Classified Classified Classified Classified Classified Classified
by mandate as invested as invested by mandate as invested as invested
Investment theme % % US$bn % % US$bn
================== =========== ============ ============ =========== ============ ============
External debt 23 39 22.5 22 38 26.5
Local currency 23 30 17.8 21 30 20.8
Corporate debt 11 13 7.8 11 14 9.4
Blended debt 25 - - 27 - -
Equities 6 7 3.9 6 6 4.5
Alternatives 2 3 1.8 2 3 1.8
Multi-asset 2 - - 2 - -
Overlay/liquidity 8 8 4.9 9 9 6.5
================== =========== ============ ============ =========== ============ ============
Total 100 100 58.7 100 100 69.5
================== =========== ============ ============ =========== ============ ============
Financial review
Fee income and net management fee margin by investment theme
The table below summarises the net management fee income after
distribution costs, performance fee income, and average net
management fee margin by investment theme, determined by reference
to weighted average assets under management.
Performance Net management fee
Net management fees fees margin
====================== ====================== ======================
H1 2017/18 H1 2016/17 H1 2017/18 H1 2016/17 H1 2017/18 H1 2016/17
Investment theme GBPm GBPm GBPm GBPm bps bps
================== ========== ========== ========== ========== ========== ==========
External debt 24.4 23.6 1.7 8.3 45 51
Local currency 21.4 22.7 7.3 10.8 43 43
Corporate debt 16.3 12.7 0.8 - 61 61
Blended debt 34.1 30.8 4.9 2.5 50 53
Equities 10.8 11.4 0.1 - 79 96
Alternatives 6.6 7.9 - - 137 141
Multi-asset 3.3 3.8 - - 76 82
Overlay/liquidity 3.6 2.0 - - 17 16
================== ========== ========== ========== ========== ========== ==========
Total 120.5 114.9 14.8 21.6 50 54
================== ========== ========== ========== ========== ========== ==========
Revenues
Higher net management fee income of GBP120.5 million was
partially offset by a lower contribution from performance fees,
leading to a 1% increase in operating revenues to GBP136.7 million
(H1 2016/17: GBP135.7 million). On a statutory basis, including
foreign exchange translation, net revenues were GBP134.4 million
(H1 2016/17: GBP144.1 million).
The Group's management fee income, net of distribution costs,
increased 5% to GBP120.5 million (H1 2016/17: GBP114.9 million).
Growth in AuM outweighed the 4% increase in the average GBP:USD
rate, from 1.2809 to 1.3259, and a year-on-year reduction in the
average net management fee margin from 54bps to 50bps. The movement
in the margin is attributable to the impact of large mandate wins
(2bps), investment theme mix (1.5bps), and other effects (0.5bps).
Compared with H2 2016/17, the net management fee margin was
unchanged.
Performance fees of GBP14.8 million (H1 2016/17: GBP21.6
million) were generated in the period across a range of funds and
investment themes.
At 31 December 2017, 12% of the Group's AuM was eligible to earn
performance fees (30 June 2017: 12%), of which a substantial
proportion is subject to rebate agreements.
Translation of the Group's non-Sterling assets and liabilities,
excluding seed capital, at the period end resulted in a foreign
exchange loss of GBP2.3 million (H1 2016/17: GBP8.4 million gain),
reflecting Sterling strength against the US dollar over the period.
The net realised and unrealised gain on the Group's foreign
exchange hedges was GBP0.3 million (H1 2016/17: GBP3.0 million
loss).
Operating costs
The Group continues to exercise strict control over its
discretionary expenditure. Consequently, total operating costs were
reduced by 6% to GBP48.7 million (H1 2016/17: GBP51.8 million),
with both personnel and other operating costs lower than in the
prior year period.
Excluding variable compensation, operating costs fell by 5% to
GBP27.0 million (H1 2016/17: GBP28.5 million). This includes GBP1.1
million of operating costs borne by consolidated funds (H1 2016/17:
GBP1.4 million). Excluding variable compensation, consolidated fund
expenses and currency effects, operating costs were reduced by 3%
versus the same period in the prior year.
Fixed staff costs of GBP12.3 million decreased by 5% compared
with the prior year (H1 2016/17: GBP12.9 million), reflecting 3%
lower average headcount and the effect of actions taken a year ago
such as the sale of the Turkish business and restructuring of the
Group's operations in the United States.
The Group's headcount increased by 2% over the six-month period
from 252 to 257 employees, due to recruitment centred on the
equities investment team as well as increases in local offices such
as Dubai and Indonesia.
Other operating costs, excluding depreciation and amortisation,
fell by GBP0.8 million to GBP12.1 million. Excluding the effects of
consolidated funds, other operating expenses declined 4% to GBP11.0
million.
From January 2018, the cost of third-party investment research
will be borne by the Group. This is not expected to have a material
impact on operating costs given the nature of the Group's
investment processes, with a heavy emphasis on well-established
in-house capabilities, and the bias towards fixed income markets in
the Group's AuM mix.
As is usual at the half-year stage, variable compensation has
been accrued at 20% of earnings before variable compensation,
interest and tax, resulting in a charge of GBP21.7 million (H1
2016/17: GBP23.3 million).
The combined depreciation and amortisation charge for the period
was GBP2.6 million (H1 2016/17: GBP2.7 million).
Adjusted EBITDA
Adjusted EBITDA, which reclassifies items relating to seed
capital investments and foreign exchange translation effects,
increased by 2% from GBP89.7 million to GBP91.2 million. This
positive operating leverage was achieved through 1% growth in
operating revenues and a 1% reduction in adjusted operating costs
excluding depreciation and amortisation.
The adjusted EBITDA margin, which reflects the Group's
underlying operating performance, increased from 66% to 67%.
Finance income
Net finance income of GBP9.1 million (H1 2016/17: GBP26.1
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 GBP2.0 million (H1 2016/17:
GBP1.2 million).
Profit before tax
Statutory profit before tax of GBP99.0 million is lower than in
the prior year period (H1 2016/17: GBP121.5 million) due to the
impact of foreign exchange translation, and lower contributions
from performance fees and seed capital investments.
Taxation
The majority of the Group's profit is subject to UK taxation; of
the total current tax charge for the six-month period of GBP18.9
million (H1 2016/17: GBP22.1 million), GBP14.3 million relates to
UK corporation tax (H1 2016/17: GBP17.4 million).
There is a GBP19.2 million net deferred tax asset on the Group's
balance sheet as at 31 December 2017 (31 December 2016: GBP13.9
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 six-month period is 18.0%
(H1 2016/17: 18.7%), which is lower than the prevailing UK
corporation tax rate of 19.0% (H1 2016/17: 19.75%). This
predominantly reflects the blend of the varying rates that apply
across the territories in which the Group operates. Note 9 to the
interim condensed financial statements provides a full
reconciliation of this difference compared to the UK corporation
tax rate.
Earnings per share
Basic earnings per share for the period declined by 18% to 12.0
pence (H1 2016/17: 14.7 pence) and diluted earnings per share
declined by 19% from 13.9 pence to 11.3 pence.
Balance sheet, cash flow and foreign exchange
It is the Group's policy to maintain a strong balance sheet in
order to meet regulatory capital requirements, to support the
commercial demands of current and prospective investors, and to
fund strategic development opportunities across the business. These
include establishing distribution offices and local asset
management ventures, seeding and investing in funds and other
assets, and other strategic initiatives.
As at 31 December 2017, total equity attributable to
shareholders of the parent was GBP704.9 million (31 December 2016:
GBP695.8 million, 30 June 2017: GBP724.4 million). Capital
resources available to the Group totalled GBP596.2 million as at 31
December 2017, equivalent to 84 pence per share, and significantly
exceeded the Group's regulatory capital requirement of GBP111.1
million, equivalent to 16 pence per share. The Group has no
debt.
Cash
Ashmore's business model delivers a high conversion rate of
profits to cash. Based on operating profit of GBP90.2 million for
the period (H1 2016/17: GBP94.6 million), the Group generated
GBP72.7 million of cash from operations (H1 2016/17: GBP96.6
million). The operating cash flows after excluding consolidated
funds represent 81% of the adjusted EBITDA for the period of
GBP91.2 million (H1 2016/17: 109%).
Cash and cash equivalents by currency
31 December 30 June
2017 2017
GBPm GBPm
========== =========== =======
Sterling 51.7 149.7
US dollar 296.3 253.8
Other 20.7 29.0
========== =========== =======
Total 368.7 432.5
========== =========== =======
The Group's cash balance declined over the six months. In the
first half of the financial year, the Group distributes the final
ordinary dividend to shareholders, makes corporation tax payments,
and pays cash variable remuneration to employees, all of which
relate to the prior financial year.
Seed capital investments
The Group's actively managed seed capital programme has
delivered growth in third-party AuM with approximately 13% of Group
AuM in funds that have been seeded.
During the six-month period, the Group made new investments of
GBP27.7 million and realised GBP18.7 million from previous
investments. Together with positive market movements of GBP7.1
million, the value of the Group's seed capital investments
increased from GBP210.2 million as at 30 June 2017 to GBP226.3
million as at 31 December 2017. The Group has also committed
GBP35.8 million that was undrawn at the period end.
As at 31 December 2017, the original cost of the Group's current
seed capital investments was GBP184.0 million, representing 29% of
Group net tangible equity. The majority of the Group's seed capital
by market value is held in liquid funds with better than one-month
dealing frequency, such as SICAV or US 40-Act mutual funds.
New investments were principally made into mutual funds in the
equities investment theme, consistent with the strategic growth
initiatives for this theme, and into alternatives products.
The Group redeemed seed capital from a range of funds, including
frontier equity funds and funds managed by the local platform in
Indonesia, as these strategies saw growth in third-party assets
under management.
Seed capital activities generated a profit before tax of GBP10.5
million (H1 2016/17: GBP25.8 million), comprising positive market
and other movements of GBP13.5 million and a foreign exchange
translation loss of GBP3.0 million (H1 2016/17: GBP10.9 million
gain and GBP14.9 million gain, respectively).
Seed capital market value by currency
31 December 30 June
2017 2017
GBPm GBPm
=================== =========== =======
US dollar 205.7 188.3
Colombian peso 12.4 9.6
Other 8.2 12.3
=================== =========== =======
Total market value 226.3 210.2
=================== =========== =======
The table below summarises the principal IFRS line items to
assist in the understanding of the financial impact of the Group's
seed capital programme.
Own shares held
The Group uses an Employee Benefit Trust (EBT) to purchase and
hold shares in anticipation of the vesting of share awards. During
the period, the EBT purchased shares worth GBP10.3 million (H1
2016/17: GBP11.8 million) and as at 31 December 2017, the EBT owned
34,953,460 (30 June 2017: 38,701,321) ordinary shares.
Foreign exchange
The majority of the Group's fee income is received in US dollars
and it is the Group's 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 or sell
by regular reference to expected non-US dollar, and principally
Sterling, cash requirements. The proportion of fee income received
in foreign currency and held as cash or cash equivalents is marked
to market at the period end exchange rate through the statement of
comprehensive income.
The translation of the Group's non-Sterling denominated balance
sheet resulted in a foreign exchange loss of GBP2.3 million (H1
2016/17: GBP8.4 million gain), primarily the effect of Sterling
strength against the US dollar. Net realised and unrealised hedging
gains of GBP0.3 million (H1 2016/17: GBP3.0 million loss) were
recognised for the period.
Financial impact of seed capital investments
H1 2017/18 H1 2016/17
GBPm GBPm
------------------------------------------------ ---------- ----------
Consolidated funds (note 14):
Gains/(losses) on investment securities 9.4 6.7
Change in third-party interests in consolidated
funds (4.9) (4.4)
Operating costs (1.1) (1.4)
Finance income 2.7 4.0
------------------------------------------------ ---------- ----------
Sub-total: consolidated funds 6.1 4.9
Unconsolidated funds (note 7):
Market return 7.4 6.0
Foreign exchange (3.0) 14.9
------------------------------------------------ ---------- ----------
Sub-total: unconsolidated funds 4.4 20.9
Total seed capital profit/(loss) 10.5 25.8
------------------------------------------------ ---------- ----------
- realised - 7.9
- unrealised 10.5 17.9
------------------------------------------------ ---------- ----------
Dividend
Ashmore's dividend policy is 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 the light of the dividend policy and considering both the
cash-generative nature of the Group's business model and
its strong and liquid balance sheet, the Board has determined
that an interim dividend of 4.55 pence per share (H1 2016/17: 4.55
pence per share) will be paid on 4 April 2018 to all shareholders
on the register on 9 March 2018.
Mark Coombs
Chief Executive Officer
7 February 2018
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
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
performance of the business before certain non-cash items,
financing income and charges, and taxation.
Adjusted EBITDA, adjusted operating costs, and operating
revenues
Adjusted figures exclude 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.
Operating revenues are defined on the same basis, that is,
excluding foreign exchange translation.
Adjusted EBITDA margin
The ratio of adjusted EBITDA to adjusted net revenue, both of
which are defined above. This is a fair measure of the Group's
efficiency and its ability to generate returns for
shareholders.
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.
Interim condensed consolidated statement of comprehensive
income
For the six months ended 31 December 2017
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Notes GBPm GBPm GBPm
========================================== ===== ============ ============ ==========
Management fees 124.4 116.8 226.2
Performance fees 14.8 21.6 28.3
Other revenue 1.1 2.2 2.7
========================================== ===== ============ ============ ==========
Total revenue 5 140.3 140.6 257.2
Distribution costs (3.9) (1.9) (4.6)
Foreign exchange 6 (2.0) 5.4 5.0
========================================== ===== ============ ============ ==========
Net revenue 134.4 144.1 257.6
Gains on investment securities 14 9.4 6.7 22.4
Change in third-party interests
in consolidated funds 14 (4.9) (4.4) (12.5)
Personnel expenses (34.0) (36.2) (67.8)
Other expenses (14.7) (15.6) (32.9)
========================================== ===== ============ ============ ==========
Operating profit 90.2 94.6 166.8
Finance income 7 9.1 26.1 38.6
Profit on disposal of joint
ventures and subsidiaries - 1.6 1.6
Share of losses from associates
and joint ventures (0.3) (0.8) (0.8)
========================================== ===== ============ ============ ==========
Profit before tax 99.0 121.5 206.2
Tax expense 9 (17.8) (22.7) (36.7)
========================================== ===== ============ ============ ==========
Profit for the period 81.2 98.8 169.5
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 (18.9) 6.2 (16.7)
Fair value reserve (available-for-sale
financial assets):
Net change in fair value 2.4 0.6 2.9
Cash flow hedge intrinsic value
gains 0.8 1.0 3.8
========================================== ===== ============ ============ ==========
Other comprehensive income,
net of related tax effect (15.7) 7.8 (10.0)
========================================== ===== ============ ============ ==========
Total comprehensive income
for the period 65.5 106.6 159.5
========================================== ===== ============ ============ ==========
Profit attributable to:
Equity holders of the parent 80.2 98.4 167.6
Non-controlling interests 1.0 0.4 1.9
========================================== ===== ============ ============ ==========
Profit for the period 81.2 98.8 169.5
========================================== ===== ============ ============ ==========
Total comprehensive income
attributable to:
Equity holders of the parent 64.5 106.3 157.8
Non-controlling interests 1.0 0.3 1.7
========================================== ===== ============ ============ ==========
Total comprehensive income
for the period 65.5 106.6 159.5
========================================== ===== ============ ============ ==========
Earnings per share
Basic 10 11.96p 14.72p 25.07p
Diluted 10 11.28p 13.93p 23.71p
========================================== ===== ============ ============ ==========
Interim condensed consolidated balance sheet
As at 31 December 2017
Unaudited Unaudited Audited
31 December 31 December 30 June
2017 2016 2017
Notes GBPm GBPm GBPm
====================================== ===== ============ ============ ========
Assets
Non-current assets
Goodwill and intangible assets 12 74.7 85.8 79.9
Property, plant and equipment 1.3 1.8 1.6
Investment in associates and
joint ventures 1.8 2.3 2.3
Non-current asset investments 14 24.9 21.1 22.5
Other receivables 0.1 0.1 0.1
Deferred acquisition costs 0.5 0.4 0.6
Deferred tax assets 26.3 21.4 27.4
====================================== ===== ============ ============ ========
129.6 132.9 134.4
====================================== ===== ============ ============ ========
Current assets
Investment securities 14 250.5 178.2 231.2
Available-for-sale financial
assets 14 13.6 9.0 11.3
Fair value through profit
or loss investments 14 24.5 63.5 36.0
Trade and other receivables 82.9 94.1 70.9
Derivative financial instruments 0.9 - 0.3
Cash and cash equivalents 368.7 378.1 432.5
====================================== ===== ============ ============ ========
741.1 722.9 782.2
====================================== ===== ============ ============ ========
Non-current assets held-for-sale 14 24.5 53.0 7.1
====================================== ===== ============ ============ ========
Total assets 895.2 908.8 923.7
====================================== ===== ============ ============ ========
Equity and liabilities
Capital and reserves - attributable
to equity holders of the parent
Issued capital 16 - - -
Share premium 15.7 15.7 15.7
Retained earnings 699.4 656.9 703.2
Foreign exchange reserve (14.3) 27.4 4.6
Available-for-sale fair value
reserve 3.5 (1.2) 1.1
Cash flow hedging reserve 0.6 (3.0) (0.2)
====================================== ===== ============ ============ ========
704.9 695.8 724.4
Non-controlling interests 1.7 1.5 2.3
====================================== ===== ============ ============ ========
Total equity 706.6 697.3 726.7
====================================== ===== ============ ============ ========
Liabilities
Non-current liabilities
Deferred tax liabilities 7.1 7.5 9.2
====================================== ===== ============ ============ ========
7.1 7.5 9.2
====================================== ===== ============ ============ ========
Current liabilities
Current tax 13.6 20.4 14.7
Third-party interests in consolidated
funds 14 113.4 101.4 108.9
Derivative financial instruments - 3.8 -
Trade and other payables 45.2 78.1 64.2
====================================== ===== ============ ============ ========
172.2 203.7 187.8
====================================== ===== ============ ============ ========
Non-current liabilities held-for-sale 14 9.3 0.3 -
====================================== ===== ============ ============ ========
Total liabilities 188.6 211.5 197.0
====================================== ===== ============ ============ ========
Total equity and liabilities 895.2 908.8 923.7
====================================== ===== ============ ============ ========
Interim condensed consolidated statement of changes in
equity
For the six months ended 31 December 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
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Audited balance at
30 June 2016 - 15.7 645.7 21.1 (1.8) (4.0) 676.7 3.3 680.0
Profit for the period - - 98.4 - - - 98.4 0.4 98.8
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - 6.3 - - 6.3 (0.1) 6.2
Net fair value
gains
on
available-for-sale
assets including
tax - - - - 0.6 - 0.6 - 0.6
Cash flow hedge
intrinsic
value gains - - - - - 1.0 1.0 - 1.0
---------------------- ------- ------- -------- -------- ------------------ ------- ------ --------------- ------
Total comprehensive
income/(loss) - - 98.4 6.3 0.6 1.0 106.3 0.3 106.6
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 - - 9.5 - - - 9.5 - 9.5
Dividends to equity
holders - - (84.9) - - - (84.9) - (84.9)
Dividends to
non-controlling
interests - - - - - - - (1.7) (1.7)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (87.2) - - - (87.2) (2.1) (89.3)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Unaudited balance
at 31 December 2016 - 15.7 656.9 27.4 (1.2) (3.0) 695.8 1.5 697.3
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Profit for the period - - 69.2 - - - 69.2 1.5 70.7
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - (22.8) - - (22.8) (0.1) (22.9)
Net fair value
gains
on
available-for-sale
assets including
tax - - - - 2.3 - 2.3 - 2.3
Cash flow hedge
intrinsic
value gains - - - - - 2.8 2.8 - 2.8
---------------------- ------- ------- -------- -------- ------------------ ------- ------ --------------- ------
Total comprehensive
income/(loss) - - 69.2 (22.8) 2.3 2.8 51.5 1.4 52.9
Transactions with
owners:
Share-based
payments - - 8.8 - - - 8.8 - 8.8
Dividends to equity
holders - - (31.7) - - - (31.7) - (31.7)
Dividends to
non-controlling
interests - - - - - - - (0.6) (0.6)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (22.9) - - - (22.9) (0.6) (23.5)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Audited balance at
30 June 2017 - 15.7 703.2 4.6 1.1 (0.2) 724.4 2.3 726.7
Profit for the period - - 80.2 - - - 80.2 1.0 81.2
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - (18.9) - - (18.9) - (18.9)
Net fair value
gains
on
available-for-sale
assets including
tax - - - - 2.4 - 2.4 - 2.4
Cash flow hedge
intrinsic
value gains - - - - - 0.8 0.8 - 0.8
---------------------- ------- ------- -------- -------- ------------------ ------- ------ --------------- ------
Total comprehensive
income/(loss) - - 80.2 (18.9) 2.4 0.8 64.5 1.0 65.5
Transactions with
owners:
Purchase of own
shares - - (10.3) - - - (10.3) - (10.3)
Acquisition of
non-controlling
interests - - - - - - - (0.4) (0.4)
Share-based
payments - - 11.7 - - - 11.7 - 11.7
Dividends to equity
holders - - (85.4) - - - (85.4) - (85.4)
Dividends to
non-controlling
interests - - - - - - - (1.2) (1.2)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (84.0) - - - (84.0) (1.6) (85.6)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Unaudited balance
at 31 December 2017 - 15.7 699.4 (14.3) 3.5 0.6 704.9 1.7 706.6
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Interim condensed consolidated cash flow statement
For the six months ended 31 December 2017
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
=========================================================== ============ ============ ==========
Operating activities
Operating profit 90.2 94.6 166.8
Adjustments for non-cash items:
Depreciation and amortisation 2.6 2.7 5.5
Accrual for variable compensation 13.9 23.4 24.4
Unrealised foreign exchange gains 2.1 (8.1) (8.7)
Other non-cash items (4.5) (5.1) (11.0)
=========================================================== ============ ============ ==========
Cash generated from operations before working capital
changes 104.3 107.5 177.0
Changes in working capital:
Decrease/(increase) in trade and other receivables (12.0) (32.9) (9.7)
Increase/(decrease) in derivative financial instruments (0.6) (0.7) (4.8)
Increase/(decrease) in trade and other payables (19.0) 22.7 8.8
=========================================================== ============ ============ ==========
Cash generated from operations 72.7 96.6 171.3
Taxes paid (20.3) (26.2) (48.0)
=========================================================== ============ ============ ==========
Net cash from operating activities 52.4 70.4 123.3
=========================================================== ============ ============ ==========
Investing activities
Interest received 4.9 5.1 8.8
Dividends received 0.1 - 0.4
Proceeds on disposal of joint ventures and subsidiaries - 4.8 4.8
Purchase of non-current asset investments (2.1) (6.6) (8.8)
Purchase of financial assets held-for-sale (14.4) (24.0) (26.9)
Purchase of available-for-sale financial assets (0.1) (1.6) -
Purchase of fair value through profit or loss investments - (6.3) (14.0)
Purchase of investment securities (21.0) (12.1) (17.0)
Sale of non-current asset investments - 0.5 0.5
Sale of financial assets held-for-sale - 11.3 47.9
Sale of available-for-sale financial assets 0.3 - -
Sale of fair value through profit or loss investments 13.2 41.5 43.2
Sale of investment securities - 11.3 28.1
Net cash flow arising on initial consolidation of
seed capital investments 1.0 1.5 8.1
Purchase of property, plant and equipment - - (0.4)
=========================================================== ============ ============ ==========
Net cash generated/(used) in investing activities (18.1) 25.4 74.7
=========================================================== ============ ============ ==========
Financing activities
Dividends paid to equity holders (85.3) (84.9) (116.6)
Dividends paid to non-controlling interests (1.2) (1.7) (2.3)
Third-party subscriptions into consolidated funds 12.2 13.9 18.7
Third-party redemptions from consolidated funds - (2.4) (8.6)
Distributions paid by consolidated funds (1.0) (1.6) (3.1)
Acquisition of interest from non-controlling interests (0.4) (0.4) (0.4)
Purchase of own shares (10.3) (11.8) (11.8)
=========================================================== ============ ============ ==========
Net cash used in financing activities (86.0) (88.9) (124.1)
=========================================================== ============ ============ ==========
Net increase/(decrease) in cash and cash equivalents (51.7) 6.9 73.9
Cash and cash equivalents at beginning of period 432.5 364.0 364.0
Effect of exchange rate changes on cash and cash
equivalents (12.1) 7.2 (5.4)
=========================================================== ============ ============ ==========
Cash and cash equivalents at end of period 368.7 378.1 432.5
=========================================================== ============ ============ ==========
Cash and cash equivalents comprise:
Cash at bank and in hand 76.9 69.5 71.1
Daily dealing liquidity funds 264.9 155.6 216.5
Deposits 26.9 153.0 144.9
=========================================================== ============ ============ ==========
368.7 378.1 432.5
=========================================================== ============ ============ ==========
Notes to the interim condensed consolidated financial
statements
1) General information
These interim condensed consolidated financial statements of
Ashmore Group plc and its subsidiaries (the Group) for the six
months ended 31 December 2017 were authorised for issue by the
Directors on 7 February 2018.
Ashmore Group plc is listed on the London Stock Exchange and
incorporated and domiciled in the United Kingdom.
2) Basis of preparation
The interim condensed consolidated financial statements have
been prepared in accordance with Disclosure and Transparency Rules
of the Financial Conduct Authority (FCA) and with International
Accounting Standard 34 Interim Financial Reporting as adopted by
the European Union.
These interim condensed consolidated financial statements and
accompanying notes are unaudited, do not constitute statutory
accounts within the meaning of Section 434 of the Companies Act
2006 and do not include all the information and disclosures
required in annual statutory financial statements. They should be
read in conjunction with the Group's annual report and accounts for
the year ended 30 June 2017 which are available on the Group's
website. Those statutory accounts were approved by the Board of
Directors on 6 September 2017 and have been filed with Companies
House. The report of the auditors on those accounts was
unqualified.
New Standards, Interpretations and Amendments adopted by the
Group
The accounting policies applied in these interim results are
consistent with those applied in the Group's annual statutory
financial statements for 2017.
New Standards and Interpretations not yet adopted
As previously described in the Group's annual statutory accounts
for the 12 months to 30 June 2017, the Group has completed an
impact assessment of the following Standards or Interpretations
which were in issue but were not required to be implemented as at
31 December 2017:
- IFRS 9 Financial Instruments;
- IFRS 15 Revenue from Contracts with Customers; and
- IFRS 16 Leases.
The Group expects to implement IFRS 9 and IFRS 15 on 1 July
2018. The Group does not anticipate the implementation of these
Standards to have a material impact on its reported results or net
assets. The estimated likely impact on implementing these Standards
is approximately 1% of the Group's net assets. However, there will
be a number of presentational changes required on the face of the
consolidated statement of comprehensive income and consolidated
balance sheet. The Group continues to assess the impact of IFRS 16,
which becomes effective from 1 July 2019.
No other Standards or Interpretations issued and not yet
effective are expected to have an impact on the Group's condensed
consolidated financial statements.
Going concern
After making enquiries, the Directors believe that the Group has
considerable financial resources and is well placed to manage its
business risks in the context of the current economic outlook.
Accordingly, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. They therefore continue to adopt the
going concern basis in preparing these interim condensed
consolidated financial statements.
3) Accounting policies
The accounting policies adopted in the preparation of these
interim condensed consolidated financial statements are consistent
with those applied in the preparation of the Group's annual report
and accounts for the year ended 30 June 2017.
4) Segmental information
Key management information, including revenues, margins,
investment performance, distribution costs and AuM flows, which is
relevant to the operation of the Group, continues to be reported to
and reviewed by the Board on the basis of the investment management
business as a whole and 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 the
provision of investment management services).
The location of the Group's non-current assets at the end of the
period other than financial instruments, deferred tax assets and
post-employment benefit assets are shown in the table below.
Disclosures relating to revenue are in note 5.
Analysis of non-current assets by geography
As at As at As at
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
========================= ============ ============ ========
United Kingdom 7.0 8.0 7.8
United States 70.8 81.9 76.1
Other 0.5 0.4 0.5
========================= ============ ============ ========
Total non-current assets 78.3 90.3 84.4
========================= ============ ============ ========
5) Revenue
Management fees are accrued throughout the period 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. None of the Group's
funds provided more than 10.0% of total revenue in the period (H1
2016/17: none; FY2015/17: none) when considering management fees
and performance fees on a combined basis.
Analysis of revenue by geography
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================= ============ ============ =========
United Kingdom revenue 128.0 129.1 232.8
United States revenue 3.7 4.3 8.7
Other 8.6 7.2 15.7
======================= ============ ============ =========
Total revenue 140.3 140.6 257.2
======================= ============ ============ =========
6) 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 rate Average rate Average rate
Closing rate Closing rate Closing rate 6 months 6 months 12 months
as at as at as at ended ended ended
31 December 31 December 30 June 31 December 31 December 30 June
GBP1 2017 2016 2017 2017 2016 2017
================== ============ ============ ============ ============ ============ ============
US dollar 1.3513 1.2340 1.2946 1.3259 1.2809 1.2766
Euro 1.1260 1.1731 1.1426 1.1258 1.1689 1.1671
Indonesian rupiah 18,311 16,535 17,340 17,776 16,922 16,918
Colombian peso 4,035 3,706 3,965 3,973 3,829 3,788
================== ============ ============ ============ ============ ============ ============
Foreign exchange gains and losses are shown below.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================================================= ============ ============ =========
Net realised and unrealised hedging gains/(losses) 0.3 (3.0) (2.8)
Translation gains/(losses) on non-Sterling denominated
monetary assets and liabilities (2.3) 8.4 7.8
======================================================= ============ ============ =========
Total foreign exchange gains/(losses) (2.0) 5.4 5.0
======================================================= ============ ============ =========
7) Finance income and expense
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================================================== ============ ============= =========
Finance income
Interest and income in consolidated funds 4.7 5.2 10.4
Net realised gains on seed capital investments measured
at fair value - 7.9 20.8
Net unrealised gains on seed capital investments
measured at fair value 4.4 13.0 7.4
======================================================== ============ ============= =========
Total finance income 9.1 26.1 38.6
======================================================== ============ ============= =========
8) Share-based payments
The cost related to share-based payments recognised by the Group
in the interim condensed consolidated statement of comprehensive
income is shown below:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
=================================== ============= ============= =========
Omnibus Plan 14.0 11.1 24.2
Phantom Bonus Plan (0.1) 0.1 0.2
=================================== ============= ============= =========
Total share-based payments expense 13.9 11.2 24.4
=================================== ============= ============= =========
The total expense recognised for the period in respect of
equity-settled share-based payment awards was GBP11.2 million (H1
2016/17: GBP12.4 million; FY2016/17: GBP21.3 million).
The Executive Omnibus Incentive Plan (Omnibus Plan)
Share awards outstanding under the Omnibus Plan were as
follows:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Number of Number of Number of
shares subject shares subject shares subject
to awards to awards to awards
===================================== =============== =============== ===============
Equity-settled awards
At the beginning of the period 38,579,871 39,805,764 39,805,764
Granted 10,237,825 7,523,609 7,523,609
Vested (6,762,746) (5,971,865) (6,281,971)
Forfeited (953,065) (2,129,853) (2,467,531)
===================================== =============== =============== ===============
Outstanding at the end of the period 41,101,885 39,227,655 38,579,871
===================================== =============== =============== ===============
Cash-settled awards
At the beginning of the period 295,492 650,906 650,906
Granted 112,509 50,760 50,760
Vested (27,334) (121,852) (121,852)
Forfeited (63,779) (284,322) (284,322)
===================================== =============== =============== ===============
Outstanding at the end of the period 316,888 295,492 295,492
===================================== =============== =============== ===============
Total awards
At the beginning of the period 38,875,363 40,456,670 40,456,670
Granted 10,350,334 7,574,369 7,574,369
Vested (6,790,080) (6,093,717) (6,403,823)
Forfeited (1,016,844) (2,414,175) (2,751,853)
===================================== =============== =============== ===============
Outstanding at the end of the period 41,418,773 39,523,147 38,875,363
===================================== =============== =============== ===============
The fair value of awards granted under the Omnibus Plan is
determined by the average Ashmore Group plc closing share price for
the five business days prior to grant.
The liability arising from cash-settled awards under the Omnibus
Plan at the end of the period and reported within trade and other
payables in the interim condensed consolidated balance sheet is
GBP0.4 million (H1 2016/17: GBP0.3 million; FY2016/17: GBP0.4
million) of which GBPnil (H1 2016/17: GBPnil; FY2016/17: GBPnil)
relates to vested awards.
9) Taxation
Analysis of tax charge for the period
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
================================================== ============ ============ =========
Current tax
UK corporation tax on profits for the period 14.3 17.4 31.3
Overseas corporation tax charge 4.6 4.7 7.9
Adjustments in respect of prior periods - - 1.5
================================================== ============ ============ =========
18.9 22.1 40.7
Deferred tax
Origination and reversal of temporary differences (3.2) 0.6 (3.2)
Effect of changes in corporation tax rates 2.1 - (0.8)
Tax expense for the period 17.8 22.7 36.7
================================================== ============ ============ =========
Factors affecting tax charge for the period
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================================================== ============ ============ =========
Profit before tax 99.0 121.5 206.2
======================================================== ============ ============ =========
Profit on ordinary activities multiplied by the blended
UK tax rate for the financial year of 19.00% (H1
2016/17: 19.75%; FY2016/17: 19.75%) 18.8 24.0 40.7
Effects of:
Non-deductible expenses 0.1 0.9 0.2
Deduction in respect of vested shares/exercised options
(Part 12, Corporation
Tax Act 2009) (3.0) (1.0) (2.8)
Different rate of taxes on overseas profits (0.5) (0.3) 1.4
Non-taxable income (0.5) (1.2) (4.1)
Disallowed deferred tax assets - 0.3 -
Effect on deferred tax balance from changes in the
US Federal tax rate* 2.1 - (0.8)
Non-deductible loss on associates 0.3 - -
Other items 0.5 - 0.5
Adjustments in respect of prior periods - - 1.6
======================================================== ============ ============ =========
Tax expense for the period 17.8 22.7 36.7
======================================================== ============ ============ =========
* The US Federal tax rate reduced to 21% with effect from 1
January 2018. This reduction has been taken into account in the
calculation of current and deferred tax for the Group's US
subsidiaries.
10) Earnings per share
Basic earnings per share at 31 December 2017 of 11.96 pence (H1
2016/17: 14.72 pence; FY2016/17: 25.07 pence) is calculated by
dividing the profit after tax for the financial period attributable
to equity holders of the parent of GBP80.2 million (H1 2016/17:
GBP98.4 million; FY2016/17: GBP167.6 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.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Number of Number of Number of
ordinary ordinary ordinary
shares shares shares
===================================================== ============ ============ ===========
Weighted average number of ordinary shares used in
the calculation of basic earnings per share 670,651,535 668,479,616 668,488,046
Effect of dilutive potential ordinary shares - share
awards 40,377,421 38,020,304 38,451,642
===================================================== ============ ============ ===========
Weighted average number of ordinary shares used in
the calculation
of diluted earnings per share 711,028,956 706,499,920 706,939,688
===================================================== ============ ============ ===========
11) Dividends
Dividends paid
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
================================================= ============ ============ =========
Final dividend for FY2016/17: 12.10p (FY2015/16:
12.10p) 85.4 84.9 84.9
Interim dividend for FY2016/17: 4.55p - - 31.7
================================================= ============ ============ =========
85.4 84.9 116.6
================================================= ============ ============ =========
In addition, the Group paid GBP1.2 million (H1 2016/17: GBP1.7
million; FY2016/17: GBP2.3 million) of dividends to non-controlling
interests.
Dividends declared/proposed
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Company pence pence pence
==================================== ============ ============ =========
Interim dividend declared per share 4.55 4.55 4.55
Final dividend proposed per share - - 12.10
==================================== ============ ============ =========
4.55 4.55 16.65
==================================== ============ ============ =========
The Board has approved an interim dividend for the six months to
31 December 2017 of 4.55 pence per share (six months to 31 December
2016: 4.55 pence per share; final dividend for the year to 30 June
2017: 12.10 pence per share) payable on 4 April 2018 to
shareholders on the register on 9 March 2018.
12) Goodwill and intangible assets
Fund management
Goodwill relationships Total
GBPm GBPm GBPm
================================================== ======== =============== ======
Cost (at original exchange rate)
================================================== ======== =============== ======
At 31 December 2017, 31 December 2016 and 30 June
2017 57.5 39.5 97.0
================================================== ======== =============== ======
Accumulated amortisation and impairment
================================================== ======== =============== ======
At 30 June 2016 - (31.1) (31.1)
Amortisation charge for the period - (2.2) (2.2)
At 31 December 2016 - (33.3) (33.3)
Amortisation charge for the period - (2.3) (2.3)
At 30 June 2017 - (35.6) (35.6)
Amortisation charge for the period - (2.2) (2.2)
At 31 December 2017 - (37.8) (37.8)
================================================== ======== =============== ======
Net book value
================================================== ======== =============== ======
At 30 June 2016 70.1 12.4 82.5
Accumulated amortisation for the period - (2.2) (2.2)
FX revaluation through reserves* 4.7 0.8 5.5
================================================== ======== =============== ======
At 31 December 2016 74.8 11.0 85.8
Accumulated amortisation for the period - (2.3) (2.3)
FX revaluation through reserves* (3.2) (0.4) (3.6)
================================================== ======== =============== ======
At 30 June 2017 71.6 8.3 79.9
Accumulated amortisation for the period - (2.2) (2.2)
FX revaluation through reserves* (2.7) (0.3) (3.0)
================================================== ======== =============== ======
At 31 December 2017 68.9 5.8 74.7
================================================== ======== =============== ======
* FX revaluation through reserves is a result of the
retranslation of US dollar-denominated intangibles and
goodwill.
Goodwill
The Group's goodwill balance relates principally to the
acquisition of the equities business in May 2011.
During the period to 31 December 2017, no factors indicating
potential impairment of goodwill were noted.
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. The
key assumptions used to determine the recoverable amount were
disclosed in the annual report and accounts for the year ended 30
June 2017. Based on management's assessment as at 31 December 2017,
the recoverable amount was in excess of the carrying value of
goodwill and no impairment was implied.
Fund management relationships
Intangible assets comprise fund management relationships related
to profit expected to be earned from clients of the equities
business.
During the period to 31 December 2017, there was a review
process to identify factors indicating whether the Group's fund
management relationships were impaired. None was identified and as
a consequence, no impairment charge has been included within the
Group's other expenses in the consolidated statement of
comprehensive income in the period (H1 2016/17: GBPnil; FY2016/17:
GBPnil).
The remaining amortisation period for fund management
relationships is one and a half years (31 December 2016: two and a
half years; 30 June 2017: two years).
13) Fair value of financial instruments
The accounting policies relating to the estimation of fair
values are consistent with those applied in the preparation of the
Group's annual report and accounts for the year ended 30 June
2017.
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 is summarised below:
At 31 December At 31 December At 30 June
2017 2016 2017
=========================== ============================= =============================
Level Level Level Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================= ===== ===== ===== ====== ===== ====== ====== ====== ===== ====== ====== ======
Financial assets
Investment securities 79.5 83.3 87.7 250.5 51.1 76.1 51.0 178.2 60.8 85.5 84.9 231.2
Non-current
financial assets
held-for-sale - 24.5 - 24.5 - 23.6 29.4 53.0 - 7.1 - 7.1
Available-for-sale
financial assets - - 13.6 13.6 0.5 0.1 8.4 9.0 - 0.1 11.2 11.3
Fair value through
profit or loss
investments 8.1 16.4 - 24.5 - 63.5 - 63.5 - 36.0 - 36.0
Non-current
asset investments - 4.4 20.5 24.9 - 4.6 16.5 21.1 - 4.5 18.0 22.5
Derivative financial
instruments - 0.9 - 0.9 - - - - - 0.3 - 0.3
87.6 129.5 121.8 338.9 51.6 167.9 105.3 324.8 60.8 133.5 114.1 308.4
======================= ===== ===== ===== ====== ===== ====== ====== ====== ===== ====== ====== ======
Financial liabilities
Third-party
interests in
consolidated
funds 36.8 43.8 32.8 113.4 29.6 40.1 31.7 101.4 30.9 42.4 35.6 108.9
Derivative financial
instruments - - - - - 3.8 - 3.8 - - - -
Non-current
financial liabilities
held-for-sale - 9.3 - 9.3 - 0.3 - 0.3 - - - -
36.8 53.1 32.8 122.7 29.6 44.2 31.7 105.5 30.9 42.4 35.6 108.9
======================= ===== ===== ===== ====== ===== ====== ====== ====== ===== ====== ====== ======
There were no transfers between Level 1, Level 2 and Level 3 of
the fair value hierarchy during the period.
Changes in Level 3 financial assets and liabilities recognised
at fair value on a recurring basis
Third-party
Non-current Available-for-sale interests
Investment financial financial Non-current in consolidated
securities assets held-for-sale assets asset investments funds
GBPm GBPm GBPm GBPm GBPm
======================== =========== ===================== ================== ================== ================
At 31 December 2016 51.0 29.4 8.4 16.5 31.7
Net
additions/(disposals) - - - 1.9 -
Reclassification from
HFS investments
to consolidated funds 28.1 (28.1) - - -
Unrealised
gains/(losses)
recognised
in finance income 5.8 (1.3) - (0.4) 3.9
Unrealised
gains/(losses)
recognised
in other comprehensive
income - - 2.8 - -
======================== =========== ===================== ================== ================== ================
At 30 June 2017 84.9 - 11.2 18.0 35.6
Net
additions/(disposals) 3.4 - - 2.1 (1.5)
Unrealised
gains/(losses)
recognised
in finance income 1.9 - - 0.4 (1.3)
Unrealised
gains/(losses)
recognised
in other comprehensive
income (2.5) - 2.4 - -
At 31 December 2017 87.7 - 13.6 20.5 32.8
======================== =========== ===================== ================== ================== ================
Valuation of Level 3 financial 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. The valuation
techniques used in the estimation of fair values are consistent
with those applied in the preparation of the Group's annual report
and accounts for the year ended 30 June 2017.
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
31 December 2017, 31 December 2016 and 30 June 2017.
14) Seed capital investments
The Group considers itself a sponsor of an investment fund when
it facilitates the establishment of the fund in which the Group is
the investment manager. The Group ordinarily invests seed capital
in order to provide initial scale and facilitate the marketing of
new funds to third-party investors. These funds are 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.
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 period, one fund (H1
2016/17: two funds; FY2016/17: three funds) was seeded in this
manner and 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 31
December 2017 were as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
===================================================== =========== =========== =======
Non-current financial assets held-for-sale 24.5 53.0 7.1
Non-current financial liabilities held-for-sale (9.3) (0.3) -
===================================================== =========== =========== =======
Seed capital investments classified as held-for-sale 15.2 52.7 7.1
===================================================== =========== =========== =======
Investments cease to be classified as held-for-sale when they
are no longer controlled by the Group. A loss of control may happen
either 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. During the period, no fund (H1 2016/17: one fund; FY2016/17:
one fund) was transferred to FVTPL category.
If the fund remains under the control of the Group for more than
one year from the original investment date and it is assessed that
the Group controls the investment fund in accordance with the
requirements of IFRS 10, it will cease to be classified as
held-for-sale and will be consolidated line by line. During the
period, one fund (H1 2016/17: one fund; FY2016/17: two funds) with
an aggregate carrying amount of GBP7.2 million (H1 2016/17: GBP4.3
million; FY2016/17: GBP12.5 million) was transferred to
consolidated funds. There was no impact on net assets or total
comprehensive income as a result of the transfer.
Included within finance income are net gains of GBP0.7 million
(H1 2016/17: net gains of GBP6.4 million; FY2016/17: net gains of
GBP9.3 million) in relation to held-for-sale investments (refer to
note 7).
As the Group considers itself to have one business 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 held at fair value at 31
December 2017 comprise equities held as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
============================================== =========== =========== =======
Equities listed on stock exchange - 0.5 -
Equity funds 13.6 8.5 11.3
Seed capital classified as available-for-sale 13.6 9.0 11.3
============================================== =========== =========== =======
Included within other comprehensive income are net gains of
GBP2.4 million (H1 2016/17: net gains of GBP0.6 million; FY2016/17:
net gains of GBP2.5 million) in relation to available-for-sale
investments.
c) Fair value through profit or loss investments
FVTPL investments at 31 December 2017 comprise shares held in
debt and equity funds as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
Equity funds 23.5 20.3 30.2
Debt funds 1.0 43.2 5.8
============================================= =========== =========== =======
Seed capital classified as FVTPL investments 24.5 63.5 36.0
============================================= =========== =========== =======
Included within finance income are net gains of GBP2.0 million
(H1 2016/17: net gains of GBP12.3 million; FY2016/17: net gains of
GBP9.6 million) on the Group's FVTPL investments.
d) Consolidated funds
The Group has consolidated 12 investment funds as at 31 December
2017 (31 December 2016: 11 investments funds; 30 June 2017: 13
investment funds), over which the Group is deemed to have control.
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.
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
============================================ =========== =========== ========
Investment securities 250.5 178.2 231.2
Cash and cash equivalents 11.2 9.9 12.4
Other (0.1) 0.4 (1.4)
Third-party interests in consolidated funds (113.4) (101.4) (108.9)
============================================ =========== =========== ========
Consolidated seed capital investments 148.2 87.1 133.3
============================================ =========== =========== ========
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 interim condensed consolidated statement of
comprehensive income are net gains of GBP6.1 million (H1 2016/17:
net gains of GBP4.9 million; FY2016/17: net gains of GBP12.8
million) relating to the Group's share of the results of the
individual statements of comprehensive income for each of the
consolidated funds, as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
====================================================== =========== =========== =======
Finance income 2.7 4.0 7.8
Gains/(losses) on investment securities 9.4 6.7 22.4
Change in third-party interests in consolidated funds (4.9) (4.4) (12.5)
Other expenses (1.1) (1.4) (4.9)
====================================================== =========== =========== =======
Net gains/(losses) on consolidated funds 6.1 4.9 12.8
====================================================== =========== =========== =======
Included in the Group's cash generated from operations is GBP0.8
million cash utilised in operations (H1 2016/17: GBP1.4 million
cash utilised in operations; FY2016/17: GBP3.5 million cash
utilised in operations) relating to consolidated funds.
As at 31 December 2017, the Group's consolidated funds were
domiciled in Guernsey, Indonesia, Luxembourg 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.
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
============================================ =========== =========== =======
Non-current asset investments at fair value 24.9 21.1 22.5
============================================ =========== =========== =======
Included within finance income are net gains of GBP0.4 million
(H1 2016/17: net gains of GBP3.3 million; FY2016/17: net gains of
GBP2.5 million) on the Group's non-current asset investments.
15) Financial risk management
The Group is subject to strategic, business, client, investment,
operational and treasury risks throughout its business as discussed
in the Risk management section of the Group's annual report for the
year ended 30 June 2017, which provides further detail on the
Group's exposure to and the management of risks derived from the
financial instruments it uses.
Those risks and the risk management policies have not changed
significantly during the six months to 31 December 2017.
16) Share capital
Authorised share capital
Number of Nominal value
shares GBP'000
=========================================================== =========== =============
Ordinary shares of 0.01p each at 31 December 2017, 30 June
2017 and 31 December 2016 900,000,000 90
=========================================================== =========== =============
Issued share capital - allotted and fully paid
As at As at As at
As at 31 December As at 31 December As at 30 June
31 December 2017 31 December 2016 30 June 2017
2017 Nominal 2016 Nominal 2017 Nominal
Number of value Number of value Number of value
shares GBP'000 shares GBP'000 shares GBP'000
========================= ============ ============ ============ ============ =========== ========
Ordinary shares of 0.01p
each 712,740,804 71 712,740,804 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.
As at 31 December 2017, there were equity-settled share awards
issued under the Omnibus Plan totalling 41,101,885 shares (31
December 2016: 39,227,655 shares; 30 June 2017: 38,579,871 shares)
that have release dates ranging from September 2018 to December
2022.
17) 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 31
December 2017, the EBT owned 34,953,460 (31 December 2016:
39,009,575; 30 June 2017: 38,701,321) ordinary shares of 0.01p with
a nominal value of GBP3,495 (31 December 2016: GBP3,901; 30 June
2017: GBP3,870) and shareholders' funds are reduced by GBP105.5
million (31 December 2016: GBP116.3 million; 30 June 2017: GBP115.4
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.
18) 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
The compensation paid to or payable to key management for
employee services is shown below:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
=================================== ============= ============= =========
Short-term employee benefits 0.1 0.1 1.4
Defined contribution pension costs - - -
Share-based payment benefits - - 4.8
=================================== ============= ============= =========
0.1 0.1 6.2
=================================== ============= ============= =========
Share-based payment benefits represent the fair value charge to
the interim condensed consolidated statement of comprehensive
income of share awards.
During the period, there were no other transactions entered into
with key management personnel (H1 2016/17 and FY2016/17: none).
Aggregate key management personnel interests in consolidated funds
at 31 December 2017 were GBP37.9 million (31 December 2016: GBP37.9
million; 30 June 2017: GBP42.4 million).
Transactions with Ashmore funds
During the period, the Group received GBP62.8 million of gross
management fees and performance fees (H1 2016/17: GBP58.3 million;
FY2016/17: GBP111.6 million) from the 87 funds (H1 2016/17: 85
funds; FY2016/17: 86 funds) it manages and which are classified as
related parties. As at 31 December 2017, the Group had receivables
due from funds of GBP5.1 million (31 December 2016: GBP5.6 million;
30 June 2017: GBP5.1 million).
Transactions with the EBT
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.
As at 31 December 2017, the loan outstanding was GBP104.3 million
(31 December 2016: GBP114.0 million; 30 June 2017: GBP103.5
million).
Transactions with the Ashmore Foundation
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 into the
countries and communities. The Group made donations of GBP20,000 to
the Foundation during the period (H1 2016/17: GBP40,000; FY2016/17:
GBP50,000).
19) Commitments
Undrawn investment commitments
As at As at As at
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
===================================================== ============ ============ ========
AA Development Capital India Fund 1 LLC 1.1 1.3 1.2
Ashmore Andean Fund II, LP 1.9 1.7 1.8
Ashmore Emerging Markets Corporate Private Debt Fund 0.3 0.5 0.3
Ashmore I - CAF Colombian Infrastructure Senior Debt
Fund 13.8 16.1 15.0
Ashmore I - FCP Colombia Infrastructure Fund - 0.3 0.1
Ashmore Special Opportunities Fund LP 10.5 1.7 1.6
Everbright Ashmore China Real Estate Fund 1.4 1.5 1.4
KCH Healthcare LLC 3.2 5.3 4.5
VTBC-Ashmore Real Estate Partners I, LP 3.6 3.5 3.5
Total undrawn investment commitments 35.8 31.9 29.4
===================================================== ============ ============ ========
20) Post-balance sheet events
There are no post-balance sheet events that require adjustment
or disclosure in these interim condensed consolidated financial
statements.
21) Accounting estimates and judgements
In preparing these interim condensed consolidated financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were substantially the same as those that
applied to the annual report and accounts as at and for the year
ended 30 June 2017.
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
the 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.
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
- the interim condensed consolidated financial statements have
been prepared in accordance with International Accounting Standard
34 Interim Financial Reporting as adopted by the European Union;
and
- the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Mark Coombs
Chief Executive Officer
7 February 2018
Independent Review Report to Ashmore Group plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 December 2017 which comprises the consolidated
statement of comprehensive income, consolidated balance sheet,
consolidated statement of changes in equity, consolidated cash flow
statement and the related explanatory notes. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
December 2017 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules (the DTR)
of the UK's Financial Conduct Authority (the UK FCA).
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The Directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Thomas Brown
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
7 February 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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