TIDMASHM
RNS Number : 3903W
Ashmore Group PLC
09 February 2017
Ashmore Group plc
9 February 2017
RESULTS FOR THE SIX MONTHSING 31 DECEMBER 2016
Ashmore Group plc (Ashmore, the Group), the specialist Emerging
Markets asset manager, today announces its audited results for the
six months ending 31 December 2016.
Overview
- Assets under management (AuM) of US$52.2 billion (30 June
2016: US$52.6 billion), an increase of 5% over 2016
- Investor sentiment towards Emerging Markets continues to improve
- Active investment processes delivering strong investment
performance across fund range
- 91% of AuM outperforming benchmarks over one year, 81% over
three years and 86% over five years (30 June 2016: 69%, 63% and
73%, respectively)
- Net revenue increased 24% to GBP144.1 million
- Net management fees of GBP114.9 million benefited from stronger US dollar
- Performance fees of GBP21.6 million
- Highly efficient business model
- Adjusted EBITDA increased 32% to GBP89.7 million; margin increased from 63% to 66%
- Non-VC operating expenses reduced through continued focus on costs
- Active seed capital management generated gains of GBP25.8
million (H1 2015/16: GBP9.2 million loss)
- Profit before tax increased 94% to GBP121.5 million
- Diluted EPS of 13.9p (H1 2015/16: 6.5p)
- Interim dividend per share maintained at 4.55p
Commenting on the Group's results, Mark Coombs, Chief Executive
Officer, Ashmore Group said:
"Emerging markets produced very strong investment returns in
2016 and delivered a 5% increase in Ashmore's AuM over the calendar
year. Relative investment performance is strong with more than 90%
of assets outperforming benchmarks over one year, and more than 80%
over three and five years. This backdrop, together with favourable
currency movements, delivered a 94% increase in Ashmore's profit
before tax. While the US election outcome interrupted the
improvement in sentiment towards Emerging Markets, the effect has
been short-lived with asset prices strengthening into 2017. The
combination of attractive absolute and relative returns,
accelerating GDP growth, and low allocations all support the
expectation of further strong performance in 2017 and a return to
the improving flow trend seen for most of 2016."
Analysts briefing
There will be a presentation for analysts at 10.00am on 9
February 2017 at the offices of UBS at 5 Broadgate, London, EC2M
2QS. 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
Kit Dunford +44 (0)20 3727 1143
Chief Executive Officer's report
The positive trends in Emerging Markets asset prices and
sentiment that were established early in 2016 continued during the
six months to 31 December and meant that, over the calendar year,
Emerging Markets delivered strong returns. The US election in
November, and consequent uncertainty regarding trade and other
policies, interrupted the recovery towards the end of the period,
but the fundamental strengths of Emerging Markets and the
attractive absolute and relative valuations on offer have enabled
the positive momentum to resume after only a brief
interruption.
Assets under management fell slightly from US$52.6 billion to
US$52.2 billion during the six months, but increased by 5% from
US$49.4 billion over the course of the calendar year. However,
profits increased significantly compared with the same period in
the prior year, reflecting the combination of higher management and
performance fees, strong market returns on the Group's seed
capital, the positive impact of a more favourable GBP:USD rate on
the Group's assets, and continued disciplined control of operating
costs.
Ashmore's investment processes continued to deliver significant
outperformance throughout the period as a direct result of active
management and having added risk in earlier periods of market
weakness. As at 31 December 2016, more than 90% of the Group's AuM
were outperforming benchmarks over one year, and more than 80% were
outperforming over three and five years.
Adjusted net revenue of GBP135.7 million increased 25% versus
the same period in the prior year, and comprised net management
fees of GBP114.9 million, performance fees of GBP21.6 million, and
other revenues of GBP2.2 million. The adjusted EBITDA margin
increased to 66% (H1 2015/16: 63%) as the cost control inherent in
the Group's business model limited the growth in total adjusted
operating costs to 14%.
Profit before tax of GBP121.5 million increased 94% from GBP62.7
million in the prior half-year period. Diluted earnings per share
increased by 114% to 13.9 pence (H1 2015/16: 6.5 pence) and the
Board has declared an interim dividend of 4.55 pence per share (H1
2015/16: 4.55 pence per share).
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 on
foreign exchange translation gains and losses.
Non-GAAP alternative performance measures (APMs) are defined and
explained below.
Reclassification of
==================================
Seed
H1 2016/17 capital-related Foreign exchange H1 2016/17 H1 2015/16
GBPm Statutory items translation Adjusted Adjusted % change
================= ================ ================ ================ ================ ================= ========
Net management
fees 114.9 - - 114.9 98.7
Performance fees 21.6 - - 21.6 8.6
Other revenue 2.2 - - 2.2 2.1
Foreign exchange 5.4 - (8.4) (3.0) (1.0)
----------------- ---------------- ---------------- ---------------- ---------------- ----------------- --------
Net revenue 144.1 - (8.4) 135.7 108.4 +25%
Investment
securities and
third-party
interests 2.3 (2.3) - - -
Personnel
expenses (36.2) - 1.7 (34.5) (28.0)
Other expenses (12.9) 1.4 - (11.5) (12.4)
================= ================ ================ ================ ================ ================= ========
EBITDA 97.3 (0.9) (6.7) 89.7 68.0 +32%
EBITDA margin 68% - - 66% 63%
Depreciation and
amortisation (2.7) - - (2.7) (2.5)
================= ================ ================ ================ ================ ================= ========
Operating profit 94.6 (0.9) (6.7) 87.0 65.5 +33%
Net finance
income/(expense) 26.1 (10.0) (14.9) 1.2 1.0
Associates and
joint ventures 0.8 - - 0.8 (1.0)
Seed
capital-related
items - 10.9 - 10.9 (8.3)
Profit before tax
excluding FX
translation 121.5 - (21.6) 99.9 57.2 +75%
================= ================ ================ ================ ================ ================= ========
Foreign exchange
translation - - 21.6 21.6 5.5
================= ================ ================ ================ ================ ================= ========
Profit before tax 121.5 - - 121.5 62.7 +94%
================= ================ ================ ================ ================ ================= ========
Market review
Investment themes
External debt Local currency Corporate debt Blended debt
============================ ============================ ============================ ============================
Invests in debt instruments Invests in local currencies Invests in debt instruments Invests in both hard
issued by sovereigns and local issued by public and private currency and local
(governments) and currency-denominated sector companies. currency-denominated assets
quasi-sovereigns instruments issued by across sovereigns,
(government-sponsored). sovereign, quasi-sovereigns
quasi-sovereign and corporates.
and corporate issuers.
============================ ============================ ============================ ============================
Equities Alternatives Multi-asset Overlay/liquidity
============================ ============================ ============================ ============================
Invests in equity and Provides access to private Specialised, efficient, Separates and centralises
equity-related instruments equity, healthcare, all-in-one access to a the currency risk of an
within the Emerging Markets infrastructure, special long-term underlying Emerging Markets
including global, situations, distressed strategic asset allocation asset
regional, small cap and debt and real estate across the full Emerging class in order to manage it
frontier opportunities. investment opportunities. Markets investment universe. effectively and efficiently.
============================ ============================ ============================ ============================
Market movements and sentiment during the period were dominated
by political events and rhetoric emanating from Developed Markets.
While these may have some bearing on specific parts of Emerging
Markets in due course, many countries continue on the path of
improving economic and market performance driven by domestic
factors. Indeed, Emerging Markets fixed income assets outperformed
developed world alternatives over the period. Hard currency assets
outperformed local currency markets, and high-yield performed
better than investment grade.
Investors are increasingly recognising the robust fundamentals
and attractive asset prices in Emerging Markets, and the pick-up in
industry flows in the early part of the period supported the
ongoing market rally. This enabled Emerging Markets fixed income
asset classes to outperform Developed Markets bonds, even as rising
inflation expectations, particularly in the US, caused a steepening
of nominal yield curves.
The US election in November led to weakness in fixed income
markets. Within Emerging Markets, the effect was understandably
greater in some countries deemed to be vulnerable to the risk of a
more protectionist US administration. There was some profit taking
after a strong run in Emerging Markets, albeit they still delivered
healthy absolute returns of 9% to 10% across fixed income indices
for calendar year 2016.
Emerging Markets equities also delivered good returns over both
the six-month period (MSCI EM +4%) and 2016 as a whole (MSCI EM
+11%), driven by expectations of accelerating GDP growth.
Despite this recent performance, valuations remain attractive
both in absolute terms and relative to alternatives in the
developed world, and there remains a supportive technical position
with investors significantly underweight or not exposed to Emerging
Markets.
External debt
The EMBI GD external debt index was unchanged (-0.1%) over the
six months, but the spread over US Treasuries tightened by 46bps
and high yield bonds (+3.1%) significantly outperformed investment
grade credits (-2.9%). The diversity of the asset class, and the
opportunities available for an active manager, are illustrated by
the wide range of country returns delivered over the six months,
from -23% for Belize to +27% for Venezuela.
Ashmore's investment performance was strong in the period,
benefiting from returns generated on positions entered into during
recent periods of market dislocation, consistent with the Group's
long-standing value-based investment philosophy. For example,
shorter duration and higher yielding sovereign and quasi-sovereign
bonds, particularly in Latin America, have generated strong
returns. Over three years, Ashmore's external debt broad composite
has outperformed and returned +7.4% annualised versus +5.9% for the
EMBI GD benchmark index.
The EMBI GD index currently yields nearly 6% and its spread over
US Treasuries of 340bps provides a healthy cushion for further
outperformance against the backdrop of steadily rising US interest
rates.
Local currency
The unhedged GBI-EM GD index fell by 3.6%, predominantly due to
renewed strength in the US dollar towards the end of the period. On
a hedged basis, the index returned -1.2%. As is the case for
external debt, the local currency index performance masks a wide
range of unhedged returns by country, from +11% for South Africa to
-20% for Turkey.
Active management of both currency and local rates positions has
delivered good relative performance in local currency portfolios,
with particular value in higher-yielding currencies where there is
potential for political or institutional reforms, such as in
Brazil. In contrast, currencies offering low carry and greater
exposure to global trade flows are less attractive. Over three
years, the Group's local currency bonds composite has outperformed
the benchmark index, returning -3.0% annualised versus -4.1% for
the GBI-EM GD index.
The asset class offers good value, as shown by an index yield of
approximately 7% and attractive carry available from a diverse
range of Emerging Markets currencies. With the potential for higher
inflation but lower real interest rates in the US, and the
historically positive relationship between Emerging Markets FX
performance and GDP growth, there is scope for Emerging Markets
currency appreciation to contribute positively to asset class
returns.
Corporate debt
Emerging Markets corporate debt performed well over the period,
with the CEMBI BD index returning +1.7%. As with sovereign debt,
high yield credits (+5.3%) outperformed investment grade
(-0.5%).
Over three years, the Group's corporate debt composite has
returned +4.5% annualised versus +5.3% for the CEMBI BD benchmark
index. The performance over one and two years is particularly
strong with annualised outperformance of between 5% and 10%,
reflecting the research-led active management of corporate credit
risk, in particular identifying and buying oversold credits in
periods of market weakness, and including opportunities in
off-benchmark bonds.
The 12-month default rate on Emerging Markets high yield credit
is 4.1%, marginally higher than the long-run average of 3.7%, and
running significantly below the US high yield default rate of 7.1%.
With the potential for easier financial conditions via a pick-up in
flows to Emerging Markets, business conditions should improve and
support a gradual improvement in default rates. The shorter
duration, higher yielding nature of the asset class is particularly
attractive in a period of US monetary policy tightening.
Blended debt
The standard blended debt benchmark (50% EMBI GD, 25% GBI-EM GD,
25% ELMI+) fell 1.5% over the six-month period, reflecting the
effect of a stronger US dollar on local currency-denominated
assets.
Ashmore's active management of the constituent elements has
delivered significant outperformance in blended debt portfolios. In
this period, reducing Emerging Markets FX exposure and shortening
duration, together with an off-benchmark exposure to corporate
debt, meant that good relative performance was delivered even in
weaker market conditions such as when yield curves steepened around
the time of the US election.
Over three years, the Group's blended debt composite has
returned 4.7% annualised versus 1.1% for the standard
benchmark.
Blended debt strategies offer the potential for significant
outperformance through broad-based, actively managed exposures to
underlying asset classes that provide a wide range of returns.
Demand is therefore expected to continue to come from a broad range
of both institutional and intermediated retail investors.
Equities
Equities outperformed fixed income during the period, with the
MSCI EM (net) index rising 4.5%. The MSCI Frontier (net) and MSCI
Small Cap (net) indices rose 3.2% and 0.9%, respectively.
The Group's range of specialist equity funds continues to
perform well relative to their respective benchmarks. In
particular, the Global Emerging Markets small cap, Frontier, India
and Middle East funds have strong track records over three and five
years.
The ongoing improvements in Emerging Markets macro drivers, in
particular the potential for the twin headwinds of FX weakness and
falling commodity prices to become tailwinds, augurs well for an
improvement in the profit cycle. However, the sensitivity of
Emerging Markets equities beta to shocks emanating from Developed
Markets means that disciplined, active management is required to
capture returns.
Alternatives
AuM in the theme was unchanged over the period as no new capital
was raised and investment performance was flat. The Group is
actively investing recently raised capital, for example in
Colombia, and continues to explore opportunities to grow this
theme.
Multi-asset
Similar to blended debt, but with the inclusion of equities, the
multi-asset theme offers investors exposure to a broad range of
actively managed investment themes, thereby increasing
diversification and offering potentially higher returns through the
cycle.
The investment performance of the Group's Emerging Markets
multi-asset funds is strong, with all funds significantly
outperforming their respective benchmarks over one, three and five
years.
Overlay/liquidity
AuM in the overlay/liquidity theme increased by US$0.5 billion
during the period as a result of net inflows.
Market outlook
The prospects for Emerging Markets in 2017, and over the longer
term, are very attractive. The fundamental strength and flexibility
of the economies contrasts sharply with much of the developed
world, and these characteristics have enabled Emerging Markets to
adjust and to withstand the global economic challenges faced over
the past three to five years, many of which originated in developed
nations.
Emerging Markets' economic growth is expected to accelerate this
year, both against recent experience and versus developed
countries. This growth outlook is supported by the improvement in
export competiveness that has occurred through currency adjustments
since 2011. Importantly, inflation is under control and falling
across many Emerging Markets as central banks have acted quickly
and appropriately by raising interest rates as currencies have
weakened.
Despite the strong performance in 2016, Emerging Markets assets
remain attractively priced, with substantial further US interest
rate increases already anticipated in valuations. The US dollar may
remain stronger for a while longer, but its medium-term prospects
against Emerging Markets currencies are arguably weaker, as fiscal
stimulus in the US could lead to higher inflation and the Federal
Reserve is unlikely to raise rates too rapidly given the United
States' 330% debt/GDP ratio. If real interest rates therefore fall,
this is likely to put downward pressure on the US dollar, to the
benefit of local currency assets in Emerging Markets.
Indeed, with a new US president focused on stimulating the
domestic economy, potentially leading to even higher levels of
debt, then the combination of rising inflation and a weaker
currency may be desirable in the short term. The expected near-term
pick-up in US economic activity should have a positive impact on
the global economy including Emerging Markets in the short term. If
the risk of a more protectionist stance by the US comes to pass,
then it is unlikely to have a uniform effect across Emerging
Markets, and therefore the diversity of the asset classes and the
ability to manage country and company exposures actively will be
increasingly important.
Finally, after several years of capital outflows as investors
have withdrawn money from Emerging Markets to fund QE trades in
Developed Markets, the technical position is favourable.
Allocations to Emerging Markets are low and underweight and in some
cases even below investors' own target levels, and therefore should
increase as Emerging Markets continue to deliver strong absolute
and relative investment returns. An additional factor in favour of
switching allocations from Developed Markets to Emerging Markets is
the nearly US$9 trillion of government debt that trades at negative
yields, representing 20% of the indexed bonds issued by developed
nations.
Ashmore has a strong, active investment performance track record
and is well positioned to benefit from these capital flows.
Strategy/business developments
During the period, the Group consolidated its US operations into
its operating hub in New York, thus locating investment
professionals in the specialist equities business alongside
distribution and support functions, and delivering operational
efficiencies through the combination of the offices.
In December 2016, Ashmore completed the sale of its local fund
management business in Turkey. Given the anticipated regulatory
changes, various options to develop the local business were
considered, as a result of which an offer was received from another
independent manager. Including seed capital gains realised in the
period, the transaction resulted in a small pre-tax gain, and will
free up resources and allow consideration of other local markets
with appropriate AuM and profit growth potential.
In China, the expected improvement in performance of the fund
management joint venture is on track following the completion of
the transaction to introduce China Taiping Insurance Group Limited
as a majority shareholder.
As a result of actions taken in recent periods to rationalise
the Group's local market platforms, these businesses are now
performing as expected and delivering an increased contribution to
Group operating profits. In aggregate, the local platforms now
manage AuM of more than US$2 billion, or approximately 5% of the
Group total. The majority of this is in Indonesia and Colombia, but
the nascent businesses in the Middle East are developing well. Fund
performance is particularly strong in areas such as Indonesian and
Indian equities, and Colombia infrastructure. Over the past three
years, AuM managed by the local businesses has more than doubled,
with an increase in headcount of less than 15%.
With regards to the process for the UK to exit the European
Union (Brexit), there has been no new information relevant to the
Group since it published its annual report in September 2016. The
Group remains focused on three principal issues: the passporting of
financial services; counterparty relationships; and the small
number of UK-based employees that are potentially affected.
Additionally, the management of foreign exchange exposures is
relevant given the impact of the EU referendum outcome on the value
of Sterling. Managing the impact of this falls under the
business-as-usual activities of the FX Management Committee. The
Group remains of the view that the operational implications of
Brexit will be manageable.
AuM development
As at 31 December 2016, assets under management were US$52.2
billion, a decline of US$0.4 billion, or 1%, during the six months.
While there was a net outflow of US$0.7 billion over the six
months, the improving trend continued: the preceding six months had
a net outflow of US$1.8 billion, which was down from the US$5.7
billion net outflow in H1 2015/16.
Investment performance contributed US$0.3 billion and average
AuM of US$53.3 billion was broadly unchanged compared with the same
period in the prior year (H1 2015/16: US$53.6 billion).
Gross subscriptions increased to US$5.5 billion, or 10% of
opening AuM (H1 2015/16: US$3.4 billion, 6% of opening AuM), with
demand continuing to be broadly spread across investment themes,
client types and geographies, and with a good mix of new client
inflows and increases to existing mandates.
Gross redemptions declined to US$6.2 billion, or 12% of opening
AuM (H1 2015/16: US$9.1 billion, 15% of opening AuM). While there
was a slight pick-up in redemptions in the middle of the second
quarter, coinciding with the US election result, this was
influenced by a small number of institutional redemptions from
local currency and external debt. Overall, the trend of falling
redemptions continued in the period as markets sustained upward
momentum.
The Group's client base remains predominantly institutional,
with 90% of AuM from such clients (30 June 2016: 90%) and the
remainder sourced through intermediaries, which provide access to
retail investors. Segregated accounts represent 69% of AuM (30 June
2016: 70%).
Ashmore's principal mutual fund platforms are in Europe and the
US, which together account for 16% of AuM (30 June 2016: 15%). The
European SICAV range comprises 26 funds with AuM of US$7.0 billion
(30 June 2016: US$6.6 billion in 28 funds) and the US 40-Act range
has 10 funds with AuM of US$1.3 billion (30 June 2016: US$1.1
billion in nine funds).
Investment performance
The Group's investment performance is strong and improved
further during the six months, with 91% of AuM outperforming over
one year, 81% over three years, and 86% over five years (30 June
2016: 69%, 63% and 73%, respectively). As at 31 December 2016, 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.
This continuing strong performance results from the Group's
active, value-based investment philosophy, which added risk to
portfolios in the periods of market dislocation experienced over
the past few years. The inefficiency of Emerging Markets, the
frequently changing sentiment towards them, and the consequent
impact on asset prices, continue to provide attractive investment
opportunities for an active, specialist manager. Indeed, the return
potential is demonstrated by the outstanding track record of
Ashmore's EMLIP fund, which will celebrate its 25-year anniversary
in October this year. Since inception, EMLIP has delivered a gross
annualised return of 18.5%, outperforming the 10.6% annualised
return of the EMBI benchmark index, and it is the top performing
fund in its peer group over one, five and 10 years.
Ashmore's fixed income investment committee takes decisions
based on rigorous credit analysis, and places access to market
liquidity at the centre of its process. These factors enable
portfolios to be actively managed and deliver outperformance even
in periods of volatile or weak markets. The main drivers of
investment outperformance recently have been local currency
positioning together with shorter duration and higher yielding
credits in external and corporate debt.
Active management in equities has also produced healthy
outperformance. For instance, the Frontier markets portfolios have
had significant active risk in Pakistan and Nigeria, which combined
represent nearly 15% of the benchmark MSCI Frontier index, and
off-benchmark positions in countries such as Georgia. These three
countries alone contributed 9.5% of outperformance in 2016.
The Group's investments are geographically diverse and broadly
consistent with recent periods, with 39% in Latin America, 23% in
Asia Pacific, 25% 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 Gross AuM
30 June 2016 Gross subscriptions redemptions Net flows Performance 31 December 2016
Investment theme US$bn US$bn US$bn US$bn US$bn US$bn
================== ============= =================== ============ ========= =========== =================
External debt 11.7 1.1 (1.6) (0.5) 0.2 11.4
Local currency 13.3 0.6 (1.2) (0.6) (0.3) 12.4
Corporate debt 5.0 0.9 (0.8) 0.1 0.1 5.2
Blended debt 13.7 1.7 (1.5) 0.2 0.2 14.1
Equities 3.1 0.4 (0.6) (0.2) - 2.9
Alternatives 1.5 - - - - 1.5
Multi-asset 1.2 - (0.2) (0.2) 0.1 1.1
Overlay/liquidity 3.1 0.8 (0.3) 0.5 - 3.6
================== ============= =================== ============ ========= =========== =================
Total 52.6 5.5 (6.2) (0.7) 0.3 52.2
================== ============= =================== ============ ========= =========== =================
AuM % by investment theme as classified by mandate and as
invested
The following table reports AuM 'as invested' by underlying
asset class, which adjusts from the 'by mandate' presentation to
reflect the allocation to underlying asset classes of the
multi-asset and blended debt themes, and the cross-over investment
by certain external debt funds.
AuM at 30 June 2016 AuM at 31 December 2016
=============================================== ===============================================
Classified by Classified as Classified as Classified by Classified as Classified as
mandate invested invested mandate invested invested
Investment theme % % US$bn % % US$bn
================== =============== ============== ============== =============== ============== ==============
External debt 22 39 20.4 22 39 20.4
Local currency 25 31 16.2 24 30 15.8
Corporate debt 10 14 7.6 10 14 7.2
Blended debt 26 - - 27 - -
Equities 6 7 3.5 5 6 3.3
Alternatives 3 3 1.7 3 3 1.7
Multi-asset 2 - - 2 - -
Overlay/liquidity 6 6 3.2 7 8 3.8
================== =============== ============== ============== =============== ============== ==============
Total 100 100 52.6 100 100 52.2
================== =============== ============== ============== =============== ============== ==============
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
EBITDA excluding items relating to foreign exchange translation
and seed capital.
This provides a better understanding of the Group's operational
performance excluding the mark-to-market volatility of foreign
exchange translation and seed capital investments. These
adjustments are merely reclassified within the adjusted profit and
loss account, leaving statutory profit before tax unchanged.
Adjusted EBITDA margin
The ratio of adjusted EBITDA to 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.
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 net management fee
margin, defined as the ratio of net management fee income to
average AuM, by investment theme.
Net management fees Performance fees Net management fee margin
====================== ====================== ===========================
H1 2016/17 H1 2015/16 H1 2016/17 H1 2015/16 H1 2016/17 H1 2015/16
Investment theme GBPm GBPm GBPm GBPm bps bps
================== ========== ========== ========== ========== ============= ============
External debt 23.6 19.9 8.3 0.1 51 54
Local currency 22.7 19.8 10.8 - 43 45
Corporate debt 12.7 11.3 - - 61 59
Blended debt 30.8 25.6 2.5 - 53 54
Equities 11.4 11.5 - - 96 106
Alternatives 7.9 5.0 - 8.5 141 165
Multi-asset 3.8 4.2 - - 82 98
Overlay/liquidity 2.0 1.4 - - 16 17
================== ========== ========== ========== ========== ============= ============
Total 114.9 98.7 21.6 8.6 54 57
================== ========== ========== ========== ========== ============= ============
Revenues
Net revenue increased by 24% from GBP116.4 million to GBP144.1
million largely as a result of higher net management fee income and
a higher contribution from performance fees compared with the same
period in the prior year.
The Group's management fee income, net of distribution costs,
was GBP114.9 million, an increase of 16% over the prior year period
(H1 2015/16: GBP98.7 million). A favourable movement in the average
GBP:USD rate, from 1.5291 to 1.2809, more than offset the decline
in the net management fee margin to 54bps (H1 2015/16: 57bps).
Compared with H2 2015/16, the net management fee margin declined
by 1bp, attributable to the effect of large segregated account
subscriptions, for example in the local currency theme, and
redemptions from higher margin pooled funds in the local currency
and multi-asset themes.
As described above, investment performance across the Group's
funds is strong and consequently performance fees of GBP21.6
million were delivered in the period compared with GBP8.6 million
in H1 2015/16.
At 31 December 2016, 12% of the Group's AuM were eligible to
earn performance fees (30 June 2016: 14%), of which a significant
proportion is subject to rebate agreements.
Translation of the Group's non-Sterling assets and liabilities,
excluding seed capital, at the period end resulted in a foreign
exchange gain of GBP8.4 million (H1 2015/16: GBP8.0 million),
principally reflecting continued US dollar strength against
Sterling.
As explained below, the Group hedges a proportion of its
budgeted management fee income. During the period, the fall in the
GBP:USD exchange rate produced a translation benefit to operating
revenues including approximately GBP16 million related to net
management fee income. This comprises the effect of a favourable
average translation rate, only partially offset by GBP3.0 million
of net realised and unrealised hedging losses (H1 2015/16: GBP1.0
million loss).
Operating costs
Total operating costs increased by 12% to GBP51.8 million (H1
2015/16: GBP46.3 million), reflecting the increased charge for
variable compensation as a result of higher profits and
approximately GBP6 million as a result of the movement in the
GBP:USD exchange rate.
Excluding variable compensation, operating costs fell by 1% to
GBP28.5 million (H1 2015/16: GBP28.8 million). This includes GBP1.4
million of operating costs borne by consolidated funds (H1 2015/16:
GBP1.8 million) and GBP2.5 million of adverse currency effects.
Excluding variable compensation, consolidated fund expenses and
currency effects, operating costs were reduced by 9% versus the
same period in the prior year.
Fixed staff costs of GBP12.9 million increased by 7% compared
with the prior year (H1 2015/16: GBP12.1 million), reflecting
recent expansion in areas such as the local offices in Colombia,
Dubai and Saudi Arabia together with the effect of weaker Sterling
against the US dollar and other currencies. Excluding the effect of
the lower exchange rate, fixed staff costs reduced by 2% compared
with the prior year.
With a disciplined approach to replacing natural turnover within
the Group's centralised functions, together with reduction in
headcount in Turkey and the efficiencies delivered from combining
the US offices, the Group's headcount fell from 266 to 246
employees over the six-month period and the average headcount
declined by 6% compared with the prior year period.
Other operating costs, excluding depreciation and amortisation,
fell by GBP1.3 million to GBP12.9 million. Excluding the effects of
consolidated funds, other operating expenses were GBP11.5 million,
a decline of GBP0.9 million and principally driven by a continued
focus on controlling discretionary expenditure.
As is usual, variable compensation at the half year has been
accrued at 20% of earnings before variable compensation, interest
and tax, resulting in a charge of GBP23.3 million (H1 2015/16:
GBP17.5 million).
The combined depreciation and amortisation charge for the period
was GBP2.7 million (H1 2015/16: GBP2.5 million), with the slight
increase being the effect of a weaker average GBP:USD rate on the
amortisation of US dollar-denominated intangible assets.
Adjusted EBITDA
Adjusted EBITDA, which reclassifies items relating to seed
capital investments and foreign exchange translation effects,
increased 32% to GBP89.7 million (H1 2015/16: GBP68.0 million). The
adjusted EBITDA margin, which reflects the underlying operating
performance, increased to 66% (H1 2015/16: 63%) as while revenues
grew strongly, the growth in total adjusted operating costs was
limited to 14%. Indeed, excluding variable compensation, adjusted
operating costs were flat and were reduced by 9% on an underlying
basis excluding currency effects.
Finance income
Net finance income of GBP26.1 million (H1 2015/16: GBP6.1
million) includes items relating to seed capital investments, which
are described in more detail below. Interest income for the period
was GBP1.2 million (H1 2015/16: GBP1.0 million).
Taxation
The majority of the Group's profit is subject to UK taxation; of
the total current tax charge for the period of GBP22.1 million (H1
2015/16: GBP14.0 million), GBP17.4 million relates to UK
corporation tax (H1 2015/16: GBP13.2 million). The Group's
effective tax rate for the period is 18.7% (H1 2015/16: 24.9%),
which is lower than the blended UK corporation tax rate for the
current financial year of 19.75%, primarily due to tax relief on
Ashmore Group plc shares that vested to employees during the
period, and the impact of tax exemptions on some seed capital
realisations. Note 10 to the interim condensed financial statements
provides a full reconciliation of this deviation from the blended
UK corporation tax rate.
Earnings per share
Basic earnings per share for the period increased by 114% to
14.7 pence (H1 2015/16: 6.9 pence). Diluted earnings per share also
increased by 114% from 6.5 pence to 13.9 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
fulfil development needs across the business. These include funding
establishment costs of distribution offices and local asset
management ventures, seeding new funds, trading or investment in
funds or other assets, and other strategic initiatives.
As at 31 December 2016, total equity attributable to
shareholders of the parent was GBP695.8 million (31 December 2015:
GBP619.2 million, 30 June 2016: GBP676.7 million). Financial
resources available to the Group totalled GBP609.2 million as at 31
December 2016, equivalent to 86 pence per share, and significantly
exceeded the Group's regulatory capital requirement of GBP99.9
million, equivalent to 14 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 GBP94.6 million for
the period (H1 2015/16: GBP57.6 million), the Group generated
GBP96.6 million of cash from operations (H1 2015/16: GBP56.9
million). The adjusted EBITDA for the period of GBP89.7 million
represents 109% of operating cash flows after excluding
consolidated funds (H1 2015/16: 87%).
Cash and cash equivalents by currency
31 December 30 June
2016 2016
GBPm GBPm
========== =========== =======
Sterling 163.9 212.6
US dollar 188.4 123.2
Other 25.8 28.2
========== =========== =======
Total 378.1 364.0
========== =========== =======
Seed capital investments
As at 31 December 2016, the amount invested in seed capital was
GBP189.4 million (at cost) with a market value of GBP233.4 million
(30 June 2016: GBP207.4 million at cost; GBP238.5 million market
value). The 'at cost' investment represents 31% of Group net
tangible equity (30 June 2016: 35%). 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.
The Group manages its seed capital actively. During the period
it made new investments of GBP40.3 million and the favourable
market environment enabled GBP69.7 million of previous investments
to be recycled. Examples of seed capital investment successfully
realised in the period include US$14 million from the short
duration product and US$41 million from funds managed by the local
Indonesian business. These seeded funds manage AuM of US$1.4
billion, illustrating the potential for seeding activity to deliver
meaningful growth in third-party AuM and therefore fee income to
the Group.
Funds that have been historically seeded by the Group represent
11% of the Group's AuM.
Seed capital by currency
31 December 30 June
2016 2016
GBPm GBPm
============= =========== =======
US dollar 210.8 189.2
Indonesian
rupiah 5.8 33.9
Other 16.8 15.4
============== =========== =======
Total market
value 233.4 238.5
============== =========== =======
Seed capital activities represent a profitable use of the
Group's capital resources, with a gain before tax of GBP25.8
million in the period (H1 2015/16: GBP9.2 million loss).
In accordance with IFRS 10, the Group consolidates funds in
which its seeding activity results in a controlling interest. Such
funds made a contribution to profit before tax of GBP4.9 million in
the period (H1 2015/16: GBP3.9 million loss). This comprises a gain
on investment securities of GBP6.7 million (H1 2015/16: GBP19.5
million loss); change in third-party interests loss of GBP4.4
million (H1 2015/16: GBP7.0 million gain); operating expenses of
GBP1.4 million (H1 2015/16: GBP1.8 million); and finance income of
GBP4.0 million (H1 2015/16: GBP10.4 million finance income).
Net finance income includes a seed capital-related gain of
GBP20.9 million (H1 2015/16: GBP5.3 million loss), comprising a
positive investment return of GBP6.0 million (H1 2015/16: GBP4.4
million loss) and a foreign exchange gain of GBP14.9 million (H1
2015/16: GBP0.9 million loss).
Further details of the movements of seed capital items during
the six months can be found in note 15 to the interim condensed
consolidated financial statements.
Own shares held
The Group purchases and holds shares through an Employee Benefit
Trust (EBT) in anticipation of the vesting of share awards. During
the period, the EBT purchased shares worth GBP11.8 million (H1
2015/16: GBP14.7 million) and as at 31 December 2016, the EBT owned
39,009,575 (30 June 2016: 41,173,968) ordinary shares.
Foreign exchange
The majority of the Group's fee income is received in US dollars
and it is the Group's policy to hedge up to two-thirds of the
notional value of up to two years' budgeted foreign
currency-denominated net management fees, using either forwards or
options.
The Group's Foreign Exchange Management Committee determines the
proportion of budgeted fee income to hedge by regular reference to
expected non-US dollar, and principally Sterling, cash
requirements. The hedging contracts effectively create a corridor
outside of which a proportion of fee income is protected from
movements in the GBP:USD exchange rate. The proportion of fee
income received in foreign currency and not subject to hedging is
held as cash or cash equivalents in the foreign currency and marked
to market at the period end exchange rate.
The translation of the Group's non-Sterling balance sheet
resulted in a foreign exchange gain reported in revenues of GBP8.4
million (H1 2015/16: GBP8.0 million), primarily the effect of
Sterling weakness against the US dollar. Also as a consequence of
the fall in the GBP:USD exchange rate, the Group recognised net
realised and unrealised hedging losses of GBP3.0 million (H1
2015/16: GBP1.0 million loss).
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 2015/16: 4.55 pence per share)
will be paid on 7 April 2017 to all shareholders on the register on
10 March 2017.
Mark Coombs
Chief Executive Officer
8 February 2017
Interim condensed consolidated statement of comprehensive
income
For the six months ended 31 December 2016
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
Notes GBPm GBPm GBPm
==================================================================== ===== ============ ============ =============
Management fees 116.8 99.3 197.1
Performance fees 21.6 8.6 10.4
Other revenue 2.2 2.1 4.1
==================================================================== ===== ============ ============ =============
Total revenue 5 140.6 110.0 211.6
Distribution costs (1.9) (0.6) (1.2)
Foreign exchange 6 5.4 7.0 22.1
==================================================================== ===== ============ ============ =============
Net revenue 144.1 116.4 232.5
Gains/(losses) on investment securities 15 6.7 (19.5) (5.7)
Change in third-party interests in consolidated funds 15 (4.4) 7.0 3.4
Personnel expenses (36.2) (29.6) (59.7)
Other expenses (15.6) (16.7) (32.6)
==================================================================== ===== ============ ============ =============
Operating profit 94.6 57.6 137.9
Finance income 7 26.1 11.4 31.5
Finance expense 7 - (5.3) (0.2)
Profit on disposal of joint ventures and subsidiaries 8 1.6 - -
Share of losses from associates and joint ventures (0.8) (1.0) (1.7)
==================================================================== ===== ============ ============ =============
Profit before tax 121.5 62.7 167.5
Tax expense 10 (22.7) (15.6) (38.8)
==================================================================== ===== ============ ============ =============
Profit for the period 98.8 47.1 128.7
Other comprehensive income, net of related tax effect
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences arising on foreign
operations 6.2 13.6 27.5
Fair value reserve (available-for-sale financial assets):
Net change in fair value 0.6 0.7 1.1
Net amount transferred to profit or loss - 0.2 0.3
Cash flow hedge intrinsic value gains/(losses) 1.0 (0.4) (3.9)
==================================================================== ===== ============ ============ =============
Other comprehensive income, net of tax 7.8 14.1 25.0
==================================================================== ===== ============ ============ =============
Total comprehensive income for the period 106.6 61.2 153.7
==================================================================== ===== ============ ============ =============
Profit attributable to:
Equity holders of the parent 98.4 46.4 127.8
Non-controlling interests 0.4 0.7 0.9
==================================================================== ===== ============ ============ =============
Profit for the period 98.8 47.1 128.7
==================================================================== ===== ============ ============ =============
Total comprehensive income attributable to:
Equity holders of the parent 106.3 60.3 152.0
Non-controlling interests 0.3 0.9 1.7
==================================================================== ===== ============ ============ =============
Total comprehensive income for the period 106.6 61.2 153.7
==================================================================== ===== ============ ============ =============
Earnings per share
Basic 11 14.72p 6.89p 19.13p
Diluted 11 13.93p 6.52p 18.08p
==================================================================== ===== ============ ============ =============
Interim condensed consolidated balance sheet
As at 31 December 2016
Unaudited Unaudited Audited
31 December 31 December 30 June
2016 2015 2016
Notes GBPm GBPm GBPm
==================================================================== ===== ============ ============ ========
Assets
Non-current assets
Goodwill and intangible assets 13 85.8 76.6 82.5
Property, plant and equipment 1.8 2.0 2.2
Investment in associates and joint ventures 2.3 6.4 6.3
Non-current asset investments 15 21.1 8.8 11.7
Other receivables 0.1 0.2 0.1
Deferred acquisition costs 0.4 - 0.4
Deferred tax assets 21.4 19.7 19.5
==================================================================== ===== ============ ============ ========
132.9 113.7 122.7
==================================================================== ===== ============ ============ ========
Current assets
Investment securities 15 178.2 140.5 143.7
Available-for-sale financial assets 15 9.0 8.8 8.8
Fair value through profit or loss investments 15 63.5 67.0 68.2
Trade and other receivables 94.1 61.7 61.2
Cash and cash equivalents 378.1 341.5 364.0
==================================================================== ===== ============ ============ ========
722.9 619.5 645.9
==================================================================== ===== ============ ============ ========
Non-current assets held-for-sale 15 53.0 22.5 106.7
==================================================================== ===== ============ ============ ========
Total assets 908.8 755.7 875.3
==================================================================== ===== ============ ============ ========
Equity and liabilities
Capital and reserves - attributable to equity holders of the parent
Issued capital 17 - - -
Share premium 15.7 15.7 15.7
Retained earnings 656.9 598.5 645.7
Foreign exchange reserve 27.4 7.8 21.1
Available-for-sale fair value reserve (1.2) (2.3) (1.8)
Cash flow hedging reserve (3.0) (0.5) (4.0)
==================================================================== ===== ============ ============ ========
695.8 619.2 676.7
Non-controlling interests 1.5 13.1 3.3
==================================================================== ===== ============ ============ ========
Total equity 697.3 632.3 680.0
==================================================================== ===== ============ ============ ========
Liabilities
Non-current liabilities
Deferred tax liabilities 7.5 4.2 5.2
==================================================================== ===== ============ ============ ========
7.5 4.2 5.2
==================================================================== ===== ============ ============ ========
Current liabilities
Current tax 20.4 14.0 24.8
Third-party interests in consolidated funds 15 101.4 58.5 75.6
Derivative financial instruments 3.8 1.3 4.5
Trade and other payables 78.1 39.5 55.4
==================================================================== ===== ============ ============ ========
203.7 113.3 160.3
==================================================================== ===== ============ ============ ========
Non-current liabilities held-for-sale 15 0.3 5.9 29.8
==================================================================== ===== ============ ============ ========
Total liabilities 211.5 123.4 195.3
==================================================================== ===== ============ ============ ========
Total equity and liabilities 908.8 755.7 875.3
==================================================================== ===== ============ ============ ========
Interim condensed consolidated statement of changes in
equity
For the six months ended 31 December 2016
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 2015 - 15.7 649.3 (5.6) (3.2) (0.1) 656.1 14.0 670.1
Profit for the period - - 46.4 - - - 46.4 0.7 47.1
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - 13.4 - - 13.4 0.2 13.6
Net fair value loss
on
available-for-sale
assets including
tax - - - - 0.7 - 0.7 - 0.7
Net gains
reclassified from
available-for-sale
reserve to
comprehensive
income - - - - 0.2 - 0.2 - 0.2
Cash flow hedge
intrinsic value
losses - - - - - (0.4) (0.4) - (0.4)
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total comprehensive
income/(loss) - - 46.4 13.4 0.9 (0.4) 60.3 0.9 61.2
Transactions with
owners:
Purchase of own
shares - - (14.7) - - - (14.7) - (14.7)
Acquisition of
non-controlling
interests - - - - - - - (0.4) (0.4)
Sale to
non-controlling
interests - - - - - - - 0.4 0.4
Share-based
payments - - 2.0 - - - 2.0 0.7 2.7
Dividends to equity
holders - - (84.5) - - - (84.5) - (84.5)
Dividends to
non-controlling
interests - - - - - - - (2.5) (2.5)
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (97.2) - - - (97.2) (1.8) (99.0)
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Unaudited balance at
31 December 2015 - 15.7 598.5 7.8 (2.3) (0.5) 619.2 13.1 632.3
Profit for the period - - 81.4 - - - 81.4 0.2 81.6
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - 13.3 - - 13.3 0.6 13.9
Net fair value loss
on
available-for-sale
assets including
tax - - - - 0.4 - 0.4 - 0.4
Net losses
reclassified from
available-for-sale
reserve to
comprehensive
income - - - - 0.1 - 0.1 - 0.1
Cash flow hedge
intrinsic value
losses - - - (3.5) (3.5) (3.5)
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total comprehensive
income/(loss) - - 81.4 13.3 0.5 (3.5) 91.7 0.8 92.5
Transactions with
owners:
Purchase of own
shares - - (7.5) - - - (7.5) - (7.5)
Acquisition of
non-controlling
interests - - (5.1) - - - (5.1) (0.8) (5.9)
Share-based
payments - - 9.9 - - - 9.9 (8.1) 1.8
Proceeds received
on exercise of
vested options - - 0.1 - - - 0.1 - 0.1
Dividends to equity
holders - - (31.6) - - - (31.6) - (31.6)
Dividends to
non-controlling
interests - - - - - - - (1.7) (1.7)
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (34.2) - - - (34.2) (10.6) (44.8)
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
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
===================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Interim condensed consolidated cash flow statement
For the six months ended 31 December 2016
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
=========================================================================== ============ ============ =============
Operating activities
Operating profit 94.6 57.6 137.9
Adjustments for non-cash items:
Depreciation and amortisation 2.7 2.5 5.1
Accrual for variable compensation 23.4 17.5 35.6
Unrealised foreign exchange gains (8.1) (8.0) (20.4)
Other non-cash items (5.1) (1.7) (7.0)
=========================================================================== ============ ============ =============
Cash generated from operations before working capital changes 107.5 67.9 151.2
Changes in working capital:
Decrease/(increase) in trade and other receivables (32.9) 2.3 2.9
Increase/(decrease) in derivative financial instruments (0.7) 1.3 4.5
Increase/(decrease) in trade and other payables 22.7 (14.6) (33.4)
=========================================================================== ============ ============ =============
Cash generated from operations 96.6 56.9 125.2
Taxes paid (26.2) (14.2) (26.7)
=========================================================================== ============ ============ =============
Net cash from operating activities 70.4 42.7 98.5
=========================================================================== ============ ============ =============
Investing activities
Interest received 5.1 3.4 6.8
Proceeds on disposal of joint venture 4.8 - -
Purchase of non-current asset investments (6.6) (1.7) (3.2)
Purchase of financial assets held-for-sale (24.0) (7.8) (42.6)
Purchase of available-for-sale financial assets (1.6) (0.2) (0.2)
Purchase of fair value through profit or loss investments (6.3) (1.0) (1.4)
Purchase of investment securities (12.1) (39.6) (55.7)
Sale of non-current asset investments 0.5 - -
Sale of financial assets held-for-sale 11.3 3.9 9.3
Sale of available-for-sale financial assets - 2.9 3.3
Sale of fair value through profit or loss investments 41.5 1.4 22.0
Sale of investment securities 11.3 27.4 33.5
Net cash flow arising on initial consolidation of seed capital investments 1.5 0.3 1.5
Purchase of property, plant and equipment - (0.1) (0.6)
=========================================================================== ============ ============ =============
Net cash generated/(used) in investing activities 25.4 (11.1) (27.3)
=========================================================================== ============ ============ =============
Financing activities
Dividends paid to equity holders (84.9) (84.5) (116.1)
Dividends paid to non-controlling interests (1.7) (2.5) (4.2)
Third-party subscriptions into consolidated funds 13.9 39.0 49.1
Third-party redemptions from consolidated funds (2.4) (18.3) (11.0)
Distributions paid by consolidated funds (1.6) - (3.5)
Acquisition of interest from non-controlling interests (0.4) (0.4) (1.2)
Sale of interest to non-controlling interests - 0.4 0.4
Purchase of own shares (11.8) (14.7) (22.2)
============================================================= ======= ======= ========
Net cash used in financing activities (88.9) (81.0) (108.7)
============================================================= ======= ======= ========
Net increase/(decrease) in cash and cash equivalents 6.9 (49.4) (37.5)
Cash and cash equivalents at beginning of period 364.0 380.8 380.8
Effect of exchange rate changes on cash and cash equivalents 7.2 10.1 20.7
============================================================= ======= ======= ========
Cash and cash equivalents at end of period 378.1 341.5 364.0
============================================================= ======= ======= ========
Cash and cash equivalents comprise:
Cash at bank and in hand 69.5 98.6 52.5
Daily dealing liquidity funds 155.6 92.5 103.7
Deposits 153.0 150.4 207.8
============================================================= ======= ======= ========
378.1 341.5 364.0
============================================================= ======= ======= ========
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 2016 were authorised for issue by the
Directors on 8 February 2017.
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 2016 which are available on the Group's
website. Those statutory accounts were approved by the Board of
Directors on 5 September 2016 and have been filed with the
Registrar of Companies. 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 2016.
New Standards and Interpretations not yet adopted
As previously described in the Group's annual statutory accounts
for the 12 months to 30 June 2016, the Group has performed an
initial impact assessment of the following Standards or
Interpretations which were in issue but were not required to be
implemented as at 31 December 2016:
- IFRS 9 Financial Instruments;
- IFRS 15 Revenue from Contracts with Customers; and
- IFRS 16 Leases.
The Group does not expect the implementation of these standards
to have a material impact on its reported results or net assets.
However, there will be a number of presentational changes required.
The Group will update its relevant accounting policies when these
standards come into force, as well as making necessary
presentational changes on the face of the consolidated statement of
comprehensive income and consolidated balance sheet. A detailed
impact assessment will be carried out nearer to the effective date
of each standard.
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 2016.
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
2016 2015 2016
GBPm GBPm GBPm
========================= ============ ============ ========
United Kingdom 8.0 11.2 12.1
United States 81.9 73.3 78.8
Other 0.4 0.5 0.5
========================= ============ ============ ========
Total non-current assets 90.3 85.0 91.4
========================= ============ ============ ========
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% of total revenue in the period (H1
2015/16: none; FY2015/16: none) when considering management fees
and performance fees on a combined basis.
Analysis of revenue by geography
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
======================= ============ ============ ============
United Kingdom revenue 129.1 101.7 194.0
United States revenue 4.3 4.8 9.2
Other 7.2 3.5 8.4
======================= ============ ============ ============
Total revenue 140.6 110.0 211.6
======================= ============ ============ ============
6) Foreign exchange
The foreign exchange rates which had a material impact on the
Group's results are the US dollar, the Euro and Indonesian
rupiah.
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 2016 2015 2016 2016 2015 2016
================== ============ ============ ============ ============ ============ ============
US dollar 1.2340 1.4736 1.3234 1.2809 1.5291 1.4759
Euro 1.1731 1.3566 1.1970 1.1689 1.3909 1.3359
Indonesian rupiah 16,535 20,462 17,482 16,922 21,171 20,172
================== ============ ============ ============ ============ ============ ============
Foreign exchange gains and losses are shown below.
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
============================================================================ ============ ============ ============
Net realised and unrealised hedging gains/(losses) (3.0) (1.0) 1.1
Translation gains on non-Sterling denominated monetary assets and
liabilities 8.4 8.0 21.0
============================================================================ ============ ============ ============
Total foreign exchange gains/(losses) 5.4 7.0 22.1
============================================================================ ============ ============ ============
7) Finance income and expense
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
=========================================================================== ============ ============= ============
Finance income
Interest and income in consolidated funds 5.2 11.4 6.7
Net realised gains on seed capital investments measured at fair value 7.9 - 1.4
Net unrealised gains on seed capital investments measured at fair value 13.0 - 23.4
Total finance income 26.1 11.4 31.5
Finance expense
Net realised losses on disposal of available-for-sale financial assets - (0.2) (0.2)
Net realised losses on disposal of seed capital investments measured at
fair value - (1.7) -
Net unrealised losses on seed capital investments measured at fair value - (3.4) -
=========================================================================== ============ ============= ============
Total finance expense - (5.3) (0.2)
=========================================================================== ============ ============= ============
Net finance income 26.1 6.1 31.3
=========================================================================== ============ ============= ============
8) Profit on disposal of joint ventures and subsidiaries
Joint ventures
During August 2016, Ashmore obtained final regulatory approval
to reduce its interest in Ashmore-CCSC Fund Management Company
Limited (ACCSC) to 15% for a cash consideration of GBP4.8 million
resulting in a profit of GBP1.8 million in the period. ACCSC was
renamed to Taiping Fund Management Company Limited after the
transaction.
Subsidiaries
During December 2016, Ashmore disposed of its entire interest in
Ashmore Portfoy Yonetimi Anonim Sirketi for a cash consideration of
GBP0.4 million resulting in a loss on disposal of GBP0.2 million.
At the time of sale, associated seed capital positions were
redeemed crystallising gains in the period of GBP0.3 million which
are presented within finance income.
9) Share-based payments
The total share-based payments-related cost recognised by the
Group in the interim condensed consolidated statement of
comprehensive income is shown below:
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
========================================================================== ============= ============= ============
Omnibus Plan 11.1 9.3 25.8
Ashmore Equities Investment Management (US) LLC (AEIM) operating agreement - 0.1 0.1
Phantom Bonus Plan 0.1 (0.2) 0.2
========================================================================== ============= ============= ============
Total related to compensation awards 11.2 9.2 26.1
Related to acquisition of AEIM - 1.0 (15.4)
========================================================================== ============= ============= ============
Total share-based payments expense 11.2 10.2 10.7
========================================================================== ============= ============= ============
The total expense recognised for the period in respect of
equity-settled share-based payment transactions was GBP12.4
million
(H1 2015/16: GBP10.3 million; FY2015/16: GBP10.5 million).
The Executive Omnibus Incentive Plan (Omnibus Plan)
Share awards outstanding under the Omnibus Plan were as
follows:
6 months to 12 months to
31 December 30 June
6 months to 2015 2016
31 December Number of Number of
2016 shares subject shares subject
Number of shares subject to awards to awards to awards
===================================== =================================== =============== ===============
Equity-settled awards
At the beginning of the period 39,805,764 35,333,782 35,333,782
Granted 7,523,609 12,156,409 12,422,254
Vested (5,971,865) (5,278,564) (5,954,694)
Forfeited (2,129,853) (1,927,123) (1,995,578)
===================================== =================================== =============== ===============
Outstanding at the end of the period 39,227,655 40,284,504 39,805,764
===================================== =================================== =============== ===============
Cash-settled awards
At the beginning of the period 650,906 1,348,818 1,348,818
Granted 50,760 50,862 50,862
Vested (121,852) (212,458) (243,913)
Forfeited (284,322) (482,928) (504,861)
===================================== =================================== =============== ===============
Outstanding at the end of the period 295,492 704,294 650,906
===================================== =================================== =============== ===============
Total awards
At the beginning of the period 40,456,670 36,682,600 36,682,600
Granted 7,574,369 12,207,271 12,473,116
Vested (6,093,717) (5,491,022) (6,198,607)
Forfeited (2,414,175) (2,410,051) (2,500,439)
===================================== =================================== =============== ===============
Outstanding at the end of the period 39,523,147 40,988,798 40,456,670
===================================== =================================== =============== ===============
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
GBP0.3 million (H1 2015/16: GBP0.6 million; FY2015/16: GBP0.6
million) of which GBPnil (H1 2015/16: GBPnil; FY2015/16: GBPnil)
relates to vested awards.
10) Taxation
Analysis of tax charge for the period
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
================================================== ============ ============ ============
Current tax
UK corporation tax on profits for the period 17.4 13.2 31.4
Overseas corporation tax charge 4.7 0.8 4.8
Adjustments in respect of prior periods - - 0.7
================================================== ============ ============ ============
22.1 14.0 36.9
Deferred tax
Origination and reversal of temporary differences 0.6 1.6 1.0
Effect of changes in corporation tax rates - - 0.9
Tax expense for the period 22.7 15.6 38.8
================================================== ============ ============ ============
Factors affecting tax charge for the period
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
============================================================================ ============ ============ ============
Profit before tax 121.5 62.7 167.5
============================================================================ ============ ============ ============
Profit on ordinary activities multiplied by the blended UK tax rate for the
financial year
of 19.75% (H1 2015/16: 20.0%; FY2015/16: 20.0%) 24.0 12.5 33.5
Effects of:
Non-deductible expenses 0.9 3.4 4.7
Deduction in respect of vested shares/exercised options (Part 12,
Corporation Tax Act 2009) (1.0) (2.7) (2.8)
Different rate of taxes on overseas profits (0.3) (0.5) 1.5
Non-taxable income (1.2) - -
Disallowed deferred tax assets 0.3 - -
Tax relief on amortisation and impairment of goodwill and intangibles - (0.5) (1.2)
Deferred tax arising from origination and reversal of temporary differences - 0.8 -
Effect on deferred tax balance from changes in the UK corporation tax rate - - 0.9
Other items - 2.6 1.5
Adjustments in respect of prior periods - - 0.7
============================================================================ ============ ============ ============
Tax expense for the period 22.7 15.6 38.8
============================================================================ ============ ============ ============
Reductions in the main rate of UK corporation tax to 19% from 1
April 2017 and 17% from 1 April 2020 were enacted in Finance (No.
2) Act 2015 and Finance Act 2016 respectively. These reductions
have been taken into account in the calculation of the Group's UK
deferred tax assets and liabilities.
11) Earnings per share
Basic earnings per share at 31 December 2016 of 14.72 pence (H1
2015/16: 6.89 pence; FY2015/16: 19.13 pence) is calculated by
dividing the profit after tax for the financial period attributable
to equity holders of the parent of GBP98.4 million (H1 2015/16:
GBP46.4 million; FY2015/16: GBP127.8 million) by the weighted
average number of ordinary shares in issue during the period,
excluding own shares.
Diluted earnings per share is calculated based on basic earnings
per share adjusted for all dilutive potential ordinary shares.
There is no difference between the profit for the year attributable
to equity holders of the parent used in the basic and diluted
earnings per share calculations.
Reconciliation of the weighted average number of shares used in
calculating basic and diluted earnings per share is shown
below.
6 months to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
Number of ordinary shares Number of ordinary shares Number of ordinary shares
================================== ========================== ========================== ==========================
Weighted average number of
ordinary shares used in the
calculation
of basic earnings per share 668,479,616 673,307,875 667,777,465
Effect of dilutive potential
ordinary shares - share awards 38,020,304 37,857,715 38,958,842
================================== ========================== ========================== ==========================
Weighted average number of
ordinary shares used in the
calculation
of diluted earnings per share 706,499,920 711,165,590 706,736,307
================================== ========================== ========================== ==========================
12) Dividends
Dividends paid
12 months to
6 months to 6 months to 30 June
31 December 2016 31 December 2015 2016
GBPm GBPm GBPm
========================================================= ================= ================= ============
Final dividend for FY2015/16: 12.10p (FY2014/15: 12.10p) 84.9 84.5 84.5
Interim dividend for FY2015/16: 4.55p - - 31.6
========================================================= ================= ================= ============
84.9 84.5 116.1
========================================================= ================= ================= ============
In addition, the Group paid GBP1.7 million (H1 2015/16: GBP2.5
million; FY2015/16: GBP4.2 million) of dividends to non-controlling
interests.
Dividends declared/proposed
12 months to
6 months to 6 months to 30 June
31 December 2016 31 December 2015 2016
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 2016 of 4.55 pence per share (six months to 31 December
2015: 4.55 pence per share; final dividend for the year to 30 June
2016: 12.10 pence per share) payable on 7 April 2017 to
shareholders on the register on 10 March 2017.
13) Goodwill and intangible assets
Goodwill Fund management relationships Total
GBPm GBPm GBPm
======================================================= ======== ============================= ======
Cost (at original exchange rate)
======================================================= ======== ============================= ======
At 31 December 2016, 31 December 2015 and 30 June 2016 57.5 39.5 97.0
======================================================= ======== ============================= ======
Accumulated amortisation and impairment
======================================================= ======== ============================= ======
At 30 June 2015 - (27.2) (27.2)
Amortisation charge for the period - (1.9) (1.9)
At 31 December 2015 - (29.1) (29.1)
Amortisation charge for the period - (2.0) (2.0)
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)
======================================================= ======== ============================= ======
Net book value
======================================================= ======== ============================= ======
At 30 June 2015 60.0 14.1 74.1
Accumulated amortisation for the period - (1.9) (1.9)
FX revaluation through reserves* 3.6 0.8 4.4
======================================================= ======== ============================= ======
At 31 December 2015 63.6 13.0 76.6
Accumulated amortisation for the period - (2.0) (2.0)
FX revaluation through reserves* 6.5 1.4 7.9
======================================================= ======== ============================= ======
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
======================================================= ======== ============================= ======
* 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 AEIM in May 2011.
The Group manages its business as a single unit, with asset
allocations, research and other such operational practices
reflecting the commonality of approach across all fund themes. The
Group therefore considers itself to have one cash-generating unit
to which goodwill is allocated.
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 2016.
During the period to 31 December 2016, no factors indicating
potential impairment of goodwill were noted.
Based on management's assessment of recoverable value at 31
December 2016, which calculates fair value less costs to sell using
the Company's share price, 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 AEIM.
During the period to 31 December 2016, 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 there was no impairment charge included within the
Group's other expenses in the consolidated statement of
comprehensive income in the period (H1 2015/16: GBPnil; FY2015/16:
GBPnil).
The remaining amortisation period for fund management
relationships is two and a half years (31 December 2015: three and
a half years; 30 June 2016: three years).
14) 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
2016.
The Group has an established control framework with respect to
the measurement of fair values. This framework includes a valuation
team that has overall responsibility for all significant fair value
measurements. It regularly reviews significant inputs and valuation
adjustments. If third-party information is used to measure fair
value, then 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 re-assessing
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 2016 At 31 December 2015 At 30 June 2016
=============================== ============================= ===============================
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 51.1 76.1 51.0 178.2 29.6 53.9 57.0 140.5 27.2 69.6 46.9 143.7
Non-current
financial assets
held-for-sale - 23.6 29.4 53.0 - 22.5 - 22.5 - 78.6 28.1 106.7
Available-for-sale
financial assets 0.5 0.1 8.4 9.0 0.5 0.4 7.9 8.8 0.4 0.4 8.0 8.8
Fair value through
profit or loss
investments - 63.5 - 63.5 - 67.0 - 67.0 - 68.2 - 68.2
Non-current asset
investments - 4.6 16.5 21.1 - - 8.8 8.8 - - 11.7 11.7
51.6 167.9 105.3 324.8 30.1 143.8 73.7 247.6 27.6 216.8 94.7 339.1
=================== ====== ====== ====== ======= ===== ====== ====== ====== ====== ====== ====== =======
Financial
liabilities
Third-party
interests in
consolidated funds 29.6 40.1 31.7 101.4 12.3 22.4 23.8 58.5 11.0 36.2 28.4 75.6
Derivative
financial
instruments - 3.8 - 3.8 - 1.3 - 1.3 - 4.5 - 4.5
Non-current
financial
liabilities
held-for-sale - 0.3 - 0.3 - 5.9 - 5.9 - 29.8 - 29.8
29.6 44.2 31.7 105.5 12.3 29.6 23.8 65.7 11.0 70.5 28.4 109.9
=================== ====== ====== ====== ======= ===== ====== ====== ====== ====== ====== ====== =======
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
Non-current Available-for-sale Non-current Third-party
financial financial assets asset interests in
Investment assets GBPm investments consolidated
securities held-for-sale GBPm funds
GBPm GBPm GBPm
====================== ================= ================ =================== ================= =================
At 1 January 2016 57.0 - 7.9 8.8 23.8
Net
additions/(disposals) (4.1) 26.0 - - 4.0
Gains/(losses)
recognised in
consolidated
comprehensive income
within finance income (6.0) 2.1 0.1 2.9 0.6
====================== ================= ================ =================== ================= =================
At 30 June 2016 46.9 28.1 8.0 11.7 28.4
Net
additions/(disposals) - - - 2.3 3.3
Gains/(losses)
recognised in
consolidated
comprehensive income
within finance income 4.1 1.3 0.4 2.5 -
At 31 December 2016 51.0 29.4 8.4 16.5 31.7
====================== ================= ================ =================== ================= =================
Valuation of Level 3 financial liabilities recognised at fair
value on a recurring basis
The measurement of investment securities and third-party
interests in consolidated funds classified within Level 3 relates
to investments in closed-end private equity funds that are neither
listed on any stock exchange nor traded on any regulated markets.
The Group considered it is more appropriate to classify these
investments within Level 3 as the valuation is based on valuation
techniques as reflected within the net asset values of the funds as
provided by the administrator.
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 2016, 31 December 2015 and 30 June 2016.
15) 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 provides seed capital
in order to provide initial scale and facilitate marketing of the
fund to third-party investors. The fund is then financed through
the issue of units to investors. Aggregate interests held by the
Group include seed capital, management fees and performance fees.
The Group generates management and performance fee income from
managing the assets on behalf of third-party investors.
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, two funds (H1
2015/16: three; FY2015/16: five) were 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 2016 were as follows:
31 December 30 June
31 December 2016 2015 2016
GBPm GBPm GBPm
===================================================== ================ =========== =======
Non-current financial assets held-for-sale 53.0 22.5 106.7
Non-current financial liabilities held-for-sale (0.3) (5.9) (29.8)
===================================================== ================ =========== =======
Seed capital investments classified as held-for-sale 52.7 16.6 76.9
===================================================== ================ =========== =======
Investments cease to be classified as held-for-sale when they
are no longer controlled by the Group. A loss of control may happen
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, one fund (H1 2015/16: none; FY2015/16:
none) 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 it will cease to be
classified as held-for-sale, and will be consolidated line by line
after it is assessed that the Group controls the investment fund in
accordance with the requirements of IFRS 10. During the period, one
such fund (H1 2015/16: two; FY2015/16: seven) with an aggregate
carrying amount of GBP4.3 million (H1 2015/16: GBP7.7 million;
FY2015/16: GBP15.8 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 GBP6.4 million
(H1 2015/16: net losses of GBP0.2 million; FY2015/16: net gains of
GBP4.2 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 2016 comprise equities held as follows:
31 December 30 June
31 December 2016 2015 2016
GBPm GBPm GBPm
============================================== ================ =========== =======
Equities listed on stock exchange 0.5 0.5 0.4
Equity funds 8.5 8.3 8.4
Seed capital classified as available-for-sale 9.0 8.8 8.8
============================================== ================ =========== =======
Included within other comprehensive income are net gains of
GBP0.6 million (H1 2015/16: net gains of GBP 0.7 million;
FY2015/16: net gains of GBP1.1 million) in relation to
available-for-sale investments.
c) Fair value through profit or loss investments
Fair value through profit or loss investments at 31 December
2016 comprise shares held in debt and equity funds as follows:
31 December 30 June
31 December 2016 2015 2016
GBPm GBPm GBPm
Equity funds 20.3 31.5 46.6
Debt funds 43.2 35.5 21.6
========================================================================= ================ =========== =======
Seed capital classified as fair value through profit or loss investments 63.5 67.0 68.2
========================================================================= ================ =========== =======
Included within finance income are net gains of GBP12.3 million
(H1 2015/16: net gains of GBP0.2 million; FY2015/16: net gains of
GBP16.3 million) on the Group's fair value through profit or loss
investments.
d) Consolidated funds
The Group has consolidated 11 investment funds as at 31 December
2016 (31 December 2015: 12 investments funds; 30 June 2016: 14
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 30 June
31 December 2016 2015 2016
GBPm GBPm GBPm
============================================ ================ =========== =======
Investment securities 178.2 140.5 143.7
Cash and cash equivalents 9.9 11.8 5.6
Other 0.4 0.2 (0.8)
Third-party interests in consolidated funds (101.4) (58.5) (75.6)
============================================ ================ =========== =======
Consolidated seed capital investments 87.1 94.0 72.9
============================================ ================ =========== =======
Investment securities are designated as FVTPL and include listed
and unlisted equities and debt securities. Other includes trade
receivables, trade payables and accruals.
The maximum exposure to loss is the carrying amount of the
assets held. The Group has not provided financial support or
otherwise agreed to be responsible for supporting any consolidated
fund financially.
Included within the interim condensed consolidated statement of
comprehensive income are net gains of GBP4.9 million (H1 2015/16:
net losses of GBP3.9 million; FY2015/16: GBPnil) relating to the
Group's share of the results of the individual statements of
comprehensive income for each of the consolidated funds, as
follows:
31 December 30 June
31 December 2016 2015 2016
GBPm GBPm GBPm
====================================================== ================ =========== =======
Finance income 4.0 10.4 4.7
Gains/(losses) on investment securities 6.7 (19.5) (5.7)
Change in third-party interests in consolidated funds (4.4) 7.0 3.4
Other expenses (1.4) (1.8) (2.4)
====================================================== ================ =========== =======
Net gains/(losses) on consolidated funds 4.9 (3.9) -
====================================================== ================ =========== =======
As of 31 December 2016, the Group's consolidated funds were
domiciled in 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 30 June
31 December 2016 2015 2016
GBPm GBPm GBPm
============================================ ================ =========== =======
Non-current asset investments at fair value 21.1 8.8 11.7
============================================ ================ =========== =======
Included within finance income are net gains of GBP3.3 million
(H1 2015/16: net losses of GBP1.7 million; FY2015/16: net losses of
GBP0.4 million) on the Group's non-current asset investments.
16) 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 2016, 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 2016.
17) Share capital
Authorised share capital
Number of Nominal value
shares GBP'000
===================================================================================== =========== =============
Ordinary shares of 0.01p each at 31 December 2016, 30 June 2016 and 31 December 2015 900,000,000 90
===================================================================================== =========== =============
Issued share capital - allotted and fully paid
As at As at As at As at As at
As at 31 December 31 December 31 December 30 June 30 June
31 December 2016 2016 2015 2015 2016 2016
Number of Nominal value Number of Nominal value Number of Nominal 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.
At 31 December 2016, there were equity-settled share awards
issued under the Omnibus Plan totalling 39,227,655 shares (31
December 2015: 39,910,745 shares; 30 June 2016: 39,805,764 shares)
that have release dates ranging from April 2017 to December
2021.
18) 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 2016, the EBT owned 39,009,575 (31 December 2015:
38,108,258; 30 June 2016: 41,173,968) ordinary shares of 0.01p with
a nominal value of GBP3,901 (31 December 2014: GBP3,811; 30 June
2015: GBP4,117) and shareholders' funds are reduced by GBP116.3
million (31 December 2015: GBP115.4 million; 30 June 2016: GBP122.3
million) in this respect. It is the intention of the Directors to
make these shares available to employees through the share-based
compensation plans. The EBT is periodically funded by the Company
for these purposes.
19) 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 to 6 months to 12 months to
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
=================================== ============= ============= ============
Short-term employee benefits 0.1 0.1 0.9
Defined contribution pension costs - - -
Share-based payment benefits - - 2.2
=================================== ============= ============= ============
0.1 0.1 3.1
=================================== ============= ============= ============
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 2015/16 and FY2015/16: none).
Aggregate key management personnel interests in consolidated funds
at 31 December 2016 were GBP37.9 million (31 December 2015: GBP16.4
million; 30 June 2016: GBP28.5 million).
Transactions with Ashmore Funds
During the period, the Group received GBP58.3 million of gross
management fees and performance fees (H1 2015/16: GBP50.9 million;
FY2015/16: GBP89.4 million) from the 85 funds (H1 2015/16: 85
funds; FY2015/16: 91 funds) it manages and which are classified as
related parties. As at 31 December 2016, the Group had receivables
due from funds of GBP5.6 million (31 December 2015: GBP23.1
million; 30 June 2016: GBP1.5 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 2016, the loan outstanding was GBP114.0 million
(31 December 2015: GBP115.4 million; 30 June 2016: GBP112.6
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 GBP40,000 to
the Foundation during the period (H1 2015/16: GBP59,000; FY2015/16:
GBP65,000).
20) Commitments
Undrawn investment commitments
As at As at As at
31 December 31 December 30 June
2016 2015 2016
GBPm GBPm GBPm
========================================================== ============ ============ ========
AA Development Capital India Fund 1 LLC 1.3 1.1 1.2
Ashmore Andean Fund II, LP 1.7 - -
Ashmore Emerging Markets Corporate Private Debt Fund 0.5 1.2 1.0
Ashmore I - CAF Colombian Infrastructure Senior Debt Fund 16.1 13.7 15.2
Ashmore I - FCP Colombia Infrastructure Fund 0.3 1.4 0.8
Ashmore Special Opportunities Fund LP 1.7 3.8 3.2
Everbright Ashmore China Real Estate Fund 1.5 1.3 1.4
KCH Healthcare LLC 5.3 5.1 5.2
VTBC-Ashmore Real Estate Partners I, LP 3.5 3.0 3.4
Total undrawn investment commitments 31.9 30.6 31.4
========================================================== ============ ============ ========
21) Post-balance sheet events
There are no post-balance sheet events that require adjustment
or disclosure in these interim condensed consolidated financial
statements.
22) 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 2016.
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
8 February 2017
Independent Review Report to Ashmore Group plc
Introduction
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 2016 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.
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 Disclosure and Transparency Rules (the DTR) of
the UK's Financial Conduct Authority (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.
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 IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34 Interim Financial
Reporting 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.
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. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) 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.
Conclusion
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 2016 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Tom Brown
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
8 February 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSDFAAFWSEFE
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