TIDMASHM
RNS Number : 1265C
Ashmore Group PLC
06 February 2020
Ashmore Group plc
6 February 2020
RESULTS FOR THE SIX MONTHSING 31 DECEMBER 2019
Ashmore Group plc (Ashmore, the Group), the specialist Emerging
Markets asset manager, today announces its unaudited results for
the six months ending 31 December 2019.
- Assets under management (AuM) increased 28% YoY and 7% over
the period to US$98.4 billion
- Diversified net inflows of US$5.7 billion and positive
investment performance of US$0.9 billion
- Active management continues to deliver long-term
outperformance
- 75% of AuM outperforming benchmarks over three years and 98%
over five years
- 24% outperforming over one year, reflecting combination of
market volatility and adding risk at attractive price levels in
line with Ashmore's disciplined investment approach
- Progress across all three phases of Ashmore's long-term growth
strategy
- Higher allocations: new and existing clients increasing
allocations to Emerging Markets
- Diversification: delivering outperformance in global equities
products and generating client flows
- Mobilise Emerging Markets capital: Ashmore Indonesia listed at
premium valuation
- Strong operating and financial performance
- Adjusted net revenue growth of 20% driven by 18% increase in
net management fees
- Adjusted EBITDA increased 24% to GBP122.5 million, delivering
an adjusted EBITDA margin of 69%
- Seed capital return of GBP8.4 million
- Profit before tax of GBP132.4 million, 42% higher than prior
year
- Diluted EPS increased 56% to 15.8p reflecting operational
performance, seed capital profit and lower effective tax rate
- Interim DPS up 5% to 4.80p
Commenting on the Group's results, Mark Coombs, Chief Executive
Officer, Ashmore Group said:
"Ashmore performed well over the six months, increasing AuM
primarily through net inflows and delivering strong financial
performance with a 24% increase in adjusted EBITDA and 56% growth
in diluted EPS. There continue to be compelling incentives for
investors to increase their allocations to Emerging Markets in
pursuit of higher risk-adjusted returns compared with those that
are available in the developed world. Ashmore's specialist focus on
the diverse Emerging Markets, the strong client flow momentum in
the first half of the financial year and ongoing client activity
levels, mean Ashmore is well-positioned to continue to grow."
Analysts briefing
There will be a presentation for analysts at 9.30am on 6
February 2020 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, Group Finance
Director +44 (0)20 3077 6191
Paul Measday, Investor
Relations +44 (0)20 3077 6278
FTI Consulting
Neil Doyle +44 (0)20 3727 1141
Laura Ewart +44 (0)20 3727 1160
Chief Executive Officer's report
Ashmore performed well in the first half of the financial year,
delivering net inflows of US$5.7 billion and a 7% increase in AuM
to US$98.4 billion. This was achieved against a backdrop of
positive returns for the Emerging Markets asset classes, ranging
from +3% in external debt to +7% in equities, and notwithstanding
fluctuating investor sentiment and price volatility driven by a
combination of global macro conditions and certain country-specific
political events.
Ashmore's financial performance reflected the strong operational
delivery with 18% growth in net management fee income and a 24%
increase in adjusted EBITDA. The business model continues to
operate effectively, generating an adjusted EBITDA margin of 69%
over the period.
Including a positive contribution from the Group's seed capital
investments and a lower effective tax rate, diluted EPS increased
by 56%. On an adjusted basis, excluding the effects of foreign
exchange translation and seed capital, diluted EPS increased by 35%
to 14.7 pence. Consequently, the interim dividend per share has
been increased 5% to 4.80 pence.
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, by
excluding the mark-to-market volatility of these items, and to
provide a more meaningful comparison with the prior period. For the
purposes of presenting 'Adjusted' profits, personnel expenses have
been adjusted for the variable compensation charge on foreign
exchange translation gains and losses.
Reclassification
of
===========================
Seed capital- Foreign
H1 2019/20 related exchange H1 2019/20 H1 2018/19
GBPm Statutory items translation Adjusted Adjusted
====================================== ========== ============= ============ ========== ==========
Net management fees 168.3 - - 168.3 142.3
Performance fees 3.4 - - 3.4 1.2
Other revenue 2.5 - - 2.5 2.0
Foreign exchange 2.6 - 0.5 3.1 2.7
-------------------------------------- ---------- ------------- ------------ ---------- ----------
Net revenue 176.8 - 0.5 177.3 148.2
Investment securities 4.2 (4.2) - - -
Third-party interests (0.5) 0.5 - - -
Personnel expenses (43.7) - (0.1) (43.8) (37.2)
Other expenses excluding depreciation
and amortisation (12.1) 1.1 - (11.0) (12.2)
====================================== ========== ============= ============ ========== ==========
EBITDA 124.7 (2.6) 0.4 122.5 98.8
EBITDA margin 71% - - 69% 67%
Depreciation and amortisation (1.7) - - (1.7) (2.6)
====================================== ========== ============= ============ ========== ==========
Operating profit 123.0 (2.6) 0.4 120.8 96.2
Net finance income/(expense) 9.5 (5.8) - 3.7 3.8
Associates and joint ventures (0.1) - - (0.1) (0.4)
Seed capital-related items - 8.4 - 8.4 (9.7)
Profit before tax excluding
FX translation 132.4 - 0.4 132.8 89.9
====================================== ========== ============= ============ ========== ==========
Foreign exchange translation - - (0.4) (0.4) 3.1
====================================== ========== ============= ============ ========== ==========
Profit before tax 132.4 - - 132.4 93.0
====================================== ========== ============= ============ ========== ==========
Investment themes
External debt Local currency Corporate debt Blended debt
============================ ============================= ====================== =========================
Invests in debt Invests in local Invests in debt Invests in external
instruments currencies and local instruments debt, local currency
issued by sovereigns currency-denominated issued by public and corporate debt
and instruments issued and private assets, measured
quasi-sovereigns by sector companies. against
and denominated sovereigns, quasi-sovereigns tailor-made blended
in foreign currencies. and companies. indices.
============================ ============================= ====================== =========================
Equities Alternatives Multi-asset Overlay/liquidity
============================ ============================= ====================== =========================
Invests in equity Invests in private Specialised and Separates the currency
and equity-related equity, healthcare, efficient asset risk of an underlying
instruments including infrastructure, allocation across asset class in order
global, regional, special situations, the to manage it effectively
country, small cap distressed full Emerging Markets and efficiently.
and frontier opportunities. debt and real estate investment universe.
opportunities.
============================ ============================= ====================== =========================
Ashmore's eight headline investment themes capture the broad
range of investable and scalable investment opportunities available
across the diverse Emerging Markets universe. Three factors will
drive longer-term growth in the Group's AuM. First, the Emerging
Markets will continue to develop and evolve, with broader, deeper
and more accessible capital markets contributing to the range and
scale of investment opportunities; second, investor allocations to
Emerging Markets will increase from very underweight levels
currently; and third, Ashmore will continue to innovate in order to
provide access to new Emerging Markets investment strategies.
Market review
Over the past six months, Emerging Markets have experienced
fluctuating investor sentiment and consequently more volatile asset
prices when compared with the first six months of 2019, driven by
the combination of developed world events and a number of domestic
political stories where the impact was limited to the country.
However, the underlying economic and political backdrop across the
vast majority of emerging nations remains supportive.
Developed world events included a return to protectionism in the
US, weaker European growth, while an improvement in US economic
data initially provided support to the US dollar.
The political developments in Emerging Markets that impacted
asset prices were limited to a small number of countries such as
Argentina, Bolivia, Chile, Ecuador and Lebanon, and came in quick
succession so prompting some investors to take profits following a
period of strong performance in the first half of 2019. For those
who remained invested, the end of the period delivered a strong
recovery in asset prices as some of the political situations began
to normalise, the global trade environment improved, the US Federal
Reserve and other central banks continued to deliver a dovish
message, and economic data improved in a number of emerging
countries including China.
Notwithstanding the price volatility during the six months,
returns across the Emerging Markets asset classes were positive for
the period as a whole, thereby continuing the broad-based rally
that began in early 2016.
External debt
The external debt market is highly diversified (73 countries in
the benchmark index), has improving credit quality (54% of issuers
are investment grade), and yet offers a significant spread over US
Treasury bonds (290 basis points), underpinning its long-term
outperformance.
In the six months to 31 December 2019, the benchmark EMBI GD
index returned 3.3% notwithstanding the significant drawdown in
countries such as Argentina.
Over three years, Ashmore's external debt composite has
delivered gross annualised returns of +6.4%, slightly below the
benchmark index, which has returned +6.7% annualised.
As is the case for the other asset classes, the attractive
returns available from a broad range of external debt investment
opportunities are best accessed by a specialist active manager with
the ability to exploit the pricing inefficiencies that exist across
the Emerging Markets.
Local currency
Although emerging nations typically fund themselves initially
with external debt, as local institutions and capital markets
develop, they increasingly issue in their own currency. Hence, in
contrast to the common misperception of Emerging Markets fixed
income being predominantly denominated in US dollars, the local
currency-denominated asset class today represents 89%, or US$10.5
trillion equivalent, of all Emerging Markets sovereign bonds
outstanding.
In the six-month period, the local currency benchmark index
(GBI-EM GD) returned 4.4% in US dollar terms.
Ashmore's local currency bonds composite has delivered an
annualised gross return of +7.5% over the past three years, ahead
of its benchmark index (+7.0%).
Local currency bonds offer attractive prospective returns. While
nominal yields have fallen recently, so has inflation that, on
average, is less than 3% across emerging countries, and therefore
real yields of 2% to 3% for the index are no higher than was the
case 10 years ago. Furthermore, currency performance tends to
correlate with relative growth rates, which favour Emerging Markets
over the developed world based on IMF forecasts. Finally, in 2020,
China will enter the benchmark index with an eventual capped weight
of 10%, supporting the prospect for further capital flows into
local markets and further increasing the diversity of the
index.
The returns available from currencies, in combination with the
attractive yields, mean local currency bonds arguably offer the
most medium-term upside of any of the Emerging Markets fixed income
asset classes.
Corporate debt
Over the six-month period, the benchmark CEMBI BD index
increased by 3.9%, performing in line with US high yield (HY)
bonds.
Over three years, the Group's corporate debt composite has
delivered gross investment performance of +7.6% annualised,
outperforming its benchmark index, which has returned +6.3%
annualised over the same period.
Credit quality continues to improve, with the default rate
falling from 0.7% to less than 0.4% over the six months, in
contrast to the US HY market where defaults increased from 2.2% to
2.9%.
The value available in corporate debt is apparent when
considering that the CEMBI BD index yields 5%, the same as the US
HY market despite greater diversification (56 countries represented
in the index) and significantly better credit quality.
Blended debt
The standard blended debt benchmark (50% EMBI GD, 25% GBI-EM GD
and 25% ELMI+ indices) returned +3.2% over the six months.
Over the past three years, Ashmore's blended debt strategy has
returned +6.8% on a gross annualised basis versus +6.2% for its
benchmark index.
The breadth of investment opportunities available across the
main fixed income asset classes is demonstrated by the minimum 450
bps annual gross return differential between the best performing
and worst performing asset classes over the past 15 years. This
means that an actively-managed blended debt strategy can add
significant value, and often serves as a logical starting point for
an investor making an allocation to Emerging Markets fixed income
for the first time. Blended debt strategies are also relevant to
the more experienced or sophisticated investor who wishes to define
a bespoke benchmark comprising the underlying fixed income asset
classes. Ashmore expects these factors to support continued demand
for blended debt products from both institutional and retail
investors.
Equities
Emerging Markets equities generated good returns in the period
with the MSCI EM index rising by 7.1% and the MSCI Frontier Markets
index increasing by 5.5%. As was the case in fixed income markets,
the occurrence of local political challenges in certain markets,
such as Hong Kong, did not impact significantly upon the
performance of the broader, diversified equity universe.
Ashmore continues to deliver strong performance in its global
equity strategies. For example, over three years the active
strategy has returned +15.2% on a gross annualised basis versus
+11.6% for the MSCI EM benchmark.
As is the case for the local currency asset class, there is a
good historical correlation between the performance of Emerging
Markets equities and the relative GDP growth rates between emerging
and developed world countries. Domestic conditions in many emerging
countries provide a good backdrop against which economic expansion
can continue; the market therefore expects 13% earnings growth in
aggregate by Emerging Markets companies in 2020. This should
support the performance of Emerging Markets equities and
consequently drive higher investor allocations.
Alternatives
The management of illiquid assets, for example private equity,
infrastructure, real estate and private healthcare assets,
represents a source of future growth for Ashmore as well as
providing differentiated returns and financial characteristics
compared with the liquid fixed income and equities themes.
Accordingly the Group continues to seek opportunities to manage
alternatives assets locally in Emerging Markets, consistent with
the second and third phases of its strategy.
Multi-asset
Ashmore's specialist active investment management capabilities
across the full range of Emerging Markets asset classes mean it is
well-positioned to manage clients' multi-asset allocations. The AuM
in this theme principally reflects retail capital raised through
intermediaries in Japan.
Overlay/liquidity
The overlay product provides clients with effective foreign
exchange hedging for Emerging Markets portfolios, which are not
managed by Ashmore. The AuM in this theme therefore fluctuates
according to the size of the clients' portfolios and decisions
taken with respect to the proportion of the underlying portfolios
to hedge. AuM increased by 15% or US$1.0 billion in the period.
Market outlook
In absolute terms and relative to developed world markets,
Emerging Markets have performed well over the past four years. This
reflects a combination of improving underlying economic and
political conditions together with an increasing recognition by
investors of the attractive return opportunities available across
the broad and diversified fixed income and equity investment
universes. Investors are therefore addressing their underweight
positions and driving capital flows into the Emerging Markets.
The outlook for Emerging Markets remains positive, and while
economic and market cycles are inevitable, there continue to be
strong incentives for global investors to increase allocations to
Emerging Markets in pursuit of higher risk-adjusted returns than
are available today in the developed world capital markets.
The IMF forecasts an expansion of the growth premium compared
with the developed world, with emerging countries expected to
deliver aggregate GDP growth of +4.6% in 2020, up from +3.9% in
2019, and compared with only +1.7% in both years for the developed
world. Stronger relative growth underpins the outlook for
currencies and supports the case for continued positive equity
returns. Local fixed income markets should also continue to benefit
from a benign inflation outlook, with domestic monetary policies
likely to remain accommodative. This favourable picture for
Emerging Markets contrasts with the structural growth impediments,
such as high indebtedness, and late-cycle valuations in many
Developed Markets and their ongoing political risks, particularly
in the US given the presidential election later this year.
Indeed, arguably the main risk to continued capital flows to
Emerging Markets remains a shock to global investor sentiment, most
likely originating in the developed world, rather than any specific
local event in an emerging nation or small group of emerging
nations.
As described above, and in the absence of such a macro shock,
the necessary conditions are in place for Emerging Markets equities
and fixed income outperformance and flows to continue in 2020.
These include the attractive valuations available, underweight
investor allocations, recent outperformance of Emerging Markets
versus developed world markets and important events such as China's
inclusion in the widely-used GBI-EM GD local currency bond
index.
Ashmore's specialist focus on Emerging Markets, the client flow
momentum maintained in the first half of the financial year and
ongoing client activity levels, mean it is well positioned to
continue to grow in keeping with this trend of higher investor
allocations.
Strategy/business developments
Ashmore has made progress in a number of areas over the past six
months, covering all three phases of its long-term growth
strategy.
Phase 1: higher allocations
As described in more detail below, the period delivered strong
net inflows of US$5.7 billion. New client mandates represented
approximately 25% of net institutional flows, meaning that client
activity in the period remained biased towards existing clients as
they increased allocations to Emerging Markets. Ashmore's growth
opportunity from higher allocations remains significant, with
typical target allocations to fixed income or equities remaining
well below 10% and therefore substantially underweight global
benchmark indices, in which Emerging Markets weights are in the
region of 15% to more than 20%.
Phase 2: diversify investment themes
Ashmore's strategy is to develop a broad-based Emerging Markets
franchise that is not reliant on any single investment theme,
client type or geography. A key component of this diversification
is to provide the Group's clients with access to a full range of
Emerging Markets equities products, from global active and all cap
strategies to specialist, regional and single country products.
The Group's equity franchise continues to demonstrate good
progress with US$0.6 billion of net flows in the six-month period,
representing 14% of opening AuM in the equities theme.
Approximately half of this was into the active and all cap
strategies, which have very strong absolute and relative three-year
performance track records and consequently are generating good
levels of client interest. The remaining flows were into a
combination of global products, such as frontier markets funds, and
funds managed by the local asset management businesses including
dedicated single country institutional mandates.
Ashmore will continue to focus on delivering strong investment
performance track records across the equity product range to
attract incremental allocations and deliver further growth in the
equities theme.
Phase 3: mobilise Emerging Markets capital
As at 31 December 2019, approximately 29% of AuM had been
sourced from clients domiciled in Emerging Markets, representing a
combination of globally-managed capital and assets managed
domestically by the Group's network of local asset management
businesses. Collectively, the local asset management platforms now
manage nearly US$6 billion.
Ashmore's Indonesian subsidiary achieved a notable milestone in
January 2020 when it listed its shares on the Jakarta stock
exchange after undertaking an IPO, and attracting a premium
price/earnings valuation of around 30x.
The IPO raised a small amount of primary capital to support
future growth and there was no sale of shares by existing
shareholders, meaning that Ashmore remains a committed majority
shareholder and the local management team continues to hold a
significant minority equity stake in the business, thereby ensuring
there continues to be a strong alignment of long-term
interests.
The listing is a logical step in the development of Ashmore's
business in Indonesia and provides a relevant route map for the
Group's other local platforms. Since its establishment in late
2012, Ashmore Indonesia has generated successful investment track
records across a range of equity and fixed income products and
delivered strong growth, meaning that the business currently
manages AuM in excess of US$2 billion.
AuM development
As at 31 December 2019, assets under management were US$98.4
billion, an increase of US$6.6 billion during the six months and
28% higher than a year ago. Net inflows from the Group's
diversified client base contributed US$5.7 billion to the growth in
AuM over the six months, including US$0.4 billion from intermediary
retail clients, and positive investment performance added a further
US$0.9 billion. Over the past 12 months, the Group has delivered
US$14.0 billion of net flows, equivalent to approximately
two-thirds of the growth in AuM in calendar year 2019.
Average AuM of US$93.3 billion was 24% higher than in the same
period in the prior year (H1 2018/19: US$75.5 billion).
Gross subscriptions of US$14.9 billion represent 16% of opening
AuM (H1 2018/19: US$8.5 billion, 12% of opening AuM), higher than
in the same period last year as investors continue to increase
allocations to Emerging Markets.
Subscriptions were broadly spread across the fixed income and
equities investment themes, and also overlay / liquidity. There was
no particular pattern to the type or location of client, but there
continued to be a bias towards additional allocations by existing
clients, which represented approximately 75% of the net
institutional flows in the period. There were notable new client
mandates in the external debt, corporate debt and blended debt
themes.
Gross redemptions of US$9.2 billion, or 10% of opening AuM, were
higher than in the prior year period (H1 2018/19: US$6.1 billion,
8% of opening AuM), largely reflecting the impact of clients
withdrawing capital from short duration strategies following the
negative mark-to-market impact of political developments in
Argentina in the summer. Towards the period end, performance
recovered and there were early signs of a flow recovery in the
short duration funds.
The Group's client base continues to be predominantly
institutional, with 87% of AuM from such clients (30 June 2019:
85%) and the remainder sourced through intermediary retail
channels. Segregated accounts including white-labelled funds
represent 69% of AuM (30 June 2019: 66%) while 29% of the Group's
AuM has been sourced from clients domiciled in Emerging
Markets.
Ashmore's principal mutual fund platforms are in Europe and the
US. The European SICAV range comprises 31 funds with AuM of US$18.9
billion (30 June 2019: US$19.6 billion in 30 funds) and the US
40-Act range has eight funds with AuM of US$3.5 billion (30 June
2019: US$3.7 billion in eight funds). In total, these funds
represent 23% of Group AuM (30 June 2019: 24%).
The Group's investments are geographically diverse and broadly
consistent with recent periods, with 39% of AuM invested in Latin
America, 22% in Asia Pacific, 22% in Eastern Europe and 17% in the
Middle East and Africa.
Investment performance
As at 31 December 2019, 24% of AuM is outperforming over one
year, 75% over three years and 98% over five years (30 June 2019:
90%, 97% and 97%, respectively). This is a similar picture to this
time last year when the combination of market volatility and the
Group's investment committees adding risk at attractive price
levels, had resulted in a period of short-term investment
underperformance before a subsequent recovery in market levels and
the delivery of strong absolute and relative investment
performance.
The continuing structural inefficiencies in Emerging Markets
allow an active manager to deliver meaningful outperformance over
time, while also inevitably meaning that there will be shorter-term
periods of underperformance if markets perform irrationally.
Ashmore's response in this situation is to take advantage of more
attractive price levels in order to deliver longer-term
outperformance, and Ashmore's investment committees have
implemented this approach consistently over more than 27 years of
investing successfully in Emerging Markets. The past six months
represent a good example of this, with short-term mark-to-market
underperformance in certain Ashmore strategies, while the
investment decisions taken in this period provide the potential for
significant upside and outperformance in the future. This has been
demonstrated by the recovery in asset prices towards the period
end.
AuM movements by investment theme as classified by mandate
The development during the period of AuM by theme as classified
by mandate is shown in the following table.
AuM AuM
30 June Gross Gross Other/ 31 December
Investment 2019 subscriptions redemptions Net flows Performance reclassification 2019
theme US$bn US$bn US$bn US$bn US$bn US$bn US$bn
================== ======== ================= ============ ========= =========== ================= ============
External
debt 19.1 1.4 (1.1) 0.3 0.3 - 19.7
Local currency 19.7 4.5 (1.9) 2.6 0.6 - 22.9
Corporate
debt 15.5 4.1 (4.6) (0.5) (0.3) (0.5) 14.2
Blended debt 24.3 2.4 (0.7) 1.7 0.2 0.5 26.7
Equities 4.4 1.1 (0.5) 0.6 0.1 - 5.1
Alternatives 1.6 0.1 - 0.1 (0.1) - 1.6
Multi-asset 0.5 - (0.1) (0.1) - - 0.4
Overlay/liquidity 6.7 1.3 (0.3) 1.0 0.1 - 7.8
================== ======== ================= ============ ========= =========== ================= ============
Total 91.8 14.9 (9.2) 5.7 0.9 - 98.4
================== ======== ================= ============ ========= =========== ================= ============
Financial review
Fee income and net management fee margin by investment theme
The table below summarises the net management fee income after
distribution costs, performance fee income, and average net
management fee margin by investment theme, determined by reference
to weighted average assets under management excluding non-fee
earning AuM and AuM for which the income is recognised elsewhere in
the financial statements, for example associates and joint
ventures.
Net management fee
Net management fees Performance fees margin
====================== ====================== ======================
H1 2019/20 H1 2018/19 H1 2019/20 H1 2018/19 H1 2019/20 H1 2018/19
Investment theme GBPm GBPm GBPm GBPm bps bps
================== ========== ========== ========== ========== ========== ==========
External debt 31.8 27.2 2.4 0.5 41 46
Local currency 31.6 26.0 - - 39 39
Corporate debt 29.9 23.5 0.1 0.2 52 58
Blended debt 49.1 39.2 0.9 0.2 49 50
Equities 12.4 12.7 - - 68 80
Alternatives 7.6 7.5 - 0.3 134 131
Multi-asset 1.7 2.6 - - 98 70
Overlay/liquidity 4.2 3.6 - - 16 16
================== ========== ========== ========== ========== ========== ==========
Total 168.3 142.3 3.4 1.2 46 49
================== ========== ========== ========== ========== ========== ==========
Revenues
Statutory net revenue increased 16% to GBP176.8 million (H1
2018/19: GBP152.1 million) as a result of strong growth in net
management fee income. On an adjusted basis, excluding
foreign-exchange translation effects, net revenue increased 20% to
GBP177.3 million (H1 2018/19: GBP148.2 million).
The Group's management fee income, net of distribution costs,
increased 18% to GBP168.3 million (H1 2018/19: GBP142.3 million).
This primarily reflects an increase of 24% in average AuM to
US$93.3 billion (H1 2018/19: US$75.5 billion), coupled with the
positive impact of a weaker average GBP:USD rate of 1.2657 (H1
2018/19: 1.2948) and a net management fee margin of 46bps (H1
2018/19: 49bps; H2 2018/19: 47bps). At constant exchange rates, net
management fees increased by 16%.
The one basis point decline in the net management fee margin
compared with the preceding six-month period primarily reflects the
impact of additional allocations to existing large institutional
mandates and a slight reduction in the proportion of AuM sourced
from intermediary retail clients.
Performance fees of GBP3.4 million (H1 2018/19: GBP1.2 million)
were generated in the period. At 31 December 2019, 13% of the
Group's AuM was eligible to earn performance fees (30 June 2019:
14%), of which a substantial proportion is subject to rebate
agreements. The Group continues to expect its diverse sources of
net management fee income to generate the substantial majority of
its net revenues.
Translation of the Group's non-Sterling assets and liabilities,
excluding seed capital, resulted in an unrealised foreign exchange
loss of GBP0.5 million (H1 2018/19: GBP3.9 million gain) reflecting
a higher GBP:USD dollar rate at the period end, mitigated by active
management of the Group's foreign exchange balances. The net
realised and unrealised gain on the Group's foreign exchange hedges
was GBP3.1 million (H1 2018/19: GBP2.7 million gain). Therefore,
the total foreign exchange gain recognised in revenues was GBP2.6
million (H1 2018/19: GBP6.6 million gain).
Other revenue increased slightly to GBP2.5 million (H1 2018/19:
GBP2.0 million) as a consequence of higher advisory fees relating
to alternatives funds.
Operating costs
Total operating costs of GBP57.5 million (H1 2018/19: GBP54.2
million) include GBP1.1 million of expenses incurred by seeded
funds that are required to be consolidated (H1 2018/19: GBP1.4
million), as disclosed in note 15.
Excluding these costs, statutory operating expenses increased by
7% or GBP3.6 million compared with the prior year period,
attributable to a higher variable compensation charge as a
consequence of higher profits, partially offset by a reduction in
other operating costs including depreciation and amortisation. At
constant exchange rates, operating costs increased by 5%.
The Group's headcount increased from 307 to 310 employees over
the six-month period, of which 294 are involved in investment
management-related activities, and the average headcount was 5%
higher than in the prior year period. The Group's fixed staff costs
of GBP13.6 million increased by only 3% (and 2% at constant
exchange rates) compared with the prior year period (H1 2018/19:
GBP13.2 million).
As is usual at the half-year stage, variable compensation has
been accrued at 20% of earnings before variable compensation,
interest and tax, resulting in a charge of GBP30.1 million (H1
2018/19: GBP24.8 million).
Other operating costs, excluding consolidated fund expenses and
depreciation and amortisation, fell by GBP1.2 million, or 10%, to
GBP11.0 million largely as a result of the adoption of IFRS 16, as
described below. Like-for-like other operating costs increased by
2% (and 1% at constant exchange rates), with lower travel expenses
and professional fees offset by higher information technology and
communications costs.
The combined depreciation and amortisation charges for the
period were GBP1.7 million (H1 2018/19: GBP2.6 million).
The adoption of IFRS 16 had a small negative impact of GBP0.2
million on profit before tax in the current period. It removed the
rental expense relating to the Group's properties (GBP1.4 million)
and replaced it with depreciation of the right-of-use asset (GBP1.3
million) and a lease finance expense (GBP0.3 million).
Adjusted EBITDA
Adjusted EBITDA increased by 24% from GBP98.8 million to
GBP122.5 million, ahead of the 20% growth in adjusted net revenue
due to adjusted cost growth being limited to 11%, and delivering an
adjusted EBITDA margin of 69%. The impact of IFRS 16 contributed
0.8% to the adjusted EBITDA margin.
Finance income
Net finance income of GBP9.5 million (H1 2018/19: GBP6.3
million) includes items relating to seed capital investments, which
are described in more detail below. Excluding these items, interest
income for the period was GBP4.0 million (H1 2018/19: GBP3.8
million).
Profit before tax
Statutory profit before tax increased by 42% to GBP132.4 million
(H1 2018/19: GBP93.0 million), reflecting the strong operational
performance and gains delivered by the Group's seed capital
programme.
Taxation
The majority of the Group's profit is subject to UK taxation. Of
the total current tax charge for the six-month period of GBP20.9
million (H1 2018/19: GBP17.9 million), GBP11.8 million relates to
UK corporation tax (H1 2018/19: GBP13.0 million).
The Group's effective tax rate for the six-month period is 13.7%
(H1 2018/19: 20.4%), which is lower than the prevailing UK
corporation tax rate of 18.5% (H1 2018/19: 19.0%). This reflects
the impact of the increase in the Group's share price on the
valuation of deferred tax assets relating to share-based
remuneration provided to employees, the impact of non-taxable
unrealised seed capital gains and the geographic mix of the Group's
profits in the period. Note 9 to the interim condensed financial
statements provides a full reconciliation of this difference
compared to the UK corporation tax rate.
The Group's ongoing effective tax rate, based on its current
geographic mix of profits, is expected to be approximately 16%,
although this will be affected by any changes to the expected UK
tax rate of 17%, which may be enacted before the end of the
financial year.
Earnings per share
Basic earnings per share for the period increased by 57% to 16.9
pence (H1 2018/19: 10.8 pence) and diluted earnings per share
increased by 56% from 10.1 pence to 15.8 pence, reflecting the
operational performance, the positive contribution from seed
capital investments and the lower effective tax rate.
On an adjusted basis, excluding the effects of foreign exchange
translation, seed capital-related items and relevant tax, diluted
earnings per share increased by 35% to 14.7 pence (H1 2018/19: 10.9
pence).
Balance sheet
Ashmore's policy is to maintain a strong balance sheet through
market cycles in order to meet regulatory capital requirements, to
support the commercial demands of current and prospective
investors, and to fund strategic development opportunities across
the business.
As at 31 December 2019, total equity attributable to
shareholders of the parent was GBP810.5 million (31 December 2018:
GBP756.6 million, 30 June 2019: GBP843.2 million). Capital
resources available to the Group totalled GBP700.7 million as at 31
December 2019, equivalent to 98 pence per share, and significantly
exceeded the Group's regulatory capital requirement of GBP121.0
million, equivalent to 17 pence per share. The Group has no
debt.
Cash
Ashmore's business model continues to deliver a high conversion
rate of operating profits to cash. Based on operating profit of
GBP123.0 million for the period (H1 2018/19: GBP87.1 million), the
Group generated GBP113.5 million of cash from operations (H1
2018/19: GBP83.3 million). The operating cash flows after excluding
consolidated funds represent 94% of the adjusted EBITDA for the
period of GBP122.5 million (H1 2018/19: 86%).
Cash and cash equivalents by currency
31 December 30 June
2019 2019
GBPm GBPm
========== =========== =======
Sterling 77.1 157.8
US dollar 318.6 269.5
Other 31.7 49.9
========== =========== =======
Total 427.4 477.2
========== =========== =======
It is normal for the Group's cash balance to decline in the
first half of the financial year as the Group distributes the final
ordinary dividend to shareholders and pays cash variable
remuneration to employees, both of which relate to the prior
financial year.
Seed capital investments
The Group's actively managed seed capital programme has
delivered growth in third-party AuM with more than US$13 billion of
AuM in funds that have been seeded, representing 14% of total Group
AuM.
During the six-month period, the Group made new investments of
GBP15.2 million and realised GBP34.6 million from previous
investments. The consequent net redemption of GBP19.4 million
together with negative market and foreign exchange movements of
GBP3.1 million, means the value of the Group's seed capital
investments declined from GBP277.8 million as at 30 June 2019 to
GBP255.3 million as at 31 December 2019.
Ashmore has also made seed capital commitments to funds of
GBP18.8 million that were undrawn at the period end, giving a total
committed value for the Group's seed capital programme of
approximately GBP274 million.
As at 31 December 2019, the original cost of the Group's current
seed capital investments was GBP220.2 million, representing 31% of
Group net tangible equity. Approximately two-thirds of the Group's
seed capital is held in funds with better than one-month dealing
frequency, such as SICAV or US 40-Act mutual funds.
The new investments were primarily into corporate debt and
equity SICAVs together with some draw down of commitments by
alternatives funds. The redemptions were mainly achieved in the
equities and local currency themes, as a consequence of client
flows, and also in alternatives.
Seed capital market value by currency
31 December 30 June
2019 2019
GBPm GBPm
=================== =========== =======
US dollar 227.2 250.7
Colombian peso 16.3 14.8
Other 11.8 12.3
=================== =========== =======
Total market value 255.3 277.8
=================== =========== =======
The table below summarises the principal IFRS line items to
assist in the understanding of the financial impact of the Group's
seed capital programme. The seed capital investments generated a
total gain of GBP8.4 million in the period of which GBP1.5 million
was realised (H1 2018/19: GBP9.7 million loss). This comprises a
GBP4.6 million gain in respect of consolidated funds, including
GBP2.0 million of finance income, and a GBP3.8 million gain in
respect of unconsolidated funds that is reported in finance
income.
Financial impact of seed capital investments
H1 2019/20 H1 2018/19
GBPm GBPm
====================================================== ========== ==========
Consolidated funds (note 15):
Gains/(losses) on investment securities 4.2 (18.6)
Change in third-party interests in consolidated funds (0.5) 7.8
Operating costs (1.1) (1.4)
Finance income 2.0 5.8
------------------------------------------------------ ---------- ----------
Sub-total: consolidated funds 4.6 (6.4)
Unconsolidated funds (note 7):
Market return 0.6 (2.9)
Foreign exchange 3.2 (0.4)
------------------------------------------------------ ---------- ----------
Sub-total: unconsolidated funds 3.8 (3.3)
Total seed capital profit/(loss) 8.4 (9.7)
------------------------------------------------------ ---------- ----------
- realised 1.5 1.0
- unrealised 6.9 (10.7)
====================================================== ========== ==========
Foreign exchange
The majority of the Group's fee income is received in US dollars
and it is the Group's policy to hedge up to two-thirds of the
notional value of budgeted foreign currency-denominated net
management fees, using either forward or option foreign exchange
contracts. Ashmore's Foreign Exchange Management Committee
determines the proportion of budgeted fee income to hedge or sell
by regular reference to expected non-US dollar, and principally
Sterling, cash requirements. Foreign currency assets and
liabilities, including cash, are marked to market at the period end
exchange rate with movements reported in either revenues or other
comprehensive income.
Goodwill and intangible assets
At 31 December 2019, goodwill and intangible assets on the
Group's balance sheet totalled GBP84.0 million (30 June 2019:
GBP87.3 million). The movement in the period is the result of an
amortisation charge of GBP0.1 million (H1 2018/19: GBP2.3 million)
and a foreign exchange revaluation loss in reserves of GBP3.2
million (H1 2018/19: GBP3.6 million gain).
Shares held by Employee Benefit Trust (EBT)
The Group's EBT purchases and holds shares in anticipation of
the vesting of share awards. At 31 December 2019, the EBT owned
43,648,181 ordinary shares (30 June 2019: 40,355,103 ordinary
shares), representing 6.1% of the Group's issued share capital (30
June 2019: 5.7%).
Dividend
The Board intends to pay a progressive ordinary dividend over
time, taking into consideration factors such as the prospects for
the Group's earnings, demands on the Group's financial resources,
and the markets in which the Group operates.
Accordingly, the Board has determined that an interim dividend
of 4.80 pence per share (H1 2018/19: 4.55 pence per share) will be
paid on 30 March 2020 to all shareholders on the register on 6
March 2020.
Mark Coombs
Chief Executive Officer
5 February 2020
Alternative performance measures
================================
Ashmore discloses non-GAAP financial alternative performance
measures (APMs) in order to assist shareholders' understanding of
the operational performance of the Group during the accounting
period. The calculation of APMs is consistent with the prior year
period and the financial year ending 30 June 2019 and unless
otherwise stated reconciliations to statutory IFRS results are
provided in the Chief Executive's report. Historical
reconciliations of APMs to statutory IFRS results can be found in
the respective interim financial reports and annual reports and
accounts.
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. The charge for variable compensation
is a component of personnel expenses.
EBVCIT is defined as operating profit excluding the charge for
variable compensation and seed capital-related items. The latter
comprises 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 operating
performance of the business before certain non-cash items,
financing income and charges, and taxation.
Adjusted net revenue, adjusted operating costs and adjusted
EBITDA
Adjusted figures exclude items relating to foreign exchange
translation and seed capital. This provides a better understanding
of the Group's operational performance excluding the mark-to-market
volatility of foreign exchange translation and seed capital
investments. These adjustments are merely reclassified within the
adjusted profit and loss account, leaving statutory profit before
tax unchanged.
Adjusted EBITDA margin
The ratio of adjusted EBITDA to adjusted net revenue, both of
which are defined above. This is an appropriate measure of the
Group's operational efficiency and its ability to generate returns
for shareholders.
Conversion of operating profits to cash
This compares adjusted EBITDA to cash generated from operations
excluding consolidated funds, and is a measure of the effectiveness
of the Group's operations at converting profits to cash.
Risk management
===============
A detailed description of the Group's risk management function
and internal control framework, which provides an ongoing process
for identifying, evaluating and managing the Group's emerging and
principal risks, was included in the 2019 Annual Report and
Accounts, together with a list of principal risks and examples of
associated controls and mitigants. This disclosure covered strategy
and business, client, treasury, investment and operational risks.
There have been no material changes to the principal risks and
associated controls and mitigants during the six-month period.
As disclosed previously, the establishment of Ashmore Ireland
addressed the risk associated with the most severe potential Brexit
scenario, as it provides the Group with continued access to
EU-based clients after the UK has left the EU and in the absence of
any equivalence arrangements.
Interim condensed consolidated statement of comprehensive
income
For the six months ended 31 December 2019
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
Notes GBPm GBPm GBPm
================================================ ===== ============ ============ ==========
Management fees 177.5 148.3 307.6
Performance fees 3.4 1.2 2.8
Other revenue 2.5 2.0 5.9
================================================ ===== ============ ============ ==========
Total revenue 5 183.4 151.5 316.3
Distribution costs (9.2) (6.0) (13.3)
Foreign exchange 6 2.6 6.6 11.3
================================================ ===== ============ ============ ==========
Net revenue 176.8 152.1 314.3
Gains/(losses) on investment securities 15 4.2 (18.6) 0.5
Change in third-party interests in consolidated
funds 15 (0.5) 7.8 3.8
Personnel expenses (43.7) (38.0) (84.2)
Other expenses (13.8) (16.2) (31.6)
================================================ ===== ============ ============ ==========
Operating profit 123.0 87.1 202.8
Finance income 7 9.5 6.3 17.4
Share of losses from associates and
joint ventures (0.1) (0.4) (0.3)
================================================ ===== ============ ============ ==========
Profit before tax 132.4 93.0 219.9
Tax expense 9 (18.2) (19.0) (38.4)
================================================ ===== ============ ============ ==========
Profit for the period 114.2 74.0 181.5
Other comprehensive income, net of related
tax effect
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences
arising on foreign operations (31.4) 15.9 14.7
Cash flow hedge intrinsic value gains 0.1 - -
================================================ ===== ============ ============ ==========
Other comprehensive income, net of related
tax effect (31.3) 15.9 14.7
================================================ ===== ============ ============ ==========
Total comprehensive income for the period 82.9 89.9 196.2
================================================ ===== ============ ============ ==========
Profit attributable to:
Equity holders of the parent 112.9 72.4 178.6
Non-controlling interests 1.3 1.6 2.9
================================================ ===== ============ ============ ==========
Profit for the period 114.2 74.0 181.5
================================================ ===== ============ ============ ==========
Total comprehensive income attributable
to:
Equity holders of the parent 81.8 88.2 193.2
Non-controlling interests 1.1 1.7 3.0
================================================ ===== ============ ============ ==========
Total comprehensive income for the period 82.9 89.9 196.2
================================================ ===== ============ ============ ==========
Earnings per share
Basic 10 16.85p 10.75p 26.57p
Diluted 10 15.84p 10.13p 25.04p
================================================ ===== ============ ============ ==========
Interim condensed consolidated balance sheet
As at 31 December 2019
Unaudited Unaudited Audited
31 December 31 December 30 June
2019 2018 2019
Notes GBPm GBPm GBPm
======================================== ===== ============ ============ ========
Assets
Non-current assets
Goodwill and intangible assets 12 84.0 89.3 87.3
Property, plant and equipment 13 12.9 1.4 1.5
Investment in associates and joint
ventures 1.2 1.8 1.8
Non-current financial assets measured
at fair value 15 31.1 40.1 31.6
Deferred acquisition costs 0.7 0.8 0.8
Deferred tax assets 32.7 25.4 30.2
======================================== ===== ============ ============ ========
162.6 158.8 153.2
======================================== ===== ============ ============ ========
Current assets
Investment securities 15 222.4 207.2 278.7
Financial assets measured at fair value 15 45.5 24.4 16.0
Trade and other receivables 89.4 75.7 79.4
Derivative financial instruments 1.4 - -
Cash and cash equivalents 427.4 425.4 477.2
======================================== ===== ============ ============ ========
786.1 732.7 851.3
======================================== ===== ============ ============ ========
Non-current assets held for sale 15 14.3 4.3 44.7
======================================== ===== ============ ============ ========
Total assets 963.0 895.8 1,049.2
======================================== ===== ============ ============ ========
Equity and liabilities
Capital and reserves - attributable
to equity holders of the parent
Issued capital 17 0.1 0.1 0.1
Share premium 15.6 15.6 15.6
Retained earnings 811.0 724.8 812.6
Foreign exchange reserve (16.3) 16.1 14.9
Cash flow hedging reserve 0.1 - -
======================================== ===== ============ ============ ========
810.5 756.6 843.2
Non-controlling interests 10.2 11.5 10.9
======================================== ===== ============ ============ ========
Total equity 820.7 768.1 854.1
======================================== ===== ============ ============ ========
Liabilities
Non-current liabilities
Lease liabilities 13 9.0 - -
Deferred tax liabilities 8.3 7.9 8.4
======================================== ===== ============ ============ ========
17.3 7.9 8.4
======================================== ===== ============ ============ ========
Current liabilities
Lease liabilities 13 2.2 - -
Current tax 2.9 10.2 22.5
Third-party interests in consolidated
funds 15 66.3 71.3 107.0
Derivative financial instruments - 1.2 1.1
Trade and other payables 50.8 37.1 56.1
======================================== ===== ============ ============ ========
122.2 119.8 186.7
======================================== ===== ============ ============ ========
Non-current liabilities held for sale 15 2.8 - -
======================================== ===== ============ ============ ========
Total liabilities 142.3 127.7 195.1
======================================== ===== ============ ============ ========
Total equity and liabilities 963.0 895.8 1,049.2
======================================== ===== ============ ============ ========
Interim condensed consolidated statement of changes in
equity
For the six months ended 31 December 2019
Attributable to equity holders
of the parent
===========================================================
Cash
Foreign flow
Issued Share Retained exchange hedging Non-controlling Total
capital premium earnings reserve reserve Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Audited balance at 30 June
2018 0.1 15.6 743.2 0.3 - 759.2 1.3 760.5
Profit for the period - - 72.4 - - 72.4 1.6 74.0
Other comprehensive
income/(loss):
Foreign currency translation
differences arising on
foreign operations - - - 15.8 - 15.8 0.1 15.9
Total comprehensive
income/(loss) - - 72.4 15.8 - 88.2 1.7 89.9
Transactions with owners:
Purchase of own shares - - (21.9) - - (21.9) - (21.9)
Acquisition of subsidiary - - 5.2 - - 5.2 9.0 14.2
Share-based payments - - 11.9 - - 11.9 - 11.9
Dividends to equity holders - - (86.0) - - (86.0) - (86.0)
Dividends to non-controlling
interests - - - - - - (0.5) (0.5)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Total contributions and
distributions - - (90.8) - - (90.8) 8.5 (82.3)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Unaudited balance at 31
December 2018 0.1 15.6 724.8 16.1 - 756.6 11.5 768.1
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Profit for the period - - 106.2 - - 106.2 1.3 107.5
Other comprehensive
income/(loss):
Foreign currency translation
differences arising on
foreign operations - - - (1.2) - (1.2) - (1.2)
Total comprehensive
income/(loss) - - 106.2 (1.2) - 105.0 1.3 106.3
Transactions with owners:
Purchase of own shares - - (1.8) - - (1.8) - (1.8)
Share-based payments - - 15.7 - - 15.7 - 15.7
Dividends to equity holders - - (32.3) - - (32.3) - (32.3)
Dividends to non-controlling
interests - - - - - - (1.9) (1.9)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Total contributions and
distributions - - (18.4) - - (18.4) (1.9) (20.3)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Audited balance at 30 June
2019 0.1 15.6 812.6 14.9 - 843.2 10.9 854.1
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Adjustment on application
of IFRS 16 (note 3) - - (0.2) - - (0.2) - (0.2)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Adjusted balance at 1 July
2019 0.1 15.6 812.4 14.9 - 843.0 10.9 853.9
Profit for the period - - 112.9 - - 112.9 1.3 114.2
Other comprehensive
income/(loss):
Foreign currency translation
differences arising on
foreign operations - - - (31.2) - (31.2) (0.2) (31.4)
Cash flow hedge intrinsic
value gains - - - - 0.1 0.1 - 0.1
Total comprehensive
income/(loss) - - 112.9 (31.2) 0.1 81.8 1.1 82.9
Transactions with owners:
Purchase of own shares - - (41.1) - - (41.1) - (41.1)
Share-based payments - - 12.8 - - 12.8 - 12.8
Dividends to equity holders - - (86.0) - - (86.0) - (86.0)
Dividends to non-controlling
interests - - - - - - (1.8) (1.8)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Total contributions and
distributions - - (114.3) - - (114.3) (1.8) (116.1)
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Unaudited balance at 31
December 2019 0.1 15.6 811.0 (16.3) 0.1 810.5 10.2 820.7
=============================== ======== ======== ========= ========= ======== ======= =============== =======
Interim condensed consolidated cash flow statement
For the six months ended 31 December 2019
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
=========================================================== ============ ============ ==========
Operating activities
Operating profit 123.0 87.1 202.8
Adjustments for non-cash items:
Depreciation and amortisation 1.7 2.6 4.8
Accrual for variable compensation 12.8 12.3 27.6
Unrealised foreign exchange losses/(gains) (2.6) (3.1) (11.3)
Other non-cash items (3.7) 8.0 (4.3)
=========================================================== ============ ============ ==========
Cash generated from operations before working capital
changes 131.2 106.9 219.6
Changes in working capital:
Decrease/(increase) in trade and other receivables (10.0) (4.5) (8.2)
Decrease/(increase) in derivative financial instruments (2.5) 1.1 1.0
Increase/(decrease) in trade and other payables (5.2) (20.2) (1.2)
=========================================================== ============ ============ ==========
Cash generated from operations 113.5 83.3 211.2
Taxes paid (37.9) (13.8) (22.1)
=========================================================== ============ ============ ==========
Net cash from operating activities 75.6 69.5 189.1
=========================================================== ============ ============ ==========
Investing activities
Interest and investment income received 5.3 8.6 15.4
Proceeds on disposal of associate 0.5 - -
Acquisition of subsidiary, net of cash acquired - (4.9) (4.9)
Purchase of non-current financial assets measured
at fair value (1.4) (3.0) (4.8)
Purchase of financial assets held for sale (11.6) (3.8) (64.0)
Purchase of financial assets measured at fair value - - (0.3)
Sale of non-current financial assets measured at
fair value 1.9 11.4 24.0
Sale of financial assets held for sale 8.4 - 19.4
Sale of financial assets measured at fair value 11.6 3.5 4.4
Sale of investment securities 16.5 8.4 4.7
Net cash on initial consolidation of seed capital
investments (0.2) 0.1 3.5
Purchase of property, plant and equipment (0.8) (0.1) (0.8)
=========================================================== ============ ============ ==========
Net cash generated/(used) in investing activities 30.2 20.2 (3.4)
=========================================================== ============ ============ ==========
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
===================================================== ============ ============ ==========
Financing activities
Dividends paid to equity holders (86.0) (86.0) (118.3)
Dividends paid to non-controlling interests (1.8) (0.5) (2.4)
Third-party subscriptions into consolidated funds 9.6 5.4 2.7
Third-party redemptions from consolidated funds (6.1) (5.8) (10.3)
Distributions paid by consolidated funds (12.8) (0.7) (1.5)
Payment of lease liabilities (note 13) (1.2) - -
Interest paid (note 13) (0.3) - -
Purchase of own shares (41.1) (21.9) (23.7)
===================================================== ============ ============ ==========
Net cash used in financing activities (139.7) (109.5) (153.5)
===================================================== ============ ============ ==========
Net increase/(decrease) in cash and cash equivalents (33.9) (19.8) 32.2
Cash and cash equivalents at beginning of period 477.2 433.0 433.0
Effect of exchange rate changes on cash and cash
equivalents (15.9) 12.2 12.0
===================================================== ============ ============ ==========
Cash and cash equivalents at end of period 427.4 425.4 477.2
===================================================== ============ ============ ==========
Cash and cash equivalents comprise:
Cash at bank and in hand 62.2 60.1 73.9
Daily dealing liquidity funds 296.0 208.5 243.3
Deposits 69.2 156.8 160.0
===================================================== ============ ============ ==========
427.4 425.4 477.2
===================================================== ============ ============ ==========
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 2019 were authorised for issue by the
Directors on 5 February 2020.
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 2019 which are available on the Group's
website. Those statutory accounts were approved by the Board of
Directors on 6 September 2019 and have been filed with Companies
House. The report of the auditors on those accounts was
unqualified.
3) New accounting standards and interpretations
Accounting standards and interpretations adopted
The accounting policies applied in these interim results are
consistent with those applied in the Group's annual statutory
financial statements for 2019, except for the adoption of new
International Financial Reporting Standards (IFRS) and
interpretations below.
IFRS 16 Leases
The Group has applied IFRS 16 Leases (IFRS 16) for the first
time for its annual reporting period commencing on 1 July 2019.
IFRS 16 replaces IAS 17 Leases and is effective for reporting
periods beginning on or after 1 January 2019. Where the Group is a
lessee, IFRS 16 requires operating leases to be recorded in the
Group's statement of financial position, reflecting a lease
liability and an associated right-of-use (ROU) asset.
The lease liability is initially measured at the present value
of the future contractual cash flows remaining under the lease
term, discounted using the Group's incremental borrowing rate.
Interest is subsequently accrued on the lease liability and
presented as a component of finance costs, and calculated using the
effective interest method to give a constant rate of return over
the life of the lease whilst the liability is reduced by the lease
payments. The ROU asset is initially measured at the amount of the
lease liability plus initial direct costs incurred by the lessee,
adjusted for any lease incentives and the estimated cost of
restoration obligations. The ROU asset is presented within
property, plant and equipment and depreciated over the lease term
as the benefit of the lease is consumed. The Group applies
judgement in assessing whether to include options to extend or
cancel the lease. All relevant factors that could create an
economic incentive to exercise the option are considered and the
option is included if it is reasonably certain to be exercised.
After the lease commencement date, the Group reassesses the lease
term if there is a significant change in circumstances that is
within its control and affects the likelihood that it will exercise
(or not exercise) the option.
The Group has measured the IFRS 16 ROU assets and lease
liabilities as if the standard had always been applied but based on
an incremental borrowing rate at the date of initial adoption, 1
July 2019. Comparative information has not been restated as the
Group has applied the modified retrospective approach with the
cumulative effect of initially applying the standard recognised as
an adjustment to the opening retained earnings at 1 July 2019. The
Group has applied the optional exemption in the standard which
permits the cost of short-term (less than 12 months) leases to be
expensed on a straight-line basis over the lease term. These lease
arrangements are not material to the Group.
At 30 June 2019, the Group had non-cancellable operating lease
commitments of GBP13.8 million. As a result of applying IFRS 16,
the Group has recognised lease liabilities and ROU assets at 1 July
2019 of GBP12.8 million and GBP12.6 million respectively. This
reduced the Group's net assets by GBP0.2 million, recognised as a
reduction in retained earnings at 1 July 2019. The weighted average
incremental borrowing rate applied to the lease liabilities on 1
July 2019 was 4.8%. Additional disclosure on the impact of IFRS 16
to the Group's ROU assets and lease liabilities is provided in note
13.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 Uncertainty over Income Tax Treatments (IFRIC 23)
became effective on 1 January 2019 and provides clarification as to
how the recognition and measurement requirements of IAS 12 Income
Tax should be applied. IFRIC 23 does not have a material impact on
the Group.
Accounting standards and interpretations not yet adopted
The Group did not implement the requirements of any other
standards or interpretations that were in issue but were not
required to be adopted by the Group at the half year. No other
standards or interpretations issued and not yet effective are
expected to have an impact on the Group's 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.
4) Segmental information
The Group's operations are reported to and reviewed by the Board
on the basis of the investment management business as a whole,
hence the Group is treated as a single segment. The key management
information considered is adjusted EBITDA which is GBP122.5 million
for the period (H1 2018/19: adjusted EBITDA of GBP98.8 million was
derived by adjusting operating profit by GBP2.6 million of
depreciation and amortisation expense, GBP12.2 million expense
related to seed capital and GBP3.1 million of foreign exchange
gains). The additional disclosures below provide the location of
the Group's non-current assets at year end other than financial
instruments, deferred tax assets and post-employment benefit
assets. Disclosures relating to revenue by location are provided in
note 5 below.
Analysis of non-current assets by geography
As at As at As at
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
=========================== ============ ============ ========
United Kingdom and Ireland 26.1 20.9 20.6
United States 67.7 71.0 69.3
Other 5.0 1.4 1.5
=========================== ============ ============ ========
Total non-current assets 98.8 93.3 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 the specific assessment criteria have been met
and it is highly probable that a significant income reversal will
not subsequently occur. The Group is not considered to be reliant
on any single source of revenue. None of the Group's funds provided
more than 10.0% of total revenue in the period (H1 2018/19: none;
FY2018/19: none) when considering management fees and performance
fees on a combined basis.
Analysis of revenue by geography
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
=========================== ============ ============ =========
United Kingdom and Ireland 158.9 129.8 265.1
United States 10.4 9.4 24.1
Other 14.1 12.3 27.1
=========================== ============ ============ =========
Total revenue 183.4 151.5 316.3
=========================== ============ ============ =========
6) Foreign exchange
The foreign exchange rates which had a material impact on the
Group's results are the US dollar, the Euro, the Indonesian rupiah
and the Colombian peso.
Average rate Average rate Average rate
Closing rate Closing rate Closing rate 6 months 6 months 12 months
as at as at as at ended ended ended
31 December 31 December 30 June 31 December 31 December 30 June
GBP1 2019 2018 2019 2019 2018 2019
================== ============ ============ ============ ============ ============ ============
US dollar 1.3248 1.2736 1.2727 1.2657 1.2948 1.2958
Euro 1.1802 1.1141 1.1176 1.1381 1.1231 1.1345
Indonesian rupiah 18,391 18,314 17,980 17,816 18,912 18,660
Colombian peso 4,347 4,136 4,082 4,264 3,981 4,058
================== ============ ============ ============ ============ ============ ============
Foreign exchange gains and losses are shown below.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
======================================================= ============ ============ =========
Net realised and unrealised hedging gains 3.1 2.7 5.1
Translation gains/(losses) on non-Sterling denominated
monetary assets and liabilities (0.5) 3.9 6.2
======================================================= ============ ============ =========
Total foreign exchange gains 2.6 6.6 11.3
======================================================= ============ ============ =========
7) Finance income
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
========================================================== ============ ============= =========
Interest and investment income 6.0 9.6 13.2
Net realised gains on seed capital investments measured
at fair value 1.5 1.0 2.4
Net unrealised gains/(losses) on seed capital investments
measured at fair value 2.3 (4.3) 1.8
Interest expense on lease liabilities (note 13) (0.3) - -
========================================================== ============ ============= =========
Net finance income 9.5 6.3 17.4
========================================================== ============ ============= =========
Included within net realised and unrealised gains/(losses) on
seed capital investments measured at fair value are GBP0.9 million
gains in relation to held for sale investments (note 15a), GBP2.2
million gains on financial assets measured at FVTPL (note 15b) and
GBP0.7 million gains on non-current financial assets measured at
fair value (note 15c).
Included within interest and investment income are gains of
GBP2.0 million from investment securities on consolidated funds
(note 15d).
8) Share-based payments
The cost related to share-based payments recognised by the Group
in the statement of comprehensive income is shown below:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
=================================== ============= ============= =========
Omnibus Plan 16.6 12.2 31.3
Phantom Bonus Plan 0.5 0.1 -
=================================== ============= ============= =========
Total share-based payments expense 17.1 12.3 31.3
=================================== ============= ============= =========
The total expense recognised for the period in respect of
equity-settled share-based payment awards was GBP13.1 million (H1
2018/19: GBP11.4 million; FY2018/19: GBP27.3 million).
The Executive Omnibus Incentive Plan (Omnibus Plan)
Share awards outstanding under the Omnibus Plan were as
follows:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
Number of Number of Number of
shares subject shares subject shares subject
to awards to awards to awards
===================================== =============== =============== ===============
Equity-settled awards
At the beginning of the period 40,668,934 40,470,000 40,470,000
Granted 8,180,778 9,493,131 9,493,131
Vested (5,038,093) (7,762,847) (8,308,886)
Forfeited (104,792) (827,519) (985,311)
===================================== =============== =============== ===============
Outstanding at the end of the period 43,706,827 41,372,765 40,668,934
===================================== =============== =============== ===============
Cash-settled awards
At the beginning of the period 255,622 316,888 316,888
Granted 69,125 56,104 56,104
Vested (9,062) (60,047) (60,047)
Forfeited - (57,323) (57,323)
===================================== =============== =============== ===============
Outstanding at the end of the period 315,685 255,622 255,622
===================================== =============== =============== ===============
Total awards
At the beginning of the period 40,924,556 40,786,888 40,786,888
Granted 8,249,903 9,549,235 9,549,235
Vested (5,047,155) (7,822,894) (8,368,933)
Forfeited (104,792) (884,842) (1,042,634)
===================================== =============== =============== ===============
Outstanding at the end of the period 44,022,512 41,628,387 40,924,556
===================================== =============== =============== ===============
The weighted average share price of awards granted to employees
under the Omnibus Plan during the period was GBP4.38 (H1 2018/19:
GBP3.33; FY2018/19: GBP3.33), as 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
GBP1.0 million (H1 2018/19: GBP0.4 million; FY2018/19: GBP0.5
million) of which GBPnil relates to vested awards.
9) Taxation
Analysis of tax charge for the period
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
================================================== ============ ============ =========
Current tax
UK corporation tax on profits for the period 11.8 13.0 36.3
Overseas corporation tax charge 9.1 4.9 8.2
Adjustments in respect of prior periods - - (2.7)
================================================== ============ ============ =========
20.9 17.9 41.8
Deferred tax
Origination and reversal of temporary differences (2.7) 1.1 (3.4)
Tax expense for the period 18.2 19.0 38.4
================================================== ============ ============ =========
Factors affecting tax charge for the period
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
========================================================== ============ ============ =========
Profit before tax 132.4 93.0 219.9
========================================================== ============ ============ =========
Profit on ordinary activities multiplied by the blended
UK tax rate for the financial year of 18.5% (H1 2018/19:
19.0%; FY2018/19: 19.0%) 24.5 17.7 41.8
Effects of:
Non-deductible expenses 0.1 0.1 0.3
Deduction in respect of vested shares (3.8) (1.9) (1.1)
Different rate of taxes on overseas profits (1.2) 1.2 1.5
Non-deductible expenses/(non-taxable income) (1.5) 2.1 (0.3)
Recognition of historical deferred tax assets 0.2 - (0.8)
Other items (0.1) (0.2) (0.3)
Adjustments in respect of prior periods - - (2.7)
========================================================== ============ ============ =========
Tax expense for the period 18.2 19.0 38.4
========================================================== ============ ============ =========
10) Earnings per share
Basic earnings per share at 31 December 2019 of 16.85 pence (H1
2018/19: 10.75 pence; FY2018/19: 26.57 pence) is calculated by
dividing the profit after tax for the financial period attributable
to equity holders of the parent of GBP112.9 million (H1 2018/19:
GBP72.4 million; FY2018/19: GBP178.6 million) by the weighted
average number of ordinary shares in issue during the period,
excluding own shares.
Diluted earnings per share is calculated based on basic earnings
per share adjusted for all dilutive potential ordinary shares.
There is no difference between the profit for the year attributable
to equity holders of the parent used in the basic and diluted
earnings per share calculations.
Reconciliation of the weighted average number of shares used in
calculating basic and diluted earnings per share is shown
below.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
Number of Number of Number of
ordinary ordinary ordinary
shares shares shares
===================================================== ============ ============ ===========
Weighted average number of ordinary shares used in
the calculation of basic earnings per share 670,451,921 672,150,906 672,361,489
Effect of dilutive potential ordinary shares - share
awards 42,895,334 41,175,121 41,007,535
===================================================== ============ ============ ===========
Weighted average number of ordinary shares used in
the calculation
of diluted earnings per share 713,347,255 713,326,027 713,369,024
===================================================== ============ ============ ===========
11) Dividends
Dividends paid
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
================================================= ============ ============ =========
Final dividend for FY2018/19: 12.10p (FY2017/18:
12.10p) 86.0 86.0 86.0
Interim dividend for FY2018/19: 4.55p - - 32.3
================================================= ============ ============ =========
86.0 86.0 118.3
================================================= ============ ============ =========
In addition, the Group paid GBP1.8 million (H1 2018/19: GBP0.5
million; FY2018/19: GBP2.4 million) in dividends to non-controlling
interests.
Dividends declared/proposed
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
Company pence pence pence
==================================== ============ ============ =========
Interim dividend declared per share 4.80 4.55 4.55
Final dividend proposed per share - - 12.10
==================================== ============ ============ =========
4.80 4.55 16.65
==================================== ============ ============ =========
The Board has approved an interim dividend for the six months to
31 December 2019 of 4.80 pence per share (six months to 31 December
2018: 4.55 pence per share; final dividend for the year to 30 June
2019: 12.10 pence per share) payable on 30 March 2020 to
shareholders on the register on 6 March 2020.
12) Goodwill and intangible assets
Fund management
Goodwill contracts Total
GBPm GBPm GBPm
========================================== ======== =============== =======
Cost (at original exchange rate)
At 31 December 2018 70.4 40.4 110.8
Fully amortised - (39.5) (39.5)
========================================== ======== =============== =======
At 31 December 2019 and 30 June 2019 70.4 0.9 71.3
========================================== ======== =============== =======
Accumulated amortisation and impairment
========================================== ======== =============== =======
At 30 June 2018 - (39.9) (39.9)
Amortisation charge for the period - (2.3) (2.3)
At 31 December 2018 - (42.2) (42.2)
Amortisation charge for the period - (1.8) (1.8)
Fully amortised 43.9 43.9
At 30 June 2019 - (0.1) (0.1)
Amortisation charge for the period - (0.1) (0.1)
At 31 December 2019 - (0.2) (0.2)
========================================== ======== =============== =======
Net book value
========================================== ======== =============== =======
At 30 June 2018 70.3 3.9 74.2
Acquisition of subsidiary 12.9 0.9 13.8
Accumulated amortisation for the period - (2.3) (2.3)
FX revaluation through reserves* 3.4 0.2 3.6
========================================== ======== =============== =======
At 31 December 2018 86.6 2.7 89.3
Accumulated amortisation for the period - (1.8) (1.8)
FX revaluation through reserves* (0.1) (0.1) (0.2)
========================================== ======== =============== =======
At 30 June 2019 86.5 0.8 87.3
Accumulated amortisation for the period - (0.1) (0.1)
FX revaluation through reserves* (3.2) - (3.2)
========================================== ======== =============== =======
At 31 December 2019 83.3 0.7 84.0
========================================== ======== =============== =======
* FX revaluation through reserves is a result of the
retranslation of US dollar-denominated intangibles and
goodwill.
Goodwill
The Group's goodwill balance relates to the acquisition of
subsidiaries.
Goodwill acquired in a business combination is allocated to the
cash-generating units that are expected to benefit from that
business combination. It is the Group's judgement that the lowest
level of cash-generating unit used to determine impairment is the
investment management segment level. The Group has assessed that it
consists of a single cash-generating unit for the purposes of
monitoring and assessing goodwill for impairment. This reflects the
Group's global operating model, based on a single operating
platform, into which acquired businesses are fully integrated and
from which acquisition-related synergies are expected to be
realised.
During the period to 31 December 2019, no factors indicating
potential impairment of goodwill were noted. Based on the
calculation as at 31 December 2019, the recoverable amount was in
excess of the carrying value of goodwill and no impairment was
implied. The key assumptions used to determine the recoverable
amount are based on a fair value less costs to sell calculation
using the Company's market share price. In addition, the
sensitivity of the recoverable amount to a 10% change in the
Company's market share price will not lead to any impairment.
Therefore, no impairment loss has been recognised in the current or
preceding periods.
Fund management contracts
Intangible assets comprise fund management contracts and
contractually agreed share of carried interest recognised by the
Group on business combinations.
During the period to 31 December 2019, a review process was
undertaken to identify factors indicating whether the Group's fund
management contracts intangible assets were impaired. None were
identified and as a consequence, no impairment charge has been
recognised (H1 2018/19: GBPnil; FY2018/19: GBPnil).
The sensitivity of the recoverable amounts of intangible assets
to a 5% increase in pre-tax discount rate used in calculating the
recoverable amount was immaterial. The remaining amortisation
periods for fund management contracts range between two to five
years.
13) Leases
Information about leases for which the Group is a lessee is
presented below.
The Group leases office property under operating lease
arrangements. In accordance with IFRS 16, the Group measures and
presents right-of-use assets in relation to operating leases within
property, plant and equipment.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
================================================= ============ ============ =========
Property, plant and equipment owned by the Group 2.0 1.4 1.5
Right-of-use assets 10.9 - -
Net book value 12.9 1.4 1.5
================================================= ============ ============ =========
The carrying value of the Group's right-of-use assets,
associated lease liabilities and the movements during the period
are set out below.
Right-of-use
assets Lease liabilities
GBPm GBPm
=================================================== ============ =================
At 1 July 2019 12.6 12.8
Lease payments - (1.5)
Interest expense (recognised in finance expense) - 0.3
Depreciation charge (recognised in other expenses) (1.3) -
FX revaluation through reserves (0.4) (0.4)
At 31 December 2019 10.9 11.2
=================================================== ============ =================
Lease liabilities are presented in the consolidated balance
sheet as follows:
31 December
2019
GBPm
======================== ===========
Current 2.2
Non-current 9.0
Total lease liabilities 11.2
======================== ===========
Total cash outflow included within financing activities in the
consolidated cash flow statement in respect of principal and
interest paid on lease liabilities during the period amounted to
GBP1.5 million.
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
2019.
The Group has an established control framework with respect to
the measurement of fair values. This framework includes committees
that have overall responsibility for all significant fair value
measurements. Each committee regularly reviews significant inputs
and valuation adjustments. If third-party information is used to
measure fair value, the team assesses and documents the evidence
obtained from the third parties to support such valuations. There
are no material differences between the carrying amounts of
financial assets and liabilities and their fair values at the
balance sheet date.
Fair value hierarchy
The Group measures fair values using the following fair value
levels that reflect the significance of inputs used in making the
measurements, based on the degree to which the fair value is
observable:
- 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. Valuation techniques may include using a broker
quote in an inactive market or an evaluated price based on a
compilation of primarily observable market information utilising
information readily available via external sources.
- Level 3: Fair value measurements are derived from valuation
techniques that include inputs not based on observable market
data.
For financial instruments that are recognised at fair value on a
recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by reassessing
categorisation (based on the lowest level input that is significant
to
the fair value measurement as a whole) at the end of each
reporting period.
The fair value hierarchy of financial instruments which are
carried at fair value is summarised below:
At 31 December At 31 December
2019 2018 At 30 June 2019
========================== ============================ =============================
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 97.7 75.5 49.2 222.4 79.1 57.2 70.9 207.2 170.4 35.8 72.5 278.7
Non-current assets
held for sale - 14.3 - 14.3 - 4.3 - 4.3 - 44.7 - 44.7
Financial assets
at FVTPL - 44.7 0.8 45.5 - 21.4 3.0 24.4 - 14.4 1.6 16.0
Non-current financial
assets - 0.5 30.6 31.1 - 9.3 30.8 40.1 - - 31.6 31.6
Derivative financial
instruments - 1.4 - 1.4 - - - - - - - -
Total financial
assets 97.7 136.4 80.6 314.7 79.1 92.2 104.7 276.0 170.4 94.9 105.7 371.0
====================== ===== ===== ===== ===== ===== ===== ====== ====== ====== ===== ====== ======
Financial liabilities
Third-party interests
in consolidated
funds 34.7 20.1 11.5 66.3 31.8 15.1 24.4 71.3 70.6 12.6 23.8 107.0
Derivative financial
instruments - - - - - 1.2 - 1.2 - 1.1 - 1.1
Non-current financial
liabilities held
for sale - 2.8 - 2.8 - - - - - - - -
Total financial
liabilities 34.7 22.9 11.5 69.1 31.8 16.3 24.4 72.5 70.6 13.7 23.8 108.1
====================== ===== ===== ===== ===== ===== ===== ====== ====== ====== ===== ====== ======
The Group recognises transfers into and transfers out of fair
value hierarchy levels as at the end of the reporting period. There
were no transfers between level 1, level 2 and level 3 of the fair
value hierarchy during the period.
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 2019, 31 December 2018 and 30 June 2019.
Fair value measurements using significant unobservable inputs
(level 3)
The following table presents the changes in level 3 items for
the period.
Third-party
Financial Non-current interests
Investment assets at financial in consolidated
securities FVTPL assets funds
GBPm GBPm GBPm GBPm
===================================== =========== ========== =========== ================
At 31 December 2018 70.9 3.0 30.8 24.4
Additions/(disposals) 1.0 (0.2) 0.5 0.7
Unrealised gains/(losses) recognised
in profit or loss 2.3 (1.2) 0.3 (1.3)
Unrealised gains/(losses) recognised
in reserves (1.7) - - -
===================================== =========== ========== =========== ================
At 30 June 2019 72.5 1.6 31.6 23.8
Additions/(disposals) (20.7) - (1.1) (10.4)
Unrealised gains/(losses) recognised
in profit or loss 0.5 (0.8) 0.7 (0.4)
Unrealised gains/(losses) recognised
in reserves (3.1) - (0.6) (1.5)
At 31 December 2019 49.2 0.8 30.6 11.5
===================================== =========== ========== =========== ================
Valuation of level 3 financial assets recognised at fair value
on a recurring basis using valuation techniques
Investments valued using valuation techniques include financial
investments which, by their nature, do not have an externally
quoted price based on regular trades, and financial investments for
which markets are no longer active as a result of market conditions
e.g. market illiquidity. The valuation techniques used in the
estimation of fair values are consistent with those applied in the
preparation of the Group's Annual Report and Accounts for the year
ended 30 June 2019.
The following tables show the valuation techniques and the
significant unobservable inputs used to estimate the fair value of
level 3 investments as at 31 December 2019 and 30 June 2019, and
the associated sensitivity to changes in unobservable inputs to a
reasonable alternative:
Fair value
at 31
December Significant Change in
Asset class and valuation 2019 unobservable Range of Sensitivity fair value
technique GBPm input estimates factor GBPm
---------------------------- ---------- --------------- ---------- ----------- -----------
Unquoted securities
Market approach using
comparable
traded multiples,
recent transaction 8.5 EBITDA multiple 10x-20x +/- 1x +/- GBP0.5
Marketability
adjustment 20%-30% +/- 5% -/+ GBP0.6
--------------- ---------- ----------- -----------
Market multiple, break
up basis (80:20) 8.5 Market multiple 5x-10x +/- 1x +/- GBP1.1
Marketability
adjustment 10%-20% +/- 5% -/+ GBP0.5
--------------- ---------- ----------- -----------
Market multiple, discounted
cash flows (75:25) 30.7 Market multiple 5x-10x +/- 1x +/- GBP2.1
WACC 10%-20% n/a(*)
--------------- ---------- ----------- -----------
Marketability
Adjusted value 1.2 adjustment 20%-35% +/- 5% -/+ GBP0.1
---------------------------- ---------- --------------- ---------- ----------- -----------
Unquoted funds
Net assets approach 31.7 Net asset value 1x +/- 5% +/- GBP1.6
---------------------------- ---------- --------------- ---------- ----------- -----------
Total level 3 investments 80.6
---------------------------- ---------- --------------- ---------- ----------- -----------
Fair value
at 30 Significant Change in
Asset class and valuation June 2019 unobservable Range of Sensitivity fair value
technique GBPm input estimates factor GBPm
---------------------------- ---------- --------------- ---------- ----------- -----------
Unquoted securities
Market approach using
comparable
traded multiples,
recent transaction 32.6 EBITDA multiple 10x-20x +/- 1x +/- GBP0.9
Marketability
adjustment 10%-30% +/- 5% -/+ GBP0.8
--------------- ---------- ----------- -----------
Market multiple, break
up basis (80:20) 10.0 Market multiple 5x-10x +/- 1x +/- GBP1.2
Marketability
adjustment 10%-20% +/- 5% -/+ GBP0.6
--------------- ---------- ----------- -----------
Market multiple, discounted
cash flows (75:25) 26.2 Market multiple 5x-10x +/- 1x +/- GBP1.8
WACC 10%-20% n/a(*)
--------------- ---------- ----------- -----------
Adjusted value, broker Marketability
quotes 3.1 adjustment 20%-35% +/- 5% -/+ GBP0.2
---------------------------- ---------- --------------- ---------- ----------- -----------
Unquoted funds
Net assets approach 33.8 Net asset value 1x +/- 5% +/- GBP1.7
---------------------------- ---------- --------------- ---------- ----------- -----------
Total level 3 investments 105.7
---------------------------- ---------- --------------- ---------- ----------- -----------
* Given the number of different factors affecting the estimate,
specific sensitivity analysis cannot be reliably quantified.
The sensitivity demonstrates the effect of a change in one
unobservable input while other assumptions remain unchanged. There
may be a correlation between the unobservable inputs and other
factors that have not been considered. It should also be noted that
some of the sensitivities are non-linear, therefore, larger or
smaller impacts should not be interpolated or extrapolated from
these results.
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 invests seed capital
in order to provide initial scale and facilitate the marketing of
funds to third-party investors. Aggregate interests held by the
Group include seed capital, management fees and performance
fees.
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
2018/19: one fund; FY2018/19: four funds) 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 2019 were as follows:
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
================================================ =========== =========== =======
Non-current financial assets held for sale 14.3 4.3 44.7
Non-current financial liabilities held for sale (2.8) - -
================================================ =========== =========== =======
Non-current assets held for sale 11.5 4.3 44.7
================================================ =========== =========== =======
Investments cease to be classified as held for sale when they
are no longer controlled by the Group. A loss of control may happen
through sale of the investment and/or dilution of the Group's
holding. When investments cease to be classified as held for sale
they are classified as financial assets measured at FVTPL. During
the period, no fund (H1 2018/19: none; FY2018/19: none) was
transferred to the 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,
three funds (H1 2018/19: one fund; FY2018/19: two funds) with an
aggregate carrying amount of GBP35.6 million (H1 2018/19: GBP6.3
million; FY2018/19: GBP10.9 million) were transferred to
consolidated funds. There was no impact on net assets or total
comprehensive income as a result of the transfer.
Included within finance income are net gains of GBP0.9 million
(H1 2018/19: net gains of GBP0.4 million; FY2018/19: net gains of
GBP3.2 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) Financial assets measured at fair value through profit or
loss
Financial assets measured at FVTPL at 31 December 2019 comprise
shares held in debt and equity funds as follows:
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
Equity funds 36.7 15.4 4.8
Debt funds 8.8 9.0 11.2
======================================== =========== =========== =======
Financial assets measured at fair value 45.5 24.4 16.0
======================================== =========== =========== =======
Included within finance income are net gains of GBP2.2 million
(H1 2018/19: net gains of GBP0.7 million; FY2018/19: net gains of
GBP0.3 million) on the Group's financial assets measured at
FVTPL.
c) Non-current financial assets measured at fair value
Non-current financial assets relate to the Group's investments
in closed-end funds and are designated as FVTPL. Fair value is
assessed by taking account of the extent to which potential
dilution of gains or losses may arise as a result of additional
investors subscribing to the fund where the final close of a fund
has not occurred.
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
==================================================== =========== =========== =======
Real estate funds 4.2 5.2 4.9
Infrastructure funds 19.4 15.8 17.8
Other funds 7.5 19.1 8.9
==================================================== =========== =========== =======
Non-current financial assets measured at fair value 31.1 40.1 31.6
==================================================== =========== =========== =======
Included within finance income are net gains of GBP0.7 million
(H1 2018/19: net losses of GBP0.6 million; FY2018/19: net gains of
GBP0.7 million) on the Group's non-current financial assets
measured at fair value.
d) Consolidated funds
The Group has consolidated 14 investment funds as at 31 December
2019 (31 December 2018: 12 investment funds; 30 June 2019: 13
investment funds), over which the Group is deemed to have control.
Consolidated funds represent seed capital investments where the
Group has held its position for a period greater than one year and
its interest represents a controlling stake in the fund in
accordance with IFRS 10. Consolidated fund assets and liabilities
are presented line by line after intercompany eliminations.
The table below sets out an analysis of the carrying amounts of
interests held by the Group in consolidated investment funds.
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
============================================ =========== =========== ========
Investment securities* 222.4 207.2 278.7
Cash and cash equivalents 10.2 9.3 14.1
Other* 0.9 (0.5) (0.3)
Third-party interests in consolidated funds (66.3) (71.3) (107.0)
============================================ =========== =========== ========
Consolidated seed capital investments 167.2 144.7 185.5
============================================ =========== =========== ========
* Investment securities represent trading securities held by
consolidated investment funds and are designated as at FVTPL.
Further detailed information at the security level is available in
the individual fund financial statements. Other includes derivative
financial instruments, 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 GBP4.6 million (H1 2018/19:
net losses of GBP6.4 million; FY2018/19: net gains of GBP6.5
million) relating to the Group's share of the results of the
individual statements of comprehensive income for each of the
consolidated funds, as follows:
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
====================================================== =========== =========== =======
Investment income 2.0 5.8 5.5
Gains/(losses) on investment securities 4.2 (18.6) 0.5
Change in third-party interests in consolidated funds (0.5) 7.8 3.8
Other expenses (1.1) (1.4) (3.3)
====================================================== =========== =========== =======
Net gains/(losses) on consolidated funds 4.6 (6.4) 6.5
====================================================== =========== =========== =======
Included in the Group's cash generated from operations is GBP1.9
million cash utilised in operations (H1 2018/19: GBP1.6 million
cash utilised in operations; FY2018/19: GBP3.1 million cash
utilised in operations) relating to consolidated funds.
As at 31 December 2019, the Group's consolidated funds were
domiciled in Guernsey, Luxembourg, Saudi Arabia and the United
States.
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 2019, 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 2019.
17) Share capital
Authorised share capital
Number of Nominal value
shares GBP'000
=========================================================== =========== =============
Ordinary shares of 0.01p each at 31 December 2019, 30 June
2019 and 31 December 2018 900,000,000 90
=========================================================== =========== =============
Issued share capital - allotted and fully paid
As at As at As at
As at 31 December As at 31 December As at 30 June
31 December 2019 31 December 2018 30 June 2019
2019 Nominal 2018 Nominal 2019 Nominal
Number of value Number of value Number of value
shares GBP'000 shares GBP'000 shares GBP'000
========================= ============ ============ ============ ============ =========== ========
Ordinary shares of 0.01p
each 712,740,804 71 712,740,804 71 712,740,804 71
========================= ============ ============ ============ ============ =========== ========
All the above ordinary shares represent equity of the Company
and rank pari passu in respect of participation and voting
rights.
As at 31 December 2019, there were equity-settled share awards
issued under the Omnibus Plan totalling 43,706,827 shares (31
December 2018: 41,101,885 shares; 30 June 2019: 40,668,934 shares)
that have release dates ranging from September 2020 to October
2024.
18) Own shares
The Trustees of The Ashmore 2004 Employee Benefit Trust (EBT)
acquire and hold shares in Ashmore Group plc with a view to
facilitating the vesting of share awards. As at 31 December 2019,
the EBT owned 43,648,181 (31 December 2018: 40,501,941; 30 June
2019: 40,355,103) ordinary shares of 0.01p with a nominal value of
GBP4,365 (31 December 2018: GBP4,050; 30 June 2019: GBP4,036) and
shareholders' funds are reduced by GBP144.8 million (31 December
2018: GBP118.9 million; 30 June 2019: GBP119.1 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 personnel
is shown below:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
=================================== ============= ============= =========
Short-term employee benefits 0.1 0.1 1.7
Defined contribution pension costs - - -
Share-based payment benefits - - 1.6
=================================== ============= ============= =========
0.1 0.1 3.3
=================================== ============= ============= =========
Short-term benefits include salary and fees, benefits and cash
bonus. 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 2018/19 and FY2018/19: none).
Aggregate key management personnel interests in consolidated funds
at 31 December 2019 were GBP29.3 million (31 December 2018: GBP42.7
million; 30 June 2019: GBP44.6 million).
Transactions with Ashmore funds
During the period, the Group received GBP88.7 million of gross
management fees and performance fees (H1 2018/19: GBP80.5 million;
FY2018/19: GBP158.9 million) from the 111 funds (H1 2018/19: 103
funds; FY2018/19: 109 funds) it manages and
which are classified as related parties. As at 31 December 2019,
the Group had receivables due from funds of GBP4.6 million (31
December 2018: GBP5.5 million; 30 June 2019: GBP6.7 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 2019, the loan outstanding was GBP135.1 million
(31 December 2018: GBP114.1 million; 30 June 2019: GBP106.3
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 GBP12,600 to
the Foundation during the period to 31 December 2019 (H1 2018/19:
GBP70,500; FY2018/19: GBP70,500).
20) Commitments
Undrawn investment commitments
As at As at As at
31 December 31 December 30 June
2019 2018 2019
GBPm GBPm GBPm
===================================================== ============ ============ ========
AA Development Capital India Fund 1 LLC - 1.2 -
Ashmore Andean Fund II, LP 0.1 0.9 0.5
Ashmore Emerging Markets Corporate Private Debt Fund - 0.3 -
Ashmore I - CAF Colombian Infrastructure Senior Debt
Fund 11.2 13.6 12.7
Ashmore Special Opportunities Fund LP 7.4 7.7 7.7
Avenida Colombia Real Estate Fund I (Cayman) LP 0.1 0.6 0.3
KCH Healthcare LLC - 0.6 -
Total undrawn investment commitments 18.8 24.9 21.2
===================================================== ============ ============ ========
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 for the year ended 30
June 2019.
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
5 February 2020
Independent Review Report to Ashmore Group plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 December 2019 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.
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 2019 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules (the DTR)
of the UK's Financial Conduct Authority (the UK FCA).
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The Directors are responsible for preparing the
condensed set of financial statements included in the half-yearly
financial report in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Thomas Brown
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
5 February 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SSMFUIESSEFE
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