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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ashmore Group Plc | LSE:ASHM | London | Ordinary Share | GB00B132NW22 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 3.30 | 1.80% | 186.20 | 186.00 | 186.40 | 186.50 | 182.80 | 182.80 | 92,587 | 13:18:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mgmt Invt Offices, Open-end | 193.2M | 83.3M | 0.1169 | 15.92 | 1.33B |
From Apr 2019 to Apr 2024
TIDMASHM
RNS Number : 2480E
Ashmore Group PLC
08 February 2018
Ashmore Group plc
8 February 2018
RESULTS FOR THE SIX MONTHSING 31 DECEMBER 2017
Ashmore Group plc (Ashmore, the Group), the specialist Emerging Markets asset manager, today announces its unaudited results for the six months ending 31 December 2017.
Overview
- Strong absolute and relative performance across Emerging Markets and increased client flows
- Assets under management (AuM) increased 18% to US$69.5 billion
- Net inflows of US$7.9 billion and positive market performance of US$3.2 billion
- Broad client demand across the range of fixed income, equity and overlay products as investors recognise the value available in Emerging Markets
- Ashmore's investment processes continuing to deliver strong investment performance
- 82% of AuM outperforming benchmarks over one year, 93% over three years and 87% over five years
- Business model delivering positive operating leverage
- Growth in operating revenues with net management fees +5% and performance fees of GBP14.8 million
- Adjusted EBITDA of GBP91.2 million, margin increased from 66% to 67%
- Improvement in operating performance offset by lower level of seed capital gains and impact of FX translation
- Seed capital gains of GBP10.5 million (H1 2016/17: GBP25.8 million) and mark-to-market FX translation loss of GBP2.3 million (H1 2016/17: GBP8.4 million gain)
- Statutory profit before tax of GBP99.0 million and diluted EPS of 11.3p
- Interim dividend per share of 4.55p
Commenting on the Group's results, Mark Coombs, Chief Executive Officer, Ashmore Group said:
"The favourable environment for Emerging Markets is reflected in Ashmore's solid operating performance during the period, with 18% growth in assets under management, strong investment performance for clients, and increased profitability. We expect another good year of performance across the range of Emerging Markets asset classes in 2018, as economic conditions continue to be supportive, valuations remain attractive, and therefore investors continue to increase allocations."
Analysts briefing
There will be a presentation for analysts at 9.30am on 8 February 2018 at the offices of Goldman Sachs at Peterborough Court, 133 Fleet Street, London EC4A 2BB. A copy of the presentation will be made available on the Group's website at www.ashmoregroup.com.
Contacts
For further information please contact:
Ashmore Group plc
Tom Shippey +44 (0)20 3077 6191 Group Finance Director Paul Measday +44 (0)20 3077 6278 Investor Relations
FTI Consulting
Andrew Walton +44 (0)20 3727 1514 Laura Ewart +44 (0)20 3727 1160
Chief Executive Officer's report
Emerging Markets have delivered consistently strong returns over the past two years, and have significantly outperformed developed world asset classes. The fundamental drivers of this performance have been attractive valuations across Emerging Markets asset classes and supportive economic conditions including accelerating GDP growth and stable inflation. Consequently, institutional investors are returning to Emerging Markets after a period of shifting allocations to Developed Markets investments that were supported by quantitative easing. Ashmore expects these positive drivers to continue in 2018.
Ashmore's performance over the six months to 31 December 2017 reflects this favourable environment. Assets under management increased by 18%, principally driven by net inflows, with broad-based investor demand across the range of fixed income, equity and overlay products as investors recognise the value available in Emerging Markets and seek to address their underweight positions. Ashmore's investment processes have continued to deliver strong performance for clients, in absolute terms and against both benchmark indices and their peer groups.
The Group's business model seeks to align the interests of clients, shareholders and employees through market cycles. For clients, Ashmore's specialist focus and active investment processes have delivered strong long-term performance. For example, the Group's first fixed income fund, EMLIP, celebrated its 25-year anniversary in October 2017, and over this period the fund has generated annualised net returns of 14.4%, outperforming its benchmark (+10.6% annualised) as well as equity indices such as the S&P500 (+9.8% annualised).
As Ashmore has generated attractive returns for clients over the past year, leading to strong inflows, it has also delivered positive operating leverage for shareholders, with growth in operating revenues and a reduction in adjusted operating costs leading to an increase in the adjusted EBITDA margin from 66% to 67%. The current margin represents an improvement from the cyclical low of 62% reported in 2016.
As described in the Market review below, the economic and market performance of Emerging Markets has further to run, as financial conditions continue to ease in a wide range of developing economies. Against this positive backdrop, Ashmore is well positioned to continue to benefit from the next phase of Emerging Markets growth.
Summary non-GAAP financial performance
The table below reclassifies items relating to seed capital and the translation of non-Sterling balance sheet positions to aid clarity and comprehension of the Group's operating performance, and to provide a more meaningful comparison with the prior period. For the purposes of presenting 'Adjusted profits', operating expenses have been adjusted for the 20% variable compensation charge relating to foreign exchange translation gains and losses.
Non-GAAP alternative performance measures (APMs) are defined and explained below.
Hot Features
Premium
Reclassification
of
=================
Seed
H1 2017/18 capital-related Foreign exchange H1 2017/18 H1 2016/17
GBPm Statutory items translation Adjusted Adjusted
================= ================= ================= ================= ================= =================
Net management
fees 120.5 - - 120.5 114.9
Performance fees 14.8 - - 14.8 21.6
Other revenue 1.1 - - 1.1 2.2
Foreign exchange (2.0) - 2.3 0.3 (3.0)
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Net revenue 134.4 - 2.3 136.7 135.7
Investment
securities 9.4 (9.4) - - -
Third-party
interests (4.9) 4.9 - - -
Personnel
expenses (34.0) - (0.5) (34.5) (34.5)
Other expenses
excluding
depreciation &
amortisation (12.1) 1.1 - (11.0) (11.5)
================= ================= ================= ================= ================= =================
EBITDA 92.8 (3.4) 1.8 91.2 89.7
EBITDA margin 69% - - 67% 66%
Depreciation and
amortisation (2.6) - - (2.6) (2.7)
================= ================= ================= ================= ================= =================
Operating profit 90.2 (3.4) 1.8 88.6 87.0
Net finance
income/(expense) 9.1 (7.1) - 2.0 1.2
Associates and
joint ventures (0.3) - - (0.3) 0.8
Seed
capital-related
items - 10.5 - 10.5 25.8
Profit before tax
excluding FX
translation 99.0 - 1.8 100.8 114.8
================= ================= ================= ================= ================= =================
Foreign exchange
translation - - (1.8) (1.8) 6.7
================= ================= ================= ================= ================= =================
Profit before tax 99.0 - - 99.0 121.5
================= ================= ================= ================= ================= =================
Market review
Investment themes
External debt Local currency Corporate debt Blended debt
======================== =========================== ====================== ===============================
Invests in debt Invests in local Invests in debt Invests in both
instruments currencies and instruments G3 currency
issued by sovereigns local currency-denominated issued by public and local currency-denominated
(governments) instruments and private assets across
and issued by sovereign, sector companies, sovereigns,
quasi-sovereigns quasi-sovereign principally quasi-sovereigns
(government-sponsored), and corporate denominated and corporates.
principally issuers. in G3 currencies.
denominated
in G3 currencies.
======================== =========================== ====================== ===============================
Equities Alternatives Multi-asset Overlay/liquidity
======================== =========================== ====================== ===============================
Invests in equity Provides access Specialised, Separates and
and equity-related to private equity, efficient, all-in-one centralises
instruments healthcare, access to a the currency
within the Emerging infrastructure, long-term strategic risk of an underlying
Markets including special situations, asset allocation Emerging Markets
global, regional, distressed across the full asset class
small cap and debt and real Emerging Markets in order to
frontier opportunities. estate investment universe. manage it effectively
investment and efficiently.
opportunities.
======================== =========================== ====================== ===============================
Emerging Markets performed strongly over the six months, reflecting attractive valuations, high and accelerating GDP growth, and supportive fiscal and monetary conditions.
External debt
The EMBI GD external debt index increased by 3.8% over the six months, and its spread over US Treasuries compressed by 25bps. High yield bonds outperformed investment grade. There is a common misperception that this asset class is vulnerable to higher US interest rates, yet it has delivered significant positive absolute and relative returns since the first rate increase by the Federal Reserve (Fed) in December 2015. So far in this cycle, the Fed has increased rates five times, and over that period the EMBI GD index has produced a total return of +22% with its spread reducing by 139bps. Importantly, only one country (Mozambique) defaulted, resulting in less than 10bps of index loss and with no read-across to the other 66 countries in the benchmark index.
Over three years, Ashmore's external debt composite has delivered gross annualised returns of +10.9%, a meaningful level of outperformance against its benchmark index, which has returned +7.1% annualised.
The diversity of the asset class coupled with attractive yields and spreads versus US Treasuries implies that external debt will continue to deliver good returns for the foreseeable future. Given the range of opportunities available, active management will continue to be critical to achieving these returns.
Local currency
The unhedged GBI-EM GD index increased by 4.4% over the period with good returns from rates and a positive contribution from stronger Emerging Markets currencies against the US dollar.
Ashmore's local currency bonds composite has delivered an annualised gross return of +4.2% over the past three years, ahead of its benchmark index (+2.5%).
From their cyclical peak in 2011, Emerging Market currencies fell 40% against the US dollar and have subsequently rallied only 5%, demonstrating that the recovery in this asset class has only just begun. When combined with high nominal and real yields, the ongoing recovery in currencies means there is the potential for local currency assets to deliver double-digit annualised returns for several more years. The outlook for investor allocations to this asset class is therefore positive.
Corporate debt
Corporate debt generated good returns over the six months with the CEMBI BD index rising 2.8%. High yield credit performed more strongly with a total return of 4.2%, thereby comfortably outperforming JP Morgan's US high yield corporate bond index (+2.9%), and it ended the period with a lower default rate of 2.0% versus 3.6% in the US high yield market.
Over three years, the Group's corporate debt composite has generated positive gross investment performance of +10.0% annualised. This is significantly ahead of the performance of its benchmark index, which has returned +6.2% annualised over the same period.
Several factors support continued strong corporate debt performance: the economic backdrop remains favourable; increases in US rates appear priced in; and there is the potential for further significant spread tightening in Emerging Markets corporate credit, particularly in the high yield market. With more than 600 issuers in the benchmark index, credit analysis and security selection is critical to deliver outperformance, and Ashmore's value-based active management approach underpins the delivery of a strong long-term investment track record.
Blended debt
The standard blended debt benchmark (50% EMBI GD, 25% GBI-EM GD, 25% ELMI+) increased by 4.0% over the period, with all constituent asset classes delivering positive returns. Stronger economic growth across Emerging Markets will be positive for local markets, but will also improve credit quality with positive implications for bonds. Consistent with the Group's positive outlook for Emerging Markets and the significant value available across each of the underlying asset classes, the blended debt strategy is positioned for further market appreciation, and currently has a bias towards local currency assets.
The Group's blended debt strategy has delivered attractive performance, with gross annualised returns of +9.1% over the past three years compared with +4.8% annualised for the standard benchmark. As described above, each underlying asset class has generated positive returns over the period, and Ashmore has delivered significant outperformance through its proven ability to identify relative value and dynamically allocate across each of its specialised themes.
Ashmore expects ongoing demand for blended debt funds, particularly from investors wanting broad but actively managed exposure to Emerging Markets debt, or those wishing to define bespoke performance benchmarks.
Equities
Emerging Markets equities performed strongly over the six months as economic growth accelerated. The MSCI EM index increased 15.9%, the MSCI Frontier Markets index rose by 14.1% and the MSCI EM small cap index increased by 15.4%.
Ashmore has delivered between 200bps and 300bps of annualised outperformance versus benchmarks over three years for the small cap and frontier markets composites, respectively.
The strong performance across emerging equity markets has been underpinned by a recovery in corporate earnings, meaning valuations remain at attractive levels. For instance, the MSCI EM index currently trades on 12.5x prospective earnings, in line with its long-run average and largely unchanged from its level a year ago despite the 38% price rally in 2017. The market expects double-digit earnings growth in 2018, providing a solid backdrop for further positive investment performance.
Alternatives
AuM in the theme increased slightly through capital raised into thematic funds such as education and infrastructure. Ashmore continues to explore opportunities to grow the alternatives theme, with a particular focus on Latin America and the Middle East and Asia.
Multi-asset
The multi-asset investment theme offers clients exposure to the full range of Ashmore's actively managed Emerging Markets investment themes, thereby increasing diversification and offering potentially higher returns through the cycle. The Group's Emerging Markets multi-asset strategy is performing well, with all funds significantly outperforming their respective benchmarks over three years.
Overlay/liquidity
AuM increased by US$1.5 billion during the period as a result of net inflows to the overlay theme.
Market outlook
Emerging Markets assets have delivered attractive absolute returns over the past two years, and outperformed developed world assets by a wide margin. Importantly, this performance has been justified by improving economic conditions and most investors have only just begun to recognise the value available across a very broad range of Emerging Markets asset classes, countries, currencies and issuers.
GDP growth is accelerating across a large number of Emerging Markets countries, following the significant macro-economic adjustments undertaken between 2011 and 2015. So far, this has principally reflected the effect of cheap currencies on export volumes. Ashmore expects the next phase of economic expansion to be driven by domestic demand, as capital flows into financially-constrained nations lead to easier financial conditions, stimulating investment and production, and consequently raising wages and consumption. This will support growth as domestic demand represents on average more than 70% of emerging nations' GDP.
One consequence of faster economic growth is that inflation is likely to pick up across Emerging Markets, from a low level of around 4%. It is therefore probable that Emerging Markets central banks will tighten monetary policy and eventually lead the global rates cycle, leaving the main Developed Markets central banks to contend with low growth, low inflation, high indebtedness and a lack of reforms. This has important positive implications for Emerging Markets currencies, and therefore will be supportive for further capital flows and an extension of the economic and business cycles.
There are several important elections in Emerging Markets in 2018, such as in Brazil and Mexico, and these typically provide opportunities for active managers to generate alpha as markets misprice assets based on unlikely implied outcomes. Another important political factor is the pursuit of reforms, as these can underpin or enhance GDP growth expectations. This is most obviously the case in China, but also relevant to other large developing nations such as India, Brazil and Argentina.
This positive outlook for Emerging Markets is set against a background of continued challenges facing Developed Markets. In the developed world, economic growth is relatively slow, high leverage constrains central banks' ability to raise interest rates, there is little occurring by way of reform, and valuations appear stretched in both equity and fixed income markets. The opportunity cost of being overweight Developed Markets and underweight Emerging Markets is high and rising as the latter enter a third consecutive year of outperformance.
Beyond the country-specific and isolated risks that occur every year, the main risks to the positive outlook for Emerging Markets relate to growth scenarios for the United States. While a low probability, there is a chance that productivity growth forces the Fed to raise rates significantly faster than currently expected by the market, thereby strengthening the US dollar. This would undermine the arguments in favour of flows into local currency markets. Conversely, a weaker growth scenario, potentially including a recession, would have mixed implications for Emerging Markets: it would be negative for certain Emerging Markets equities, but with the probability of lower rates and a weaker US dollar, local currency bonds would stand to benefit.
However, the resilience shown by Emerging Markets in the 2011 to 2015 period in the face of challenges that originated primarily in the developed world, suggest that the asset classes are able to continue to deliver appreciable absolute and relative returns and attract significant investor flows over the medium term. The fact that investors remain underweight Emerging Markets adds further support to the view that the cyclical recovery has only just begun. As a specialist, active manager delivering outperformance from a scalable platform, Ashmore is well-positioned to benefit from the structural growth opportunities in Emerging Markets.
Strategy/business developments
Ashmore continues to invest in its future growth. During the period, the Group's global and specialist equities capabilities were enhanced through the recruitment of a number of senior investment professionals in London. Over the medium term, the Group's goal is to increase the level and proportion of the Group's AuM managed in equity strategies from 6% today.
The Group continues to manage its seed capital programme actively. During the six months, new investments of GBP27.7 million were made across a range of funds, and successful recycling of previous seed capital investments totalled GBP18.7 million.
The Group's local market businesses are performing well. Together, the five businesses in Colombia, Saudi Arabia, Dubai, India and Indonesia manage US$4.3 billion, or 6% of the Group's total AuM, and are increasingly profitable.
With consistently good performance across Emerging Markets, Ashmore's intermediary retail AuM increased by 20% to US$8.1 billion over the six months. The majority of the growth has been delivered through net inflows, which at US$1.1 billion for the period are equivalent to the total retail net flows achieved in the whole of the preceding financial year.
There is ongoing demand for blended debt and short duration products from retail clients in Asia, Europe and the US, and particular interest in specialist equity strategies, such as frontier markets. There was also a significant increase in Europe and US client flows into local currency funds during the period. By intermediary type, the Group has seen strong flow momentum from Asian and European private banks, and good net inflows from European and US wealth managers and platforms, as well as US registered investment advisers (RIAs) and wirehouses.
With regards to the process for the UK to leave the European Union (Brexit), there has been no new information relevant to the Group since it published its annual report in September 2017. Ashmore remains of the view that the operational implications of Brexit will be manageable.
AuM development
As at 31 December 2017, assets under management were US$69.5 billion, an increase of US$10.8 billion, or 18%, during the six months. A significant proportion of this resulted from net inflows of US$7.9 billion over the six months, continuing the positive trend experienced in the prior financial year.
The strong net flow performance is consistent with this stage in the cycle, as there is inevitably a lag between consistently good market performance and institutional investors taking action, which in many cases is dependent on manager selection, asset allocation and mandate funding processes that can play out over several months or quarters.
Investment performance contributed US$3.2 billion and average AuM of US$64.3 billion was 21% higher than in the same period in the prior year (H1 2016/17: US$53.3 billion).
Gross subscriptions increased significantly to US$15.0 billion, or 26% of opening AuM (H1 2016/17: US$5.5 billion, 10% of opening AuM), with broad-based demand across client categories and geographies. The stronger sales performance reflects both higher allocations from existing institutional clients and new segregated mandates, and an acceleration of flows through retail intermediary channels.
Gross redemptions were similar to last year at US$7.1 billion, or 12% of opening AuM (H1 2016/17: US$6.2 billion, 12% of opening AuM). Redemptions were slightly higher in the second quarter, as some clients took the opportunity to realise profits towards the end of the calendar year.
During the first quarter of the financial year, assets totalling US$2.2 billion were reclassified into the blended debt theme as a result of, for example, changes to performance benchmarks or investment guidelines. The majority of the assets (US$2.0 billion) were previously in the local currency theme, with the remainder in the external debt theme.
The Group's client base is predominantly institutional, with 88% of AuM from such clients (30 June 2017: 88%) and the remainder sourced through intermediaries, which provide access to retail investors. Segregated accounts represent 64% of AuM (30 June 2017: 67%).
Ashmore's principal mutual fund platforms are in Europe and the US, which together account for 20% of AuM (30 June 2017: 19%). The European SICAV range comprises 26 funds with AuM of US$12.1 billion (30 June 2017: US$9.3 billion in 26 funds) and the US 40-Act range has eight funds with AuM of US$2.0 billion (30 June 2017: US$1.7 billion in 10 funds).
Investment performance
The Group's investment performance remains strong with 82% of AuM outperforming over one year, 93% over three years, and 87% over five years (30 June 2017: 91%, 86% and 87%, respectively). As at 31 December 2017, the majority of the Group's fixed income and specialist equity products are in the first or second performance quartile when compared with peers, over one, three and five years.
EMLIP's 25-year track record is an important factor in illustrating to clients not only the potential returns available in Emerging Markets, but also the virtues of active management and the success across numerous market cycles of Ashmore's rigorous and consistent investment processes.
The Group's investments are geographically diverse and consistent with recent periods, with 37% in Latin America, 23% in Asia Pacific, 27% in Eastern Europe and 13% in the Middle East and Africa.
AuM movements by investment theme as classified by mandate
The development during the period of AuM by theme as classified by mandate is shown in the following table.
AuM AuM
30 June Gross Gross Other/ 31 December
Investment 2017 subscriptions redemptions Net flows Performance reclassification 2017
theme US$bn US$bn US$bn US$bn US$bn US$bn US$bn
================== ======== ================= ============ ========= =========== ================= ============
External
debt 13.3 2.4 (1.1) 1.3 0.6 (0.2) 15.0
Local
currency 13.7 4.1 (1.7) 2.4 0.8 (2.0) 14.9
Corporate
debt 6.3 2.6 (1.5) 1.1 0.4 - 7.8
Blended
debt 14.6 2.6 (1.4) 1.2 0.8 2.2 18.8
Equities 3.4 1.1 (0.9) 0.2 0.3 - 3.9
Alternatives 1.5 0.1 - 0.1 - - 1.6
Multi-asset 1.1 - (0.1) (0.1) 0.2 - 1.2
Overlay/liquidity 4.8 2.1 (0.4) 1.7 0.1 (0.3) 6.3 ================== ======== ================= ============ ========= =========== ================= ============ Total 58.7 15.0 (7.1) 7.9 3.2 (0.3) 69.5 ================== ======== ================= ============ ========= =========== ================= ============
In August 2017, Ashmore's equity interest in Taiping Fund Management Company Limited reduced from 15% to 8.5%, resulting in a US$0.3 billion reduction in AuM in the overlay/liquidity investment theme.
AuM % by investment theme as classified by mandate and as invested
The following table reports AuM 'as invested' by underlying asset class, which adjusts from the 'by mandate' presentation to reflect the allocation to underlying asset classes of the multi-asset and blended debt themes, and the cross-over investment by certain external debt funds.
AuM at 30 June 2017 AuM at 31 December 2017
======================================= =======================================
Classified Classified Classified Classified Classified Classified
by mandate as invested as invested by mandate as invested as invested
Investment theme % % US$bn % % US$bn
================== =========== ============ ============ =========== ============ ============
External debt 23 39 22.5 22 38 26.5
Local currency 23 30 17.8 21 30 20.8
Corporate debt 11 13 7.8 11 14 9.4
Blended debt 25 - - 27 - -
Equities 6 7 3.9 6 6 4.5
Alternatives 2 3 1.8 2 3 1.8
Multi-asset 2 - - 2 - -
Overlay/liquidity 8 8 4.9 9 9 6.5
================== =========== ============ ============ =========== ============ ============
Total 100 100 58.7 100 100 69.5
================== =========== ============ ============ =========== ============ ============
Financial review
Fee income and net management fee margin by investment theme
The table below summarises the net management fee income after distribution costs, performance fee income, and average net management fee margin by investment theme, determined by reference to weighted average assets under management.
Performance Net management fee
Net management fees fees margin
====================== ====================== ======================
H1 2017/18 H1 2016/17 H1 2017/18 H1 2016/17 H1 2017/18 H1 2016/17
Investment theme GBPm GBPm GBPm GBPm bps bps
================== ========== ========== ========== ========== ========== ==========
External debt 24.4 23.6 1.7 8.3 45 51
Local currency 21.4 22.7 7.3 10.8 43 43
Corporate debt 16.3 12.7 0.8 - 61 61
Blended debt 34.1 30.8 4.9 2.5 50 53
Equities 10.8 11.4 0.1 - 79 96
Alternatives 6.6 7.9 - - 137 141
Multi-asset 3.3 3.8 - - 76 82
Overlay/liquidity 3.6 2.0 - - 17 16
================== ========== ========== ========== ========== ========== ==========
Total 120.5 114.9 14.8 21.6 50 54
================== ========== ========== ========== ========== ========== ==========
Revenues
Higher net management fee income of GBP120.5 million was partially offset by a lower contribution from performance fees, leading to a 1% increase in operating revenues to GBP136.7 million (H1 2016/17: GBP135.7 million). On a statutory basis, including foreign exchange translation, net revenues were GBP134.4 million (H1 2016/17: GBP144.1 million).
The Group's management fee income, net of distribution costs, increased 5% to GBP120.5 million (H1 2016/17: GBP114.9 million). Growth in AuM outweighed the 4% increase in the average GBP:USD rate, from 1.2809 to 1.3259, and a year-on-year reduction in the average net management fee margin from 54bps to 50bps. The movement in the margin is attributable to the impact of large mandate wins (2bps), investment theme mix (1.5bps), and other effects (0.5bps). Compared with H2 2016/17, the net management fee margin was unchanged.
Performance fees of GBP14.8 million (H1 2016/17: GBP21.6 million) were generated in the period across a range of funds and investment themes.
At 31 December 2017, 12% of the Group's AuM was eligible to earn performance fees (30 June 2017: 12%), of which a substantial proportion is subject to rebate agreements.
Translation of the Group's non-Sterling assets and liabilities, excluding seed capital, at the period end resulted in a foreign exchange loss of GBP2.3 million (H1 2016/17: GBP8.4 million gain), reflecting Sterling strength against the US dollar over the period. The net realised and unrealised gain on the Group's foreign exchange hedges was GBP0.3 million (H1 2016/17: GBP3.0 million loss).
Operating costs
The Group continues to exercise strict control over its discretionary expenditure. Consequently, total operating costs were reduced by 6% to GBP48.7 million (H1 2016/17: GBP51.8 million), with both personnel and other operating costs lower than in the prior year period.
Excluding variable compensation, operating costs fell by 5% to GBP27.0 million (H1 2016/17: GBP28.5 million). This includes GBP1.1 million of operating costs borne by consolidated funds (H1 2016/17: GBP1.4 million). Excluding variable compensation, consolidated fund expenses and currency effects, operating costs were reduced by 3% versus the same period in the prior year.
Fixed staff costs of GBP12.3 million decreased by 5% compared with the prior year (H1 2016/17: GBP12.9 million), reflecting 3% lower average headcount and the effect of actions taken a year ago such as the sale of the Turkish business and restructuring of the Group's operations in the United States.
The Group's headcount increased by 2% over the six-month period from 252 to 257 employees, due to recruitment centred on the equities investment team as well as increases in local offices such as Dubai and Indonesia.
Other operating costs, excluding depreciation and amortisation, fell by GBP0.8 million to GBP12.1 million. Excluding the effects of consolidated funds, other operating expenses declined 4% to GBP11.0 million.
From January 2018, the cost of third-party investment research will be borne by the Group. This is not expected to have a material impact on operating costs given the nature of the Group's investment processes, with a heavy emphasis on well-established in-house capabilities, and the bias towards fixed income markets in the Group's AuM mix.
As is usual at the half-year stage, variable compensation has been accrued at 20% of earnings before variable compensation, interest and tax, resulting in a charge of GBP21.7 million (H1 2016/17: GBP23.3 million).
The combined depreciation and amortisation charge for the period was GBP2.6 million (H1 2016/17: GBP2.7 million).
Adjusted EBITDA
Adjusted EBITDA, which reclassifies items relating to seed capital investments and foreign exchange translation effects, increased by 2% from GBP89.7 million to GBP91.2 million. This positive operating leverage was achieved through 1% growth in operating revenues and a 1% reduction in adjusted operating costs excluding depreciation and amortisation.
The adjusted EBITDA margin, which reflects the Group's underlying operating performance, increased from 66% to 67%.
Finance income
Net finance income of GBP9.1 million (H1 2016/17: GBP26.1 million) includes items relating to seed capital investments, which are described in more detail below. Excluding these items, net interest income for the period was GBP2.0 million (H1 2016/17: GBP1.2 million).
Profit before tax
Statutory profit before tax of GBP99.0 million is lower than in the prior year period (H1 2016/17: GBP121.5 million) due to the impact of foreign exchange translation, and lower contributions from performance fees and seed capital investments.
Taxation
The majority of the Group's profit is subject to UK taxation; of the total current tax charge for the six-month period of GBP18.9 million (H1 2016/17: GBP22.1 million), GBP14.3 million relates to UK corporation tax (H1 2016/17: GBP17.4 million).
There is a GBP19.2 million net deferred tax asset on the Group's balance sheet as at 31 December 2017 (31 December 2016: GBP13.9 million), which arises principally as a result of timing differences in the recognition of the accounting expense and actual tax deduction in connection with i) share-based payments and ii) goodwill and intangibles arising on the acquisition of Ashmore's equity business.
The Group's effective tax rate for the six-month period is 18.0% (H1 2016/17: 18.7%), which is lower than the prevailing UK corporation tax rate of 19.0% (H1 2016/17: 19.75%). This predominantly reflects the blend of the varying rates that apply across the territories in which the Group operates. Note 9 to the interim condensed financial statements provides a full reconciliation of this difference compared to the UK corporation tax rate.
Earnings per share
Basic earnings per share for the period declined by 18% to 12.0 pence (H1 2016/17: 14.7 pence) and diluted earnings per share declined by 19% from 13.9 pence to 11.3 pence.
Balance sheet, cash flow and foreign exchange
It is the Group's policy to maintain a strong balance sheet in order to meet regulatory capital requirements, to support the commercial demands of current and prospective investors, and to fund strategic development opportunities across the business. These include establishing distribution offices and local asset management ventures, seeding and investing in funds and other assets, and other strategic initiatives.
As at 31 December 2017, total equity attributable to shareholders of the parent was GBP704.9 million (31 December 2016: GBP695.8 million, 30 June 2017: GBP724.4 million). Capital resources available to the Group totalled GBP596.2 million as at 31 December 2017, equivalent to 84 pence per share, and significantly exceeded the Group's regulatory capital requirement of GBP111.1 million, equivalent to 16 pence per share. The Group has no debt.
Cash
Ashmore's business model delivers a high conversion rate of profits to cash. Based on operating profit of GBP90.2 million for the period (H1 2016/17: GBP94.6 million), the Group generated GBP72.7 million of cash from operations (H1 2016/17: GBP96.6 million). The operating cash flows after excluding consolidated funds represent 81% of the adjusted EBITDA for the period of GBP91.2 million (H1 2016/17: 109%).
Cash and cash equivalents by currency
31 December 30 June
2017 2017
GBPm GBPm
========== =========== =======
Sterling 51.7 149.7
US dollar 296.3 253.8
Other 20.7 29.0
========== =========== =======
Total 368.7 432.5
========== =========== =======
The Group's cash balance declined over the six months. In the first half of the financial year, the Group distributes the final ordinary dividend to shareholders, makes corporation tax payments, and pays cash variable remuneration to employees, all of which relate to the prior financial year.
Seed capital investments
The Group's actively managed seed capital programme has delivered growth in third-party AuM with approximately 13% of Group AuM in funds that have been seeded.
During the six-month period, the Group made new investments of GBP27.7 million and realised GBP18.7 million from previous investments. Together with positive market movements of GBP7.1 million, the value of the Group's seed capital investments increased from GBP210.2 million as at 30 June 2017 to GBP226.3 million as at 31 December 2017. The Group has also committed GBP35.8 million that was undrawn at the period end.
As at 31 December 2017, the original cost of the Group's current seed capital investments was GBP184.0 million, representing 29% of Group net tangible equity. The majority of the Group's seed capital by market value is held in liquid funds with better than one-month dealing frequency, such as SICAV or US 40-Act mutual funds.
New investments were principally made into mutual funds in the equities investment theme, consistent with the strategic growth initiatives for this theme, and into alternatives products.
The Group redeemed seed capital from a range of funds, including frontier equity funds and funds managed by the local platform in Indonesia, as these strategies saw growth in third-party assets under management.
Seed capital activities generated a profit before tax of GBP10.5 million (H1 2016/17: GBP25.8 million), comprising positive market and other movements of GBP13.5 million and a foreign exchange translation loss of GBP3.0 million (H1 2016/17: GBP10.9 million gain and GBP14.9 million gain, respectively).
Seed capital market value by currency
31 December 30 June
2017 2017
GBPm GBPm
=================== =========== =======
US dollar 205.7 188.3
Colombian peso 12.4 9.6
Other 8.2 12.3
=================== =========== =======
Total market value 226.3 210.2
=================== =========== =======
The table below summarises the principal IFRS line items to assist in the understanding of the financial impact of the Group's seed capital programme.
Own shares held
The Group uses an Employee Benefit Trust (EBT) to purchase and hold shares in anticipation of the vesting of share awards. During the period, the EBT purchased shares worth GBP10.3 million (H1 2016/17: GBP11.8 million) and as at 31 December 2017, the EBT owned 34,953,460 (30 June 2017: 38,701,321) ordinary shares.
Foreign exchange
The majority of the Group's fee income is received in US dollars and it is the Group's policy to hedge up to two-thirds of the notional value of budgeted foreign currency-denominated net management fees, using either forward or option foreign exchange contracts. The Group's Foreign Exchange Management Committee determines the proportion of budgeted fee income to hedge or sell by regular reference to expected non-US dollar, and principally Sterling, cash requirements. The proportion of fee income received in foreign currency and held as cash or cash equivalents is marked to market at the period end exchange rate through the statement of comprehensive income.
The translation of the Group's non-Sterling denominated balance sheet resulted in a foreign exchange loss of GBP2.3 million (H1 2016/17: GBP8.4 million gain), primarily the effect of Sterling strength against the US dollar. Net realised and unrealised hedging gains of GBP0.3 million (H1 2016/17: GBP3.0 million loss) were recognised for the period.
Financial impact of seed capital investments
H1 2017/18 H1 2016/17
GBPm GBPm
------------------------------------------------ ---------- ----------
Consolidated funds (note 14):
Gains/(losses) on investment securities 9.4 6.7
Change in third-party interests in consolidated
funds (4.9) (4.4)
Operating costs (1.1) (1.4)
Finance income 2.7 4.0
------------------------------------------------ ---------- ----------
Sub-total: consolidated funds 6.1 4.9
Unconsolidated funds (note 7):
Market return 7.4 6.0
Foreign exchange (3.0) 14.9
------------------------------------------------ ---------- ----------
Sub-total: unconsolidated funds 4.4 20.9
Total seed capital profit/(loss) 10.5 25.8
------------------------------------------------ ---------- ----------
- realised - 7.9
- unrealised 10.5 17.9
------------------------------------------------ ---------- ----------
Dividend
Ashmore's dividend policy is to pay a progressive ordinary dividend over time, taking into consideration factors such as prospects for the Group's earnings, demands on the Group's financial resources, and the markets in which the Group operates.
In the light of the dividend policy and considering both the cash-generative nature of the Group's business model and
its strong and liquid balance sheet, the Board has determined that an interim dividend of 4.55 pence per share (H1 2016/17: 4.55 pence per share) will be paid on 4 April 2018 to all shareholders on the register on 9 March 2018.
Mark Coombs
Chief Executive Officer
7 February 2018
Alternative performance measures ================================
The Group discloses non-GAAP financial alternative performance measures in order to assist shareholders' understanding of the operational performance of the Group during the accounting period.
Net revenue
As shown on the face of the consolidated statement of comprehensive income, net revenue is total revenue less distribution costs and including foreign exchange. This provides a comprehensive view of the revenues recognised by the Group in the period.
Variable compensation ratio
The charge for employee variable compensation as a proportion of earnings before variable compensation, interest and tax (EBVCIT). The linking of variable annual pay awards to the Group's profitability is one of the principal methods by which the Group controls its operating costs.
EBVCIT is defined as operating profit excluding the charge for variable compensation and seed capital-related items. The items relating to seed capital are gains/losses on investment securities; change in third-party interests in consolidated funds; and other expenses in respect of consolidated funds.
EBITDA
The standard definition of earnings before interest, tax, depreciation and amortisation is operating profit before depreciation and amortisation. It provides a view of the performance of the business before certain non-cash items, financing income and charges, and taxation.
Adjusted EBITDA, adjusted operating costs, and operating revenues
Adjusted figures exclude items relating to foreign exchange translation and seed capital.
This provides a better understanding of the Group's operational performance excluding the mark-to-market volatility of foreign exchange translation and seed capital investments. These adjustments are merely reclassified within the adjusted profit and loss account, leaving statutory profit before tax unchanged. Operating revenues are defined on the same basis, that is, excluding foreign exchange translation.
Adjusted EBITDA margin
The ratio of adjusted EBITDA to adjusted net revenue, both of which are defined above. This is a fair measure of the Group's efficiency and its ability to generate returns for shareholders.
Conversion of operating profits to cash
This compares adjusted EBITDA to cash generated from operations excluding consolidated funds, and is a measure of the effectiveness of the Group's operations at converting profits to cash.
Interim condensed consolidated statement of comprehensive income
For the six months ended 31 December 2017
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Notes GBPm GBPm GBPm
========================================== ===== ============ ============ ==========
Management fees 124.4 116.8 226.2
Performance fees 14.8 21.6 28.3
Other revenue 1.1 2.2 2.7
========================================== ===== ============ ============ ==========
Total revenue 5 140.3 140.6 257.2
Distribution costs (3.9) (1.9) (4.6)
Foreign exchange 6 (2.0) 5.4 5.0
========================================== ===== ============ ============ ==========
Net revenue 134.4 144.1 257.6
Gains on investment securities 14 9.4 6.7 22.4
Change in third-party interests
in consolidated funds 14 (4.9) (4.4) (12.5)
Personnel expenses (34.0) (36.2) (67.8)
Other expenses (14.7) (15.6) (32.9)
========================================== ===== ============ ============ ==========
Operating profit 90.2 94.6 166.8
Finance income 7 9.1 26.1 38.6
Profit on disposal of joint
ventures and subsidiaries - 1.6 1.6
Share of losses from associates
and joint ventures (0.3) (0.8) (0.8)
========================================== ===== ============ ============ ==========
Profit before tax 99.0 121.5 206.2
Tax expense 9 (17.8) (22.7) (36.7)
========================================== ===== ============ ============ ==========
Profit for the period 81.2 98.8 169.5
Other comprehensive income,
net of related tax effect
Items that may be reclassified
subsequently to profit or loss:
Foreign currency translation
differences arising on foreign
operations (18.9) 6.2 (16.7)
Fair value reserve (available-for-sale
financial assets):
Net change in fair value 2.4 0.6 2.9
Cash flow hedge intrinsic value
gains 0.8 1.0 3.8
========================================== ===== ============ ============ ==========
Other comprehensive income,
net of related tax effect (15.7) 7.8 (10.0)
========================================== ===== ============ ============ ==========
Total comprehensive income
for the period 65.5 106.6 159.5
========================================== ===== ============ ============ ==========
Profit attributable to:
Equity holders of the parent 80.2 98.4 167.6
Non-controlling interests 1.0 0.4 1.9
========================================== ===== ============ ============ ==========
Profit for the period 81.2 98.8 169.5
========================================== ===== ============ ============ ==========
Total comprehensive income
attributable to:
Equity holders of the parent 64.5 106.3 157.8
Non-controlling interests 1.0 0.3 1.7
========================================== ===== ============ ============ ==========
Total comprehensive income
for the period 65.5 106.6 159.5
========================================== ===== ============ ============ ==========
Earnings per share
Basic 10 11.96p 14.72p 25.07p
Diluted 10 11.28p 13.93p 23.71p
========================================== ===== ============ ============ ==========
Interim condensed consolidated balance sheet
As at 31 December 2017
Unaudited Unaudited Audited
31 December 31 December 30 June
2017 2016 2017
Notes GBPm GBPm GBPm
====================================== ===== ============ ============ ========
Assets
Non-current assets
Goodwill and intangible assets 12 74.7 85.8 79.9
Property, plant and equipment 1.3 1.8 1.6
Investment in associates and
joint ventures 1.8 2.3 2.3
Non-current asset investments 14 24.9 21.1 22.5
Other receivables 0.1 0.1 0.1
Deferred acquisition costs 0.5 0.4 0.6
Deferred tax assets 26.3 21.4 27.4
====================================== ===== ============ ============ ========
129.6 132.9 134.4
====================================== ===== ============ ============ ========
Current assets
Investment securities 14 250.5 178.2 231.2
Available-for-sale financial
assets 14 13.6 9.0 11.3
Fair value through profit
or loss investments 14 24.5 63.5 36.0
Trade and other receivables 82.9 94.1 70.9
Derivative financial instruments 0.9 - 0.3
Cash and cash equivalents 368.7 378.1 432.5
====================================== ===== ============ ============ ========
741.1 722.9 782.2
====================================== ===== ============ ============ ========
Non-current assets held-for-sale 14 24.5 53.0 7.1
====================================== ===== ============ ============ ========
Total assets 895.2 908.8 923.7
====================================== ===== ============ ============ ========
Equity and liabilities
Capital and reserves - attributable
to equity holders of the parent
Issued capital 16 - - -
Share premium 15.7 15.7 15.7
Retained earnings 699.4 656.9 703.2
Foreign exchange reserve (14.3) 27.4 4.6
Available-for-sale fair value
reserve 3.5 (1.2) 1.1
Cash flow hedging reserve 0.6 (3.0) (0.2)
====================================== ===== ============ ============ ========
704.9 695.8 724.4
Non-controlling interests 1.7 1.5 2.3
====================================== ===== ============ ============ ========
Total equity 706.6 697.3 726.7
====================================== ===== ============ ============ ========
Liabilities
Non-current liabilities
Deferred tax liabilities 7.1 7.5 9.2
====================================== ===== ============ ============ ========
7.1 7.5 9.2
====================================== ===== ============ ============ ========
Current liabilities
Current tax 13.6 20.4 14.7
Third-party interests in consolidated
funds 14 113.4 101.4 108.9
Derivative financial instruments - 3.8 -
Trade and other payables 45.2 78.1 64.2
====================================== ===== ============ ============ ========
172.2 203.7 187.8
====================================== ===== ============ ============ ========
Non-current liabilities held-for-sale 14 9.3 0.3 -
====================================== ===== ============ ============ ========
Total liabilities 188.6 211.5 197.0
====================================== ===== ============ ============ ========
Total equity and liabilities 895.2 908.8 923.7
====================================== ===== ============ ============ ========
Interim condensed consolidated statement of changes in equity
For the six months ended 31 December 2017
Attributable to equity
holders of the parent
=========================================================================
Cash
Foreign flow
Issued Share Retained exchange Available-for-sale hedging Non-controlling Total
capital premium earnings reserve reserve reserve Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Audited balance at
30 June 2016 - 15.7 645.7 21.1 (1.8) (4.0) 676.7 3.3 680.0
Profit for the period - - 98.4 - - - 98.4 0.4 98.8
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - 6.3 - - 6.3 (0.1) 6.2
Net fair value
gains
on
available-for-sale
assets including
tax - - - - 0.6 - 0.6 - 0.6
Cash flow hedge
intrinsic
value gains - - - - - 1.0 1.0 - 1.0
---------------------- ------- ------- -------- -------- ------------------ ------- ------ --------------- ------
Total comprehensive
income/(loss) - - 98.4 6.3 0.6 1.0 106.3 0.3 106.6
Transactions with
owners:
Purchase of own
shares - - (11.8) - - - (11.8) - (11.8)
Acquisition of
non-controlling
interests - - - - - - - (0.4) (0.4)
Share-based
payments - - 9.5 - - - 9.5 - 9.5
Dividends to equity
holders - - (84.9) - - - (84.9) - (84.9)
Dividends to
non-controlling
interests - - - - - - - (1.7) (1.7)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (87.2) - - - (87.2) (2.1) (89.3)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Unaudited balance
at 31 December 2016 - 15.7 656.9 27.4 (1.2) (3.0) 695.8 1.5 697.3
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Profit for the period - - 69.2 - - - 69.2 1.5 70.7
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - (22.8) - - (22.8) (0.1) (22.9)
Net fair value
gains
on
available-for-sale
assets including
tax - - - - 2.3 - 2.3 - 2.3
Cash flow hedge
intrinsic
value gains - - - - - 2.8 2.8 - 2.8
---------------------- ------- ------- -------- -------- ------------------ ------- ------ --------------- ------
Total comprehensive
income/(loss) - - 69.2 (22.8) 2.3 2.8 51.5 1.4 52.9
Transactions with
owners:
Share-based
payments - - 8.8 - - - 8.8 - 8.8
Dividends to equity
holders - - (31.7) - - - (31.7) - (31.7)
Dividends to
non-controlling
interests - - - - - - - (0.6) (0.6)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (22.9) - - - (22.9) (0.6) (23.5)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Audited balance at
30 June 2017 - 15.7 703.2 4.6 1.1 (0.2) 724.4 2.3 726.7
Profit for the period - - 80.2 - - - 80.2 1.0 81.2
Other comprehensive
income/(loss):
Foreign currency
translation
differences
arising on foreign
operations - - - (18.9) - - (18.9) - (18.9)
Net fair value
gains
on
available-for-sale
assets including
tax - - - - 2.4 - 2.4 - 2.4
Cash flow hedge
intrinsic
value gains - - - - - 0.8 0.8 - 0.8
---------------------- ------- ------- -------- -------- ------------------ ------- ------ --------------- ------
Total comprehensive
income/(loss) - - 80.2 (18.9) 2.4 0.8 64.5 1.0 65.5
Transactions with
owners:
Purchase of own
shares - - (10.3) - - - (10.3) - (10.3)
Acquisition of
non-controlling
interests - - - - - - - (0.4) (0.4)
Share-based
payments - - 11.7 - - - 11.7 - 11.7
Dividends to equity
holders - - (85.4) - - - (85.4) - (85.4)
Dividends to
non-controlling
interests - - - - - - - (1.2) (1.2)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Total contributions
and distributions - - (84.0) - - - (84.0) (1.6) (85.6)
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Unaudited balance
at 31 December 2017 - 15.7 699.4 (14.3) 3.5 0.6 704.9 1.7 706.6
====================== ======= ======= ======== ======== ================== ======= ====== =============== ======
Interim condensed consolidated cash flow statement
For the six months ended 31 December 2017
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
=========================================================== ============ ============ ==========
Operating activities
Operating profit 90.2 94.6 166.8
Adjustments for non-cash items:
Depreciation and amortisation 2.6 2.7 5.5
Accrual for variable compensation 13.9 23.4 24.4
Unrealised foreign exchange gains 2.1 (8.1) (8.7)
Other non-cash items (4.5) (5.1) (11.0)
=========================================================== ============ ============ ==========
Cash generated from operations before working capital
changes 104.3 107.5 177.0
Changes in working capital:
Decrease/(increase) in trade and other receivables (12.0) (32.9) (9.7)
Increase/(decrease) in derivative financial instruments (0.6) (0.7) (4.8)
Increase/(decrease) in trade and other payables (19.0) 22.7 8.8
=========================================================== ============ ============ ==========
Cash generated from operations 72.7 96.6 171.3
Taxes paid (20.3) (26.2) (48.0)
=========================================================== ============ ============ ==========
Net cash from operating activities 52.4 70.4 123.3
=========================================================== ============ ============ ==========
Investing activities
Interest received 4.9 5.1 8.8
Dividends received 0.1 - 0.4
Proceeds on disposal of joint ventures and subsidiaries - 4.8 4.8
Purchase of non-current asset investments (2.1) (6.6) (8.8)
Purchase of financial assets held-for-sale (14.4) (24.0) (26.9)
Purchase of available-for-sale financial assets (0.1) (1.6) -
Purchase of fair value through profit or loss investments - (6.3) (14.0)
Purchase of investment securities (21.0) (12.1) (17.0)
Sale of non-current asset investments - 0.5 0.5
Sale of financial assets held-for-sale - 11.3 47.9
Sale of available-for-sale financial assets 0.3 - -
Sale of fair value through profit or loss investments 13.2 41.5 43.2
Sale of investment securities - 11.3 28.1
Net cash flow arising on initial consolidation of
seed capital investments 1.0 1.5 8.1
Purchase of property, plant and equipment - - (0.4)
=========================================================== ============ ============ ==========
Net cash generated/(used) in investing activities (18.1) 25.4 74.7
=========================================================== ============ ============ ==========
Financing activities
Dividends paid to equity holders (85.3) (84.9) (116.6)
Dividends paid to non-controlling interests (1.2) (1.7) (2.3)
Third-party subscriptions into consolidated funds 12.2 13.9 18.7
Third-party redemptions from consolidated funds - (2.4) (8.6)
Distributions paid by consolidated funds (1.0) (1.6) (3.1)
Acquisition of interest from non-controlling interests (0.4) (0.4) (0.4)
Purchase of own shares (10.3) (11.8) (11.8)
=========================================================== ============ ============ ==========
Net cash used in financing activities (86.0) (88.9) (124.1)
=========================================================== ============ ============ ==========
Net increase/(decrease) in cash and cash equivalents (51.7) 6.9 73.9
Cash and cash equivalents at beginning of period 432.5 364.0 364.0
Effect of exchange rate changes on cash and cash
equivalents (12.1) 7.2 (5.4)
=========================================================== ============ ============ ==========
Cash and cash equivalents at end of period 368.7 378.1 432.5
=========================================================== ============ ============ ==========
Cash and cash equivalents comprise:
Cash at bank and in hand 76.9 69.5 71.1
Daily dealing liquidity funds 264.9 155.6 216.5
Deposits 26.9 153.0 144.9
=========================================================== ============ ============ ==========
368.7 378.1 432.5
=========================================================== ============ ============ ==========
Notes to the interim condensed consolidated financial statements
1) General information
These interim condensed consolidated financial statements of Ashmore Group plc and its subsidiaries (the Group) for the six months ended 31 December 2017 were authorised for issue by the Directors on 7 February 2018.
Ashmore Group plc is listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom.
2) Basis of preparation
The interim condensed consolidated financial statements have been prepared in accordance with Disclosure and Transparency Rules of the Financial Conduct Authority (FCA) and with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union.
These interim condensed consolidated financial statements and accompanying notes are unaudited, do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and do not include all the information and disclosures required in annual statutory financial statements. They should be read in conjunction with the Group's annual report and accounts for the year ended 30 June 2017 which are available on the Group's website. Those statutory accounts were approved by the Board of Directors on 6 September 2017 and have been filed with Companies House. The report of the auditors on those accounts was unqualified.
New Standards, Interpretations and Amendments adopted by the Group
The accounting policies applied in these interim results are consistent with those applied in the Group's annual statutory financial statements for 2017.
New Standards and Interpretations not yet adopted
As previously described in the Group's annual statutory accounts for the 12 months to 30 June 2017, the Group has completed an impact assessment of the following Standards or Interpretations which were in issue but were not required to be implemented as at 31 December 2017:
- IFRS 9 Financial Instruments;
- IFRS 15 Revenue from Contracts with Customers; and
- IFRS 16 Leases.
The Group expects to implement IFRS 9 and IFRS 15 on 1 July 2018. The Group does not anticipate the implementation of these Standards to have a material impact on its reported results or net assets. The estimated likely impact on implementing these Standards is approximately 1% of the Group's net assets. However, there will be a number of presentational changes required on the face of the consolidated statement of comprehensive income and consolidated balance sheet. The Group continues to assess the impact of IFRS 16, which becomes effective from 1 July 2019.
No other Standards or Interpretations issued and not yet effective are expected to have an impact on the Group's condensed consolidated financial statements.
Going concern
After making enquiries, the Directors believe that the Group has considerable financial resources and is well placed to manage its business risks in the context of the current economic outlook. Accordingly, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis in preparing these interim condensed consolidated financial statements.
3) Accounting policies
The accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those applied in the preparation of the Group's annual report and accounts for the year ended 30 June 2017.
4) Segmental information
Key management information, including revenues, margins, investment performance, distribution costs and AuM flows, which is relevant to the operation of the Group, continues to be reported to and reviewed by the Board on the basis of the investment management business as a whole and the Group's management considers that the Group's services and its operations are not run on a discrete geographic basis and comprise one business segment (being the provision of investment management services).
The location of the Group's non-current assets at the end of the period other than financial instruments, deferred tax assets and post-employment benefit assets are shown in the table below. Disclosures relating to revenue are in note 5.
Analysis of non-current assets by geography
As at As at As at
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
========================= ============ ============ ========
United Kingdom 7.0 8.0 7.8
United States 70.8 81.9 76.1
Other 0.5 0.4 0.5
========================= ============ ============ ========
Total non-current assets 78.3 90.3 84.4
========================= ============ ============ ========
5) Revenue
Management fees are accrued throughout the period in line with prevailing levels of assets under management and performance fees are recognised when they can be estimated reliably and it is probable that they will crystallise. The Group is not considered to be reliant on any single source of revenue. None of the Group's funds provided more than 10.0% of total revenue in the period (H1 2016/17: none; FY2015/17: none) when considering management fees and performance fees on a combined basis.
Analysis of revenue by geography
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================= ============ ============ =========
United Kingdom revenue 128.0 129.1 232.8
United States revenue 3.7 4.3 8.7
Other 8.6 7.2 15.7
======================= ============ ============ =========
Total revenue 140.3 140.6 257.2
======================= ============ ============ =========
6) Foreign exchange
The foreign exchange rates which had a material impact on the Group's results are the US dollar, the Euro, the Indonesian rupiah and the Colombian peso.
Average rate Average rate Average rate
Closing rate Closing rate Closing rate 6 months 6 months 12 months
as at as at as at ended ended ended
31 December 31 December 30 June 31 December 31 December 30 June
GBP1 2017 2016 2017 2017 2016 2017
================== ============ ============ ============ ============ ============ ============
US dollar 1.3513 1.2340 1.2946 1.3259 1.2809 1.2766
Euro 1.1260 1.1731 1.1426 1.1258 1.1689 1.1671
Indonesian rupiah 18,311 16,535 17,340 17,776 16,922 16,918
Colombian peso 4,035 3,706 3,965 3,973 3,829 3,788
================== ============ ============ ============ ============ ============ ============
Foreign exchange gains and losses are shown below.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================================================= ============ ============ =========
Net realised and unrealised hedging gains/(losses) 0.3 (3.0) (2.8)
Translation gains/(losses) on non-Sterling denominated
monetary assets and liabilities (2.3) 8.4 7.8
======================================================= ============ ============ =========
Total foreign exchange gains/(losses) (2.0) 5.4 5.0
======================================================= ============ ============ =========
7) Finance income and expense
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================================================== ============ ============= =========
Finance income
Interest and income in consolidated funds 4.7 5.2 10.4
Net realised gains on seed capital investments measured
at fair value - 7.9 20.8
Net unrealised gains on seed capital investments
measured at fair value 4.4 13.0 7.4
======================================================== ============ ============= =========
Total finance income 9.1 26.1 38.6
======================================================== ============ ============= =========
8) Share-based payments
The cost related to share-based payments recognised by the Group in the interim condensed consolidated statement of comprehensive income is shown below:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
=================================== ============= ============= =========
Omnibus Plan 14.0 11.1 24.2
Phantom Bonus Plan (0.1) 0.1 0.2
=================================== ============= ============= =========
Total share-based payments expense 13.9 11.2 24.4
=================================== ============= ============= =========
The total expense recognised for the period in respect of equity-settled share-based payment awards was GBP11.2 million (H1 2016/17: GBP12.4 million; FY2016/17: GBP21.3 million).
The Executive Omnibus Incentive Plan (Omnibus Plan)
Share awards outstanding under the Omnibus Plan were as follows:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Number of Number of Number of
shares subject shares subject shares subject
to awards to awards to awards
===================================== =============== =============== ===============
Equity-settled awards
At the beginning of the period 38,579,871 39,805,764 39,805,764
Granted 10,237,825 7,523,609 7,523,609
Vested (6,762,746) (5,971,865) (6,281,971)
Forfeited (953,065) (2,129,853) (2,467,531)
===================================== =============== =============== ===============
Outstanding at the end of the period 41,101,885 39,227,655 38,579,871
===================================== =============== =============== ===============
Cash-settled awards
At the beginning of the period 295,492 650,906 650,906
Granted 112,509 50,760 50,760
Vested (27,334) (121,852) (121,852)
Forfeited (63,779) (284,322) (284,322)
===================================== =============== =============== ===============
Outstanding at the end of the period 316,888 295,492 295,492 ===================================== =============== =============== =============== Total awards At the beginning of the period 38,875,363 40,456,670 40,456,670 Granted 10,350,334 7,574,369 7,574,369 Vested (6,790,080) (6,093,717) (6,403,823) Forfeited (1,016,844) (2,414,175) (2,751,853) ===================================== =============== =============== =============== Outstanding at the end of the period 41,418,773 39,523,147 38,875,363 ===================================== =============== =============== ===============
The fair value of awards granted under the Omnibus Plan is determined by the average Ashmore Group plc closing share price for the five business days prior to grant.
The liability arising from cash-settled awards under the Omnibus Plan at the end of the period and reported within trade and other payables in the interim condensed consolidated balance sheet is GBP0.4 million (H1 2016/17: GBP0.3 million; FY2016/17: GBP0.4 million) of which GBPnil (H1 2016/17: GBPnil; FY2016/17: GBPnil) relates to vested awards.
9) Taxation
Analysis of tax charge for the period
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
================================================== ============ ============ =========
Current tax
UK corporation tax on profits for the period 14.3 17.4 31.3
Overseas corporation tax charge 4.6 4.7 7.9
Adjustments in respect of prior periods - - 1.5
================================================== ============ ============ =========
18.9 22.1 40.7
Deferred tax
Origination and reversal of temporary differences (3.2) 0.6 (3.2)
Effect of changes in corporation tax rates 2.1 - (0.8)
Tax expense for the period 17.8 22.7 36.7
================================================== ============ ============ =========
Factors affecting tax charge for the period
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
======================================================== ============ ============ =========
Profit before tax 99.0 121.5 206.2
======================================================== ============ ============ =========
Profit on ordinary activities multiplied by the blended
UK tax rate for the financial year of 19.00% (H1
2016/17: 19.75%; FY2016/17: 19.75%) 18.8 24.0 40.7
Effects of:
Non-deductible expenses 0.1 0.9 0.2
Deduction in respect of vested shares/exercised options
(Part 12, Corporation
Tax Act 2009) (3.0) (1.0) (2.8)
Different rate of taxes on overseas profits (0.5) (0.3) 1.4
Non-taxable income (0.5) (1.2) (4.1)
Disallowed deferred tax assets - 0.3 -
Effect on deferred tax balance from changes in the
US Federal tax rate* 2.1 - (0.8)
Non-deductible loss on associates 0.3 - -
Other items 0.5 - 0.5
Adjustments in respect of prior periods - - 1.6
======================================================== ============ ============ =========
Tax expense for the period 17.8 22.7 36.7
======================================================== ============ ============ =========
* The US Federal tax rate reduced to 21% with effect from 1 January 2018. This reduction has been taken into account in the calculation of current and deferred tax for the Group's US subsidiaries.
10) Earnings per share
Basic earnings per share at 31 December 2017 of 11.96 pence (H1 2016/17: 14.72 pence; FY2016/17: 25.07 pence) is calculated by dividing the profit after tax for the financial period attributable to equity holders of the parent of GBP80.2 million (H1 2016/17: GBP98.4 million; FY2016/17: GBP167.6 million) by the weighted average number of ordinary shares in issue during the period, excluding own shares.
Diluted earnings per share is calculated based on basic earnings per share adjusted for all dilutive potential ordinary shares. There is no difference between the profit for the year attributable to equity holders of the parent used in the basic and diluted earnings per share calculations.
Reconciliation of the weighted average number of shares used in calculating basic and diluted earnings per share is shown below.
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Number of Number of Number of
ordinary ordinary ordinary
shares shares shares
===================================================== ============ ============ ===========
Weighted average number of ordinary shares used in
the calculation of basic earnings per share 670,651,535 668,479,616 668,488,046
Effect of dilutive potential ordinary shares - share
awards 40,377,421 38,020,304 38,451,642
===================================================== ============ ============ ===========
Weighted average number of ordinary shares used in
the calculation
of diluted earnings per share 711,028,956 706,499,920 706,939,688
===================================================== ============ ============ ===========
11) Dividends
Dividends paid
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
================================================= ============ ============ =========
Final dividend for FY2016/17: 12.10p (FY2015/16:
12.10p) 85.4 84.9 84.9
Interim dividend for FY2016/17: 4.55p - - 31.7
================================================= ============ ============ =========
85.4 84.9 116.6
================================================= ============ ============ =========
In addition, the Group paid GBP1.2 million (H1 2016/17: GBP1.7 million; FY2016/17: GBP2.3 million) of dividends to non-controlling interests.
Dividends declared/proposed
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
Company pence pence pence
==================================== ============ ============ =========
Interim dividend declared per share 4.55 4.55 4.55
Final dividend proposed per share - - 12.10
==================================== ============ ============ =========
4.55 4.55 16.65
==================================== ============ ============ =========
The Board has approved an interim dividend for the six months to 31 December 2017 of 4.55 pence per share (six months to 31 December 2016: 4.55 pence per share; final dividend for the year to 30 June 2017: 12.10 pence per share) payable on 4 April 2018 to shareholders on the register on 9 March 2018.
12) Goodwill and intangible assets
Fund management
Goodwill relationships Total
GBPm GBPm GBPm
================================================== ======== =============== ======
Cost (at original exchange rate)
================================================== ======== =============== ======
At 31 December 2017, 31 December 2016 and 30 June
2017 57.5 39.5 97.0
================================================== ======== =============== ======
Accumulated amortisation and impairment
================================================== ======== =============== ======
At 30 June 2016 - (31.1) (31.1)
Amortisation charge for the period - (2.2) (2.2)
At 31 December 2016 - (33.3) (33.3)
Amortisation charge for the period - (2.3) (2.3)
At 30 June 2017 - (35.6) (35.6)
Amortisation charge for the period - (2.2) (2.2)
At 31 December 2017 - (37.8) (37.8)
================================================== ======== =============== ======
Net book value
================================================== ======== =============== ======
At 30 June 2016 70.1 12.4 82.5
Accumulated amortisation for the period - (2.2) (2.2)
FX revaluation through reserves* 4.7 0.8 5.5
================================================== ======== =============== ======
At 31 December 2016 74.8 11.0 85.8
Accumulated amortisation for the period - (2.3) (2.3)
FX revaluation through reserves* (3.2) (0.4) (3.6)
================================================== ======== =============== ======
At 30 June 2017 71.6 8.3 79.9
Accumulated amortisation for the period - (2.2) (2.2)
FX revaluation through reserves* (2.7) (0.3) (3.0)
================================================== ======== =============== ======
At 31 December 2017 68.9 5.8 74.7
================================================== ======== =============== ======
* FX revaluation through reserves is a result of the retranslation of US dollar-denominated intangibles and goodwill.
Goodwill
The Group's goodwill balance relates principally to the acquisition of the equities business in May 2011.
During the period to 31 December 2017, no factors indicating potential impairment of goodwill were noted.
Goodwill is tested for impairment annually or whenever there is an indication that the carrying amount may not be recoverable based on management's judgements regarding the future prospects of the business, estimates of future cash flows and discount rates. The key assumptions used to determine the recoverable amount were disclosed in the annual report and accounts for the year ended 30 June 2017. Based on management's assessment as at 31 December 2017, the recoverable amount was in excess of the carrying value of goodwill and no impairment was implied.
Fund management relationships
Intangible assets comprise fund management relationships related to profit expected to be earned from clients of the equities business.
During the period to 31 December 2017, there was a review process to identify factors indicating whether the Group's fund management relationships were impaired. None was identified and as a consequence, no impairment charge has been included within the Group's other expenses in the consolidated statement of comprehensive income in the period (H1 2016/17: GBPnil; FY2016/17: GBPnil).
The remaining amortisation period for fund management relationships is one and a half years (31 December 2016: two and a half years; 30 June 2017: two years).
13) Fair value of financial instruments
The accounting policies relating to the estimation of fair values are consistent with those applied in the preparation of the Group's annual report and accounts for the year ended 30 June 2017.
The Group has an established control framework with respect to the measurement of fair values. This framework includes committees that have overall responsibility for all significant fair value measurements. Each committee regularly reviews significant inputs and valuation adjustments. If third-party information is used to measure fair value, the team assesses and documents the evidence obtained from the third parties to support such valuations. There are no material differences between the carrying amounts of financial assets and liabilities and their fair values at the balance sheet date.
Fair value hierarchy
The Group measures fair values using the following fair value hierarchy that reflects the significance of inputs used in making the measurements:
- Level 1: Valuation is based upon a quoted market price in an active market for an identical instrument. This fair value measure relates to the valuation of quoted and exchange traded equity and debt securities.
- Level 2: Valuation techniques are based upon observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This fair value measure relates to the valuation of quoted equity securities in inactive markets or in interests in unlisted funds whose net asset values are referenced to the fair values of the listed or exchange traded securities held by those funds.
- Level 3: Valuation techniques use significant unobservable inputs.
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The fair value hierarchy of financial instruments which are carried at fair value is summarised below:
At 31 December At 31 December At 30 June
2017 2016 2017
=========================== ============================= =============================
Level Level Level Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total 1 2 3 Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================= ===== ===== ===== ====== ===== ====== ====== ====== ===== ====== ====== ======
Financial assets
Investment securities 79.5 83.3 87.7 250.5 51.1 76.1 51.0 178.2 60.8 85.5 84.9 231.2
Non-current
financial assets
held-for-sale - 24.5 - 24.5 - 23.6 29.4 53.0 - 7.1 - 7.1
Available-for-sale
financial assets - - 13.6 13.6 0.5 0.1 8.4 9.0 - 0.1 11.2 11.3
Fair value through
profit or loss
investments 8.1 16.4 - 24.5 - 63.5 - 63.5 - 36.0 - 36.0
Non-current
asset investments - 4.4 20.5 24.9 - 4.6 16.5 21.1 - 4.5 18.0 22.5
Derivative financial
instruments - 0.9 - 0.9 - - - - - 0.3 - 0.3
87.6 129.5 121.8 338.9 51.6 167.9 105.3 324.8 60.8 133.5 114.1 308.4
======================= ===== ===== ===== ====== ===== ====== ====== ====== ===== ====== ====== ======
Financial liabilities
Third-party
interests in
consolidated
funds 36.8 43.8 32.8 113.4 29.6 40.1 31.7 101.4 30.9 42.4 35.6 108.9
Derivative financial
instruments - - - - - 3.8 - 3.8 - - - -
Non-current
financial liabilities
held-for-sale - 9.3 - 9.3 - 0.3 - 0.3 - - - -
36.8 53.1 32.8 122.7 29.6 44.2 31.7 105.5 30.9 42.4 35.6 108.9
======================= ===== ===== ===== ====== ===== ====== ====== ====== ===== ====== ====== ======
There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the period.
Changes in Level 3 financial assets and liabilities recognised at fair value on a recurring basis
Third-party
Non-current Available-for-sale interests
Investment financial financial Non-current in consolidated
securities assets held-for-sale assets asset investments funds
GBPm GBPm GBPm GBPm GBPm
======================== =========== ===================== ================== ================== ================
At 31 December 2016 51.0 29.4 8.4 16.5 31.7
Net
additions/(disposals) - - - 1.9 -
Reclassification from
HFS investments
to consolidated funds 28.1 (28.1) - - -
Unrealised
gains/(losses)
recognised
in finance income 5.8 (1.3) - (0.4) 3.9
Unrealised
gains/(losses)
recognised
in other comprehensive
income - - 2.8 - -
======================== =========== ===================== ================== ================== ================
At 30 June 2017 84.9 - 11.2 18.0 35.6
Net
additions/(disposals) 3.4 - - 2.1 (1.5)
Unrealised
gains/(losses)
recognised
in finance income 1.9 - - 0.4 (1.3)
Unrealised
gains/(losses)
recognised
in other comprehensive
income (2.5) - 2.4 - -
At 31 December 2017 87.7 - 13.6 20.5 32.8
======================== =========== ===================== ================== ================== ================
Valuation of Level 3 financial liabilities recognised at fair value on a recurring basis
Investments valued using valuation techniques include financial investments which, by their nature, do not have an externally quoted price based on regular trades, and financial investments for which markets are no longer active as a result of market conditions e.g. market illiquidity. The valuation techniques used include comparison to recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and, if applicable, enterprise valuation. The valuation techniques used in the estimation of fair values are consistent with those applied in the preparation of the Group's annual report and accounts for the year ended 30 June 2017.
Financial instruments not measured at fair value
Financial assets and liabilities that are not measured at fair value include cash and cash equivalents, trade and other receivables, and trade and other payables. The carrying value of financial assets and financial liabilities not measured at fair value is considered a reasonable approximation of fair value as at 31 December 2017, 31 December 2016 and 30 June 2017.
14) Seed capital investments
The Group considers itself a sponsor of an investment fund when it facilitates the establishment of the fund in which the Group is the investment manager. The Group ordinarily invests seed capital in order to provide initial scale and facilitate the marketing of new funds to third-party investors. These funds are then financed through the issue of units to investors. Aggregate interests held by the Group include seed capital, management fees and performance fees. The Group generates management and performance fee income from managing the assets on behalf of third-party investors.
a) Non-current assets and non-current liabilities held-for-sale
Where Group companies invest seed capital into funds operated and controlled by the Group and the Group is actively seeking to reduce its investment, and it is considered highly probable that it will relinquish control within a year, the interests in the funds are treated as held-for-sale and are recognised as financial assets and liabilities held-for-sale. During the period, one fund (H1 2016/17: two funds; FY2016/17: three funds) was seeded in this manner and met the above criteria, and consequently the assets and liabilities of these funds were initially classified as held-for-sale.
The non-current assets and liabilities held-for-sale at 31 December 2017 were as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
===================================================== =========== =========== =======
Non-current financial assets held-for-sale 24.5 53.0 7.1
Non-current financial liabilities held-for-sale (9.3) (0.3) -
===================================================== =========== =========== =======
Seed capital investments classified as held-for-sale 15.2 52.7 7.1
===================================================== =========== =========== =======
Investments cease to be classified as held-for-sale when they are no longer controlled by the Group. A loss of control may happen either through sale of the investment and/or dilution of the Group's holding. When investments cease to be classified as held-for-sale they are classified as financial assets designated as FVTPL. During the period, no fund (H1 2016/17: one fund; FY2016/17: one fund) was transferred to FVTPL category.
If the fund remains under the control of the Group for more than one year from the original investment date and it is assessed that the Group controls the investment fund in accordance with the requirements of IFRS 10, it will cease to be classified as held-for-sale and will be consolidated line by line. During the period, one fund (H1 2016/17: one fund; FY2016/17: two funds) with an aggregate carrying amount of GBP7.2 million (H1 2016/17: GBP4.3 million; FY2016/17: GBP12.5 million) was transferred to consolidated funds. There was no impact on net assets or total comprehensive income as a result of the transfer.
Included within finance income are net gains of GBP0.7 million (H1 2016/17: net gains of GBP6.4 million; FY2016/17: net gains of GBP9.3 million) in relation to held-for-sale investments (refer to note 7).
As the Group considers itself to have one business segment (refer to note 4), no additional segmental disclosure of held-for-sale assets or liabilities is applicable.
b) Available-for-sale financial assets
Available-for-sale financial assets held at fair value at 31 December 2017 comprise equities held as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
============================================== =========== =========== =======
Equities listed on stock exchange - 0.5 -
Equity funds 13.6 8.5 11.3
Seed capital classified as available-for-sale 13.6 9.0 11.3
============================================== =========== =========== =======
Included within other comprehensive income are net gains of GBP2.4 million (H1 2016/17: net gains of GBP0.6 million; FY2016/17: net gains of GBP2.5 million) in relation to available-for-sale investments.
c) Fair value through profit or loss investments
FVTPL investments at 31 December 2017 comprise shares held in debt and equity funds as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
Equity funds 23.5 20.3 30.2
Debt funds 1.0 43.2 5.8
============================================= =========== =========== =======
Seed capital classified as FVTPL investments 24.5 63.5 36.0
============================================= =========== =========== =======
Included within finance income are net gains of GBP2.0 million (H1 2016/17: net gains of GBP12.3 million; FY2016/17: net gains of GBP9.6 million) on the Group's FVTPL investments.
d) Consolidated funds
The Group has consolidated 12 investment funds as at 31 December 2017 (31 December 2016: 11 investments funds; 30 June 2017: 13 investment funds), over which the Group is deemed to have control. Consolidated funds represent seed capital investments where the Group has held its position for a period greater than one year and its interest represents a controlling stake in the fund in accordance with IFRS 10. Consolidated fund assets and liabilities are presented line by line after intercompany eliminations. The table below sets out an analysis of the carrying amounts of interests held by the Group in consolidated investment funds.
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
============================================ =========== =========== ========
Investment securities 250.5 178.2 231.2
Cash and cash equivalents 11.2 9.9 12.4
Other (0.1) 0.4 (1.4)
Third-party interests in consolidated funds (113.4) (101.4) (108.9)
============================================ =========== =========== ========
Consolidated seed capital investments 148.2 87.1 133.3
============================================ =========== =========== ========
Investment securities are designated as FVTPL and include listed and unlisted equities and debt securities. Other includes trade receivables, trade payables and accruals.
The maximum exposure to loss is the carrying amount of the assets held. The Group has not provided financial support or otherwise agreed to be responsible for supporting any consolidated fund financially.
Included within the interim condensed consolidated statement of comprehensive income are net gains of GBP6.1 million (H1 2016/17: net gains of GBP4.9 million; FY2016/17: net gains of GBP12.8 million) relating to the Group's share of the results of the individual statements of comprehensive income for each of the consolidated funds, as follows:
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
====================================================== =========== =========== =======
Finance income 2.7 4.0 7.8
Gains/(losses) on investment securities 9.4 6.7 22.4
Change in third-party interests in consolidated funds (4.9) (4.4) (12.5)
Other expenses (1.1) (1.4) (4.9)
====================================================== =========== =========== =======
Net gains/(losses) on consolidated funds 6.1 4.9 12.8
====================================================== =========== =========== =======
Included in the Group's cash generated from operations is GBP0.8 million cash utilised in operations (H1 2016/17: GBP1.4 million cash utilised in operations; FY2016/17: GBP3.5 million cash utilised in operations) relating to consolidated funds.
As at 31 December 2017, the Group's consolidated funds were domiciled in Guernsey, Indonesia, Luxembourg and the United States.
e) Non-current asset investments
Non-current asset investments relate to the Group's holding in closed-end funds and are designated as FVTPL. Fair value is assessed by taking account of the extent to which potential dilution of gains or losses may arise as a result of additional investors subscribing to the fund where the final close of a fund has not occurred.
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
============================================ =========== =========== =======
Non-current asset investments at fair value 24.9 21.1 22.5
============================================ =========== =========== =======
Included within finance income are net gains of GBP0.4 million (H1 2016/17: net gains of GBP3.3 million; FY2016/17: net gains of GBP2.5 million) on the Group's non-current asset investments.
15) Financial risk management
The Group is subject to strategic, business, client, investment, operational and treasury risks throughout its business as discussed in the Risk management section of the Group's annual report for the year ended 30 June 2017, which provides further detail on the Group's exposure to and the management of risks derived from the financial instruments it uses.
Those risks and the risk management policies have not changed significantly during the six months to 31 December 2017.
16) Share capital
Authorised share capital
Number of Nominal value
shares GBP'000
=========================================================== =========== =============
Ordinary shares of 0.01p each at 31 December 2017, 30 June
2017 and 31 December 2016 900,000,000 90
=========================================================== =========== =============
Issued share capital - allotted and fully paid
As at As at As at
As at 31 December As at 31 December As at 30 June
31 December 2017 31 December 2016 30 June 2017
2017 Nominal 2016 Nominal 2017 Nominal
Number of value Number of value Number of value
shares GBP'000 shares GBP'000 shares GBP'000
========================= ============ ============ ============ ============ =========== ========
Ordinary shares of 0.01p
each 712,740,804 71 712,740,804 71 712,740,804 71
========================= ============ ============ ============ ============ =========== ========
All the above ordinary shares represent equity of the Company and rank pari passu in respect of participation and voting rights.
As at 31 December 2017, there were equity-settled share awards issued under the Omnibus Plan totalling 41,101,885 shares (31 December 2016: 39,227,655 shares; 30 June 2017: 38,579,871 shares) that have release dates ranging from September 2018 to December 2022.
17) Own shares
The Ashmore 2004 Employee Benefit Trust (EBT) acts as an agent to acquire and hold shares in Ashmore Group plc with a view to facilitating the recruitment and motivation of employees. As at 31 December 2017, the EBT owned 34,953,460 (31 December 2016: 39,009,575; 30 June 2017: 38,701,321) ordinary shares of 0.01p with a nominal value of GBP3,495 (31 December 2016: GBP3,901; 30 June 2017: GBP3,870) and shareholders' funds are reduced by GBP105.5 million (31 December 2016: GBP116.3 million; 30 June 2017: GBP115.4 million) in this respect. It is the intention of the Directors to make these shares available to employees through the share-based compensation plans. The EBT is periodically funded by the Company for these purposes.
18) Related party transactions
Related parties of the Group include key management personnel, close family members of key management personnel, subsidiaries, associates, joint ventures, Ashmore funds, the EBT and the Ashmore Foundation.
Key management personnel
The compensation paid to or payable to key management for employee services is shown below:
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
=================================== ============= ============= =========
Short-term employee benefits 0.1 0.1 1.4
Defined contribution pension costs - - -
Share-based payment benefits - - 4.8
=================================== ============= ============= =========
0.1 0.1 6.2
=================================== ============= ============= =========
Share-based payment benefits represent the fair value charge to the interim condensed consolidated statement of comprehensive income of share awards.
During the period, there were no other transactions entered into with key management personnel (H1 2016/17 and FY2016/17: none). Aggregate key management personnel interests in consolidated funds at 31 December 2017 were GBP37.9 million (31 December 2016: GBP37.9 million; 30 June 2017: GBP42.4 million).
Transactions with Ashmore funds
During the period, the Group received GBP62.8 million of gross management fees and performance fees (H1 2016/17: GBP58.3 million; FY2016/17: GBP111.6 million) from the 87 funds (H1 2016/17: 85 funds; FY2016/17: 86 funds) it manages and which are classified as related parties. As at 31 December 2017, the Group had receivables due from funds of GBP5.1 million (31 December 2016: GBP5.6 million; 30 June 2017: GBP5.1 million).
Transactions with the EBT
The EBT has been provided with a loan facility to allow it to acquire Ashmore shares in order to satisfy outstanding unvested share awards. The EBT is included within the results of the Group. As at 31 December 2017, the loan outstanding was GBP104.3 million (31 December 2016: GBP114.0 million; 30 June 2017: GBP103.5 million).
Transactions with the Ashmore Foundation
The Ashmore Foundation is a related party to the Group. The Foundation was set up to provide financial grants to worthwhile causes within the Emerging Markets countries in which Ashmore invests and/or operates with a view to giving back into the countries and communities. The Group made donations of GBP20,000 to the Foundation during the period (H1 2016/17: GBP40,000; FY2016/17: GBP50,000).
19) Commitments
Undrawn investment commitments
As at As at As at
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
===================================================== ============ ============ ========
AA Development Capital India Fund 1 LLC 1.1 1.3 1.2
Ashmore Andean Fund II, LP 1.9 1.7 1.8
Ashmore Emerging Markets Corporate Private Debt Fund 0.3 0.5 0.3
Ashmore I - CAF Colombian Infrastructure Senior Debt
Fund 13.8 16.1 15.0
Ashmore I - FCP Colombia Infrastructure Fund - 0.3 0.1
Ashmore Special Opportunities Fund LP 10.5 1.7 1.6
Everbright Ashmore China Real Estate Fund 1.4 1.5 1.4
KCH Healthcare LLC 3.2 5.3 4.5
VTBC-Ashmore Real Estate Partners I, LP 3.6 3.5 3.5
Total undrawn investment commitments 35.8 31.9 29.4
===================================================== ============ ============ ========
20) Post-balance sheet events
There are no post-balance sheet events that require adjustment or disclosure in these interim condensed consolidated financial statements.
21) Accounting estimates and judgements
In preparing these interim condensed consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were substantially the same as those that applied to the annual report and accounts as at and for the year ended 30 June 2017.
Cautionary statement regarding forward looking statements
It is possible that this document could or may contain forward looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning.
Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward looking statements. There are several factors that could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. The Group undertakes no obligation to revise or update any forward looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.
Responsibility statement of the Directors in respect of the half-yearly financial report
We confirm that to the best of our knowledge:
- the interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union; and
- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period and any changes in the related party transactions described in the last annual report that could do so.
By order of the Board
Mark Coombs
Chief Executive Officer
7 February 2018
Independent Review Report to Ashmore Group plc
Conclusion
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2017 which comprises the consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules (the DTR) of the UK's Financial Conduct Authority (the UK FCA).
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Thomas Brown
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
7 February 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSUFAWFASEDE
(END) Dow Jones Newswires
February 08, 2018 02:00 ET (07:00 GMT)
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