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Part 2 : For preceding part double-click [nRn1O0444Z]
headcount increase during the first half, growing from 93 to 138 employees at 31
December 2008. Subsequently, the Group has added a further 4 heads, taking the
year end headcount to 142, of whom 41 are employed in relatively newly
established local asset management operations. The increased headcount has been
focused on two areas: first, improving the Group's infrastructure; and secondly,
expanding the number of investment professionals based in overseas
jurisdictions, in keeping with the Group's strategy establishing local asset
management operations in emerging economies.
The Group's investment in infrastructure initiatives to support the development
of the business have also affected other operating costs, which increased by
£5.8 million (52%) to £16.9 million during the period. As reported in last
year's annual report, an additional £1.8 million was incurred in respect of full
year charges on the Group's new premises in London and amortisation of the
deferred acquisition costs (DAC) associated with the launch of AGOL in December
2007. In addition, a further £1.3 million of the increment on FY07/08 relates to
enhancing information technology capabilities across the business; £0.8 million
to legal and professional fees, including corporate development and due
diligence activities; and £0.8 million to higher travel costs, reflecting the
Group's increased headcount.
As a result, the operating profit margin for the year ended 30 June 2009 was
74.5% (2008: 76.0%).
Taxation
The vast majority of the Group's profit is subject to UK taxation, and typically
the Group has a limited number of non-tax deductible expenses. Consequently the
Group's effective tax rate (27.8%) has historically tracked close to the UK
corporation tax rate (currently 28.0%).
There is a £14.0 million deferred tax asset on the Group's balance sheet at 30
June 2009, as a result of timing differences in the recognition of the
accounting expense and actual tax deductions in connection with share price
appreciation on share based awards.
Dividend
In recognition of the financial performance during the period, and our
confidence in the Group's future prospects, the directors are recommending a
final dividend of 8.34 pence per share for the year ended 30 June 2009 which,
subject to shareholder approval, will be paid on 4 December 2009 to all
shareholders who are on the register on 6 November 2009.
An interim dividend for the six month period to 31 December 2008 of 3.66p
(2007:3.66p) was paid on 24 April 2009. Together, these result in a full year
dividend of 12.0p (2008: 12.0p).
Purchase of Ashmore Group plc shares
In line with authorities granted at the AGM in October 2008, the Company
purchased 5,368,331 shares, for an aggregate consideration of £6.9 million,
which are held in treasury.
Balance sheet management and cash flow
It is the Group's policy to maintain a strong balance sheet in order to support
regulatory capital requirements, to meet the commercial demands of current and
prospective investors, and to fulfil the development needs across the business.
Development needs include funding the establishment costs of local asset
management ventures, seeding new funds and other strategic initiatives.
As at 30 June 2009, total equity attributable to shareholders of the parent was
£308.5 million, as compared to £271.8 million at 30 June 2008. There is no debt
on the Group's balance sheet.
Cash
The Group's cash and cash equivalents balance increased by £9.2 million in the
period to £288.4 million. The Group continues to generate significant cash from
operations, totalling £150.9 million in the year (year to 30 June 2008: £195.5
million), from which it paid the following significant items: £81.9 million in
cash dividends (FY07/08: £70.1 million); £47.7 million of taxation (FY07/08:
£46.5 million); £11.6 million for new seed investments (FY07/08: £15.1 million);
£6.9 million for Ashmore Group plc shares held in treasury (FY07/08: nil); £3.7
million to acquire new subsidiaries (FY07/08: nil); and £2.1 million to purchase
property, plant and equipment, largely IT-related (FY07/08: £3.5 million).
The Group's cash balances are invested with the objective of optimising returns
within a strict framework which emphasises capital preservation, security,
liquidity and counterparty risk. Cash is invested only in institutions with
approved credit ratings of A or better. Typically, during the financial year,
investments have been in short-term cash deposits. Based on the level of cash
balances at 30 June 2009, a 1% change in UK interest rates would have a £2.8
million impact on the Group's profit before tax.
Seeding
The Group supports the creation of new business by seeding new funds where
necessary. As at 30 June 2009 the amount invested was £26.6 million (at cost),
with a market value of £32.2 million, and an aggregated annualised return for
FY08/09 of 13% (including FX).
Foreign exchange management
The Group's long-standing policy is to hedge up to two-thirds of the foreign
exchange exposure in connection with its net management fee cash flows, using a
combination of forward foreign exchange contracts and options for up to two
years forward.
The period to 30 June 2009 was characterised by extreme currency volatility,
with the GBP/USD exchange rate ranging between GBP1.00:1.43-1.98USD. In the
first half there was a significant strengthening of the US Dollar relative to
sterling, with the exchange rate closing on 31 December 2008 at GBP1:1.46USD. As
we set out in our Interims, this volatility resulted in a £41.4 million loss
being recognised in the first half in respect of the unrealised marked-to-market
of US$265 million open forward foreign exchange contracts. The overall foreign
exchange loss for the first half was £49.8 million, comprising £54.2 million
relating to hedging activity, partially offset by £4.4 million of gains on
revaluation of other non-sterling denominated assets and liabilities.
During the second half US$165 million of these contracts matured, with the
crystallised losses offsetting gains on the translation of the US Dollar
management fees back into sterling at the prevailing rate, relative to the
budgeted rate of GBP1:2.00USD. The weakening of the US Dollar during the second
half to close at a 30 June 2009 rate of GBP1:1.65USD contributed to
hedging-related losses being reduced by £11.8 million to £42.4 million, within
an overall foreign exchange loss for the year of £38.6 million.
The level of FX hedges in place as 30 June 2009 is US$180 million. This includes
the US$120 million of forward foreign exchange contracts in respect of FY09/10
net management fee cash flows, and US$60 million of options in respect of
FY10/11 net management fee cash flows. These have been marked-to-market at the
year end rate of GBP1:1.65USD.
The options effectively operate as a collar, protecting the sterling value of
US$60 million of the Group's forecast management fee revenue cash flows for
FY10/11 from being impacted by currency movements outside of a range from
GBP1:1.52-1.70USD. As designated hedges the mark-to-market movement in the
value of the options will be taken through reserves, until such time as they and
the associated hedged revenues mature, so long as the hedges are assessed as
being effective. If assessed as ineffective, the mark-to-market of the options
will be taken through the income statement.
Deferred acquisition costs ("DAC")
As we indicated last year, Ashmore was appointed investment manager of Ashmore
Global Opportunities Limited ("AGOL"), a newly incorporated publicly listed
closed-ended investment company on 12 December 2007. This vehicle raised E500
million capital, with the purpose of investing in Ashmore's special situations
and multi strategy funds. During 2008, the shares of the company have, for the
most part, traded at a discount to the net asset value of its balance sheet,
although this discount was significantly less than many of its peer group. Where
this discount is in excess of 10% for 12 consecutive months, an EGM is required
to consider whether AGOL should be wound up. Such an EGM was held on 5 May 2009,
with 80% of the voting shareholders voting against the resolution. Should the
discount continue to exceed 10% for a further 12 consecutive months, an EGM
would once again be required.
The Group holds on its balance sheet unamortised DAC in respect of the launch of
AGOL which amounted to £11.3 million at 30 June 2009. Any such future vote would
not result in an escalation of the recognition of these costs, as an early
termination of the company triggers full recovery of the set up costs (including
the portion previously amortised - £2.1 million per annum, and £3.3 million
cumulative to 30 June 2009).
Regulatory capital
As a UK listed asset management group, Ashmore is subject to regulatory
supervision by the Financial Services Authority (FSA) under the Prudential
Sourcebook for Banks, Building Societies and Investment Firms. The Group has one
UK regulated entity, Ashmore Investment Management Limited ("AIML"), on behalf
of which quarterly capital adequacy returns are filed. AIML held surplus capital
resources relative to its requirements at all times during the period under
review.
Further, with effect from 1 January 2007, the Group has been subject to
consolidated regulatory capital requirements, whereby the Board is required to
assess the degree of risk across the business, and hold sufficient capital
within the Group against them. The Board has assessed the amount of capital
required to cover such risks as £28.0 million. Thus, given the considerable
balance sheet resources available to the Group, the Board is satisfied that the
Group is adequately capitalised to continue its operations effectively. Further
information regarding the Group's capital adequacy status can be found in the
Group's Internal Capital Adequacy Assessment Process (ICAAP) Pillar III
disclosures, which are available on our website at www.ashmoregroup.com.
Graeme Dell
Group Finance Director
Ashmore Group plc
Consolidated income statement
Year ended 30 June 2009
2009 2008
Notes £m £m
Management fees 186.8 186.7
Performance fees 52.5 44.7
Other revenue 6.4 10.1
Total revenue 245.7 241.5
Less: Distribution costs (3.6) (4.7)
Less: Foreign exchange 2 (38.6) 3.2
Net revenue 203.5 240.0
Personnel expenses 3 (36.0) (47.7)
Other expenses 4 (16.9) (11.1)
Operating profit 150.6 181.2
Interest income 9.2 15.0
Profit before tax 159.8 196.2
Tax expense (44.3) (55.2)
Profit for the year 115.5 141.0
Attributable to:
Equity holders of the parent 115.0 140.8
Minority interests 0.5 0.2
Profit for the year 115.5 141.0
Earnings per share:
Basic 5 17.12p 21.03p
Diluted 5 15.99p 19.89p
Ashmore Group plc As at As at
Consolidated balance sheet 30 June 30 June
2009 2008
Notes £m £m
Assets
Property, plant and equipment 4.6 3.3
Intangible assets 6.7 4.1
Deferred acquisition costs 11.3 13.4
Other receivables 0.9 -
Deferred tax assets 14.0 13.8
Total non-current assets 37.5 34.6
Trade and other receivables 33.1 34.7
Available-for-sale financial assets 4.8 -
Derivative financial instruments 0.8 1.2
Cash and cash equivalents 288.4 279.2
Total current assets 327.1 315.1
Non current assets held for sale 7 34.8 16.4
Total assets 399.4 366.1
Equity
Issued capital - -
Share premium 0.3 0.3
Retained earnings 308.2 271.5
Total equity attributable to equity holders of the parent 308.5 271.8
Minority interests 2.0 1.5
Total equity 310.5 273.3
Liabilities
Deferred tax liabilities 1.5 3.8
Total non-current liabilities 1.5 3.8
Current tax 24.0 24.5
Derivative financial instruments 5.0 0.7
Trade and other payables 51.0 63.7
Total current liabilities 80.0 88.9
Non current liabilities held for sale 7 7.4 0.1
Total liabilities 88.9 92.8
Total equity and liabilities 399.4 366.1
Mark Coombs Graeme Dell
Chief Executive Officer Group Finance Director
Ashmore Group plc Total equity attributable to equity holders of the parent
Consolidated statement of changes in equity
Issued capital Share premium Retained earnings Minority interests Total equity
£m £m £m £m £m £m
Balance at 1 July 2007 - 0.3 195.6 195.9 0.1 196.0
Net gains on available-for-sale financial assets including - - 0.4 0.4 - 0.4
deferred tax
Total income and expense recognised directly in equity - - 0.4 0.4 - 0.4
Profit for the year - - 140.8 140.8 0.2 141.0
Total recognised income and expense - - 141.2 141.2 0.2 141.4
Issue of share capital - - - - 1.2 1.2
Share based payments - - 8.8 8.8 - 8.8
Current tax related to share based payments - - (1.3) (1.3) - (1.3)
Deferred tax related to share based payments - - (2.7) (2.7) - (2.7)
Dividends to equity holders - - (70.1) (70.1) - (70.1)
Balance at 30 June 2008 - 0.3 271.5 271.8 1.5 273.3
Exchange adjustments on translation of foreign operations - - 0.5 0.5 - 0.5
Net gains on available-for-sale financial assets including - - 2.3 2.3 - 2.3
deferred tax
Total income and expense recognised directly in equity - - 2.8 2.8 - 2.8
Profit for the year - - 115.0 115.0 0.5 115.5
Total recognised income and expense - - 117.8 117.8 0.5 118.3
Own shares - - (0.8) (0.8) - (0.8)
Treasury shares - - (6.9) (6.9) - (6.9)
Share based payments - - 8.2 8.2 - 8.2
Current tax related to share based payments - - 0.2 0.2 - 0.2
Deferred tax related to share based payments - - 0.1 0.1 - 0.1
Dividends to equity holders - - (81.9) (81.9) - (81.9)
Balance at 30 June 2009 - 0.3 308.2 308.5 2.0 310.5
Ashmore Group plc
Consolidated cash flow statement
Year ended 30 June 2009
2009 2008
Notes £m £m
Operating activities
Cash receipts from customers 198.9 242.8
Cash paid to suppliers and employees (48.0) (47.3)
Cash generated from operations 150.9 195.5
Taxes paid (47.7) (46.5)
Net cash from operating activities 103.2 149.0
Investing activities
Interest received 9.3 15.4
Acquisition of subsidiary (3.7) -
Net purchase of non-current assets held for sale (6.9) (15.1)
Purchase of available-for-sale financial assets (4.7) -
Purchase of deferred acquisition costs - (14.6)
Purchase of property, plant and equipment (2.1) (3.5)
Net cash used in investing activities (8.1) (17.8)
Financing activities
Dividends paid 6 (81.9) (70.1)
Purchase of own shares (0.9) -
Purchase of treasury shares 9 (6.9) -
Net cash used in financing activities (89.7) (70.1)
Effect of exchange rate changes on cash and cash equivalents 3.8 0.1
Net increase in cash and cash equivalents 9.2 61.2
Cash and cash equivalents at beginning of year 279.2 218.0
Cash and cash equivalents at end of year 288.4 279.2
Cash and cash equivalents comprise:
Cash at bank and in hand 288.4 279.2
288.4 279.2
Notes to the Group Financial Statements
1 Basis of preparation and significant accounting policies
In preparing the financial information in this statement the Group has applied
policies which are in accordance with IFRSs as adopted by the European Union at
30 June 2009.
Certain comparative amounts relating to foreign exchange have been reclassified
to conform to the current year presentation. None of the changes are significant
in nature.
In addition to consistently applying the accounting policies applied in the
Group's annual report for the year ended 30 June 2008, which is available on the
Group's website, the following accounting policies were adopted:
Financial assets
The Group may, from time-to-time, invest in funds where an Ashmore Group
subsidiary is the Investment Manager or an Adviser ('seeding'). Where the
holding in such investments is deemed to represent a controlling stake and is
acquired exclusively with a view to subsequent disposal through sale or
dilution, these seed investments are recognised as non-current assets
held-for-sale in accordance with IFRS 5. Where control is not deemed to exist,
and the assets are readily realisable, they are recognised as available-for-sale
financial assets. The recognition policy for both is set out below:
* Financial assets held as non current assets held for sale
Non-current assets held for sale are measured at the lower of their carrying
amount and fair value less costs to sell except where measurement and
re-measurement is outside the scope of IFRS 5, the relevant policy is set out in
Financial Instruments. Where investments that have initially been recognised as
non-current assets held-for-sale, because the Group has been deemed as holding a
controlling stake, are subsequently disposed of or diluted such that the Group's
holding is now insufficient to be deemed a controlling stake, the investment
will subsequently be reclassified as an available-for-sale financial asset. Any
such reclassification will crystallise any gain or loss previously recognised
directly through equity within the income statement. Subsequent movements will
be recognised in accordance with the Group's accounting policy for the newly
adopted classification.
* Financial assets held as available-for-sale
For available-for sale financial assets, gains and losses arising from changes
in their fair value are recognised directly in equity, until the security is
disposed of or is impaired, at which time the cumulative gain or loss previously
recognised in equity is taken to the income statement for the accounting period.
Hedge accounting
The Group applies cash flow hedge accounting when the transactions meet the
specified hedge accounting criteria. To qualify the following conditions must be
met:
* Formal documentation of the relationship between the hedging instrument(s)
and hedged item(s) must exist at inception.
* The hedged cash flows must be highly probable and must present an exposure to
variations in cash flows that could ultimately affect profitability.
* The effectiveness of the hedge can be reliably measured.
* The hedge must be highly effective, with effectiveness assessed on an ongoing
basis.
For qualifying cash flow hedges, the change in fair value of the effective
hedging instrument, is initially recognised in equity and is released to the
income statement in the same period during which the relevant financial asset or
liability affects profit or loss.
Where highly effective, any ineffective portion of the hedge is immediately
recognised in the income statement. Where the instrument ceases to be highly
effective as a hedge, or is sold, terminated or exercised, hedge accounting is
discontinued.
Treasury shares
Treasury Shares are recognised in equity and are measured at cost. Consideration
received for the sale of such shares is also recognised in equity, with any
difference between the proceeds from the sale and original cost being taken to
revenue reserves.
2 Foreign exchange
The only foreign exchange rate which has a material impact on the reporting of
the Group's results is the US dollar.
Closing rate Closing rate Average rate Average rate
as at as at year ended year ended
30 June 30 June 30 June 30 June
2009 2008 2009 2008
US dollar 1.6458 1.9923 1.6044 2.0119
Analysis of foreign exchange
Year ended Year ended
30 June 30 June
2009 2008
£m £m
Realised and unrealised hedging (losses)/gains (42.4) 3.1
Translation gains on non-Sterling denominated monetary 3.8 0.1
assets and liabilities
Total foreign exchange (losses)/gains (38.6) 3.2
3 Personnel expenses
Analysis of employee benefits expense
Year ended Year ended
30 June 30 June
2009 2008
£m £m
Wages and salaries 8.9 5.3
Performance related bonuses 10.1 23.5
Share based payments 11.9 10.0
Social security costs 3.2 7.3
Pension costs 0.6 0.3
Other costs 1.3 1.3
Total employee benefits 36.0 47.7
4 Other expenses
Other expenses
Year ended Year ended
30 June 30 June
2009 2008
£m £m
Travel 3.3 2.5
Professional fees 3.0 2.2
Information technology and communications 2.1 1.4
Deferred acquisition costs charges 2.1 1.2
Operating leases 1.9 1.0
Premises related costs 0.8 0.6
Insurance 0.6 0.5
Auditors' remuneration 0.6 0.7
Depreciation of property, plant and equipment 0.8 0.3
Other expenses 1.7 0.7
Total other expenses 16.9 11.1
5 Earnings per share
Basic earnings per share is calculated by dividing the profit for the financial
year attributable to equity holders of the parent of £115.0m (2008: £140.8m) by
the weighted average number of ordinary shares in issue during the year.
Reconciliation of the figures used in calculating basic and diluted earnings per
share:
Year ended Year ended
30 June 30 June
2009 2008
Weighted average number of ordinary shares used in calculation 671,667,998 669,671,683
of basic earnings per share
Effect of dilutive potential ordinary shares - share options 47,330,538 38,322,426
Weighted average number of ordinary shares used in calculation 718,998,536 707,994,109
of diluted earnings per share
6 Dividends
An analysis of dividends is as follows:
2009 2008
Dividends declared/proposed in respect of the year:
Interim dividend declared per share (p) 3.66 3.66
Final dividend proposed/declared per share (p) 8.34 8.34
Dividends paid in the year:
Interim dividend paid(£m) 24.9 24.9
Interim dividend per share (p) 3.66 3.66
Final dividend paid(£m) 57.0 45.2
Final dividend per share (p) 8.34 6.70
Dividends are recognised in the accounts in the year in which they are paid, or
in the case of a final dividend when approved by the shareholders.
On 15 September 2009 the Board proposed a final dividend of 8.34p per share for
the year ended 30 June 2009. This has not been recognised as a liability of the
Group at the year end as it has not yet been approved by shareholders. Based on
the number of shares in issue at the year end which qualify to receive a
dividend, the total amount payable would be £56.7m (2008:£57.0m).
7 Non-current assets and non-current liabilities held for sale
Where Group companies inject seed capital into funds operated and controlled by
the Group, then the fund is classified as being held for sale. Typically, if the
fund remains under the control of the Group for more than one year from the
original investment date it will cease to be classified as held for sale, and
will be consolidated line by line. In determining whether to execute the
reclassification, the Group will have regard to the proximity of loss of
control, and the extent to which consolidation of the fund on a line by line
basis would be material to the presentation of the Group's financial statements.
2009 2008
£m £m
Non-current assets held for sale 34.8 16.4
Non-current liabilities held for sale (7.4) (0.1)
Seed capital classified as being held for sale 27.4 16.3
The Group's maximum exposure to credit, liquidity, interest rate, foreign
exchange and price risk in respect of these assets and liabilities is
represented by their carrying value.
8 Own shares
The Ashmore 2004 Employee Benefit Trust ("EBT") was established to encourage and
facilitate the acquisition and holding of shares in the Company by the employees
of the Company with a view to facilitating the recruitment and motivation of the
employees of the Company. As at the period end, the EBT owned 34,293,185 (2008:
34,012,500) ordinary shares of 0.01p with a nominal value of £3,429.32 (2008:
£3,401.25) and shareholders' funds are reduced by £6.2m (2008: £5.4m) in this
respect. It is the intention of the directors to make these shares available to
employees by way of sale through the share based compensation plans.
9 Treasury shares
In line with authorities granted at the AGM in October 2008 the Company
purchased shares which are held in treasury. An analysis of treasury shares is
as follows:
Treasury shares held by Ashmore Group plc 2009 2008
Cost of treasury shares: £m £m
Ashmore Group plc ordinary shares 6.9 -
Number Number
Ashmore Group plc ordinary shares 5,368,331 -
Reconciliation of treasury shares Number Number
At beginning of year - -
Purchase of own shares 5,368,331 -
At end of year 5,368,331 -
Market value of treasury shares: £m £m
Ashmore Group plc 10.2 -
10 Group risks
The Group's principal risks are as detailed within the Business Review and
Corporate Governance sections of the Group's Annual Report and are categorised
as strategic and business, investment and operational.
11 Post balance sheet events
There are no post balance sheet events for the year ended 30 June 2009.
12 Statutory accounts
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 June 2009 or 2008. Statutory accounts
for 2008 have been delivered to the registrar of companies, and those for 2009
will be delivered in due course. The auditors have reported on those accounts;
their reports were (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section 237
(2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a
statement under section 498 (2) or (3) of the Companies Act 2006 in respect of
the accounts for 2009.
13 Forward-looking statements
This news release contains certain forward-looking statements with respect to
the Ashmore Group's financial condition, operations, and business opportunities.
These forward-looking statements represent the Group's expectations or beliefs
concerning future events, and involve known and unknown risks, and uncertainty,
that could cause actual results, performance, or events to differ materially
from those expressed or implied in such statements. Past performance cannot be
relied on as a guide to future performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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