REG-Ashmore Group Plc PRELIMINARY RESULTS FOR YEAR - Part 2

Released : 16/09/2008

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Part 2 : For preceding part double click [nRn1P4544D]  
  Multi strategy funds        30 June 2008      30June 2007    
  AuM opening (US$bn)                  2.6              0.6    
  Subscriptions (US$bn)       1.2               1.8            
  Redemptions (US$bn)         (1.1)             0.0            
  Net subscriptions (US$bn)            0.1              1.8    
  Performance (US$bn)                  0.3              0.2    
  Closing AuM (US$bn)                  3.0              2.6    
  
  
In addition, Ashmore was appointed investment manager following the launch of a 
newly incorporated publicly listed closed-ended investment company, Ashmore 
Global Opportunities Limited ("AGOL"), This source of permanent capital raised E 
500 million upon listing on the Main Market of the London Stock Exchange on 12 
December 2007. These funds are now invested across the Group's investment themes 
and multi strategy fund. AGOL provides the Group with a new point of access for 
an investor class to gain access to Ashmore's investment themes within a listed 
fund vehicle with a stated focus on the special situations investment theme, in 
line with which, AGOL has invested US$250 million into GSSF4.  
  
Additionally, during the year, a liquidity fund was launched offering a Standard 
& Poor's "AAAm" rated fund. This is able to manage the cash components of the 
underlying Ashmore funds, retained by the funds for liquidity purposes, with a 
view to enhancing the absolute return received on this cash and to attract 
external funds in due course.  The level of funds at year end was US$2.2 billion 
drawn from across the investment themes and funds.   
  
Management fee margins and performance fees  
  
The year on year improvements in management fee margins detailed in each of the 
investment theme reviews above have resulted in the achievement of an overall 
average management fee margin of 103bp across the themes (2007: 93bp). This is 
in line with the Group's strategy of maintaining high and stable management fee 
margins.   
  
The Group's strategy is also to maintain a balance between funds able to earn 
performance fees and those that are management fees only. At the year end the 
Group was able to earn performance fees on 65% of AuM (2007: 64%). Within this a 
further proportion of the AuM did not earn performance fees in the year because 
either such fees are earned at the end of the multi year fund life; or are 
subject to rebate agreements. The overall performance fee income was £44.7 
million for the year ended 30 June 2008 (2007: £20.4 million).  
  
Operating costs and operating margin  
  
The Group's cost structure, with a low proportion of tightly controlled 
recurring costs and a large proportion of variable performance related costs, is 
at the core of the Group's philosophy.   
  
The majority of the Group's costs are made up of personnel expenses. The Group 
continues to invest to support the future growth of the business through 
recruitment. Headcount increased by 35%, from 69 at 30 June 2007 to 93 at 30 
June 2008, in line with which wages and salaries increased to £5.3 million 
(2007: £3.8 million). The Group's variable compensation represents the majority 
of the overall personnel expenses. This includes performance related bonuses, 
share based payments and associated social security costs and is calculated as a 
percentage of profit before tax, interest and variable compensation. In the year 
ended 30 June 2008 the percentage of variable compensation was 18.2% (2007: 
18.4%).  
  
The Group continues to undertake infrastructure initiatives to support the 
development of the business. In line with this, and the headcount growth, the 
overall total for other expenses for the year ended 30 June 2008 was £11.1 
million (2007: £5.5 million) which included a number of new and one off costs. 
Firstly £1.2 million of deferred acquisition costs related to the Group meeting 
the underwriting expenses of the AGOL launch were charged in the year. This will 
result in an annualised charge going forward of £2.1 million for seven years 
from December 2007. Secondly the Group completed the lease of a new London 
office, from January 2008 with an annualised increase in operating lease and 
other premises costs of £1.0 million, and a £0.3 million one off charge in 
relation to the office move. Finally the cost base included amounts of £1.2 
million (2007: £0.1 million) in the subsidiary  local asset management 
operations in India, Turkey and Brazil, together with additional professional 
fees associated with the establishment of these and other potential local asset 
management ventures.   
  
As a result, the operating profit margin for the year ended 30 June 2008 was 76% 
(2007: 76%).  
  
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 has historically tracked close to the 30% UK 
corporation tax rate. The introduction of a 28% UK corporation tax rate from 1 
April 2008 has resulted in a small beneficial impact on the Group's effective 
corporation tax rate in the financial year to 30 June 2008 (overall blended 
corporation tax rate of 29.5%), with the full-year benefit coming through in the 
following financial year.  
  
There is a £13.8 million deferred tax asset on the Group's balance sheet at 30 
June 2008. This is largely due to cash tax deductions which will arise over the 
next six or so years in respect of share price appreciation on share-based 
payments awards. In addition there is also a deferred tax liability on the 
Group's balance sheet of £3.8 million. This is in respect of the deferred 
acquisition costs associated with the launch of AGOL which will be charged over 
seven years to the Group's income statement.  
  
Balance sheet and cash flow  
  
The Group's strategy is 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. 
These needs include funding the establishment costs of local asset management 
ventures, seeding new funds and other strategic initiatives.   
  
In line with this strategy during the period, the Group invested £14.6 million 
in meeting the underwriting costs of the AGOL fundraising. In accordance with 
International Accounting Standards, these underwriting costs are recognised in 
the balance sheet as deferred acquisition costs which are charged to the income 
statement as the related revenue is recognised. Additionally, during April 2008, 
the Group invested BRL49.3 million (£15.1 million) of seed capital in the 
initial launch of an onshore Brazilian local currency fund, managed by the 
Brazilian asset management subsidiary.   
  
The Group continues to generate significant cash from operations which totalled 
£195.5 million in the year (year to 30 June 2007: £132.3 million). After the 
payments of the deferred acquisition costs and seed capital investment and, 
after taking account for taxation, property, plant and equipment purchases, 
dividend payments and interest received the overall cash has increased by £61.2 
million during the year ended 30 June 2008 to £279.2 million (30 June 2007: 
£218.0 million).   
  
As at 30 June 2008, total equity attributable to shareholders of the parent was 
£271.8 million compared to £195.9 million at 30 June 2007. There is no debt on 
the Group's balance sheet.  
  
Foreign exchange and treasury management  
  
The Group's revenue is almost entirely denominated in US dollars, whilst the 
Group's cost base is largely Sterling based. Consequently, the Group has an 
exposure to movements in the US$/£ exchange rate. The results for the year ended 
30 June 2008 were achieved against the backdrop of a weaker US$/£ exchange rate 
and this has impacted on the Group's reported profit. Reported profit before tax 
increased by £64.8 million, a 49% increase over the prior year. In constant 
exchange rate terms, profit before tax increased by £68.9 million, an increase 
of 54% in the year. This was after restating the prior year figures at the 
current year's average US$/£ exchange rate (2008: US$/£2.01; 2007: US$/£1.95). 
This resulted in the following restatements to the prior year numbers: lower net 
revenue in Sterling terms (£5.1 million), net hedging gains excluded (£2.7 
million), and a notional reworking of the variable compensation cost to reflect 
the above items (a £1 million reduction). In the current year, net hedging gains 
of £3.2 million were excluded. On this basis, the net impact of the movement in 
the US$/£ exchange rate on the reported increase in profit before tax in the 
year of £64.8 million was £4.1 million.   
  
The Group's policy is to hedge its net foreign exchange exposure by using a 
combination of forward foreign exchange contracts and options for up to two 
years forward. The Group also sells US dollars at spot rates when opportunities 
arise. As at the date of this report, the Group has hedged 67% of its forecast 
US dollar based net management fee revenue for the remainder of this financial 
year at US$/£1.95. Based on the current year's net management fee revenue, at 
current exchange rates, a +/-10 cent exchange rate movement would have an £3.9 
million/£4.3 million impact on net management fees.   
  
Dividend  
  
Recognising the continued strong progress and the Board's confidence in the 
Group's prospects, subject to shareholder approval, a final dividend of 8.34p 
per share is proposed to be paid on 5 December 2008 (2007: 6.7p) to shareholders 
on the register on 7 November 2008. An interim dividend for the six-month period 
to 31 December 2007 of 3.66p (2007:2.3p) was paid on 25 April 2008. This would 
result in a full-year dividend of 12.0p (2007: 9.0p). The Company's intention is 
for its dividend policy to be progressive.  
  
Ashmore Group plc  
  
Consolidated income statement  
  
Year ended 30 June 2008  
  
 
                                                          
                                                          
                                                          
                                         2008     2007    
                                 Notes   £m       £m      
                                                          
  Management fees                        186.7    130.2   
  Performance fees                       44.7     20.4    
  Other revenue                          13.3     13.0    
  Total revenue                          244.7    163.6   
  Less: Distribution costs               (4.7)    (3.8)   
  Net revenue                            240.0    159.8   
                                                          
  Personnel expenses             2       (47.7)   (32.6)  
  Other expenses                 3       (11.1)   (5.5)   
  Operating profit                       181.2    121.7   
                                                          
  Interest income                        15.0     9.7     
  Profit before tax                      196.2    131.4   
                                                          
  Tax expense                            (55.2)   (39.9)  
  Profit for the year                    141.0    91.5    
                                                          
  Attributable to:                                        
                                                          
  Equity holders of the parent           140.8    91.4    
  Minority interest                      0.2      0.1     
  Profit for the year                    141.0    91.5    
                                                          
  Earnings per share:                                     
                                                          
  Basic                          4       21.0p    13.7p   
  Diluted                        4       19.9p    12.9p   
                                                          
  
  
Ashmore Group plc  
  
Consolidated balance sheet  
  
 
                                                                      As at30 June2008   As at30 June2007  
                                                              Notes   £m                 £m                
                                                                                                           
  Assets                                                                                                   
  Property, plant and equipment                                       3.3                0.2               
  Intangible assets                                                   4.1                4.1               
  Deferred acquisition costs                                  7       13.4               -                 
  Other receivables                                                   -                  0.1               
  Deferred tax assets                                                 13.8               14.4              
  Total non-current assets                                            34.6               18.8              
                                                                                                           
  Trade and other receivables                                         34.7               27.2              
  Derivative financial instruments                                    1.2                0.5               
  Cash and cash equivalents                                           279.2              218.0             
  Total current assets                                                315.1              245.7             
                                                                                                           
  Non-current assets held for sale                            6       16.4               -                 
                                                                                                           
  Total assets                                                        366.1              264.5             
                                                                                                           
  Equity                                                                                                   
  Issued capital                                                      -                  -                 
  Share premium                                                       0.3                0.3               
  Retained earnings                                                   271.5              195.6             
  Total equity attributable to equity holders of the parent           271.8              195.9             
                                                                                                           
  Minority interest                                                   1.5                0.1               
                                                                                                           
  Total equity                                                        273.3              196.0             
                                                                                                           
  Liabilities                                                                                              
  Deferred tax liabilities                                            3.8                -                 
  Total non-current liabilities                                       3.8                -                 
                                                                                                           
  Current tax                                                         24.5               15.7              
  Derivative financial instruments                                    0.7                -                 
  Trade and other payables                                            63.7               52.8              
  Total current liabilities                                           88.9               68.5              
                                                                                                           
  Non-current liabilities held for sale                       6       0.1                -                 
                                                                                                           
  Total liabilities                                                   92.8               68.5              
  Total equity and liabilities                                        366.1              264.5             
                                                                                                           
  
  
Ashmore Group plc  
  
Consolidated statement of changes in equity  
  
 
                                                     Issued capital   Share premium   Retained earnings   Total equity attributable to equity holders of the parent   Minority interest   Total equity  
                                                     £m               £m              £m                  £m                                                          £m                  £m            
                                                                                                                                                                                                        
  Balance at 1 July 2006                             -                0.3             96.3                96.6                                                        -                   96.6          
                                                                                                                                                                                                        
  Profit for the year                                -                -               91.4                91.4                                                        0.1                 91.5          
  Share based payments                               -                -               6.5                 6.5                                                         -                   6.5           
  Current tax related to share based payments        -                -               4.2                 4.2                                                         -                   4.2           
  Deferred tax related to share based payments       -                -               11.6                11.6                                                        -                   11.6          
  Sale of own shares held                            -                -               1.1                 1.1                                                         -                   1.1           
  Dividends                                          -                -               (15.5)              (15.5)                                                      -                   (15.5)        
                                                                                                                                                                                                        
  Balance at 30 June 2007                            -                0.3             195.6               195.9                                                       0.1                 196.0         
                                                                                                                                                                                                        
  Profit for the year                                -                -               140.8               140.8                                                       0.2                 141.0         
  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)         
  Net gains on available-for-sale financial assets   -                -               0.4                 0.4                                                         -                   0.4           
  Dividends                                          -                -               (70.1)              (70.1)                                                      -                   (70.1)        
                                                                                                                                                                                                        
  Balance at 30 June 2008                            -                0.3             271.5               271.8                                                       1.5                 273.3         
                                                                                                                                                                                                        
  
  
Ashmore Group plc  
  
Consolidated cash flow statement  
  
Year ended 30 June 2008  
  
 
                                                                         2008     2007    
                                                                 Notes   £m       £m      
                                                                                          
                                                                                          
  Operating activities                                                                    
  Cash receipts from customers                                           242.8    164.6   
  Cash paid to suppliers and employees                                   (47.3)   (32.3)  
                                                                                          
  Cash generated from operations                                         195.5    132.3   
                                                                                          
  Taxes paid                                                             (46.5)   (39.2)  
                                                                                          
  Net cash from operating activities                                     149.0    93.1    
                                                                                          
  Investing activities                                                                    
  Interest received                                                      15.4     9.5     
  Purchase of non-current assets held for sale                           (15.1)   -       
  Purchase of deferred acquisition costs                         7       (14.6)   -       
  Purchase of property, plant and equipment                              (3.5)    (0.1)   
                                                                                          
  Net cash from investing activities                                     (17.8)   9.4     
                                                                                          
  Financing activities                                                                    
                                                                                          
  Dividends paid                                                 5       (70.1)   (15.5)  
                                                                                          
  Net cash used in financing activities                                  (70.1)   (15.5)  
                                                                                          
  Effect of exchange rate changes on cash and cash equivalents           0.1      (1.7)   
                                                                                          
  Net increase in cash and cash equivalents                              61.2     85.3    
                                                                                          
  Cash and cash equivalents at beginning of year                         218.0    132.7   
                                                                                          
  Cash and cash equivalents at end of year                               279.2    218.0   
                                                                                          
                                                                                          
  Cash and cash equivalents comprise:                                                     
  Cash at bank and in hand as shown in balance sheet                     279.2    218.0   
                                                                         279.2    218.0   
  
  
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 2008.  
  
The accounting policies applied in these financial statements are consistent 
with those applied in theGroup's annual report and accounts for the year ended 
30 June 2007. The annual report and accounts is available on the Group's 
website.  
  
In addition to the accounting policies applied in the Group's annual report for 
the year ended 30 June 2007, the following accounting policies were adopted:  
  
Deferred acquisition costs  
  
Costs that are directly attributable to securing an investment management 
contract are deferred if they can be identified separately and measured reliably 
and it is probable that they will be recovered. Deferred acquisition costs 
represent the contractual right to benefit from providing investment management 
services and is amortised as the related revenue is recognised.  
  
Financial assets  
  
For available-for-sale financial assets, gains and losses arising from changes 
in 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.  
  
Non-current assets held for sale  
  
Non-current assets (and disposal groups) acquired exclusively with a view to 
subsequent disposal through sale or dilution are classified as held for sale and 
measured at the lower of their carrying amount and fair value less costs to 
sell. Where measurement and re-measurement is outside the scope of IFRS 5, the 
relevant policy is set out within financial instruments.  
  
2)   
  
Personnel expenses  
  
 
                                                                                            
  Analysis of employee benefits expense                                                     
                                          Year ended30 June2008      Year ended30 June2007  
                                          £m                         £m                     
  Wages and salaries                      5.3                        3.8                    
  Performance related bonuses             23.5                       18.0                   
  Share based payments                    10.0                       5.7                    
  Social security costs                   7.3                        4.2                    
  Pension costs                           0.3                        0.2                    
  Other costs                             1.3                        0.7                    
  Total employee benefits                 47.7                       32.6                   
  
  
3)   
  
Other expenses  
  
 
  Other expenses                                                                                    
                                                  Year ended30 June2008      Year ended30 June2007  
                                                  £m                         £m                     
  Travel                                          2.5                        1.7                    
  Professional fees                               2.2                        0.6                    
  Information technology and communications       1.4                        1.0                    
  Operating leases                                1.0                        0.4                    
  Premises related costs                          0.6                        0.3                    
  Insurance                                       0.5                        0.3                    
  Auditors' remuneration                          0.7                        0.2                    
  Depreciation of property, plant and equipment   0.3                        0.1                    
  Deferred acquisition costs charges              1.2                        -                      
  Other expenses                                  0.7                        0.9                    
  Total other expenses                            11.1                       5.5                    
  
  
4)   
  
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 £140.8m (2007: £91.4m) by 
the weighted average number of ordinary shares in issue during the year.  
  
Diluted earnings per share is calculated as for basic earnings per share with a 
further adjustment to the weighted average number of ordinary shares to reflect 
the effects of 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 figures used in calculating basic and diluted earnings per 
share:  
  
 
                                                                   Year ended30 June2008      Year ended30 June2007  
                                                                                                                     
  Weighted average number of ordinary shares used in calculation   669,671,683                667,467,808            
  of basic earnings per share                                                                                        
  Effect of dilutive potential ordinary shares - share options     38,322,426                 38,827,815             
  Weighted average number of ordinary shares used in calculation   707,994,109                706,295,623            
  of diluted earnings per share                                                                                      
  
  
5)   
  
Dividends  
  
An analysis of dividends is as follows:  
  
 
  Group and Company    Year ended30 June2008      Year ended30 June2007  
                                                                         
  Interim dividend     £24.9m                     £15.5m                 
  Dividend per share   3.66p                      2.30p                  
                                                                         
  Final dividend       £57.0m                     £45.2m                 
  Dividend per share   8.34p                      6.70p                  
  
  
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 16 September 2008 the Board proposed a final dividend of 8.34p per share for 
the year ended 30 June 2008. 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 £57.0m (2007:£45.2m).  
  
6)   
  
Non-current assets and non-current liabilities held for sale  
  
From time to time, Group companies inject capital into funds operated by the 
Group (seed capital). Where the Group holds more than 50 percent of the fund in 
which it is investing and where voting rights are attached to the holding, the 
Group technically controls the fund and it becomes a subsidiary of the Group. 
Where the Group is actively seeking to reduce its holding, the fund is 
classified as being held for sale as it is considered highly probable that the 
fund will not remain under the control of the Group one year after the original 
investment is made. If the Group still retains control of the fund after this 
time, the fund ceases to be classified as held for sale and is consolidated line 
by line.  
  
 
                                                   2008       2007  
                                                   £m         £m    
  Non-current assets held for sale                 16.4       -     
  Non-current liabilities held for sale            (0.1)      -     
  Seed capital classified as being held for sale   16.3       -     
  
  
In the year to 30 June 2008, an investment in a Brazilian onshore local currency 
fund was classified as non-current assets held for sale.  
  
7)   
  
Deferred acquisition costs  
  
 
                       2008       2007  
                       £m         £m    
  Cost                 14.6       -     
  Accumulated charge   (1.2)      -     
                       13.4             
  
  
During the year ended 30 June 2008 deferred acquisition costs of £14.6m were 
incurred. These were directly attributable to securing the investment management 
contract for a permanent capital vehicle Ashmore Global Opportunities Limited, a 
newly incorporated investment company, which was listed on the London Stock 
Exchange. £1.2m was charged during the year and recognised in other expenses.  
  
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 34,012,500 (2007: 
38,725,000) ordinary shares of 0.01p with a nominal value of £3,401.25 (2007: 
£3,872.50) and shareholders' funds are reduced by £5.4m (2007: £5.9m) in this 
respect. It is the intention to make these shares available to employees by way 
of sale through the share option scheme.  
  
9)   
  
Exchange rates  
  
The only foreign exchange rate which has a material impact on the reporting of 
the Group's results is the US dollar.  
  
 
              Closing rateas at30 June2008   Closing rateas at30 June2007   Average rateyear  ended30 June2008   Average rateyear ended30 June2007  
  US dollar   1.9923                         2.0088                         2.0119                               1.9466                             
  
  
 
This information is provided by RNS  
  
The company news service from the London Stock Exchange  
  
  END  
  
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